FORD MOTOR CO | 2013 | FY | 3


NET PROPERTY AND LEASE COMMITMENTS

Net Property

Net property includes land, buildings and land improvements, machinery and equipment, tooling, and other assets that we use in our normal operations.  These assets are recorded at cost, net of accumulated depreciation and impairments.  We capitalize new assets when we expect to use the asset for more than one year.  Routine maintenance and repair costs are expensed when incurred.

Property and equipment are depreciated primarily using the straight-line method over the estimated useful life of the asset.  Useful lives range from 3 years to 36 years.  The estimated useful lives generally are 14.5 years for machinery and equipment, 3 years for software (8 years for mainframe and client based software), 30 years for land improvements, and 36 years for buildings.  Tooling generally is amortized over the expected life of a product program using a straight-line method.  If the expected production volumes for major product programs associated with tooling decline significantly, we accelerate the amortization reflecting the rate of decline.

Net property was as follows (in millions):
Automotive Sector
December 31,
2013
 
December 31,
2012
Land
$
440

 
$
423

Buildings and land improvements
10,325

 
10,249

Machinery, equipment and other
34,830

 
35,040

Software
2,069

 
1,813

Construction in progress
2,110

 
1,783

Total land, plant and equipment and other
49,774

 
49,308

Accumulated depreciation
(31,476
)
 
(32,835
)
Net land, plant and equipment and other
18,298

 
16,473

Tooling, net of amortization
9,194

 
8,340

Total Automotive sector
27,492

 
24,813

Financial Services sector (a) 
124

 
129

Total Company
$
27,616

 
$
24,942

__________
(a)
Included in Financial Services other assets on our sector balance sheet.

Automotive sector property-related expenses for the years ended December 31 were as follows (in millions):
 
2013
 
2012
 
2011
Depreciation and other amortization
$
2,110

 
$
1,794

 
$
1,759

Tooling amortization
1,954

 
1,861

 
1,774

Total
$
4,064

 
$
3,655

 
$
3,533

 
 
 
 
 
 
Maintenance and rearrangement
$
1,422

 
$
1,352

 
$
1,431



Conditional Asset Retirement Obligations

We accrue for costs related to legal obligations to perform certain activities in connection with the retirement, abandonment, or disposal of our assets for which the fair value can be reasonably estimated.  These conditional asset retirement obligations relate to the estimated costs for asbestos abatement and the removal of other regulated building materials.


 

NOTE 12.  NET PROPERTY AND LEASE COMMITMENTS (Continued)

The liability for our conditional asset retirement obligations which are recorded in Other liabilities and deferred revenue was as follows (in millions):
 
December 31,
2013
 
December 31,
2012
Beginning balance
$
267

 
$
266

Liabilities settled
(5
)
 
(8
)
Revisions to estimates
(16
)
 
9

Ending balance
$
246

 
$
267



Lease Commitments

We lease land, buildings, and equipment under agreements that expire over various contractual periods. Minimum non-cancellable operating lease commitments at December 31, 2013 were as follows (in millions):
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Automotive sector
$
199

 
$
168

 
$
128

 
$
95

 
$
58

 
$
134

 
$
782

Financial Services sector
47

 
43

 
38

 
28

 
17

 
18

 
191

Total Company
$
246

 
$
211

 
$
166

 
$
123

 
$
75

 
$
152

 
$
973


Operating lease expense for the years ended December 31 was as follows (in millions):
 
2013
 
2012
 
2011
Automotive sector
$
411

 
$
404

 
$
416

Financial Services sector
105

 
106

 
124

Total Company
$
516

 
$
510

 
$
540


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