Property, Plant and Equipment

Changes in property, plant and equipment in 2018 were as follows:

Changes in Property, Plant and Equipment

 

 

Land and buildings

 

Plant installations and machinery

 

Furniture, fixtures and other equipment

 

Construction in progress and advance payments

 

Total

 

 

€ million

 

€ million

 

€ million

 

€ million

 

€ million

Cost of acquisition or construction, December 31, 2017

 

6,706

 

8,646

 

1,721

 

1,763

 

18,836

Acquisitions

 

2,209

 

2,167

 

318

 

961

 

5,655

Capital expenditures

 

196

 

378

 

183

 

1,108

 

1,865

Retirements

 

(79)

 

(370)

 

(174)

 

(6)

 

(629)

Transfers

 

370

 

704

 

49

 

(1,123)

 

Transfers (IFRS 5)

 

(356)

 

(329)

 

(79)

 

170

 

(594)

Divestments / Changes in the scope of consolidation

 

(2)

 

 

4

 

1

 

3

Inflation adjustment (IAS 29)

 

63

 

58

 

13

 

10

 

144

Exchange differences

 

88

 

79

 

1

 

11

 

179

December 31, 2018

 

9,195

 

11,333

 

2,036

 

2,895

 

25,459

Accumulated depreciation and impairments, December 31, 2017

 

3,661

 

6,267

 

1,256

 

19

 

11,203

Retirements

 

(39)

 

(353)

 

(150)

 

(6)

 

(548)

Depreciation and impairment losses

 

473

 

802

 

235

 

471

 

1,981

Depreciation

 

316

 

752

 

233

 

 

1,301

Impairment losses

 

157

 

50

 

2

 

471

 

680

Impairment loss reversals

 

 

 

 

 

Transfers

 

4

 

7

 

(11)

 

 

Transfers (IFRS 5)

 

(116)

 

(101)

 

(47)

 

 

(264)

Divestments / Changes in the scope of consolidation

 

 

 

2

 

 

2

Inflation adjustment (IAS 29)

 

34

 

46

 

10

 

 

90

Exchange differences

 

28

 

26

 

(4)

 

1

 

51

December 31, 2018

 

4,045

 

6,694

 

1,291

 

485

 

12,515

Carrying amounts, December 31, 2018

 

5,150

 

4,639

 

745

 

2,410

 

12,944

Carrying amounts, December 31, 2017

 

3,045

 

2,379

 

465

 

1,744

 

7,633

Impairment losses on property, plant and equipment amounted to €680 million, including in particular €519 million resulting from the decision regarding Factor VIII facilities in Wuppertal and Berkeley in the Pharmaceuticals segment, along with €132 million pertaining to a Chinese production facility in the Consumer Health segment.

In 2018, borrowing costs of €56 million (2017: €31 million) were capitalized as components of the cost of acquisition or construction of qualifying assets, applying an average interest rate of 3.5% (2017: 2.5%).

Capitalized property, plant and equipment included assets with a total net value of €353 million (2017: €231 million) held under finance leases. The cost of acquisition or construction of these assets as of the closing date totaled €511 million (2017: €368 million). They comprised buildings with a carrying amount of €136 million (2017: €98 million), plant installations and machinery with a carrying amount of €151 million (2017: €75 million), and other property, plant and equipment with a carrying amount of €66 million (2017: €58 million). For information on the liabilities arising from finance leases, see Note “Financial liabilities.”

In 2018, rental payments of €565 million (2017: €385 million) were made for assets leased under operating leases as defined in IAS 17 (Leases).

Sublease agreements exist primarily for company cars and accommodation for employees on overseas assignments. Minimum lease payments expected to be received under these subleases in the future amount to €30 million, while the rental expenses thereunder in 2018 amounted to €26 million.

Through its acquisition of Monsanto, Bayer acquired a property that was transferred to the County of St. Louis, Missouri, United States, in 2013 in return for industrial revenue bonds. This property was then leased back to Monsanto through December 31, 2026. A buyback option exists at the end of the rental period. In view of the economic substance of the agreement, the rental payment obligations are netted against the right to receive payment from the industrial revenue bonds in the statement of financial position.

Bayer leases buildings under operating leases, some of which Bayer can extend when the original term of the lease expires. Of these leases, some contain an early termination option that in certain cases involves a compensation payment. Some leases are subject to price adjustments based on the market rates prevailing at the time or due to changes in the value of regional price indices.

Changes in property, plant and equipment in 2017 were as follows:

Changes in Property, Plant and Equipment (Previous Year)

 

 

Land and buildings

 

Plant installations and machinery

 

Furniture, fixtures and other equipment

 

Construction in progress and advance payments

 

Total

 

 

€ million

 

€ million

 

€ million

 

€ million

 

€ million

Cost of acquisition or construction, December 31, 2016

 

10,346

 

20,335

 

2,297

 

2,551

 

35,529

Acquisitions

 

 

 

 

 

Capital expenditures

 

286

 

460

 

193

 

1,022

 

1,961

Retirements

 

(82)

 

(304)

 

(143)

 

 

(529)

Transfers

 

282

 

699

 

52

 

(1,033)

 

Transfers (IFRS 5)

 

(498)

 

(601)

 

(66)

 

(240)

 

(1,405)

Divestments / Changes in the scope of consolidation

 

(3,167)

 

(11,059)

 

(500)

 

(455)

 

(15,181)

Inflation adjustment (IAS 29)

 

5

 

 

 

 

5

Exchange differences

 

(466)

 

(884)

 

(112)

 

(82)

 

(1,544)

December 31, 2017

 

6,706

 

8,646

 

1,721

 

1,763

 

18,836

Accumulated depreciation and impairments, December 31, 2016

 

5,592

 

15,111

 

1,685

 

27

 

22,415

Retirements

 

(60)

 

(280)

 

(125)

 

 

(465)

Depreciation and impairment losses

 

334

 

893

 

223

 

5

 

1,455

Depreciation

 

310

 

860

 

222

 

 

1,392

Impairment losses

 

24

 

33

 

1

 

5

 

63

Impairment loss reversals

 

(7)

 

(6)

 

 

 

(13)

Transfers

 

6

 

4

 

(1)

 

(9)

 

Transfers (IFRS 5)

 

(82)

 

(214)

 

(31)

 

 

(327)

Divestments / Changes in the scope of consolidation

 

(1,923)

 

(8,631)

 

(420)

 

(1)

 

(10,975)

Exchange differences

 

(199)

 

(610)

 

(75)

 

(3)

 

(887)

December 31, 2017

 

3,661

 

6,267

 

1,256

 

19

 

11,203

Carrying amounts, December 31, 2017

 

3,045

 

2,379

 

465

 

1,744

 

7,633

Carrying amounts, December 31, 2016

 

4,754

 

5,224

 

612

 

2,524

 

13,114

Investment property

The total carrying amount of investment property as of December 31, 2018, was €96 million (December 31, 2017: €97 million). The fair value of this property was €383 million (2017: €336 million). The rental income from investment property was €14 million (2017: €14 million), and the operating expenses directly allocable to this property amounted to €5 million (2017: €4 million).

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