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Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property, plant and equipment are stated at cost. Additions to property, plant and equipment generally include material, labor and overhead. Time Warner also capitalizes certain costs associated with coding, software configuration, upgrades and enhancements incurred for the development of internal use software. Depreciation is recorded on a straight-line basis over estimated useful lives. Leasehold improvements are depreciated over the lesser of the estimated useful life of the improvement or the term of the applicable lease. Time Warner periodically evaluates the depreciation periods of property, plant and equipment to determine whether a revision to its estimates of useful lives is warranted.
| Estimated Useful Lives | |
| Land | n/a |
| Buildings and improvements | 7 to 30 years |
| Capitalized software costs | 3 to 7 years |
| Furniture, fixtures and other equipment | 3 to 10 years |
Source: 10-K (filing date: 2018-02-22).
Property, Plant and Equipment Disclosure
Time Warner Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in millions
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| Furniture, fixtures and other equipment, excludes construction in progress | |
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Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
| Item | Description | The company |
|---|---|---|
| Property, plant and equipment, gross | 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. | Time Warner Inc.’s property, plant and equipment, gross increased from 2015 to 2016 and from 2016 to 2017. |
| 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. | Time Warner Inc.’s property, plant and equipment, net declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Property, Plant and Equipment Ratios (Summary)
Time Warner Inc., Property, Plant and Equipment Ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
| 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. | Time Warner Inc.’s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 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. | Time Warner Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Time Warner Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
| Estimated remaining life | Time Warner Inc.’s estimated remaining life of depreciable property, plant and equipment declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Average Age
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
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| Selected Financial Data (USD $ in millions) | ||||||
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Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – 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. | Time Warner Inc.’s average age of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 Estimated total useful life (years) = (Property, plant and equipment, gross – Land) ÷ Depreciation 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. | Time Warner Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2015 to 2016 and from 2016 to 2017. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 Time elapsed since purchase (years) = Accumulated depreciation ÷ Depreciation 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. | Time Warner Inc.’s estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017. |
Estimated Remaining Life
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 Estimated remaining life (years) = (Property, plant and equipment, net – Land) ÷ Depreciation of property, plant and equipment
= ( – ) ÷ =
| Ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Time Warner Inc.’s estimated remaining life of depreciable property, plant and equipment declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |