Board paper cover sheet - NHS Ayrshire and Arran.

NHS Board Meeting23 June 2010 Paper 5and cost over £20,000 in total, or where they are part of the initialcosts of equipping a new development and total over £20,000.Where a large asset, for example a building, includes a number ofcomponents with significantly different asset lives e.g. plant and equipment,then these components are treated as separate assets and depreciated overtheir own useful economic lives.6.2 MeasurementValuation:All property, plant and equipment assets are measured initially at cost, representingthe costs directly attributable to acquiring or constructing the asset and bringing it tothe location and condition necessary for it to be capable of operating in the mannerintended by management.All assets are measured subsequently at fair value as follows:Specialised NHS Land, buildings, equipment, installations and fittings are stated atdepreciated replacement cost, as a proxy for fair value as specified in the FReM.Those buildings which qualify as specialist operational assets, and therefore fall to beassessed using the Depreciated Replacement Cost, (DRC) approach, have beenvalued on a replacement basis; ie the valuation approach assumes that the existingasset will be replaced by an asset of similar design to the original and constructedusing similar materials, except those hospitals built circa 1900, which in accordancewith the Board’s instructions have been valued on a modern equivalent asset basis(as allowed under RICS standards covering “The Depreciated Replacement CostMethod of Valuation for Financial Reporting”.Non specialised land and buildings, such as offices, are stated at fairvalue.Valuations of all land and building assets are reassessed by valuers under a 5-year programme of annual professional valuations including valuer’s views on valueadding / non value adding elements in the annual capital programme. The valuationsare carried out in accordance with the Royal Institution of Chartered Surveyors(RICS) Appraisal and Valuation Manual insofar as these terms are consistent withthe agreed requirements of the Scottish Government.Non specialised equipment, installations and fittings are valued at fair value. Boardsvalue such assets using the most appropriate valuation methodology available (forexample, appropriate indices). A depreciated historical cost basis is used as a proxyfor fair value in respect of such assets which have short useful lives or low values (orboth).Assets under construction are valued at current cost. This is calculated by theexpenditure incurred to which an appropriate index is applied to arrive at currentvalue. These are also subject to impairment review.To meet the underlying objectives established by the Scottish Government thefollowing accepted variations of the RICS Appraisal and Valuation Manual have beenrequired:Page 46 of 136