Property depreciation in Government
| DOI | https://doi.org/10.1108/14635780610659955 |
| Date | 01 May 2006 |
| Published date | 01 May 2006 |
| Pages | 259-263 |
| Author | Anthony Andrew,Michael Pitt |
| Subject Matter | Property management & built environment |
PRACTICE BRIEFING
Property depreciation in
Government
Anthony Andrew
Scottish Executive, Edinburgh, UK, and
Michael Pitt
Liverpool John Moores University, Liverpool, UK
Abstract
Purpose – To examine the way the Government accounting and capital charging system allows for
depreciation. Like the private sector, it is designed as an accounting measure of the consumption of
assets. Unlike the private sector, it has no tax implications. Beyond accounting for asset consumption
it does not seem to be a particularly useful tool of asset management. This professional paper
examines the role of depreciation in the public sector, notes some shortcomings and asks whether its
role could usefully be developed.
Design/methodology/approach – It examines the existing professional standards and guidelines
within which public sector property managers work and looks at a selection of the literature on
depreciation generally with a view to shedding light on public sector asset management.
Findings – Currently the utility of the measures of depreciation for asset managers is limited. With
extra work and research, economic measures of depreciation could be devised which might provide a
broad measure of the consumption of assets or the deterioration of larger portfolios of property that
can be valued on a market basis.
Research limitations/implications – Further research should focus on the stability of the model
when other portfolios are used and for different periods of the real estate cycle. It would also be fruitful
to dig deeper in the relation between capital expenses and property values.
Practical implications – With further work measures of economic depreciation may be designed to
provide broad indicators of the deterioration of large public sector portfolios of assets such as offices or
housing.
Originality/value – Of interest to asset managers, public sector finance managers and researchers
in this sphere who have to deal with the long-term investment in non-specialised public sector property
portfolios.
Keywords Depreciation,Public sector organizations, Property,Assets management,
Public sector accounting, United Kingdom
Paper type General review
Introduction
The decline of parts Britain’s public infrastructure over recent decades is an increasing
concern. As CIPFA put it:
It is generally accepted that, throughout Great Britain, the state of many public service assets
has deteriorated to a significant extent. It is vital that practices are put into place that both
ensure the long term sustainability of long life public assets in use, and encourage the
consideration of future developments on their out comes rather than on their means of
financing (CIPFA, 2002).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1463-578X.htm
Practice briefing
259
Journal of Property Investment &
Finance
Vol. 24 No. 3, 2006
pp. 259-263
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635780610659955
To continue reading
Request your trial