Highways Agency Annual Report and Accounts 2011-2012

Financial Statements: SECTION 10
i) One of the assumptions in the standard cost is that all construction is new build on a ‘green-field’
site. This is not always the case, therefore the cost of new constructions can be much higher due
to building in non-rural areas or replacing existing roads etc.
ii) Generally it is cheaper to build a three lane motorway in the first instance rather than two lanes
initially and then to widen at some point thereafter. In a road widening scheme, a significant
amount of cost will be in traffic management and therefore will be written-down.
The Agency uses standard write-down percentages for different types of projects. These percentages
are based on projects constructed over the previous five years. The write down percentages are
applied to construction projects lasting more than one year, this ensures the Agency writes-down
the asset on an on-going basis rather than when the project is opened for traffic. When a project is
open for traffic, a formal calculation of the write-down required is completed and compared with the
cumulative write-down; adjustments are made as necessary.
Land and Buildings, including Dwellings
Freehold land and buildings have been valued on the basis of open market value for existing use.
External professional surveyors, in accordance with the RICS Appraisal and Valuation Manual,
undertake a full valuation of these assets at intervals not exceeding five years. Between valuations
values are adjusted using regional land and building indices published twice yearly by the VOA.
Land and buildings are freehold and leasehold. Some Regional Control Centres are leasehold
properties under 50 years and defined as short leasehold properties.
The land and buildings assets were last fully valued as follows:
Asset: Valuation date: Undertaken by:
Federated House 17 March 2010 Donaldson’s LLP, professional surveyors
Motorway Maintenance Compounds 1 October 2011 VOA
Motorway Service Areas 31 March 2010 VOA
Surplus properties (including dwellings) 31 Dec 2010 VOA
Regional Control Centres 31 March 2011 VOA
National Traffic Control Centre 31 March 2011 VOA
Plant and Equipment
Structural steelwork is stated at fair value using the current market value of steel. Other plant and
machinery is stated at fair value using monthly plant and equipment indices supplied by BIS.
Information Technology
Information Technology consists of IT Hardware and Database Development. The development of
Agency databases is stated at cost. Other information technology assets are stated at fair value using
monthly plant and equipment indices supplied by BIS.
1.5 Depreciation
Network Infrastructure Assets
Depreciation is a measure of the book value of an asset that has been consumed during the
accounting period. It attempts to allocate the cost of the asset over the accounting periods that will
benefit from its use, it is charged each year to the Statement of Comprehensive Net Expenditure.
The network infrastructure asset as reported in the annual accounts, is based on depreciated
replacement cost (DRC), as required by the FReM.
All parts of the network infrastructure, apart from land which has an unlimited useful life, are
depreciated. However, the land element of the network infrastructure is not depreciated as land has an
unlimited useful life.
Highways Agency Annual Report and Accounts 2011-12