During 201S, the company reponed Estimate the percent depreciated of Koala\'s th

Question

During 201S, the company reponed Estimate the percent depreciated of Koala's the percent depreciated of Koala's depreciable assets. Hou uo ul The following information is from Note 12 to the 2013 annual report of Burberry Group pl ish luxury goods manufacturer, wroesaler, and retailer ( millions): g and Interpreting Percent Depreciated and PPE Turnover BURBERRY GROUP PLC (UNITED KINGDOM) 12. Property, plant and equipment Fixtures, Assets in the Freehold land and Leasehold fittings and course of buildings im ents equ Cost 366.3 270.9 23.2 796 247.6 34.5 607.2 Accumulated depreciation and impairment 141.2 110.4 207.3 151.1 39.2 3877 278.4 Net book value As at March 31, 2013... As at March 31, 2012... 161.9 137.2 .65.0 159.0 119.8 23.2 409. 34.5 328.8

Explanation / Answer

1 Calculation of the percent depreciated ratio for each year Total Assets as on 31st march 2012 Meaning of Accumulated Depreciation to Fixed Asset Ratio or the percent depreciated ratio It Represents the lost of value on a fixed asset over time as it ages and becomes useless. By comparing the total amount a company has used its assets to total value of assets is useful for determining the current value and importantly the useful life of the asset. Depending on the type of the asset different depreciation schedules are used.This is the most important factor and is monitored closely by the organisation. Assumption Since the land value have to be omitted while calculating this ratio but since here the leashold land and building is clubbed in one figure the value of the land cannot be seperated ascertained and reduced from the Total value of Freehold Land and Buildings So the total Value of land and Building is taken for calculation Formula : Accumulated Deprecaition to Fixed Asset Ratio Accumulated Deprecaition/Fixed Assets Here we calculate for the individual items in the PPE schedule Year 2012 in GBP millions Cost Accumulated Deprecation Formula Ratio FreeHold Land and Building 54.2 16.9 (16.9/54.2) 31.18% Leashold Improvements 247.6 110.4 (110.4/247.6) 44.59% Fixture Fittings and Improvement 270.9 151.1 (151.1/270.9) 55.78% Assets in Course of Construction 34.5 Nil Not to be calculated NA Total PPE 607.2 278.4 (278.4/607.2) 45.85% Year 2013 in GBP millions FreeHold Land and Building 104.2 39.2 (39.2/104.2) 37.62% Leashold Improvements 303.1 141.2 (141.2/303.1) 46.59% Fixture Fittings and Improvement 366.3 207.3 (207.3/366.3) 56.59% Assets in Course of Construction 23.2 Nil Not to be calculated NA Total PPE 796.8 387.7 (387.7/796.8) 48.68% 2 The formula for PPE Turnover ratio is given as below PPET = Revenue/ending PPE Since the sales revenue totalled GBP 1998.7 Million in 2013 1998.7/(796.8-387.7) 4.89 3 Comment on these ratios: The first one is the Percent Depreciated ratio Since Investors and Management use this ratio calculation to measure the productiveness of the company invested capital.A low ratio means that the assets have plenty of life in them and should be able to used for years to come . Oppositely the high ratio indicates the assets usefulness and most importantly the financial value is used up and and the company need to replace the assets in the near future. Since in the given question as per calculation we can see that Fixture Fittings and Improvement is more than the other categories like leashold improvements and and the leasehold land and building it means that the assets like Fixture fittings have been utilized much more to the assets usefulness and its life Also the total value of PPE it is seen that the ratio have increased from 45.85% to 48.68% the assets utilization have increased as compared to last year 2012 However this comparison have to be compared with the industry standard which is currently missing in the problem. The second one is PPET Turnover Ratio The PPET turnover ratio tells about how much dollar invested in PPE will give how much of revenue. it is a measure of how efficient the company is generating the revenue from fixed assets such as building, land and Fixture and Fittings etc Since in the given problem we have only the turnover for 2013 we can interpreate that the company generated $4.89 in sales revenue for every $1 of PPE.

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