# 7. Measure Calculation

7. Measure Calculation
Once one has established all of the parameters for the asset value calculation, the task remains to calculate value for individual assets or groups of assets. One should compare the asset value calculated to that used for financial reporting. In addition to calculating overall value, one may calculate other supporting measures, such as the cost to maintain value, asset sustainability ratio, asset consumption ratio, and others.

Calculating Value for Groups of Assets

The discussion of how to calculate asset value has thus far focused on how to perform the calculation for a single asset or asset component. This section addresses the question of how to perform the calculation for groups of assets. The following subsections provide an overview of the calculation process and key issues, and recommended calculation steps.

Preparing Financial Statements

Asset value is an important component in an organization’s financial reports. Much of the prior guidance for calculating asset value has focused on this application. While this guide concentrates on the calculation of asset value to support TAM rather than financial reporting, an asset manager should remain mindful of how an agency develops its financial reports, how asset value is calculated in these reports, and any differences between TAM and financial reporting approaches. The following subsections summarize U.S. public agency financial reporting requirements, and discuss discrepancies between approaches used for asset valuation in financial reporting and TAM.

Asset Value-Related Measures

This section discusses how to calculate a set of performance measures related to asset value: the cost to maintain current value, asset consumption ratio, asset sustainability ratio, asset renewal funding ratio, and net present value. For each a definition of the measure is provided, along with guidance for calculating the measure and a discussion of the measure’s strengths and limitations.

Note the definitions presented in this guide are similar to those presented in other related guidance, most notably the Institute of Public Works Engineering Australasia (IPWEA) Australian Infrastructure Financial Management Manual (AIFMM) (9). However, these have been adapted and revised for U.S. agency use and to reflect the range of different valuation approaches presented here.

Practice Assessment

This section provides examples of “emerging,” “strengthening,” and “advanced” practices for the calculation of value and related measures. 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 a strengthening practice lies between these two levels.