Bayer AG - Annual Report 2006 - Property, plant and equipment

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Financial Statements

18. Property, plant and equipment

Changes in property, plant and equipment in 2006 were as follows:

	Land and buildings	Plant installations and machinery	Furniture, fixtures and other equipment	Construction in progress and advance payments to vendors and sub-contractors	Total
€ million
Gross carrying amounts, December 31, 2005	7,014	12,913	1,960	910	22,797
Changes in the scope of consolidation	0	0	(1)	0	(1)
Acquisitions	784	507	204	87	1,582
Capital expenditures	130	369	184	913	1,596
Retirements	(165)	(264)	(204)	(5)	(638)
Reclassifications to current assets	(467)	(1,029)	(636)	(80)	(2,212)
Transfers	233	487	129	(795)	54
Exchange differences	(262)	(469)	(70)	(59)	(860)
Gross carrying amounts, December 31, 2006	7,267	12,514	1,566	971	22,318

Accumulated depreciation and write-downs, December 31, 2005	3,857	9,156	1,463	0	14,476
Changes in the scope of consolidation	0	0	(1)	-	(1)
Retirements	(98)	(237)	(171)	0	(506)
Reclassifications to current assets	(252)	(678)	(432)	0	(1,362)
Depreciation and write-downs in 2006	276	774	241	31	1,322
of which write-downs	46	39	9	31	125
Write-backs	0	0	0	-	0
Transfers	4	1	(2)	-	3
Exchange differences	(117)	(313)	(49)	(2)	(481)
Accumulated depreciation and write-downs, December 31, 2006	3,670	8,703	1,049	29	13,451
Net carrying amounts, December 31, 2006	3,597	3,811	517	942	8,867

In connection with the closure of the Bayer MaterialScience subgroup’s diphenylmethane diisocyanate production facility in New Martinsville, West Virginia, United States, a write-down of €9 million was recorded for assets that are no longer required. Further, a change in the plan to expand the chlor-alkali production facility in Baytown, Texas, United States, resulted in a write-down of €31 million on construction work in process.

Capitalized property, plant and equipment includes assets with a total net value of €273 million (2005: €316 million) held under finance leases. The gross carrying amounts of these assets total €780 million (2005: €868 million). These assets are mainly plant installations and machinery with a carrying amount of €187 million (gross amount: €635 million) and buildings with a carrying amount of €80 million (gross amount: €121 million).

Also included are assets with a carrying amount of €48 million (2005: €202 million) leased to other parties under operating leases as defined in IAS 17 (Leases). The decline compared with the previous year is mainly due to the divestment of the Diagnostics business, for which operating leases exist. The gross carrying amount of assets classified as operating leases was €69 million (2005: €589 million); their depreciation in 2006 amounted to €5 million (2005: €72 million). However, if under the relevant agreements the lessee is to be regarded as the economic owner of the assets and the lease therefore constitutes a finance lease, a receivable is recognized in the balance sheet in the amount of the discounted future lease payments.

	Land and buildings	Plant installations and machinery	Furniture, fixtures and other equipment	Construction in progress and advance payments to vendors and sub-contractors	Total
€ million
Gross carrying amounts, December 31, 2004	6,562	12,021	1,873	505	20,961
Changes in the scope of consolidation	5	3	3	0	11
Acquisitions	73	63	8	11	155
Capital expenditures	81	223	103	885	1,292
Retirements	(176)	(304)	(239)	(9)	(728)
Transfers	147	284	120	(549)	2
Exchange differences	322	623	92	67	1,104
Gross carrying amounts, December 31, 2005	7,014	12,913	1,960	910	22,797

Accumulated depreciation and write-downs, December 31, 2004	3,610	8,292	1,397	0	13,299
Changes in the scope of consolidation	1	1	3	-	5
Retirements	(148)	(270)	(211)	(5)	(634)
Depreciation and write-downs in 2005	244	757	207	5	1,213
of which write-downs	37	12	1	5	55
Write-backs	0	0	0	-	0
Transfers	16	(16)	1	0	1
Exchange differences	134	392	66	0	592
Accumulated depreciation and write-downs, December 31, 2005	3,857	9,156	1,463	0	14,476
Net carrying amounts, December 31, 2005	3,157	3,757	497	910	8,321