What is Allergan Depreciation, Depletion and Amortization?
Allergan's depreciation, depletion and amortization for the
three
months ended in Dec. 2014 was €51 Mil. Its depreciation, depletion and amortization for the trailing twelve months (TTM) ended in Dec. 2014 was €189 Mil.
Allergan Depreciation, Depletion and Amortization Historical Data
The historical data trend for Allergan's Depreciation, Depletion and Amortization can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
* Premium members only.
Allergan Depreciation, Depletion and Amortization Chart
Allergan Depreciation, Depletion and Amortization Calculation
Depreciation is a present expense that accounts for the past cost of an asset that is now providing benefits.
Depletion and amortization are synonyms for depreciation.
Generally:
The term depreciation is used when discussing man made tangible assets
The term depletion is used when discussing natural tangible assets
The term amortization is used when discussing intangible assets
Depreciation, Depletion and Amortization for the trailing twelve months (TTM) ended in Dec. 2014 adds up the quarterly data reported by the company within the most recent 12 months, which was €189 Mil.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Allergan (FRA:AG4) Depreciation, Depletion and Amortization Explanation
One of the key tenets of Generally Accepted Accounting Principles (GAAP) is the matching principle. The matching principle states that companies should report associated costs and benefits at the same time.
For example:
If a company buys a $300 million cruise ship in 1982 and then sells tickets to passengers for the next 30 years, the company should not report a $300 million expense in 1982 and then ticket sales for 1982 through 2012. Instead, the company should spread the purchase price of the ship (the cost) over the same time period it sells tickets (the benefit).
To create income statements that meet the matching principle, accountants use an expense called depreciation.
So, instead of reporting a $300 million purchase expense in 1982, the company might:
Report a $30 million depreciation expense in 1982, 1983, 1984...and every year after that for the 30 years the company expects to sell tickets to passengers on this cruise ship.
To calculate depreciation, a company must make estimates and choices such as:
The cost of the asset
The useful life of the asset
The salvage value of the asset at the end of its useful life
And a way of spreading the cost of the asset to match the time when the asset provides benefits
The range of different ways of spreading the cost under GAAP accounting is too long to list. However, public companies in the United States explain their depreciation choices to shareholders in a note to their financial statements. It is critical that investors read this note. Investors can find this note in the company's 10-K.
Past depreciation expenses accumulate on the balance sheet. Most public companies choose not to show this contra asset account on the balance sheet they present to shareholders. Instead, they simply show a single item. This single asset item may be marked Net. Such as Property, Plant, and Equipment - Net. It is actually the asset account netted against the contra asset account.
A contra asset account is an account that offsets an asset account. So, for example a company might have:
Property, Plant, and Equipment - Gross: $150 million
Accumulated Depreciation: $120 million
Property, Plant, and Equipment - Net: $30 million
In this case, the only item likely to be shown on the balance sheet is Property, Plant, and Equipment - Net. This is the cost of the company's property, plant, and equipment (asset account) minus the accumulated depreciation (the contra asset account). It means the company's assets cost $150 million, the company has reported $120 million in depreciation expense over the years, and the company is now reporting the assets have a book value of $30 million.
It is possible for a company to have fully depreciated assets on its balance sheet. This means the company's estimate of the useful life of the asset was shorter than the asset's actual useful life. As a result, the asset - although it is still being used - is carried on the balance sheet at its salvage value.
This is a reminder that depreciation involves estimates and choices. It is not an infallible process.
Companies do not have cash layout for depreciation. Therefore, depreciation is added back in the cash flow statement.
Although depreciation is not a cash cost, it is a real business cost because the company has to pay for the fixed assets when it purchases them. Both Warren Buffett and Charlie Munger hate the idea of EDITDA because depreciation is not included as an expense. Warren Buffett even jokingly said We prefer earnings before everything when criticizing the abuse of EDITDA.
Be Aware
Depreciation estimates make the calculation of net income susceptible to management's accounting choices. These choices can be either overly aggressive or overly conservative.
Allergan Depreciation, Depletion and Amortization Related Terms
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Allergan Inc incorporated in Delaware in 1977. It is a multi-specialty health care company. The Company is engaged in the developing and commercializing pharmaceuticals, biologics, medical devices and over-the-counter products that enable people to live life to its full potential - to see more clearly, move more freely and express themselves more fully. It offers products for the ophthalmic, neurological, medical aesthetics, medical dermatology, breast aesthetics, urological and other specialty markets in more than 100 countries around the world. It is also engaged in specialty pharmaceutical, biologic and medical device research and development. The Company's business segments are specialty pharmaceuticals and medical devices. The specialty pharmaceuticals segment produces pharmaceutical products, including: ophthalmic products for dry eye, glaucoma, inflammation, infection, allergy and retinal disease; Botox for certain therapeutic and aesthetic indications; skin care products for acne, psoriasis, eyelash growth and other prescription and over-the-counter skin care products; and urologics products. The medical devices segment produces medical devices, including: breast implants for augmentation, revision and reconstructive surgery and tissue expanders; and facial aesthetics products. The Company sells its products directly through its own sales subsidiaries in approximately 40 countries and, supplemented by independent distributors, in over 100 countries. Its products are sold to drug wholesalers, independent and chain drug stores, pharmacies, commercial optical chains, opticians, mass merchandisers, food stores, hospitals, group purchasing organizations, integrated direct hospital networks, ambulatory surgery centers, government purchasing agencies and medical practitioners. The Company also utilize distributors for its products in smaller international markets. The Company's competitors include Akorn, Inc., Alcon Laboratories, Inc./Novartis AG, Abbott Laboratories, Alimera Sciences, Inc., Bausch & Lomb, Inc., a division of Valeant, Genentech/Hoffmann La Roche AG, Merck & Co., Pfizer Inc., Regeneron Pharmaceuticals, Inc. and Santen Seiyaku. Mentor and Sientra, Inc., or Sientra, a partner of Silimed, LifeCell Corporation, CR Bard Inc. The Company's operations are subject to federal, state, local and foreign environmental laws and regulations, including the U.S. Occupational Safety and Health Act, the U.S. Toxic Substances Control Act, the U.S. Resource Conservation and Recovery Act, Superfund Amendments and Reauthorization Act, Comprehensive Environmental Response, Compensation and Liability Act and other current and potential future federal, state or local regulations.
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