Q » Topics » Note 7: Property, Plant and Equipment

These excerpts taken from the Q 10-K filed Feb 13, 2009.

Property, Plant and Equipment

        Property, plant and equipment are carried at cost, plus the estimated value of any associated legally or contractually required retirement obligations. Property, plant and equipment are depreciated primarily using the straight-line group method. Under the straight-line group method, assets dedicated to providing telecommunications services (which comprise the majority of our property, plant and equipment) that have similar physical characteristics, use and expected useful lives are categorized in the year acquired on the basis of equal life groups for purposes of depreciation and tracking. Generally, under the straight-line group method, when an asset is sold or retired, the cost is deducted from property, plant and equipment and charged to accumulated depreciation without recognition of a gain or loss. A gain or loss is recognized in our consolidated statements of operations only if a disposal is abnormal or unusual. Leasehold improvements are amortized over the shorter of the useful lives of the assets or the lease term. Expenditures for maintenance and repairs are expensed as incurred. Interest is capitalized during the construction phase of network and other internal-use capital projects.

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QWEST COMMUNICATIONS INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the Years Ended December 31, 2008, 2007 and 2006

Note 2: Summary of Significant Accounting Policies (Continued)


Employee-related costs directly related to construction of internal use assets are also capitalized during the construction phase. Property, plant and equipment supplies used internally are carried at average cost, except for significant individual items for which cost is based on specific identification.

        We perform annual internal studies or reviews to determine depreciable lives for our property, plant and equipment. Our studies utilize models that take into account actual usage, physical wear and tear, replacement history, assumptions about technology evolution and, in certain instances, actuarially determined probabilities to calculate the remaining life of our asset base.

        We have asset retirement obligations associated with the legally or contractually required removal of a limited group of property, plant and equipment assets from leased properties, and the disposal of certain hazardous materials present in our owned properties. When an asset retirement obligation is identified, usually in association with the acquisition of the asset, we record the fair value of the obligation as a liability. The fair value of the obligation is also capitalized as property, plant and equipment and then amortized over the estimated remaining useful life of the associated asset. Where the removal obligation is not legally binding, the net cost to remove assets is expensed in the period in which the costs are actually incurred.

Note 6: Property, Plant and Equipment

        The components of our property, plant and equipment as of December 31, 2008 and 2007 are as follows:

 
   
  December 31,  
 
  Depreciable
Lives
 
 
  2008   2007  
 
   
  (Dollars in millions)
 

Property, plant and equipment—net:

                 
 

Land

  N/A   $ 101   $ 101  
 

Buildings

  15-30 years     3,412     3,388  
 

Communications equipment

  5-10 years     20,047     19,832  
 

Other network equipment

  8-45 years     20,927     20,904  
 

General purpose computers and other

  5-11 years     2,104     2,190  
 

Construction in progress

  N/A     179     231  
               

Total property, plant and equipment

        46,770     46,646  
 

Less: accumulated depreciation

        (33,725 )   (32,975 )
               

Property, plant and equipment—net

      $ 13,045   $ 13,671  
               

        During 2008, we recognized charges of approximately $6 million, or less than $0.01 per basic and diluted share, for impairment of network assets associated with the transition to our new Verizon Wireless arrangement from our pre-existing wireless services arrangement with a different provider.

        In 2008, as a result of decisions to discontinue certain product offerings and exiting our expiring wireless services arrangement, we changed our estimates of the remaining economic lives of certain assets, which accelerated the depreciation of those assets. This change resulted in additional depreciation expense of $21 million for the year ended December 31, 2008. The additional depreciation, net of deferred taxes, reduced net income by approximately $13 million, or less than $0.01 per basic and diluted share, for the year ended December 31, 2008.

        During 2007, we changed the estimates of the remaining economic lives of our communications and other network equipment. This resulted in a net increase in depreciation expense in our consolidated statements of operations of $19 million ($0.01 per basic and diluted share) for the year ended December 31, 2007.

This excerpt taken from the Q 8-K filed Apr 4, 2008.

Note 7: Property, Plant and Equipment

The components of our property, plant and equipment as of December 31, 2007 and 2006 are as follows:

 

     Depreciable
Lives
   December 31,  
        2007     2006  
          (Dollars in millions)  

Property, plant and equipment—net:

       

Land

   N/A    $ 101     $ 100  

Buildings

   15-30 years      3,388       3,355  

Communications equipment

   7-10 years      19,832       20,052  

Other network equipment

   8-45 years      20,904       20,440  

General purpose computers and other

   4-11 years      2,190       2,285  

Construction in progress

   N/A      231       142  
                   

Total property, plant and equipment

        46,646       46,374  

Less: accumulated depreciation

        (32,975 )     (31,795 )
                   

Property, plant and equipment—net

      $ 13,671     $ 14,579  
                   

During 2007 and 2006, we changed the estimates of the remaining economic lives of our communications and other network equipment. This resulted in a net increase in depreciation expense in our consolidated statements of operations of $19 million ($0.01 per basic and diluted share) in 2007 and $27 million ($0.01 per basic and diluted share) in 2006.

 

20


QWEST COMMUNICATIONS INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2007, 2006 and 2005

 

This excerpt taken from the Q 10-K filed Feb 12, 2008.

Note 7: Property, Plant and Equipment

The components of our property, plant and equipment as of December 31, 2007 and 2006 are as follows:

 

     Depreciable
Lives
   December 31,
      2007    2006
          (Dollars in millions)

Property, plant and equipment—net:

        

Land

   N/A    $101    $100

Buildings

   15-30 years    3,388    3,355

Communications equipment

   7-10 years    19,832    20,052

Other network equipment

   8-45 years    20,904    20,440

General purpose computers and other

   4-11 years    2,190    2,285

Construction in progress

   N/A    231    142
            

Total property, plant and equipment

      46,646    46,374

Less: accumulated depreciation

      (32,975)    (31,795)
            

Property, plant and equipment—net

      $13,671    $14,579
            

During 2007 and 2006, we changed the estimates of the remaining economic lives of our communications and other network equipment. This resulted in a net increase in depreciation expense in our consolidated statements of operations of $19 million ($0.01 per basic and diluted share) in 2007 and $27 million ($0.01 per basic and diluted share) in 2006.

This excerpt taken from the Q 10-K filed Feb 8, 2007.

Note 6: Property, Plant and Equipment

The components of property, plant and equipment as of December 31, 2006 and 2005 are as follows:

 

     Depreciable
Lives
   December 31,  
      2006     2005  
          (Dollars in millions)  

Property, plant and equipment—net:

       

Land

   N/A    $ 100     $ 104  

Buildings

   15-30 years      3,355       3,486  

Communications equipment

   8-10 years      20,052       19,505  

Other network equipment

   8-50 years      20,440       19,964  

General purpose computers and other

   4-11 years      2,285       2,686  

Construction in progress

   N/A      142       209  
                   

Total property, plant and equipment

        46,374       45,954  

Less: accumulated depreciation

        (31,795 )     (30,386 )
                   

Property, plant and equipment—net

      $ 14,579     $ 15,568  
                   

 

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QWEST COMMUNICATIONS INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

For the Years Ended December 31, 2006, 2005 and 2004

 

This excerpt taken from the Q 10-K filed Feb 16, 2006.

Note 4: Property, Plant and Equipment

 

The components of property, plant and equipment are as follows:

 

    

Depreciable

Lives


     December 31,

 
        2005

    2004

 
            (Dollars in millions)  

Land

   N/A      $ 104     $ 107  

Buildings

   15-40 years        3,486       3,588  

Communications equipment

   8-10 years        19,505       19,346  

Other network equipment

   8-50 years        19,964       19,355  

General purpose computers and other

   3-11 years        2,686       2,844  

Construction in progress

   N/A        209       188  
           


 


Total property, plant and equipment

            45,954       45,428  

Less: accumulated depreciation

            (30,386 )     (28,575 )
           


 


Property, plant and equipment—net

          $ 15,568     $ 16,853  
           


 


 

Asset impairments recognized for property, plant and equipment and internal use software projects for the years ended December 31, 2005, 2004 and 2003 were $0 million, $113 million, and $230 million, respectively.

 

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QWEST COMMUNICATIONS INTERNATIONAL INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

For the Years Ended December 31, 2005, 2004 and 2003

 

This excerpt taken from the Q 8-K filed Mar 31, 2005.

Note 4: Property, Plant and Equipment

        The components of property, plant and equipment are as follows:

 
   
  December 31,
 
 
  Depreciable
Lives

 
 
  2004
  2003
 
 
   
  (Dollars in millions)

 
Land   N/A   $ 107   $ 113  
Buildings   30-40 years     3,588     3,559  
Communications equipment   7-10 years     19,346     18,913  
Other network equipment   8-50 years     19,355     19,324  
General purpose computers and other   3-11 years     2,844     2,942  
Construction in progress   N/A     188     243  
       
 
 
  Total property, plant and equipment         45,428     45,094  
Less: accumulated depreciation         (28,575 )   (26,945 )
       
 
 
  Property, plant and equipment—net       $ 16,853   $ 18,149  
       
 
 

F-14


        A summary of asset impairments recognized is as follows:

 
  Years Ended December 31,
 
  2004
  2003
  2002
 
  (Dollars in millions)

Property, plant and equipment and internal use software projects   $ 113   $ 230   $ 10,493
Real estate assets held for sale             28
Capitalized software due to restructuring and Merger activities             4
   
 
 
  Total asset impairments   $ 113   $ 230   $ 10,525
   
 
 
This excerpt taken from the Q 10-K filed Feb 18, 2005.

Note 4: Property, Plant and Equipment

        The components of property, plant and equipment are as follows:

 
   
  December 31,
 
 
  Depreciable
Lives

 
 
  2004
  2003
 
 
   
  (Dollars in millions)

 
Land   N/A   $ 107   $ 113  
Buildings   30-40 years     3,588     3,559  
Communications equipment   7-10 years     19,346     18,913  
Other network equipment   8-50 years     19,355     19,324  
General purpose computers and other   3-11 years     2,844     2,942  
Construction in progress   N/A     188     243  
       
 
 
  Total property, plant and equipment         45,428     45,094  
Less: accumulated depreciation         (28,575 )   (26,945 )
       
 
 
  Property, plant and equipment—net       $ 16,853   $ 18,149  
       
 
 

        A summary of asset impairments recognized is as follows:

 
  Years Ended December 31,
 
  2004
  2003
  2002
 
  (Dollars in millions)

Property, plant and equipment and internal use software projects   $ 113   $ 230   $ 10,493
Real estate assets held for sale             28
Capitalized software due to restructuring and Merger activities             4
   
 
 
  Total asset impairments   $ 113   $ 230   $ 10,525
   
 
 
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