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Verizon Communications Inc. (VZ)
Analysis of Property, Plant and Equipment
Advanced level
Accounting Policy on Property, Plant and Equipment
Verizon records property, plant and equipment at cost. Property, plant and equipment are generally depreciated on a straight-line basis.
Leasehold improvements are amortized over the shorter of the estimated life of the improvement or the remaining term of the related lease, calculated from the time the asset was placed in service.
When depreciable assets are retired or otherwise disposed of, the related cost and accumulated depreciation are deducted from the property, plant and equipment accounts and any gains or losses on disposition are recognized in income.
Verizon capitalizes and depreciates network software purchased or developed along with related property, plant and equipment assets. Verizon also capitalizes interest associated with the acquisition or construction of network-related assets. Capitalized interest is reported as a reduction in interest expense and depreciated as part of the cost of the network-related assets.
In connection with the ongoing review of the estimated useful lives of property, plant and equipment during 2018, Verizon determined that the average useful lives of certain assets would be increased. These changes in estimates were applied prospectively and resulted in a decrease to depreciation expense of $0.3 billion for the year ended 2018. In addition, during 2016 Verizon determined that the average useful lives of certain leasehold improvements would be increased from 5 to 7 years. This change resulted in decreases to depreciation expense of $0.1 billion, $0.1 billion and $0.2 billion in 2018, 2017 and 2016, respectively. Verizon determined that changes were also necessary to the remaining estimated useful lives of certain assets as a result of technology changes, enhancements and planned retirements. These changes resulted in increases in depreciation expense of $0.5 billion, $0.3 billion and $0.3 billion in 2018, 2017 and 2016, respectively. While the timing and extent of current deployment plans are subject to ongoing analysis and modification, Verizon believes that the current estimates of useful lives are reasonable.
Source: 10-K (filing date: 2019-02-15).
Property, Plant and Equipment Disclosure
Verizon Communications Inc., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-23).
| Item | Description | The company |
|---|---|---|
| Plant, 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. | Verizon Communications Inc.’s plant, property and equipment, at cost increased from 2016 to 2017 and from 2017 to 2018. |
| Plant, property 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. | Verizon Communications Inc.’s plant, property and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Asset Age Ratios (Summary)
Verizon Communications Inc., asset age ratios
Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-23).
| Asset age ratio | Description | The company |
|---|---|---|
| Average age ratio | 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. | Verizon Communications Inc.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 and 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. | Verizon Communications Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly decreased from 2017 to 2018. |
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Verizon Communications 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 | Verizon Communications Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then decreased significantly from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-23).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Plant, property and equipment, at cost – Land)
= 100 × ÷ ( – ) =
| Asset age 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. | Verizon Communications Inc.’s average age ratio of depreciable property, plant and equipment deteriorated from 2016 to 2017 and from 2017 to 2018. |
Estimated Total Useful Life
Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-23).
2018 Calculations
1 Estimated total useful life = (Plant, property and equipment, at cost – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Asset age 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. | Verizon Communications Inc.’s estimated total useful life of depreciable property, plant and equipment increased from 2016 to 2017 but then slightly decreased from 2017 to 2018. |
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-23).
2018 Calculations
1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= ÷ =
| Asset age ratio | Description | The company |
|---|---|---|
| Estimated time elapsed since purchase | The approximate age in years of a company’s fixed assets. Useful for comparison purposes. | Verizon Communications 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
Based on: 10-K (filing date: 2019-02-15), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-23), 10-K (filing date: 2015-02-23).
2018 Calculations
1 Estimated remaining life = (Plant, property and equipment, net – Land) ÷ Depreciation expense
= ( – ) ÷ =
| Asset age ratio | Description | The company |
|---|---|---|
| Estimated remaining life | Verizon Communications Inc.’s estimated remaining life of depreciable property, plant and equipment increased from 2016 to 2017 but then decreased significantly from 2017 to 2018. |