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Properties | 12 Months Ended
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Dec. 31, 2020
Properties [Abstract] |
Properties | 11. Properties The following tables list the major categories of property and equipment as well as the weighted-average estimated useful life for each category (in years):
Millions, Except Estimated Useful Life |  | Accumulated | Net Book | Estimated
As of December 31, 2020 | Cost | Depreciation | Value | Useful Life
Land | $ | 5,246 | $ | N/A | $ | 5,246 | N/A
Road: |  |  |  |  |  |  |
Rail and other track material |  | 17,620 |  | 6,631 |  | 10,989 | 42
Ties |  | 11,051 |  | 3,331 |  | 7,720 | 34
Ballast |  | 5,926 |  | 1,753 |  | 4,173 | 34
Other roadway [a] |  | 21,030 |  | 4,329 |  | 16,701 | 48
Total road |  | 55,627 |  | 16,044 |  | 39,583 | N/A
Equipment: |  |  |  |  |  |  |
Locomotives |  | 9,375 |  | 3,555 |  | 5,820 | 17
Freight cars |  | 2,118 |  | 789 |  | 1,329 | 25
Work equipment and other |  | 1,107 |  | 351 |  | 756 | 18
Total equipment |  | 12,600 |  | 4,695 |  | 7,905 | N/A
Technology and other |  | 1,199 |  | 520 |  | 679 | 13
Construction in progress |  | 748 |  | - |  | 748 | N/A
Total | $ | 75,420 | $ | 21,259 | $ | 54,161 | N/A
Millions, Except Estimated Useful Life |  | Accumulated | Net Book | Estimated
As of December 31, 2019 | Cost | Depreciation | Value | Useful Life
Land | $ | 5,276 | $ | N/A | $ | 5,276 | N/A
Road: |  |  |  |  |  |  |
Rail and other track material |  | 17,178 |  | 6,381 |  | 10,797 | 42
Ties |  | 10,693 |  | 3,186 |  | 7,507 | 34
Ballast |  | 5,752 |  | 1,669 |  | 4,083 | 34
Other roadway [a] |  | 20,331 |  | 4,056 |  | 16,275 | 48
Total road |  | 53,954 |  | 15,292 |  | 38,662 | N/A
Equipment: |  |  |  |  |  |  |
Locomotives |  | 9,467 |  | 3,434 |  | 6,033 | 18
Freight cars |  | 2,083 |  | 779 |  | 1,304 | 25
Work equipment and other |  | 1,081 |  | 322 |  | 759 | 18
Total equipment |  | 12,631 |  | 4,535 |  | 8,096 | N/A
Technology and other |  | 1,136 |  | 503 |  | 633 | 12
Construction in progress |  | 1,249 |  | - |  | 1,249 | N/A
Total | $ | 74,246 | $ | 20,330 | $ | 53,916 | N/A
[a]Other roadway includes grading, bridges and tunnels, signals, buildings, and other road assets. Property and Depreciation – Our railroad operations are highly capital intensive, and our large base of homogeneous, network-type assets turns over on a continuous basis. Each year we develop a capital program for the replacement of assets and for the acquisition or construction of assets that enable us to enhance our operations or provide new service offerings to customers. Assets purchased or constructed throughout the year are capitalized if they meet applicable minimum units of property criteria. Properties and equipment are carried at cost and are depreciated on a straight-line basis over their estimated service lives, which are measured in years, except for rail in high-density traffic corridors (i.e., all rail lines except for those subject to abandonment, and yard and switching tracks) for which lives are measured in millions of gross tons per mile of track. We use the group method of depreciation in which all items with similar characteristics, use, and expected lives are grouped together in asset classes and are depreciated using composite depreciation rates. The group method of depreciation treats each asset class as a pool of resources, not as singular items. We currently have more than 60 depreciable asset classes, and we may increase or decrease the number of asset classes due to changes in technology, asset strategies, or other factors. We determine the estimated service lives of depreciable railroad assets by means of depreciation studies. We perform depreciation studies at least every 3 years for equipment and every 6 years for track assets (i.e., rail and other track material, ties, and ballast) and other road property. Our depreciation studies take into account the following factors: Statistical analysis of historical patterns of use and retirements of each of our asset classes; Evaluation of any expected changes in current operations and the outlook for continued use of the assets; Evaluation of technological advances and changes to maintenance practices; and Expected salvage to be received upon retirement. For rail in high-density traffic corridors, we measure estimated service lives in millions of gross tons per mile of track. It has been our experience that the lives of rail in high-density traffic corridors are closely correlated to usage (i.e., the amount of weight carried over the rail). The service lives also vary based on rail weight, rail condition (e.g., new or secondhand), and rail type (e.g., straight or curve). Our depreciation studies for rail in high-density traffic corridors consider each of these factors in determining the estimated service lives. For rail in high-density traffic corridors, we calculate depreciation rates annually by dividing the number of gross ton-miles carried over the rail (i.e., the weight of loaded and empty freight cars, locomotives and maintenance of way equipment transported over the rail) by the estimated service lives of the rail measured in millions of gross tons per mile. For all other depreciable assets, we compute depreciation based on the estimated service lives of our assets as determined from the analysis of our depreciation studies. Changes in the estimated service lives of our assets and their related depreciation rates are implemented prospectively. Under group depreciation, the historical cost (net of salvage) of depreciable property that is retired or replaced in the ordinary course of business is charged to accumulated depreciation and no gain or loss is recognized. The historical cost of certain track assets is estimated by multiplying the current replacement cost of track assets by a historical index factor derived from (i) inflation indices published by the Bureau of Labor Statistics and (ii) the estimated useful lives of the assets as determined by our depreciation studies. The indices were selected because they closely correlate with the major costs of the properties comprising the applicable track asset classes. Because of the number of estimates inherent in the depreciation and retirement processes and because it is impossible to precisely estimate each of these variables until a group of property is completely retired, we continually monitor the estimated service lives of our assets and the accumulated depreciation associated with each asset class to ensure our depreciation rates are appropriate. In addition, we determine if the recorded amount of accumulated depreciation is deficient (or in excess) of the amount indicated by our depreciation studies. Any deficiency (or excess) is amortized as a component of depreciation expense over the remaining service lives of the applicable classes of assets. For retirements of depreciable railroad properties that do not occur in the normal course of business, a gain or loss may be recognized if the retirement meets each of the following three conditions: (i) is unusual, (ii) is material in amount, and (iii) varies significantly from the retirement profile identified through our depreciation studies. A gain or loss is recognized in other income when we sell land or dispose of assets that are not part of our railroad operations. We review construction in progress assets that have not yet been placed into service, for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset or assets may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying value of construction in progress assets when grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent, the carrying value is reduced to the estimated fair value. When we purchase an asset, we capitalize all costs necessary to make the asset ready for its intended use. However, many of our assets are self-constructed. A large portion of our capital expenditures is for replacement of existing track assets and other road properties, which is typically performed by our employees, and for track line expansion and other capacity projects. Costs that are directly attributable to capital projects (including overhead costs) are capitalized. Direct costs that are capitalized as part of self-constructed assets include material, labor, and work equipment. Indirect costs are capitalized if they clearly relate to the construction of the asset. Costs incurred that extend the useful life of an asset, improve the safety of our operations, or improve operating efficiency are capitalized, while normal repairs and maintenance are expensed as incurred. These costs are allocated using appropriate statistical bases. Total expense for repairs and maintenance incurred was $2.0 billion for 2020, $2.3 billion for 2019, and $2.5 billion for 2018. Assets held under finance leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. Brazos Yard Impairment – In the fourth quarter of 2020, we made the strategic decision that our Brazos yard investments made to date will be used for freight car block swapping activities, rather than proceeding with additional investments required to complete the freight car classification yard. As a result, we recorded a non-cash impairment charge of $278 million, recognized in other expense in our Consolidated Statements of Income. The Brazos yard investment was recorded as construction in progress as it had not yet been placed into service. We estimated the fair value of the remaining Brazos investments not used for freight car block swapping activities based on market values of similar assets, which are Level 2 inputs.

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