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Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
DEPRECIATION AND AMORTIZATION
The cost of GE manufacturing plant and equipment is generally depreciated on a straight-line basis over its estimated economic life.
The cost of GE Capital equipment leased to others on operating leases is depreciated on a straight-line basis to estimated residual value over the lease term or over the estimated economic life of the equipment.
Source: General Electric Co., Annual Report
Property, Plant and Equipment Disclosure
General Electric Co., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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| Land and improvements | |
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| Buildings, structures and related equipment | |
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| Machinery and equipment | |
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| Leasehold costs and manufacturing plant under construction | |
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| GE | |
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| Land and improvements, buildings, structures and related equipment | |
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| Aircraft | |
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| Vehicles | |
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| Railroad rolling stock | |
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| Construction and manufacturing | |
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| All other | |
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| Equipment leased to others | |
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| GE Capital | |
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| Eliminations | |
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| Property, plant and equipment, original cost | |
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| Accumulated depreciation | |
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| Property, plant and equipment, net carrying value | |
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Source: Based on data from General Electric Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Land and improvements | Real estate assets held for productive use and depreciable assets that are an addition or improvement to real estate held for productive use. | General Electric Co.'s land and improvements increased from 2015 to 2016 and from 2016 to 2017. |
| Buildings, structures and related equipment | Carrying amount as of the balance sheet date of long-lived, depreciable assets that include building structures held for productive use including any addition, improvement, or renovation to the structure, such as interior masonry, interior flooring, electrical, and plumbing. | General Electric Co.'s buildings, structures and related equipment declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Machinery and equipment | Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. | General Electric Co.'s machinery and equipment increased from 2015 to 2016 and from 2016 to 2017. |
| Leasehold costs and manufacturing plant under construction | Carrying amount at the balance sheet date of long-lived asset under construction that include construction costs to date on capital projects that have not been completed and assets being constructed that are not ready to be placed into service. | General Electric Co.'s leasehold costs and manufacturing plant under construction declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Property, plant and equipment, original cost | Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation. | General Electric Co.'s property, plant and equipment, original cost declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level. |
| Property, plant and equipment, net carrying value | Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment. | General Electric Co.'s property, plant and equipment, net carrying value declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level. |
Property, Plant and Equipment Ratios (Summary)
General Electric Co., Property, Plant and Equipment Ratios
| Ratio | Description | The company |
|---|---|---|
| Average age | As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient. | General Electric Co.'s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level. |
| Estimated total useful life | Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors. | General Electric Co.'s estimated total useful life of depreciable property, plant and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | General Electric Co.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2015 to 2016 and from 2016 to 2017. |
| Estimated remaining life | General Electric Co.'s estimated remaining life of depreciable property, plant and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Average Age
2017 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, original cost – Land and improvements)
= 100 × ÷ ( – ) = %
| Ratio | Description | The company |
|---|---|---|
| Average age | As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient. | General Electric Co.'s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level. |
Estimated Total Useful Life
2017 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, original cost – Land and improvements) ÷ Consolidated depreciation and amortization related to property, plant and equipment
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated total useful life | Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors. | General Electric Co.'s estimated total useful life of depreciable property, plant and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Estimated Age, Time Elapsed Since Purchase
2017 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Consolidated depreciation and amortization related to property, plant and equipment
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company's fixed assets. Useful for comparison purposes. | General Electric Co.'s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2015 to 2016 and from 2016 to 2017. |
Estimated Remaining Life
2017 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net carrying value – Land and improvements) ÷ Consolidated depreciation and amortization related to property, plant and equipment
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | General Electric Co.'s estimated remaining life of depreciable property, plant and equipment declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
