Integration of the component of financial statement in highway maintenance planning

Highway agencies attempt to apply efficient accounting systems to help improve the transparency of their budget allocation and their overall performance. The accrual accounting system has been adopted to substitute the cash accounting system by many central governments around the world. The system reports transactions of economic value changes rather than when cash movements are made. The asset value and its depreciation determined by the accrual accounting system illustrate the total amount of economic value owned by an agency and the consumption of the future economic benefits for an asset. The age-based depreciation approach, which is a traditional approach, is applied to determine the depreciation of an asset based on the defined useful life and the straight-line depreciation method. The advantage of this approach is its simplicity and its ability to support the long-term asset management system. The condition-based depreciation is recommended as an alternative approach since the actual condition of an asset can reflect its depreciation. The depreciation of an asset based on the condition-based approach is suitable for single-year maintenance planning since the executives cannot estimate the required budget for replacing or preserving of an asset in the long-term period. This research focuses on developing the new depreciation approach by integrating the age-based and the condition-based depreciation approaches in order to strategically plan long-term highway maintenance and to enable the actual condition of an asset to be reflected.