ASTM E2219-02

Standard Practice for Valuation and Management of Moveable, Durable Property (Withdrawn 2009)

SIGNIFICANCE AND USE
Contributory value, an alternative model to acquisition cost valuation, provides an economic and logical basis for efficient and cost-effective property management. This value should be the basis for allocating resources and developing and improving systems and processes for the acquisition, control, accounting and disposal of such property.
Contributory valuation is based on the premise that an organization invests in property for the reason that the availability of the property is necessary to the success of the organization, either the accomplishment of a mission or the generation of profit.
The contributory valuation model assumes that the life-cycle cost of acquisition, maintenance, control and disposal of a property asset should be evaluated in the manner of any capital investment; it should yield an appropriate return on assets (ROA) in terms of profit or a contribution to the agency’or institution’mission success.
The use of contributory valuation eliminates the distortions in worth associated with acquisition valuation and encourages a more rational allocation of resources to the management and control of property. This valuation enables an organization to devote the preponderance of its attention and resources to the property that contributes the greatest value to the goods and services produced.
The Property Management Efficiency Factor (described in Section 10) can be used to trend the value added by the property management function and to compare performance with similar organizations.
SCOPE
1.1 This practice covers the assignment of a value to property that provides an economic and logical basis for efficient and cost-effective property management. This value should be the basis for allocating resources and developing and improving systems and processes for the acquisition, control, accounting and disposal of such property.
1.2 While acquisition cost and depreciation of property are useful and appropriate for financial accounting and reporting purposes, this information does not reflect the value of property to an organization or the costs and other damages the organization would incur if the property were lost, damaged, destroyed, or inappropriately released or handled. This financial information is therefore inadequate for property management purposes.
1.3 The degree to which property is controlled and the cost of that control must be reasonable and commensurate with the practical consequences of both a shortage; that is, the property not being available when needed due to loss, damage or destruction; or an overage; that is, maintaining inventories of excess property.
1.4 The valuation of property for the purposes of management and control is to be based upon the risks and costs of shortages and overages as well as the cost of owning property.
WITHDRAWN RATIONALE
This practice covers the assignment of a value to property that provides an economic and logical basis for efficient and cost-effective property management.
Formerly under the jurisdiction of Committee E53 on Property Management Systems, this practice was withdrawn in June 2009. This standard was withdrawn with no replacement due to lack of use and relevancy in the industry.

General Information

• Status: Withdrawn
• Publication Date: 09-Jul-2002
• Withdrawal Date: 31-May-2009
• ICS: 03.100.01 - Company organization and management in general
• Technical Committee: E53 - Asset Management
• Drafting Committee: E53.03 - Financial Aspects Asset Management

Relations

• Referred By: ASTM E2452-12(2019) - Standard Practice for Equipment Management Process Maturity (EMPM) Model
• Effective Date: 10-Jul-2002

Standards Content (Sample)

NOTICE: This standard has either been superseded and replaced by a new version or withdrawn.
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Designation: E 2219 – 02
Standard Practice for
Valuation and Management of Moveable, Durable Property
This standard is issued under the fixed designation E 2219; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (e) indicates an editorial change since the last revision or reapproval.
1. Scope 3.1.1 acquisition cost—the purchase price paid for property
and any subsequent improvements to it.
1.1 This practice covers the assignment of a value to
3.1.2 agency—government organization, regardless of level
property that provides an economic and logical basis for
(federal, state, or local).
efficient and cost-effective property management. This value
3.1.3 company—a for-profit organization.
should be the basis for allocating resources and developing and
3.1.4 contributory valuation—a value assigned to a prop-
improving systems and processes for the acquisition, control,
erty asset based on its proportional contribution to the genera-
accounting and disposal of such property.
tion of profit or its criticality to the accomplishment of an
1.2 While acquisition cost and depreciation of property are
organization’s mission or the manufacturing process. It is
useful and appropriate for financial accounting and reporting
represented by the sum of the profit or profit equivalent earned
purposes,thisinformationdoesnotreflectthevalueofproperty
as the result of the use of the property asset and the estimated
to an organization or the costs and other damages the organi-
return the agency, company or institution will earn from the
zation would incur if the property were lost, damaged, de-
sale of the property. The term contributory valuation empha-
stroyed, or inappropriately released or handled. This financial
sizes that this value accounts for the contribution of the
information is therefore inadequate for property management
property to organizational success.
purposes.
3.1.5 institution—a not-for-profit, non-governmental orga-
1.3 The degree to which property is controlled and the cost
nization.
of that control must be reasonable and commensurate with the
3.1.6 inventory variance—phrase used to describe when the
practical consequences of both a shortage; that is, the property
results of an inventory and the official records do not agree.
not being available when needed due to loss, damage or
3.1.7 organization—an agency, company, or institution.
destruction; or an overage; that is, maintaining inventories of
3.1.8 overage—the accumulation and maintenance of un-
excess property.
needed property assets as a consequence of ineffective
1.4 The valuation of property for the purposes of manage-
utilization/reutilization practices, inadequate acquisition plan-
ment and control is to be based upon the risks and costs of
ning, record keeping, or other management system inadequa-
shortages and overages as well as the cost of owning property.
cies.
2. Referenced Documents
3.1.9 profit equivalent—an indicia of success in lieu of
profit for an agency or institution.
2.1 ASTM Standards:
3.1.10 property—moveable, durable assets as opposed to
E 2131 Practice for Assessing Loss, Damage, or Destruc-
realty.
tion or Property
3.1.11 risk-based management—applying the underlying
E 2132 Practice for Physical Inventory of Durable, Move-
principles of risk, recognizing where the instances of risk are
able Property
overstated and acting to balance the likelihood of the risk of
E 2220 Practice for Establishing the Full Valuation of the
non-availability the costs of control.
Loss/Overage Population Identified During the Inventory
3.1.12 shortage—property that is not available for use.
of Movable, Durable Property
3.1.13 Type “A” property—property anticipated to be nec-
3. Terminology
essary to generate profit or accomplish an agency’s or institu-
tion’s mission.
3.1 Definitions of Terms Specific to This Standard:
3.1.14 Type “B” property—property not anticipated to be
necessary to generate profit or accomplish an agency’s or
This practice is under the jurisdiction of ASTM Committee E53 on Property
institution’s mission.
Management Systems and is the direct responsibility of Subcommittee E53.03 on
3.1.15 Type “C” property—property that, if not properly
Financial Management.
controlled or disposed of, poses a significant risk to the success
Current edition approved July 10, 2002. Published July 2002.
Annual Book of ASTM Standards, Vol 04.12. of an organization, for example, property that poses a safety or
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
E2219–02
environmental hazard or could be instrumental in a damaging followed for each shortage category, the result is a combined
release of information. loss factor, which, when multiplied by the acquisition cost of
the shortage and other costs, yields the contributory value.
4. Significance and Use
7.2 The resulting historical loss and overage costs should be
4.1 Contributory value, an alternative model to acquisition
annualized and compared to the annual organizational costs of
cost valuation, provides an economic and logical basis for
managing and controlling property and a determination made
efficient and cost-effective property management. This value
as to the scope and complexity of control, given the loss
should be the basis for allocating resources and developing and
experience.
improving systems and processes for the acquisition, control,
accounting and disposal of such property.
8. Acceptable Property Management Control Ratios
4.2 Contributory valuation is based on the premise that an
8.1 This is a strict criterion, which requires management
organization invests in property for the reason that the avail-
investigation and analysis if the threshold ratios are exceeded,
ability of the property is necessary to the success of the
organization, either the accomplishment of a mission or the especially for sensitive items as defined under Terminology
generation of profit.
E 2135.
4.3 The contributory valuation model assumes that the
8.2 The threshold ratios are dependent on an organization’s
life-cycle cost of acquisition, maintenance, control and dis-
inventory risk factor determination as determined under Prac-
posal of a property asset should be evaluated in the manner of
tices E 2131 and E 2132.
any capital investment; it should yield an appropriate return on
8.2.1 High Risk Organizations—Where inventory variance
assets (ROA) in terms of profit or a contribution to the
is more than 5 %, the ratio of control cost to loss liability
agency’s or institution’s mission success.
should be no less than 10:1.
4.4 The use of contributory valuation eliminates the distor-
8.2.2 Medium Risk Organizations—Where inventory vari-
tions in worth associated with acquisition valuation and en-
ance is between 2 and 5 %, the ratio of control cost to loss
courages a more rational allocation of resources to the man-
liability should be no less than 7:1
agement and control of property. This valuation enables an
8.2.3 Low Risk Organizations—Where inventory variance
organization to devote the preponderance of its attention and
resources to the property that contributes the greatest value to is less than 2 %, the ratio of control cost to loss liability should
the goods and services produced. be no less than 4:1.
4.5 The Property Management Efficiency Factor (described
8.2.4 The use of these management contr
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