Tesla 2011 Annual Report Download - page 118

Table of Contents
Property, Plant and Equipment
Property, plant and equipment are recognized at cost less accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets as follows:
Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the term of the related
lease. Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is
reflected in operations. Maintenance and repair expenditures are expensed as incurred, while major improvements that increase functionality of
the asset are capitalized and depreciated ratably to expense over the identified useful life. Land is not depreciated.
In October 2010, we completed the purchase of our Fremont, California facility and certain manufacturing assets and spare parts located
thereon. As these assets are not yet ready for their intended use, they are classified within construction in progress and the depreciation has not
yet commenced (see Note 4).
Operating Lease Vehicles
Vehicles that are leased as part of our leasing program, are classified as operating lease vehicles. Operating lease vehicles are recorded at
cost less accumulated depreciation. Depreciation is computed using the straight-line method over the term of operating leases of three years. The
total cost of operating lease vehicles recorded in the consolidated balance sheet as of December 31, 2010 was $8.4 million. Accumulated
depreciation related to leased vehicles was $0.4 million as of December 31, 2010.
Intangible Assets
Intangible assets with finite useful lives are amortized over their estimated useful lives. As of December 31, 2010, intangible assets are
comprised of emission credits (see Note 4).
Long-lived Assets
We evaluate our long-lived assets, including intangible assets, for indicators of possible impairment when events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable. Impairment exists if the carrying amounts of such assets exceed
the estimates of future net undiscounted cash flows expected to be generated by such assets. Should impairment exist, the impairment loss would
be measured based on the excess carrying value of the asset over the asset’s estimated fair value. As of December 31, 2010, we have not
recorded any impairment losses on our long-lived assets.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development expenses consist primarily of payroll, benefits and
stock-based compensation of those employees engaged in research, design and development activities, costs related to design tools, license
expenses related to intellectual property, supplies and services, depreciation and other occupancy costs. Also included in research and
development are development services costs incurred, if any, prior to the finalization of agreements with our development services customers as
reaching a final agreement and revenue recognition is not assured. Development services costs incurred after the finalization of an agreement are
recorded in cost of revenues.
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Computer equipment and software
3 years
Office furniture and equipment
3 to 7 years
Tooling
3 to 5 years