CJ 2017 Annual Report

Start Reporting Date, the Company began utilizing the Weighted Average method for determining inventory cost. Inventory cost for the prior periods presented are still reflective of the FIFO method. Inventories consisted of the following (in thousands): Successor Predecessor As of December 31, 2017 2016 Raw materials $ 5,302 $ 16,367 Work-in-process 1,329 5,022 Finished goods 74,552 38,091 Total inventory 81,183 59,480 Inventory reserve (3,390) (5,009) Inventory, net $ 77,793 $ 54,471 Property, Plant and Equipment . Property, plant and equipment (PP&E) are reported at cost less accumulated depreciation. Maintenance and repairs, which do not improve or extend the life of the related assets, are charged to expense when incurred. Refurbishments are capitalized when the value of the equipment is enhanced for an extended period. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operating income. The cost of property and equipment currently in service is depreciated, on a straight-line basis, over the estimated useful lives of the related assets, which range from three to 25 years. Depreciation expense was $136.5 million, $206.7 million, and $261.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. Major classifications of property, plant and equipment and their respective useful lives were as follows (in thousands): Successor Predecessor Estimated Useful Lives As of December 31, 2017 2016 Land Indefinite $ 38,385 $ 46,000 Building and leasehold improvements 5-25 years 79,985 121,915 Office furniture, fixtures and equipment 3-5 years 34,672 29,435 Machinery and equipment 3-10 years 577,922 1,219,645 Transportation equipment 3-10 years 23,352 179,426 754,316 1,596,421 Less: accumulated depreciation (133,755) (683,189) 620,561 913,232 Construction in progress 82,468 37,579 Property, plant and equipment, net $ 703,029 $ 950,811 PP&E are evaluated on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain PP&E may not be recoverable. PP&E are reviewed for impairment upon the occurrence of a triggering event. An impairment loss is recorded in the period in which it is determined that the carrying amount of PP&E is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group, excluding interest expense. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the service line level. The Company's assets groups consist of the well support services, fracturing, cased-hole wireline and pumping services, well construction and intervention, artificial lift applications, and data acquisition and control instruments provider service lines as well as the research and technology ("R&T") service lines. If the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the related assets, an C&J ENERGY SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 76