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Thermo Fisher Scientific Inc. (TMO)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment are recorded at cost. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Thermo Fisher provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings and improvements, 25 to 40 years; machinery and equipment (including software), 3 to 10 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in the accompanying statement of income.
Depreciation and amortization expense of property, plant and equipment was $526 million, $439 million and $380 million in 2018, 2017 and 2016, respectively.
Source: 10-K (filing date: 2019-02-27).
Property, Plant and Equipment Disclosure
Thermo Fisher Scientific Inc., balance sheet: property, plant and equipment
US$ in millions
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| Machinery, equipment and leasehold improvements | |
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| Property, plant and equipment, at cost | |
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| Accumulated depreciation and amortization | |
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| Property, plant and equipment, net | |
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Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).
| 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. | Thermo Fisher Scientific Inc.’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. | Thermo Fisher Scientific Inc.’s property, plant and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Thermo Fisher Scientific Inc., 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: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).
| 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. | Thermo Fisher Scientific Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 but then slightly deteriorated 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. | Thermo Fisher Scientific Inc.’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. | Thermo Fisher Scientific Inc.’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 | Thermo Fisher Scientific Inc.’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: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).
2018 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ (Property, plant 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. | Thermo Fisher Scientific Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).
2018 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, at cost – Land) ÷ Depreciation and amortization expense of property, plant 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. | Thermo Fisher Scientific Inc.’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: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).
2018 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation and amortization ÷ Depreciation and amortization expense of property, plant 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. | Thermo Fisher Scientific Inc.’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: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).
2018 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Depreciation and amortization expense of property, plant and equipment
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Thermo Fisher Scientific Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |