Estimate the age of company assets

The disclosure found in a company's footnote section of its financial statements provides useful information about the age and possible usefulness of the assets held by the company. Using the information contained in the footnote, an analyst can estimate the total age of the assets held by a company.

Analyst can consider:
· Older asset may imply the company may loss competitive advantage and major capital expenditures will be required in the future.

There are three ways to estimate the average age of a company's fixed assets:

Average depreciable life = Gross asset value / Depreciation expense.

Average age = Accumulated depreciation / Depreciation expense.

Relative age (aka average age as a % of depr life) = accumulated depreciaton / ending gross asset value

Note:
· The estimations are affected by what is included in fixed assets (asset mix). Relative age can be used only when the assets analyzed use a straight-line depreciation method.