Asset Retirement Obligations
Our team includes experienced quantity surveyors with detailed knowledge of the planning and costing of complex projects including the decommissioning of large industrial facilities including power plants.
Particularly where owners have defined time period agreements, e.g. independent power producers (IPP’s) operating under fixed term power purchase agreements, it is vital to have researched and defendable asset retirement obligation provisions made in financial statements for the costs of demolition, debris removal and remediation to bring the location to a ‘brownfield’ site.
John Foord have extensive knowledge of not only the preparation of these reports but also in justifying the analysis and conclusions with clients’ auditors and senior management teams.
Our reports can include projected values to a defined point in the future, backed by research on long term inflation and cost trends.
Often required as part of the consideration of financial provisions for decommissioning costs is the assessment of recoverable values from materials and assets at the end of a facility’s economic life or defined term period.
The recoverable value is a combination of the market value for removal for any assets that are likely to be saleable in the open market to a third party, plus the salvage value of any remaining materials.
Salvage Value is defined as:
“The value of an asset, as if disposed of for the materials it contains, rather than for continued use without special repairs or adaptation.”
The salvage value definition complies with those recognised by International Valuation Standards and other appraisal organisations.
Typically, in our reports the removal, relocation, processing and recycling of any assets would be carried out at the expense of the purchaser, but our reports can also be adjusted to reflect these costs if they are to be borne by the owner.
Our recoverable value reports can include projected values to a defined point in the future, reflecting the expected ages and condition of the assets at the time of disposal or decommissioning, again backed by research on inflation trends, depreciation and market value trends.
Cost to Complete Assessments
Economic Life Assessment
Economic life is usually defined as either (a) the period over which an asset is expected to be used; or (b) the number of production or similar units expected to be obtained from the asset. It reflects the period over which the asset could produce economic benefit for an owner.
We provide in-depth reports on the economic lives of facilities or individual assets for financial reporting, impairment assessments and commercial asset management purposes based on our in-house analysis of thousands of other facilities and assets.
Useful Life Assessment
Useful life is usually defined as either (a) the period over which an asset is expected to be available for use; or (b) the number of production or similar units expected to be obtained from the asset. Useful life reflects the potential physical life of the asset rather than the economic benefit of ownership.
John Foord is able to access a huge database of information on actual useful lives of commercial assets, derived from extensive research and analysis of changes in facilities over time.