Arla Foods Consolidated Annual Report 2021
87
Arla Foods Consolidated Annual Report 2021 / Consolidated Financial Statements / Notes
Capital employed
3.2 PROPERTY, PLANT AND EQUIPMENT
Investments in and depreciation of property, plant and equipment and right of use assets
(EURM)
600
400
200
248
0
2017
298
383
2018
Right of use assets
Depreciation of property, plant and equipment
Investments in property, plant and equipment
306
580
102
521
506
69
81
478
452
406
425
381
367
67
70
314
2019
297
2020
Contents
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2021
74
332
2020
50
20-30
5-20
3-7
50
20-30
5-20
3-7
å
Accounting policies
Property, plant and equipment are measured at cost
less accumulated depreciation and accumulated
impairment losses. Assets under construction, land
and decommissioned plants are not depreciated.
Cost
Cost comprises the acquisition price as well as costs
directly associated with an asset until the asset is ready
for its intended use. For self-constructed assets, cost
comprises direct and indirect costs relating to materials,
components, payroll and the borrowing costs from
specific and general borrowing that directly concerns
the construction of assets. If significant parts of an item
of property, plant and equipment have different useful
lives, they are recognised as separate items (major
components) and depreciated separately. When
component parts are replaced, any remaining carrying
amount of replaced parts is removed from the balance
sheet and recognised as an accelerated depreciation
charge in the income statement. Subsequent
expenditure items of property, plant and equipment are
only recognised as an addition to the carrying amount
of the item, when it is likely that incurring the cost will
result in financial benefits for the group. Other costs
such as general repair and maintenance are recognised
in the income statement when incurred.
Depreciation
Depreciation aims to allocate the cost of the asset, less
any amounts estimated to be recoverable at the end of
its expected use, to the periods in which the group
obtains benefits from its use. Property, plant and
equipment are depreciated on a straight-line basis from
the time of acquisition, or when the asset is available for
use based on an assessment of the estimated useful life.
The depreciation base is measured taking into account
the residual value of the asset, being the estimated
value the asset can generate through sale or scrappage
at the balance sheet date if the asset was of the age
and in the condition expected at the end of its useful
life, and reduced by any impairment made. The residual
value is determined at the date of acquisition and is
reviewed annually. Depreciation ceases when the
carrying amount of an item is lower than the residual
value, or when an item is decommissioned. Changes
during the depreciation period or in the residual value
are treated as changes to accounting estimates, the
effect of which is adjusted only in current and future
periods. Depreciation is recognised in the income
statement in production costs, selling and distribution
costs or administration costs.
A Uncertainties and estimates
Estimates are made in assessing the useful lives of
items of property, plant and equipment that determine
the period over which the depreciable amount of the
asset is expensed in the income statement. The
depreciable amount of an item of property, plant and
equipment is a function of the asset's cost or carrying
amount and its residual value. Estimates are made in
assessing the amount that the group can recover at the
end of the useful life of an asset. An annual review is
performed to assess the appropriateness of the
depreciation method, useful life and residual values of
items of property, plant and equipment.
Table 3.2.b Estimated useful life in years
2021
(EURM)
Office buildings
Production buildings
Technical plant
Other fixtures and fittings, tools and equipmentView entire presentation