AP-144 00 Valuation of Road Infrastructure Assets in Australia and New Zealand

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Australia and New Zealand

AUSTROADS RESEARCH REPORT
Valuation of Road Infrastructure Assets in

AP-144/00
Valuation of Road Infrastructure Assets in Australia and New Zealand
First Published 2000
© Austroads Inc. 2000
This work is copyright. Apart from any use as permitted under the Copyright Act 1968,
no part may be reproduced by any process without the prior written permission of Austroads.
National Library of Australia

Cataloguing-in-Publication data:

ISBN 0 85588 532 7
Austroads Project No. BS.A.70
Austroads Publication No. AP–144/00

The Austroads Asset Management Reference Group

Mr Paul Smith, DMR Qld (Convenor)
Mr John Wilson, VicRoads
Mr Ron Ferguson, RTA NSW
Mr Gary Norwell, MR WA
Mr Peter Tymukas, TSA
Mr Michael Bushby (until mid 1998), DIER Tas
Mr Rodney McGee (after mid 1998), DIER Tas
Mr Peter Bosmajian, DTW NT
Mr Leigh Palmer, ACT City Services, DUS ACT
Mr Paul Blair, CDoTRS
Mr John Howard, ALGA
Mr Dave Robertson, Transit NZ
Dr John McLean, ARRB TR
Project Manager
Mr Michael Bushby, DIER Tas (until mid 1998), RTA NSW (from Sep 1998)
Consultant
Mr Laurie Dowling, LB Dowling & Associates, Newcastle, NSW
Published by Austroads Incorporated

Level 9, Robell House
287 Elizabeth Street
Sydney NSW 2000 Australia
Phone: +61 2 9264 7088
Fax: +61 2 9264 1657
Email: austroads@austroads.com.au
www.austroads.com.au
Austroads believes this publication to be correct at the time of printing and does not accept
responsibility for any consequences arising from the use of information herein. Readers should rely on
their own skill and judgement to apply information to particular issues.
Sydney 2000
VALUATION OF ROAD
INFRASTRUCTURE ASSETS
IN AUSTRALIA AND NEW ZEALAND
AUSTROADS INCORPORATED
Austroads is the association of Australian and New Zealand road transport and traffic authorities
whose mission is to contribute to development and delivery of the Australasian transport vision by:
• supporting safe and effective management and use of the road system
• developing and promoting national practices
• providing professional advice to member organisations and national and international bodies.
Within this ambit, Austroads aims to provide strategic direction for the integrated development,
management and operation of the Australian and New Zealand road system — through the promotion
of national uniformity and harmony, elimination of unnecessary duplication, and the identification and
application of world best practice.
Austroads is governed by a council consisting of the chief executive (or an alternative senior executive
officer) of each of its eleven member organisations.
MEMBER ORGANISATIONS
! Roads and Traffic Authority New South Wales

! Roads Corporation Victoria
! Department of Main Roads Queensland
! Main Roads Western Australia
! Transport South Australia
! Department of Infrastructure, Energy and Resources Tasmania
! Department of Transport and Works Northern Territory
! Department of Urban Services Australian Capital Territory
! Commonwealth Department of Transport and Regional Services
! Australian Local Government Association
! Transit New Zealand
CONTENTS
Executive summary ........................................................ ......................................... v

1. Scope ........................................................................ ......................................... 1
2. Aims ......................................................................... ......................................... 1
3. Background .............................................................. ......................................... 3
3.1. General ........................................................ ......................................... 3
3.2. Valuation of Local Roads ............................ ......................................... 5
3.3. Current action by OECD on valuation of road infrastructure ............... 5
3.4. Land under roads and within road reserves ......................................... 6
4. Asset management and valuation ............................. ......................................... 7
5. Trends in values and costs ........................................ ......................................... 9
5.1. Trends in values .......................................... ......................................... 9
5.2. Trends in costs ............................................ ......................................... 11

6. Current position in Australia and New Zealand ...... ......................................... 14
6.1. General ........................................................ ......................................... 14
6.2. Practices used in valuing ............................ ......................................... 14
6.3. Infrastructure categories valued and reported ....................................... 14
6.4. Land ............................................................ ......................................... 15
6.5. Depreciation methods ................................. ......................................... 17
6.6. The use of asset valuation in Performance Indicators .......................... 19
6.7. Bridge values as a proportion of road infrastructure assets .................. 20
7. Depreciation of road infrastructure assets ................ ......................................... 21
7.1. The meaning of depreciation in accounting terms ................................ 21
7.2. A discussion of depreciation of depreciation in physical terms ........... 21
7.3. Technical obsolescence ............................... ......................................... 22
7.4. Current AARF reviews of Australian accounting practice ................... 22
8. Factors affecting road asset values .......................... ......................................... 23
9. Issues to be resolved in valuation of road infrastructure ................................... 24
10. Benefits of valuation ................................................ ......................................... 26
11. Financial summaries ................................................ ......................................... 27
12. Directions for future action ...................................... ......................................... 28
13. Conclusions .............................................................. ......................................... 29
14. References ................................................................ ......................................... 30
TABLES
Table 1 Progress by Austroads MAs with reporting
road infrastructure valuation information .............................................................. 4
Table 2 Comparison of road sector cost indices in use in Australia and New Zealand ...... 13
Table 3 Road infrastructure categories with valuations in Annual Reports at June 1997 ... 16
Table 4 Depreciation methods in use by Austroads Member Agencies (June 1997) .......... 18
Table 5 Performance Indicators with asset value as an input ............................................. 19
Table 6 Written-down values of roads and bridges at 30 June 1997 .................................. 20
FIGURES
Figure 1 The role of valuation in asset management ............................................................ 2

Figure 2 Pavement asset valuation process .......................................................................... 6
Figure 3 A framework of asset value, maintenance budget options and user costs ............. 8
Figure 4 Reported written down values of total road infrastructure ..................................... 10
Figure 5 Reported written down values of bridges .............................................................. 10
Figure 6 Accumulated depreciation as a proportion of
replacement value (roads sub-category) ............................................................... 11
Figure 7 Comparison of road sector cost indices in use in Australia and New Zealand ...... 12
APPENDICES
Appendix 1 Charter for Austroads Project BS.A.70 -
The Use of Valuation in Asset Management.
Appendix 2 Possible formats for financial data summaries for Australasian roads.
Appendix 3 OECD project on Performance Indicator PI12 - Value of Assets
Summary of responses from Australian MAs to OECD questionnaire
Appendix 4 Valuation of land under roads and within road reserves - points of agreement.
Appendix 5 Summaries of MAs’ road infrastructure asset valuation data.
Appendix 6 Checklist for compliance with Austroads 1994 policy.
Appendix 7 Current practice of MAs in valuing land under roads and within road reserves, work in
progress, roads, bridges, traffic signals and street lighting, and definitions of bridges.
Appendix 8 MR WA Program Performance Indicators using valuation of road infrastructure.
Appendix 9 Extracts from RTA NSW 1995, 1996 and 1998 Annual Reports on depreciation.
Appendix 10 DIER Tas approach to asset valuation
Summary report following 1996/97 review
Extracts from Finance Policy manual.
Appendix 11 Responses to Questionnaire issued with the June 1998 draft of this report.
Appendix 12 Extract from VicRoads 1998 Annual Report on depreciation.
ABBREVIATIONS
AARF Australian Accounting Research Foundation
ALGENZ Association of Local Government Engineers, New Zealand
BOOT Build, own, operate and transfer
BTE Bureau of Transport Economics (formerly BTCE)
CMPI BTE Road Construction and Maintenance Price Index
DMR Qld Department of Main Roads, Queensland
DIER Tas Department of Infrastructure, Energy and Resources, Tasmania
DTW NT Department of Transport and Works, Northern Territory
DUS ACT Department of Urban Services, Australian Capital Territory
IMEA Institute of Municipal Engineering Australia
LGA Local Government Authority
MA Member authority (of Austroads)
MR WA Main Roads Department, Western Australia
PSASB Public Sector Accounting Standards Board
QML Queensland Motorways Limited
RTA NSW Roads and Traffic Authority of New South Wales
SMH Sydney Morning Herald
TNZ Transit New Zealand
VG Valuer General
VicRoads Roads Corporation of Victoria
vkt vehicle kilometres of travel
Executive Summary
• Over about the last 10 years, government bodies in Australia have moved from cash accounting to
accrual accounting. As a consequence, government departments have begun to capitalise their
infrastructure.
• Valuations of road infrastructure assets were first reported in Australasia in 1990.
• Australian Accounting Standard AAS 29 - Financial Reporting by Government Departments, was

issued in 1993, and came into force in 1996.
• AAS 29 requires Government departments to recognise and depreciate infrastructure assets in their
annual reports.
• In 1994, Austroads issued a policy and framework for valuation of road assets, entitled
Capitalisation of Infrastructure.
• The major road agencies in Australia and New Zealand report annually the value of road
infrastructure assets under their control.
• Austroads is supporting effort by AARF and PSASB to develop a policy on the valuation of land
associated with road infrastructure.
• It is now appropriate to examine the valuation process to identify how the resulting information can
be used to enhance asset management.
• The aims of this report are to:

⇒ facilitate informed discussion on the relevance of road asset valuations to the needs of road
users and to an agency’s ability to deliver road services to meet those needs,
⇒ identify benefits of valuation as an asset management tool, and
⇒ provide a basis for a review of valuation methods for road infrastructure, as proposed in the
Austroads Strategic Plan 1998 - 2001 (Ref 23), by suggesting areas where changes to existing
valuation practices would enhance the benefits generated by the valuation process.
• The report summarises the practices of State road agencies in Australia and Transit New Zealand as
at 30 June 1997 in arriving at values for road infrastructure and depreciation, highlighting areas of
consistency and inconsistency.
• The meaning of depreciation in physical as well as accounting terms is discussed.
• A number of issues are identified where further work is necessary to improve consistency in
deriving and reporting valuation information.
• The potential benefits of the valuation process are listed.
• A format is presented for annual financial summaries of national road assets showing valuation,
depreciation and investment.
• More study is required, involving road asset management and accounting professionals, on the
relative merits of condition-based and age-based approaches to the calculation of accumulated
depreciation, particularly for road pavements which represent the largest single component of road
asset value and investment.
• The report encourages asset managers to use the valuation process and resulting information to
facilitate effective communication with financial and general managers, as well as politicians who
represent road users and the broader community.
Valuation of Road Infrastructure Assets

in Australia and New Zealand
1. Scope
This report examines practices by State and Territory road agencies in Australia and by Transit New
Zealand in valuation of road infrastructure assets, as at 30 June 1997. Areas of consistency and
inconsistency are identified. It is acknowledged that valuation practices are under continuing review,
and that some agencies have introduced improvements since 30 June 1997.
The practices used by local government Councils are not specifically covered.
The report focuses on the potential for infrastructure valuation to assist road agencies in formulating
asset management strategies which will meet the needs of road users while minimising the long term
costs of providing and maintaining the road networks.
The Project Charter for this report is in Appendix 1.

2. Aims
The aims of this report are:

• to facilitate informed discussion on the relevance of road asset valuations to the needs of road
users and to an agency’s ability to deliver road services to meet those needs,
• to identify benefits of valuation as an asset management tool, and
• to provide a basis for a review of valuation methods for road infrastructure, as proposed in the
Austroads Strategic Plan 1998 - 2001 (Ref 23), by suggesting areas where changes to existing
valuation practices would enhance the benefits generated by the valuation process.
Notes:
1. A draft version of this report was distributed in June 1998 for comment to a
reference panel of approximately 40 people in the Australian State and Territory
road agencies, Transit New Zealand and a small number of local government bodies
in Australia and New Zealand.
2. In addition, a questionnaire was distributed in June 1998 to the Australian State and
Territory road agencies, Transit New Zealand and Devonport City Council. The
Questionnaire and responses are in Appendix 11.
3. During 1998, VicRoads reviewed some aspects of its infrastructure valuation

practices. Appendix 12 contains extracts from the VicRoads Annual Report to
30 June 1998.
—1—
Needs of Road Users and

Community Benefits
Asset Features and

Condition
Road User Physical Management

Costs Treatments of Road Use
Decisions on Asset Maintenance

Level of Investment Management Standards, and
Strategy Levels of Service
Road
Transport Road Use
Taxation
Valuation Process
Other Tools Other Tools
and Information
Figure 1 - The Role of valuation in asset management
—2—
3. Background
3.1 General
AAS 29 - Financial Reporting by Government Departments, (Ref 15) first issued in December 1993,
requires Government Departments in Australia to prepare general purpose financial reports that are
useful in making and evaluating decisions about the allocation of resources. AAS 29 also requires that
infrastructure assets be recognised and depreciated. These requirements came onto effect for
Australian State and Territory road authorities for financial reports relating to the year ending on 30
June 1996.
AAS 27 - Financial Reporting by Local Governments, (Ref 14) places similar requirements on local
government Councils in Australia (see Clause 3.2).
The 1994 Austroads report Capitalisation of Infrastructure (Ref 6) established policies on:
(i) a framework for valuation of road infrastructure assets in Australia in the following categories:
Land under roads and within road reserves
Work in progress
Roads and bridges

Privately funded road infrastructure assets
(ii) determining valuations in each category
(iii) determining depreciation in each category
(iv) periodic revaluation of road infrastructure assets.
These Austroads polices are consistent with AAS 27 (Ref 14) and AAS 29 (Ref 15).
The 1995 Austroads Working Papers Road Asset Management in Australia - State of the Nation
1994/95 (Ref 9 & 10) identified practices current in 1994/95, and proposed the formats in Appendix 2
for the annual presentation of national summaries of road infrastructure financial information.
At 30 June 1997 for the first time, all of the State and Territory road agencies in Australia and Transit
New Zealand issued data on the valuation of road infrastructure, generally in line with the policies and
rationale in the 1994 Austroads publication Capitalisation of Infrastructure.
Table 1 shows the history of reporting road infrastructure valuation information by the larger Member
Agencies of Austroads.
The Austroads Strategic Plan 1998 - 2001 (Ref 23), in Strategy 4 under Issue 3.2 (Asset
Management), calls for a review of valuation methods for elements of road infrastructure, as one
means of achieving a “reduction in the whole-of-life cost of road supply, maintenance and operation”.
All Australian State and Territory road agencies value National Highways separately from other roads.
In most cases, valuations of National Highways are not reported separately. Transit New Zealand
reports the value of only one class of roads, State Highways. (The term ‘National Highway’ is not
used in New Zealand.)
—3—
Table 1
Progress by Australian State Road Agencies and Transit New Zealand
in reporting road infrastructure valuation
89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97

RTA NSW !# # # # # # # #
DMR Qld ##!
T SA # # # # # ## # !#
DIER Tas !# #! #! #! #! ##
! !
VicRoads # !# #
MR WA !# # # #
TNZ !# #* #* #* #* #* #*
# unaudited valuation reported ! first audited valuation

# valuation audited and reported ## revaluation
! DIER Tas measures road asset condition annually, and
introduced a modified replacement cost estimation model in 1996/97
* TNZ re-values the network in 2 of the 14 Regions each year, by rotation
—4—
3.2 Valuation of local roads
This report does not specifically cover the practices used in the valuation of Local Roads. The value
of Local Roads in New Zealand has been estimated at NZ$18.4b (Ref 11, p 31), or more than double
the value of the State Highway network. At this time, the aggregate value of Local Roads in Australia
has not been determined. In Tasmania alone, the value of Local Roads is estimated at A$2b (Ref 25).
By length Local Roads represent 74% and 88% respectively of the total road networks in Australia and
New Zealand.
In Australia, AAS 27 - Financial Reporting by Local Governments, (Ref 14) first issued in July 1991,
requires Local Governments to prepare general purpose financial reports that are useful in making and
evaluating decisions about the allocation of resources. AAS 27 also requires that road infrastructure
assets be recognised and depreciated. These requirements came onto effect for financial reports
relating to the year ending on 30 June 1996.
The Australian National Asset Management Manual (Ref 7) and the New Zealand Infrastructure Asset
Management Manual (Ref 24) focus on local government assets, and contain guidance on the
valuation of Local Road infrastructure.
Organisations such as the IMEA and ALGENZ have been active in reviewing valuation
methodologies since the two Manuals were issued. It appears that all Local Governments in Australia
and New Zealand now value their road infrastructure. Some Auditors-General are also taking an
active interest (Ref 25).
Depreciation of Local Roads is widely determined on a linear basis. However there is considerable
support for condition based depreciation (Ref 7, p 4.37).
3.3 Current action by OECD on valuation of road infrastructure
In 1998, OECD conducted an international survey of practices among road agencies around the world
relating to valuation of road infrastructure. This survey is part of OECD Project IR7 on Performance
Indicators. “Value of Assets” (designated PI 12) is one of the Indicators being examined. OECD has
listed the intended purpose of Indicator PI 12 as “to establish the existence of standard and applicable
methods to calculate and measure the value of assets of road infrastructure”.
It is interesting to note that the Highways Agency in England intended to change from cash accounting
to resource accounting from 1 April 1998. Accordingly, to date, valuation of road assets has not been
reported for the motorway and trunk road networks in England.
Appendix 3 contains a summary of responses prepared in 1998 by Australian road agencies to a

questionnaire from the OECD project team on the “Value of Assets” Performance Indicator.
—5—
3.4 Land under roads and within road reserves
The 1994 Austroads report Capitalisation of Infrastructure (Ref 6) notes that “the issue of land under
roads and within road reserves has not been fully resolved in some States”.
As shown in Table 3 and Appendix 7 (Table 7.1), a number of agencies did not recognise the value of
land under roads and within road reserves in their financial reports at 30 June 1997. However,
representatives of five Australian States have agreed on a number of matters relating to the valuation
of land under roads and within road reserves, as described in Appendix 4.
Significant progress ahs been made in this area, in particular introduction of the concept of “Raw Land
Value” which is supported by several Australian State Valuers General.
The Public Sector Accounting Standards Board (PSASB), in conjunction with the Australian
Accounting Research Foundation (AARF), recognises some diversity of opinion on the question of
whether “land under roads” should be recognised as an asset, and if so, on a suitable method for
valuing “land under roads”.
Austroads is cooperating with the PSASB and AARF in work to resolve these matters.
Asset inventory Replacement cost Asset valuation

22,178km $7,714m $5,151m
Asset condition Restore to

1994/95 “as new”
$2,563m
Figure 2 Pavement asset valuation process (Source: VicRoads)
—6—
4. Asset Management and Valuation
Austroads uses the term “asset management” to mean a comprehensive and structured approach to the
delivery of community benefits through management of road networks.
The focus in asset management is on the purpose of the asset as part of a road network. In turn, the
purpose of the road network is to facilitate delivery of community benefits such as accessibility,
mobility, economic development and social justice.
Austroads defined the following eight strongly inter-related elements of asset management in a 1994
report Road Asset Management Guidelines (Ref 5):
• community benefits • asset use

• road system performance • physical treatments
• asset features • management of use
• asset condition • asset management strategy.
These elements encompass the asset itself (particularly high value components such as pavements,
bridges, other structures and traffic control devices), asset condition and use, as well as strategies and
actions to maintain and improve asset performance.
The practice of asset management in road agencies centres on decisions about strategies and actions to
achieve a balance between the needs of road users, the long term performance of the road network, and
funding.
Valuation plays an important role in asset management because one of the main purposes of valuation
is to enable reporting in monetary terms to reflect the physical condition of the road network, thereby
assisting asset managers to inform asset owners of the effects of current levels of financing and
management strategies.
Valuation information is also an indicator of the remaining life or service potential of a road network.
Figure 1 illustrates the role of the valuation process and the resulting information in the asset
management decision making process.
Figure 2, developed by VicRoads, shows a simplified version of the pavement valuation process..
Figure 3 shows a framework also developed by VicRoads connecting asset value, maintenance budget
options, and road user costs.
—7—
Figure 3 - A Framework of Asset Value, Maintenance Budget Options and User Costs
(Source: VicRoads)
—8—
5. Trends in Values and Costs
5.1 Trends in values
Appendix 5 contains summaries of road infrastructure asset valuation data for seven Austroads MAs
since the valuation process began.
Figure 4 shows trends in the reported written down values of total road infrastructure for six of the
Austroads MAs.
Figure 5 shows the corresponding trends for the bridge sub-category.
Figure 6 shows accumulated depreciation as a proportion of replacement value for the roads sub-
category for the six Australian States and Transit New Zealand.
The following observations have been drawn from Figures 4, 5 and 6 and Appendices 5 and 7:
• Fluctuations are evident in the values, due largely to difficulties in the valuation process in
the early years.
• As a general observation from the trends in accumulated depreciation in Figure 6, the

condition of road networks has been reasonably stable in recent years, for most of the
agencies shown.
• For Transport SA, accumulated depreciation represents a significantly higher ratio of

replacement cost than for other MAs in roads and bridges.
• DIER Tas adopted a revised model for calculation of replacement value in 1996 and
reported infrastructure valuations using both the old and new models, giving a break in its
time series for the roads sub-category, as shown in Figures 4, 5 and 6 and in Appendices 5
and 7.
• RTA NSW reported a significant reduction in total asset value in 1996 reflecting its loss
of control of the regional road network to local government.
• Changes by MR WA and VicRoads in the depreciation of earthworks may distort the

trends - from 1 July 1997, VicRoads treats earthworks as having infinite life, while
MR WA has reduced the life of earthworks from 200 to 100 years.
—9—
50
45
40 NSW
35 TNZ
Vic
30
Tas 1
$b
25 Tas 2
WA
20
SA
15
10
0
1990 1991 1992 1993 Year 1994 1995 1996 1997
Figure 4 - Reported written down values of total road infrastructure
4.50
4.00
3.50 NSW
3.00 NSW
2.50 TNZ
$b
Vic
2.00
Tas
1.50 WA
1.00 SA
0.50
0.00
1990 1991 1992 1993 1994 1995 1996 1997
Year
Figure 5 - Reported written down values of bridges
— 10 —
60.00
50.00
NSW
40.00 VIC
TAS 1
Percentage
TAS 2
30.00
WA
SA
20.00 QLD
NZ
10.00
0.00
1990 1991 1992 1993 1994 1995 1996 1997
Year
Figure 6 - Accumulated depreciation as a proportion of

replacement value (roads sub-category)
5.2 Trends in costs
Four MAs (DMR Qld, RTA NSW, Transport SA, and TNZ) have their own indices of road
construction costs. Main Roads WA uses indices issued by ABS for roads and road furniture, and the
Rawlinsons Building Price Index for bridges.
The BTE has published a similar index for more than 20 years. The BTE Road Construction and
Maintenance Index (RCMPI), was restructured in 1994, as described in BTE Information Paper 41
(Ref 16).
These indices are used to update valuations from year to year between revaluations.
Recent values of these indices are in Figure 7 and Table 2, with corresponding values of the BTE
Road Construction and Maintenance Price Index and the Australian CPI (weighted average for eight
capitals).
— 11 —
Figure 7 - Comparison of road sector cost indices in use in Australia and New Zealand
Index Movement Trends
14
12 BTE
CPI
10 DMR Qld
GNFP (WA)
% change from previous year
Raw' BPI
8
RTA NSW
TSA
6
TNZ Rds
TNZ Brdgs
4
0
1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98
-2
-4
Year
— 12 —
BTE ABS DMR Qld Main Roads WA RTA NSW Transport SA Transit NZ
Year BTE Trend CPI Trend Road Trend Gross Trend Rawlins Trend Road Trend Price Trend Road Trend Bridge Trend
RCMPI (%) (%) Input (%) non- (%) on’s (%) Cost (%) Index (%) Constr (%) Constr (%)
Cost farm Building Index uction uction
Index product Price Index Index
Index
Base (93/94 (89/90 (72/73 (89/90 (89/90 = (85/86 (85/86
year = 100) = 100) = 100) = 100) 100) = 100) = 100)
1985/86 73.3 75.6 76.02 100.0 6.4 100.0

1986/87 76.4 4.2 82.6 9.3 80.39 5.7 104.6 4.6 107.7 7.7
1987/88 80.9 5.9 88.5 7.1 85.66 6.6 109.2 4.4 115.1 6.9
1988/89 86.1 6.4 95.2 7.6 95.2 96.75 12.9 116.9 7.1 122.0 6.0
1989/90 89.5 3.9 102.5 7.7 529.8 100.8 5.9 102.49 5.9 124.6 6.6 130.7 7.1
1990/91 96.2 7.5 106.0 3.4 555.2 4.8 105.0 4.2 106.04 3.5 134.3 7.8 135.7 3.8 1327 1328
1991/92 97.0 0.8 107.3 1.2 572.0 3.0 106.6 1.5 106.04 0.0 137.7 2.5 139.7 3.0 1337 0.8 1339 0.8
1992/93 98.8 1.9 109.3 1.9 582.7 1.9 108.5 1.8 106.04 0.0 135.0 (2.0) 142.3 1.8 1371 2.5 1368 2.2
1993/94 100.0 1.2 111.2 1.7 591.1 1.4 109.1 0.6 106.04 0.0 134.7 (0.2) 145.1 2.0 1371 0.0 1369 0.1
1994/95 102.3 2.3 116.2 4.5 601.5 1.8 110.2 1.0 107.63 1.5 137.2 1.9 149.3 2.9 1396 1.8 1396 2.0
1995/96 102.9 0.6 119.8 3.1 611.2 1.6 113.4 2.9 111.42 3.5 144.3 5.2 153.5 2.8 1418 1.6 1412 1.1
1996/97 104.2 1.3 120.2 0.3 618.1 1.1 116.3 2.6 113.65 2.0 148.2 2.7 156.9 2.2 1442 1.7 1438 1.8
1997/98 121.0 0.7 117.7 1.2 115.00 1.2 151.8 2.4 157.8p 0.6p 1461 1.3 1456 1.3
Table 2 - Comparison of the Australian Consumer Price Index and the BTE Road Construction and Maintenance Price Index
with Cost Indices used by DMR Qld, MR WA, RTA NSW, Transport SA and Transit NZ
— 13 —
6. Current Position in Australia and New Zealand
6.1 General
All Australian State and Territory road agencies and TNZ now report the value of their road
infrastructure assets in accordance with AAS 29, and generally in accordance with the 1994 Austroads
policy (Ref 6).
A checklist for compliance with the 1994 Austroads policy is in Appendix 6.
TNZ regards the State Highway network as being owned by the Crown and local authorities. TNZ
therefore reports the value of the State Highway network in an annual “Statement of Resources” which
forms part of each TNZ Annual Report.
6.2 Practices used in valuing
The current practices of Australian State Road Agencies and Transit New Zealand for valuing land
under roads and within road reserves, work in progress, roads, bridges, traffic signals, street lighting
and earthworks are summarised and tabulated in Appendix 7.
Also in Appendix 7, Table 7.5 gives the definitions of bridges used in the valuation process.
Most MAs publish an outline of their valuation method and any changes as notes to the financial
statements in Annual Reports. Additional detail is available from each MA.
The TNZ approach to valuation and depreciation of road infrastructure assets is in Section 6.5 of the
TNZ State Highway Asset Management Plan (Ref 26).
6.3 Infrastructure categories valued and reported
Table 3 shows the infrastructure categories valued and reported by MAs in Annual Reports at June
1997.
MAs typically value more infrastructure categories than shown in Table 3 which lists only those
categories with valuations shown as part of infrastructure assets in Annual Reports at June 1997. For
example, DIER Tas also values traffic signals, land purchased for future roadworks and surplus land.
All Australian State Road Agencies and Transit New Zealand report the value of “bridges” separately
from “roads”.
TNZ values land, formation, pavement, drainage, bridges, other structures, miscellaneous (traffic
facilities, road furniture, etc), and reports under three headings - roads, bridges and other. As a result
of the NZ Institute of Chartered Accountants Exposure Draft 82, Accounting for property, plant and
equipment (Ref 27), the NZ Auditor-General’s Office is promoting specific valuation of a greater
number of components in the roads and bridges category, including the separate recognition of the seal
from the balance of the pavement.
— 14 —
RTA NSW intends to review its Traffic Signal Control Network classification (SCATS computers and
communications equipment, closed circuit TV systems, fibre optic cable network, and control room
equipment), expanding it to cover all infrastructure used for the dynamic control of traffic, including
traffic signals (approximately 3,000 sets), the lane changing system on the Sydney Harbour Bridge,
and the Transport Management Centre.
RTA NSW is the only MA to recognise assets at 30 June 1997 under the “privately funded road
infrastructure assets” category. Values reported under this category represent the RTA’s future right
to assume full control of privately funded roads in Sydney (Sydney Harbour Tunnel, M2, M4 and M5
at 30 June 1997) which have been developed and are being managed under BOOT (build, own,
operate and transfer) arrangements.
6.4 Land
Road agencies typically have other land assets in addition to land under roads and within road
reserves, particularly
• land acquired for future roadworks,

• land used for management purposes (offices, depots, etc), and
• surplus land.
The value of land under roads and within road reserves is included in road infrastructure asset
valuation, whereas the value of other land is included in property assets. Reference to Appendix 5
shows that the value of land under roads and within road reserves varies from approximately 10%
(DIER Tas) to around 35% (MR WA and RTA NSW) of the total written down value of road
infrastructure assets.
Transport SA has reported that a complete valuation of its land under roads and within road reserves is
intended by 30 June 2000.
VicRoads has agreed a valuation approach with the Victorian Valuer-General based on “Raw Land
Value”, and has placed a value on land under roads. The valuation is yet to be audited pending a
clearance from Victoria’s Treasury to include the value in VicRoads Annual Financial Statements.
— 15 —
Table 3
Road infrastructure categories with valuations in Annual Reports at June 1997
Land under Privately

Agency Roads and Work in Roads and Bridges Funded
Within Road Progress Infrastructure
Reserves Assets
RTA NSW # # Roads #

Bridges
Traffic Signal Control Network
(see Clause 6.3)
VicRoads " # Road Pavements Not applicable
Bridges
Traffic Control Systems
Earthworks (from June 1998)
Sound barriers (from June
1998)
DIER Tas # # Roads Not applicable
Bridges
Main Roads WA # # Roads Not applicable

Bridges
Road Furniture (covers traffic
signals, road lighting
installations, a reversible lane
system, and the Narrows
Interchange reticulation system)
Transport SA Value of # Roads Not applicable
$253,000 at 30 Bridges and Culverts
June 1997
Traffic Signals
includes only
land acquired Street Lighting
since 1 July
1996.
DUS ACT " " Roads Not applicable
Bridges
Other
DMR Qld " # Roads Not applicable
Land cost is Bridges (Note 2)
expensed when
construction
begins
TNZ " " Roads (includes land under Not applicable
Valuation Included in roads and within road reserves,
carried out, but the relevant traffic facilities, earthworks,
included with category, drainage and pavement)
“Roads” in and not Bridges
Annual disclosed Other (includes tunnels,
Reports separately culverts, subways and other
structures)
# Valuation reported for this category; " Valuation not reported for this category
— 16 —
Notes to Table 3:
1. RTA NSW subdivided the road category of infrastructure assets into three separate sub categories
(roads, bridges and traffic signal control network) following a review of AAS10.
2. At 30 June 1997, DMR Qld reported road infrastructure valuations under “Parent Entity”, and
“Consolidated (includes QML)”. QML is Queensland Motorways Limited. Amounts quoted in this
report are those for the Consolidated accounts, that is, they include the Logan Motorway and the
Gateway Bridge.
6.5 Depreciation methods
Table 4 shows the practices of MAs at 30 June 1997 in depreciation of road infrastructure assets.
For roads, of the eight MAs with details in Table 4, three use condition as the basis of depreciation for
roads, and five use age. One (Transport SA) is investigating a change from age to condition.
VicRoads, Main Roads WA and Transport SA have conducted analyses to determine the service and
maximum lives of roads (40 to 60 years) shown in Table 4 as inputs to the calculation of depreciation.
Within the roads sub-category, those MAs which value earthworks separately generally do not
depreciate earthworks. VicRoads and Transport SA have reviewed their approach to the valuation of
earthworks during 1997/98. Outlines of the proposed approaches to the valuation of earthworks are in
Appendix 7 (Table 7.4).
For bridges, most MAs use bridge age to determine depreciation. The RTA NSW approach is
predominantly based on age at present, and RTA is planning to adopt a condition based methodology.
Transport SA uses remaining life as the basis of depreciation, and periodically reassesses the
remaining life of individual bridges. The other six MAs with details in Table 4 use age as the basis of
depreciation. DIER Tas uses a parabolic depreciation curve, and the remaining five use a straight line
for depreciation of bridges.
For traffic signals and street lighting, straight line depreciation is used, generally with assumed
average life spans from 12 to 50 years, as detailed in Table 4.
Assets recognised in the categories “land under roads and within road reserves” and “work in
progress” are not depreciated.
— 17 —
Table 4 - Depreciation methods in use by Austroads Member Agencies (June 1997)
Agency Roads Bridges Traffic Street

Signals Lighting
RTA NSW Condition based, using Predominantly based Straight line.
6 subnetworks - similar on age (condition First
to DIER Tas - see below. based method being depreciated
developed). First 1995/96.
depreciated 1994/95.
VicRoads Pavements: See Note 4. Straight line, Straight line,
Straight line, 60 years. 90 years. 24 years.
Earthworks: Infinite life
from 1 July 1997.
DIER Tas Condition based, using Parabolic (age Traffic
4 categories of roads. squared). signals:
PMS (FNOS) is used to Steel, concrete 70 yrs straight line,
calculate accumulated Timber bridge 33 years.
depreciation as the 25 years Associated
estimate of cost of T-Beam 50 years electronics:
restoring pavement to Historic 250 years straight line,
“near new” condition in Major 100 years. 20 years.
one year.
Main Roads WA Sealed rural roads: Straight line over Straight line, Straight line,
Condition based, with service life, ranging different 50 years.
maximum life 50 years. up to 100 years, lives are
Other roads: depending on generic assigned to
Straight line - 40 years type, as detailed in different
(asphalt metropolitan), Appendix 7 (Table components,
12 years (gravel roads). 7.9). from 11 to
Earthworks: 40 years.
Straight line - 200 years
(100 yrs, after 1997).
Transport SA Straight line: Straight line, 70 - 100 Straight line, Straight line,
40 yrs (inner urban years with changing 12 years. 25 years.
arterials and Nat Hwys), gradient (remaining
53 yrs (rural and outer life reviewed at each
urban Nat Hwys), 58 yrs inspection).
(rural and outer urban
arterials). Investigating a
move to condition-based.
DTW NT DTW NT does not depreciate its assets
DUS ACT Straight line, 100 years. Straight line, Straight line, Straight line,
100 years. 30 years. 30 years.
DMR Qld Straight line: Straight line,
Surfacing 7 - 10 years. 100 years.
Pavement 30 years.
Formation 80 years.
TNZ Zero for earthworks and Straight line. Zero annual Zero annual
tunnels. Straight line, 36 Economic life depreciation, depreciation,
years for pavements assumed to be 100 based on based on
(TNZ assumes that years for bridges built assumptions assumptions
restoration costs are 55% before 1920, and 90 that these that these
of the cost of replacing years for bridges built assets are assets are
base and surface, which since 1920. maintained maintained
are assumed to represent at near new at near new
70% of the pavement condition. condition.
replacement cost).
— 18 —
Notes to Table 4:
1. Land under roads and within road reserves is not depreciated.
2. Depreciation is not applicable for work in progress.
3. Depreciation is not applicable for privately funded road infrastructure assets.
4. Whilst VicRoads has adopted a straight line depreciation methodology, it does take
account of pavement condition when establishing the accumulated depreciation. The
VicRoads depreciation model allows for revaluations based on condition information. A
straight line methodology is adopted between revaluations.
6.6 Use of asset valuation in Performance Indicators
Main Roads WA has reported annually since 1993/94 two performance indicators of “assets
employed”, as shown in Table 5.
Table 5 - Performance Indicators with asset value as an input
MA No Title Description
MR WA Indicator 1.3.A Asset value and vehicle travel Vkt per $ of road network asset value
MR WA Indicator 1.3.B Asset value and freight Tonne-km per $ of road network asset
value
Details of these two Main Roads WA Program Performance Indicators are in an extract from the 1997
Annual Report in Appendix 8 to this report.
Main Roads WA also uses asset value as a basis for determining the annual user fee for capital which
is an input to the MRWA Performance Index, an indicator used in determining shifts in productivity
pay for personnel.
The DMR Qld Strategic Plan 1998 - 2002 nominates “asset value of the state-controlled road network”
as a corporate performance measure.
— 19 —
6.7 Bridge Values as a Proportion of Road Infrastructure Assets
All Australian State Road Agencies and Transit New Zealand report the value of “bridges” separately
from “roads”. Table 6 shows the written down replacement values for roads, bridges, and total road
infrastructure excluding land under roads and excluding privately funded infrastructure assets, at 30
June 1997. This indicates a fairly consistent proportion of bridge values (13% to 18% of total
excluding land), except for a high dependency on bridges in Tasmania, and Queensland with the
lowest proportion of bridge value.
Table 6 - Written-down values of roads and bridges at 30 June 1997
Total Road Bridges Bridges

MA Roads Bridges Infrastructure as a % of as a % of
(Notes 1 & 2) Roads Total
RTA NSW A$18,106m A$3,870m A$22,549m 21.37 17.16

VicRoads A$9,365m A$2,104m A$11,970m 22.47 17.58
DIER Tas A$1,454m A$914m A$2,391m 62.86 38.23
MR WA A$5,514m A$865m A$6,508m 15.69 13.29

Transport SA A$1,839m A$345m A$2,387m 18.76 14.45
DMR Qld A$11,545m A$1,396m A$13,301m 12.09 10.50
Total (6 States A$47,823m A$9,494m A$59,106m 19.85 16.06
of Australia)
TNZ NZ$6,145m NZ$1,452m NZ$7,928m 23.63 18.31
Notes to Table 6:
1. The value of land under roads and within road reserves has been omitted from total road
infrastructure asset values used in Table 6 because at 30 June 1997 four MAs have not
reported the value of land under roads and within road reserves. In addition, exclusion of land
may give a more meaningful comparison.
2. The value of privately funded road infrastructure has also been excluded from total road
infrastructure asset values used in Table 6.
Trends in the written down values of bridges are in Figure 5.
— 20 —
7. Depreciation of Road Infrastructure Assets
7.1 The meaning of depreciation in accounting terms
Depreciation is the proportion of an asset consumed during an accounting period.
Accumulated depreciation is the part of the original cost of a non-current asset which has been treated
as an expense in successive profit and loss accounts.
A non-current asset is an asset which has a useful life extending over more than one accounting
period.
Accumulated depreciation, therefore, is a measure of the loss of service potential of an asset since the
asset was acquired or constructed.
7.2 A discussion of depreciation in physical terms
Accumulated depreciation in the context of an asset such as a road network is an indicator of the future
cost of restoring the network from its present actual condition to an as-new or near-new condition, that
is the cost of restoring its as-new service potential. A robust method for calculating depreciation is
therefore essential for accumulated depreciation to be a reliable management tool.
Road assets, especially pavements, can be restored to as-new or near-new condition (or service
potential) through physical treatments such as rehabilitation. Restoration to as-new or near-new
service potential is not economical for many assets (eg motor vehicle, personal computer). Note
however that an asset such as a fleet of motor vehicles (as distinct from each specific vehicle) can be
restored to new condition.
The non-linear nature of the pattern of deterioration of the condition of pavements over long periods is
well documented. Pavement deterioration is always non-linear at the project level. At the network
level, uniform pavement deterioration might theoretically be possible, but factors such as non-uniform
distribution of traffic loading and pavement age, variations in quality of construction and maintenance,
axle loadings increasing with time, and pavement technology improving with time give rise to non-
linear deterioration at the network level. It can therefore be argued that, at least for pavements, a
uniform rate of depreciation will not give a true indication of asset value, thereby diminishing the
worth of accumulated depreciation as a management tool, if calculated on a linear time basis.
For example, in successive Annual Reports since 1993 (Ref 2), RTA NSW has reported a strong
objection to the use of age-based depreciation for long-life assets such as road pavements, favouring
condition-based depreciation, on the basis that wear and tear from physical use outweighs commercial
or technical obsolescence (see Appendix 9).
Condition based depreciation is described by Burns (Ref 17).
Expenditure on maintenance or rehabilitation of assets offsets consumption or depreciation of those

assets. Net movements in accumulated depreciation, year on year, therefore are potentially strong
indicators of the change in condition of the network, or the change in service potential of the network.
Examples of these movements are shown in Appendix 5.
— 21 —
7.3 Technical obsolescence
Some assets lose service potential through technical obsolescence, rather than through deteriorating
condition. Examples include electronic control equipment used in intelligent transport systems such as
traffic signals, and bridge structures designed for axle loading standards which become superseded.
For these assets, restoration to provide as-new service potential is not practical or economic, and it is
appropriate to dispose of or write off these assets for operational reasons notwithstanding their good
condition.
Condition based depreciation is not appropriate for assets which are likely to become technically
obsolete. A different measure of loss of service potential is necessary. Age based depreciation is
appropriate in these cases, and a straight line approach is usually used in calculating depreciation.
As shown in Table 4, age is the most common basis for calculating depreciation of bridges in Australia
and New Zealand. DIER Tas makes two calculations, one using a straight line and one using a
parabola (ie age2). DIER Tas reports depreciation of bridges on the basis of parabolic deterioration
with age, whereas the other Austroads MAs use a straight line.
With an age based system for calculating depreciation, the challenges are to determine the expected
life and the rate of change of “provision for restoration”. It is appropriate to conduct periodic reviews
of the expected life of assets subject to age-based depreciation. For example, Transport SA reviews
the remaining life of each bridge at the time of the regular inspection.
Austroads (Ref 10) has defined “remaining life” for a road pavement as:
Remaining life of a pavement may be defined as the period, under current or stated
traffic growth, during which the pavement condition is expected to remain within stated
limits, provided that appropriate routine and preventive maintenance are carried out.
Until June 1993, RTA NSW calculated depreciation for its road assets as the sum of a condition based
amount “provision for restoration” (ie, condition based deterioration) and an age based amount
“provision for asset renewal” (ie a straight line based on a 100 year life before technical obsolescence).
This is explained in the RTA NSW Annual Report (p46) to 30 June 1993 (Ref 2). However, for
valuations at 30 June 1994 and since, RTA NSW has calculated depreciation for roads (dominantly
pavements) only on the basis of condition, as explained in the extracts from the 1995 and 1996 Annual
Reports in Appendix 9.
The current approach by RTA NSW to calculation of depreciation for roads effectively renders
estimation of remaining life unnecessary.
7.4 Current AARF reviews of Australian accounting practice
There is concern in the Australian accounting profession that some, but not necessarily all methods of
condition based depreciation may not comply with relevant Accounting Standards. The Australian
Accounting Research Foundation (AARF) has initiated a review of condition based depreciation
(Ref 29). This review is also closely related to recent AARF work on major cyclical maintenance
(Ref 30), of “complex assets” such as road infrastructure.
— 22 —
8. Factors Affecting Road Asset Values
Factors which may contribute to changes in reported asset values include:
• changes in the quantity of asset - road networks can be extended or reduced either through
commissioning newly constructed works, closing old routes or sections of road, or through
changes in classification. For example, in NSW control of the regional road network passed
from the State (RTA) to Local Government during 1995/96 (Ref 2, 1996 RTA Annual Report,
page 46).
• changes in the condition of components of the asset where depreciation is based on asset
condition.
• changes in the age of the asset where depreciation is based on asset age.
• changes in the estimated remaining life of part of the asset where depreciation is based on
remaining life.
• changes in the methodology used to value any component of the asset. For example,
DIER Tas adopted a revised valuation model on 30 June 1996, and reported two valuations at
that date, one using the old method and one using the new method, as shown in Figures 4, 5
and 6 and Appendix 5.
• technology innovations which increase efficiency - a reduction in construction costs will result
in reduced estimates of reproduction or replacement cost.
• changes in standards - for example where current written down costs are based on replacement
costs rather than reproduction costs, a change in standards for say shoulder width on roads or
bridges may result in changed estimates of replacement cost. Changes in performance
standards such as flood immunity or safety could potentially have a similar effect. It has to be
recognised that changes in standards impact service potential.
— 23 —
9. Issues to be Resolved in Valuation of Road Infrastructure
a) The degree of precision and integrity and the cost of the valuation process should be influenced
by the purpose or intended use and the potential benefits of the resulting information.
b) What is capitalised? What is expensed? (Eg, Construction of road infrastructure assets). As an
example, one MA proposes to expense all roadworks costs, with the valuation process picking
up changes in capital value as a result of changes in inventory. A consistent approach to the
definitions of maintenance, rehabilitation and construction is desirable.
c) Criteria for recognising expenditure as “work in progress”. Is work in progress recognised and
reported in historical (“out turn”) or indexed to current year dollars? (cf Responses to
Questions 9, 10 and 11 in Appendix 11).
d) Improved consistency and robust methods for calculating accumulated depreciation are
desirable. Age based (usually straight line) depreciation can be over a fixed pre-determined life,
or over a “remaining useful life” which can be regularly reviewed and reassessed from time to
time.
e) In estimating the replacement cost of infrastructure assets in a particular category, some MAs
value every asset (eg, bridge, road link, etc) individually and aggregate them in spreadsheets or
similar, others assemble like assets into generic groups, allocate typical values and aggregate
them. For “roads”, DIER Tas uses an algorithm where the inputs are surface area, terrain,
traffic volume, road class, and adjacent landuse (rural/urban), and the output is a cost per sq m.
The Auditor-General of Tasmania has accepted the algorithm. The algorithm and an
explanation are in Appendix 10.
f) Varying approaches to the inclusion of specific road related infrastructure contribute to
inconsistency between jurisdictions in total reported valuations of road infrastructure. For
example, the Melbourne City Link, a significant road infrastructure asset in Victoria, being the
responsibility of the Melbourne City Link Authority, not VicRoads, is not included in VicRoads
valuation information, though its value is expected to be recorded in the appropriate set of
accounts. The busway in Adelaide is included in Transport SA’s infrastructure assets, and some
ferry-related infrastructure assets have been valued and reported by DIER Tas whereas
corresponding assets are not included for other MAs, notably TNZ and VicRoads which do not
include facilities for inter-island shipping in road asset valuations.
g) With respect to the cost of service adjustments in association with road infrastructure
construction, at least one MA reports that it is impractical or not economical to omit utility
adjustment costs with existing costing arrangements. The 1994 Austroads report Capitalisation
of Infrastructure stipulates that the cost of public utilities should not be included in the value of
roads and bridges. However, it is necessary to distinguish between the cost of adjustments and
the cost of new utility assets. The responses to Question 8 in the Questionnaire in Appendix 11
indicate some diversity on this point, which could make significant differences to the valuation
of road infrastructure in urban situations.
h) Should the costs of traffic control be included? See the responses to Question 8 in
Appendix 11.
i) What does “construction has commenced” mean in relation to “land under roads and within road
reserves”? - presumably physical works, viz too late to sell land back.
— 24 —
a) Some MAs make no allowance for upgrading to current geometric or hydraulic standards in
estimating the replacement cost of roads and bridges. The relevant point here may be to
distinguish between “reproduction cost” and “replacement cost” as used in the 1994 Austroads
report Capitalisation of Infrastructure (Clause 3.3(c)), especially in relation to functional
obsolescence. It appears that MAs do not make a clear distinction between replacement and
reproduction in this context, with most MAs using reproduction cost, but describing it as
replacement (see the responses to Question 6 in the Questionnaire in Appendix 11).
b) Australian State Road Agencies and Transit New Zealand report the value of “bridges”
separately from “roads”. This reflects significant differences in service lives, differences in
condition assessment, the dominance of pavements in road valuations, and the consequential
dominance of pavement management in asset management decisions, in terms of the quantum of
investment involved and the effect on asset depreciation.
c) Some State Road Agencies in Australia also report traffic signals separately, though there are at
present major differences in the scope of assets included in traffic signals.
d) While the separate values of roads and bridges can be added to give a value in accordance with
the Austroads category “Roads and Bridges”, it is opportune to test the possibility of agreement
on sub-categories within “Roads and Bridges”. This is covered in Question 3 in the attached
questionnaire (see Appendix 11).
e) Pavement is the element of road assets with the highest value, and typically represents around
80% of the total value of road infrastructure assets without land under roads and within road
reserves. The cost of pavement restoration is easily the largest component of accumulated
depreciation when calculated on the basis of road condition, possibly representing more than
90% of accumulated depreciation. Pavement life cycle costs are high. Deferred maintenance
tends to be concentrated in the pavement sub-category of road infrastructure assets. Is there a
case for the valuation process to be more rigorously applied to pavements than to other
components?
f) No attempt has been made in this report to use available valuation data to calculate indicators
such as return on investment. The MR WA Performance Indicators on Table 5 appear
appropriate to the concept of return on investment. A per capita approach is potentially useful
for specific classes of roads (eg, National, State, Local).
g) What level of awareness is there among MAs of the use made by external entities of valuation
information in Annual Reports? Are users satisfied with the extent of information available?
h) Figure 7 compares the trends of the indices in Table 2. Rationalisation of the use of cost indices
among MAs appears to offer an opportunity for cost savings.
i) A number of issues relating to land under roads and within road reserves have been identified as
shown in Appendix 4, and are being addressed by the PSASB Working Party on land under
roads and within road reserves.
j) The concept of a renewal annuity, as being used in the Australian water industry, could be
explored, including consideration of concepts such as “annual average asset consumption” and
“sustainability index” (Ref 27).
— 25 —
10. Benefits of Valuation
In an article about performance indicators for the road sector, an OECD scientific expert group
reported in 1997 that the trend in the value of road assets “has been found to be a most useful indicator
which has many uses and is the best summary descriptor of the long term performance of the road
program” (Ref 22).
Specific benefits of road infrastructure valuation in the Australian and New Zealand context are
expected to include:
• Facilitates more effective and credible communication between politicians, senior

management, and staff in road agencies with Finance and Asset Management
responsibilities, in strategic planning and budgeting processes
• Provides a common language for communication about asset management of road

networks between people with strong affiliations to accounting, engineering, economic
and management disciplines
• Includes asset consumption or asset performance (change in condition or remaining

service life over time), principally the performance of road pavements and bridges (the
dominant components of accumulated depreciation of non-current assets), as a key
contributor to the agency’s financial position
• Improves awareness of the overall condition of the road network, and changes in
condition
• Creates potential to study relative movements in asset value as a result of say wet seasons
or significant changes in landuse and traffic patterns, not only in a technical engineering
sense, but also in a commercial sense
• Creates potential to study relative movements in asset value between geographic areas,
road routes, etc, and between government service provision sectors
• Raises awareness of movements over time in the condition of the road network -
particularly important with mature networks where physical deterioration may be
accelerating
• Sharpens focus on key management issues such as remaining service potential and
remaining life of components of the asset
• Facilitates more effective allocation of resources to match service potential with user
needs
• Provides fundamental benefit in setting up road use charges reflecting the cost of
providing road infrastructure
• Facilitates comparisons as a starting point to explore differences, thereby underpinning the

process of benchmarking
• Differences year on year between accumulated depreciation (accounting terminology) or

provision for restoration (asset management) indicate whether the network as a whole is
moving towards or away from condition targets
— 26 —
• Assists in assessment of investment priorities between asset management of road

infrastructure and other forms of community services
• Asset valuation data facilitates a balance between technical and commercial

considerations in decisions about levels of investment and allocation of resources
• Gives potential for coarse inter-regional comparisons of returns on assets, eg vkt and
tonne-km freight per $(value of assets) as used by Main Roads WA (see Appendix 8), and
as an aid to identification of Community Service Obligations, and
• Contributes to Austroads objectives such as a coordinated approach to administrative

practice (Ref 23, Issue 4.2), and improved effectiveness and efficiency in management of
the road system (Ref 23, Issue 3.2), and a consistent approach to asset management.
Refinement of valuation methods may be expected to enhance these benefits. Agency staff would be
more effectively motivated and committed to preparation of annual valuation reports if they were
confident that the resulting valuation reports would be used as management tools.
11. Financial Summaries
The availability of valuation information from all MAs enables compilation of annual financial
summaries of Australasian Road Data in the formats along the lines suggested in Appendix 2. These
formats show annual valuation, depreciation and investment by road class (National, State and Local)
by agency.
Annual financial summaries of this type have the potential to generate discussion on what this data
means (particularly the meaning in changes over time of this data) and how the data can be used in
managing road assets.
— 27 —
12. Directions for Future Action
1. Work towards improved consistency in valuation methodologies and reporting, with

effort focussed initially on the issues in Section 9 in this report, covering Commonwealth,
State, Territory and Local Governments in Australia and New Zealand.
2. Develop a consistent approach among Austroads MAs to the definitions of key asset
management terms such as maintenance, rehabilitation and construction.
3. Continue current work to develop a consistent approach among Austroads MAs to the
assessment of condition of the main components of road infrastructure, particularly
pavements and bridges.
4. Review the suggested formats in Appendix 2, and compile annual financial summaries for
incorporation in future editions of the Austroads series Road Facts (Ref 18) and
elsewhere.
5. Update and expand the 1994 Austroads policy booklet Capitalisation of Infrastructure.
For example:
• It appears that most MAs are valuing roads and bridges at written down
replacement cost rather than at written down current cost (the lower of
reproduction, replacement or historical cost) in accordance with Clause 3.3(c).
• There appears to be a case for expanding the number of categories of road
infrastructure assets, to show separately earthworks, pavement and drainage,
bridges, traffic signals (or more generically intelligent transport systems), etc.
• Clarification of surplus land and land held for future infrastructure as a separate
category of assets from land under roads and within road reserves, but not
forming part of infrastructure assets.
6. Explore the feasibility of adopting a single national index in Australia or a rationalised

suite of indices for road costs.
7. Explore means of analysing valuation data to provide useful management information

(eg, net rates of road asset consumption, year-on-year or inter-regional comparisons of
ratios such as written down value/replacement value, return on assets employed, value of
assets per capita, etc).
8. Gauge the use and potential use by external bodies of valuation information published by
road agencies.
9. Explore the potential for an Austroads National Performance Indicator based on road
infrastructure valuation information, and OECD PI 12.
— 28 —
13. Conclusions
A. This report sets out current practices in road infrastructure valuation, and identifies areas
of consistency and inconsistency between the State road agencies in Australia and Transit
New Zealand.
B. Valuation information is described from an asset management perspective,

complementing the traditional accounting perspective on capitalisation.
C. The potential benefits to a road agency from both the valuation process and the resulting
information are articulated.
D. The relative potential of the different approaches to depreciation (condition based and age
based) to support the use of valuation information as an effective input to road asset
management decisions is worthy of further study, involving asset management and
accounting professionals.
E. A number of other directions for future action are identified for consideration as part of
the intended Austroads review of valuation methods for road infrastructure elements.
— 29 —
14. References
1. NAASRA, August, 1982, NIMPAC Road Planning Model Manual (Page 2-C-8 et alia).
2. Roads and Traffic Authority, NSW, 1990 to 1998, Annual Reports.
3. Department of Infrastructure, Energy and Resources Tasmania
(formerly DTW Tas and DoT Tas), 1991 to 1997, Annual Reports.
4. Transit New Zealand, 1992, 1993, 1996, 1997 and 1998, Annual Reports.
5. Austroads, 1994, Road Asset Management Guidelines, AP-109/94.
6. Austroads, 1994, Capitalisation of Infrastructure, AP-116/94.
7. IMEA Australia, 1994, National Asset Management Manual.
8. Department of Transport SA, 1994, 1996, 1997 and 1998, Annual Reports.
9. Austroads, 1995a, Road Asset Management in Australia - State of the Nation 1994/95.
10. Austroads, 1995b, Road Asset Management in Australia - State of the Nation 1994/95 -
Technical Supplement.
11. Ministry of Transport, NZ, Land Transport Pricing Study, 1995, The Cost of Roading
Infrastructure.
12. VicRoads, 1995 to 1998, Annual Reports.
13. Main Roads WA, 1995 to 1998, Annual Reports.
14. AAS 27, June, 1996 (Australian Accounting Standard) - Financial Reporting by Local
Governments (AARF).
15. AAS 29, November, 1996 (Australian Accounting Standard) - Financial Reporting by
Government Departments (AARF).
16. Bureau of Transport Economics, (formerly BTCE) 1996, BTE Road Construction and
Maintenance Price Index (Information Paper 41).
17. Burns, P, 1996, Managing for Asset Maintenance and Renewal, International Conference of
Maintenance Societies, Melbourne. ICOMS-96, Paper 48.
18. Austroads, 1997a, Road Facts ’96, AP18-97.
19. Austroads, 1997b, Strategy for Improving Road Asset Management Practice.
20. DMR Qld, 1997 and 1998, Annual Reports.
21. Department of Infrastructure, Energy and Resources Tasmania (formerly DoT Tas),
1997, Transport Infrastructure, June 1997 Valuation.
22. OECD, Road Transport Research, Performance Indicators for the Road Sector, 1997.
23. Austroads, 1998, Strategic Plan 1998 - 2001.
24. ALGENZ, June, 1998, New Zealand Infrastructure Asset Management Manual.
25. Parliament of Tasmania, Auditor-General Special Report No 26, May 1998, Capitalisation and
Reporting of Road Assets in Tasmania.
26. Transit New Zealand, 1998, State Highway Asset Management Plan
(draft, March 1998), Section 6.5.
27. Institute of Chartered Accountants of New Zealand and Financial Reporting Standards Board,
March 1998 Exposure Draft 82, Accounting for property, plant and equipment.
28. Office of Local Government, AMQ International, Skilmar Systems, and Jeff Roorda and
Associates, July 1998 (Final Draft), Facing the Renewal Challenge, Victorian Local
Government Infrastructure Study.
29. AARF, Urgent Issues Group, 8 September 1999, Condition-Based Depreciation - Discussion
Paper, Issue 99/7.
30. AARF, Urgent Issues Group, June 1999, Accounting for major cyclical maintenance,
Abstract 26 and Issue Summary 98/8.
— 30 —
APPENDIX 1
Charter for Austroads Project BS.A.70 - The Use of Valuation

Valuation of
Road Infrastructure Assets
(September 1999)
— 31 —
AUSTROADS PROJECT - BS.A.70
Use of Valuation in Asset Management
Project Charter
A. PURPOSE
To promote wide and common understanding of the important role asset valuation can take in
improving:
(i) public knowledge of how well infrastructure is being managed,

(ii) knowledge regarding the effects of level of investment,
(iii) Road Authority decision making in targeting investment decisions, and

(iv) effective communication and cooperation between finance and asset management staff in
road authorities
B. ISSUE/BACKGROUND
In 1996/97 for the first time, most if not all, of the larger road agencies in Australia will issue data on
the capitalisation of road infrastructure, generally in line with the Policies and Rationale in the 1994
Austroads publication Capitalisation of Infrastructure. This in part results from the adoption of
accounting standard AAS 29.
This will enable Austroads and others to compile annual financial summaries of Australasian Road
Data in the formats such as that suggested in Appendix 11 in the Austroads 1994/95 State of the Nation
Report on Road Asset Management in Australia.
Analysis could show annual valuation, depreciation and investment by road class (National, State and
Local) by agency amongst other things. Time series analysis and reporting of movements in
depreciation over time can be used to monitor changes in condition.
Financial summaries of this type will have the potential to generate discussion on what this data means
(particularly the meaning in changes over time of this data) and how the data can be used in managing
road assets. External users will use the data for lobbying.
To help ensure that this discussion is well informed, an Austroads report is proposed on the relevance
of road asset valuations to the needs of road users and to an agency’s ability to deliver road services.
This project will lead to such a report.
— 32 —
C. AUSTROADS FIT
Strategic Plan 1995-98: Issues 1.1 and 4.4

(Outcome and Strategy 2)
Strategy for Improving Asset
Management Practice: Actions A10, C5
D. SCOPE
Project scope consists of:
(i) assembly of data on asset valuation prepared by road agencies and the methods in use
(ii) review methodologies compared with the 1994 ‘Capitalisation of Infrastructure’
document
(iii) generate financial summaries
(iv) workshop meaning of the financial data and how it can be used
(v) report national status and detailed benefits from valuation.
E. OBJECTIVE
The aim is to facilitate discussion on the relevance of capitalisation information, including annual
valuations and movements in value of road infrastructure, in the context of the needs of road users and
planning by road agencies to satisfy those needs.
The crux is to establish rational links between asset valuation, asset condition, asset use and investment
in maintenance, rehabilitation and construction. The Project would also examine the sensitivity of
valuations to any variations in methods between agencies, even where methods comply with the
Austroads report Capitalisation of Infrastructure and AAS 29.
F. CONSULTATION PROCESS
Consultation is intended among the member authorities (MAs) through members of AUSTROADS
AMRG and finance representatives.
Contact with external bodies interested in MAs financial reporting is proposed. Although not finalised,
this is likely to include user and accounting bodies, and members of academia.
G. METHODOLOGY
As defined in D. Scope above the following methodology is proposed:
(i) assembly of data on asset valuation prepared by road agencies and the methods they use
(ii) review methodologies compared with the 1994 ‘Capitalisation of Infrastructure’
document
(iii) generate financial summaries for possible inclusion in future editions of the Austroads
“Road Facts” publication.
(iv) workshop meaning of the financial data and how it can be used
(v) report national status and detailed benefits from valuation.
— 33 —
H. OUTPUTS
A report on the potential to use infrastructure valuation data in planning asset management strategies,
with a view to an increased focus on the needs of road users.
I. OUTCOMES AND BENEFITS
a. Common understanding of asset valuation as a tool.

b. An increasingly credible and uniform approach to asset management.
c. A balanced approach to the use of asset valuation data in decisions about levels of
investment and allocation of resources.
d. Improved opportunities for inter-agency benchmarking.
J. SUCCESS CRITERIA
Increased acceptance of Asset Valuation as a public relations and network management tool.
K. STAFFING AND RESOURCES

Project Manager: Michael Bushby DoT (Tas)
Working Group: To be assembled involving finance staff and asset managers.

Consultant to facilitate and prepare report.
— 34 —
APPENDIX 2
Possible Formats for

Financial Data Summaries for Australasian Roads
Valuation of
(September 1999)
— 35 —
AUSTRALASIAN ROAD DATA

FINANCIAL SUMMARY
Year Ended Value* Depreciatio Constructio Maintenanc Rehabilitatio

n n e n
30 June …….. ($’000) Investment Investment Investment
($’000) ($’000) ($’000) ($’000)
National Roads
Land under roads
Works in progress
Roads and bridges
Privately funded inf

assets
Total National Roads
State Roads
Land under roads
Works in progress
Roads and bridges

assets
Total State Roads
Local Roads
Land under roads
Works in progress
Roads and bridges

assets
Total Local Roads
GRAND TOTAL
— 36 —
AUSTRALASIAN ROAD DATA 199? - DISTRIBUTION OF ASSETS

Year Ended National Roads State Roads Local Roads
Total Grand
30 June …….. Land Works in Roads & Privately Land Works in Roads & Privately Land Works in Roads & Privately Land Totals
Under Progres Bridges Funded Under Progres Bridges Funded Under Progres Bridges Funded
Roads s Infrastr Roads s Infrastr Roads s Infrastr
Assets Assets Assets
Queensland Value $ m
Qty ’000 km
NSW Value $ m
Qty ’000 km
Victoria Value $ m
Qty ’000 km
Tasmania Value $ m
Qty ’000 km
South Value $ m
Australia Qty ’000 km
Western Value $ m
Australia Qty ’000 km
Northern Value $ m
Territory Qty ’000 km
Australian Value $ m
Cap Territory Qty ’000 km
AUSTRALIA Value $ m
TOTAL Qty ’000 km
NEW Value $ m
ZEALAND Qty ’000 km
— 37 —
APPENDIX 3
OECD Project IR7 on Performance Indicators
Performance Indicator PI 12 - Value of Assets

Summary of Australian Responses to OECD Questionnaire
Valuation of
(September 1999)
— 38 —
APPENDIX 3
OECD PROJECT IR7: PERFORMANCE INDICATOR "PI 12 - VALUE OF ASSETS" - FIELD TEST
Tasmania South Australia New South Western Australia Queensland Victoria Northern Territory
Wales
Measuring (a) Is there a method in use to calculate and YES YES YES YES YES YES YES
Procedure measure the value of assets of the road
infrastructure:
(1) Is the road infrastructure defined for YES YES YES YES YES YES YES
asset value calculation?
(2) Does the defined road infrastructure YES
include classified engineering structures: -
- road structures? YES YES YES YES YES (Earthworks & YES YES
Drainage)
- pavements? YES YES YES YES YES YES YES

- bridges and tunnels? YES YES YES YES YES YES YES
- other engineering structures? NO YES YES YES NO YES YES
- equipment or accessories? NO YES YES YES NO (included in YES YES
others)
(3) Does the road infrastructure include land YES NO YES YES YES YES NO
areas or other properties?
(4) Does the road infrastructure include other YES
elements:
- unfinished structures (construction project) YES YES YES YES YES YES NO
?
- project plans? NO NO NO NO NO NO
- other? NO NO NO NO NO NO NO
(5) Are the annual road investments YES YES YES YES YES YES NO
(reconstruction, new investments etc.)
defined for asset value calculation.
(6) Is there a standard procedure for NO YES YES YES YES YES N/A
calculation of road investments?
(7) Are the road investments calculated or NO YES YES YES YES YES YES
reported annually?
— 39 —
(8) Is there a standard procedure for asset

calculation comprising calculation
parameters:
- depreciation parameters? YES YES YES YES YES YES NO

- hold times? YES NO NO YES YES NO NO
- salvage values? NO NO NO NO NO NO NO
(9) Are the calculation parameters based on YES YES YES YES YES YES NO
studied or measured information?
(10) Is the asset value calculated or YES NO YES YES NO YES YES
addressed for the physical road sections?
(11) Is there a system (module, software YES NO YES YES YES YES NO
etc.) to calculate and measure the asset
value?
(12) Does the asset value calculation system YES YES YES Not the system itself, YES YES YES
record data history? but copies of data files
used for the calculation
every year are kept.
(13) Does the calculation system include:
- possibility to adjust calculation YES NO YES YES NO YES NO

parameters?
- analysis routines for investment option NO NO YES Not the asset valuation NO NO NO
selection? model. A pavement
management system
called dTIMS has
recently been acquired
that may be used for
investment option
selection and for
optimising fund
distribution.
- fund distribution optimisation techniques? NO NO YES see above NO YES NO
— 40 —
(14)Is the asset value calculated for different YES YES YES YES YES YES YES
type of structure?
(15) Is the asset value calculated for YES YES YES YES YES YES YES
different road classes?
(16) Is the annual calculation and asset YES YES YES YES YES YES YES
value reviewed and reported transparently
depending on circumstances?
(17) Is the asset value used for:

- strategic planning for road management? YES YES YES NO NO YES YES
- planning for funding of road investments? NO YES YES NO NO YES NO
- balance sheets of road authorities? YES YES YES YES YES YES YES
C) Specify asset value calculation
parameters, yearly depreciation values (%),
hold times (year) and salvage values(%):
- road structures Included in Yearly Depreciation Included in Calculation Formation/Drainage 60 years, 2% N/A ARV ONLY
pavements Expenditure pavements parameters=terrain 1.25%, 80yr depreciation
$US3.0M, ie. 4.5% factor, formation width,
written down section length, terrain
replacement cost, type, soil type, unit
straight line rates, clearing costs,
depreciation. overheads. Yearly
depreciation = 0.5%
Hold time = 200 years
(changed to 100 years
this year
— 41 —
- pavements Carriageway Yearly depreciation Written down Calculation 3.3%, 30yr

area, terrain, land $US64m ie. 2.5%, value = cost to parameter=pavement
use, traffic straight line replace less cost depth, formation width,
volumes, depreciation. to restore section length,
National/State pavement type, road
road; condition type, soil type, unit
based rates, overheads.
depreciation is Yearly depreciation =
employed varies according to road
type, pavement age and
roughness value.
Hold time = varies

according to road type,
pavement age and
roughness values, but
not more than 50 years.
- bridges or tunnels class of structure, Yearly depreciation Written down Calculation parameters Timber, 1.25%, 80yr 90 years 1%
base unit rates $US6.4m ie. 1.6%, value = cost to = average unit depreciation
for replacement; straight line replace less cost replacement cost by
parabolic depreciation to restore type. Yearly
depreciation depreciation = varies
Present Value = according to bridge
Replacement type. Hold time = varies
Cost x (1- according to bridge type
age/life)2 from 50 to 100 years.
- other engineering structures NIL Yearly depreciation N/A Yearly depreciation = Concrete 1%, 100,
$US0.13m ie. varies according to
7.7%, straight line culvert type and
depreciation. environment type. Hold
time = varies according
to culvert type and
environment type from
30 to 100 years.
— 42 —
- equipment or accessories NIL To be determined N/A Yearly depreciation = Surfacing 14% or

4%. Hold time = 25 10%, 7 or 10
years.
- land areas Average value/sq To be determined N/A Calculation parameters

m for = average land values in
commercial, the metropolitan area
residential and and nominal
urban areas. unimproved valuation
rates for rural area. No
depreciation.
- unfinished structures ACTUAL COST To be determined N/A Calculation parameters Not depreciated
= direct actual costs.
No depreciation
- project plans NIL To be determined N/A N/A
- other NIL To be determined N/A N/A Traffic control

systems 24years,
4% depreciation
- road infrastructure in total, if not classified NIL N/A N/A
d) Report asset value (1997) RV=Replacement Value

WDV=Written Down
Value
- road structures Included in Included in $US11.859B RV=$US2.59B Formation/Draining $US6248M $US1.64 Billion
pavements pavements WDV=$US1.26B $US4,644M
- pavements $US952M $US1225M RV=$US2.32B $US2325M
WDV=$US1.26B
- bridges or tunnels $US599M $US226M $US2.534B RV=$US0.76B $US917M $US1378M
WDV=$US0.56B
- other engineering structures NIL $US2M $US3.802M Included in bridges and
(Traffic Facilities) culverts above
- equipment or accessories NIL RV=$US0.057B Surfacing $US590M $US63
WDV=$US0.035B
- land areas $US186M $US9.630B RV=$US2.47B NIL
WDV=$US2.47B
— 43 —
- unfinished structures (construction $US16M $US114M $US372M RV=$US0.089B $US236M $US149M

projects) WDV=$US0.089B
- project plans NIL N/A
- other NIL N/A N/A
- road infrastructure in total, if not classified NIL RV=$US8.28B
WDV=$US6.70B
Unit Number or percent of yes/no answers Yes 20, No 10
Value of assets in $US million $US1753M Gross Value $US24.40B RV=$US7.92B $US8712M $US7838M $US1.64 Billion
$US3144M, Written WDV=$US6.42B
down value
$US1567M
Target Value Goal for standard of the method to calculate NIL Not developed The goal is to ensure The calculation N/A
or measure value of assets of road accurate calculation of method used for
infrastructure, if any? the replacement value Infrastructure
and the depreciated Assets must
value, and to better adhere to
determine the remaining Australian
life and value of Accounting
pavements by improving Standards
the current deterioration
model that is based only
on roughness and
pavement age.
Goal for value of assets ($USmillion) or road NIL Currently, there is no Value based on N/A
infrastructure, if any? corporate target for this deprival method
indicator at current
replacement cost
and any capital
works in progress
at current cost.
Goal for change of assets ($US million) or NIL Existing asset to Currently, there is no N/A
road infrastructure over a time period, if any? be preserved at corporate target for this
least to current indicator
value
— 44 —
Trends Value of assets ($US billion) of road

infrastructure (structures/land areas):
1998 $US26.77B
($US/$A - 0.655)
1997 $US1.75b $US1.57b $US24.40B RV=$US8.28B $US8.71b $US7.84b
($US/$A - 0.655) WDV=$US6.70B
1996 $US1.74b $US1.64b $US23.67B RV=$US7.92B Not available $US6.0b

($US/$A - 0.655) WDV=$US6.42B
1995 UNAVAILABLE UNAVAILABLE $US27.18B RV=$US6.74B Not available Not Available

($US/$A - 0.655) WDV=$US5.91B
(Approximately 1,550km
of road was taken from
Local Government at 30
June 1996 as result of a
road classification
review.)
1994 UNAVAILABLE UNAVAILABLE $US26.09B RV=$US6.37B Not available Not Available

($US/$A - 0.655) WDV=$US5.56B (not
depreciation for earth
works)
1993 UNAVAILABLE UNAVAILABLE $US26.48B Asset valuation was Not available Not Available
($US/$A - 0.655) applied from 1994
onwards.
— 45 —
Data Report data collection methods for annual Inventory and Annual Visual and Laser profile, 3 lasers, Most data sourced Data collected
Collection road investments condition capitalisation of automated data for collecting roughness from existing Asset with assistance
surveys, works work in progress. collection (roads) and rutting. However, Management of VicRoads
completion report Systematic and manual data only roughness is used Information Regions and
collection of collection for calculating the Systems consultants
pavement (bridges) remaining life of
treatment data. pavements. Other road
inventory data used in
the valuation (see
qu.17c) is updated
annually.
Costs Approximate administration authority level $US200000/year $US65,000/year Bridges not $US160,000 for $US120,000 Major $US100,000
(national/state/provincial/regional/local) available, collecting roughness additional cost in approx.
relevant to indicator. RoadCrack and rutting data (every 2 extracting data from
Survey years). $US400,000 to existing systems
$US170,000 maintain and update the and performing the
Road Condition road inventory system calculations
Survey (annual). $US350,000
(Roughness, to maintain and update
Rutting, and the bridge management
Texture) system (annual).
$US200,000
Management State the lengths of different classes of National & state State State State government State State
Authority roads under the above management roads
authority relevant to the indicator.
Road State the lengths of different classes of National Hwy Nat. Highways National National Highways Nat Highways Nat Highways
Classification roads under the above management 320kms, State 2753 km, Urban Highways 4,650km State 10,760kms, 19,440kms,
authority relevant to the indicator. Rds, 3,273km Arterials 890km, 3,010km, State Highways 6,273km Developmental Freeways
Rural Arterial roads 14,610km, Main roads 6,547km Roads 8,815km, 623kms, Tourist
8633km, Urban Toll roads 58km, Total 17,470km Main 7,757km, Roads 3,001kms,
Local 24km, and Unincorporated Secondary Main Roads
Rural Local Regional 510km, 6,135km, Arterials 27,242kms
10328km Unincorporated 132km, Sub-
Local 2,461km, arterials 67kms.
Total 20,649 km
— 46 —
How is the Describe the utilisation of the calculation or Annual report, For financial Used in the Asset valuation is used Government The valuation of
indicator measurement method of asset value and the budget statements. For following: RTA mainly for financial Financial infrastructure
used? reported value of assets. negotiations and strategic funding Annual Report reporting and to Statements assets is being
strategic planning assessment. and in Asset highlight trends in the used as a
in a general Management for value of the asset, as a budgeting tool for
sense. Resource result of the allocation of depreciation.
Allocation funds for preservation
works (calculated as a
percentage of
replacement value).
MRWA recognises the

potential use of asset
valuation in calculating
the return on
invbestment.
$US/$A exchange rate used of 0.655
— 47 —
APPENDIX 4
Valuation of Land under Roads and Within Road Reserves

Points of Agreement
Valuation of
(September 1999)
— 48 —
APPENDIX 4
Valuation of Land Under Roads and Within Road Reserves
Representatives of VicRoads, RTA NSW, DIER Tas, DMR Qld and Transport SA met on 15 April 1998 at
VicRoads to develop an Austroads consensus for submission to the PSASB Working Party on valuation of
land under roads and within road reserves.
A six-page report was produced. The main points are:
• Land under roads and within road reserves should be recognised as an infrastructure asset (all agreed
except NT).
• Land under roads and within road reserves should be separated into “Land in Road Reserves” and
“Surplus Land and Land held for Future Infrastructure”.
• Land under roads is essential to the provision of road services and there are no legal impediments to road
authorities gaining benefit from land under roads or denying or regulating access by others to the
benefits embodied in the land.
• Land in road reserves of all roads whether freeways, arterial or local roads including National and State
roads can be reliably valued, and a single common approach should be used.
• Surplus land and land held for future infrastructure can be valued reliably.
• The potential future economic benefits of land in a road reserve would be overstated if recorded at
current market price when the road agency is restricted in its use of the land (as in the case of the
majority of public roads where there is a common law right of access to the road from adjoining land).
• The current market price of adjacent land is not normally the best indicator of the current market price
for land in a road reserve, partly because of an interdependence of values between land within a road
reserve and land adjacent to a road reserve.
• Land in road reserves should be valued using an average of rateable values for a wide area such as a
local government area or a postcode area.
• Current market price could be applicable to land for future roadworks.
• All land in road reserves, surplus land and land for future roadworks should, regardless of the method of
acquisition, be recognised and valued, including land contributed without cost by for example a
developer.
• Recognition of land under roads is considered likely to benefit users of financial reports.
• Recognition of land under roads may influence road pricing but would have no real impact on day to day
asset management decisions.
• Land under roads will represent a significant item in balance sheets and profit and loss statements.
• The value of land under roads is unlikely to be useful in assessing the efficiency of an agency in
providing road services.
• Agencies that control land within road reserves, surplus land and land held for future infrastructure are
accountable for those assets as resources.
• The benefits of valuing land will exceed the costs involved provided the valuation methodology reflects
the purpose of the valuation.
• The value of land under roads and within road reserves would have no real impact on day to day asset
management decisions.
— 49 —
APPENDIX 5
Summaries of MAs’ road infrastructure asset valuation data

Valuation of
(September 1999)
— 50 —
REPORTED VALUES OF ROAD INFRASTRUCTURE ASSETS
Tasmania (Department of Infrastructure, Energy anmd Resources) (A$m)
ROADS BRIDGES LAND WORK PRIVATELY TRAFFIC TOTAL

SIGNALS
Replacement Accumulated Written Down Replacement Accumulated Written Down UNDER ROADS IN PROGRESS FUNDED Replacement Accumulated Written Down Replacement Accumulated Written Down
Cost Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value Cost Depreciation Value
1997 2,193 739 1,454 1,103 189 914 285 24 21 11 10 3,626 939 2,687
1996 (A. R.) 2,181 732 1,449 1,089 177 911 284 9 3,563 909 2,653
1996 3,826 779 3,047 1,089 178 911 284 9 5,208 957 4,251
1995 (adj) 3,837 793 3,044 1,058 164 911 276 21 5,192 957 4,235
1995 3,837 793 3,044 936 42 894 276 21 5,070 835 4,235
1994 3,831 753 3,079 874 874 265 31 5,001 753 4,248
1993 3,195 750 2,446 753 25 728 249 16 4,213 775 3,439
1992 3,562 985 2,577 738 274 6 985 3,595
Victoria (VicRoads) (A$m)
EARTHWORKS PAVEMENTS BRIDGES LAND WORK PRIVATELY TRAFFIC SOUND TOTAL

(pre '98, CONTROL BARRIERS
"Roads") SYSTEM
Replacement Accumulated Written Down Replacement Accumulated Written Down Replacement Accumulated Written Down UNDER ROADS IN PROGRESS FUNDED Replacement Accumulated Written Down Replacement Accumulated Written Down Replacement Accumulated Written Down
Cost Depreciation Value Cost Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value Cost Depreciation Value Cost Depreciation Value
1998 4,250 0 4,250 9,279 2,542 6,737 2,859 762 2,097 (see 191 224 138 86 92 5 88 #VALUE! 3,446 13,449
1997 included in 12,942 3,403 9,539 2,833 728 2,104 Clause 229 224 128 96 #VALUE! 4,259 11,970
roads
1996 included in 9,910 2,950 6,960 2,202 665 1,537 6.4) 515 217 66 151 #VALUE! 3,681 9,164
roads
1995 4,743 0 4,743 7,714 2,563 5,151 2,117 705 1,412 577 157 45 112 15,308 3,313 11,996
(unaudited)
Queensland (Department of Main Roads) (A$m)
ROADS BRIDGES LAND WORK PRIVATELY TOTAL
Replacement Accumulated Written Down Replacement Accumulated Written Down UNDER ROADS IN PROGRESS FUNDED Replacement Accumulated Written Down
Cost Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value
1997 19,869 8,323 11,545 1,812 415 1,396 359 22,040 8,738 13,301
Western Australia (Main Roads Department) (A$m)
EARTHWORKS PAVEMENT, BRIDGES LAND WORK PRIVATELY ROAD TOTAL

DRAINAGE & FURNITURE
SEAL
Replacement Accumulated Written Down Replacement Accumulated Written Down Replacement Accumulated Written Down UNDER ROADS IN PROGRESS FUNDED Replacement Accumulated Written Down Replacement Accumulated Written Down
Cost Depreciation Value Cost Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value Cost Depreciation Value
1998 3,786 927 2,859 3,415 1,586 1,829 1,123 298 826 3,898 244 86 30 56 12,552 2,841 9,711
1997 3,982 476 3,507 3,569 1,625 1,945 1,165 299 865 3,798 137 87 33 54 12,738 2,433 10,306
1996 3,893 450 3,443 3,467 1,543 1,924 1,142 288 854 3,512 79 78 26 52 12,171 2,307 9,864
1995 3,346 3,346 2,980 1,046 1,933 1,050 218 831 2,902 19 68 20 48 10,365 1,284 9,080
1994 3,252 3,252 2,878 1,018 1,861 1,029 208 821 2,523 41 65 20 45 9,788 1,246 8,543
— 51 —
Transport South Australia (A$m)
ROADS BRIDGES LAND WORK PRIVATELY TRAFFIC STREET TOTAL

SIGNALS LIGHTING
Replacment Accumulated Written Down Replacment Accumulated Written Down UNDER ROADS IN PROGRESS FUNDED Replacment Accumulated Written Down Replacment Accumulated Written Down Replacment Accumulated Written Down
Cost Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value Cost Depreciation Value Cost Depreciation Value
1997 3,878 2,039 1,839 623 278 345 0.253 174 44 36 8 57 36 21 4,776 2,389 2,387
1996 3,749 1,944 1,816 607 264 344 305 40 33 7 61 37 24 4,762 2,278 2,484
1995 3,726 2,076 1,898 591 248 343 54 27 27 61 31 30 4,432 2,382 2,050
1994 4,337 2,415 1,922 4,337 2,415 1,922
1993 4,193 2,253 1,940 4,193 2,253 1,940
1992 4,135 2,176 1,958 4,135 2,176 1,959
1991 3,906 2,150 1,756 3,906 2,150 1,756
1990 3,786 2,022 1,764 3,786 2,022 1,764
New South Wales (Roads and Traffic Authority) (A$m)
ROADS BRIDGES LAND WORK PRIVATELY TRAFFIC TOTAL

SIGNAL
CONTROL
SYSTEM
Cost Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value Cost Depreciation Value
1997 22,175 4,070 18,106 3,924 54 3,870 14,703 568 498 8 2 6 41,876 4,126 37,750
1996 21,071 4,036 17,035 3,838 52 3,786 14,826 493 484 7 1 6 40,719 4,089 36,630
1995 27,886 5,792 22,094 4,120 61 4,059 14,803 522 469 10 10 47,810 5,853 41,957
1994 21,964 570 21,395 3,933 3,933 13,797 692 455 10 10 40,851 570 40,281
1993 21,696 848 20,849 3,906 3,906 14,743 925 262 8 8 41,540 848 40,692
1992 21,417 943 20,474 3,775 3,775 16,679 766 269 7 7 42,913 943 41,970
1991 18,456 351 18,105 3,729 3,729 20,922 302 6 6 43,415 351 43,064
1990 17,778 17,778 3,714 3,714 20,922 6 6 42,420 0 42,420
Transit NZ (NZ$m)
ROADS BRIDGES LAND WORK PRIVATELY OTHER TOTAL
Cost (incl land Depreciation Value Cost Depreciation Value INFRASTRUCTURE Cost Depreciation Value Cost Depreciation Value
under roads)
1998 9,258 1,354 7,904 2,395 933 1,462 1,671 500 120 380 12,153 2,407 9,746
1997 9,049 1,336 7,713 2,356 903 1,453 1,568 435 105 330 11,840 2,344 9,496
1996 8,382 1,032 7,350 2,302 862 1,440 1,411 372 74 298 11,056 1,968 9,088
1995 8,042 991 7,051 2,305 832 1,473 1,373 354 72 282 10,701 1,895 8,806
1994 7,565 951 6,614 2,270 805 1,465 355 80 275 10,190 1,836 8,354
1993 6,915 1,219 5,696 2,282 817 1,465 341 72 269 9,538 2,108 7,430
1992 6,673 1,057 5,616 2,272 791 1,481 341 70 271 9,286 1,918 7,368
— 52 —
APPENDIX 6
Checklist for compliance with Austroads 1994 policy

Valuation of
(September 1999)
— 53 —
APPENDIX 6
Checklist for Compliance with Austroads 1994 Policy
(Reference: 1994 Austroads report Capitalisation of Infrastructure)
General
1. Are road infrastructure assets recognised under four categories:

Land under roads and within road reserves,
Work in progress,
Roads and Bridges, and
Privately funded infrastructure assets?
Valuation
Land Under Roads and Within Road Reserves
2. Is the land valued on basis of area of road reserve at average VG’s average rateable
value of land in the LGA, categorised as “urban” or “non-urban”?
3. Is land included only where road is in use, or construction has commenced?
Work in Progress
4. Are all actual costs shown, including overheads and pre-construction activities, but
excluding land?
Roads and Bridges
5. Are current costs shown for all road and bridge assets?
6. Is the rationale explained for arriving at current cost (eg, historical indexed,
replacement or reproduction) for the various components of road and bridge
assets?
7. Is the depreciation rationale described for the various components which are
depreciated differently, eg, road formation, drainage, pavement, bridges, other
structures, signals, signs, street lighting, etc?
8. Where indexing is used, is the source of the index shown?
9. Are the costs of public utilities (eg, gas, water, electricity, communications,
irrigation, sewer, etc) excluded?
— 54 —
APPENDIX 7
Current MA practices in valuing

land under roads and within road reserves,
work in progress,
roads,
earthworks,
bridges,
traffic signals,
and street lighting
Definitions used by MAs for bridges
Service lives of structures assumed by MR WA
Valuation of
(September 1999)
— 55 —
APPENDIX 7
CONTENTS
Table 7.1 Valuations of land under roads and within road reserves category
at 30 June 1997
Table 7.2 Valuations of work in progress category at 30 June 1997
Table 7.3 Valuations of roads sub-category at 30 June 1997
Table 7.4 MA approaches to the valuation of earthworks
Table 7.5 Valuations of bridges sub-category at 30 June 1997
Table 7.6 Definitions of bridges adopted by Member Agencies

for valuation purposes
Table 7.7 Valuations at 30 June 1997 of traffic signals/facilities

and MR WA road furniture sub categories
Table 7.8 Valuations at 30 June 1997 of Transport SA street lighting

and TNZ culverts, subways and other structures sub-categories
Table 7.9 Service lives of structures assumed by MR WA

for depreciation purposes
— 56 —
Table 7.1 -
Valuations of Land Under Roads and Within Road Reserves category at 30 June 1997
Value Value at
Reported 30.6.97 Reference Comment
at 30.6.97 (A$m)
NSW Yes 14,703 Note 12(b), p77 Accords with Austroads 1994
in Annual policy (see p48 in 1996 Annual
Report to 30 Report, not described in 1997
June 1997 Annual Report).
Qld No - DMR Qld “expenses” land cost
when construction begins.
Tas Yes 285 Note 11, p42 in Accords with Austroads 1994
Annual Report policy. Urban is subdivided to
to 30 June 1997 “residential” and “commercial”.
SA No Note 3(b), p67 Intended to be reported by 30
in Annual June 2001.
Report to 30
June 1997
Vic No - VicRoads did not use this
category at 30 June 1997.
VicRoads adopted the “Raw
Land Value” concept as a basis
for valuation of land under roads
and within road reserves at 30
June 1998 (see Clause 3.4).
WA Yes 3,798 Note 1 (d)(i), Accords with Austroads 1994
p60, & Note 4, policy in metropolitan area.
pp64 & 65 in Simplified approach in rural
Annual Report area.
to 30 June 1997
TNZ Not shown 1,439 Table 6.6 in Aust dollar amount based on
in TNZ draft State Hwy conversion rate of NZ$1.09 =
Annual (NZ$1,568) Asset A$1.00 (ref SMH, 28 June
Report Management 1997).
Plan (March
1998)
— 57 —
Table 7.2 - Valuations of Work in Progress category at 30 June 1997
Value Value at
Reported 30.6.97 Reference Comment
at 30.6.97 (A$m)
NSW Yes 568 Note 12(b), p77 Accords with Austroads 1994
in Annual policy.
Report to 30
June 1997
Qld Yes 359 Note 3(j), p82 in Appears to accord with
Annual Report Austroads policy.
to 30 June 1997
Tas Yes 25 Note 11, p42 in Accords with Austroads 1994
Annual Report policy.
to 30 June 1997
SA Yes 174 Note 14, p74 in
Annual Report
to 30 June 1997
Vic Yes 230 Note 8.11, p68 Accords with Austroads 1994
in Annual policy.
Report to 30
June 1997
WA Yes 137 Note 1(d) (v), Appears to comply with
p60 in Annual Austroads 1994 policy (At 30
Report to 30 June 1997, land under roads has
June 1997 been included only where the
land was acquired immediately
before site works commenced,
and the works continue beyond
one year).
TNZ No - TNZ does not use this category.
— 58 —
Table 7.3 - Valuations of Roads sub-category at 30 June 1997
Value at 30.6.97 (A$m) Reference Comment

NSW Replacement Cost: 22,175 Note 12(b), p77 Includes pavement, earthworks,
Accum Depreciation: 4,070 in Annual Report drainage, etc and all traffic
Written Down Value: 18,106 to 30 June 1997 signals, but excludes “Traffic
Signal Control Network” (cf
Table 7.7). Complies with
Austroads 1994 policy.
Movement since 1996 largely
influenced by Road Cost Index.
Qld Replacement Cost: 19,869 Note 3(j), p80 & Initial valuation. Includes roads
Accum Depreciation: 8,323 Note 18, p88 in (surface, pavement and
Written Down Value: 11,545 Annual Report to formation), bridges and
30 June 1997 construction works in progress.
Tas Replacement Cost: 2,193 Note 11, p42 in Complies with Austroads 1994
Accum Depreciation: 739 Annual Report to policy. Includes all components
Written Down Value: 30 June 1997 except bridges.
1,454
SA Replacement Cost: 3,981 Note 14, p74 in Includes pavement, seal,

Accum Depreciation: 2,081 Annual Report to drainage, street lighting and
Written Down Value: 30 June 1997 busway. Earthworks are not
1,900
included, and are intended to be
included at 30 June 1998.
Vic1 Replacement Cost: 12,942 Note 2.4(b), Reported as “road pavement”
Accum Depreciation: 3,403 pp60 & 61, & which includes earthworks
Written Down Value: 9,539 Note 8.11, p68 (partial in 1997 (no earthworks
in Annual Report included in 1996 valuation1)),
to 30 June 1997 drainage, pavement, surfacing,
roadside furniture, intersections,
design and surveillance costs.
Depreciation is on the basis of a
straight line with an assumed
average life of 60 years.
WA Replacement Cost: 7,552 Note 1(d), pp63 Includes earthworks, drainage,
Accum Depreciation: 2,100 to 65 in Annual pavement and seal. Excludes
Written Down Value: Report to 30 road furniture.
5,451
June 1997
TNZ Replacement Cost: 6,740 Table 6.6 in Includes earthworks, drainage &
Accum Depreciation: 1,226 TNZ draft Asset pavement. Dollar amounts are
Written Down Value: Management based on NZ$7,346.2m
5,514
Plan (March replacement cost, and a
1998) conversion rate of NZ$1.09 =
A$1.00 (ref SMH, 28 June 1997).
Note 1: VicRoads reported the value of earthworks at 30 June 1995 as $4,743m (unaudited).
The VicRoads 1997 valuation includes $2,855m for earthworks (representing earthworks
above formation level only) which was not included in the 1996 valuation. VicRoads
reviewed its approach to the valuation of earthworks during 1997/98, as described in
Table 7.4.
— 59 —
Table 7.4 - MA Approaches to the valuation of earthworks
State/ Valuation Methods for Earthworks Depreciation

Territory/ In Use/ of Earthworks
Nation Description
Proposed
NSW In Use RTA NSW includes the value of earthworks with Earthworks are
pavement, signs, drainage (other than bridges), etc when considered to be
estimating the gross replacement cost of the road sub- a long term asset
category of its road infrastructure assets. Estimates of and are not
comprehensive replacement costs are based on current depreciated.
unit construction costs per square metre of pavement for a
range of terrain types and regional circumstances. Four
terrain types are used - flat, undulating, hilly and
mountainous as defined by Austroads (Ref 1).
Victoria Included in Road sections have been grouped into classes based on Earthworks are
“road function and cross-section. For each road section the considered to
pavement” proportion of adjacent terrain is classed as flat, have an
at 30 June undulating, hilly or mountainous is calculated using a GIS indefinite life,
1997. analysis. Using an expert working group, comprising and are not
Revalued regional and project staff, quantities are estimated for each depreciated.
and functional and terrain class. The quantities are broadly

reported checked using available road construction contract data
separately from the past 5 years (although this tends to be limited).
at 30 June Likewise, unit costs ($/m3) are determined for each
1998. functional and terrain class. Excavation in rock is seen as
a minor effect and has been applied as an overhead on the
total rates.
Tasmania In Use DIER Tas uses a similar approach to RTA NSW with PMS is used to
earthworks included in the overall estimate of road calculate
replacement costs in accordance with the algorithm in accumulated
Appendix 10. Two terrain types are used (flat/undulating) depreciation, and
and hilly/mountainous). so earthworks are
effectively not
depreciated.
Western In Use MR WA uses volumes of general earth, silt and rock per Earthworks are
Australia square metre of road formation are estimated for terrain depreciated on a
type (flat, undulating, hilly and mountainous), each straight line basis
Region and road type. Allowances are included for over 100 years
clearing. (formerly 200).
South In Use Transport SA is nearing completion of a review of its At this stage no
Australia approach to the valuation of earthworks. The proposal is depreciation of
to sort the road network into lengths with similar the earthworks is
earthworks characteristics, based on only one variable proposed.
(terrain type - flat, hilly, undulating and mountainous),
and apply generic unit costs for pavement area to each
length. Proposed to report National Highways and State
Roads separately.
Queensland In Use DMR Qld values earthworks on the basis of unit rates for Earthworks are
terrain type (3 classes - flat, undulating and depreciated on a
hilly/mountainous), Model Road State (using 9 of the 19 straight line basis
Austroads Model Road States (Ref 1)) and road over 80 years.
configuration, with unit rates for lane-kilometres.
New Zealand In Use TNZ values earthworks on the basis of unit costs per Earthworks are
square metre of pavement, varied to reflect location, not depreciated.
width, terrain and foundation conditions.
— 60 —
Table 7.5 - Valuations of Bridges sub-category at 30 June 1997

NSW Replacement Cost: 3,924 Note 12(b), p77 in Includes all bridges and culverts 6m
Accum Depreciation: 54 Annual Report to or more long on the road centreline.
Written Down Value: 3,870 30 June 1997 Bridges depreciated for the first time
at 30 June 1996. Depreciation
method understood to be partly
based on condition, and partly based
on age/assumed remaining life.
Qld Replacement Cost: 1,812 Notes 3 & 18, p81 Appears to include only bridges, not
Accum Depreciation: 415 & 88 in Annual culverts or other structures. Straight
Written Down Value: 1,396 Report to 30 June line depreciation with assumed
1997 average life of 100 years.
Tas Replacement Cost: 1,103 Note 11, p42 in Includes approximately 1,230
Accum Depreciation: 189 Annual Report to structures (bridges, culverts,
Written Down Value: 914 30 June 1997 slipways, jetties, boat ramps,
retaining walls, sign gantries and
concrete safety barriers).
Replacement cost does not include

any allowance for improved
geometry or hydraulic capacity.
Depreciation based on age squared
(ie, parabolic) as shown in Table 4.
SA Replacement Cost: 623 Note 14, p74 in Includes bridges and culverts with
Accum Depreciation: 278 Annual Report to spans greater than 1.8m or waterway
Written Down Value: 345 30 June 1997 area greater than 3 sq m. Straight
line depreciation, with remaining life
and age assessed periodically for
each structure.
Vic Replacement Cost: 2,833 Note 8.11, p68 in Includes all bridges and culverts
Accum Depreciation: 728 Annual Report to with span length equal to or more
Written Down Value: 30 June 1997 than 1.8m or a waterway area >
2,104 3 sq m. Depreciated on a straight
line basis, assuming a 90 year life (cf
80 years in 1994/95. Westgate
Bridge valued separately.
WA Replacement Cost: 1,165 Note 1(d), pp63 to Includes box culverts and arches
Accum Depreciation: 299 65 in Annual with spans greater than 6m, and
Written Down Value: 865 Report to 30 June other structures with clear openings
1997 greater than 3m. Straight line
depreciation used.
TNZ Replacement Cost: 2,161 Note 1, p39 in Includes bridges, but not culverts,
Accum Depreciation: 828 Annual Report to subways or other structures. Dollar
Written Down Value: 30 June 1997, & amounts are based on conversion
1,332 Table 6.6 in TNZ rate of NZ$1.09 = A$1.00 (ref SMH,
draft Asset 28 June 1997). Straight line
Management Plan depreciation used.
(March 1998)
— 61 —
Table 7.6 - Definitions of bridges adopted by Member Agencies for valuation purposes
Agency Definition of Bridge
Austroads A clear span structure greater than 15 m in length (not a culvert or series of
(1994 culvert runs).
Interim
Efficiency This Austroads definition for bridges was adopted on the basis that structures
Measures shorter than 15m are unlikely to have a significant impact on the performance
(AP-110-94) of a road at network level. The Austroads definition for bridges may not be
appropriate for the purposes of infrastructure valuation.
RTA NSW Structure to carry a road over an obstacle by spanning it, with a clear length
of 6m or more, measured between faces of abutments and in the direction of
the road centreline.
VicRoads Structure with a span or diameter 1.8 m or greater, or a waterway area 3 sq m

or greater
DIER Tas All structures where detail structural design input has been involved, eg
bridges, subways, culverts, slipways, jetties, boat ramps, retaining walls, sign
gantries and concrete safety barriers.
Main Roads All structures which carry a road over a road, railway, stream or other
WA obstruction, and has a clear opening in any span of more than 3 m (more than
6 m for an arch or box culvert). Footbridges and pedestrian underpasses are
included. Sign gantries are not included.
Transport SA Structure with a span or diameter 1.8 m or greater.
DMR Qld A bridge is a structure built to cross an obstacle in the road network. For the
purpose of road infrastructure asset valuation, bridges consist of:
• structural elements such as abutments, piers, beams, decks, etc, and
• ancillary elements such as footways, railing, lights, etc.
Cellular structures or sets of pipes built as part of a road formation to allow
for drainage in case of flooding or general wet conditions are culverts, not
bridges. For the purpose of road infrastructure asset valuation, culverts are
part of the road formation and are valued as part of the Road classification.
TNZ Structure with a waterway area 3.4 sq m or greater.
— 62 —
Table 7.7 - Valuations at 30 June 1997 of traffic signals/facilities

and MR WA road furniture sub-categories

NSW Replacement Cost: 8 Note 12(b), p77 in Labelled as “Traffic Signal Control
Accumulated Deprec: 2 Annual Report to Network”. Covers only assets
Written Down Value: 6 30 June 1997 associated with coordination of
traffic signals.
First depreciated in 1995/96. Note
that the value of RTA’s
approximately 3,000 traffic control
signal installations is of the order of
$300m, and is included in “Roads”.
Tas Replacement Cost: 21 Note 11, p42 in Covers 247 sets of traffic signals.
Accum Depreciation: 11 Annual Report to All components are depreciated on a
Written Down Value: 10 30 June 1997 straight line basis with assumed
average lives of 33 years, except for
associated electronics which have
assumed average service lives of 20
years.
SA Replacement Cost: 44 Note 14, p74 in Covers approximately 400 sets of
Accum Depreciation: 36 Annual Report to intersection type and 228 sets of
Written Down Value: 8 30 June 1997 pedestrian traffic signals, and 41
school crossings. Straight line
depreciation, based on average life
of 12 years.
Vic Replacement Cost: 224 Note 8.10, p68 in Covers approximately 2,500 sets of
Accum Depreciation: 128 Annual Report to traffic signals and traffic control
Written Down Value: 96 30 June 1997 systems. Straight line depreciation,
based on average life of 24 years.
WA Replacement Cost: 87 Note 4, pp63 to 65 Labelled as “Road Furniture”.
Accum Depreciation: 33 in Annual Report Covers 633 (603 at 30 June 1994)
Written Down Value: 54 to 30 June 1997 sets of traffic signals. Also covers
164 (138 at 30 June 1994) road
lighting installations, emergency
telephones and other electrical assets
(SCATS, CCTV and variable
message signs), a reversible lane
system, and the Narrows Interchange
reticulation system. All components
are depreciated on a straight line
basis with assumed average lives of
25 years.
TNZ Replacement Cost: 123 Table 6.6 in TNZ Labelled as “Traffic facilities”.
Accum Depreciation: 58 draft Asset Covers traffic signals, all signs, sign
Written Down Value: 65 Management Plan supports, lighting, pavement
Australian dollar (March 1998) markings and markers, medians,
amounts are based on median barriers, guide posts,
NZ$134.26m chevrons, sight rails, safety barrier
replacement cost and a systems, footpaths, berms, traffic
conversion rate of islands and other road furniture.
NZ$1.09 = A$1.00 (ref
SMH, 28 June 1997)
— 63 —
Table 7.8 - Valuations at 30 June 1997 of

T SA Street Lighting and TNZ Culverts, Subways and Other Structures sub-categories

SA Replacement Cost: 57 Note 14, p74 in Covers 11,936 (10,020 at 30 June
Depreciation: 36 Annual Report to 1995) poles. Straight line
Written Down Value: 21 30 June 1997 depreciation, based on average
life of 25 years.
WA A total of 164 (138 at 30 June
See Table 7.7 1994) installations with 3,982
(3,737 at 30 June 1994) poles is
included in “Road Furniture”, as
shown in Table 7.7.
TNZ Replacement Cost: 400 Table 6.6 in Covers culverts, subways and
Depreciation: 96 TNZ draft Asset Other Structures.
Written Down Value: 304 Management
Plan (March
Australian dollar amounts are based
1998)
on NZ$435.92m replacement cost
and a conversion rate of NZ$1.09 =
A$1.00 (ref SMH, 28 June 1997)
— 64 —
Table 7.9 - Service lives of structures assumed by MR WA for depreciation purposes
Assumed
Generic
Specific Structure Type Environment Average
Structure Type
Service Life
Timber bridges Timber bridges All 60 years

Refurbished timber bridges (from All 50 years
the date of concrete overlay
construction)
Timber stingers and reinforced All 100 years
concrete slabs
Concrete and Concrete and steel road bridges All 100 years
steel bridges
Concrete steel and footbridges All 100 years
Concrete pedestrian underpasses all 100 years
Corrugated steel pedestrian all 100 years

underpasses
Concrete Pipe Reinforced concrete pipe culverts non-aggressive 75 years
Culverts Reinforced concrete pipe culverts aggressive 55 years
Reinforced Small box culverts (spans <= 1.2m) non-aggressive 60 years
concrete box manufactured prior to 1985
culverts Small box culverts (spans <= 1.2m) aggressive 35 years
manufactured prior to 1985
Small box culverts (spans <= 1.2m) non-aggressive 75 years
manufactured after 1985
Small box culverts (spans <= 1.2m) aggressive 55 years
Large box culverts (spans > non-aggressive 60 years
1.2m)manufactured prior to 1985
Large box culverts (spans > aggressive 45 years
1.2m)manufactured prior to 1985
Large box culverts (spans > 1.2m) non-aggressive 75 years
Large box culverts (spans > 1.2m) aggressive 70 years
Corrugated Steel non-aggressive 65 years
metal pipe Steel aggressive 30 years
culverts Aluminium all 100 years
— 65 —
APPENDIX 8
Main Roads WA Program Performance Indicators

using Road Infrastructure Asset Valuation
Valuation of
(September 1999)
— 66 —
APPENDIX 8
Main Roads WA Program Performance Indicators

using Road Infrastructure Asset Valuation
Indicator 1.3A - Asset Value and Vehicle Travel
1
VKT per $ of Road Network
0.8
Asset Value
0.6
0.4
0.2
0
93/94 94/95 95/96 96/97
Financial Year (National & State roads only - 1997 dollars)
Indicator 1.3B - Asset Value and Freight
1.5
Tonne-km per $ of Road
Network Asset Value
1.2
0.9
0.6
0.3
0
93/94 94/95 95/96 96/97
Financial Year (National and State roads only - 1997 dollars)
The overall effectiveness of the road network in Western Australia can be assessed by
comparing the amount of travel and freight on National Highways and State Roads with the
value of those roads.
Such a comparison can provide an indication of the return on the public’s investment in the
road network.
Indicator 1.3A shows that there is little variation in the value of the asset and total vehicle
travel on National and State Roads.
Indicator 1.3B shows a steady increase in the amount of freight hauled on the network
compared with the growth in asset value over the same period. This highlights the relatively
rapid growth in freight on Western Australian roads.
— 67 —
APPENDIX 9
Extracts from RTA NSW Annual Reports

to 30 June 1995, 30 June 1996 and 30 June 1998
on depreciation
Valuation of
(September 1999)
— 68 —
ASSESSING THE USEFUL LIFE OF AN ASSET

FOR DEPRECIATION PURPOSES
1. Extract from the RTA NSW 1995 Annual Report (p45)
DEPRECIATION POLICY
Infrastructure
The existing Accounting Standard AAS4 - “Depreciation of Non Current Assets”

outlines factors which should be considered in assessing the useful life of an asset for
depreciation purposes. These factors include wear and tear from physical use and
technological and commercial obsolescence. In the case of road infrastructure the
dominant factor in the loss of service potential is wear and tear from physical use.
AAS4 is not considered appropriate for the raising of depreciation expense against the
Authority’s infrastructure assets which comprise a network of roads and bridges
which vary across a range of pavement types, terrain and usage factors. It is not
possible to determine the “useful life” of these long lived assets with any degree of
certainty and it is considered that depreciation expenses based on this concept would
not provide useful information for the management of the assets nor for external users
of the Authority’s financial statements.
To address this situation, the Authority has developed an industry methodology and
approach which is considered to provide an appropriate disclosure of the loss of
service potential of the infrastructure assets. The basis of this methodology has been
subject to ongoing review and has involved the determination and disclosure of a
Provision for Asset Restoration and, prior to 1993/94, the disclosure (by way of a note
only) of a 1% Provision for Asset Renewal. This latter provision was intended to
provide for the technological obsolescence of the road network. While it is
acknowledged that technological obsolescence does occur to some extent in road
infrastructure the evidence available suggests that it is not material, especially when
compared to the impact of physical wear and tear. It has therefore been determined
that, at this time, physical wear and tear as measured by the Provision for Asset
Restoration, will form the basis for the assessment of depreciation of Authority
infrastructure.
Provision for Asset Restoration
This provision recognises the expense each year of normal wear, tear and
deterioration which has occurred since the base year in 1989/90 when the Authority’s
infrastructure was first capitalised and the written down value brought to account.
The annual movement in this provision is calculated from the Authority’s Pavement
Management System (PMS) which is used to collate, consolidate and calculate road
network data which facilitates the measurement of both the movement in condition
and replacement cost of the road network. The total amount of this provision
represents the movement in condition since the base year.
— 69 —
2. Extract from the RTA NSW 1996 Annual Report (p48)
ASSET MANAGEMENT POLICY
Authority Infrastructure

outlines factors which should be considered in assessing the useful life of an asset for
While it is acknowledged that technological obsolescence does occur to some extent
in road infrastructure the evidence available suggests that it is not material, especially
when compared to the impact of physical wear and tear.
It is not possible to determine the “useful life” of the majority of these long lived
assets with any degree of certainty and it is considered that depreciation expenses
based on this concept would not provide useful information for the management of
the assets nor for external users of the Authority’s financial statements. To address
this situation, the RTA has developed an industry methodology and approach which is
considered to provide an appropriate disclosure of the loss of service potential of
roads.
Formerly referred to as the provision for asset restoration (refer Note 2(ii) c), the
provision for depreciation recognises the total accumulated depreciation of the road
asset due to wear, tear and deterioration as at 30/6/96. The calculation is based on the
total cost to restore the road network from its current condition to near new. The
annual movement in this provision is calculated from the RTA’s Pavement
Management System (PMS) which is used to collate, consolidate and calculate the
road network data which facilitates the measurement of both the movement in
condition and the replacement cost of the road network.
In the case of bridges, the current methodology is based on a formula of age and
construction type augmented with information gained from an ongoing bridge
inspection program.
The RTA is implementing a Bridge Information System (BIS) which includes the
collection and recording of relevant condition data. This information will form the
basis of a review of depreciation rates for implementation in 1996/97. A provision for
depreciation of bridges has been raised in the accounts for the first time this year for
consistency with roads.
— 70 —
3. Extract from the RTA NSW 1998 Annual Report (pp 54 & 55)
ASSET MANAGEMENT POLICY
(iii) Authority Infrastructure
The RTA, being responsible for the development and management of the State’s road
network, has recognised the control aspect of some infrastructure assets and the
ownership of other infrastructure assets when formulating policy in respect to the
valuation and reporting of infrastructure.
The valuation policies provide for roads and bridges to be valued using the written
down replacement cost method. Each road is assigned a value which equates to the
cost of replacing that road to its current condition, without improving the road. In the
case of bridges, such replacement cost is based on the structural type. This valuation
method has been adopted because it reflects the current minimum economic valuation
of the infrastructure.
The RTA’s traffic control signal network is valued using written down replacement
cost.
The determination of road, bridge and traffic control signal infrastructure valuations is
carried out annually by suitably qualified engineers of the RTA.
In respect of land under roads and within road reserves, valuations are assessed
according to the average rateable value per hectare of urban and rural areas within
each local Government Area. Such valuations are undertaken annually by RTA’s
registered valuers.
Major works in progress are valued at construction cost and exclude the cost of land,
which is currently disclosed as land under roads.

outlines factors to be considered in assessing the useful life of an asset for
While it is acknowledged that technological obsolescence does occur to some extent
in road infrastructure the evidence available suggests that it is not material, especially
when compared to the impact of physical wear and tear.
It is not possible to determine the “useful life” of the majority of these long lived
assets with any degree of certainty and it is considered that depreciation expenses
based on this concept would not provide useful information for the management of
the assets nor for external users of the Authority’s financial statements. To address
this situation, the RTA has developed an industry methodology and approach which is
— 71 —
considered to provide an appropriate disclosure of the loss of service potential of

roads.
The provision for depreciation recognises the total accumulated depreciation of the
road asset due to wear, tear and deterioration as at 30/6/98. The calculation is based
on the total cost to restore the road network from its current condition to near new.
The annual movement in this provision is calculated from the RTA’s Pavement
Management System (PMS) which is used to collate, consolidate and calculate the
road network data which facilitates the measurement of both the movement in
condition and the replacement cost of the road network.
In the case of bridges, the current methodology is based on a formula of age and
construction type augmented with information gained from an ongoing bridge
inspection program.
The RTA is implementing a Bridge Information System (BIS) which includes the
collection and recording of relevant condition data. This information will form the
basis of a condition based depreciation methodology which is consistent with the
approach taken in respect of roads.
(iv) Private Sector Provided Infrastructure
The RTA has recognised an infrastructure asset in respect of the Sydney Harbour
Tunnel. It has been valued at the present value of the estimated written down
replacement cost of the Tunnel at the date of transfer to the RTA in 2022.
In respect of the M2, M4 and M5 Motorways, the RTA values the asset by reference
to the RTA’s emerging share of the written down replacement cost of each asset
apportioned over the respective period of the concession agreement.
— 72 —
APPENDIX 10
DIER Tas approach to asset valuation:

Summary report following 1996/97 review
Extracts from Finance Policy Manual
Valuation of
(September 1999)
— 73 —
— 74 —
— 75 —
— 76 —
— 77 —
— 78 —
— 79 —
— 80 —
— 81 —
— 82 —
— 83 —
— 84 —
APPENDIX 11
Responses to Questionnaire
issued with the June 1998 draft of this report
Valuation of
(September 1999)
— 85 —
Responses to
Questionnaire
Austroads Project No BS.A.70
The Use of Asset Valuation
Compiled during preparation of a report for Austroads on Valuation of

Road Infrastructure Assets in Australia and New Zealand (Austroads
Project BS.A.70) by
Laurie Dowling Ph: 02 4926 5194

28 Wrightson Avenue Fax: 02 4929 7651
NEWCASTLE NSW 2300 E-Mail: lbdowli@ibm.net
— 86 —
Preamble
Responses to this questionnaire were used in 1998 to finalise an Austroads report on

the benefits of valuing road infrastructure assets, prepared under Austroads Project
BS.A.70.
The report is nearing completion, and is expected to be submitted to the Project

Manager (Michael Bushby, RTA NSW) and the Program Manager, Business Systems
(Rolf Lunsmann, RTA NSW) during January 1999. The likely title is Valuation of
Road Infrastructure Assets in Australia and New Zealand.
The Charter for Austroads Project BS.A.70 is in Appendix 1 to the report.

The time and effort spent in completing this questionnaire are very much appreciated.
The following abbreviations are used in this summary:
DMR Qld Department of Main Roads, Queensland
DIER Tas Department of Infrastructure, Energy and

Resources, Tasmania
MR WA Main Roads Department, Western

Australia
RTA NSW Roads and Traffic Authority, New South

Wales
T SA Transport South Australia
VicRoads The Roads Corporation of Victoria
TNZ Transit New Zealand
DCC Devonport City Council
— 87 —
Question 1 Performance indicators
Does your organisation use asset value as an input for any Performance Indicator which is not
already in Table 4 in the June 1998 draft? If so, please provide brief descriptions for inclusion
in Section 6.5, Table 4 and/or Appendix 8.
Responses have been used to complete Clause 6.5 and Table 4 in the
January 1999 draft of the Austroads report.
Question 2 Benefits of valuation
Does your organisation gain benefits from valuation information that are not covered in
Section 10 in the June 1998 draft?
Can Section 10 be amended to better reflect any benefits to your organisation from the
valuation process? If so, how?
The responses to this question have been incorporated in Clause 10 in the

January 1999 draft of the Austroads report.
— 88 —
Question 3 Asset classes

Four main categories presently in use, as defined in the 1994 Austroads report Capitalisation of
Infrastructure, viz
• Land under roads and within road reserves
• Work in progress
• Roads and bridges
• Privately funded road infrastructure assets.
Would your organisation support establishing a number of standard sub-categories for
recognition of infrastructure assets in financial reports, for example bridges, earthworks,
pavement, traffic signals, intelligent transport systems, surplus land, land held for future
infrastructure, etc? See Section 6.3 and Table 2 in the June 1998 draft. Any such list of
standard sub-categories would be subsidiary to and would not alter the four main categories
defined by Austroads.
DMR Qld Yes. Further work is required to ensure that the DMR could capture and value
data at this level.
DIER Tas Yes. This seems a good idea. However the fewer sub-categories there are the
better because we do not separately assess values of lighting, ITS systems, etc.
MR WA MRWA reports on earthworks, pavements (including seal, drainage and

kerbs), bridges, road furniture, land within road reserves and work in progress.
Data for sign valuation is available only for metropolitan area.
RTA NSW No, not initially. The cost of collecting this information in sub-categories has
to be commensurate with the benefit derived from the use of the information.
T SA TSA is not opposed to the existing four asset categories but does maintain
other non road assets (eg, marine and others) which could be useful for TSA
to have additional asset classes. TSA supports a number of standard sub-
categories - this is particularly useful under the “roads and bridges” category.
VicRoads VicRoads would support establishing a number of standard sub-categories for

recognition of infrastructure assets.
TNZ The main categories need review to separate roads and bridges. Formation
should also be separate, because it represents a sunk cost, with ongoing asset
management primarily related to pavement. Work in Progress represents
approximately 2.5% of TNZ’s asset value. Therefore is Work in Progress
sufficiently material to warrant separate identification?
DCC No response
Comments:
1. Within the Austroads category “roads and bridges”, those agencies which responded (listed above)
already recognise roads and bridges separately. Each agency’s definition for “bridge” is in Table 7.6 in
the draft Austroads report.
2. Only TNZ has queried the merit of “work in progress” as a distinct category. Reference to Appendix 5
shows that “work in progress” represents less than 5% of the replacement value of roads and bridges.
3. There appears to be scope for agreement to standardise significant sub-categories such as pavement and
traffic control equipment.
— 89 —
Question 4
Are there any references to the practices of your organisation in the June 1998 draft which you
consider to be incorrect, or that you consider should be amended? If so, please provide details.
(A marked up copy will suffice).
The responses to this question have been incorporated in the January 1999
draft of the Austroads report.
Question 5 Cost indices
Does your organisation use an index which is not included in Table 6 and Figure 7 in the June
1998 draft?
If so, please provide details for inclusion in Table 6 and Figure 7.
If an index is not used, please describe how values are updated between revaluations.
The responses to this question have been incorporated in Clause 5.2 in the
January 1999 draft (Figure 7, and Table 2).
Comment:
DMR QLD, RTA NSW, Transport SA and Transit NZ maintain cost indices. Main Roads WA uses indices
issued by ABS and Rawlinsons. BTE also maintains its own “Road Construction and Maintenance Price
Index”. Differences in movements in these indices over time appear to be marginal, and so consideration
could be given to some rationalisation, perhaps multi-lateral adoption of a common index maintained by
BTE, ABS or ARRB TR.
— 90 —
Question 6 Replacement cost vs reproduction cost

In determining the written down current cost of road and bridge assets, does your organisation
distinguish between “replacement” and “reproduction” costs as described in Section 3.3 (c) in
the 1994 Austroads report Capitalisation of Infrastructure?
For example, in estimating the replacement value of a bridge, do you allow for improvements to
satisfy current standards - geometric standards, hydrology standards? Or, in estimating the
replacement value of a road, do you allow for improvements to satisfy current width standards
where the existing road is narrower than a modern equivalent?
Which do you use - replacement or reproduction? Any reason?
Is the same used for all road and bridge assets?
DMR Qld Our valuation methodology is based on replacement cost. Qld Treasury
guidelines define “current replacement cost” as the cost per unit of future
economic benefits of the most appropriate modern replacement facility. It
applies where the asset being valued would be replaced at balance date by a
different asset in terms of scale and technology.
Use of current replacement cost is valid where a similar asset is not available
or is available but is technologically outdated. For roads, replacement costs
are the costs incurred when replacing and existing segment with a new
segment, based on current technology, including construction and
administration costs.
For structures, replacement costs are the costs incurred when replacing an
existing structure with a new structure, based on current technology. For
example, where a one lane timber bridge is to be replaced by a one lane
concrete bridge, there is no change in functionality of the new replacement
asset, and accordingly, no discontinuity of the replacement cost needs to take
place even though the new concrete structure may have a greater load carrying
capacity than the existing timber bridge.
DIER Tas Replacement costs are used for both roads and bridges, based on existing
configurations with no allowance for improvements.
(One of the influences is the difficulty in objectively measuring improvements
across the network, and then having them accepted by the Auditor-General.)
MR WA The road and bridge asset is generally valued at reproduction cost although it
may be argued that the distinction between reproduction cost and replacement
cost is not clear cut because improvements in technology are reflected in
current contract rates. The one clear exception to the use of reproduction
costs is timber bridges. Replacement cost is used for timber bridges because
MR WA no longer builds timber bridges. The cost reported represents the
cost of an equivalent concrete structure with the same deck area.
RTA NSW Replacement cost is used.

It represents the actual replacement cost, not an idealised replacement cost.
Replacement cost is used for roads and bridges.
— 91 —
TSA The basis for current valuations is replacement to the same standard for both
roads and bridges.
It is also TSA policy that the valuation of replacement pavement includes
reuse of retained pavement. This in effect recognises any residual value of the
old pavement being replaced through a cheaper replacement cost, and allows
the use of tendered prices where some residual pavement is incorporated into
the replacement pavement.
This is also the case for drainage and earthworks, as a consequence
replacement costs may be under-estimated. The method of carrying out this
valuation requires some clarification to be consistent with other states.
Replacement costs are calculated every 3 years using current unit rates. Every
other year the replacement cost is calculated using cost indices. The unit rate
based replacement cost (every 3 years) is checked against the cost index based
replacement cost to track the reliability of the cost indices.
TSA acknowledges using road construction unit rates to value replacement
costs may be limited due to the low number of replacement projects on a
mature network.
VicRoads For all infrastructure assets, VicRoads works on the basis of replacement cost
using:
• current service capacity, and
• modern technology.
TNZ TNZ uses replacement cost, but current construction techniques are allowed
for. Improvements to satisfy current standards of service (eg, road alignment
or width, bridge waterway area) are not allowed for, except for pavement
thickness, with replacement value determined on the basis of current traffic
volumes and composition, using the Austroads Pavement Design Guide.
The same method is used for roads and bridges.
DCC DCC uses deprival value, that is replacement value using current materials
and methods. DCC would value a deficient asset at existing standard and not
a desired upgraded standard.
Comment:
The 1994 Austroads report Capitalisation of Infrastructure gives the following definitions in Clause 3.3 (c) -
Valuation Policies for Roads and Bridges:
Reproduction cost: determined by calculating the current cost of constructing or acquiring a copy of
the existing asset.
Replacement cost: the current cost of the service potential; of the most appropriate modern
equivalent asset. Unit costs of constructing a reference asset are applied based on the physical
quantities and useful life of the existing asset.
It appears MAs do not make a clear distinction between replacement and reproduction in this context, with
the mostly used word being “replacement”, whereas, on the basis of these definitions, most MAs actually use
“reproduction” cost to determine the written down value of roads and bridges.
— 92 —
Question 7 Ensuring that financial statements are of benefit to users

What form of estimating current written down value does your organisation regard as best
suited to ensuring that financial statements are of benefit to users of those financial statements?
DMR Qld Straight line adjusted for known material reductions in useful lives. That is,
roads and bridges which are to be replaced as part of the Pacific Motorway
project are being fully depreciated over the next 3 years.
DIER Tas As described in Table 3 in the draft Austroads report.
MR WA Written down value is calculated as the depreciated replacement/reproduction

value (refer also to Q 6).
RTA NSW Condition based means of estimation because most decisions on maintenance
expenditure are driven by condition and not age.
T SA For both roads and bridges the current method of depreciation is straight line
over an estimated economic life. Options for depreciation that will be debated
by TSA shortly include the existing straight line method, condition based, and
perhaps straight line based on periodic assessment of remaining useful life

with condition used as one factor.
VicRoads Use of the deprival value concept (cost of replacing infrastructure assets if an
entity is deprived of them).
TNZ “Optimised Depreciated Replacement Cost” (ODRC), that is the depreciated

replacement cost, after allowances are made for over design, technological
and functional obsolescence, surplus assets, and in some cases reconfiguration
and relocation. The amount by which the optimisation process changes the
valuation may be an indication of how perceived user needs have changed
over time and the quality of past investment decisions.
ODRC is based on an estimate of the replacement cost. Given the size of the
roading network and the variety of assets to be valued, an ODRC valuation
would be an extremely complex, lengthy and expensive undertaking.
The experience in NZ across all the infrastructure sectors that have undertaken
and ODRC based valuation has been the reduction in value from that
determined on a pure DRC basis. A similar experience could occur in an
ODRC valuation of roads. By definition optimisation is all about providing
the same level of service in the least expensive manner, by eliminating surplus
capacity, obsolescence, over design, less than optimal routes, including
duplication. Where part of the network is substandard, the work required to
bring it up to standard can only be captured in the valuation once it has been
carried out.
DCC DCC uses actual costs or estimates for annual revaluations. Dollar values
must reflect the actual physical condition to be of benefit to users.
— 93 —
Question 8 Costs of service adjustments and traffic control

Does your organisation include costs such as service adjustments and traffic control in its
estimation of replacement cost for road assets? [It is acknowledged that the value of services
(eg, water reticulation, communications, energy lines, etc) which are not controlled by the road
organisation should not be included in the value of road infrastructure.]
DMR Qld Yes.
DIER Tas Replacement cost is based on total project costs which include the cost of
associated minor activities such as service adjustments and traffic control.
MR WA No.
RTA NSW Traffic control is included as part of the all-up unit rates for road construction,
but not utility adjustment or property adjustments or land.
Traffic control is regarded as a necessary cost similar to survey, design,
geotechnical investigations, supervision, etc.
Costs of service alterations are excluded from the valuation. These costs are
TSA
often significant, but do not add value to the asset, and are sunk costs. TSA
needs to explore this further as ignoring these costs on replacement would
under-value individual projects.
Costs of traffic control during construction are excluded from the valuation.
VicRoads VicRoads does not include costs such as service adjustments and traffic
control in the valuation of infrastructure.
TNZ No.
DCC No.
Comment:
With two “yes”, five “no” and one mixed response, there is scope for review of this aspect, which potentially
could have a significant impact on valuations in urban areas.
— 94 —
Question 9 Work in progress

What criteria does your organisation use to identify expenditure which is recognised as “work
in progress”?
DMR Qld The Capital Work in Progress figure represents incomplete Roads and Bridges
under construction (or work which represents a capital improvement which
will be capitalised to the asset). When roads/bridges are open to traffic the
completed costs per project are transferred to "completed" infrastructure
assets. This is an annual event and occurs at 30 June each year.
DIER Tas DIER Tas includes only those works involving a deviation as “work in
progress”, because works on existing alignment return incremental benefits to
customers as the work proceeds.
Expenditure on these works is recognised as “work in progress” until the
works are opened to the public.
MR WA Work in progress is that work which extends beyond one year.

RTA NSW Capital works projects with a value greater than A$5m.
T SA “Work in progress” is work that continues beyond one year.
VicRoads VicRoads selects only those works involving a deviation.
TNZ Transit New Zealand does not use the “work in progress” category in its
financial reporting.
DCC All capital work is work in progress until capitalised.
Comment: Except for TNZ which does not use the “work in progress” category, practice appears to be
generally consistent with works capitalised at the next balance date after completion or opening to traffic,
including partial opening to traffic, except that RTA NSW uses the “work in progress” category only for
works valued at more than A$5m, while DIER Tas and VicRoads uses the “work in progress” category only
for deviations (ie, works where it is clear that traffic derives no benefit until the works are completed).
— 95 —
For work extending over more than one year, is “work in progress” recognised and reported in
historical (“out turn”) dollars or indexed to current year dollars?
DMR Qld Recorded at historical dollars.
DIER Tas Historical or out-turn dollars, not indexed.
MR WA “Work in progress” is reported in historical dollars.
RTA NSW Indexed through inflation adjustment to present year dollars.
T SA Work extending over more than one year is reported as historical and not
indexed.
VicRoads In this situation, “work in progress” is recognised and reported in historical

dollars.
TNZ Transit New Zealand does not use the “work in progress” category in its
financial reporting.
DCC DCC reports work in progress carried over to the following year at historical
cost. Ideally this should be part of current cost adjustments.
Comment:
RTA NSW is the only respondent which indexes amounts recognised as “work in progress” which carry
forward from one year to the next.
— 96 —
When does your organisation capitalise “work in progress” - eg, at the time of opening to
traffic, at practical completion, or when finally completed?
DMR Qld When open to traffic.
DIER Tas When open to traffic.
MR WA When physical works are complete.
RTA NSW When open to traffic. However, bridges that are completed may be capitalised
if they form part of traffic staging.
T SA Capitalisation occurs at contract practical completion or when the road is open

to traffic. This information is collected through a formal procedure at asset
handover.
VicRoads At the time of opening to traffic.
TNZ Work in progress is capitalised in the year costs are incurred.
DCC Work is capitalised when it is completed, or when put into service whichever
comes first. DCC capitalises subdivisions (donated assets) when accepted at
practical completion (on to maintenance period).
Comment:
Except for TNZ which does not recognise or report “work in progress” as a separate category, there is
uniformity in this aspect of road infrastructure valuation.
— 97 —
Question 12 Land and work in progress
How does your organisation recognise land under work in progress - as part of “work in
progress”, or as “land under roads”?
DMR Qld Neither. Land is expensed when construction commences.
DIER Tas All land is included in “land under roads”.
MR WA In the majority of cases, land under work in progress is reported under

separate asset category “land acquired for roadworks” until physical works are
complete. The exception being when land is resumed immediately prior to the
commencement of physical works and the works extend for more than one
year. The land is reported as part of “work in progress” on these occasions.
RTA NSW RTA NSW has recorded land under work in progress as land under roads
since 30 June 1996 (cf page 48 in RTA NSW Annual Report, 1996).
T SA Land under roads is capitalised upon acquisition as a separate asset category,

therefore land purchased for roadworks is not part of “work in progress”.
VicRoads Land under work in progress is recognised as part of “work in progress”.
TNZ As land under roads.
DCC
Comment:
Except for DMR Qld where land is expensed, there is uniformity in this aspect of the road infrastructure
valuation process.
— 98 —
Question 13 Changes being considered to valuation methodology
Is your organisation considering any changes to improve valuation methods and processes?
If so, please briefly describe.
DMR Qld DMR Qld is continually moving to improve the valuation methodology and
processes. But we are mindful of the costs of continual improvement for an
outcome which is predominantly geared to external financial reporting
requirements.
An example of one of the improvements currently being explored is the use of

forward planning forecasts to estimate remaining useful lives of individual
road sections based on obsolescence. A pilot of 1 of 14 Districts was
undertaken in 1997/98 and further work is planned in 1998/99.
DIER Tas The road replacement cost method, now in place is to be reviewed annually.
A working party is currently reviewing the bridge valuation process.
MR WA MR WA is moving to improve the valuation model by including additional

condition information such as rutting in the deterioration model.
RTA NSW Yes. Improvements under consideration include:

• bridge capitalisation based on condition rather than age, and
• pavement capitalisation based on a new condition based method.
T SA TSA is continuously moving to improve our valuation processes. Information

contained in Figures 4, 5 and 6 of this Report may indicate inconsistencies
with road agencies in other States. TSA intends to explore this.
TSA is also considering internal processes for capitalisation and periodic

revaluations.
TSA is currently evaluating moving towards a condition based depreciation

model rather than a straight line model. Benefits of this shift for TSA would
be to establish a clearer link between asset accounting and asset management.
VicRoads VicRoads is considering refining aspects of the valuation model, such as land
under roads and the use of cost indices.
TNZ Yes. Improvements under consideration include:

• optimisation of depreciation (see Q 7),
• improvements to the estimation of remaining life, and
• incorporation of valuation in asset management.
DCC No
— 99 —
Question 14 Additional uses of valuation information

Is your organisation considering any additional uses of valuation information?
If so, please briefly describe.
DMR Qld None at this stage.
DIER Tas Intend to consider incorporating valuation information into internal indicators,
as done elsewhere.
MR WA Trends in road expenditure, for example as a percentage of asset value, can be
used for determining the efficiency of the program.
RTA NSW To assist in making decisions on maintaining or replacing bridges.
TSA Could be used more broadly such as in whole of government budget

negotiations, but no action at this stage in this direction.
VicRoads The uses for valuation information are growing all the time. The
methodologies used by VicRoads have been looked upon by other
Departments and Local Government Authorities.
TNZ Yes. Asset management planning.
DCC No.
Question 15 Descriptions of valuation methods

Would your organisation be in a position to provide descriptions of valuation methods for
incorporation in a possible compendium of road agency valuation methodologies? It is
envisaged that existing material would be used, without a requirement that new material be
prepared.
DMR Qld Yes. Would be more than happy to participate.
DIER Tas Yes.
MR WA Yes.
RTA NSW Yes - the procedures are documented.
TSA Can provide descriptions of valuation methods.
VicRoads Yes.
TNZ Yes.
DCC Yes, if required.
Comment:
Should we proceed to compile such a compendium of current practice, or is it adequate for individuals to
make contact with other MAs as required?
— 100 —
Question 16 Is there any other comment you would like to add?
DMR Qld DMR Qld is very supportive of the current work being undertaken by
Austroads in this area and is keen to be involved with a view to moving
towards a uniform approach for recording and valuing road infrastructure in
Australia.
DIER Tas No.
MR WA Valuation of land under roads: MR WA is in general agreement with the

treatment proposed in Appendix 4 and currently uses average values, it is our
view that the objective should be to move to using the current market value of
the land immediately adjacent to the road reserve to value land under roads
and within the road reserve. The change should occur when the technology is
available to gather and process the data at a reasonable cost.
RTA NSW There is a need to ensure that asset management practice and resource
allocation practice are consistent with valuation methods. Otherwise, if only
consistent with accounting, the information will not be very relevant.
TSA Figure 6 in the June 1998 draft report tends to suggest that TSA’s road and
bridge assets are over 50% run-down which appears high compared to other
States.
TSA’s asset depreciation and valuation methods need to be challenged with

further research and development required to transform current practices such
that valuations produced are reliable, in a meaningful format and can be used
as quality intelligence in asset management.
The current benefits of our asset valuation process are still to be realised.
VicRoads No.
TNZ Guidelines are needed to give a consistent approach between agencies.
The method of depreciation needs to be reviewed and agreed upon.
Optimising the network needs to be considered as it is the method of valuation

along with a more earnings based approach that are used for evaluating the
rates of return for infrastructure monopolies.
DCC We would support a valuation method for land under roads and within road
reserves (we do not distinguish between them) whereby land is valued at the
Valuer-General’s average rateable value per hectare for the urban and non-
urban sectors in each local government area. Average rateable value per
hectare is supplied by the Valuer-General and is based on adjacent land use
type. We interpret this to mean an average over the whole Council area for
urban and non-urban land values applied to the area of roads in each
classification.
— 101 —
APPENDIX 12
Extract from VicRoads Annual Report

to 30 June 1998
on depreciation
Valuation of
(September 1999)
— 102 —
— 103 —
— 104 —
— 105 —
— 106 —
INFORMATION RETRIEVAL
Austroads (1999), Valuation of Road Infrastructure Assets in Australia and New

Zealand: Sydney, A4, 117pp, AP-144/00.
KEYWORDS:
Accounting, bridge management, capitalisation, depreciation, financial statements,
infrastructure, inventory, investment, pavement evaluation, road management, valuation
SUMMARY
This report examines current practices by State road agencies in Australia and by Transit New
Zealand in valuation of road infrastructure assets. Areas of consistency and inconsistency are
identified. The report focuses on the potential for infrastructure valuation to assist road
agencies in formulating asset management strategies which will meet the needs of road users
while minimising the long term costs of providing and maintaining the road networks.
Valuation information is described from an asset management perspective, complementing
the traditional accounting perspective on capitalisation. The potential benefits to a road
agency from both the valuation process and the resulting information are articulated. Further
study is necessary of the relative potential for condition based and age based depreciation of
road pavement assets to be an effective input to road asset management decisions. A number
of other directions for future action are identified for consideration as part of the intended
Austroads review of valuation methods for road infrastructure elements.
AUSTROADS PUBLICATIONS
Austroads publishes a large number of guides and reports. Some of its more recent publications are:
AP-1/89 Rural Road Design
AP-2/90 Design of Sprayed Seals
AP-8/87 Visual Assessment of Pavement Condition
Guide to Traffic Engineering Practice
AP-11.1/88 Traffic Flow AP-11.9/88 Arterial Road Traffic Management
AP-11.2/88 Roadway Capacity AP-11.10/88 Local Area Traffic Management
AP-11.3/88 Traffic Studies AP-11.11/88 Parking
AP-11.4/88 Road Crashes AP-11.12/88 Roadway Lighting
AP-11.5/88 Intersections at Grade AP-11.13/95 Pedestrians
AP-11.6/93 Roundabouts AP-11.14/99 Bicycles
AP-11.7/88 Traffic Signals AP-11.15/99 Motorcycle Safety
AP-11.8/88 Traffic Control Devices
AP-12/91 Road Maintenance Practice
AP-13/91 Bridge Management Practice
AP-14/91 Guide to Bridge Construction Practice
AP-15/96 Australian Bridge Design Code
AP-17/92 Pavement Design
AP-18/96 RoadFacts 96
AP-22/95 Strategy for Pavement Research and Development
AP-23/94 Waterway Design, A Guide to the Hydraulic Design of Bridges, Culverts & Floodways
AP-26/94 Strategy for Structures Research and Development

AP-29/98 Austroads Strategic Plan 1998–2001
AP-30/94 Road Safety Audit
AP-34/95 Design Vehicles and Turning Path Templates
AP-36/95 Adaptions and Innovations in Road & Pavement Engineering
AP-38/95 Guide to Field Surveillance of Quality Assurance Contracts
AP-40/95 Strategy for Ecological Sustainable Development
AP-41/96 Bitumen Sealing Safety Guide
AP-42/96 Benefit Cost Analysis Manual
AP-43/98 National Performance Indicators
AP-44/97 Asphalt Recycling Guide
AP-45/96 Strategy for Productivity Improvements for the Road Transport Industry
AP-46/97 Strategy for Concrete Research and Development
AP-47/97 Strategy for Road User Cost
AP-48/97 Australia at the Crossroads, Roads in the Community — A Summary
AP-49/97 Roads in the Community — Part 1: Are they doing their job?
AP-50/97 Roads in the Community — Part 2: Towards better practice
AP-51/98 Electronic Toll Collection Standards Study
AP-52/97 Strategy for Traffic Management Research and Development
AP-53/97 Strategy for Improving Asset Management Practice
AP-54/97 Austroads 1997 Bridge Conference Proceedings — Bridging the Millennia
AP-55/98 Principles for Strategic Planning
AP-56/98 Assessing Fitness to Drive
AP-57 & 58/98 Cities for Tomorrow — Better Practice Guide & Resource Document
AP-59/98 Cities for Tomorrow — CD
AP-60/98 Guide to Stabilisation in Roadworks
AP-61/99 Australia Cycling 1999-2004 — The National Strategy
AP-62/99 e-transport — The National Strategy for Intelligent Transport Systems
AP-63/00 Guide to the Selection of Road Surfacings
These and other Austroads publications may be obtained from:

ARRB Transport Research Ltd Telephone: +61 3 9881 1547
500 Burwood Highway Fax: +61 3 9887 8144
VERMONT SOUTH VIC 3131 Email: donm@arrb.org.au
Australia Website: www.arrb.org.au
or from road authorities, or their agent in all States and Territories; Standards New Zealand; Standards Australia &
Bicycle New South Wales.

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Australia and New Zealand

Valuation of Road Infrastructure Assets in

© Austroads Inc. 2000

National Library of Australia

Valuation of Road Infrastructure Assets in Australia and New Zealand

Austroads Project No. BS.A.70

Austroads Publication No. AP–144/00

The Austroads Asset Management Reference Group

Published by Austroads Incorporated

! Roads and Traffic Authority New South Wales

Executive summary ........................................................ ......................................... v

5.2. Trends in costs ............................................ ......................................... 11

Figure 1 The role of valuation in asset management ............................................................ 2

Appendix 12 Extract from VicRoads 1998 Annual Report on depreciation.

• Valuations of road infrastructure assets were first reported in Australasia in 1990.

• Australian Accounting Standard AAS 29 - Financial Reporting by Government Departments, was

• The aims of this report are to:

• The meaning of depreciation in physical as well as accounting terms is discussed.

• The potential benefits of the valuation process are listed.

Valuation of Road Infrastructure Assets

The Project Charter for this report is in Appendix 1.

The aims of this report are:

3. During 1998, VicRoads reviewed some aspects of its infrastructure valuation

Needs of Road Users and

Asset Features and

Road User Physical Management

Decisions on Asset Maintenance

Figure 1 - The Role of valuation in asset management

Roads and bridges

(ii) determining valuations in each category

(iii) determining depreciation in each category

(iv) periodic revaluation of road infrastructure assets.

89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97

# unaudited valuation reported ! first audited valuation

3.2 Valuation of local roads

3.3 Current action by OECD on valuation of road infrastructure

Appendix 3 contains a summary of responses prepared in 1998 by Australian road agencies to a

3.4 Land under roads and within road reserves

Asset inventory Replacement cost Asset valuation

Asset condition Restore to

Figure 2 Pavement asset valuation process (Source: VicRoads)

4. Asset Management and Valuation

• community benefits • asset use

actions to maintain and improve asset performance.

5. Trends in Values and Costs

5.1 Trends in values

Figure 5 shows the corresponding trends for the bridge sub-category.

• As a general observation from the trends in accumulated depreciation in Figure 6, the

• For Transport SA, accumulated depreciation represents a significantly higher ratio of

• Changes by MR WA and VicRoads in the depreciation of earthworks may distort the

Figure 4 - Reported written down values of total road infrastructure

Figure 5 - Reported written down values of bridges

Figure 6 - Accumulated depreciation as a proportion of

5.2 Trends in costs

Valuation of Road Infrastructure Assets in Australia and New Zealand

Index Movement Trends

Valuation of Road Infrastructure Assets in Australia and New Zealand

1985/86 73.3 75.6 76.02 100.0 6.4 100.0

6. Current Position in Australia and New Zealand

A checklist for compliance with the 1994 Austroads policy is in Appendix 6.

6.2 Practices used in valuing

6.3 Infrastructure categories valued and reported