Fully depreciated assets
Hi forum. Could anyone please help me to learn how to identify fully depreciated assets among total gross fixed assets?
If company has gross PPE=100, Net PPE=50 and hence accumulated deprec of 50, how can I find out what portion of gross ppe is not being depreciated, that is what portion of gross ppe is already fully depreciated.
Also, if there is a way to calculate whether there are fully depreciated assets at all...
Thank you very much.
I am trying to figure out how much of gross ppe the company is actually using to generate revenue.
sooo you want a dep schedule by individual assets? Confused by your question
Thanks for the reply.
Not really. A rough aggregate would be sufficient. See Adoptedcheesenip21 below, he/she is getting my question well.
It's pretty much impossible to tell what portion of gross PP&E is not being depreciated unless you are given a salvage values for each asset within the account.
If you assume that there is no salvage value and you are using the straight line method, you can determine how much the company depreciated based on how much time has passed and sort of extrapolate an answer for the remaining useful life of the assets.
Usually information regarding useful lives, salvage values, and method of depreciation will be given in the 10-Ks.
Thanks for taking the time and effort. So if I assume 0 salvage value and a straight line method, then to extrapolate the amount of gross ppe not being depreciated - Should I take a rough weighted average for estimated lifes and work backwards?
Note: i am doing this in the context of Greenwald's reproduction value method, which he describes in his "from graham to Buffett" book.
Thanks again
No weighted average is necessary. Try this method: let's say you have a PP&E asset with 0 salvage value and a useful life of 10 years. The PP&E account shows $50 in book value of the asset and accumulated depreciation of $50. Basically you would add the $50+$50 together to get your initial asset value. Divide this by 10 years and you get $10 of depreciation. This means that 5 years has passed since you first purchased the asset. In this scenario there is no "fully" depreciated PP&E as the asset is still being used.
However, if in this same scenario you were given a salvage value of $30, you would need to take the initial $100 PP&E value and subtract the salvage value ($30--which is also the non-depreciable amount) to get $70, the depreciable amount. With the same useful life of 10 years, this means you would instead depreciate $7/year.
So basically salvage value=fully depreciated asset.
I gotcha. Like the other person mentioned, it's just something you'll have to do a bit of reading and digging to create. People don't want to go through the trouble of telling you what things are worth, especially when they're probably marked up more than they should be. Just depends what info is available from SEC filings, company reports, etc to be able to extrapolate some numbers out
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