Question
Property, Plant and Equipment Property and equipment are initially recorded at cost. Gains or losses on disposition are recognized as earned or incurred. Costs of
Property, Plant and Equipment
Property and equipment are initially recorded at cost. Gains or losses on disposition are recognized as earned or incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense s incurred. The following table summarizes the company's property and equipment balances and includes the estimated useful lives that are generally used to depreciate the assets on a straight-line basis:
amount in mil. | estimated useful lives | 2018 | 2017 |
Land | N/A | $25,298 | $24,801 |
Buildings and Improvements | 3-40 years | 101,155 | 98,547 |
Fixtures and equipment | 1-30 years | 52,696 | 48,998 |
Transportation equipment | 3-15 years | 2,387 | 2,845 |
Construction in progress | N/A | 3,619 | 4,301 |
Property and Equipment | $185,154 | $179,492 | |
Accumulated depreciation | (77,479) | (71,782) | |
Property and equipment, net | $107,675 | $107,710 |
Leasehold improvement are depreciated or amortized over the shorter of the estimated useful life of the asset or the remaining expected lease term. Total depreciation and amortization expense for property and equipment, property under financing obligations and property under capital leases for fiscal year 2018 and 2017 was $10,532 million, and $9,580 million, respectively.
(1) using the above PP&E footnote information, calculate the Average Useful Life for 2018.
(2) You note that the Average Useful Life calculation has increased dramatically from similar calculations in prior years. Why is this a concern for an analyst?
(3) List 3 reasons why the company's average useful life calculation may be different from the Average Useful Life calculations of a close competitor.
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