Proper Valuation of Property Plant Equipment: Module VI. Disposal Management

Module VI.
Disposal Management
PROPER VALUATION
OF PROPERTY PLANT
AND EQUIPMENT
Regional Basic Logistics Course

Module VI. Disposal Management
PROPER VALUATION
OF GOVERNMENT PROPERTIES

Learning Goal
The Lesson is designed to enable

the participants to understand and
apply the proper valuation of
government Properties.

Objective:
• At the end of the lecture, the Participants
will be able to:
Define and Know the different government
properties.
Enumerate the phase of property and supply
management (life cycle of the GP).
Appraise Government Properties using the
proper method applicable.
Discuss and apply the proper valuation of
Government Properties.
Government Properties
“Asset”
• Are economic resources owned and
controlled by the enterprise
resulting from past events and from
which future economic benefits are
expected to flow to the entity.

“not”
 owned and control
( Rented/Leased Properties )
 past events
( PO, not completed transaction)
 future economic benefits
( Expenses, Consumed supplies)
Property Accountability

Who are Accountable Officers?
Every public
officer whose
duties permit
or require the
possession or
custody of
government
funds or
property
Who are Accountable Officers?
Collecting Officer
CASHIER
 Disbursing
Officer
 Property/Supply
Officer
Treasurer
Bond Coverage
Cash accountability – minimum of P5,000
Property accountability
Equipment: 30% of Total value

 Supplies and Materials:50% of total value;
Accountable Forms:10% of total value
INVENTORIES
and
PROPERTY, PLANT
AND EQUIPMENT
INVENTORIES
 are commodities/goods in the form of

supplies/materials acquired for immediate use in
connection with government operations.
 includes items normally consumed within one

year after being put into use, or converted in the
process of manufacture or construction.

Classification of Inventory Items
Expendable supplies
- Items which are normally consumed in use within one year or converted in the
process of manufacture or construction
Semi-Expendables Property
- Items below the capitalization threshold of P15,000.00 which are not consumed in
use and ordinarily retain their original identity for more than one year. (COA cir.
2015-007)

Accountability for Inventories

 For monitoring, control and accountability, an
Inventory Custodian Slip (ICS) shall be
prepared upon issuance of semi-expendable
items; accountability shall be extinguished upon
return to Property/ Supply Officer or upon
approval of request for relief for lost semi-
expendable items
Forms (Inventories)
REQUISITION AND ISSUE SLIP (RIS)
The RIS shall be used by the Requisitioning Division or
Office to request supplies, goods, equipment, property
carried in stock and by the Supply and/or Property
Division/Unit to issue the items requested
INVENTORY CUSTODIAN SLIP (ICS)

Forms (Inventories)
REPORT OF SUPPLIES AND MATERIALS
ISSUED (RSMI)
The RSMI is a form prepared by the Supply and/or
Property Division/Unit to report/summarize all issues of
inventories (by stock number) during the day.
WASTE MATERIALS REPORT (WMR)
The WMR shall be used by the Supply and/or Property Custodian to
report all waste materials previously taken up in the books of accounts
as assets or in his/her custody so that they may be properly disposed of
and derecognized from the books.

Property, Plant and Equipment (PPE)
are tangible assets that:

Are probable to bring economic benefits/ hold
service potential to the entity;
Ownership and control rests with the gov’t;
Used to achieve government objectives/
mandate
Meets capitalization threshold of P15,000
Applying Capitalization
Threshold of P15,000
 Items individually valued below threshold but

function as a network asset with total value over
P15,000 shall be recognized as part of the primary
PPE (i.e. Computer network; PABX system;
sewerage system)
 Applied on per item basis – each item in a bulk
acquisition will need to meet the threshold to be
considered PPE (i.e. Library books; computer
peripherals; small items of equipment)
Property, Plant and Equipment (PPE)
Accountability
for
Property, Plant and
Equipment
Accountability for PPE
 The person in possession of or having custody

or control of property is immediately accountable
therefore and Property Acknowledgement Receipt
(PAR) shall be issued. He shall be liable for its
money value in case of illegal, improper or
unauthorized use or misapplication thereof by
himself or any other persons for whose acts he
may be responsible.

He shall likewise be liable for all losses,

damages, or deterioration due to negligence in
the keeping or use of property, whether or not it
be, at the time of such loss, damage or
deterioration.
 When the equipment issued to an officer or
employee is no longer needed by him, said
equipment shall be returned to the Property
Officer.
Upon receipt of the returned equipment, the

Property Officer shall cancel the original PAR and
shall surrender the same to the concerned
employee.
 The return of the equipment shall be posted in

the Property Card by the Property Custodian
either for reissuance, repair or disposal.

 A new PAR shall be accomplished and

issued to the new user.
 The PAR shall be renewed every three

years or every time there is a change in
accountability/custodianship.

PHASES OF
PROPERTYAND
SUPPLY
MANAGEMENT

PHASES OF PROPERTY AND SUPPLY

MANAGEMENT
• ACQUISITION
• UTILIZATION/Custodianship
• DISPOSITION/Destruction or Sale

Acquisition
The Act of obtaining properties/assets that will
be use to achieve the objectives and missions of
the Entity
•Exchange Transaction(Procurement Governed
by RA 9184 & its IRR.)
•Non-Exchange Transaction
 3 values that will be considered at acquisition

Measurement at Recognition
 An item of property, plant, and equipment

that qualifies for recognition as an asset shall
be measured at its cost.
 Where an asset is acquired through a non-
exchange transaction, its cost shall be
measured at its fair value as at the date of
acquisition.
UTILIZATION
• is the process of promoting greater services

and economy in the use of supplies, materials
and equipment of the government through
efficient and honest procurement, systematic
and coordinated transfer of control and
recording; proper care, maintenance and repair
and appropriate and timely disposal.

Measurement after Recognition
 An entity shall choose either the cost model

or the revaluation model as its accounting
policy and shall apply the entire class of
property, plant and equipment. (par. 42)

Cost Model
• After Recognition as an asset, an item of

property, plant and equipment shall be
carried at its cost, less any accumulated
depreciation and any accumulated
impairment losses. (par 43)
“Carrying Amount”

Carrying Amount of Property, Plant and Equipment.
• Is the amount at which an asset is

recognized after deducting any
accumulated depreciation and
accumulated impairment losses.
( CA = cost – AD – AI)

Carrying Amount of Property, Plant

and Equipment.
Factors; (CA = Cost – AD –AI)

DISPOSITION / DISPOSAL
“The end of the life cycle of a government

property”
 Has become unserviceable for any

cause
 Is no longer needed
- Sec. 79 of PD 1445 GAAM 502
MODES OF DISPOSAL
Public Auction
Negotiated Sale
Transfer “Appraise
Barter Value”
Donation
Condemnation
APPRAISAL/VALUATION

APPRAISAL/VALUATION
Appraised Value
an estimate or opinion of value of a
described property as of a specific date
transmitted in writing and supported by
relevant and factual data

Four Pillars that Create Value

Desirability - the capacity to incite man to covet ownership
Utility - the capacity to fill man's needs
Scarcity - the limited availability to those desires to
own/posses land. In the "economic concept," value is
conversely proportional to the level of scarcity of the thing
desired (the more the thing is scarce, the more valuable it
becomes)
Transferability - the transferability of use, occupation and
ownership of property or liquidity at anytime possible.
MARKET VALUE as defined in the

International Valuation Standards
“The estimated amount for which property

should exchange on the date of valuation
between a willing buyer and a willing seller in an
arms length transaction after proper
marketing wherein the parties had each
acted knowledgeably, prudently and without
compulsion”.

BUYER SELLER
MATRIX
WILLING BUYER NOT WILLING BUYER
NOT WILLING SELLER NOT WILLING SELLER
NOT WILLING BUYER WILLING BUYER
WILLING SELLER WILLING SELLER
Regional Basic Logistics Course MARKET VALUE

Appraisal Process
The Appraisal Process in general consists of;
“conducting an ocular inspection of the

property to be appraised to assess
its physical condition and to
determine condition rating”

Appraisal Process
1.Conduct inspection (I)
2.Seek reference price information (S)
3.Compute the appraised value (C)

REVISED FORMULAE ON APPRAISAL OF

GOVERNMENT PROPERTIES
• Appraised Value - an estimate or opinion of value
• Current Market Value - the agreed value base on the canvass sheet, or the
value/amount that will be considered base on market research
• Condition Factor of the Property being appraised – Condition Rating of the
property being appraised
• Condition Factor of the Advertised/Canvassed Property – Condition Rating of
the property being
• Replacement Cost – the replacement cost of the part of the property being
appraised.
REVISED FORMULAE ON APPRAISAL OF

GOVERNMENT PROPERTIES
• Effective Remaining Useful Life - the usefulness of the property base on the
appraiser
• Estimated useful Life - use in the depreciation of the property. (table 2)
• Acquisition Cost – the total cost of acquiring the property (value given up)
• Currency Fluctuation Factor - use to adjust the price factor base on the current
exchange rate at the date of appraisal.
• Junk Value - Junk Value is based on prevailing price of scrap

metal or lumber, whichever is appropriate
• When property is still operational/functional or can

be repaired:
–When Current Market Value of a comparable data is available

CF 1
AV = CMV x
CF 2
where:
AV - Appraised Value
CMV - Current Market Value
CF1 - Condition Factor of the Property
being appraised
CF2 - Condition Factor of the
Advertised/Canvassed Property

•When property is still

operational/functional or can be
repaired:
–When Replacement Cost New is available
B. When the Estimated Useful Life of the equipment is

not available
AV = RCN x CF
where:
RCN - Replacement Cost - New
CF - Condition Factor of the property being
appraised


repaired:
– When Replacement Cost-New is available
A. When the Estimated Useful Life of the equipment is

available
ERUL
AV = RCN x
EUL
where:
ERUL - Effective Remaining Useful Life
EUL - Estimated useful Life (Table 2)

repaired:
–When Replacement Cost New is available
B. When the Estimated Useful Life of the equipment is

not available
AV = RCN x CF
where:
CF - Condition Factor of the property being
appraised


operational/functional or can be repaired:
– When Replacement Cost-New is available
A. When the Estimated Useful Life of the equipment is

available
ERUL
AV = RCN x
EUL
where:
ERUL - Effective Remaining Useful Life
EUL - Estimated useful Life (Table 2)

repaired:
– When Acquisition Cost is available
A. For Imported Properties
AV = ( AC x CFF ) x CF
where:
AC - Acquisition Cost
CFF - Currency Fluctuation Factor
P/dollar exchange rate on year of appraisal

CFF =
P/dollar exchange rate on year of acquisition
CF - Condition Factor of the Property

repaired:
– When Acquisition Cost is available
B. For Locally Manufactured Properties
AV = ( AC x PIF ) x CF
where:
PIF - Price Index Factor
CF - Condition Factor of the Property
Price Index on year of appraisal

PIF =
Price Index on year of acquisition
REVISED FORMULAE ON APPRAISAL

OF GOVERNMENT PROPERTIES
• For waste materials and property which are

unserviceable and can no longer be
repaired/reconditioned :
AV = Junk Value
Note: Junk Value is based on prevailing price of scrap

metal or lumber, whichever is appropriate

REFERENCE DATA ON JUNK
JUNK VALUE
1) BY LOT
2) BY WEIGHT
3) BY CLASSIFICATION
TWO TYPES OF JUNK VALUE

1) NON COMMERCIAL VALUE (NCV)
2) COMMERCIAL VALUE
- PER KILO
Regional-Basic
PER PIECE
Logistics Course

ICS – Inventory Items (small tangible items)



PPE Cost Composition

a) Purchase price including import duties and non-
refundable purchase taxes after deducting trade
rebates/discounts;
b) Any cost attributable to bringing the PPE to the location
and condition necessary to be operable in the manner
intended by mgmt. (i.e. installation & assembly; initial
delivery & handling; site preparation; salaries &
allowances of employees involved in the project
delivery; professional fees; cost of testing)

SAMPLE PPE Cost

• On January 24, 2017 Philippine National Police ordered an Office
Equipment with cash Price of P 470,000.00 and was delivered on
February 7, 2017. In addition to the cash payment, PNP pays the
following cost in connection with the machinery; Transportation
P 10,000.00, Installation Cost P 15, 000.00, Cost of 5,000.00

Testing .

Fair market value

(fair value less cost to sell)
• Is the amount obtainable from the sale of an

asset in an arm’s length transaction between
knowledgeable, willing parties, less the cost
of disposal.

Conduct Inspection
establish the existence and condition of

the property / asset
to supplement theoretical computation of

value with first-hand observation

Guidelines in observing Condition of Property

(CF of Missing Property - 100%)/ Sec 41.c, p 201, GAM, Vol.1
Very Good (VG), 80-100% - being used to its fully

specified purpose w/o being modified
Good (G), 55-75% - being used near its fully specified
utilization, with minor repair
Fair (F), 35-50% - below its fully specified utilization,
requires general repair / replacement of minor parts
Poor (P), 15-30% - below its fully specified utilization, needs

extensive repair/replacement of major components
Scrap (S), 0-10% - unserviceable / cannot be utilized to any

practical degree regardless of modification or repair
Condition Rating (Police Service)
Age Condition Rating Remarks

Seek reference price information

Seeking reference price information such as:
 acquisition cost, or
 current market price of similar property, or
 replacement cost for a similar new property;
 prices from second hand rebuilders and
reconditioners of machinery, cars or
equipment;
 currency exchange rates for acquisition year
and current year.

Seek reference price information
Toyota S. Grandia
a. Toyota Shop – 2,200,000.00 (Brand new

100% condition
b. Auto Deal - 2,100,000.00 ( Brand New
100% condition)
c. Lazada - 2,150,000.00 ( Brand New)
(100 % condition

CASE Sample Case
• I phone 6 PLUS 32 GB
• Acquisition Date: June 1, 2016
• Acquisition Cost: 42,000.00
• Condtion 45 % Fair
Advertised Prices : Exchange Rate: 2016
a) Php 14,500.00 $ 1.00= Php 48.00
$ 1.00= Php 51.51(today)
(50% condtion)
b) Php 14,000.00
(50 % condition)
c) Php 16,500.00
(50% condition)

CASE Sample Case
• Isuzu Mux 2.5 LS-Automatic 4x 2 (pearl White)

• Acquisition Date: October 1, 2016
Exchange Rate: 2016
• Acquisition Cost: 1,400,000.00
$ 1.00= Php 48.33
Advertised Prices all brand new: $ 1.00= Php 51.51(today)
a) Php 1,500,000 For RCN:
b) Php 1, 450,000 1)Use BOTH FORMULA
c) Php 1,650,000 2)ENGINE
=Php200,000.00
CF1 CF2 3)For ERUL:
B/C 85 % T 100% D–6 T–5
T 85% O 100% E -5 O-6
B/C-6
D 80% E 100% 4)Assembly,etc:
O 80% B/C 100% Php70,000.00
E 80% D 100%

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Module VI.

Regional Basic Logistics Course

Regional Basic Logistics Course

The Lesson is designed to enable

Regional Basic Logistics Course

Regional Basic Logistics Course

Regional Basic Logistics Course

Who are Accountable Officers?

Who are Accountable Officers?

Cash accountability – minimum of P5,000

Equipment: 30% of Total value

 are commodities/goods in the form of

 includes items normally consumed within one

Regional Basic Logistics Course

Classification of Inventory Items

Regional Basic Logistics Course

Accountability for Inventories

Regional Basic Logistics Course

Regional Basic Logistics Course

Property, Plant and Equipment (PPE)

are tangible assets that:

 Items individually valued below threshold but

Property, Plant and Equipment (PPE)

Accountability for PPE

 The person in possession of or having custody

Regional Basic Logistics Course

Accountability for PPE

He shall likewise be liable for all losses,

Accountability for PPE

Upon receipt of the returned equipment, the

 The return of the equipment shall be posted in

Regional Basic Logistics Course

Accountability for PPE

 A new PAR shall be accomplished and

 The PAR shall be renewed every three

Regional Basic Logistics Course

Regional Basic Logistics Course

PHASES OF PROPERTY AND SUPPLY

Regional Basic Logistics Course

Regional Basic Logistics Course

 An item of property, plant, and equipment

• is the process of promoting greater services

Regional Basic Logistics Course

Measurement after Recognition

 An entity shall choose either the cost model

Regional Basic Logistics Course

• After Recognition as an asset, an item of

Regional Basic Logistics Course

Carrying Amount of Property, Plant and Equipment.

• Is the amount at which an asset is

Regional Basic Logistics Course

Carrying Amount of Property, Plant

Factors; (CA = Cost – AD –AI)

Regional Basic Logistics Course

“The end of the life cycle of a government

 Has become unserviceable for any

Regional Basic Logistics Course

Regional Basic Logistics Course

Four Pillars that Create Value

MARKET VALUE as defined in the

“The estimated amount for which property

Regional Basic Logistics Course