Notice

This document is disseminated under the sponsorship of the U.S. 

Department of Transportation in the interest of information 

exchange. The U.S. Government assumes no liability for the use 

of the information contained in this document.

The U.S. Government does not endorse products or manufacturers. Trademarks or manufacturers’ names appear in this report 

only because they are considered essential to the objective of 

the document.

Quality Assurance Statement

The Federal Highway Administration (FHWA) provides highquality information to serve Government, industry, and the public 

in a manner that promotes public understanding. Standards and 

policies are used to ensure and maximize the quality, objectivity, 

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Contents

1. Introduction and Overview........................... 1

The Potential Role for Asset Valuation 

and Depreciation ................................ 2

2. Asset Valuation Defined............................ 3

The Benefits of Asset Valuation ................... 4

U.S. Valuation Process............................ 11

Utah and Ohio Replacement Cost Examples ........ 15

“Unofficial’ Use of Asset Valuation ................. 17

Asset Valuation as an Investment Consideration..... 18

Depreciated Replacement Cost: Balancing Value 

and Depreciation ............................... 22

Asset Valuation as a Component of Financial 

Management................................... 28

Complications of Transitioning to Depreciated 

Replacement Costs ............................. 33

Reporting Under GASB 34....................... 36

Potential Uses of Valuation ...................... 38

Asset Valuation and Depreciation Performance

Measures ...................................... 42

Steps to Update Asset Valuation ................. 45

3. Summary and Conclusion.......................... 49

4. Endnotes ......................................... 51
ii Financial Planning for Transportation Asset Management

Figures

Figure 1. Utah DOT asset replacement values. ........... 16

Figure 2. The City of Melbourne, Australia’s, Asset 

Management Strategy 2015-25 ....................... 39

Tables

Table 1. GASB 34 valuation example. ................... 14

Table 2. Depreciated Replacement Cost Calculation. .... 25

Table 3. Historic Cost Calculation ..................... 26
Report 5 1

1. Introduction and Overview

Transportation agencies face the challenging task to maintain, preserve and improve infrastructure assets for current 

and future generations while grappling with limited funding. 

Because assets such as pavements and bridges have long 

useful lives, sound asset management requires a long-term 

approach. Experiences from U.S. and international agencies 

with mature asset management processes show that sustaining the condition of assets is helped by long-term financial 

plans that are linked to long-term asset management strategies. Comprehensive transportation asset management plans 

(TAMP) can demonstrate expected and desired projections 

of asset performance and condition for ten or more years 

into the future. A TAMP can address the amount of investment required each year for the rehabilitation, preservation, 

and maintenance of assets during the plan period. The 

associated financial plan can be linked to the targeted 

performance and conditions 

of the assets to document 

any projected funding gaps. 

The financial plan can illustrate the financial state of 

the agency and express the 

financial needs for the plan 

period. The strategies in the 

financial plan can succinctly 

highlight the actions that 

need to be taken over the 

long term to maintain the 

health, performance, and 

condition of the assets. 

The financial plan also can address financial risks. It could 

enable the agency to monitor and compare the funding 

available to the funding projected throughout the life of the 

plan, document tradeoffs, and note corrective actions to 

Experiences from U.S. and 

international agencies with 

mature asset management 

processes show that 

sustaining the condition 

of assets is helped by 

long-term financial plans 

that are linked to longterm asset management 

strategies.
accomplish the agency’s asset management objectives. 

By acknowledging these risks, the financial plan brings 

credibility to an asset management plan. 

Well-developed financial plans allow agencies to accomplish 

several important goals. These include:

communicating with the public and stakeholders the 

value of transportation assets;

present the current, projected, and desired condition 

of assets;

document the funding required to support those 

conditions;

explain the financial risks, and accompanying revenue 

forecasts.

The Potential Role for Asset Valuation 

and Depreciation

This fifth and last report in the financial plan series 

addresses asset valuation and depreciation.

Asset valuation translates infrastructure conditions into 

monetary terms as public wealth or equity. Its corollary 

is depreciation. Depreciation captures the cost to public 

wealth or equity as assets age or deteriorate through use or 

neglect. Valuation and depreciation help portray infrastructure as part of the public’s “portfolio of wealth” that merits 

sound management, investment, and preservation.

Asset valuation plays a much larger role in asset management in England and Australia than it does in the United 

States. This report compares and contrasts U.S. practice to 

2 Financial Planning for Transportation Asset Management
Report 5 3

that in other countries and it explores the potential for asset 

valuation to play a larger role in U.S. asset-management 

efforts. It also explores challenges to expanded use of 

asset valuation and depreciation.

2. Asset Valuation Defined

This report defines asset valuation as the assignment of 

monetary value to infrastructure based upon its size, age, 

condition, replacement cost, or original cost to construct. 

Asset valuation is ambiguous because it means different 

things to different disciplines. To an economist, the value 

of infrastructure consists of its contribution to economic 

activity. In the economist’s view, the value of roads, bridges, 

or buses can be determined by their generation of travel 

time savings, accident reductions, or economic activity. To a 

businessperson, income-generating potential or the market 

price of comparable assets determines their value. Businessvaluation experts estimate an asset’s value by how much 

revenue it can generate, or what a willing seller would pay 

for it in an “arm’s length” transaction.[1]

This report focuses upon the transportation asset manager’s 

perspective on asset valuation. In this report, the value of 

assets is based upon their physical nature, size, age, condition, components, or some derivative of their cost to construct. In the international transportation asset management 

frameworks discussed in this report, asset valuation generally 

relates to these physical characteristics inherent within the 

assets. They do value some assets such as income-generating 

toll road service plazas based upon their potential sale price. 

However, international agencies generally value most assets 

based upon their cost, age, and condition. By focusing asset 

valuation upon the age or condition of the asset it supports 

the sound long-term maintenance of it. 
4 Financial Planning for Transportation Asset Management

The Benefits of Asset Valuation

Asset valuation plays a large role in several international 

asset management frameworks because it emphasizes that 

transportation assets represent government’s largest capital 

investment. Roads and bridges are public capital and comprise one of the largest sources of public wealth. The recording of infrastructure as capital reflects a business-sector 

accounting perspective that emphasizes that an entity’s 

“wealth” is not limited to cash, stocks, or bonds. Its land, 

building, factories—and in the case of transportation agencies—its infrastructure comprise a large component of its 

wealth. Just as government must be a responsible steward 

of cash or bonds, it also should be a responsible steward of 

all capital assets, the largest of which is the transportation 

network. As one British guidance document states, “Putting 

a monetary value on the assets is important because it 

emphasizes the substantial value that is tied up in them 

and hence the need to invest in maintaining their value.”[2]

The relatively large size of 

this investment is captured in 

states’ comprehensive annual 

financial reports, or their 

CAFRs. The 2014 Washington 

State CAFR reports $35.4 

billion in capital assets, or 

physical assets as opposed to 

cash or pension-fund investments. Of that $35.4 billion, 

$21.7 billion are transportation infrastructure.[3] The 2014 

State of Utah CAFR reports $17.1 billion in capital assets with 

$13.4 billion consisting of infrastructure.[4] The 2014 Florida 

State CAFR reports $62.8 billion in capital assets with $37.6 

billion of that being infrastructure. In Ohio, the 2014 CAFR 

reports $25.8 billion in capital assets with $19.9 billion 

comprising state-owned roads and bridges.[5] As will be 

“Putting a monetary value 

on the assets is important 

because it emphasizes the 

substantial value that is 

tied up in them and hence 

the need to invest in 

maintaining their value.”
Report 5 5

discussed below, these values are understated substantially 

at least in comparison to valuation practices of other 

countries. Although these values represent the relative 

magnitude of infrastructure value compared to a state’s 

total capital assets, the nominal values stated are much 

less than actual values because of U.S. accounting 

standards that will be discussed below.

Australian and British transportation agencies emphasize 

valuation as a significant component of transportation asset 

management. In those countries, transportation engineers 

and planners collaborated with accountants to move toward 

a common reporting approach. The intent is to have the 

disciplines “speak a common language” so that the finance 

and engineering staff are preserving physical capital with 

diligence comparable to the managing of financial capital. 

In Great Britain, the Chartered Institute of Public Finance 

and Accounting (CIPFA) collaborated with the UK Roads 

Liaison Group (UKRLG) that is an association of national 

and local governments. The accounting body developed a 

Code of Practice on Transport Infrastructure Assets that 

provides guidelines on assigning monetary value to physical 

assets. The accountants coordinated with the Roads Liaison 

Group that produced asset management guidelines. The 

two coordinated the financial management and valuation 

guidelines with a pavement management system and draft 

bridge management system. The intent is to generate 

common values for asset management and financial 

management decision making.[6]

CIPFA says the financial reporting code and its emphasis on 

asset valuation supports long-term financial planning and 

budgeting, good evidence-based asset management, and 

transparent information on agencies’ management of highway assets. Its guidelines say that the local highway networks and other transportation infrastructure represent by 
6 Financial Planning for Transportation Asset Management

far the largest capital asset that the UK public sector holds. 

However, few local governments know what their infrastructure is worth, and detailed inventory and condition information are not uniformly available. Although there is a perception that transportation assets are underfunded, the amount 

of investment to sustain them is unclear.

The British guidelines advance the concept that physical 

assets have financial value by stating that good financial 

planning and good engineering overlap with transportation 

asset management. An example lies with asset inventories. In 

U.S. practice, asset inventories are thought of as a planning, 

engineering, or maintenance support tool. The British guidelines cite asset inventories also as financial tools that allow 

for the identification and valuation of the agency’s physical 

capital. Similarly, pavement and bridge management systems 

serve the needs of engineers, planners, programmers and 

CORPORATE REPORTING

In the corporate world, asset valuation is a basic 

component of financial reporting to investors and 

shareholders. The Union Pacific railroad’s 2014 annual 

report says that total capital investment to maintain 

and improve its railways and rolling stock increased 

from $3.176 billion in 2011 to $3.496 billion in 2013. 

This investment more than offset reported depreciation of $1.77 billion. This increase in capital investment 

contributed to a total growth in assets from $45.1 

billion in 2011 to $49.7 billion in 2013. The effect of this 

growth is each shareholder owned part of a company 

with a “book value” of $49.7 billion in 2013, up nearly 

10 percent in two years. If UP’s depreciation outpaced 

its capital investment in infrastructure, shareholder 

value would have declined instead of grown.
Report 5 7

accountants who make project and program decisions. 

For accountants, the deterioration curves and forecasting 

scenarios support estimates of long-term investment needs 

that the accountants and financial staff should anticipate. 

Good unit cost data not only helps the planner and estimator 

but they allow the finance staff to improve forecasting of 

investment needs. The overlap of engineering and finance 

resulted in the code’s development to serve the needs of 

both. The code attempts to identify standards that will 

generate data to allow both the transportation asset 

managers and the agency financial staff to do their jobs.

“Effective implementation will require highway engineers and 

finance staff to work closely together to ensure that financial 

information is timely, consistent and of high quality to meet 

the needs of both.”[7]

In the British guidelines, further overlap between asset 

management and financial management is encouraged by 

using asset-inspection protocols to help estimate asset 

values. One of the first steps in valuing assets is to identify 

their components. For example, the underlying rights-ofway and earthworks seldom depreciate. However, pavement 

layers and drainage components do. For valuation purposes, 

the inventory is broken down into components and each 

component valued and depreciated separately. This “componentization” is recommended to be coordinated with the 

inspection protocols. If bridge components are inspected as 

individual items of the structure, those same component 

classifications are used to determine the value of different 

bridge elements. In this way, the value of a bridge deck 

could be differentiated from the value of the superstructure, 

just as the condition of the deck can be differentiated from 

the condition of the superstructure. Similarly, if pavement 

surfaces are inspected, those inspection reports feed the 

estimate of pavement age and condition that determine 

the pavement layer’s value.
8 Financial Planning for Transportation Asset Management

NUMBERS: ESTIMATES VERSUS ABSOLUTES

To fully understand financial statements, one must 

appreciate that their numbers often represent 

approximations. Although a checking account may be 

balanced to the penny, such precision is not possible 

when making revenue forecasts, or when assigning 

costs for depreciation. A checking account is a shortterm “cash” account. It can be absolutely balanced. 

However, forecasts of future revenues and the allocation 

of long-term depreciation are “accrual” estimates. 

They are my nature approximations. 

Basic concepts in accounting are “accrual,” “allocation,” 

and “recognition.” These mean that revenue, expenses, 

and profits are often estimated and spread across many 

months, years, or even decades. If a widget-making 

company purchases a $1 million widget-making 

machine it will spread the purchase price across years 

or decades on the financial statements. This reflects the 

basic accounting concepts of “accrual” and “allocation.” 

The cost of purchasing the widget-making equipment 

is allocated or spread across the company’s widgetmaking functions. The company’s cost of widget 

production reflects the accrued or allocated cost of 

the $1 million equipment. If the equipment helps 

produce a product for 10 years, its purchase price is 

spread, or accrued, across the cost of production for 

10 years. These practices lead to numbers on financial 

reports that do not correlate to any actual income or 

outlay. The $1 million price of the equipment may never 

appear on the financial reports as a $1 million outlay. 

Instead one-tenth of its cost may appear in 10-year 

increments if it is depreciated over 10 years. Also 

complicating the issue is there are many different ways
Report 5 9

S

to depreciate the equipment, each of which generates 

a different annual depreciation cost.

Accounting logic says when the company bought the 

$1 million machine it exchanged $1 million in cash for 

$1 million in equipment. Its assets remain balanced. 

The costs are recognized as the machine is depreciated, or a bit of its economic value is consumed each 

year. Analogous in the public sector, if a transportation 

agency buys from a contractor a $1 million bridge, 

the agency still has $1 million in value. The value is in 

infrastructure, not cash. The loss in the agency’s value 

occurs over time as the bridge depreciates, which 

reflects its “consumption.” Estimating the annual 

depreciation is an estimate, not an absolute.

“The fact is, accounting and finance... really are as 

much art as they are science,” says Financial Intelligence, A Manager’s Guide to Knowing What Numbers 

Really Mean. “We think that if a number shows up on 

the financial statements or the finance department 

reports to management, it must accurately represent 

reality. ...The art of accounting and finance is the art of 

using limited data to come as close as possible to an 

accurate description of how well a company is performing. Accounting and finance are not reality, they are a 

reflection of reality.”[8]

This need to approximate and estimate holds true for 

valuing transportation assets. Agencies’ valuations 

always will be estimates. The key is for an agency to 

use a consistent valuation process comparable over 

many years.
10 Financial Planning for Transportation Asset Management

The British code also emphasizes that assets with the highest 

costs merit the highest focus. As such, pavements and 

bridges that comprise more than 90 percent of a typical 

agency’s assets merit the most sophisticated management 

while less complex assets such as signs merit less complexity.

A key difference in U.S. asset valuation guidelines and those 

in Great Britain or Australia is in the use of what is known as 

“historical costs” versus “depreciated replacement costs.” 

COMMON LANGUAGE FOR OPEN BOOKS

U.S. and Australian financial-reporting frameworks 

emphasize the use of common language so that a 

“reasonably knowledgeable” person could understand 

the agency’s financial status.[9,10] GASB 34 requires a 

manager’s discussion and analysis (MD&A) that should 

give “an objective and readable analysis.” Detracting 

from the asset management utility, the GASB 34 

analysis is only required to relate to the past year. 

The Australian guidelines emphasize an accrual 

accounting approach that summarizes the agency’s 

long-term financial sustainability. It describes financial 

sustainability as “able to manage financial risks and 

financial shocks in future periods without having to 

introduce significant and economically destabilizing 

expenditure or revenue adjustments in those future 

periods...Effectively, a financial sustainability assessment 

involves a comparison of an agency’s long-term financial 

capacity with its long-term financial requirements.”

Despite their different timeframes, both sets of 

guidance emphasize common, understandable 

language to support public decision making.
Report 5 11

The U.S. valuation process divorces asset condition from 

its value which is illogical to an engineer or planner. The 

British and Australian practices more closely relate asset 

value to condition resulting in much higher stated values. 

The U.S. valuation practice diminishes the utility of asset 

valuation as an asset management tool. First, the U.S. 

process of asset valuation will be described. Then, it will 

be contrasted to practices in other industrialized Englishspeaking nations.

U.S. Valuation Process

For the typical U.S. planner or engineer the valuation of an 

asset plays little role in deciding how to manage it. They 

instead focus upon asset condition.

State and local agencies annually report on asset valuation 

under the Governmental Accounting Standards Board 

Statement 34 (GASB 34) requirement. Transportation 

agencies generally produce internal estimates of their 

agency’s infrastructure value that then are included 

as footnotes or tables in the statewide CAFR. The CAFRs 

tend not to be widely read and the asset valuation tables 

even less so. Generally, the agency’s asset valuation 

estimates are a few lines of the CAFR table of capital assets 

along with other state capital assets such as parks, buildings, universities, and museums. A few paragraphs of 

explanation are included.[11]

Most U.S. transportation officials report receiving little 

interest in the GASB 34 valuation estimates.[12] This lack 

of interest is in part because they are published only in the 

relatively obscure CAFRs but also because the logic used to 

value assets is different from the logic used by engineers 

and planners to invest in assets. This is despite GASB 34’s 

original intent to spur public review of the adequacy of 

infrastructure investment.
12 Financial Planning for Transportation Asset Management

GASB 34 was adopted in 1999 at the same time that 

accounting bodies around the world increased their 

emphasis upon public-sector capital accounting. From the 

U.S. and Canada, across Europe and to Australia and New 

Zealand, accounting and financial professionals recognized 

that much of the public’s “capital” was not reported in 

agency budgets and financial statements. Agency budgets 

reported upon current account balances and expenditures for a one or two-year 

period. However, physical 

capital was de-emphasized. 

An analogy would be to a 

homeowner balancing her 

checkbook and savings 

account but ignoring depreciation of her home, car, and 

retirement account. Her home 

and car may represent her largest assets but they were not 

reported in her checkbook as capital assets whose value 

may increase or decrease. Similarly, agency financial statements ignored declines in highway and bridge conditions 

that represent loss of value in public assets.

Another analogy is between pension funds and transportation agencies. Pension funds hold many long-lived assets 

for many decades. They invest pension contributions in 

stocks, bonds, real estate and other investments to grow 

their portfolio for the benefit of the pension recipients 

who contributed to the system. The accounting reforms 

of the 1990s intended to put all government agencies on 

a somewhat similar footing to pension fund managers. 

The roads, bridges, buildings, and transit facilities owned 

by the transportation agencies reflected large investments 

as did the pension fund contributions. If transportation 

agency officials were managing a large infrastructure portfolio, they should report upon changes in its value. They also 

GASB 34 was adopted in 

1999 at the same time that 

accounting bodies around 

the world increased their 

emphasis upon publicsector capital accounting.
Report 5 13

should disclose their strategies and investments to grow, or 

at least to sustain, their portfolio.

In 1999, GASB 34 required for the first time that agency 

financial officials provide a “management discussion and 

analysis” summarizing the changes in the agency’s financial 

position regarding its physical capital or infrastructure. It also 

was to report on all costs, including costs such as the loss of 

infrastructure value through depreciation. Again, the analogy 

to a portfolio manager is relevant. If the stocks held by a 

pension manager decline in value, the pension fund would 

record the decline as a loss of portfolio value. Similarly, if an 

agency’s infrastructure portfolio declined in value through 

a lack of maintenance, that loss of capital value was to be 

recorded.[13] GASB 34 summarized the intent as, “In short, the 

new annual reports should give government officials a new 

more comprehensive way to demonstrate their stewardship 

in the long term in addition to the way they currently 

demonstrate their stewardship in the short term through 

the budgetary process.”[14]

The GASB 34 guidelines, however, specified asset valuation 

calculations that reduce their relevance to transportation 

asset management. GASB 34 requires agencies to value 

assets only based upon their original construction cost, 

known as their historic costs.[15] As a result, a 30-year-old 

bridge that has been restored to near “as new” condition 

would be reported on the agency’s balance sheet only at its 

30-year-old original cost. Also, many costs to maintain and 

restore assets are recorded as expenses, not as capital. As 

a result, a rehabilitation project that restores a bridge or 

pavement may not increase its reported value.

These guidelines tend to divorce an asset’s condition from its 

reported GASB 34 value. Under GASB 34, costs for electricity to light an office and the cost to rehabilitate a bridge are 

both expenses that don’t increase asset values, even if the 
14 Financial Planning for Transportation Asset Management

bridge is restored to nearly “as new” condition. Exceptions 

are brand new assets, such as a new bypass on new alignment. When complete, it is recorded at its construction cost. 

However, its value is not updated in later years when its 

components are rehabilitated. Thus, inflation erodes its 

relative value despite its condition.

Table 1 represents an example from the GASB 34 guidelines, 

with the years updated. It illustrates how the reported value 

of a serviceable asset would be reduced regardless of its 

condition. The original construction year was 2001, and 

the estimated cost to replace the asset in 2016 dollars is 

$65 million. 

Using FHWA construction cost indices, the 2001 construction 

costs are estimated to be 69 percent of 2016’s construction 

costs. Therefore, the estimated historic cost to build the asset 

in 2001 was the current value times 69 percent or $44.8 

million. Because the asset is assumed to have a 25-year life, 

one-twenty-fifth of its value is depreciated each year. By 2016, 

the 15 years of accumulated depreciation is $26.9 million. That 

is subtracted from the estimated 2001 construction cost 

Table 1. GASB 34 valuation example.

Step Factor or Calculation Value

A Year Asset Constructed 2001

B Current Replacement Cost $65M

C 2001 Construction Index (% of 2016 Costs) .69

D 2016’s Estimate of the 2001 Construction Cost (B x C) $44.9 M

E Annual Depreciation Cost Based on 25-Year Life (D ÷ 25) $1.794M

F 15 Years Accumulated Depreciation (E x 15) $26.9M

G Recorded Asset Value in 2016 (D – F) $17.95

H Years Remaining Until Asset Value = $0 (G ÷ E) 10
Report 5 15

leaving a recorded asset value of $17.94 million on the 2016 

financial reports. In subsequent years, the annual depreciation 

of $1.794 is deducted resulting in the asset having a value of 

zero by 2025. Although the asset may have been maintained 

and rehabilitated, its value will continue to decline and reach 

a value of zero 25 years after its construction. 

This use of “historic” costs tends to greatly understate the 

intrinsic value of U.S. infrastructure and makes asset valuation 

largely irrelevant to U.S. transportation asset management. 

From a narrow valuation view point, if an asset has no reported value, what is the imperative to maintain it? On the other 

hand, if the asset is reported as a high-value publicly owned 

piece of capital, the imperative to sustain its value increases. 

Utah and Ohio Replacement Cost Examples

A comparison of GASB 34 asset values with estimated 

replacement costs illustrates how much the U.S. valuation 

standards reduce the reported value of assets. The Ohio DOT 

reports a GASB 34 value of $2.893 billion for its bridges in 

2014. Based upon its average square foot cost to replace or 

rehabilitate a bridge, it would cost $32.9 billion to replace its 

bridge inventory based on 2014 costs. The GASB valuation 

equals 9 percent of replacement cost, although the agency 

bridges are in relatively good condition. ODOT reports that 

only 1.4 percent of its bridge area is in unacceptable condition. From a performance standpoint, their value is high. 

From a GASB 34 standpoint, their value is much less.

The Utah DOT estimates the replacement value for its 

roadway assets at $34.6 billion, shown in Figure 1. By comparison, its GASB 34 values for pavements, structures and 

land are $15.9 billion or 45 percent of the replacement cost. 

Despite depreciating replacement values by 55 percent by 

using the required GASB 34 valuation, the Utah DOT reports 

good asset conditions. It reports 99 percent of all bridges 
16 Financial Planning for Transportation Asset Management

and interstate highway pavements are good or fair. For 

non-interstate roads with more than 1,000 vehicles per day, 

92 percent of pavements are good or fair. For routes with 

less than 1,000 vehicles a day 76 percent were good or fair 

and 24 percent poor. 

The result of the U.S. standards is that the reported value or 

“carrying amount” of infrastructure is much less than for 

equivalent assets in Great Britain, Australia, or New Zealand.

“There is virtually no benefit to TAM if assets are valued at 

historical cost under the GASB 34 depreciation approach,” 

says the second asset management guide.[16] This is because 

of the long-term effects of inflation that decrease the 

Figure 1. Utah DOT asset replacement values.
Report 5 17

reported value of serviceable assets, according to the guide 

published by the American Association of State Highway 

and Transportation Officials (AASHTO.) 

Using FHWA construction cost indices, the 2001 construction 

costs are estimated to be 69 percent of 2016’s construction 

costs. Therefore, the estimated historic cost to build the 

asset in 2001 was the current value times 69 percent or 

$44.8 million. Because the asset is assumed to have a 25-year 

life, one-twenty-fifth of its value is depreciated each year. 

By 2016, the 15 years of accumulated depreciation is 

$26.9 million. That is subtracted from the estimated 2001 

construction cost leaving a recorded asset value of $17.94 

million on the 2016 financial reports. In subsequent years, 

the annual depreciation of $1.794 is deducted resulting in 

the asset having a value of zero by 2025. Although the asset 

may have been maintained and rehabilitated, its value will 

continue to decline and reach a value of zero 25 years after 

its construction. 

“Unofficial” Use of Asset Valuation

Although GASB34 requires the use of historical costs for 

valuation of assets in the CAFRs it does not prohibit an 

agency’s use of more realistic valuation estimates for planning, communication, or asset management purposes. The 

Utah DOT incorporates its much-higher asset-replacement 

costs into its risk-based asset management decision making. 

It uses the values from Figure 1 to both illustrate the value of 

its assets but to also help set investment priorities.[20]

UDOT developed a tiered approach to managing its assets 

based upon their value and their risks. Tier 1 assets have the 

highest combined value combined with the highest negative 

risk of financial impact if they are poorly managed. These 

high-value assets receive the most sophisticated management that includes accurate and sophisticated data collection, 
18 Financial Planning for Transportation Asset Management

targets that are tracked, and predictive modeling and risk 

analysis. Tier 2 assets have a moderate value and risk and 

may have data collected less than annually, risks are assessed 

for failure only, and management may be by spreadsheet 

calculation rather than sophisticated model. Tier 3 assets 

have the lowest values and risks. They are generally repaired 

or replaced when damaged. Assets valued in Tier 1 or Tier 2 

are managed for four categories of risks:

Financial risks or the analysis of sustainable funding to 

achieve performance goals;

Information risks or the availability and quality of data 

needed for long term management;

Operational risk or the analysis of the probability 

and impact of asset failure upon the operation of 

the system, and;

Safety or the analysis of risks to the impact on public 

safety of asset failure or poor condition.

Tier 1 assets are pavements, bridges, pipes and culverts. 

Tier 2 assets include retaining walls, barrier, signs, signals, 

pavement markings, rumble strips, intelligent transportation 

system (ITS) devices and curb ramps. The Tiers are broken 

down further with pavements stratified into the Interstates 

which are 16 percent of the system, Level 1 sections, or 

those with greater than 1,000 ADT and truck volumes above 

200 daily. These comprise about 50 percent of its system. 

Level 2 pavements have less than 1,000 AADT and comprise 

34 percent of the network.

Asset Valuation as an Investment Consideration

As with the Utah DOT, asset valuation plays a prominent 

role in asset management decision making abroad. The 
Report 5 19

high value of infrastructure assets is cited in British asset 

management plans as one of the rationales for effective 

asset management. Transport for London’s first highway 

asset management plan in 2007 started by noting the plan 

will help the City of London manage its $5 billion in roadway 

GETTING ON THE SAME PAGE

By calculating an agency’s asset values, transportation 

officials can relate to business-oriented citizens and 

elected officials by referring to the agency’s “book 

value.” When the total value of an agency’s physical and 

financial assets is calculated, the total would be what 

business analysts call the “book value.” Book value is a 

common business term that refers to the estimated 

value of a company if all of its assets were sold. It is a 

different type of valuation than income-generating 

valuation, or market value, that bases a company’s 

estimated value upon the revenue it could generate in 

the future. Book value is calculated by estimating the 

value of plant, equipment, inventory, land, cash, and 

other assets that could be sold. Understanding a company’s book value is a key factor for business owners.

With many legislators and governors coming from the 

private sector, they would understand book value from 

their business experience. By calculating and using book 

value as a decision-making tool, transportation agency 

officials can speak in a language that these former 

business people readily understand. Another term for 

book value is “owner’s equity.” By discussing owner’s 

equity and book value, agency officials can demonstrate 

they understand that transportation infrastructure is 

owners’ equity, and the owner is the public.
20 Financial Planning for Transportation Asset Management

assets, which are among the most valuable assets owned by 

the City.[21] The London asset management plan says that 

changes in asset values reflect changes in asset conditions, 

providing the city an important benchmark of its asset 

management effectiveness. It also can track its depreciation 

expenses against its asset investments to determine if it is 

keeping pace with asset deterioration. The London borough 

of Croydon’s asset management plan says it uses asset 

valuation as one of several measures to track the condition 

of assets.[22] Knowing the annual change in asset values 

helps the city determine 

investment levels to build a 

business case to ensure the 

network remains “fit for 

purpose.” It compares its 

Gross Replacement Cost, or 

its as-new costs, compared 

to current, depreciated costs 

to determine how much 

network value has been lost 

to “consumption of the 

asset” or depreciation. Its 

calculations indicate that current assets represent about 

89 percent of “as new” value. This indicates that assets 

are in relatively good condition with only 11 percent of the 

assets “consumed” or depreciated. Although not stated in 

the Croydon asset management plan, this percentage has 

sometimes been called an Asset Consumption Ratio. It 

measures the percent of “as new” assets that have been 

consumed through use or depreciation. 

The Town of New Market Ontario’s asset management plan 

reports that the value of its infrastructure assets is immense 

in relation to the town’s operations. It says in recent years the 

linking of the management of these assets to fiscal sustainability principles has become more prevalent. It prepared 

six strategic documents to guide its long-term operations 

The London asset 

management plan says 

that changes in asset values 

reflect changes in asset 

conditions, providing 

the city an important 

benchmark of its asset 

management effectiveness. 
Report 5 21

including a capital financing sustainability strategy, a roads 

needs study, and an asset management plan that covers all 

its infrastructure.[23]

Canadian governments such as New Market must report 

historic costs on their financial statements, as do U.S. 

governments. However, New Market’s asset management 

plan says the historic costs have limited value for making 

infrastructure investment decisions. Therefore, it also reports 

replacement costs which are more meaningful to decision 

makers. It notes its town hall was built in 1860 for $60,000 

but was recently renovated for $9 million. Its roads and 

bridges are on the books for $139 million in historic costs but 

are valued at $323 million for replacement costs. “It is the 

replacement costs, the costs that will be incurred now or in 

the future, that are essential for decision-makers to be aware 

of.” It bases its 10-year financial plan, which is called a Capital 

Financing Sustainability Strategy, upon the costs to renew 

and replace assets based upon their replacement costs. 

The City of Sydney, Australia’s, Resourcing Strategy provides 

a 10-year financial plan for the city which includes tracking 

of asset valuation and depreciation.[24] Although it cautions 

that the amount of depreciation does not equate to any 

given year’s maintenance needs, it does reflect the long-term 

reduction in the asset’s estimated useful life. Depreciation of 

the value of the city’s assets provides a benchmark against 

which its asset-renewal expenditures can be compared. It 

reports that its program for asset renewal and replacement 

over 10 years will match or exceed the assets’ depreciation. 

As with other governments in Australia, the predicted depreciation appears as a line item on the agency’s projected 

10-year income statement. Depreciation represents about 

20 percent of the city’s expenses from continuing operations 

over 10 years. Depreciation averages $124 million annually 

over 10 years while the city’s projected capital plan averages 

$186 million, outpacing the accumulated depreciation.
22 Financial Planning for Transportation Asset Management

The Australian State of Victoria’s highway agency, known as 

VicRoads, reported 2014 asset values of $47.7 billion, which 

is more than twice that of Ohio’s although Victoria has half of 

Ohio’s population. The higher values result from Australia’s 

reliance on what is called “depreciated replacement costs” 

rather than the historic costs used in the U.S. Depreciated 

replacement cost will be explained below. The VicRoads 

annual report reflects the private-sector-like accounting used 

in Australia. The agency reported a net deficit in 2014-15 in 

part because of a recognition of higher depreciation resulting from an every-five-year revaluation of its assets.[25]

Depreciated Replacement Cost: 

Balancing Value and Depreciation

The British and Australian accounting guidelines call for 

agencies to report the “fair value” of assets, not the historic 

costs. As noted, this leads to higher and probably more 

realistic valuations than in the U.S. The Australian Accounting Standards Board Standard 13 defines fair value as the 

price that would be received to sell an asset in an orderly 

transaction between market participants.[26] When estimating fair value, the organization shall take into account the 

characteristics of the asset such as its condition and location. Standard 13’s inclusion of condition as a valuation 

factor significantly differentiates it from GASB 34 which 

focuses on only the original, or historical, construction cost. 

Australian Standard 13 also says that in the absence of a 

principal market—such as for publicly owned transportation 

assets—the fair value measure assumes that the asset could 

be sold in the most advantageous market. For non-financial 

assets such as infrastructure the standard says fair value 

should take into account the market participant’s ability to 

generate economic benefit by using the asset at its highest 

and best use. Again, this provision allows the condition of 

assets to be factored into their value because the economic 

benefits can include the asset’s remaining years of service. 
Report 5 23

For non-market assets, the entity shall consider all “relevant 

observable inputs” when valuing assets. This opens the door 

for asset conditions to influence the asset’s value.

Under the Australian accounting standards, different 

valuation approaches could 

be applied to different assets. 

The valuation process would 

depend upon how robust 

comparable price data are. 

The guidelines provide three 

different levels of valuation 

ranked in order of preference. 

Level 1 inputs would be used 

when there are quoted prices 

for comparable assets, such 

as if the agency owns excess 

rights-of-way whose value 

can be equated to comparable land prices. Level 2 

inputs would be observable inputs, such as the price of an 

asphalt pavement resurface. The agency could not re-sell 

an asphalt surface to determine its market value. It could, 

however, estimate the cost or value of a pavement surface 

based on typical construction costs and the asphalt surface’s 

age and condition. Level 3 inputs are not observable in the 

open market but can be derived from an entity’s own data, 

such as asset-inventory condition data. 

The agency also could use different valuation techniques 

depending upon the use of the asset. A market-based 

approach to valuation could be used for items that have 

comparable market prices, again, such as excess rights-ofway that could be sold. The agency could use an income 

approach for assets that generate income, such as the 

service plaza on a turnpike. The value of the service plaza 

The Australian Accounting 

Standards Board Standard 

13 defines fair value as 

the price that would be 

received to sell an asset 

in an orderly transaction 

between market participants.When estimating 

fair value, the organization 

shall take into account 

the characteristics of the 

asset such as its condition 

and location.
24 Financial Planning for Transportation Asset Management

could be determined by the net present value of its income 

over a specific time period. The income-based approach is 

typical when private companies estimate the value of a 

business they want to buy or sell. 

The third approach would be most typical for transportation 

assets and it is the cost approach. The cost approach reflects 

the amount that would be required currently to replace the 

service capacity of the assets, or as the Standard 13, says, the 

“current replacement cost.” The replacement cost, however, 

is not to an “as new” condition but rather to an “as is” condition. “From the perspective of the market participant seller, 

the price that would be received for the asset is based on the 

cost to the market participant buyer to acquire or construct 

a substitute asset of comparable utility, adjusted for obsolescence...Obsolescence encompasses physical deterioration, 

functional (technological) obsolescence and economic 

obsolescence...” For instance, an asset that no longer meets 

standard or which is technologically obsolete would have 

lower value regardless of its physical condition.

A definition very similar to current replacement cost is the 

depreciated replacement cost, or DRC.[27] It is most commonly used to value assets in Australia and is recommended 

for adoption in Great Britain. Both have similar definitions 

but the depreciated replacement cost may have the more 

descriptive and less-ambiguous title. It is defined in AASB 

Standard 136 as “the current replacement cost of an asset 

less, where applicable, accumulated depreciation calculated 

on the basis of such cost to reflect the already consumed or 

expired future economic benefits of the asset.”[28] In other 

words, what would it cost to replace the asset as it is?

Depreciated replacement cost addresses some of the shortcomings of GASB 34’s reliance on historic costs. As its name 

suggests, it captures both the cost to replace an asset “as is” 

and also reflects the reduced value caused by age and 
Report 5 25

depreciation. Table 2 which is modified from the Australian 

Infrastructure Financial Management Guidelines 29 illustrates 

an example of calculating a depreciated replacement cost. 

In the example, an agency determines the value of a 55-yearold bridge. It determines that the cost to replace the bridge 

with a modern equivalent will be $3 million. The bridge has 

an expected life of 60 years, with five years remaining. 

Therefore, it has 8 percent of its remaining useful life or 

5 years/60 years. The replacement value of $3 million is 

multiplied by the remaining life, or 8 percent, to produce a 

depreciated replacement value of $250,000. The 55-year-old 

bridge is thus carried on the books at a depreciated replacement value of $250,000. If a new bridge is built in five years, 

it will be “recognized” on the books at $3 million and the 

agency’s asset values will increase by that amount.

Table 3 (see next page) compares the value of the bridge if 

historic costs were used. In this scenario, it is estimated that 

the historic cost of the bridge was $500,000 55 years ago. 

Because it has an estimated life of 60 years, one-sixtieth of 

its value is depreciated each year so that by the current time 

it has a value of only $41,667, compared to $250,000 in the 

depreciated replacement cost valuation. As can be seen, the 

major difference is applying depreciation to the replacement 

cost, not the historic cost. The Australian and British guidelines contend that the depreciated replacement cost provides

Table 2. Depreciated Replacement Cost Calculation.

Step Factor or Calculation Value

A Cost to Build New Replacement Bridge $3M

B Useful Life 60 years

C Age of Bridge 55 years

D Remaining Life 5 years

E Percent of Remaining Useful Life (D ÷ B) 8.3%

F Depreciated Replacement Cost (A X E) $250,000
26 Financial Planning for Transportation Asset Management

a more realistic estimate of the actual value of the structure. 

In this case, the structure will provide 5 years of service, 

which in modern cost terms, is valued at $250,000 and 

not the $41,667. 

The British asset management accounting guidelines also 

recommend depreciated replacement cost for valuing assets.

[30] It says that depreciation is a useful measure of the cost of 

the economic benefits of assets that have been consumed 

during the accounting period. However, applying depreciation to the historical cost of assets is not a good basis for 

dealing with assets that have long lives. The depreciation 

expense applied to the lower historical cost understates the 

amount of annual depreciation incurred, which understates 

the amount of investment needed to sustain asset values. 

It defines depreciated replacement cost as, “the current cost 

of replacing an asset with its modern equivalent asset, less 

deductions for all physical deterioration and all relevant 

forms of obsolescence and optimization.” The gross replacement cost (GRC) is the cost of constructing a modern, equivalent asset. From the gross replacement cost is subtracted 

depreciation to determine the depreciated replacement cost. 

The British guidance has two other elements that increase 

asset values in comparison to values derived from historic 

Table 3. Historic Cost Calculation.

Step Factor or Calculation Value

A Historic Cost to Build Bridge 55 Years Ago $500,000

B Bridge Age 55 years

C Estimate Bridge Life 60 years

D Annual Depreciation (A ÷ C) $8,333

E 55 Years of Depreciation (B x D) $458,333

F Bridge Historic Value (A – E) $41,667
Report 5 27

costs. First, the asset values are indexed upward each year 

to reflect inflation. Agencies should differentiate or track the 

amount of increased asset value caused by inflation so that 

they can recognize how much the value is increased by 

inflation and how much by investment. 

Secondly, the British guidelines allow more increase in asset 

value through investment than does the U.S. standards. This 

is called “capitalization.” As investments are made to extend 

the life of assets, the asset value is increased more liberally 

under the UK guidelines than the U.S. guidelines. In the U.S., 

costs such as painting steel beams or replacing an asphalt 

layer are considered expenses that cost the agency but 

which do not increase asset 

value. In most U.S. agencies, 

they only “capitalize” items 

that expand the size or 

footprint of assets. And they 

often have higher capitalization limits of $500,000 or 

more. The result is that many 

U.S. asset renewal projects 

don’t increase asset values, 

which again is contrary to 

engineering logic. In the 

British guidelines, the capitalization limits are lower and 

more types of projects result 

in increased asset values. 

The CIPFA guidelines say, “Put simply, the intention is to 

capture anything that adds to or restores the economic 

benefits and service potential of the asset compared to the 

condition at the time the expenditure is made.”[31] Filling 

potholes or cleaning ditches are not capitalized but painting 

steel beams or sealing pavement surface layers are. 

The result of the British 

capitalization guidelines 

is to “reward” sound asset 

management. As investments are made to extend 

the life of assets, the 

agency’s asset values 

increase. The agency can 

demonstrate to the public 

and to policy makers that 

it is growing the public’s 

equity and acting 

sustainably. 
28 Financial Planning for Transportation Asset Management

The result of the British capitalization guidelines is to 

“reward” sound asset management. As investments are 

made to extend the life of assets, the agency’s asset values 

increase. The agency can demonstrate to the public and 

to policy makers that it is growing the public’s equity and 

acting sustainably. It will be leaving for future users higher 

asset values and more public “equity” than currently exist. 

In effect, they have grown the value of the public’s 

transportation portfolio.

Asset Valuation as a Component of 

Financial Management

In the Canadian, British, and Australian infrastructuremanagement frameworks asset valuations are only part 

of a larger process to encourage state, local, and national 

governments to focus upon the financial sustainability of 

infrastructure. Asset values alone do not drive the infrastructure-management framework but are part of a suite 

of financial-sustainability metrics and analyses intended 

to support the long-term, responsible investment in assets. 

A more detailed discussion of Australian and British financial infrastructure plans can be found in the FHWA report, 

Asset Sustainability Index: A Proposed Measure for LongTerm Performance, pages 21-31, accessible at https://www.

planning.dot.gov/documents/ASI_report/ASI_July9_FINAL_

web.pdf Here, the financial-sustainability frameworks are 

summarized and the role of asset values put into the 

financial-planning context.

In most of the international examples, asset valuation 

complements typical asset performance measures and 

processes, it does not replace them. Officials still focus on 

pavement and bridge conditions, deterioration rates, and 

other asset-condition attributes. But the inclusion of asset 

values translates deteriorating infrastructure into depreciation that appears as lost dollars and cents to taxpayers.
Report 5 29

In Canada, the Public Sector Accounting Group of the 

Canadian Institute of Chartered Accountants (CICA) produced for local governments a Guide to Accounting for 

Reporting Tangible Capital Assets.[32] It’s opening paragraphs 

reflect the sentiment seen in similar efforts in Great Britain, 

Australia, and New Zealand. 

“There is growing evidence that our communities 

are facing major challenges financing deferred 

maintenance, renewal and replacement of aging 

capital assets. This may be an indicator that decision 

makers have not received sufficient information to 

understand the financial effects of past funding 

decisions on the condition of existing capital assets 

and the cost of using them in service provision.

As the existing capital asset base ages and population grows, increased demands for new capital 

assets will place further pressures on the ability of a 

local government to sustain those services. Information about the existing stock, the cost of its use and 

the needs for its replacement must be at the forefront of decision making. To be useful, that information must be complete, reliable and unbiased and 

provided on a local government-wide basis.

This is not to say that local governments have not 

been maintaining information about their assets to 

properly manage them. Municipal engineers have 

developed asset management systems for work 

management, customer care and capital budgeting. 

But those systems exist largely independently of the 

core financial systems. They are often specialized in 

nature, incomplete and not comparable within a 

local government itself, nor with those of other 

local governments.”
30 Financial Planning for Transportation Asset Management

The Canadian guide says accounting standards can play a 

vital role in bridging the gap between asset management 

and financial management by bring capital asset information 

to the attention of the public and policy makers. It references 

“accrual accounting” which is a form of accounting that 

captures on financial reports the long-term assets and 

liabilities of an agency, not only the ones evident in the 

current annual or biennial budget. When assets and liabilities 

are accrued, future funding gaps and declines in asset values 

are highlighted and reported in the financial reports. The 

Canadian guidelines say that one of the main benefits of 

asset valuation, accrual accounting, and long-term financial 

reporting is to provide better information for management 

decision making.

Although not summarized in quite this way, the Canadian 

and other guidelines seek to bring to the attention of decision makers the long-term consequences on “public equity” 

of current investment decisions. When considering investments, decision makers such as local city council members 

or transportation agency commissioners could choose 

between building new assets or investing in the renewal 

of current assets. Investing in the new asset increases the 

government’s asset values, at least in the initial years. 

However, after a few years, the amount of total depreciation 

grows as the government’s asset base expands. Depreciation of the old assets continues and the newer assets begin 

to depreciate as well. Depreciation on the agency’s financial 

reports increase and leads to more long-term financial 

liability. If, however, the agency invests in improving the 

condition of existing assets, their value rises and total 

long-term depreciation costs decrease. The intent of the 

financial-reporting guidelines is, in part, to increase public 

recognition of the cost of depreciation. The capturing of 

depreciation puts a number, or a cost, before decision 

makers and allows them to compare that cost against 

the benefits of alternative investments.
Report 5 31

Two financial-reporting practices bring this cost to the 

decision-makers’ attention. First, depreciation appears on 

the financial reports as a negative value that decreases the 

agency’s equity or value. Second, is the 10-year timeframe 

of the financial plan. It captures the increase in depreciation 

as assets age. If the agency focuses only upon short-term 

accounts, it can balance income and spending without 

showing a deficit. When depreciation is included, the decline 

in asset condition appears as depreciation that is evident to 

readers of the financial reports.

The capturing of depreciation 

also serves to recognize on 

agency financial reports that 

“savings” don’t exist from deferring maintenance. Short-term 

cash outlays may be reduced but 

long-term depreciation increases. 

The need to capture the full 

effect of depreciation requires 

a long-term financial plan of 

10 years because the increased depreciation caused by poor 

maintenance is not apparent in the short term.

The Canadian accounting association notes that although 

financial statements themselves may not drive decision 

making, the larger process of integrating financial reporting 

with asset management planning can improve decision 

making. The decision-making process improves because of 

the effort needed to develop sound inventories, assess asset 

condition, and determine long-term investment needs.[33]

The Canadian guidelines express sentiments similar to 

those of the U.S. Government Finance Officers Association 

published in its report, Long-Term Financial Planning for Local 

Government.

[34] It lists several key roles for financial planning 

to support strategic, long-term decision making including:

The need to capture the 

full effect of depreciation 

requires a long-term 

financial plan of 10 years 

because the increased 

depreciation caused by 

poor maintenance is not 

apparent in the short term.
32 Financial Planning for Transportation Asset Management

Long-term financial planning should be central 

to governance and management, and not be a 

one-time event or staff tool;

Financial planning supports elected officials’ efforts 

to maintain financial discipline despite short-term 

political pressures;

The linkage from the long-term financial plan to 

the short-term budget is critical;

Financial planning supports elected officials’ ability 

to “step back” from daily detail and see a strategic 

view of budgeting;

Financial plans support elected officials’ realistic 

understanding of how quickly financial stability can 

be reached, or long it will last, given the agency’s 

financial reality, and;

Financial planning can improve staff performance by 

keeping them focused on the agency’s key priorities.

Another Canadian publication advises local agencies that 

accounting for assets helps them assess the long-term sustainability of debt loads, the sustainability of their infrastructure, 

and their financial resilience.[35] If their community experiences 

high depreciation and debt levels, and low infrastructure 

conditions, it is less resilient and less able to respond to disasters or public requests for higher service levels. In effect, the 

community’s assets are depleted and its financial reserves 

limited making it less resilient. The higher the asset value in 

relation to “as new” the more robust the community is. If 

disaster struck, the agency could forego years of investment 

without irreparable harm to its assets. On the other hand, an 

agency with poor asset conditions and fully depreciated assets 

has less “equity” to draw upon in times of emergency.
Report 5 33

Complications of Transitioning to Depreciated 

Replacement Costs

Although valuation methods that rely on depreciated 

replacement costs may be attractive to the U.S. engineer 

or planner, transitioning away from historical costs faces 

challenges. To be officially accepted on financial statements, 

the use of depreciated replacement costs would need to 

be recognized by the Government Accounting Standards 

Board. GASB has not listed a change in capital accounting 

standards as an initiative.

Also, many state transportation agency financial officials are 

accustomed to the GASB 34 process and have routinized 

processes to estimate infrastructure values using historic 

costs. Changing to depreciated replacement costs or another 

method would present additional staff costs and reporting 

effort. It also could require restatement of past financial 

reports. Perhaps even more complex, state accounting 

system processes outside of the transportation agency 

may need to be changed. GASB 34 reports are incorporated 

into statewide reports for other state-owned assets such as 

buildings, universities, and airports. Changing the standards 

would not limit the impact to only states. Local governments 

would be affected as well. 

In addition, many accounting professionals still advocate for 

historic costs as a valuation standard for capital reporting. 

Although the Canadian Institute of Chartered Accountant’s 

Guide to Accounting for and Reporting Tangible Capital 

Assets strongly endorsed capital reporting as a sound public 

finance process, it still accepts the use of historic cost as the 

valuation basis.[36] It acknowledges that arguments are 

raised against historic costs including:

They do not present meaningful performance 

measurements in times of changing prices;
34 Financial Planning for Transportation Asset Management

The cost of using infrastructure should reflect 

current costs, not past costs, and;

Replacement costs or depreciated replacement 

costs reflect the amounts that should be budgeted 

to replace assets.

However, the accounting body says because accounting is 

“transaction based” the primary measurement for both 

assets and liabilities is the value at the time they were 

acquired, developed or constructed. Historical cost accounting is objective and reliable, not dependent on uncertainties 

or estimates.

The Canadian Institute of Chartered Accountants and the 

Canadian Public Sector Accounting Handbook[37] appear 

to provide some opportunity for increasing asset values 

based upon maintenance investments. 

Although the original value 

of the asset is fixed by its 

historic cost, the rate at which 

it is depreciated could be 

affected by the maintenance 

investment it receives. So 

although the beginning value 

of the asset would not be 

increased, the useful life of 

the asset could be extended 

which has the effect of 

reducing the annual amount 

of depreciation. This practice 

could allow a government 

agency to demonstrate 

financially through decreased 

depreciation the benefits of 

asset management.

Although the financial statements 

may still rely on historic costs, 

those financial statement standards do not prevent an agency 

from including different valuation 

processes in its asset management plan, in budget testimony, 

or in other communications to the 

public and policy makers. Just as 

do the Utah DOT and the Ontario 

community of New Market, 

agencies can calculate total 

replacement cost, depreciated 

replacement costs or other values 

and use them for programming, 

project-selection, budgeting, and 

communication efforts.
Report 5 35

Although the financial statements may still rely on historic 

costs, those financial statement standards do not prevent 

an agency from including different valuation processes in its 

TRANSLATING PRIVATE SECTOR 

DEPRECIATION TO THE PUBLIC SECTOR

The application of generally accepted accounting 

practices (GAAP) to public sector capital assets in the 

1990s was viewed as a “good government” reform.[38,39]

It put the issue of asset depreciation and sustainability 

clearly into agency financial statements.

However, transferring private-sector depreciation 

practices to long-lived public infrastructure creates 

some challenges. In the private sector, assets are 

depreciated for two major reasons. One relates to tax 

write offs. The government encourages capital investment by allowing companies to depreciate assets. If a 

company depreciates a piece of equipment over 10 

years, it deducts a tenth of the cost of the equipment 

from its revenue each year, reducing its tax burden. 

Also, the depreciation of privately owned assets reflects their obsolescence. A company is worth less if its 

assets are old or outdated, and modern equipment can 

become obsolete in just a few years.

In the public sector, depreciation schedules for tax 

write offs are meaningless. Also, a bridge or roadway 

may be 100 years old but still not be obsolete, such as 

the Brooklyn Bridge. The Australian and British use of 

Depreciated Replacement Cost is an attempt to find a 

depreciation process that captures depreciation but 

complements transportation asset management. 
36 Financial Planning for Transportation Asset Management

asset management plan, in budget testimony, or in other 

communications to the public and policy makers. Just as do 

the Utah DOT and the Ontario community of New Market, 

agencies can calculate total replacement cost, depreciated 

replacement costs or other values and use them for programming, project-selection, budgeting, and communication efforts.

Reporting Under GASB 34

Although GASB 34’s requirement to use historic costs may 

have diminished the U.S. focus on asset values, GASB 34 

did stimulate ongoing reporting of how much agencies 

invest in assets and whether those investments are sustaining asset conditions. When the GASB 34 standard was 

under discussion in the late 1990s, some government 

officials raised the shortcomings of historic asset values. 

The accounting standards board responded by giving 

governments two options. Both options require use of 

historic costs for valuing assets. However, agencies could 

adopt the “modified” approach that does not require a 

reporting of depreciation. Instead, they can use their asset 

management systems to document that they are sustaining 

asset conditions through annual investments. The alternative would be to report their annual depreciation and 

demonstrate that asset investments are offsetting the 

depreciation and sustaining asset value.

A survey by AASHTO’s Subcommittee on Financial Management and Accounting in 2012 [40] found that of 22 responding states, 13 reported using the modified approach and the 

remaining report depreciation in their CAFRs. For states 

that report depreciation, their report in the CAFR generally 

consists of a few lines of how much depreciation was estimated in the past year compared to the amount spent on 

infrastructure.[41] Few details are included and the report is 

limited to the past year.
Report 5 37

States that use the modified approach must have an asset 

management system that meets the following GASB 34 

conditions.

They have an updated inventory of eligible assets.

They perform condition assessments and summarize 

them on a measurement scale.

They estimate each year the annual amount to maintain 

and preserve the eligible assets at the targeted condition level.

They document that the assets are preserved at 

approximately the target condition level.

An example of a modified report is seen in the Florida 

CAFR for the Department of Transportation.[42] It reports the 

department commits to maintaining its assets at the levels 

established by the Florida Legislature. The department 

maintains an asset inventory and performs periodic condition 

assessments to document that condition targets are met. In 

addition, it estimates the amount needed to maintain the 

assets and budgets accordingly. 

In the Utah CAFR three pages summarize the DOT’s highway 

infrastructure investment reporting. It notes the department 

sets targets for pavements and bridge, which it exceeded 

in 2010, 2011, and 2012. Similarly, its estimated spending for 

the preceding four years exceeded the amounts needed to 

sustain the targets.

Despite the brevity of the asset valuation and asset-investment 

discussion in the two CAFRs, both departments provide 

extensive asset management information on their web sites 

that extensively explain their asset conditions, their expenditures, and their efforts to sustain their assets. The contrast 
38 Financial Planning for Transportation Asset Management

between the limited information in the CAFRs and the 

extensive information on their asset management websites 

demonstrates how in the U.S. the asset valuation process 

plays little role in managing assets.

No comprehensive study of the effects of GASB 34 on U.S. 

transportation agencies has occurred since 2008.[43] That 

study found that four years after GASB 34 was fully implemented in 2004 it had devolved to a routine administrative 

task. Agencies studied reported little interest in the information from outside bodies such as legislators, the investment 

community, or the general public. A positive outcome was 

that the financial information and asset management 

information was more integrated than before.

Potential Uses of Valuation

Typically, accounting data are not thought of as material for 

communicating with the public. However, an old newspaper 

saying is that, “there are no boring topics, only boring 

presentations.” There are examples of how asset values 

and depreciation have been used to communicate to the 

public the need for infrastructure investment.

The City of Melbourne, Australia’s, Asset Management Strategy 2015-25 [44] is a colorful, 31-page report with minimal text 

and ample maps, charts, tables and drawings. A two-page 

wide illustration represents a cross section of a typical urban 

street lined with community buildings, sidewalks, curbs, 

landscaping, street lights, and pavement. The cross-sectional 

drawing also illustrates underground assets such as the road 

base, drainage structures, and water systems. Associated 

with each category of asset is its value. The illustration notes 

the community owns $424 million worth of road bases, 

$43 million worth of pavement surfaces, $93 million worth 

of bridges, $176 million worth of curbs, and $177 million 

worth of sidewalks and footpaths. It even estimates the 
Report 5 39

value of landscaping, street furniture and irrigation systems. 

Accompanying each asset value is a red, yellow, or green 

summation of its condition.

The city’s mayor’s introduction to the asset management 

plan notes that Melbourne has been named the world’s 

most livable city for the fifth year in a row. To preserve its 

livability, it needs to strategically preserve its $3.5 billion in 

assets in the face of a rapidly growing population, a changing climate, and rising costs, while constraining tax growth. 

The strategy includes not only efforts to maintain assets 

but also to improve the asset data to better communicate 

with the public.

The asset management plan says that in almost every 

case city services are delivered through a physical asset 

such as a street, building, or park. Services such as providing child care or supporting the elderly often depend upon 

adequate child-care or senior centers, and sidewalks, curbs, 

and parks that meet the needs of everyone, not just the 

abled-bodied.

Figure 2. The City of Melbourne, Australia’s, Asset Management 

Strategy 2015-25. SOURCE: CITY OF MELBOURNE
40 Financial Planning for Transportation Asset Management

The asset management strategy emphasizes the value of 

the community’s assets and how they provide community 

benefits. It notes it costs about $364 million annually to 

operate the $3.5 billion in assets, and that over the past 

10 years annual depreciation has been about $44 million 

annually. The plan uses everyday language to explain that 

capital assets are physical objects that provide service to 

the public. To maximize the value of these assets for up to 

100 years it is necessary to preserve and invest in them. 

The strategy refers to the city’s physical assets as a portfolio 

with a combined value of $3.5 billion that has grown on 

average 5.9 percent for the past decade. A line drawing 

illustrates the concept of depreciation and notes that asset 

values increase through proper design, materials, construction and maintenance but depreciate through use, climate, 

conditions, and market forces.

The plan calls each asset a “touch point” for providing 

service to the community. Because of their importance, each 

asset is assessed for its condition, functionality, and capacity. 

The plan also emphasizes the future strategies and expenditures needed to sustain these service-providing assets. 

The asset management strategy is accompanied by a 10-

year financial plan that provides the city with a long-term 

sources and uses financial statement.[45] Included in the 

10-year financial plan is an annual estimate of asset depreciation. It begins in 2015-16 at $59.7 million and grows to 

$89.5 million by 2024-25. This line item approximates the 

amount of investment needed to sustain assets at current 

values. The financial plan was developed with a community 

involvement panel called the People’s Panel. The panel 

recommended and the city agreed to reduce emphasis upon 

building new assets and to increase emphasis upon sustaining current assets. This was adopted after forecasts indicate 

that future revenues would grow only moderately but that 

annual expenditure growth of 4.6 percent was needed to 
Report 5 41

sustain asset conditions. This growth rate was predicated on 

2.6 percent annual inflation plus a 2 percent real growth rate 

for a 4.6 percent annual asset-investment increase.

The City of Sydney council reports $8.5 billion worth of 

physical assets. It’s financial plan and its asset management 

plan [46] includes 10-year strategies and investment levels for 

major asset classes such as the road network, storm water 

assets, parks and open space, and property. For each, 

10-year-trend lines of investment levels compared to 

investment needs are forecast.

Canadian guidance for 

municipal asset management 

also recommends that communities value their assets 

and emphasize the need to 

sustain them as valuable 

community assets. A British 

Columbia local government 

asset management framework 

says the reporting of asset values is important to asset 

management planning, financial planning, and public communication.[47] It includes calculation of depreciated replacement 

costs as one of the core elements for decision making. It also 

advises that annual budget deliberations be informed by 

asset renewal alternative options. It also argues against using 

historical costs and says assets should be depreciated using 

replacement costs. Those costs should become an integral 

part of the community’s financial planning. One anecdote 

included in the guidance says that the City of Prince George 

became more aware of the need for asset management when 

it calculated the replacement cost of its assets and realized 

their “if new” value was $2.3 billion compared to the $810 

million it had been reporting as their historic costs. The size 

of the investment and the recognition of significant maintenance backlogs spurred increased asset management efforts.

Guidance for municipalities 

in Ontario, Canada, says 

municipalities need to face 

the replacement value of 

assets as a consideration 

in annual budgeting.
42 Financial Planning for Transportation Asset Management

Guidance for municipalities in Ontario, Canada, says 

municipalities need to face the replacement value of assets 

as a consideration in annual budgeting.[48] An accrual approach based upon replacement costs puts into the annual 

budget framework the need to invest annually to offset the 

depreciation in the replacement costs of its assets. When 

a community understands the magnitude of its asset replacement costs and realizes those costs are not in the infinite 

future but impact incrementally each year, it spurs adequate, 

annual infrastructure investment levels. Asset management 

financial planning emphasizes a forward-looking approach 

to the community’s financial sustainability. 

Asset Valuation and Depreciation 

Performance Measures 

Among governments that emphasize asset valuations, 

performance measures exist for incorporating them into 

performance management systems. Several state governments in Australia require local governments to report their 

financial sustainability metrics, and to forecast them 10 years 

into the future. They provide additional insight into the 

sustainability of the governments, and the governments’ 

assets. Definitions for these measures vary around the world 

with some agencies using the same name for a measure but 

calculating it differently. 

The Austroads Guide to Asset Management Part 8 includes 

as financial sustainability performance measures the Asset 

Sustainability Ratio, the Asset Consumption Ratio, and 

the Future Renewal Funding Ratio. [49] Austroads is the 

association of state transportation agencies in Australia 

and New Zealand.

Its Asset Sustainability Ratio differs from the U.S. version. 

The Austroads sustainability ratio is a ratio of current asset 

replacement expenditure relative to depreciation for a 
Report 5 43

period. It would be calculated by dividing the amount spent 

on asset renewal and replacement for a given period by the 

amount of asset depreciation. The Austroads sustainability 

ratio calculation is dependent upon having sound asset 

valuations and credible depreciation. The depreciation 

provides the denominator which divides into the renewal 

and replacement budget to calculate the ratio.

Also relying on asset valuations is the Asset Consumption Ratio. Austroads calculates it by using the Current 

Replacement Cost as a 

denominator and dividing its 

value into the Depreciated 

Replacement Cost. This 

divides the “as is” value by 

the “as new” value. If the 

depreciated “as is” values 

are substantially less than 

the “as new” cost to recreate the assets, the ratio will be 

low. Austroads says that an indicative target level could be 

between 40 percent and 80 percent. In other words, an 

agency would forecast asset renewal and replacement 

investments so that its assets remain for the next decade at 

a given percentage of their “as new” value of somewhere 

between 40 percent and 80 percent. Trying to keep them 

above 80 percent “as new” value could lead to over investment. Values below 40 percent of replacement costs could 

indicate under-investment. Judgment is needed for an 

agency to determine the optimal consumption ratio.

The Austroads Future Renewal Funding Ratio is nearly the 

same as the FHWA Asset Sustainability Ratio. Both divide 

the amount budgeted for asset renewal and replacement 

for 10 years by the amount called for in the agency’s asset 

management plan. Assuming the asset management plan 

The Austroads Future 

Renewal Funding Ratio is 

nearly the same as the 

FHWA Asset Sustainability 

Ratio. Both divide the 

amount budgeted for asset 

renewal and replacement for 

10 years by the amount 

called for in the agency’s 

asset management plan. 
44 Financial Planning for Transportation Asset Management

identifies a credible amount of investment to sustain asset 

conditions, that amount of “need” is divided into the amount 

budgeted. If the budgeted amount is less than what is needed to sustain conditions, the ratio will be below 1.0 indicating 

a gap in investment levels. 

Most of the Australian states have relied on these types of 

measures for the past decade. From one of many Australian 

examples, the City of Sydney forecasts a related series of 

financial metrics in its 10-year asset management and financial 

plans. It calculates and reports on a Building and Infrastructure 

Asset Renewal Ratio which is the annual renewal expenditure 

divided by the amount of depreciation.[50] This makes it similar 

to the Austroads Asset Consumption Ratio. The city projects a 

10-year trend for this ratio that indicates in 2013/2014 the ratio 

is about 1.30, indicating more than adequate investment to 

offset depreciation. The ratio slips before 1.0 by 2016/2017 

before rising above 1.0 again in 2021/2022 through 2024/2025. 

The dip occurs in years in which the city has an aggressive 

capital-expansion program. The forecasting of depreciation 

and the forecasting of asset renewal levels allows the city to 

illustrate that it plans for adequate long-term investment to 

offset depreciation and sustain its asset values.

Although not dependent on valuations, Sydney also reports 

two related metrics. It forecasts for 10 years its Infrastructure 

Backlog Ratio which is the amount estimated to restore 

assets to satisfactory condition divided by the total value of 

the infrastructure. It forecasts ratios of less than 3 percent 

through 2024/2025. It also reports on an Asset Maintenance 

Ratio that compares the maintenance need by the planned 

maintenance expenditure. All are leading measures that 

forecast future performance and are not lagging measures 

that look at past performance.

Monitoring the measures such as these allowed the State of 

New South Wales to determine that a substantial number of 
Report 5 45

its predominately smaller local governments were not operating in a financially sustainable manner. [51] A report included 

an assessment of the degree to which local governments are 

operating in a fashion that will sustain their infrastructure, and 

other essential services. It defined sustainability as, “A local 

government will be financially sustainable over the long term 

when it is able to generate sufficient funds to provide the 

levels of service and infrastructure agreed with its community.” By reviewing the local government’s asset management 

and financial plans, the report determined that 74 percent of 

the local governments were in a moderate or better position, 

but 26 percent are weak or very weak. Among the principal 

weaknesses were first-generation asset management and 

financial plans that fail to adequately provide the needed 

investment levels to sustain their physical assets. 

Despite the substantial problems found in a large minority 

of local governments, the New South Wales report found 

that the state’s financial planning and asset valuation requirements had a positive effect overall on local governments. It says the local governments are more cognizant of 

long-term needs and not only focus on the next 12-month 

budget period. It also said the asset management plans 

require the local governments to consider whole-life costs 

of their assets, and have highlighted the underspending on 

maintenance. The New South Wales report categorized all 

the local governments and assessed them by 10 financial 

sustainability metrics.[52] Four of those metrics relate to 

infrastructure investment. From the analysis, the state 

government could assess how sustainably the local 

governments are.

Steps to Update Asset Valuation 

If U.S. transportation agencies were to collaborate to update 

the asset valuation processes the experience of their counterparts in Great Britain and Australia provide a precedent. 
46 Financial Planning for Transportation Asset Management

In both nations, associations of accounting professionals and 

transportation professionals collaborated to develop financial 

reporting guidelines that both support and build from transportation asset management practices.

In Australia and New Zealand, the Institute of Public Works 

Engineering Australasia is the association that supports local 

government infrastructure managers, similar to the function 

of the American Public Works Association. Austroads is 

similar to AASHTO by representing state transportation 

officials in Australia and the national transportation agency 

in New Zealand. The accounting and transportation officials 

in Australia collaborated to first produce asset management 

manuals. The one for local governments is known as the 

“double I double M” or the International Infrastructure Management Manual (IIMM.) Austroads produced for state governments the Guide to Asset Management. Included in the 

Austroads guide is a chapter on asset valuation and audit.

The IIMM financial management guide represents about 

three years of collaborative effort between Australian 

engineers and accountants. The IIMM financial guidelines 

exceed 300 pages, and sections of them are quite detailed. 

This reflects the different audit and review requirements in 

Australia, and the complex asset ownership practices. In 

several Australia states the requirement that local government asset management and financial management plans 

be audited leads to a need for more detailed accounting 

and asset valuation standards. Also, the Australian standards apply to all physical assets owned by local governments including water systems, hospitals, parks, and 

buildings, as well as highways. 

The British local government asset valuation standards for 

highways are less complex. They reflect a first-generation 

effort that recognizes many local governments will not have 

sophisticated asset management systems. It advises that 
Report 5 47

DIFFERING DEFINITIONS OF VALUE

When discussing asset valuations, agency officials may 

want to clarify how they define value because many 

other disciplines use the term “value” differently. 

For instance, the U.S. Bureau of Economic Analysis 

estimated the value of U.S. streets and roads in 2011 at 

$3.132 trillion dollars. [53] BEA does not, however, base 

this estimate upon inventories of roads and bridges. 

Instead, it bases its estimate upon a “perpetual inventory” method. [54] This calculates the estimated amount 

of cumulative investment made. It estimates the 

amount of investment made in the past year and adds 

it to the cumulative estimates of past years, minus 

depreciation. The perpetual inventory method used by 

BEA is very different from the depreciated replacement cost method described here. However, the 

perpetual inventory method does attempt to capture 

the value of past investments and only partially relies 

on historic values. 

Economists also can define infrastructure value as a 

measure of the difference infrastructure makes to 

businesses, consumers, and the nation. [55] The value is 

based on the net contributions to society and economic activity. Under economic theory, some transportation facilities could have negative values. The externalities of noise, pollution, community separation or 

reduced property values would be deducted from 

transportation value. [56] Although these methods are 

valid for economic analysis, they do not lend themselves to transportation asset management and hence 

are not captured in the British or Australian asset 

valuation processes.
48 Financial Planning for Transportation Asset Management

local governments begin reporting asset values based upon 

their asset inventories, even if their asset management 

systems are incomplete. It recommends “beginning with 

what you have” and iteratively improving the asset-valuation 

data as the asset management systems improve.

It recommends a tiered approach to valuing an agency’s 

assets based upon the completeness and complexity of its 

asset inventories. It recommends dividing assets into three 

levels. Level 1 is quite general and includes only the broad 

categories of roadways, sidewalks and paths, structures, 

lighting, roadway “furniture” or roadside assets, traffic 

management systems, and land. Within each level would be 

more details, such as for pavements they could be broken 

down further into square meters of area, flexible pavements, 

rigid pavements and composite pavements. Units costs could 

be estimated for each based upon general estimates, if that 

is the only data the agency has. 

However, if the agency has more detailed data it can use 

them to develop more refined asset values. For pavements, 

the additional detail could consist of inventory data such as 

pavement layers, surface condition, earthworks, embankments, medians, curbs, drainage structures or barrier. If the 

agency has this more detailed data, it can develop more 

refined unit costs for each component. For instance, the 

miles of barrier could be multiplied by the barrier unit cost to 

determine total barrier values. The unit costs would be based 

upon the cost to replace such assets. Their depreciated 

replacement cost would be calculated by multiplying the 

number or size of the assets times their replacement cost 

minus their depreciation.

The British valuation guidance takes a step toward basing 

asset values upon their condition, at least for pavements. [57]

It notes that many agencies will not have the historic costs of 

pavements. They were built over many years and the records 
Report 5 49

for what each costs may 

not exist. For pavement 

surfaces, it produces a 

conversion calculation 

that converts the asphalt 

surface condition into an 

age equivalent. From the age, the amount of depreciation 

from an “as new” condition can be estimated.

The Canadian experience provides some analogies for the 

use of depreciated replacement cost in the U.S. Like with 

GASB 34, the Canadian accounting rules require use of 

historic costs. That, however, has not stopped agencies 

from estimating their replacement costs and depreciated 

replacement costs and using those estimates for communicating to decision makers. The New Market, Ontario, asset 

management analysis is similar to the Utah DOTs in that 

both emphasize outside of their financial statements the 

high value of their assets and their need to sustain them. 

Although GASB 34 requires historic costs, it also requires 

a management discussion and analysis that could bring 

in depreciated replacement costs for comparison. Also, 

depreciated replacement costs could be cited in budget 

testimony, asset management plans, and other key 

communication documents.

3. Summary and Conclusion

Transportation agency officials are acutely aware of the 

public’s and legislators’ insistence that agencies conserve 

public resources. However, most times this insistence relates 

to preserving tax receipts, or employees’ labor costs, or 

agency equipment. By emphasizing asset valuation and 

depreciation, agency officials can demonstrate that depreciation and impairment consume public resources as well. 

The British valuation guidance 

takes a step toward basing asset 

values upon their condition, at 

least for pavements. 
50 Financial Planning for Transportation Asset Management

“Doing nothing” costs money. The declining value of the 

infrastructure through depreciation and impairment reduces 

the public’s “owner’s equity.” Unless depreciation is captured 

and reported, this loss of equity is hidden, or is “off the 

books.” Documenting depreciation, and demonstrating that 

asset renewal and replacement offsets it, allows an agency 

to demonstrate it is increasing the state’s owner’s equity.

Sound asset management allows an agency to document 

that it is lowering depreciation rates and conserving the 

public’s equity. A vigorous bridge or pavement preservation 

program can extend asset life which decreases the amount 

of depreciation that an asset experiences. By discussing the 

role of sound asset management in extending asset life and 

decreasing depreciation, an agency can demonstrate that it 

is not only providing a higher level of service but also helping 

to preserve the public’s massive investment.

Discussing asset conditions in terms of asset values may not 

resonate with every member of the public. Some may be 

reached more effectively by discussing the number of 

potholes that will occur under a given investment level, or 

how more bridges may be load-limited. However, for members of the public with some accounting or business backgrounds discussing book value, owner’s equity, or fair value 

will resonate. To them, it can communicate that the agency 

understands that it needs to manage not only its short-term 

cash assets but also its long-term tangible capital assets. 

Growing the owner’s equity is a primary objective for the 

corporate CEO. Discussing infrastructure in terms of book 

value allows the transportation agency executive to demonstrate “they get it” and know that they too are tasked with 

growing the public’s wealth.

However, it takes money to save money. To preserve asset 

values requires timely investment in asset renewal and 

replacement to offset depreciation and impairment. 
Report 5 51

Capturing depreciation allows an agency to demonstrate 

that savings may not occur when maintenance budgets 

are cut. Cash may be saved but owner’s equity is lost.

Discussing asset replacement costs or depreciated replacement costs also allows an agency to demonstrate that the 

state’s infrastructure is its largest capital investment. The 

value of the state’s infrastructure probably rivals the value of 

its pension funds. Because pension funds report their valuation, their appreciation, and their depreciation, regulators 

can monitor the increase or decrease in critical pension-fund 

balances. From those balances they can forecast if assets 

will be sufficient to meet future pension needs.

Similarly, by translating infrastructure depreciation into 

financial terms, agencies can forecast if current investments 

will be sufficient to sustain future conditions, and future value.

4. Endnotes

[1] Berman, K., J. Knight, J. Case, Financial Intelligence, 

A Manager’s Guide to Knowing What the Numbers Really Mean, 

Harvard Business Review Press, 2006, pages 15-17

[2] The Chartered Institute of Public Finance and Accounting, 

Code of Practice on Transportation Infrastructure Assets, 2013 

edition, page 51

[3] Washington State 2014 Comprehensive Annual Financial 

Statement, Note 6 Capital Assets, page 110

[4] State of Utah Comprehensive Annual Financial State Note 8, 

Capital Assets, page 97

[5] State of Ohio CAFR, Note 8, capital assets page 2013

[6] Chartered Institute, page 11

[7] Chartered Institute, page 5
52 Financial Planning for Transportation Asset Management

[8] Berman, K. and J. Knight with J. Case, “Financial Intelligence, 

A Manager’s Guide to Knowing What the Numbers Really 

Mean,” Harvard Business Review Press, 2006 pages 4, 5

[9] Austroads Guide to Asset Management Part 8: Asset Valuation 

and Audit, page 4

[10] Government Accounting Standards Board Statement 34 1999, 

preface, page ii

[11] Florida 2014 CAFR pages 18, 158-159

[12] Chait, Edward P. “Report 608 GASB Methods for Condition 

Assessment and Preservation”, National Cooperative Highway 

Research Program, page 1

[13] Governmental Accounting Standards Board Statement 34, 1999, 

preface, page 2

[14] GASB 34, preface

[15] GASB 34, page 10

[16] American Association of State Highway and Transportation 

Officials (AASHTO) Asset Management Guide, A Focus on 

Implementation, 2011, pages 7-29

[17] The Pew Charitable Trust, State Pensions Funding Gap: 

Challenges Persist, July 14, 2015

[18] Utah Retirement System 2014 Summary Report to Members, 

accessed at https://www.urs.org/mango/pdf/urs/SummaryReport/2014/summaryReport.pdf

[19] Ohio Public Employee Retirement System, OPERS History and 

Background accessed at https://www.opers.org/about/history/

index.shtml

[20] Utah Department of Transportation asset management process 

accessed at https://www.udot.utah.gov/public/ucon/uconowner.gf?n=18090611976967933 Jan. 8, 2016

[21] Transport for London Highway Asset Management Plan, 2007, 

executive summary, pages 57-58

[22] Croydon Highway Asset Management Plan, London Borough of 

Croydon, May 2015, version 2.1 
Report 5 53

[23] Town of New Market, Asset Management Plan, December, 2014

[24] City of Sydney, Resourcing Strategy 2018, page 28

[25] VicRoads Annual Report 2014/15 page 24, and pages 51-52

[26] Australian Accounting Standards Board, Standard 13, October 

2013

[27] Australian Accounting Standards Board Staff Issue Paper, AASB 

3-4 September, 2014, agenda paper 16.3 (M140)

[28] AASB Standard 136, page 22

[29] Institute of Public Works Engineer Australasia, Australian 

Infrastructure Financial Management Guidelines, Version 1.3, 

2012 page 12.58

[30] CIPFA, page 9

[31] CIPFA, page 40

[32] The Public Sector Accounting Group of the Canadian Institute 

of Chartered Accountants (CICA), Guide to Accounting for and 

Reporting Tangible Capital Assets, April 2007, accessible at 

http://www.frascanada.ca/standards-for-public-sector-entities/

resources/reference-materials/item14603.pdf

[33] Public Sector Accounting Group, page 11

[34] Kavanagh, S., M Hana Na, Long-Term Financial Planning for 

Local Government, Government Finance Officers Association, 

Chicago, Ill., 2008

[35] Canadian Institute of Chartered Accountants, Accounting for 

Infrastructure in the Public Sector, 2002, page 2

[36] CICA, page 16-17

[37] Public Sector Accounting Standards Board, Public Sector 

Accounting Handbook, Section PS 3150 Tangible Capital Assets, 

subsections 19-31

[38] Austroads, page 6 

[39] GASB 34, page 1
[40] Accessed at http://sofma.transportation.org/Pages/ReportsandStudies.aspx 

[41] Comptroller of Maryland Comprehensive Annual Financial 

Report, June 30, 2015, pages 78-79

[42] State of Utah Comprehensive Annual Financial Report for 2014 

pages 139-140

[43] Chait, page 1

[44] City of Melbourne Asset Management Strategy 2015-2015 

accessed at http://sofma.transportation.org/Pages/ReportsandStudies.aspx

[45] City of Melbourne, 10 Year Financial Plan 2015-2025, accessed 

at http://www.melbourne.vic.gov.au/about-council/governancetransparency/policies-protocols/Pages/finanacial-plan.aspx

[46] City Sydney Resourcing Strategy 2015 accessed at http://www.

cityofsydney.nsw.gov.au/council/forms-and-publications/

integrated-planning-reporting/resourcing-strategy

[47] Asset Management BC, of the Local Government Asset Management Working Group, Asset Management for Sustainable 

Service Delivery, A BC Framework, accessed at http://www.

assetmanagementbc.ca/framework/ 

[48] Ontario Ministry of Infrastructure, Guide for Municipal Asset 

Management Plans, accessed at http://www.moi.gov.on.ca/pdf/

en/Municipal%20Strategy_English_Web.pdf

[49] Austroads, Guide to Asset Management Park 8 Asset Valuation 

and Audit, pages 55-59

[50] City of Sydney Resourcing Strategy 2015, pages 31-36

[51] New South Wales Treasury Corporation, Financial Sustainability 

of the New South Wales Local Government Sector, April 2013 

[52] New South Wales Treasury Corporation, page 24.

[53] U.S. Department of Commerce Bureau of Economic Analysis, 

Fixed Asset Tables, tables 3 1ES

[54] Herman, S. et al, Fixed Assets and Consumer Durable Goods in 

the United States, 1925-97, accessed at http://www.bea.gov/

national/pdf/Fixed_Assets_1925_97.pdf

54 Financial Planning for Transportation Asset Management
Report 5 55

[55] Fraumeni, B. Valuation Methods, included in Data and Statistics 

for Valuing Transportation Infrastructure and Transportation’s 

Contribution to the Economy, Workshop Proceedings July 

24-24, 2014, page 20

[56] Cohen, J., Contingent Valuation, Hedonics, and Spatial Multiplier 

Effects, Data and Statistics for Valuing Transportation Infrastructure and Transportation’s Contribution to the Economy, 

Workshop Proceedings July 24-24, 2014, page 25

[57] CIPFA, pages 74-76
Nastaran Saadatmand

Asset Management Program Manager

Office of Asset Management, Pavements, and Construction

Federal Highway Administration

1200 New Jersey Avenue, SE

Washington, DC, 20590

(202) 366-1337

nastaran.saadatmand@dot.gov

Stephen Gaj

Leader, System Management & Monitoring Team

Office of Asset Management, Pavements, and Construction

Federal Highway Administration

1200 New Jersey Avenue, SE

Washington, DC 20590

(202) 366-1336

stephen.gaj@dot.gov

Prepared by:

Gordon Proctor

Gordon Proctor & Associates, Inc. 

and

Shobna Varma

StarIsis Corporation

Administrative and Contract Support by:

Greenman Pedersen Inc. 

Office of Asset Management, Pavements and Construction

Federal Highway Administration

1200 New Jersey Avenue, SE • Washington, DC 20590

FHWA-HIF-16-009

ASSET MANAGEMENT FINANCIAL REPORT SERIES