STEM applications and examples

Calculating economic depreciation for regulatory accounts

Depreciation which considers the economic value of assets is widely used in cost models to support the regulation of markets for telecommunications

STEM has immediate built-in capabilities to calculate straight-line and reducing-balance depreciation. Built-in cost trends and explicit depreciation schedules may then be combined to model also tilted straight-line depreciation, sum of the years digits depreciation, annuity and tilted annuity, independent of the usage of the assets in question.

These depreciation policies can reflect price changes and the effects of later capital investment or market entry, and can be combined with Cost of Capital to recover the total cost. The regulatory context then demands consideration of asset usage over its lifetime as a measure for the economic value. This example model applies user-defined results to show economic depreciation based on units of production.

Figure 1: Live snapshot from the model

Implied Logic can work with you to customise these techniques to your individual market and requirements. Our objective is to effect sufficient knowledge transfer for you to quickly take ownership of the modelling concepts and system considerations so that all the routine model updates and future expansion can be handled in-house. Please access the full model and contact us if you would like to find out more about our established modelling process.

Online model

A more comprehensive web interface exposes a broad selection of inputs and outputs across multiple tabs. A detailed description of the methodology is available to review offline and share with interested colleagues.

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About the author

Frank Haupt has been actively using STEM for over ten years in various international projects, focusing particularly on service costing. Frank has an intimate knowledge of network architecture, design and technology, combined with hands-on experience of installation, configuration, and training in operational environments.

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