ASTM E2220-02
(Practice)Standard Practice for Establishing the Full Valuation of the Loss/Overage Population Identified During the Inventory of Moveable, Durable Property (Withdrawn 2009)
Standard Practice for Establishing the Full Valuation of the Loss/Overage Population Identified During the Inventory of Moveable, Durable Property (Withdrawn 2009)
SIGNIFICANCE AND USE
The calculated cost of property loss and destruction in combination with the cost of overages presents a logical foundation for the development of alternative models which can be used to evaluate the effectiveness of property management systems and provide relevant information to management useful for the distribution of resources to the task of property utilization and control.
The understanding of an organization’loss, destruction and overage cost of inventory is a necessary prerequisite to the development of cost effective systems for the management of movable, durable assets.
The costing model used in this standard assumes that individual categories of property represent a range of realized costs to an organization and that these loss or destruction costs can range from significant to minimal.
The use of overage is a necessary corollary to the model since there can be significant costs associated with the inventory and control of unneeded assets.
SCOPE
1.1 This practice covers the assignment of a value to categories and complete populations of lost or destroyed property assets for the purpose of determining the composite cost of all such losses on a periodic basis. This practice does not address the valuation of individual property assets.
1.2 The reason for assigning a loss or destruction value is to establish an economic basis for the allocation of resources to manage property efficiently and in a cost effective manner.
1.3 The direct cost of lost, damaged or destroyed (LDD) property has little to do with the acquisition, book or market value of such assets. While in many organizations, the value of LDD property is reflected at acquisition cost in the General Ledger accounts this approach is only appropriate for the financial reporting of property assets.
1.4 The calculation of the cost of loss or destruction of property for the purposes of computing a necessary factor to be used in the equation applied under Practice E 2219 is to be based upon the consideration of both the risk of an inventory shortage as well as the benefits of inventory control and overage management.
1.5 The valuation of property for the purposes of management and control is to be based upon the consideration of both the risk of an inventory shortage and benefits of inventory management as contained in this standard.
WITHDRAWN RATIONALE
This practice covers the assignment of a value to categories and complete populations of lost or destroyed property assets for the purpose of determining the composite cost of all such losses on a periodic basis. This practice does not address the valuation of individual property assets.
Formerly under the jurisdiction of Committee E53 on Property Management Systems, this practice was withdrawn in February 2009. This standard was withdrawn without replacement due to its limited use by the industry.
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Designation: E 2220 – 02
Standard Practice for
Establishing the Full Valuation of the Loss/Overage
Population Identified During the Inventory of Moveable,
Durable Property
This standard is issued under the fixed designation E 2220; 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. Terminology
1.1 This practice covers the assignment of a value to 3.1 Definitions of Terms Specific to This Standard:
categories and complete populations of lost or destroyed 3.1.1 acquisition cost—the purchase price paid for property
property assets for the purpose of determining the composite and any subsequent improvements to it.
cost of all such losses on a periodic basis. This practice does 3.1.2 agency—government organization, regardless of level
not address the valuation of individual property assets. (federal, state, or local).
1.2 The reason for assigning a loss or destruction value is to 3.1.3 company—a for-profit organization.
establish an economic basis for the allocation of resources to 3.1.4 institution—a not-for-profit, non-governmental orga-
manage property efficiently and in a cost effective manner. nization.
1.3 The direct cost of lost, damaged or destroyed (LDD) 3.1.5 loss—the consequence of failing to account for
property has little to do with the acquisition, book or market propertyon-handwhencomparedwiththeapplicablehistorical
value of such assets. While in many organizations, the value of records.
LDD property is reflected at acquisition cost in the General 3.1.6 organization—an agency, company, or institution.
Ledger accounts this approach is only appropriate for the 3.1.7 overage—the accumulation and maintenance of un-
financial reporting of property assets. needed property assets as a consequence of ineffective
1.4 The calculation of the cost of loss or destruction of utilization/reutilization practices, inadequate acquisition plan-
property for the purposes of computing a necessary factor to be ning, record keeping, or other management system inadequa-
used in the equation applied under Practice E 2219 is to be cies.
based upon the consideration of both the risk of an inventory 3.1.8 profit equivalent—indicia of success in lieu of profit
shortage as well as the benefits of inventory control and for an agency or institution.
overage management. 3.1.9 property—moveable, durable assets as opposed to
1.5 The valuation of property for the purposes of manage- realty.
ment and control is to be based upon the consideration of both 3.1.10 risk-based management—applying the underlying
the risk of an inventory shortage and benefits of inventory principles of risk, recognizing where the instances of risk are
management as contained in this standard. overstated and acting to balance the likelihood of the risk of
non-availability against the costs of control.
2. Referenced Documents
3.1.11 shortage—property that is unavailable for use.
2.1 ASTM Standards:
4. Significance and Use
E 2219 Practice for the Valuation and Management of
Moveable, Durable Property 4.1 The calculated cost of property loss and destruction in
combination with the cost of overages presents a logical
foundation for the development of alternative models which
This practice is under the jurisdiction of ASTM Committee E53 on Property
can be used to evaluate the effectiveness of property manage-
Management Systems and is the direct responsibility of Subcommittee E53.03 on
ment systems and provide relevant information to management
Financial Management.
useful for the distribution of resources to the task of property
Current edition approved July 10, 2002. Published July 2002.
Annual Book of ASTM Standards, Vol 04.12. utilization and control.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
E2220–02
4.2 The understanding of an organization’s loss, destruction with no value at disposal, a cost not earned for items missing
and overage cost of inventory is a necessary prerequisite to the but could have been sold and a cost for the items which were
development of cost effective systems for the management of
missing and should have been or were replaced. In addition to
movable, durable assets. the cost of shortage inventory items, historical inventory
4.3 The costing model used in this standard assumes that
records need to be reviewed to determine inventory overages.
individual categories of property represent a range of realized
For each inventory overage category identified in this section
costs to an organization and that these loss or destruction costs
(6.2) a value is to be determined both in estimated item count
can range from significant to minimal.
and estimated dollar terms and these figures are to be used to
4.4 The use of overage is a necessary corollary to the model
demonstrate the actual economic impact of the inventory
since there can be significant costs associated with the inven-
overage on the organization.
tory and control of unneeded assets.
6.2.1 What percentage of the property has a value to the
organization?
5. Procedure
6.2.2 What percentage of the overage property has a value
5.1 To establish the loss, damage and overage valuation of
as scrap?At this point overage goes from value to expense cost
property assets, it is necessary to determine the direct financial
to scrap minus the cost recovery from base materials sale.
impact that missing or unnecessarily retained assets had on the
6.2.3 What percentage of the overage property has no
organization.
value?
6. Determination of Historical Risk
6.2.4 What percentage of the total inventory is represented
6.1 An analysis must be made
...
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