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Honeywell International Inc. (HON)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment are recorded at cost, including any asset retirement obligations, less accumulated depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated useful lives of 10 to 50 years for buildings and improvements and 2 to 16 years for machinery and equipment. Recognition of the fair value of obligations associated with the retirement of tangible long-lived assets is required when there is a legal obligation to incur such costs. Upon initial recognition of a liability, the cost is capitalized as part of the related long-lived asset and depreciated over the corresponding asset’s useful life.
Source: 10-K (filing date: 2019-02-08).
Property, Plant and Equipment Disclosure
Honeywell International Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | |||||||
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| Machinery and equipment | |
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| Property, plant and equipment, gross | |
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| Accumulated depreciation | |
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| Property, plant and equipment, net | |
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Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
| Item | Description | The company |
|---|---|---|
| Property, plant and equipment, gross | 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. | Honeywell International Inc.’s property, plant and equipment, gross increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Property, plant and equipment, net | 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. | Honeywell International Inc.’s property, plant and equipment, net increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Honeywell International Inc., Property, Plant and Equipment Ratios
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
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| Estimated total useful life (years) | |
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| Estimated age, time elapsed since purchase (years) | |
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| Estimated remaining life (years) | |
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Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
| 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. | Honeywell International Inc.’s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 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. | Honeywell International Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Honeywell International Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
| Estimated remaining life | Honeywell International Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – 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. | Honeywell International Inc.’s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, gross – Land and improvements) ÷ Depreciation 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. | Honeywell International Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
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| Selected Financial Data (USD $ in millions) | ||||||
| Accumulated depreciation | |
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| Depreciation expense | |
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| Time elapsed since purchase (years)1 | |
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Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation 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. | Honeywell International Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land and improvements) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Honeywell International Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |