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Home Depot Inc. (HD)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Buildings, furniture, fixtures, and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. Leasehold improvements are amortized using the straight-line method over the original term of the lease or the useful life of the improvement, whichever is shorter. The estimated useful lives of Home Depot’s property and equipment follow.
| Life | |
| Buildings | 5 – 45 years |
| Furniture, fixtures and equipment | 2 – 20 years |
| Leasehold improvements | 5 – 45 years |
Home Depot capitalizes certain costs related to the acquisition and development of software and amortizes these costs using the straight-line method over the estimated useful life of the software, which is three to six years. Certain development costs not meeting the criteria for capitalization are expensed as incurred.
Home Depot evaluates the long-lived assets each quarter for indicators of potential impairment. Indicators of impairment include current period losses combined with a history of losses, Home Depot’s decision to relocate or close a store or other location before the end of its previously estimated useful life, or when changes in other circumstances indicate the carrying amount of an asset may not be recoverable. The evaluation for long-lived assets is performed at the lowest level of identifiable cash flows, which is generally the individual store level. The assets of a store with indicators of impairment are evaluated for recoverability by comparing its undiscounted future cash flows with its carrying value. If the carrying value is greater than the undiscounted future cash flows, Home Depot then measures the asset’s fair value to determine whether an impairment loss should be recognized. If the resulting fair value is less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value. Impairment losses on property and equipment are recorded as a component of SG&A. When a leased location closes, Home Depot also recognizes, in SG&A, the net present value of future lease obligations less estimated sublease income. Impairments and lease obligation costs on closings and relocations were not material to Home Depot’s consolidated financial statements in fiscal 2018, fiscal 2017, or fiscal 2016.
Source: 10-K (filing date: 2019-03-28).
Property, Plant and Equipment Disclosure
Home Depot Inc., balance sheet: property, plant and equipment
US$ in millions
| Feb 3, 2019 | Jan 28, 2018 | Jan 29, 2017 | Jan 31, 2016 | Feb 1, 2015 | Feb 2, 2014 | ||||||||
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| Construction in progress | |
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| Property and equipment, at cost | |
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| Accumulated depreciation and capital lease amortization | |
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| Net property and equipment | |
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Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).
| Item | Description | The company |
|---|---|---|
| Property and equipment, at cost | Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Home Depot Inc.’s property and equipment, at cost increased from 2017 to 2018 and from 2018 to 2019. |
| Net property and equipment | Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Home Depot Inc.’s net property and equipment increased from 2017 to 2018 and from 2018 to 2019. |
Property, Plant and Equipment Ratios (Summary)
Home Depot Inc., Property, Plant and Equipment Ratios
Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).
| 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. | Home Depot Inc.’s average age of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
| 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. | Home Depot Inc.’s estimated total useful life of depreciable property, plant and equipment declined from 2017 to 2018 and from 2018 to 2019. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Home Depot Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
| Estimated remaining life | Home Depot Inc.’s estimated remaining life of depreciable property, plant and equipment declined from 2017 to 2018 and from 2018 to 2019. |
Average Age
Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).
2019 Calculations
1 Average age = 100 × Accumulated depreciation and capital lease amortization ÷ (Property and equipment, at cost – Land)
= 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. | Home Depot Inc.’s average age of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).
2019 Calculations
1 Estimated total useful life (years) = (Property and equipment, at cost – Land) ÷ Depreciation and capital lease amortization expense
= ( – ) ÷ =
| 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. | Home Depot Inc.’s estimated total useful life of depreciable property, plant and equipment declined from 2017 to 2018 and from 2018 to 2019. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).
2019 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation and capital lease amortization ÷ Depreciation and capital lease amortization expense
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Home Depot Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2017 to 2018 and from 2018 to 2019. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-03-28), 10-K (filing date: 2018-03-22), 10-K (filing date: 2017-03-23), 10-K (filing date: 2016-03-24), 10-K (filing date: 2015-03-26), 10-K (filing date: 2014-03-27).
2019 Calculations
1 Estimated remaining life (years) = (Net property and equipment – Land) ÷ Depreciation and capital lease amortization expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Home Depot Inc.’s estimated remaining life of depreciable property, plant and equipment declined from 2017 to 2018 and from 2018 to 2019. |