Asset Valuation as a Key Element of Pavement Management

Transportation agencies are changing the way they do their public accounts and are moving toward a corporate type business strategy. Among the associated requirements is valuation of the assets under their jurisdiction. This is particularly important for pavements since they generally represent the item of largest asset value. Accordingly, it is essential for asset valuation to be a key element of asset management and its component system of pavement management. Carrying out asset valuation requires the following: (a) a consistent management framework, (b) adoption of an accounting basis and methodology for actually valuing assets, (c) performance indicators and depreciation functions or performance models for calculating future asset values, and (d) public and executive information systems for reporting pavement network condition and asset value. This paper first provides the framework for asset valuation and then discusses the alternative accounting bases and methodologies. Both financial accounting and management accounting, and correspondingly a written down replacement cost methodology, are described, along with their pros and cons. Other methods, including market value, equivalent present worth in place and productivity realized value are also briefly described. This paper is based largely on an asset valuation and performance indicators project carried out for the Transportation Association of Canada.