Microsoft Excel LibreOffice Calc

Merck & Co. Inc. (MRK)


Analysis of Property, Plant and Equipment

High level of difficulty


Property, Plant and Equipment Accounting Policy

Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. For tax purposes, accelerated tax methods are used. The estimated useful lives primarily range from 25 to 45 years for Buildings, and from 3 to 15 years for Machinery, equipment and office furnishings. Depreciation expense was $1.4 billion in 2018, $1.5 billion in 2017 and $1.6 billion in 2016.

Source: 10-K (filing date: 2019-02-27).


Property, Plant and Equipment Disclosure

Merck & Co. Inc., balance sheet: property, plant and equipment

US$ in millions

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Land 333  365  412  490  541 
Buildings 11,486  11,726  11,439  12,154  13,101 
Machinery, equipment and office furnishings 14,441  14,649  14,053  14,261  16,050 
Construction in progress 3,355  2,301  1,871  1,525  1,448 
Property, plant and equipment, at cost 29,615  29,041  27,775  28,430  31,140 
Accumulated depreciation (16,324) (16,602) (15,749) (15,923) (18,004)
Property, plant and equipment, at cost, net of accumulated depreciation 13,291  12,439  12,026  12,507  13,136 

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

Item Description The company
Property, plant 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. Merck & Co. Inc.’s property, plant and equipment, at cost increased from 2016 to 2017 and from 2017 to 2018.
Property, plant and equipment, at cost, net of 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. Merck & Co. Inc.’s property, plant and equipment, at cost, net of accumulated depreciation increased from 2016 to 2017 and from 2017 to 2018.

Property, Plant and Equipment Ratios (Summary)

Merck & Co. Inc., Property, Plant and Equipment Ratios

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Average age 55.75% 57.90% 57.56% 56.99% 58.84%
Estimated total useful life (years) 21 19 17 17 12
Estimated age, time elapsed since purchase (years) 12 11 10 10 7
Estimated remaining life (years) 9 8 7 8 5

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

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. Merck & Co. Inc.’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. Merck & Co. Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018.
Estimated time elapsed since purchase The approximate age in years of a company’s fixed assets. Useful for comparison purposes. Merck & Co. Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018.
Estimated remaining life Merck & Co. Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018.

Average Age

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Accumulated depreciation 16,324  16,602  15,749  15,923  18,004 
Property, plant and equipment, at cost 29,615  29,041  27,775  28,430  31,140 
Land 333  365  412  490  541 
Ratio
Average age1 55.75% 57.90% 57.56% 56.99% 58.84%

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, at cost – Land)
= 100 × 16,324 ÷ (29,615333) = 55.75%

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. Merck & Co. Inc.’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

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Property, plant and equipment, at cost 29,615  29,041  27,775  28,430  31,140 
Land 333  365  412  490  541 
Depreciation expense 1,400  1,500  1,600  1,600  2,500 
Ratio
Estimated total useful life (years)1 21 19 17 17 12

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Estimated total useful life (years) = (Property, plant and equipment, at cost – Land) ÷ Depreciation expense
= (29,615333) ÷ 1,400 = 21

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. Merck & Co. Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018.

Estimated Age, Time Elapsed since Purchase

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Accumulated depreciation 16,324  16,602  15,749  15,923  18,004 
Depreciation expense 1,400  1,500  1,600  1,600  2,500 
Ratio
Time elapsed since purchase (years)1 12 11 10 10 7

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation expense
= 16,324 ÷ 1,400 = 12

Ratio Description The company
Estimated time elapsed since purchase The approximate age in years of a company’s fixed assets. Useful for comparison purposes. Merck & Co. Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018.

Estimated Remaining Life

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Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Property, plant and equipment, at cost, net of accumulated depreciation 13,291  12,439  12,026  12,507  13,136 
Land 333  365  412  490  541 
Depreciation expense 1,400  1,500  1,600  1,600  2,500 
Ratio
Estimated remaining life (years)1 9 8 7 8 5

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26), 10-K (filing date: 2015-02-27).

2018 Calculations

1 Estimated remaining life (years) = (Property, plant and equipment, at cost, net of accumulated depreciation – Land) ÷ Depreciation expense
= (13,291333) ÷ 1,400 = 9

Ratio Description The company
Estimated remaining life Merck & Co. Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 and from 2017 to 2018.