Asset Valuation

Asset Valuation is the process of assigning a monetary value to an asset or group of assets. Councils are obliged to accurately value their assets under various accounting standards and regulations.

Challenges

The following asset valuation related issues have been identified as challenges for some councils via the local government collaboration project survey.

  • Standardisation of valuation methodologies
  • Justification of condition based infrastructure valuations

If you have any thoughts on how to best meet these challenges, please feel free to share them below.

Standardisation of valuation methodologies

The way councils value assets is constrained by a number accounting standards including 'AASB 1041 - Revaluation of Non-Current Assets'. Even so there is some variation in the way these standards are interpreted by different councils and auditors and this leads to a certain amount of variation in how assets are valued at different councils. This variation in how assets are valued raises the possibility that in some cases the assets are being valued incorrectly and often results in auditors asking for valuation methods to be explained and justified. This in turn puts more pressure on the individuals preparing asset valuations. If asset valuation methods were totally standardised this could make it easier for those performing valuations to carry them out. On the other hand doing away with what flexibility there currently is could also cause problems in some situations. Getting this balance right is probably at the centre of this challenge.

Justification of condition based infrastructure valuations

The written down value / carrying amount of an asset is decreased over time as its ability to generate future economic benefit declines. The condition of an asset also deteriorates over time. Many people believe that an asset's condition should be used to determine its written down value, but this is not universally accepted. In addition to this it is not always (perhaps not usually) possible to inspect an asset and be absolutely sure of its condition and remaing useful life. Because of all this, even in juristdictions where it is permissible for councils to value their assets based on their condition it is typically necessary to justisfy how the valuation has been determined.

One way of dealing with this challenge may be by documenting exactly how condition is used to generate valuations in an asset management policy or manual and carefully applying that policy when valuing assets.

Collaborators

The following people have indicated (via the Local Government Collaboration Topics Survey) that they have an interest and/or expertise in the topic of 'asset valuation' and are willing to collaborate with their peers at other councils to identify challenges and resources relating to the topic and to look for ways to work together to overcome any challenges that are identified.

Contributors

The following site members have contributed to this page:

Related Pages

External Links & References

  1. Asset Valuations for Government - Department of Sustainability and Environment
  2. Felix Schrodinger's Blog
  3. Google Search
  4. Corowa Shire Asset Valuation Manual
  5. NCAP 3 - Valuation of Assets (December 2014)
  6. Public Asset Valuation - Victorian Auditor-General (April 2013)
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