Arla Foods Annual Report 2020
400
200
0
Capital employed
3.2 PROPERTY, PLANT AND EQUIPMENT
Management Review
Our Strategy Our Brands and Commercial Segments Our Responsibility Our Governance
Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Investments and depreciation property, plant and equipment and right of use assets
(EURM)
600
292
298
263
248
2016
2017
Right of use assets
Depreciation property, plant and equipment
Investments property, plant and equipment
Table 3.2.b Estimated useful life in years
(EURM)
Office buildings
Production buildings
Technical facilities
Other fixtures and fittings, tools and equipment
87 ARLA FOODS ANNUAL REPORT 2020
2018
383
306
580
102
506
81
478
425
381
367
67
70
314
297
2019
2020
2020
2019
Accounting policies
Property, plant and equipment is 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
value 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 value
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 within production
costs, sales and distribution costs or administration
costs.
♫ 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 to 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.
50
20-30
50
20-30
5-20
5-20
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