What is the definition of Plant, Property & Equipment (PP&E)?

Plant, Property and Equipment (PP&E) are assets owned by a firm which are tangible, long term and illiquid. PP&E is fairly self-explanatory and contains assets such as:

• Buildings - Factories, offices, warehouses etc
• Machinery - Construction equipment, mass production
• Transportation - Company cars, truck fleets, aircraft, shipping containers

PP&E is listed on the Balance Sheet under Long-Term Assets. PP&E tends to be worth zero (or at least a lot less) after a given period of time so to account for this, PP&E is assumed to depreciate at a given rate over the lifetime of the asset and this is shown on the Income Statement and Cash Flow Statement as Depreciation.

On the Income Statement, Depreciation on PP&E is listed as a loss but on the Cash Flow Statement, this must be added back in as it is not actually a physical loss in cash, merely a way of accounting for lifetime loss in value.