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Scope

1.1 This practice covers the assignment of a value to property that provides an economic and logical basis for efficient and cost-effective property management. This value should be the basis for allocating resources and developing and improving systems and processes for the acquisition, control, accounting and disposal of such property.

1.2 While acquisition cost and depreciation of property are useful and appropriate for financial accounting and reporting purposes, this information does not reflect the value of property to an organization or the costs and other damages the organization would incur if the property were lost, damaged, destroyed, or inappropriately released or handled. This financial information is therefore inadequate for property management purposes.

1.3 The degree to which property is controlled and the cost of that control must be reasonable and commensurate with the practical consequences of both a shortage; that is, the property not being available when needed due to loss, damage or destruction; or an overage; that is, maintaining inventories of excess property.

1.4 The valuation of property for the purposes of management and control is to be based upon the risks and costs of shortages and overages as well as the cost of owning property.

Significance and Use

Contributory value, an alternative model to acquisition cost valuation, provides an economic and logical basis for efficient and cost-effective property management. This value should be the basis for allocating resources and developing and improving systems and processes for the acquisition, control, accounting and disposal of such property.

Contributory valuation is based on the premise that an organization invests in property for the reason that the availability of the property is necessary to the success of the organization, either the accomplishment of a mission or the generation of profit.

The contributory valuation model assumes that the life-cycle cost of acquisition, maintenance, control and disposal of a property asset should be evaluated in the manner of any capital investment; it should yield an appropriate return on assets (ROA) in terms of profit or a contribution to the agency’or institution’mission success.

The use of contributory valuation eliminates the distortions in worth associated with acquisition valuation and encourages a more rational allocation of resources to the management and control of property. This valuation enables an organization to devote the preponderance of its attention and resources to the property that contributes the greatest value to the goods and services produced.

The Property Management Efficiency Factor (described in Section 10) can be used to trend the value added by the property management function and to compare performance with similar organizations.

Keywords

category; control cost ration; control ratio; efficiency factor; historical risk; inventory ; profit; property; risk management; shortage; threshold ratios; valuation; ICS Number Code 03.100.01 (Company organization and management in general)

To find similar documents by ASTM Volume:

04.12 (Building Constructions (II): E2112 - latest; Sustainability; Property Management Systems; Technology and Underground Utilities)

To find similar documents by classification:

03.100.01 (Company organization and management in general Including legal aspects and risk management)

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