Efficient Plant December 2017 - 55

column | ISO 55000

HE PRINCIPLES OF asset
management consider "asset
value" in various ways. As
specified by ISO 55000: 2014 ("the AM
Standard"), the true meaning will no
doubt be debated, over time, by experts
seeking a standardized meaning. For
now, I believe it's adequately defined.
According to the AM Standard,
an "asset" is an "item, thing, or entity
that has potential or actual value to an
organization." But how is the meaning
of "value" defined? Let's look at the ISO
55K documents. They reflect approximately 25 substantive uses of "value" in
ISO 55000 ("Overview") and ISO 55002
("Guidelines"). Oddly, the term isn't
found in ISO 55001 ("Requirements"),
which states, "For the purposes of this
document, the terms and definitions given in ISO 55000 apply." To summarize,
these documents ("Standards") refer to
"asset value" as follows:
value for the organization from
assets
value to an organization and its
stakeholders that an asset brings
value through managing risk and
opportunity (essential to asset management)
value from assets with regard to
organizational objectives.
"Value of" is where most of the
confusion begins. First, the AM Standards state, "Asset management does
not focus on the asset itself, but on the
value that the asset can provide to the
organization. The value (which can be
tangible or intangible, financial or nonfinancial). . . " (55000: 2.4.2). But, as
the following list shows, the Standards
include minimal references to the financial value of an asset:

DECEMBER 2017

Asset management objectives and
planning to achieve them: "Typical issues, amongst others, that are
addressed by (AM) objectives include
the following: a) for asset management:
total cost of ownership; net present
value; return on capital employed. . . "
(55002: 6.2.1.3)
Support-information requirements: "In general, the organization
should consider its asset information
requirements related to the following
areas: g) financial and resource management (e.g. historical cost, depreciation, asset replacement value, date of
acquisition, materiality, capitalization
rules, asset classification/ hierarchies,
life cycle costing analysis, useful lives of
assets, residual value and any residual
liabilities). . . " (55002: 7.5.2)
Performance evaluation-Monitoring, measurement, analysis, and
evaluation of the asset portfolio and
asset-management processes: "The
change in future value of the assets
and the risk profile should be evaluated in both a financial context
and a non-financial context"
(55002: 9.1.2.5). "This monitoring in the financial reporting
system should be done at a level
suitable to the risk, complexity
and value of the assets." (55002:
9.1.2.6)
The purpose of the AM Standards is to ensure a systematic means
of achieving tangible value from assets
to meet organizational objectives.
Speaking of such value solely in financial
or accounting terms overshadows the
whole purpose of an Asset Management
System.
-RobertMW2@cs.com

Defining
Asset
Value
Bob Williamson
Contributing Editor

Considering value
only in financial or
accounting terms is
short sighted.

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