This section describes the four approaches for calculating an asset’s initial value: replacement cost, historic cost, market value, and economic value. It also presents a flowchart which guides readers to select the appropriate method.
This section describes how to calculate initial asset value using each of the four methods described previously: current replacement cost; historic cost; market value; and economic value. The following subsections discuss issues specific to each approach and provide step-by-step guidance. This guidance should be applied for calculating value for each asset class and component identified previously as described in Chapter 3. Since economic value differs significantly from the other three approaches and is recommended only for specific applications, details of this approach are provided in Appendix 4.A.
The following are hypothetical examples illustrating application of the steps described in Section 4.2.
This section provides examples of “emerging,” “strengthening,” and “advanced” practices with respect to calculation of initial asset value. Maturity levels are defined for each of the four approaches defined in the guidance. In the table an emerging practice is one that supports the guidance with minimal complexity, an advanced practice illustrates a “state of the art” example in which an agency has addressed some aspect of the asset value calculation in a comprehensive manner, and strengthening practice lies between these two levels.