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McDonald’s Corp. (MCD)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives: buildings–up to 40 years; leasehold improvements–the lesser of useful lives of assets or lease terms, which generally include certain option periods; and equipment–3 to 12 years.
Source: 10-K (filing date: 2019-02-22).
Property, Plant and Equipment Disclosure
McDonald’s Corp., balance sheet: property, plant and equipment
US$ in thousands
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | |||||||
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| Buildings and improvements on owned land | |
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| Buildings and improvements on leased land | |
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| Equipment, signs and seating | |
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| Other | |
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| Property and equipment, at cost | |
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| Accumulated depreciation and amortization | |
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| Net property and equipment | |
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Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).
| 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. | McDonald’s Corp.’s property and equipment, at cost increased from 2016 to 2017 and from 2017 to 2018. |
| 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. | McDonald’s Corp.’s net property and equipment increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
McDonald’s Corp., 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: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).
| 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. | McDonald’s Corp.’s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 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. | McDonald’s Corp.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | McDonald’s 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 | McDonald’s Corp.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Average age = 100 × Accumulated depreciation and 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. | McDonald’s Corp.’s average age of depreciable property, plant and equipment deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Estimated total useful life (years) = (Property and equipment, at cost – Land) ÷ Depreciation and amortization expense for property and equipment
= ( – ) ÷ =
| 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. | McDonald’s Corp.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation and amortization ÷ Depreciation and amortization expense for property and equipment
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | McDonald’s 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: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).
2018 Calculations
1 Estimated remaining life (years) = (Net property and equipment – Land) ÷ Depreciation and amortization expense for property and equipment
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | McDonald’s Corp.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |