Asset Inventory and Valuation - الصفحة الرئيسيةosp.mans.edu.eg/elbeltagi/Infra-Asset...

1

Asset Inventory

and Valuation

Asset Inventory

and Valuation

18/10/2015 Emad Elbeltagi 2

Asset InventoryAsset Inventory

Decision Support System (DSS)Decision Support System (DSS)

� An asset management framework is a decision support system

� A DSS refers to the use of computers to store, analyze and

display information that is used to support decision making

� In the core of a DSS comes the Data Storing (Asset Inventory)

� As such, A central database is the heart of a DSS

� A central database has several advantages that can achieved

through:

� An asset management framework is a decision support system

� A DSS refers to the use of computers to store, analyze and

display information that is used to support decision making

� In the core of a DSS comes the Data Storing (Asset Inventory)

� As such, A central database is the heart of a DSS

� A central database has several advantages that can achieved

through:

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Asset Database (Inventory)Asset Database (Inventory)

� Reducing redundancy, each piece of data is stored in only one place

� Allow sharing, data can be utilized by different application, different

departments

� Standardization in data names, format, etc.

� Security restrictions, to ensure the data are stored safely and

securely

� Data integrity, controlling the data update and checking for integrity

when update is made

� Reducing redundancy, each piece of data is stored in only one place

� Allow sharing, data can be utilized by different application, different

departments

� Standardization in data names, format, etc.

� Security restrictions, to ensure the data are stored safely and

securely

� Data integrity, controlling the data update and checking for integrity

when update is made



Asset Database (Inventory)Asset Database (Inventory)

3



Asset Database (Inventory) QuestionAsset Database (Inventory) Question

� What attributes should be collected for

infrastructure assets?

� Bridges

� Roads

� Water networks

� Sewer networks

� Buildings

� What attributes should be collected for

infrastructure assets?

� Bridges

� Roads

� Water networks

� Sewer networks

� Buildings



Data Required for Management SystemData Required for Management System

� Physical descriptions of infrastructure facilities, including location,

construction and metrical data, preferably geographically based

� Usage-history data (for example, water usage for water-distribution

systems, aircraft coverage for airport pavement)

� Condition monitoring and evaluation data

� Maintenance history and operation data

� Unit cost and budget data

� Design and analysis data


construction and metrical data, preferably geographically based

� Usage-history data (for example, water usage for water-distribution

systems, aircraft coverage for airport pavement)

� Condition monitoring and evaluation data

� Maintenance history and operation data

� Unit cost and budget data

� Design and analysis data

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Information DetailsInformation Details� Classification of data and levels of detail are very important issues

because data collection can be very expensive effort


construction and metrical data

� A study by the World Bank recognizes five functional levels of data

needs

� Sectorial level: Aggregation of data from the infrastructure

system; e,g., annual statistics and road-user charges for

comparison

� Classification of data and levels of detail are very important issues

because data collection can be very expensive effort


construction and metrical data

� A study by the World Bank recognizes five functional levels of data

needs

� Sectorial level: Aggregation of data from the infrastructure

system; e,g., annual statistics and road-user charges for

comparison

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Information DetailsInformation Details

� Network level: Planning, programming, and budgeting

(strategic) for M&R

� Project level: Selection and extent of treatment and exact

location; may require intensive data collection and analysis.

� Operational level: Facility and operation related to construction,

maintenance, traffic, and safety.

� Research and Development: Data needs are more detailed and

precise than that for project level and operational Level. Data

are usually study-specific.

� Network level: Planning, programming, and budgeting

(strategic) for M&R

� Project level: Selection and extent of treatment and exact

location; may require intensive data collection and analysis.

� Operational level: Facility and operation related to construction,

maintenance, traffic, and safety.

� Research and Development: Data needs are more detailed and

precise than that for project level and operational Level. Data

are usually study-specific.



Integrated overall management systemIntegrated overall management system

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Database SecurityDatabase Security� When working with high-volume of databases, it is imperative to

develop and maintain a comprehensive data backup and security

system, such a system should be based upon:

� Daily and weekly backup

� Permanent backup at appropriate intervals; at a minimum it

should be done on an annual basis

� Off-site storage of permanent backup

� Kuwait example

� Oklahoma city federal building

� When working with high-volume of databases, it is imperative to

develop and maintain a comprehensive data backup and security

system, such a system should be based upon:

� Daily and weekly backup

� Permanent backup at appropriate intervals; at a minimum it

should be done on an annual basis

� Off-site storage of permanent backup

� Kuwait example

� Oklahoma city federal building



Database Collection Frequency and UpdateDatabase Collection Frequency and Update

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Database Collection Frequency and UpdateDatabase Collection Frequency and Update



Methods of Data CollectionMethods of Data Collection

� From "as-built" project records. The historical project record is the

least expensive source of inventory information.

� Pedestrian observer visual survey, this is feasible for small-size

facilities. It is also the best method to verify the information

collected from other sources.

� moving observer visual survey, this method relatively faster and

enables greater coverage for a fixed budget.

� From "as-built" project records. The historical project record is the

least expensive source of inventory information.

� Pedestrian observer visual survey, this is feasible for small-size

facilities. It is also the best method to verify the information

collected from other sources.

� moving observer visual survey, this method relatively faster and

enables greater coverage for a fixed budget.

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Methods of Data CollectionMethods of Data Collection� Photo or video logging has the advantage of permanent records , this

method can be used for roads, airports, railroad tracks, subways,

sewers, large water lines, and other facilities. Subsequent data

reduction by either manual or automated image-processing

techniques is required.

� Automated measurements of geometrical and structural

characteristics for roads, railroad tracks, and pipelines and sewers.

� Weather records can provide simple, inexpensive environmental data

� Nondestructive testing, such as ground-penetrating radar, magnetic

Resonance and wave-propagation methods.

� Photo or video logging has the advantage of permanent records , this

method can be used for roads, airports, railroad tracks, subways,

sewers, large water lines, and other facilities. Subsequent data

reduction by either manual or automated image-processing

techniques is required.

� Automated measurements of geometrical and structural

characteristics for roads, railroad tracks, and pipelines and sewers.

� Weather records can provide simple, inexpensive environmental data

� Nondestructive testing, such as ground-penetrating radar, magnetic

Resonance and wave-propagation methods.


Infrastructure Rating systemInfrastructure Rating system

� A structured approach to evaluate the current

state of infrastructure.

� Evaluating and rating the community,

environmental, and economic benefits of all

types and sizes of infrastructure projects. It

evaluates, grades, and gives recognition to

infrastructure projects.

� A structured approach to evaluate the current

state of infrastructure.

� Evaluating and rating the community,

environmental, and economic benefits of all

types and sizes of infrastructure projects. It

evaluates, grades, and gives recognition to

infrastructure projects.

DefinitionDefinition

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� Evaluation of a facility involves three steps:

� Selecting sample sections with inventory data and historical

information on usage and load.

� Monitoring condition Via measurements or observations

� Processing and evaluation via manipulation and

interpretation of the data collected to provide an overall

condition rating and to make a judgment based on the

results .

� Evaluation of a facility involves three steps:

� Selecting sample sections with inventory data and historical

information on usage and load.

� Monitoring condition Via measurements or observations

� Processing and evaluation via manipulation and

interpretation of the data collected to provide an overall

condition rating and to make a judgment based on the

results .

ProcedureProcedure



Evaluation CriteriaEvaluation Criteria� Evaluation involves the assessment of facility conditions with

respect to the user, the function, and the structural condition,

and may include the following:

� Capacity - Evaluate the infrastructure’s capacity to meet

current and future demands.

� Condition - Evaluate the infrastructure’s existing or near

future physical condition.

� Funding – Identify the current level of funding for the

infrastructure category and compare it to the estimated

funding need.

� Evaluation involves the assessment of facility conditions with



� Capacity - Evaluate the infrastructure’s capacity to meet

current and future demands.

� Condition - Evaluate the infrastructure’s existing or near

future physical condition.

� Funding – Identify the current level of funding for the

infrastructure category and compare it to the estimated

funding need.

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Evaluation CriteriaEvaluation Criteria� Evaluation involves the assessment of facility conditions with



� Public Safety-Evaluate to what extent the public's safety is

jeopardized by the condition of the infrastructure and what

the consequences of failure may be.

� Evaluation involves the assessment of facility conditions with



� Public Safety-Evaluate to what extent the public's safety is

jeopardized by the condition of the infrastructure and what

the consequences of failure may be.



Evaluation CriteriaEvaluation Criteria� User Evaluation

� Convenience, comfort, health, safety, aesthetic aspects, and

overall satisfaction with the quality of service.

� These are generally subjective in nature and often depend on

visual observation or opinion.

� Examples, Serviceability Rating for highways based on riding

quality; safety of air travel and complaints of poor water

pressure and/or accumulation of garbage on streets.

� The subjective rating scale is numeric, ranging from zero (the

worst) to a maximum of 5, 10, or 100 for excellent condition.

� User Evaluation

� Convenience, comfort, health, safety, aesthetic aspects, and

overall satisfaction with the quality of service.

� These are generally subjective in nature and often depend on

visual observation or opinion.

� Examples, Serviceability Rating for highways based on riding

quality; safety of air travel and complaints of poor water

pressure and/or accumulation of garbage on streets.

� The subjective rating scale is numeric, ranging from zero (the

worst) to a maximum of 5, 10, or 100 for excellent condition.

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Evaluation CriteriaEvaluation Criteria� Functional evaluation

� Functional evaluation is the effectiveness of a facility in fulfilling

its intended functions. Major concerns are safety, size adequacy,

sufficiency based on capacity and demand requirements,

serviceability or quality of service, and physical appearance.

� Use of objective measurements. Examples include: Pavement

Condition Index based on distress measurements for highways;

condition index for bridge decks based on distress mapping and

analysis; track quality index for railroad tracks based on

measurement of track geometry, cross slope, and alignment.

� Functional evaluation

� Functional evaluation is the effectiveness of a facility in fulfilling

its intended functions. Major concerns are safety, size adequacy,

sufficiency based on capacity and demand requirements,

serviceability or quality of service, and physical appearance.

� Use of objective measurements. Examples include: Pavement

Condition Index based on distress measurements for highways;

condition index for bridge decks based on distress mapping and

analysis; track quality index for railroad tracks based on

measurement of track geometry, cross slope, and alignment.



Evaluation CriteriaEvaluation Criteria� Structural evaluation

� Structural evaluation is used to assess structural integrity by

conducting tests and structural analysis of test data.

� Structural evaluation includes load-carrying capacity, structural

integrity, seismic or fire hazard, and safety of users.

� Example are: Structural Capacity Index, used for highways

based on pavement deflection testing; structural rating and

remaining life for bridge structures based on nondestructive

deflection testing; frequency of breakdowns and failures of

utility lines.

� Structural evaluation

� Structural evaluation is used to assess structural integrity by

conducting tests and structural analysis of test data.

� Structural evaluation includes load-carrying capacity, structural

integrity, seismic or fire hazard, and safety of users.

� Example are: Structural Capacity Index, used for highways

based on pavement deflection testing; structural rating and

remaining life for bridge structures based on nondestructive

deflection testing; frequency of breakdowns and failures of

utility lines.

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ASCE Infrastructure Report CardASCE Infrastructure Report Card


Infrastructure ValuationInfrastructure Valuation

PurposePurpose� The purpose of infrastructure valuation is to answer the

question:

How much is my asset currently worth?

� With infrastructure many answers could be obtained.

� The purpose of infrastructure valuation is to answer the

question:

How much is my asset currently worth?

� With infrastructure many answers could be obtained.

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PurposePurpose

� Why value infrastructure assets?

� Financial Reporting

� Determining appropriate pricing and funding levels

� Risk management (insurance)

� Benchmarking

� Possible sale/merge

� Why value infrastructure assets?

� Financial Reporting

� Determining appropriate pricing and funding levels

� Risk management (insurance)

� Benchmarking

� Possible sale/merge



Valuation methodsValuation methods

� Cost Method (Historical)

� Valuation of assets is made on the basis of purchase price of the

assets. It is very simple method of valuation of assets.

� Market Value Method (Replacement)

� Valuation of assets is made on the basis of market price of such

assets. So, it is named Replacement Method. If same asset is to

be purchased then on the basis of same value, valuation of assets

can be done.

� Cost Method (Historical)

� Valuation of assets is made on the basis of purchase price of the

assets. It is very simple method of valuation of assets.

� Market Value Method (Replacement)

� Valuation of assets is made on the basis of market price of such

assets. So, it is named Replacement Method. If same asset is to

be purchased then on the basis of same value, valuation of assets

can be done.

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� Managerial accounting

� Used primarily by those within a company or organization.

Reports can be generated for any period of time such as daily,

weekly or monthly. Reports are considered to be "future

looking" and have forecasting value to those within the

company. Management Accounting is the branch of Accounting

that deals primarily with confidential financial reports for the

exclusive use of top management within an organization.

� Managerial accounting

� Used primarily by those within a company or organization.

Reports can be generated for any period of time such as daily,

weekly or monthly. Reports are considered to be "future

looking" and have forecasting value to those within the

company. Management Accounting is the branch of Accounting

that deals primarily with confidential financial reports for the

exclusive use of top management within an organization.

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� Financial accounting

� Used primarily by those outside of a company or organization.

Financial reports are usually created for a set period of time,

such as a financial year or period. Financial reports are

historically factual and have predictive value to those who wish

to make financial decisions or investments in a company.

� Financial accounting

� Used primarily by those outside of a company or organization.

Financial reports are usually created for a set period of time,

such as a financial year or period. Financial reports are

historically factual and have predictive value to those who wish

to make financial decisions or investments in a company.


� The depreciation in defined as “the decrease in market value of

an asset”

� An asset may depreciate because it is no longer performing its

function as well as when it was new

� Another aspect of depreciation is that caused by obsolescence

� A machine is described as obsolete when the function it performs

can be done in some better manner

� An asset may be in excellent working condition, yet may still be

obsolete. For example, electronic machines, computers

� The depreciation in defined as “the decrease in market value of

an asset”

� An asset may depreciate because it is no longer performing its

function as well as when it was new

� Another aspect of depreciation is that caused by obsolescence

� A machine is described as obsolete when the function it performs

can be done in some better manner

� An asset may be in excellent working condition, yet may still be

obsolete. For example, electronic machines, computers


DepreciationDepreciation

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� The initial value represents the purchase price of an asset

� Salvage value represents the expected price for selling the asset

at the end of its useful life

� The book value represents the current value in the accounting

systems

� The book value equals the initial value of the asset minus all the

depreciation costs till given time

� The market value represents the value of the asset if it is sold in

the free market

� The initial value represents the purchase price of an asset

� Salvage value represents the expected price for selling the asset

at the end of its useful life

� The book value represents the current value in the accounting

systems

� The book value equals the initial value of the asset minus all the

depreciation costs till given time

� The market value represents the value of the asset if it is sold in

the free market


DepreciationDepreciation


� The simplest and best known of the various depreciation methods

� The straight-line method assumes linear depreciation or the

depreciation cost is allocated equally over the asset useful life

� (Annual depreciation charge) Dn = (P – F) / N

� Example: If the purchase price of an equipment is LE60,000 and

its salvage value after 8 years is LE6,000, calculate the annual

depreciation and the book value of the equipment each year

� Total depreciation = 60000 – 6000 = LE54,000

� Annual depreciation = 54000 / 8 = LE6,750

� The simplest and best known of the various depreciation methods

� The straight-line method assumes linear depreciation or the

depreciation cost is allocated equally over the asset useful life

� (Annual depreciation charge) Dn = (P – F) / N





� Annual depreciation = 54000 / 8 = LE6,750


Depreciation: straight-line method Depreciation: straight-line method

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Depreciation: straight-line method Depreciation: straight-line method Year Annual depreciation Book value

0 0 60,000

1 6,750 53,250

2 6,750 46,500

3 6,750 39,750

4 6,750 33,000

5 6,750 26,250

6 6,750 19,500

7 6,750 12,750

8 6,750 6,000


� This method results in faster depreciation at the early life of an

asset

� Each year, the depreciation is computed as the remaining

life at the beginning of the year divided by the

sum of the years digits for the total life, multiplied by the

total amount of depreciation

� Dn = (Remaining useful life at beginning of a year / Sum of years

digits) × (P – F)

� This method results in faster depreciation at the early life of an

asset

� Each year, the depreciation is computed as the remaining

life at the beginning of the year divided by the

sum of the years digits for the total life, multiplied by the

total amount of depreciation

� Dn = (Remaining useful life at beginning of a year / Sum of years

digits) × (P – F)


Depreciation: Sum-of-years digitsDepreciation: Sum-of-years digits

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� P = 60,000; F = 6,000; N = 8


� Sum-of-years digits = 8 (8 + 1) / 2 = 36 years

� Depreciation = (8-n+1)/36 x 54000

� Calculate for n = 1, 2, 3, 4, 5, 6, 7, 8




� P = 60,000; F = 6,000; N = 8


� Sum-of-years digits = 8 (8 + 1) / 2 = 36 years

� Depreciation = (8-n+1)/36 x 54000

� Calculate for n = 1, 2, 3, 4, 5, 6, 7, 8






YearRemaining life /

sum-of-years

Annual

depreciationBook value

0 0 0 60,000

1 8/36 12,000 48,000

2 7/36 10,500 37,500

3 6/36 9,000 28,500

4 5/36 7,500 21,000

5 4/36 6,000 15,000

6 3/36 4,500 10,500

7 2/36 3,000 7,500

8 1/36 1,500 6,000

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� This method assumes that the asset initial value – the salvage

value are converted into a series of uniform payments over the

asset life

� The amount of yearly depreciation is invested in a compound

manner for the remaining period

� Dn = C × (1 + i)n-1 ; n = 1, 2, 3, …….. ……., N

� This method assumes that the asset initial value – the salvage

value are converted into a series of uniform payments over the

asset life

� The amount of yearly depreciation is invested in a compound

manner for the remaining period

� Dn = C × (1 + i)n-1 ; n = 1, 2, 3, …….. ……., N


Depreciation: Sinking fundDepreciation: Sinking fund

−+

×−=

1)1()(

ni

iFPC


� Example: Assume the same previous example with interest rate of

10%

� P = 60,000; F = 6,000; N = 8; i =10%

� C = (60000 – 6000) × [(0.1) / (1.18 – 1)] = LE4,722

� At the first year: D1 = LE4,722

� At the second year: D2 = 4722 × (1.1) = LE5,194

� At the third year: D3 = 4722 × (1.1)2 = LE5,714

� …

� At the eighth year: D8 = 4722 × (1.1)7 = LE9,202

� Example: Assume the same previous example with interest rate of

10%

� P = 60,000; F = 6,000; N = 8; i =10%

� C = (60000 – 6000) × [(0.1) / (1.18 – 1)] = LE4,722

� At the first year: D1 = LE4,722

� At the second year: D2 = 4722 × (1.1) = LE5,194

� At the third year: D3 = 4722 × (1.1)2 = LE5,714

� …

� At the eighth year: D8 = 4722 × (1.1)7 = LE9,202



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Year Annual depreciation Book value

0 0 60,000

1 4,722 55,278

2 5,194 50,084

3 5,714 44,370

4 6,285 38,085

5 6,913 31,172

6 7,605 23,567

7 8,365 15,202

8 9,202 6,000



Depreciation: ComparisonDepreciation: Comparison

Age

Book

value

Salvage value

Initial value

Sinking fund

Sum-of years

Straight- line

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� Assuming linear depreciation

Value = Acquisition Cost x (Remaining life l Useful life)

� Considering deflated cost (inflation)

Value =

Acquisition Cost x (1/ (1+i)n) x (Remaining life l Useful life)

� i = average inflation rate

� n = year of replacement – year of acquisition

� Actual condition

Value = replacement cost x actual condition

� Assuming linear depreciation

Value = Acquisition Cost x (Remaining life l Useful life)

� Considering deflated cost (inflation)

Value =

Acquisition Cost x (1/ (1+i)n) x (Remaining life l Useful life)

� i = average inflation rate

� n = year of replacement – year of acquisition

� Actual condition

Value = replacement cost x actual condition



� The replacement cost for a water main is $100,000

� Useful life = 80 years

� Average inflation rate = 4%

� The replacement cost for a water main is $100,000

� Useful life = 80 years

� Average inflation rate = 4%


ExampleExample

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ExampleExample

16 years 64 years

Initial Deflated Condition Initial Deflated Condition

Good Bad Good Bad Good Bad Good Bad Good Bad Good Bad

80,0

00

80,0

00

42,1

72

42,1

72

75,0

00

25,0

00

20,0

00

20,0

00

1,5

82

1,5

82

75,0

00

25,0

00


� For old infrastructure that is in good condition, estimating current

value based on a theoretical useful life undervalues the assets

� For new infrastructure that is in bad condition, estimating current

value based on a theoretical useful life overvalues the assets

� Conducting valuation based on actual observed condition results

in defensible results. However, the problem of the costs

associated with obtaining condition data

� For old infrastructure that is in good condition, estimating current

value based on a theoretical useful life undervalues the assets

� For new infrastructure that is in bad condition, estimating current

value based on a theoretical useful life overvalues the assets

� Conducting valuation based on actual observed condition results

in defensible results. However, the problem of the costs

associated with obtaining condition data


CommentsComments

Asset Inventory and Valuation - الصفحة الرئيسيةosp.mans.edu.eg/elbeltagi/Infra-Asset...

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