Asset Management

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Revaluation of New Components

  • 1.  Revaluation of New Components

    Posted 28 May 2020 01:04
    ​​Hi All,

    AHC is in the process of splitting its Pavement asset to both base course and sub-base.

    The sub-base will have a longer life and the base course will retain the existing useful life.

    In undertaken the change to useful life is the revaluation done on the current value of the sub-base or given that the sub-base is in essence a new asset should it be valued from the Replacement Value and pavement active from date with the new life?

    Many thanks for any advice from people that have undertaken this process and feedback from auditors about the preferred method would be appreciated.

    regards

    David Collins
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  • 2.  RE: Revaluation of New Components

    Posted 23 days ago
    Hi David
    Did you get any feedback on your question?
    I assume you already have 3 separate components: Wearing/Surface Course, Base/.Sub-base Layer and Earthworks components.
    I think you are creating future difficulties by splitting the Base and Sub-base as part of Revaluation. Unless you have accurate as constructed records, this would require pavement studies to identify the representative material and layer depth of each layer and the remaining life of each for each segment. These can be quite costly.
    If you wind up making assumptions to split the base and sub-base without actual records or pavement data there seems little point to separate them for Revaluation. However, for pavement management, it would be worth collecting the pavement history data.



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    GrantSheldon
    Sheldon Consulting Pty Ltd
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  • 3.  RE: Revaluation of New Components

    Posted 22 days ago
    Hi David

    This approach to componentization is permitted and appropriate if your pavement management strategy does include the provision to rework only the top layer of the pavement when you renew or rehabilitate the pavement asset.  Much the same way as you treat the surface layer of asphalt/seal as a different component.  If your real world pavement renewal strategy is done this way it will (in theory) produce a more accurate valuation.

    Very few organisations would do this for minor roads because the amount of data you need to keep, the error margins and the added complexity are not sufficient to justify the improvement in accuracy or quality of output.  In some cases the amount of noise you introduce into the valuation can be detrimental to the accuracy or the quality/credibility of the result.

    You need to consider whether introducing a new layer in the valuation model will materially improve your valuation and be worth the effort.  Short answer to this is that if your asset managers aren't separately modelling these components it's probably not worth doing it in the valuation.

    This idea does have strong merit where you are dealing with a major highway or freeway with a complex structured and thick pavement, possibly with reinforced layers or other complexity.  You are then considering a high value per sq m asset where different layers are readily identifiable as having different useful lives and being replaced/renewed separately.  You would certainly want to do this if you were operating such a road as a commercial entity where valuation reporting has added commercial implication.

    Always check a change in approach like this with your finance manager first and make sure you document it for the auditors.  Also don't get too out of step with industry practice. In my experience auditors are looking at whether the valuation approach is a compliant and a sound approach; and whether you are correctly following the method.  The AASB rules are flexible in how you componentize your assets.  You need to justify that the reason for componentizing and depreciating components differently and that your calculations are consistent and based on real world information.  Consistency and justification.  Also document, document, document for your auditors.

    Hope this helps

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    Graham Lantzke
    Principal Asset Engineer
    WSP Pty Ltd
    graham.lantzke@wsp.com
    PERTH WA
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  • 4.  RE: Revaluation of New Components

    Posted 22 days ago
    A sign of the times when a councils seek valuation advice from auditors.

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    Martin Burns
    National Director of Valuations
    Liquid Pacific
    North Sydney
    02 9025 3788
    solutions@liquidpacific.com
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