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Percentage of PPE Depreciated (Age)
Financial statements contain information about the original cost of property, plant, and equipment, as well as the depreciation that has been taken since the assets’ acquisition. This permits an assessment of the relative age of a firm’s assets. The calculation involves dividing accumulated depreciation by PPE - gross. PPE - gross is simply the assets’ historical cost. Older assets have larger proportions of PPE - gross that have already been depreciated. OB’s ratio for 1997 is 47%:
This is considerably below Garan’s percentage that appears in figure 6.4 in the section "Utilization of Property, plant, and equipment (PPE)" and suggests that OB replaces its equipment more quickly than its competitor. That is, OB might have depreciated a lower percentage of its total property, plant, and equipment because it recently acquired fixed assets that have not yet generated much depreciation. Another interpretation might be that OB is a relatively young entrant into the apparel industry; an examination of OB’s history, however, indicates that this is not the case.
Property, Plant, and Equipment (PPE) Topics
- Property, Plant and Equipment (PPE)
- Initial Valuation of Property, plant, and equipment (PPE)
- Depreciation of Property, plant, and equipment (PPE)
- Expenditures After Acquisition - Property, plant, and equipment (PPE)
- Disposals of Property, plant, and equipment (PPE)
- Write-Downs - Property, plant, and equipment (PPE)
- Financial Statement Presentation of Property, plant, and equipment (PPE)
- Utilization of Property, plant, and equipment (PPE)
- Percentage of PPE Depreciated (Age)
- Evaluation of the Accounting for Property, Plant, and Equipment (PPE)
Related Noncurrent Assets Topics
