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Analysis of Property, Plant and Equipment
Advanced level
Property, Plant and Equipment Disclosure
Illinois Tool Works Inc., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).
| Item | Description | The company |
|---|---|---|
| Gross plant and equipment | 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. | Illinois Tool Works Inc.’s gross plant and equipment increased from 2017 to 2018 but then slightly decreased from 2018 to 2019. |
| Net plant 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. | Illinois Tool Works Inc.’s net plant and equipment increased from 2017 to 2018 but then decreased significantly from 2018 to 2019. |
Asset Age Ratios (Summary)
Illinois Tool Works Inc., asset age ratios
Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).
| Asset age ratio | Description | The company |
|---|---|---|
| Average age ratio | 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. | Illinois Tool Works Inc.’s average age ratio 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. | Illinois Tool Works Inc.’s estimated total useful life of depreciable property, plant and equipment decreased from 2017 to 2018 but then slightly increased from 2018 to 2019. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Illinois Tool Works Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. |
| Estimated remaining life | Illinois Tool Works Inc.’s estimated remaining life of depreciable property, plant and equipment decreased from 2017 to 2018 and from 2018 to 2019. |
Average Age
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Accumulated depreciation | ||||||
| Gross plant and equipment | ||||||
| Land | ||||||
| Asset Age Ratio | ||||||
| Average age1 | ||||||
Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).
2019 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Gross plant and equipment – Land)
= 100 × ÷ ( – ) =
| Asset age 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. | Illinois Tool Works Inc.’s average age ratio 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: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).
2019 Calculations
1 Estimated total useful life = (Gross plant and equipment – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Asset age 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. | Illinois Tool Works Inc.’s estimated total useful life of depreciable property, plant and equipment decreased from 2017 to 2018 but then slightly increased from 2018 to 2019. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).
2019 Calculations
1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= ÷ =
| Asset age ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Illinois Tool Works Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. |
Estimated Remaining Life
Based on: 10-K (filing date: 2020-02-14), 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12).
2019 Calculations
1 Estimated remaining life = (Net plant and equipment – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Asset age ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Illinois Tool Works Inc.’s estimated remaining life of depreciable property, plant and equipment decreased from 2017 to 2018 and from 2018 to 2019. |