Property, Plant And Equipment (PP&E)
A company asset that is vital to business operations but cannot be easily liquidated. The value of property, plant and equipment is typically depreciated over the estimated life of the asset, because even the longest-term assets become obsolete or useless after a period of time.
Depending on the nature of a company's business, the total value of PP&E can range from very low to extremely high compared to total assets. International accounting standard 16 deals with the accounting treatment of PP&E. Investopedia Says:
An example of a business with a high amounts of PP&E would be a shipping company, because most of its assets would be tied into its fleet of ships and administrative buildings. On the other hand, a management consulting firm would have less PP&E, because a consultant would only need a computer and an office in a building to run its operations.
This item is listed separately in most financial statements because PP&E is treated differently in accounting statements. This is because improvements, replacements and betterments can pose accounting issues depending on how the costs are recorded. Related Terms:
Asset Valuation
Cost Per Gross Addition - CPGA
Depreciation
Fixed Asset
Fundamental Analysis
Generally Accepted Accounting Principles - GAAP
Tangible Asset |