Relative Age Percentage (or Average Age Percentage) is used to measure the relative age of PP&E and the measurement is valid only when SL method is used. When the relative age is high, it suggests the firm may not be adding/modernizing its capital stock. I’m wondering how high is considered high? Reading 37 p. 418 #6 Roche’s accounting policy shows its machinery & equip. stated life as 5 -15 yrs. Based on the given data, we calculated the avg. age % for '97, '98 and '99 are 54.7%, 53.6% and 53.2% respectively. The answer for part B seems telling me these ratios suggests that most assets in this category are depreciated over 15 yrs despite the stated 5 -15 yrs. How does this conclusion come from? Is it because all ratios supassed 50%? Then the answer for part C went on saying these SAME ratios suggest that Roche’s physical facilities are modern. Now I’m confused: based on the results, are Roche’s machineray and equip. new or old? The answers are conflicting to me. Your take?
Look at average depreciable life. It is 15/12/12 for the 3 years, indicating that most equipment is old.
So what ratios tell Roche’s physical facilities are modern? I think the answer to C is wrong.
average age % is around 34%, thus pretty modern
I see. So you are talking about the ratios of buildings and land improvements … I mixed them up 'cause the explanation goes back and forth betwn these two categories. Thx.