14. [Analysis of fixed assets] Roche's summary of significant accounting policies states Property, plant and equipment are initially recorded at cost of purchase or construction and are depreciated on a straight-line basis, except for land, which is not depreciated Estimated useful lives of major classes of depreciable as- sets are as follows. Buildings and land improvements Machinery and equipment Office equipment 40 years 5 15 years 3 years 5 years Motor vehicles The following data were obtained from Roche's annual reports (the 1999 data are located in Note 12 of its 2000 annual report): Property, plant, and equipment (CHF millions) 1997 1998 1999 Buildings and land improvements. Gross investment $ 7,576 $ 7,947 $8.578 Accumulated depreciation (2,580) (2,695) (2.944) Net investment S 4,996 $ 5,252 $ 5,634 Depreciation expense 233 195 210 Machinery and equipment Gross investment $10,529 $11,350 $13,174 Accumulated depreciation (5.755) (6,079) (7.015) Net investment $ 4.774 $ 5,271 $ 6.159 Depreciation expense 692 948 1.036

a. Using the above data, compute each of the following ratios for all three years: (i) Average depreciable life (years) (ii) Average age (years) (iii) Average age (%)

b. Compare the result of part a (1) with the accounting policy statement above.

c. Discuss the three-year trend of the three ratios in part a for both fixed-asset classes.

d. State the questions you would ask management after review- ing parts a through c above.