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When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

  • 1.  When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 13 September 2017 20:41
    I want to know  if we seal gravel road, should we consider that as a new asset or renew/upgrade existing asset. Some of my colleagues say it is a new asset and others say it is a renew/upgrade of existing asset. What would be the better definition.

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    Indunil
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  • 2.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 14 September 2017 20:13
    It think it probably depends a bit on how you intend to componentise the road and how much extra pavement (if any) you put down in order to seal the road.

    The road formation could well be unchanged.
    The road pavement will probably be upgraded.  (You could perhaps make the existing unsealed road pavement the road sub-base, and any new pavement the base.)
    The road surface will be new.

    The project as a whole will be an upgrade, but some of the components will be new.

    Doe's that make sense/help?

    Regards,

    Wayne.

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    Wayne Eddy
    Strategic Asset Planning Coordinator
    City of Whittlesea
    BUNDOORA MDC VIC
    Wayne.Eddy@whittlesea.vic.gov.au
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  • 3.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:59
    I would offer that it should be determined by levels of service - unless you are only just taking over ht eroad then it could be a new asset - if the LOS remains the same it is a renewel, if the level of service improves it is an upgrade
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  • 4.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:59
    ​With us it is considered a new asset, although the pavement layers stayed the same.
    We did stabilise the Base Course so that becomes a modified / upgraded asset but the seal is a new asset.
    The road is therefore a new asset.
    If you have to do repairs in future, it will be considered as a seal pavement repair.
    So, yes, I agree with Wayne Eddy's view of it.
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  • 5.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 23:46
    ​I don't see any uncertainty  here - this is an "upgrade".  There are several things that distinguish this as a substantial change in asset type and management.
    You are "improving" the road surface quality,  introducing a new, different pavement finish,  completely changing your maintenance intervention arrangements from patrol grading to pothole management/resealing., and your "useful life:" will (most likely) change.
    The seal should be considered a new asset component of the road, and as Wayne suggests, the existing wearing course (gravel)  now becomes your pavement or subgrade (depending on your own terminology).

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  • 6.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 23:47
    I would consider it a mix of Renewal and Upgrade / New. As the asset exists, it would be an upgrade, rather than a new asset and the 'expansion' and sealing would be upgrade. If the formation (and pavement) have been widened, then the additional width could be considered upgrade (for example going from a 6m to 8m formation could be 25% upgrade and 75% renewal, or similarly for an increase in the depth of the pavement).
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  • 7.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 18 September 2017 20:11

    Just wondering which of you would have replaced the entire footpath panel to fix the defect shown on the LHS of the above before and after photo or if you'd just let it be or use another treatment option?

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    Wayne Eddy
    Strategic Asset Planning Coordinator
    City of Whittlesea
    BUNDOORA MDC VIC
    Wayne.Eddy@whittlesea.vic.gov.au
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  • 8.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 20 September 2017 19:50

    Following are definitions from the IPWEA Infrastructure Financial management Guideline for expenditure reporting.   Exact definitions may vary from jurisdiction to jurisdiction but most Government reporting bodies will work with something very similar.  As a profession the IIMM is our most comprehensive guide.

    The examples quoted are mine.

    Based on these definitions sealing a gravel road would be an Upgrade because it is enhancing the service level and expected life of the existing asset.  The service (transport of goods) was already existing.

    Operational Expenditure

     Continuously required expenditure to operate the asset.

    e.g. power, fuel, staff, cleaning, inspection, white ant protection of a bridge and similar costs.

    Most road agencies don't tend to track operational costs separately to maintenance costs.

     Maintenance expenditure

     Periodic or reactive expenditure required to ensure an asset achieves its useful life.

    e.g. grading a gravel road, patching a pothole, repairing edge breaks, banding/sealing a bridge element.

    Most road agencies typically include in maintenance minor asset replacement below capitalisation threshold (replacing guide posts, signs, etc)

     Renewal

     Expenditure on an existing asset which returns its service potential or remaining useful life up to the original expectation.

    e.g. re-sheeting a gravel road, resurfacing an existing sealed surface, replacing the deck of a bridge
    Renewal might include refurbishment or replacement and some reporting systems make a distinction.

     Upgrade (Improvement)

     Expenditure which enhances an existing asset to provide a higher level of service or increasing its useful life beyond original expectation.

    e.g. sealing a gravel road, sealing shoulders on a sealed road, widening a bridge

     New (Expansion)

    Expenditure to create a new asset where no asset previously existed

    e.g building a new road or bridge

     

     

    You could argue that components of the work (e.g. topping up the gravel is renewing the gravel asset) but this is trying to be precise with a fairly crude generalisation of expenditure and unusual for most reporting systems. You are normally reporting the predominant category of expenditure. Some jurisdictions and finance managers might require a breakdown or Project costs where a project included two types of work (e.g. 80% resurfacing an existing road  and 20% building a new stopping bay).

    Understand what you are being asked for and why. When your finance manager (accountant) is asking for this information they are typically trying to determine how much depreciation they should "write off" the original asset. When a government agency is asking this question they usually want to know how much you are spending on renewing and expanding your assets. If you are creating a breakdown for your own budgeting and cost management purposes there are better ways to do this that don't involve crude generalisations.

    Hope this assists

     


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  • 9.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 20 September 2017 19:51
    ​Wayne, If that defect is just a raised slab, then what we would do is simply grind down the raised lip to the level of the adjacent slab.
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  • 10.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:55
    ​Hi Indunil,

    If you seal existing surface it's comes under renew and if you do sealing on a existing gravel road, it is a upgrading. If you construct a new road from pavement layer and seal, it is a new asset. That is my understanding.

    Regards

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    KanchanaKahatadeniyaShire of EsperanceKanchana.Kahatadeniya@esperance.wa.gov.au08 9071 0647ESPERANCEWAauAustralia
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  • 11.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:55
    ​The seal is a new asset, it should deteriorate faster than the base material, and as such be recognized separately.
    For the base material, it would be likely that funds were spent upgrading this and grading prior to sealing.
    If you have removed all the pavement material and imported new material, then treat it as a new asset.
    If you have added more material and graded and compacted this, best to treat it as an upgrade.
    Good luck!
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  • 12.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:57
    https://www.ipart.nsw.gov.au/files/d40c3db9-cd63-4669-a4ab-a2d80123ab99/Attachment_13_Fact_Sheet_Asset_Maintenance_Renewal_and_Upgrade.pdf

    From the NAMS Plus Asset Management Template:
    "5.5 Creation/ Acquisition/ Upgrade Plan
    New works are those works that create a new asset that did not previously exist, or works which upgrade or
    improve an asset beyond its existing capacity or performance. These improvements may result from service
    needs and changes in service provision or levels of service. Road infrastructure upgrade works include items
    such as road widening and the sealing of a gravel road. New works include new roads constructed as part of a
    residential or industrial subdivision by developers and granted to Council."


    In my opinion these documents explain it as an asset upgrade, not a new asset. The road will have a new asset component to it being the seal, but the original details of the road (year acquired/length) should stay the same, to be able to identify the original asset. You would have to update the asset class (unsealed to sealed) and maybe the width if that was extended.

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    Corinna Lalor
    Liverpool Plains Shire Council
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  • 13.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:57
    ​This is clearly a road Improvement/Expansion project, having said that :-

    Reconstruction of roads is not maintenance as it replaces the existing asset with a new one, typically with a design life of 40? years. Where appropriate, the need to undertake reconstruction of all or part of a road should be included in the individual roads strategies.
    So in essence this is a new asset and the old asset must be therefore disposed of and replaced with the new one. If sealing is to be done without significant reconstruction then it is simply an upgrade of the existing asset.
    Clear as mud I know
    Regards Barrie


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  • 14.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:59
      |   view attached
    Hi Indunil,

    Depending on the treatment, the answer is likely a combination of renewal and upgrade/new.

    Attached are two Case Studies from Section 12 of the Australian Infrastructure Financial Management Manual (2015 Ed. Sec. 12.8, p.40) that relate to your question:
    1. Recycling Road Pavements; and
    2. Renewing Rural Pavements.  

    Hope this helps.

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    Stephen Verity
    NAMS Council Support | IPWEA Australasia
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    Attachment(s)

    pdf
    Scan_0001.pdf   509K 1 version
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  • 15.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 17 September 2017 17:59
    ​I would agree with Wayne that it would more than likely be considered an upgrade. Some things to take into consideration from an accounting point of view are that the road has increased in value and the depreciable life of the asset has increased as well.

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    Linda Thoms
    City of Corinth, Texas, USA
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  • 16.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 18 September 2017 20:11
    It will depend on the policy you have, if you have one. First what is the asset - in this case it is the road.

    Formation, pavement, seal are components of that asset. The hierarchy is Class, Type, Asset Components. Then as the road is the asset and you are making it a better road then it is an upgrade - much as others have said. You can let it get really complicated if you want but it just isn't worth it but you have to be consistent, what have you done in the past? What does your Asset Management Plan say about this?

    But my advice is go with upgrade.

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    Ashley Bishop
    So2 Logistics
    Australian Defence Force
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  • 17.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 19 September 2017 18:26

    ​​Is agree with Ashley Bishop;
    the answer depends on the level of detail that you require and can even depend on the type of asset management software that you are using. In case a (partly) change in properties (like type of layer) would require the definition of a new asset, than thats what you have to do.
    In general you may only want to change the properties in order to ensure that the related maintenance intervals stay aligned with the type of material and the function. Being subjected to management of change, this should be registered as a change (which a normal upgrade need not be, since that might as well be like4like) which then would lead to the requirement to review the maintenance plan as well.

    I  hope this addition helps.

    Best regards,
    Geert Henk 


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  • 18.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 20 September 2017 19:52

    I agree that it should be an upgrade. The asset exists already in your AMIS (asset register or GIS inventory) under a different class maybe and it has been renewed to provide a different level of service. A few things to note is that AMIS needs to be updated for example changing the asset class, type and other technical attributes, valuation, level of service and maintenance activities for the new economic lifecycle.

     



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    Dharmen Dhaliah
    Town of Halton Hills, Ontario
    Canada
    http://www.dharmendhaliah.com/
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  • 19.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 21 September 2017 22:20
    Legally, TMR thinks the project is a road upgrade.  This is how the Transport Planning and Coord Act deals with it. But you should also look at the funding bucket as well to make sure that isnt inconsistent with it being an upgrade.
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  • 20.  RE: When Gravel Road Sealed, Is that a new asset or renewal/upgrade existing asset?

    Posted 20 September 2017 19:51
    Hello,

    My thoughts are from the accounting perspective.

    Usually councils have a register for sealed roads and a register for unsealed roads. When you seal the unsealed road the following outcomes will follow:

    1) The road should be reclassified as sealed road;
    2) Its useful life and value will increase;
    3) Its functionality and level of service (highly probable) will increase.
    4) Its componentisation will increase (now it will have base, sub-base, seal)

    In this regard, for the accounting purposes, this would be treated as creation of the new asset with write off of the carrying value of the existing unsealed road. Upgrade for the unsealed road would be for example extension of width or increased level of depth of the gravel.

    However, if you will treat it as upgrade, the net effect in accounting will be the same, as you will utilise the cost of formation and gravel in creation of the new asset.

    One main thing to note that, for accounting purposes, you need to consider discounting the value of the road if the road is not using the full capacity it suppose to serve (it is also called adjustment for over surplus or optimisation adjustment). For example, you have upgraded the unsealed road to sealed. The cost of the sealed road is much more higher than for the unsealed one. Let us assume, the standard level of traffic the unsealed road can serve is 100 vehicles per day while the sealed one - 300 vehicles per day. However, after upgrading the road, you realise that there are only 100 vehicles driving the road and it is not planned to increase. In this case, for accounting purposes, we say that the value of the road is overstated and need to be impaired. This is something councils usually miss in valuation of the infrastructure assets.

    Kind Regards,
    Igor.
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