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Lowe’s Cos. Inc. (LOW)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property is recorded at cost. Costs associated with major additions are capitalized and depreciated. Capital assets are expected to yield future benefits and have original useful lives which exceed one year. The total cost of a capital asset generally includes all applicable sales taxes, delivery costs, installation costs, and other appropriate costs incurred by Lowe’s, including interest in the case of self-constructed assets. Upon disposal, the cost of properties and related accumulated depreciation is removed from the accounts, with gains and losses reflected in SG&A expense in the consolidated statements of earnings.
Property consists of land, buildings and building improvements, equipment, and construction in progress. Buildings and building improvements includes owned buildings, as well as buildings under capital lease and leasehold improvements. Equipment primarily includes store racking and displays, computer hardware and software, forklifts, vehicles, and other store equipment.
Depreciation is provided over the estimated useful lives of the depreciable assets. Assets are depreciated using the straight-line method. Leasehold improvements and assets under capital lease are depreciated over the shorter of their estimated useful lives or the term of the related lease, which may include one or more option renewal periods where failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. During the term of a lease, if leasehold improvements are placed in service significantly after the inception of the lease, Lowe’s depreciates these leasehold improvements over the shorter of the useful life of the leasehold assets or a term that includes lease renewal periods deemed to be reasonably assured at the time the leasehold improvements are placed into service. The amortization of these assets is included in depreciation and amortization expense in the consolidated financial statements.
Source: 10-K (filing date: 2019-04-02).
Property, Plant and Equipment Disclosure
Lowe’s Cos. Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
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| Property, cost | |
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Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).
| Item | Description | The company |
|---|---|---|
| Property, 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. | Lowe’s Cos. Inc.’s property, cost increased from 2017 to 2018 but then declined significantly from 2018 to 2019. |
| Property, less accumulated depreciation | 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. | Lowe’s Cos. Inc.’s property, less accumulated depreciation declined from 2017 to 2018 and from 2018 to 2019. |
Property, Plant and Equipment Ratios (Summary)
Lowe’s Cos. Inc., Property, Plant and Equipment Ratios
Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).
| 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. | Lowe’s Cos. 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. | Lowe’s Cos. Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2017 to 2018 but then slightly declined from 2018 to 2019. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Lowe’s Cos. 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 | Lowe’s Cos. Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2017 to 2018 but then declined significantly from 2018 to 2019. |
Average Age
| Feb 1, 2019 | Feb 2, 2018 | Feb 3, 2017 | Jan 29, 2016 | Jan 30, 2015 | Jan 31, 2014 | ||
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| Selected Financial Data (USD $ in millions) | |||||||
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| Average age1 | |
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Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).
2019 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, 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. | Lowe’s Cos. 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: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).
2019 Calculations
1 Estimated total useful life (years) = (Property, cost – Land) ÷ 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. | Lowe’s Cos. Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2017 to 2018 but then slightly declined from 2018 to 2019. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).
2019 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. | Lowe’s Cos. 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: 2019-04-02), 10-K (filing date: 2018-04-02), 10-K (filing date: 2017-04-04), 10-K (filing date: 2016-03-29), 10-K (filing date: 2015-03-31), 10-K (filing date: 2014-03-31).
2019 Calculations
1 Estimated remaining life (years) = (Property, less accumulated depreciation – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Lowe’s Cos. Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2017 to 2018 but then declined significantly from 2018 to 2019. |