Accounting policy

General

Property, plant, and equipment are tangible items that:

  • are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and
  • are expected to be used during more than one period.

The items of property, plant, and equipment owned by the Group are recognized as property, plant, and equipment when the following conditions are satisfied:

  • it is probable that the future economic benefits associated with the asset will flow to the Group;
  • the cost of the asset can be measured reliably.

Items of property, plant, and equipment are initially measured at cost. The cost of an item of property, plant, and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. If applicable, the cost comprises borrowing costs during the construction period.

After initial recognition, items of property, plant, and equipment are measured at cost less accumulated depreciation and impairment losses, if any.

Items of property, plant, and equipment are depreciated on a straight-line basis over their estimated useful lives. The components of an item of property, plant, and equipment with different useful lives are depreciated separately. Land is not depreciated. The estimated useful lives, residual values, and depreciation methods are reviewed at each year end, and any changes in estimates are accounted for prospectively.

Buildings

 

30-40 years

IT equipment

 

3-5 years

Machinery and equipment

 

10-20 years

Transportation equipment

 

5-20 years

Depreciation expense is included in the consolidated income statement within cost of goods sold, administrative costs, and R&D costs.

The asset is tested for impairment if there is a trigger for impairment (see note F27 Impairment of property, plant, and equipment, intangible assets, and equity method investees).

Items of property, plant, and equipment are derecognized from the consolidated statement of financial position on disposal or when no future economic benefits are expected from their use or disposal. The gain or loss arising from the derecognition of an item of property, plant, and equipment is recognized in profit or loss at the moment of derecognition.

Subsequent expenditure

Subsequent expenditure related to items of property, plant, and equipment is capitalized only if it is probable that it will increase the future economic benefits associated with the specific asset. Other expenditure is recognized in profit or loss as incurred. Subsequent expenditure incurred for the replacement of a component of an item of property, plant, and equipment is recognized as an asset only if it satisfies the recognition criteria mentioned above. The carrying amount of replaced items is derecognized.

Repair and maintenance costs are recognized in the consolidated income statement as incurred.

Regarding its industrial activity, Solvay incurs expenditure for major repairs over several years for most of its sites. The purpose of this expenditure is to maintain certain installations in proper working order without altering their useful life. This expenditure is considered a specific component of the item of property, plant, and equipment and is depreciated over the period during which the economic benefits are expected to be obtained, i.e. the interval between major repairs.

Dismantling and restoration costs

Dismantling and restoration costs are included in the cost of an item of property, plant, and equipment if the Group has a legal or constructive obligation to dismantle or restore. They are depreciated over the useful life of the items to which they pertain.

Generally, Solvay’s obligation to dismantle and/or restore its operating sites is likely to arise only upon the discontinuation of a site’s activities. A provision for dismantling discontinued sites or installations is recognized if there is a legal obligation (due to a request or injunction from the relevant authorities), or if there is no technical alternative to dismantling, so to ensure the safety compliance of the discontinued sites or installations.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

In € million

 

Land and buildings

 

Fixtures and equipment

 

Other tangible assets

 

Property, plant and equipment under construction

 

Total

Gross carrying amount

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

3,237

 

10,929

 

409

 

916

 

15,492

Additions

 

80

 

241

 

16

 

352

 

689

Disposals and closures

 

(34)

 

(266)

 

(22)

 

(1)

 

(322)

Increase through business combinations

 

 

 

22

 

(1)

 

 

 

21

Currency translation differences

 

(149)

 

(594)

 

(21)

 

(46)

 

(808)

Other

 

64

 

451

 

17

 

(551)

 

(19)

Transfer to assets held for sale

 

(354)

 

(1,422)

 

(20)

 

(86)

 

(1,882)

At December 31, 2017

 

2,844

 

9,362

 

380

 

585

 

13,171

Additions

 

15

 

123

 

12

 

547

 

697

Disposals and closures

 

(29)

 

(216)

 

(14)

 

 

 

(259)

Increase through business combinations

 

1

 

 

 

 

 

 

 

1

Currency translation differences

 

19

 

78

 

1

 

4

 

102

Other

 

43

 

255

 

26

 

(429)

 

(106)

Transfer to assets held for sale

 

(2)

 

(31)

 

1

 

(53)

 

(86)

At December 31, 2018

 

2,889

 

9,571

 

405

 

654

 

13,519

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

(1,543)

 

(7,181)

 

(297)

 

 

 

(9,020)

Depreciation

 

(99)

 

(517)

 

(36)

 

 

 

(652)

Impairment

 

(43)

 

(56)

 

 

 

 

 

(99)

Reversal of impairment

 

 

 

 

 

2

 

 

 

2

Disposals and closures

 

31

 

265

 

22

 

 

 

318

Currency translation differences

 

56

 

341

 

14

 

 

 

411

Other

 

19

 

(30)

 

2

 

 

 

(10)

Transfer to assets held for sale

 

220

 

1,076

 

16

 

 

 

1,312

At December 31, 2017

 

(1,359)

 

(6,101)

 

(278)

 

 

 

(7,737)

Depreciation

 

(96)

 

(462)

 

(35)

 

 

 

(592)

Impairment

 

(10)

 

(31)

 

(1)

 

 

 

(41)

Reversal of impairment

 

 

 

22

 

 

 

 

 

22

Disposals and closures

 

26

 

211

 

14

 

 

 

250

Currency translation differences

 

(6)

 

(34)

 

 

 

 

 

(41)

Other

 

33

 

67

 

 

 

 

 

101

Transfer to assets held for sale

 

8

 

(34)

 

(1)

 

 

 

(27)

At December 31, 2018

 

(1,404)

 

(6,361)

 

(301)

 

 

 

(8,065)

Net carrying amount

 

 

 

 

 

 

 

 

 

 

At December 31, 2016

 

1,695

 

3,748

 

112

 

916

 

6,472

At December 31, 2017

 

1,485

 

3,261

 

102

 

585

 

5,433

At December 31, 2018

 

1,486

 

3,210

 

104

 

654

 

5,454

The line “Other” mainly includes changes following portfolio transactions and reclassification of property, plant, and equipment under construction to the appropriate categories when they are ready for intended use.

Cash flows relating to major investments are disclosed in note F17 Cash flows from investing activities - acquisition/disposal of assets and investments.