Property, Plant, and Equipment

6 Months Ended

Jun. 30, 2016

Property Plant And Equipment [Abstract]

Note 5 - Property, Plant and Equipment

As of June 30, 2016 and December 31, 2015, our property, plant and equipment consisted of the following (in thousands):

	June 30,			December 31,
	2016			2015
Machinery, equipment and office furniture	$	1,931,100		$	1,694,910
Tooling	$	740,008			550,902
Leasehold improvements	$	389,154			338,392
Building and building improvements	$	574,603			461,303
Land	$	60,238			60,234
Computer equipment and software	$	205,926			175,512
Construction in progress	$	876,207			693,207
		4,777,236			3,974,460
Less: Accumulated depreciation and amortization		(783,986	)		(571,126	)
Total	$	3,993,250		$	3,403,334

Construction in progress is comprised primarily of tooling and equipment related to the manufacturing of Model S and Model X vehicles, Gigafactory construction, and related capitalized interest. Completed assets are transferred to their respective asset class and depreciation begins when the asset is ready for its intended use. Interest expense on outstanding debt is capitalized during the period of significant capital asset construction. Capitalized interest on construction in progress is included in property, plant and equipment, and is amortized over the life of the related assets. During the three and six months ended June 30, 2016, we capitalized $9.9 million and $19.0 million of interest expense. During the three and six months ended June 30, 2015, we capitalized $12.3 million and $20.6 million of interest expense, respectively.

We are sometimes involved in construction at our leased facilities primarily related to retail stores, service centers, and certain manufacturing facilities. In accordance with Accounting Standards Codification 840, Leases, for build-to-suit lease arrangements where we are involved in the construction of structural improvements prior to the commencement of the lease or take some level of construction risk, we are considered the owner of the assets and land during the construction period. Accordingly, upon commencement of our construction activities, we record a construction in progress asset and a corresponding financing liability. Once the construction is completed, if the lease meets certain “sale-leaseback” criteria, we will remove the asset and related financial obligation from the balance sheet and treat the building lease as an operating lease. If upon completion of construction, the project does not meet the “sale-leaseback” criteria, the leased property will be treated as a capital lease and included in building and building improvements in the table above. As of June 30, 2016 and December 31, 2015, the table above includes $379.4 million and $206.1 million of build-to-suit assets. As of June 30, 2016 and December 31, 2015, corresponding financing obligations of $2.4 million and $1.3 million are recorded in accrued liabilities and $380.7 million and $201.3 million are recorded in other long-term liabilities.

Depreciation and amortization expense during the three and six months ended June 30, 2016, was $111.9 million and $211.1 million. Depreciation and amortization expense during the three and six months ended June 30, 2015, was $60.8 million and $112.9 million. Total property and equipment assets under capital lease as of June 30, 2016 and December 31, 2015 were $73.9 million and $58.1 million. Accumulated depreciation related to assets under capital lease as of these dates were $31.5 million and $22.7 million.

We have incurred $430.7 million of costs for our Gigafactory as of June 30, 2016.