Property, Plant and Equipment

Property, Plant and Equipment (PPE) are the fixed assets of the companyFixed assets are also known as non-current assets. Property, plant, and equipment includes assets that will - in the normal course of business - neither be used up in the next year nor will become a part of any product sold to customers. Some of the most common parts of property, plant, and equipment are: Land Buildings (and leasehold improvements) Transportation equipment Manufacturing equipment Office equipment Office furniture Companies with lots of property, plant, and equipment often have special categories. For example, railroad property includes: Track Ties Ballast Bridges Tunnels Signals Locomotives Freight Cars There is often a note in the financial statements - found in a company™s 10-K - that will explain the different categories of property a company owns. The market value of property, plant, and equipment can differ tremendously from the book value of property, plant, and equipment. For example, when Berkshire Hathaway liquidated its textile mills, it had to pay the buyers of the company™s manufacturing equipment to haul the equipment away. That property, plant, and equipment was literally worth less than zero. On the other hand, some companies own thousands of acres of land. All property, plant, and equipment other than land is depreciated. Land is never depreciated. However, land is not marked up to market value either. Under Generally Accepted Accounting Principles (GAAP), land is shown on the balance sheet at cost. The property, plant, and equipment line shown on the balance sheet is usually net property, plant, and equipment. This means it is the cost of the property, plant, and equipment less accumulated depreciation.