Property, plant and equipment are stated at their acquisition and/or construction cost, less accumulated depreciation and impairment losses (the latter only if applicable). Depreciation is calculated based on the straight line method over terms that take into account the expected useful lives of the assets and their residual values.
The estimated costs of dismantling towers and equipment on rented properties are capitalized and depreciated over the estimated useful lives of these assets. The Company recognizes the present value of these costs in property, plant and equipment with a counter-entry to liabilities account “Provision for future asset retirement”. Interest incurred on updating the provision is classified within financial expenses.
Gains and losses from disposals are determined by comparing the amounts of these disposals with their carrying values at the time of the transaction, and are recognized in “other income (expenses), net” in the statement of income.
On January 1, 2009 TIM S.A., on its first adoption of IFRS, used deemed cost to measure its property, plant and equipment assets. After this its property, plant and equipment have been demonstrated based on the historical cost of acquisition and/or construction. Both (deemed cost and historical cost) are deductible from the accumulated depreciation and from the impairment losses, if applicable.
(a) Changes in property, plant and equipment
| 2016 | Additions (depreciation) | Disposals | Transfers | 2017 | |
| Cost of property, plant and equipment, gross | |||||
| Commutation/transmission equipment | 17,232,254 | 28,694 | (57,683) | 1,563,575 | 18,766,840 |
| Fiber optic cables | 600,504 | 3 | - | 83,464 | 683,971 |
| Leased handsets | 2,071,334 | - | (10,502) | 120,798 | 2,181,630 |
| Infrastructure | 5,269,043 | 238 | (15,195) | 398,754 | 5,652,840 |
| Informatics assets | 1,550,614 | 113 | (1) | 64,599 | 1,615,325 |
| General use assets | 675,682 | 18 | (258) | 63,997 | 739,439 |
| Land | 40,794 | - | - | - | 40,794 |
| Construction in progress | 1,819,606 | 2,279,913 | 5,359 | (2,618,812) | 1,486,066 |
| Total property, plant and equipment, gross | 29,259,831 | 2,308,979 | (78,280) | (323,625) | 31,166,905 |
| Accumulated depreciation | |||||
| Commutation/transmission equipment |
(11,969,208) |
(1,417,827) |
14,054 |
(22) |
(13,373,003) |
| Fiber optic cables | (242,709) | (47,990) | - | - | (290,699) |
| Leased handsets | (1,905,228) | (114,370) | 3,580 | - | (2,016,018) |
| Infrastructure | (2,224,932) | (482,463) | 9,211 | 306 | (2,697,878) |
| Informatics assets | (1,372,663) | (76,080) | 1 | 48 | (1,448,694) |
| General use assets | (460,561) | (41,491) | 258 | (331) | (502,125) |
| Total accumulated depreciation | (18,175,301) | (2,180,221) | 27,104 | 1 | (20,328,417) |
| Property, plant and equipment, net | |||||
| Commutation/transmission equipment |
5,263,046 |
(1,389,133) |
(43,629) |
1,563,553 |
5,393,837 |
| Fiber optic cables | 357,795 | (47,987) | - | 83,464 | 393,272 |
| Leased handsets | 166,106 | (114,370) | (6,922) | 120,798 | 165,612 |
| Infrastructure | 3,044,111 | (482,225) | (5,984) | 399,060 | 2,954,962 |
| Informatics assets | 177,951 | (75,967) | - | 64,647 | 166,631 |
| General use assets | 215,121 | (41,473) | - | 63,666 | 237,314 |
| Land | 40,794 | - | - | - | 40,794 |
| Construction in progress | 1,819,606 | 2,279,913 | 5,359 | (2,618,812) | 1,486,066 |
| Total property, plant and equipment, net |
11,084,530 |
128,758 |
(51,176) |
(323,624) |
10,838,488 |
Balance in 2015 |
Additions (depreciation) |
Disposals |
Transfers |
Balance in 2016 | |
| Cost of property, plant and equipment, gross | |||||
| Commutation/transmission equipment |
16,164,178 |
- |
(57,363) |
1,125,439 |
17,232,254 |
| Fiber optic cables | 563,995 | - | (19) | 36,528 | 600,504 |
| Leased handsets | 1,952,079 | 7 | (26,089) | 145,337 | 2,071,334 |
| Infrastructure | 4,933,743 | 107,828 | (127,470) | 354,942 | 5,269,043 |
| Informatics assets | 1,501,480 | - | (5,482) | 54,616 | 1,550,614 |
| General use assets | 650,580 | - | (24,163) | 49,265 | 675,682 |
| Land | 40,794 | - | - | - | 40,794 |
| Construction in progress | 1,119,800 | 2,433,983 | 31,950 | (1,766,127) | 1,819,606 |
| Total property, plant and equipment, gross | 26,926,649 | 2,541,818 | (208,636) | - | 29,259,831 |
| Accumulated depreciation | |||||
| Commutation/transmission equipment |
(10,653,118) |
(1,366,859) |
50,769 |
- |
(11,969,208) |
| Fiber optic cables | (200,123) | (42,589) | 3 | - | (242,709) |
| Leased handsets | (1,783,940) | (136,262) | 14,974 | - | (1,905,228) |
| Infrastructure | (1,884,692) | (416,085) | 75,845 | - | (2,224,932) |
| Informatics assets | (1,296,837) | (81,267) | 5,441 | - | (1,372,663) |
| General use assets | (440,591) | (40,944) | 20,974 | - | (460,561) |
| Total accumulated depreciation | (16,259,301) | (2,084,006) | 168,006 | - | (18,175,301) |
| Property, plant and equipment, net | |||||
| Commutation/transmission equipment |
5,511,060 |
(1,366,859) |
(6,594) |
1,125,439 |
5,263,046 |
| Fiber optic cables | 363,872 | (42,589) | (16) | 36,528 | 357,795 |
| Leased handsets | 168,139 | (136,255) | (11,115) | 145,337 | 166,106 |
| Infrastructure | 3,049,051 | (308,257) | (51,625) | 354,942 | 3,044,111 |
| Informatics assets | 204,643 | (81,267) | (41) | 54,616 | 177,951 |
| General use assets | 209,989 | (40,944) | (3,189) | 49,265 | 215,121 |
| Land | 40,794 | - | - | - | 40,794 |
| Construction in progress | 1,119,800 | 2,433,983 | 31,950 | (1,766,127) | 1,819,606 |
| Total property, plant and equipment, net |
10,667,348 |
457,812 |
(40,630) |
- |
11,084,530 |
Part of the amount classified as “Construction in progress” corresponds to the cost of intangible assets incurred during their construction and installation, until the date when the assets are ready for operations, at which time they are transferred to their relevant asset accounts.
Therefore, the amount of R$323,625 in the “Transfers” column was reclassified from the “construction in progress” account in property, plant and equipment, to the “intangible assets in progress” account in intangible assets for better presentation according to the nature of the assets.
(b) Depreciation rates
| Annual rate % | ||
| Commutation/transmission equipment | 8 to 14.29 | |
| Fiber optic cables | 4 to 10 | |
| Leased handsets | 14.28 to 50 | |
| Infrastructure | 4 to 20 | |
| Informatics assets | 10 to 20 | |
| General use assets | 10 to 20 |
In 2017, pursuant to IAS 16, the Company and its subsidiaries assessed the useful life estimates for their property, plant and equipment, concluding that there were no significant changes to the circumstances on which the estimates were based that would justify changes to the useful lives currently in use. To determine the useful lives of the assets, the Company considers not just the type of the asset, but also the way it is used and the conditions to which the asset is subjected during its use.