Property, Equipment, and Capitalized Software

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Equipment, and Capitalized Software

Property and equipment are stated at historical cost. Replacements and major improvements are capitalized, and repairs and maintenance are charged to expense as incurred. Furniture and equipment are generally depreciated using the straight-line method over estimated useful lives ranging from three to seven years. Software developed for internal use is capitalized. Software is generally amortized over its estimated useful life of three years. Leasehold improvements are amortized over the term of the lease, or over their useful lives from five to 10 years, whichever is shorter. Buildings are depreciated over their estimated useful lives of 31.5 to 40 years.

The costs associated with certain of our Molina Medicaid Solutions segment equipment and software are capitalized and recorded as deferred contract costs. Such costs are amortized on a straight-line basis over the shorter of the useful life or the contract period, and the amortization is recorded within the heading “Cost of service revenue.”

A summary of property, equipment, and capitalized software is as follows:



	December 31,
	2016			2015
	(In millions)
Capitalized software	$	443		$	336
Furniture and equipment	301			250
Building and improvements	159			153
Land	16			16
	919			755
Less: accumulated amortization for capitalized software	(259		)	(195		)
Less: accumulated depreciation and amortization on building and improvements, furniture and equipment	(206		)	(167		)
	(465		)	(362		)
Property, equipment, and capitalized software, net	$	454		$	393

The following table presents all depreciation and amortization recorded in our consolidated statements of income, regardless of whether the item appears as depreciation and amortization, or as cost of service revenue.



	Year Ended December 31,
	2016		2015		2014
	(In millions)
Recorded in depreciation and amortization:
Amortization of capitalized software	$	62	$	37	$	41
Depreciation of property and equipment	45		50		34
Amortization of intangible assets	32		17		18
	139		104		93
Recorded in cost of service revenue:
Amortization of capitalized software	22		15		18
Amortization of deferred contract costs	21		6		20
	43		21		38
Other	—		1		3
	$	182	$	126	$	134

Molina Center. In 2011, we acquired two coterminous office buildings in Long Beach, California, known as the Molina Center. In 2013, we entered into a sale-leaseback transaction for the Molina Center. Due to our continuing involvement with the leased property, the sale did not qualify for sales recognition and we remain the “accounting owner” of the property. For further information, see Note 12, “Debt.” Sublease income from third party tenants of the Molina Center is reported as investment income and other revenue in our consolidated statements of income. As of December 31, 2016, future sublease income was insignificant.