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Northrop Grumman Corp. (NOC)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment are depreciated over the estimated useful lives of individual assets. Most assets are depreciated using declining-balance methods, with the remainder using the straight-line method. Depreciation expense is generally recorded in the same segment where the related assets are held. However, the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired through business combinations is recorded in unallocated corporate expense within operating income as such depreciation is not considered part of management’s evaluation of segment operating performance. Major classes of property, plant and equipment and their useful lives are as follows:
| Useful life in years | Useful Life |
| Land and land improvements | Up to 40(1) |
| Buildings and improvements | Up to 40 |
| Machinery and other equipment | Up to 20 |
| Capitalized software costs | 3-5 |
| Leasehold improvements | Length of Lease(2) |
(1) Land is not a depreciable asset.
(2) Leasehold improvements are depreciated over the shorter of the useful life of the asset or the length of the lease.
Source: 10-K (filing date: 2019-01-31).
Property, Plant and Equipment Disclosure
Northrop Grumman Corp., balance sheet: property, plant and equipment
US$ in millions
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | |||||||
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| Property, plant and equipment, at cost | |
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| Accumulated depreciation | |
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| Property, plant and equipment, net | |
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Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-30), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-02).
| 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. | Northrop Grumman Corp.’s property, plant and equipment, at cost 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. | Northrop Grumman Corp.’s property, plant and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Northrop Grumman Corp., Property, Plant and Equipment Ratios
Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-30), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-02).
| 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. | Northrop Grumman Corp.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-30), 10-K (filing date: 2016-02-01), 10-K (filing date: 2015-02-02).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, at cost – Land and land improvements)
= 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. | Northrop Grumman Corp.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |