Define the Analysis Scope – Asset Valuation Guide

Step 1: Define the Analysis Scope

The scope of an asset value analysis is thoroughly described in Chapter 3.

Information on asset value and how it is changing may support a number of different applications related to both TAM and financial reporting. When establishing the approach to calculating asset value, it is important to consider which applications the calculation is intended to support. This will then guide subsequent decisions concerning how specifically to calculate asset value.

Table 3-1. Implications of Different Asset Value Drivers on the Calculation Process

Asset Value Driver	Initial Asset Value (Chapter 4)	Treatment Effects (Chapter 5)	Depreciation (Chapter 6)	Measure Calculation (Chapter 7)
Maintaining Financial Reporting Consistency	Calculate value based on historic cost.	Establish cost, useful life and treatment history for construction, reconstruction and replacement.	Depreciate value linearly based on asset age.	Asset Value Asset Consumption Ratio
Reporting Asset Value for TAM	Calculate value based on replacement cost or market value.	Establish cost and useful life for construction, reconstruction and replacement. Avoid analysis of historic treatments by using condition data where available.	Depreciate value based on effective age determined using condition data. Use linear depreciation unless a non-linear depreciation pattern has been established.	Asset Value Cost to Maintain Value Asset Consumption Ratio Asset Sustainability Ratio Asset Funding Ratio
Evaluating Treatment Decisions	Calculate value based on replacement cost	Establish cost, useful life and treatment effects for all treatments being compared. Avoid analysis of historic treatments by using condition data where available.	Depreciate value based on effective age determined using condition data. Evaluate the benefit consumption pattern in determining how to depreciate.	Asset Value Cost to Maintain Value Net Present Value Asset Consumption Ratio
Determining Benefits to Users and Society	Calculate value using an economic perspective.	Establish cost and useful life for construction, reconstruction and replacement.	Calculate costs and benefits expected over the life of the asset in lieu of depreciation.	Net Present Value Benefit/Cost Ratio

For more information go to Section 3.1

Review Data Availability and Quality

Data needs and data quality play an important role in the scope of the asset value calculation. Explore the table below to identify which data your agency needs, and consider applying a data assessment to your data in order to determine it’s quality and completeness.

Table 3-2. Data Needs for Asset Value Calculation

Inventory Data
Always Needed Asset quantity by: Asset class Asset sub-group (e.g., asphalt vs. concrete pavement) System (e.g., Interstate, NHS)	May Be Needed Asset quantity for each individual asset or component
Challenges Asset sub-groups are typically defined to capture differences in asset life or treatment strategies Some asset classes may be implicitly included with another asset class – e.g., pavement markings and shoulders may be captured as part of pavement
Condition Data
Always Needed Distribution of asset life or condition by asset class or sub-group	May Be Needed Asset life or condition for each individual asset or component
Treatment Data
Always Needed Treatment cost The impact of treatment on the life or condition of an asset or component	May Be Needed Historic data on treatments performed by: Asset class, Sub-group, Specific asset, Asset component
Challenges Treatment costs may be specified either as a unit cost or based on historic data depending on the application
Other Data and Parameters
Always Needed Expected asset life by asset class and sub-group	May Be Neeeded Market value of existing assets Asset utilization data - e.g., traffic or ridership Discount rate Inflation rate
Challenges A number of parameters are required if calculating economic value - See Chapter 4 for further discussion

For more information go to Section 3.2

Establish the Asset Hierarchy

Consider the following set of asset types when determining which assets to include in the valuation: pavement, structures, traffic & safety assets, vehicles, fixed guideway, and facilities.

For more information go to Section 3.3

Determine the Need for Componentization

Componentization provides greater accuracy in the asset value calculation, for it separates an asset into component pieces which allows for the application of different depreciation and treatment effects. Typical assets componentized are pavements and bridges, as these assets are more complex and have specialized treatments.

For more information go to Section 3.4

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