Palfinger Ag Case Study

Palfingers AG Property, do, and Equipment a. ) Palfingers keeping would include the spot that they entertain to store the forklifts and other large origin that they have on. The equipment would include all equipment that is requisite to make the inventory that they sell such(prenominal) as the cranes. b. ) This effect represents the broad(a) of the plant, property, and equipment that Palfinger has. This piece should be recorded as the diachronic cost that the plant, property and equipment was purchased at.This total number also has the total sum of amortized depreciation subtracted by to get the net get of PP&E that is put on the dimension sheet c. ) In the notes to the financial averments, Palfinger reports the plant, property and equipment of the following Land and equipment Undeveloped buildings and investments Plant and machinery Other plant, fixtures, fittings, and equipment Payments and assets at a lower place construction d. Prepayments and assets under c onstruction represents write offs that have prepaid for and assets that harbourt been finished yet. Because the assets arent realized and havent been used, they arent creation depreciated. The reclassification comes from al stead of depreciation from the spic-and-spanly ideal projects that now have been put to use. e. ) Palfinger depreciates its property and equipment by using straight-line depreciation over the prospective reusable lives of the relevant assets.They allocate 8-50 historic period on buildings, 3-15 years on plant and machinery, and 3-10 years on fixtures, fittings, and equipment. This insurance policy does not seem reasonable because there is a short 8-year building useful livelihood. Because of this, Palfingers ROA and EPS ratios are heavily come toed. f. You thunder mug both depreciate replacements investments, and economic regard as enhancing investments that are capitalized and depreciated over the new useful life or original useful life.The ele ction system to this would be to just expense out the costs of renovations or value enhancing investments. This way it is completely hit on the income statement, and is not shown on the balance sheet. g. ) i. harmonize to the notes to the consolidated financial statements, Palinger bought $61,444 worth of new PPE in 2007. ii. There was a variegate of ($733) concerning politics grants. According to IAS 20 government grants for property, plant, and equipment are presented as reductions of the acquisition and/or manufacturing costs.When these are deducted from the account, it lessens the amount depreciated during the life of the acquired assets. iii. disparagement expense for 2007 was $12,557. iv. exonerate book value of total disposed PPE, was $1,501 (Derived from $13,799 $12,298) h. ) To derive the prepare or injury Palfinger incurred, we compute their emergence from the exchange of PPE $1,655 and subtract it from $1,501 (net book value). This gives us a total strain of $15 4. i. ) i. on-key Line division Beg Dep. Exp Accum Dep. close Bal 1 $10,673 $1,880 $1,880 $8,793 2 8,793 1,880 3,760 6,913 3 6,913 1,880 5,640 5,033 4 5,033 1,880 7,520 3,153 5 3,153 1,880 9,400 1,273 ii. Double- declining- balance depreciation Year Beg Dep. Exp. Accum Dep. Ending Bal 1 $10,673 $4,269 $4,269 $6,404 2 6,404 2,562 6,831 3,842 3 3,842 1,537 8,368 2,305 4 2,305 922 9,290 1,383 5 1,383 cx 9,400 1,273 . ) i. Net book value at end of year 1 is $8,793. less(prenominal) what you received on the sale $7,500. Gives you a disposal loss of $1,293 using the straight-line method of depreciation. You thus add the disposal loss from the previous years depreciation $1,880, which results in a total income statement impact of $3,173. ii. Using double- declining method, the first year closedown balance of $6,404 is subtracted form the consequence of the sale netting in a elaboration of $1,096 on the disposal.Once this is subtracted form the previous years depreciatio n $4,269, you get a total income statement impact of $3,173. iii. The total income statement impact is exactly the same. The computations turn out to be identical because it is essentially a backwards way of computing the sign cost of the asset of $10,673, minus the proceeds from the sale $7,500, which both gives you $3,173. The difference surrounded by the two is perception. One reports a gain on disposals, while the other reports a loss. k. ) Palfinger Palfinger quat Caterpillar 2007 2006 2007 2006 Net PPE 149,990 98,130 9,997 8,851 summation Assets 528,314 409,366 56,132 51,449 frequent Size 28. 4% 24% 17. % 17. 2% Dep 12,557 9,980 1,797 1,602 Sales/Rev 695,623 585,205 41,962 38,869 Common Size 1. 8% 1. 7% 4. 3% 4. 1% This table shows that Palfinger has much to a greater extent assets involved in PPE at 28. 4%, than does Caterpillar 17. 8%. l. ) Palfinger Palfinger Caterpillar Caterpillar 2007 2006 2007 2006 Sales or Rev 695,623 585,205 41,962 38,869 Avg. PPE 1 24,060 94,091 9,424 8,420 PPE dollar volume 5. 61 6. 22 4. 45 4. 2 turnover went down about 11% (5. 61/6. 22) for Palfinger, we also see the condescension being less effective theyre still more efficient then Caterpillar by about 26% (5. 61/4. 45) in regards to PPE sales for every dollar spent. m. ) Depreciation, Amortization & Impairment expense1,960 lay in Depreciation & Impairment1,960 n. ) i. Due to the companies building location concept ii. Accumulated depreciation disadvantage1,755 Depreciation, Amortization, & impairment expense1,755 The credit is posted to an account the union has called revaluation reserve, if it is the initial write up. iii. 2007 Net Sales $695,623 Avg. PPE Adjusted 124,060 (1,755 x 0. 5) = 123,183 Turnover Adjusted 5. 65 The ratio has changed 5. 61 to 5. 65, which is not a very material difference. Recalculating the impact of the write offs compared to the total net PPE is considered a token(prenominal) change for the company.