Asset Valuation: Getting value on the road ahead Damien Douglas Senior Asset Management Engineer Opus International Consultants Perth, Western Australia

Engineering perspective – I’m an engineer not an accountant! Asset management purposes Valuation links finance and asset management Focus on roads / WA / RAMM module Introduction

Mandatory integrated planning Mandatory fair value Need reasonable asset financial valuations Reporting requirements are affected Importance of valuation

Australian Infrastructure Financial Management Guidelines manual produced by IPWEA up to version coming very soon… Key guidelines

CPA Valuation and Depreciation Guidelines Free download from Key guidelines

IIMM (IPWEA/NAMS asset management bible) AASB Standards (AASB 116, AASB 13 etc) Key guidelines

Road and road-related assets = specialised assets No liquid market, rarely sold etc Specialised public sector assets use the cost approach Depreciated replacement cost method Fair value of road assets

Value at component level Value entire asset class at the same time Consider “network” assets e.g. signs Include all costs to replace Key requirements of DRC

Appropriate methodology Accurate quantities Fair and reasonable cost to replace the asset Understanding / knowledge is key Getting value from a valuation

Operating environment/complexities e.g. traffic management Overheads (both physical labour and on-costs) Include removal/demolition/disposal Typical scale / 50 th percentile / medium trends Unit costs

Don’t use CPI Do use WA road and bridge construction index Index at the component level Using indices for price movement

Four methods: 1.Fixed life by asset group 2.Statistical analysis by subgroup 3.Condition, performance, risk etc 4.Advanced predictive methods e.g. dTIMS Life assessment

Depends on asset class/type definition, but may include: Pavement formation Pavement structure (basecourse, subbase) Pavement surface Surface water channel (incl. kerb) Road drainage Road structures (bridges, retaining walls) Signs Rails Line marking Street lights Traffic facilities (Land under roads) Road assets to include

Include primer seal in pavement value (part of the full cost of doing work to the pavement) Use suitable residual values (what value will remain e.g. pavement material recycled) Value the modern equivalent not an upgraded version of it Road valuation tips

1.Requires understanding of valuation process 2.Requires understanding of RAMM RAMM valuation tips

3.Don’t value on Surface and Pavement tables 4.Do value on the Treatment Length table RAMM valuation tips (2)

5.Understand your data and how you use it (are TLs accurately set up) 6.Ensure data is summarised correctly 7.Check warning/validation reports RAMM valuation tips (3)

8.Run all steps (incl. create TL components) RAMM valuation tips (4)

9.Set up the module to reflect your network 10.Make sure all assets have a standard unit cost applied by the module 11.Check for errors & inconsistencies!! RAMM valuation tips (5)

12.Take “snapshots” and label them well! – e.g. as at 30 June 2013, by Damien Douglas (Opus), run on 15 August – Mark as “complete” and then as “audited” if appropriate – You will be able to compare easily in future 13.Export your configuration – Restore later if something gets modified RAMM valuation tips (6)

14.Export and save all valuation detail e.g. treatment length component detail 15.Use SQL queries if you know how – Link the ‘av_tl_cpnt’ table to treatment lengths – Check that there are the right number of components for the number of treatment lengths – Attach kerb value to treatment lengths – Summarise values to roads RAMM valuation tips (7)

How confident are you in the results? Who is using the results? Highly Reliable (±5%) to Very Uncertain (±40%) Each category (e.g. formation, pavement etc) Confidence ratings

Auditors may require an increased level of independence in future (e.g. peer review) AASB 116 states: “If items […] are stated at revalued amounts, the following must be disclosed […]: (b) whether an independent valuer was involved;” Independent reviews

Questions