A proposed elemental decomposition and bi-criteria method for asset valuation

Michelle Sophie Dojutrek, Purdue University

Abstract

The Government Accounting Standards Board (GASB) requires transportation agencies to report the values of their tangible assets. Numerous valuation methods exist which use different underlying concepts and data items. These traditional methods have a number of shortcomings, such as their implicit assumption that assets are monolithic and their inability to simultaneously consider a satisfactory range of value-related asset attributes. In a bid to address these limitations, this thesis proposes a number of valuation methods. The elemental decomposition and bi-criteria (EDBC) method carries out asset valuation on the basis of cost, remaining service life, and the condition of the individual components of an asset. Using the proposed method, bridge and pavement assets, in the state of Indiana, were valued at $5.19B (range: $2.4B-$9.3B) and $37.9B (range: $22.1B-$50B), respectively. The proposed replacement-downtime-salvage (RDS) method considers only the life-cycle costs, including user cost during work zones and recycling benefits or disposal costs. The third proposed method, decommission-and-reuse (D&R), is based on the real-estate value of the land occupied by the asset. Further, on the basis of the unit asset values derived for Indiana, the existing asset inventory of other states, and the state-specific cost factors, the total estimated value of state-owned highway bridge and pavement assets in the United States was estimated at $2.9T or $3.4T using the traditional GASB 34 and the EDBC methods respectively. For all highways in the United States, the estimated values were found to be $13.8B and $16.2B for the GASB 34 and the EDBC methods, respectively. This thesis also shows how the asset value or added asset value could be incorporated as a decision criterion in project evaluation.

Degree

M.S.C.E.

Advisors

Labi, Purdue University.

Subject Area

Civil engineering

COinS