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International Business Machines Corp. (IBM)
Analysis of Property, Plant and Equipment
Advanced level
Accounting Policy on Property, Plant and Equipment
Property, plant and equipment are carried at cost and depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of certain depreciable assets are as follows: buildings, 30 to 50 years; building equipment, 10 to 20 years; land improvements, 20 years; production, engineering, office and other equipment, 2 to 20 years; and information technology equipment, 1.5 to 5 years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, rarely exceeding 25 years.
Source: 10-K (filing date: 2019-02-26).
Property, Plant and Equipment Disclosure
International Business Machines Corp., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
| 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. | International Business Machines Corp.’s property, plant and equipment, gross increased from 2016 to 2017 and 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. | International Business Machines Corp.’s property, plant and equipment, net increased from 2016 to 2017 but then decreased significantly from 2017 to 2018. |
Asset Age Ratios (Summary)
International Business Machines Corp., asset age ratios
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
| 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. | International Business Machines Corp.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018. |
| 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. | International Business Machines Corp.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then decreased 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. | International Business Machines Corp.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
| Estimated remaining life | International Business Machines Corp.’s estimated remaining life of depreciable property, plant and equipment decreased from 2016 to 2017 and from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – Land and land improvements)
= 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. | International Business Machines Corp.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Estimated total useful life = (Property, plant and equipment, gross – Land and land improvements) ÷ 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. | International Business Machines Corp.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then decreased significantly from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 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. | International Business Machines Corp.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Estimated Remaining Life
Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Estimated remaining life = (Property, plant and equipment, net – Land and land improvements) ÷ Depreciation expense
= ( – ) ÷ =
| Asset age ratio | Description | The company |
|---|---|---|
| Estimated remaining life | International Business Machines Corp.’s estimated remaining life of depreciable property, plant and equipment decreased from 2016 to 2017 and from 2017 to 2018. |