NOTE F23 Property, plant, and equipment
- Index
- 21 NOTE F21 Intangible assets
- 22 NOTE F22 Goodwill and business combinations
- 23 NOTE F23 Property, plant, and equipment
- 24 NOTE F24 Leases
- 25 NOTE F25 Assets held for sale
- 26 NOTE F26 Investments in associates and joint ventures
- 27 NOTE F27 Other investments
- 28 NOTE F28 Impairment of property, plant, and equipment, intangible assets, and equity method investees
- 29 NOTE F29 Inventories
- 30 NOTE F30 Other receivables (current)
- 31 NOTE F31 Provisions
- 32 NOTE F32 Financial instruments and financial risk management
- 33 NOTE F33 Net indebtedness
- 34 NOTE F34 Other liabilities (current)
- 35 NOTE F35 Share-based payments
Accounting policy
General
Property, plant, and equipment are tangible items that:
- are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and
- are expected to be used during more than one period.
The items of property, plant, and equipment owned by the Group are recognized as property, plant, and equipment when the following conditions are satisfied:
- it is probable that the future economic benefits associated with the asset will accrue to the Group, and
- the cost of the asset can be measured reliably.
Items of property, plant, and equipment are initially measured at cost. The cost of an item of property, plant, and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. If applicable, the cost comprises borrowing costs during the construction period.
After initial recognition, items of property, plant, and equipment are measured at cost less accumulated depreciation and impairment losses, if any.
Items of property, plant, and equipment are depreciated on a straight-line basis over their estimated useful lives. The components of an item of property, plant, and equipment with different useful lives are depreciated separately. Land is not depreciated. The estimated useful lives, residual values, and depreciation methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.
Buildings |
30-40 years |
IT equipment |
3-5 years |
Machinery and equipment |
10-20 years |
Transportation equipment |
5-20 years |
Depreciation expense is included in the consolidated income statement within cost of goods sold, commercial and administrative costs, and R&D costs.
The asset is tested for impairment if there is a trigger for impairment (see note F28 Impairment of property, plant, and equipment, intangible assets, and equity method investees).
Items of property, plant, and equipment are derecognized from the consolidated statement of financial position on disposal or when no future economic benefits are expected from their use or disposal. The gain or loss arising from the derecognition of an item of property, plant, and equipment is recognized in profit or loss at the moment of derecognition.
Subsequent expenditure
Subsequent expenditure related to items of property, plant, and equipment is capitalized only if it is probable that it will increase the future economic benefits associated with the specific asset. Other expenditure is recognized in profit or loss as incurred. Subsequent expenditure incurred for the replacement of a component of an item of property, plant, and equipment is recognized as an asset only if it satisfies the recognition criteria mentioned above. The carrying amount of replaced items is derecognized.
Repair and maintenance costs are recognized in the consolidated income statement as incurred.
Regarding its industrial activity, Solvay incurs expenditure for major repairs over several years for most of its sites. The purpose of this expenditure is to maintain certain installations in proper working order without altering their useful life. This expenditure is considered a specific component of the item of property, plant, and equipment and is depreciated over the period during which the economic benefits are expected to be obtained, i.e. the interval between major repairs.
Dismantling costs
Dismantling and restoration costs are included in the cost of an item of property, plant, and equipment if the Group has a legal or constructive obligation to dismantle or restore. They are depreciated over the useful life of the items to which they pertain.
Generally, Solvay’s obligation to dismantle and/or restore its operating sites is likely to arise only upon the discontinuation of a site’s activities. A provision for dismantling discontinued sites or installations is recognized if there is a legal obligation (due to a request or injunction from the relevant authorities), or if there is no technical alternative to dismantling, so to ensure the safety compliance of the discontinued sites or installations.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
In € million |
Land and buildings |
Fixtures and equipment |
Other tangible assets |
Property, plant and equipment under construction |
Total |
|||||
Gross carrying amount |
|
|
|
|
|
|||||
At December 31, 2015 |
3,332 |
11,718 |
480 |
1,248 |
16,778 |
|||||
Additions |
22 |
170 |
11 |
621 |
823 |
|||||
Disposals and closures |
(72) |
(302) |
(24) |
|
(397) |
|||||
Currency translation differences |
(48) |
35 |
2 |
2 |
(9) |
|||||
Other |
260 |
687 |
41 |
(922) |
66 |
|||||
Transfer to assets held for sale |
(256) |
(1,378) |
(102) |
(33) |
(1,769) |
|||||
At December 31, 2016 |
3,237 |
10,929 |
409 |
916 |
15,492 |
|||||
Additions |
80 |
241 |
16 |
352 |
689 |
|||||
Disposals and closures |
(34) |
(266) |
(22) |
(1) |
(322) |
|||||
Increase through business combinations |
|
22 |
|
|
22 |
|||||
Currency translation differences |
(149) |
(594) |
(21) |
(46) |
(808) |
|||||
Other |
64 |
451 |
17 |
(551) |
(19) |
|||||
Transfer to assets held for sale |
(354) |
(1,422) |
(20) |
(86) |
(1,882) |
|||||
At December 31, 2017 |
2,844 |
9,362 |
381 |
585 |
13,171 |
|||||
Accumulated depreciation |
|
|
|
|
|
|||||
At December 31, 2015 |
(1,530) |
(7,935) |
(367) |
|
(9,832) |
|||||
Depreciation |
(111) |
(572) |
(42) |
|
(725) |
|||||
Impairment |
(57) |
(75) |
|
|
(132) |
|||||
Reversal of impairment |
|
|
3 |
|
3 |
|||||
Disposals and closures |
41 |
301 |
23 |
|
364 |
|||||
Currency translation differences |
39 |
51 |
|
|
89 |
|||||
Other |
(7) |
(34) |
(8) |
|
(50) |
|||||
Transfer to assets held for sale |
84 |
1,083 |
96 |
|
1,263 |
|||||
At December 31, 2016 |
(1,543) |
(7,181) |
(297) |
|
(9,020) |
|||||
Depreciation |
(99) |
(517) |
(36) |
|
(652) |
|||||
Impairment |
(43) |
(56) |
|
|
(99) |
|||||
Reversal of impairment |
|
|
2 |
|
2 |
|||||
Disposals and closures |
31 |
265 |
22 |
|
318 |
|||||
Currency translation differences |
56 |
341 |
14 |
|
411 |
|||||
Other |
19 |
(30) |
2 |
|
(10) |
|||||
Transfer to assets held for sale |
220 |
1,076 |
16 |
|
1,312 |
|||||
At December 31, 2017 |
(1,359) |
(6,101) |
(278) |
|
(7,737) |
|||||
Net carrying amount |
|
|
|
|
|
|||||
At December 31, 2015 |
1,802 |
3,783 |
113 |
1,248 |
6,946 |
|||||
At December 31, 2016 |
1,695 |
3,748 |
112 |
916 |
6,472 |
|||||
At December 31, 2017 |
1,485 |
3,260 |
103 |
585 |
5,433 |
Cash flows related to major investments have been disclosed in note F17 Cash flows from investing activities – acquisition/disposal of assets and investments.