Demonstrating the Use of Pavement Management Tools to Address GASB Statement 34 Requirements

The field of asset management has emerged in the last few years as an important decision-making framework that incorporates economic and engineering factors and considers a broad range of assets. Its importance to government agencies has increased with the recent initiative by the Government Accounting Standards Board (GASB) recommending that States and local governments improve their annual financial reporting by incorporating the value of capital assets (including transportation infrastructure) into their financial statements. This initiative, referred to as GASB Statement 34, has established guidance in how transportation assets should be reported on financial statements and has established a schedule for compliance with its recommendations (Federal Highway Administration 2000). GASB recommends that government agencies use a historical cost approach for capitalizing long-lived capital assets; however, if historical information is not available, guidance is provided for an alternate approach based on the current replacement cost of the assets. A method of representing the costs associated with the use of the assets must also be selected, and two methods are allowed by GASB. One approach is to depreciate the assets over time. The modified approach, on the other hand, provides an agency more flexibility in reporting the value of its assets based upon the use of a systematic, defensible approach that accounts for the preservation of the asset. Agencies that have implemented pavement management systems are well positioned to use the modified approach to address the GASB Statement 34 guidelines. This paper illustrates the use of a pavement management database to determine the replacement value of an agency's pavement assets using both the depreciation and modified approaches. The advantages and disadvantages of both approaches are also presented.