A revaluation carried out without sighting the assets being revalued is known as a desktop revaluation.
A revaluation will typically consider the following values.
Replacement Costs are adjusted to reflect the current costs of purchasing and/or constructing assets.
Written Down Replacement Costs are adjusted to reflect the new replacement costs and the condition of existing assets.
Adjusting Written Down Values
There are at least two schools of thought about how to adjust an asset's Written Down Value in the case where its condition score hasn't changed since it was most recently revalued.
Method (1) is to reset the WDRC of the asset to a value corresponding to a particular percentage of its Replacement Cost. The percentage would be taken from a table similar to the one below.
e.g. If the RC = $1,000 and the condition score = 2 the WDV should be set to $600.
Method (2) is to adjust the WDRC by the same percentage as the RC was adjusted.
e.g. If an asset has a pre-revaluation RC of $1,000 a pre-revaluation WDRC of $500, a post-revaluation RC of $1,100 the post-revaluation WDRC will be equal to 1100 * 500 / 1000 = $550.00.
If the calculated WDRC falls below the range associated with its condition score (see table below), either its WDRC may need to be adjusted up, or its condition score amended.
Pros & Cons
- Marginally Simpler
- At least one valuer has opined that it is the only acceptable method under the accounting regs.
- The WDV of a typical asset increases slowly and then drops sharply when its condition finally changes. The resulting Graph of WDV over time would seem to poorly represent how the asset would actually be consumed.
- The Graph of WDV over time appears to better approximate the way a typical asset's condition would actually change.
- AASB 1041
- Asset Revaluation Index
- Asset Revaluation Reserve
- Australian Infrastructure Financial Management Guidelines
- Consumer Price Index
- Desktop Revaluation
- Unit Rate
External Links & References
- Queensland Treasury Revaluation of Assets Policy
- An Asset Valuation Manual for Queensland Local Governments