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102 Ford Motor Company | 2012 Annual Report
FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 13. NET PROPERTY AND LEASE COMMITMENTS
Net Property
Net property includes land, buildings and land improvements, machinery and equipment, special tools, 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. Special tools generally are 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 the tools decline
significantly, we accelerate the amortization reflecting the rate of decline.
Net property was as follows (in millions):
Automotive Sector
December 31,
2012
December 31,
2011
Land $ 423 $384
Buildings and land improvements 10,249 10,129
Machinery, equipment and other 35,040 34,363
Software 1,813 1,917
Construction in progress 1,783 1,311
Total land, plant and equipment and other 49,308 48,104
Accumulated depreciation (32,835) (32,874)
Net land, plant and equipment and other 16,473 15,230
Special tools, net of amortization 8,340 6,999
Total Automotive sector 24,813 22,229
Financial Services sector (a) 129 142
Total Company $ 24,942 $ 22,371
__________
(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):
2012 2011 2010
Depreciation and other amortization $ 1,794 $1,759 $ 1,956
Amortization of special tools 1,861 1,774 1,920
Total $ 3,655 $3,533 $ 3,876
Maintenance and rearrangement $ 1,352 $1,431 $ 1,397
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 removal of polychlorinated biphenyl
("PCB").
Asbestos abatement costs were estimated using site-specific surveys where available and a per/square foot estimate
where surveys were unavailable. PCB removal costs were based on historical removal costs per transformer and applied
to transformers identified by a PCB transformer global survey we conducted.