Items of property, plant, and equipment are included in a separate category on a classified balance
sheet. Property, plant, and equipment typically follows the Long-term Investments section, and is
oftentimes simply referred to as “PP&E.” Items appropriately included in this section of the balance
sheet are the physical assets deployed in the productive operation of the business, like land, buildings,
and equipment. Note that idle facilities or land held for speculation may more appropriately be listed
in some other category on the balance sheet (like long-term investments) since these items are not
in productive use. Within the PP&E section, the custom is to list PP&E according to expected life --
meaning that land (with an indefinite life) comes first, followed by buildings, then equipment. For
some businesses, the amount of PP&E can be substantial. This is the case for firms that have heavy
manufacturing operations or significant real estate holdings. Other businesses, say those that are
service or intellectual based, may actually have very little to show within this balance sheet category.
Below is an example of how a typical PP&E section of the balance sheet might appear. In the
alternative, some companies may relegate this level of detailed disclosure into a note accompanying
the financial statements, and instead just report a single number for “property, plant, and equipment,
net of accumulated depreciation” on the face of the balance sheet.
Property, Plant, and Equipment
Your goals for this “property, plant, and equipment” chapter are to learn about:
Measurement of costs appropriately assigned to property, plant, and equipment.
Equipment leases and the accounting implications.
Principles relating to service life and depreciation.
Depreciation methodology and terminology.
Double-declining balance depreciation.