Asset Valuation: Getting value
on the road ahead
Damien Douglas
Senior Asset Management Engineer
Opus International Consultants
Perth, Western Australia
Introduction
• Engineering perspective – I’m an engineer not an
accountant!
• Asset management purposes
• Valuation links finance and asset management
• Focus on roads / WA / RAMM module
Importance of valuation
• Mandatory integrated planning
• Mandatory fair value
• Need reasonable asset financial valuations
• Reporting requirements are affected
Key guidelines
• Australian Infrastructure Financial Management
Guidelines
• manual produced by IPWEA
• up to version 1.3
• 1.4 coming very soon…
Key guidelines
• CPA Valuation and Depreciation Guidelines
• Free download from www.cpaaustralia.com.au
Key guidelines
• IIMM (IPWEA/NAMS asset management bible)
• AASB Standards (AASB 116, AASB 13 etc)
Fair value of road assets
• Road and road-related assets = specialised assets
• No liquid market, rarely sold etc
• Specialised public sector assets use the cost
approach
• Depreciated replacement cost method
Key requirements of DRC
• Value at component level
• Value entire asset class at the same time
• Consider “network” assets e.g. signs
• Include all costs to replace
Getting value from a valuation
• Appropriate methodology
• Accurate quantities
• Fair and reasonable cost to replace the asset
• Understanding / knowledge is key
Unit costs
• Operating environment/complexities e.g. traffic
management
• Overheads (both physical labour and on-costs)
• Include removal/demolition/disposal
• Typical scale / 50th percentile / medium trends
Using indices for price movement
• Don’t use CPI
• Do use WA road and bridge construction index
• Index at the component level
Life assessment
• Four methods:
1. Fixed life by asset group
2. Statistical analysis by subgroup
3. Condition, performance, risk etc
4. Advanced predictive methods e.g. dTIMS
Road assets to include
• Depends on asset class/type definition, but may
include:
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Pavement formation
Pavement structure (basecourse, subbase)
Pavement surface
Surface water channel (incl. kerb)
Road drainage
Road structures (bridges, retaining walls)
Signs
Rails
Line marking
Street lights
Traffic facilities
(Land under roads)
Road valuation tips
• Include primer seal in pavement value
(part of the full cost of doing work to the pavement)
• Use suitable residual values
(what value will remain e.g. pavement material recycled)
• Value the modern equivalent not an upgraded
version of it
RAMM valuation tips
1. Requires understanding of valuation process
2. Requires understanding of RAMM
RAMM valuation tips (2)
3. Don’t value on Surface and Pavement tables
4. Do value on the Treatment Length table
RAMM valuation tips (3)
5. Understand your data and how you use it
(are TLs accurately set up)
6. Ensure data is summarised
correctly
7. Check warning/validation
reports
RAMM valuation tips (4)
8. Run all steps (incl. create TL components)
RAMM valuation tips (5)
9. Set up the module to reflect your network
10. Make sure all assets have a standard unit cost
applied by the module
11. Check for errors & inconsistencies!!
RAMM valuation tips (6)
12. Take “snapshots” and label them well!
– e.g. as at 30 June 2013, by Damien Douglas (Opus),
run on 15 August 2013.
– Mark as “complete” and then as “audited” if
appropriate
– You will be able to compare easily in future
13. Export your configuration
– Restore later if something gets modified
RAMM valuation tips (7)
14. Export and save all valuation detail
e.g. treatment length component detail
15. Use SQL queries if you know how
– Link the ‘av_tl_cpnt’ table to treatment lengths
– Check that there are the right number of components
for the number of treatment lengths
– Attach kerb value to treatment lengths
– Summarise values to roads
Confidence ratings
• How confident are you in the results?
• Who is using the results?
• Highly Reliable (±5%)
to Very Uncertain (±40%)
• Each category (e.g. formation, pavement etc)
Independent reviews
• Auditors may require an increased level of
independence in future (e.g. peer review)
• AASB 116 states:
“If items […] are stated at revalued amounts, the
following must be disclosed […]:
(b) whether an independent valuer was involved;”
Questions