When formulating a budget for the life of a project or a technology, depreciation and amortisation policies have an impact on calculating costs and benefits, particularly in future years.
Depreciation
How depreciation is calculated and taken into account depends on the locally applicable finance procedures. Where accrual accounting methods are used, depreciation is a significant factor that can heavily influence the bottom line of a project.
Unfortunately, items of technology, particularly computers, depreciate quickly. The rate of change in the computer industry is such that most computer items are obsolete within months of being purchased. Thus in many cases the value of computer equipment can depreciate so rapidly that it can be written off as worthless within two to four years.
Consequently, depreciation needs to be factored into the budget strategy in accordance with local regulations or conventions. Replacement costs of obsolete technology as well as possible gains from reselling the old equipment while it retains some value are factors that also need to be included.
Amortisation
At the end of the life cycle of an item of technology, the issue arises as to whether it is more economical to use or dispose of obsolete equipment. As improvement in computer technology accelerates, this issue can occur within a year or two of purchase.
On the other hand, if the life of a piece of technology can be extended so that it can be used over several electoral events or if the technology continues to perform satisfactorily notwithstanding that it is obsolete, it may be worth retaining. Then, the cost of that technology can be amortised over a longer period and the long-term cost of implementing technology is reduced accordingly.
This approach necessitates a deliberate decision to reuse technology even where it may, in industry terms, be obsolete. Provided that the technology continues to perform its intended service to an acceptable standard, this is generally sound practice.
In addition to avoiding the cost of upgrading to new technology, reusing existing technology has the advantage of familiarity, and avoids the pitfalls of implementing new, possibly untested, technology.
When deciding whether to reuse technology and amortise it over two or more electoral events, the cost of maintaining and, if necessary, upgrading or enhancing the technology has to be weighed against the cost of replacing it. The most economic course will depend on the particular type of technology being considered and the timeframes involved.
The issue of when to upgrade obsolete equipment has to be taken into account when budgeting, as it impacts on the likely long-term cost of the technology.
Once a decision has been taken to dispose of obsolete equipment, it may be possible to achieve some return on the investment made on that equipment by selling it. Technology that may be obsolete in one jurisdiction or industry may be still an improvement on technology in use elsewhere. While any returns to be gained are unlikely to be a significant offset on the original purchase price, there may still be value in selling obsolete equipment rather than simply destroying it or giving it away.
Governments often have agencies that specialise in disposing of obsolete equipment on a whole‑of‑government basis. Some governments distribute obsolete equipment to other jurisdictions as a form of aid. Other agencies under the same government umbrella may be happy to accept obsolete equipment. For example, schools may be interested in receiving out-of-date personal computers for student use.
If these options are not available or feasible, it may be possible to sell obsolete equipment by tender or auction, or simply by setting a reasonable market price on the equipment and advertising it for sale.
