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Pages 63-78

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From page 63...
... 63 The objectives of this Asset Valuation chapter are to: • Describe what asset valuation is and the approach to determining asset values • Consider how to apply accounting standards • Describe the various approaches that may be used to support financial planning • Describe the respective financial and engineering functions • Describe the audience for asset valuation and how it can be used to support the case for investments in highways • Learn lessons from international practice 6.1 Fundamentals of Asset Valuation Introduction Asset valuation is the assignment of a monetary value to property. In everyday life, we value, for example, stocks and bonds, real estate, and used cars.
From page 64...
... 64 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management approach for preparing financial statements based on historic costs with two options for calculating depreciation of asset value: the Standard and Modified approaches. An alternative approach termed depreciated replacement cost (DRC)
From page 65...
... Asset Valuation 65 valuation of neglected maintenance and repair. Asset valuation within the financial plan, therefore, can assist in the following ways: • Determining whether the government's overall financial position improved or deteriorated; • Evaluating whether the government's current-year revenues were sufficient to pay for currentyear services (e.g., maintenance)
From page 66...
... 66 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management It is important to note that in GASB Statement 34 there is no special treatment for pavements, bridges, or other assets. GASB Statement 34 views a 20-year pavement or 75-year bridge as part of a network or system of assets providing an overall service.
From page 67...
... Asset Valuation 67 this cost assuming straight-line depreciation. However, the disadvantage of the approach is that it is more computationally intensive.
From page 68...
... 68 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management cost they would incur if the bridge were not in service. With this approach, if a given asset fails to yield a social benefit (e.g., a road or bridge carries no traffic)
From page 69...
... Asset Valuation 69 Figure 6-1. UDOT financial plan summary excerpt (Utah DOT 2017)
From page 70...
... 70 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management Asset valuation plays a key role in international financial plans as well, demonstrating the sustainability of investment and the needed investment to maintain newly constructed assets. Further, the FHWA Asset Management Financial Report Series (Report 5)
From page 71...
... Asset Valuation 71 In the TAM financial plan it may be worthwhile to show this valuation, together with the DRC valuation, and document why the values are different. Step 1: Obtain (or Calculate)
From page 72...
... 72 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management Assets should be broken down into identifiable components with a calculable unit cost for each component. You should then calculate depreciation for each component separately.
From page 73...
... Asset Valuation 73 valuation or achieve agreement with the engineers on cost estimation to fit your report. Careful consideration should also be given to understanding how design, environmental, right-of-way, and traffic management costs have all been included in the unit rates.
From page 74...
... 74 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management Figure 6-4. Colorado DOT DRC example (CDOT Division of Accounting and Finance 2016a)
From page 75...
... Asset Valuation 75 Equipped with up-to-date inventory, measurable condition assessments, and -- most central to this step -- an estimate of need (e.g., a cost to restore or repair) , you can now defend a calculation of the reduced value or AC to derive a DRC.
From page 76...
... 76 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management explain the source of the calculation and that you can repeat the exercise when the financial plan is updated. Step 4: Document the Calculation Using the Preferred Method Next you need to actually document the calculation of asset value.
From page 77...
... Asset Valuation 77 Figure 6-6. Excerpt from Colorado DOT asset value report (CDOT Division of Accounting and Finance 2016a)
From page 78...
... 78 A Guide to Developing Financial Plans and Performance Measures for Transportation Asset Management Figure 6-7. Trunk road maintenance backlog (Transport Scotland 2016)

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