Drivers available to calculate asset disposal costs at end-of-life

Description

In Corporate Performance Management (CPM) software, drivers related to asset disposal costs at end-of-life provide a way to estimate and plan for the financial impact of retiring assets. These drivers are mathematical formulas or algorithmic models that incorporate various factors to estimate the cost associated with disposing of tangible or intangible assets when they have reached the end of their useful life.

Example Use Case

Scenario: A manufacturing company with heavy machinery and equipment that depreciate over time uses CPM software for capital asset planning. They require a forecast of the disposal costs associated with these assets to adjust their financial planning.

Solution: The CPM software uses drivers that take into account factors such as the age of the equipment, its residual value, environmental disposal considerations, and any applicable regulations to estimate the disposal cost at the end of the asset's life. This information guides the company in its financial and operational planning, ensuring no surprise costs.

Considerations

The drivers used should provide reasonably accurate estimates that can be used for practical planning, meaning that it should be more sophisticated than “10% of purchase price” or something similarly simplistic. This works best when an asset is bucketed into a category with similar assets, allowing the users to apply a common rule across all for them. This makes ongoing planning much easier, as the users are not forced to create a new policy for each individual asset.

Questions to Ask a Vendor

• Driver Setup: Are we able to assign a disposal cost to groups of assets instead of one by one?
• Disposal Cost Drivers: How do we create a new set of disposal costs drivers and associate them to a particular asset?