Data processing: financial – business practice – management – or co – For cost/price
Reexamination Certificate
1995-05-24
2003-06-17
Sheikh, Ayaz R. (Department: 2781)
Data processing: financial, business practice, management, or co
For cost/price
Reexamination Certificate
active
06581045
ABSTRACT:
FIELD OF THE INVENTION
The invention relates to apparatus and methods for efficiently maintaining, evaluating and managing the physical state or condition of assets and, more particularly, apparatus and methods for “rating” asset conditions, estimating asset service life and providing data for facilitating alternative repair/replacement decisions.
DESCRIPTION OF THE RELATED ART
Commercial, industrial and other types of organizations must continuously be concerned about the business “condition” of their organizations. Such concerns typically involve business decisions regarding sales, marketing, advertising and numerous other issues. Also, these concerns may involve relatively “tangible” issues such as existing and future space requirements, future employee growth (or reduction), necessary equipment purchases and similar concerns. For purposes of forecasting space requirements, requisite employee hiring requirements and new equipment purchases, along with similar issues involving current and future growth and expenditures, various activities of differing “sophistication” can be undertaken.
For example, it is common for industrial and commercial establishments to undertake “forecasting” activities directed to prediction of future expectations as to the general economy and the economic expectations of the specific business in-which the individual organization is involved. In fact, a number of management consultant firms specialize in such undertakings. Also, various types of business forecasting “models” have been developed in an attempt to more accurately predict the future state of the general economy and the future state of specific types of businesses. These forecasting models are often in the form of computer software packages and the like, whereby various types of algorithms are utilized to predict future economic status, based on input data comprising various financial and demographic variables. The software packages can be in the form of computer programs licensed or sold directly to business organizations or alternatively, may comprise software packages maintained proprietary and internally by financial and other business management consultants.
Such forecasting models typically utilize a number of variables in attempting to more accurately predict future business conditions. For example, a business forecasting model for a specific organization may take into account the geographic location of the business, expected population growth around the location, “age” of the specific business or technology in which the organization is involved, parameters indicative of future product or service demands, and many other variables. Through the use of these models, it is possible for a commercial or industrial organization to predict, within finite confidence limits, the expected growth of the demand for the organization's products or services and, therefore, the expected potential growth (or reduction) of the organization's business.
More specifically, financial and other business management consultants can use the business forecast to estimate future sales of the organization's products or services, given that certain purchases of physical plant, other equipment and similar assets required for such sales are undertaken. Correspondingly, assuming certain levels of product sales or services are attained, an organization can estimate its expected revenues. Similarly, assuming certain employee growth and equipment and plant purchases, an organization can estimate future expenses relating to such items. With all this information, income, cash flow and other financial matters can be reviewed and analyzed to determine suitable activities to be undertaken by a business organization with respect to its growth.
The foregoing description of an organization's future business concerns, and the proceedings undertaken to predict the economic future and potential business growth, are relatively well known. However, in addition to concerns about space requirements, equipment purchases, employee hiring and the like commercial and industrial organizations have other “inherent” items which may have a significant impact on future expenses. Among these items is the actual physical condition of existing physical plant components.
That is, the expenses associated with repair and/or replacement of currently existing physical plant components can have a significant impact on the financial status of an organization. For example, it can be assumed that a small or medium sized business organization is involved in the assembly and manufacture of a product requiring a relatively large number of machined parts which are produced at the organization's own facilities. The facilities may thus comprise a factory or a single building of relatively large floor space. If such facilities are relatively old, significant repairs or replacement may be required of plant items such as a main heating, ventilation and air conditioning (HVAC) system. Correspondingly, the costs associated with such repairs or replacement may significantly affect the organization's financial status, notwith-standing that repair or replacement expenses may be amortized over the remaining useful life of the repaired or new system. That is, notwithstanding amortization, a business organization may be required to have a relatively large amount of cash available immediately for such repairs or replacement. It is not uncommon for typical business forecasting models to substantially “ignore” required expenditures for repair or replacement of existing plant structures.
Furthermore, with respect to repairs or replacement of plant facility components, it is not uncommon for a business organization to have a number of alternative activities available which may be undertaken. Returning to the example of the HVAC system described above, an alternative to replacement of the entirety of the system may be replacement of only a selected number of individual components of the system, with less expenditures associated with such selective replacement. Still further, the entirety of the system may be repaired, as a substitute for replacement of any substantive components. Adding another layer of complexity to the repair or replacement decision process is the further alternative of selective repair of components, with deferral of other repair options. As an example, a business organization may choose only to effect “emergency” repairs of system defects, i.e., repairs of defects which must be made immediately to avoid potential production downtime, or a similar deleterious events.
Each of the foregoing decisions may have significantly different impacts on the financial status of the business organization, relative to other potential decisions. In addition, some of the repair or replacement decisions may be financially unfeasible, given current budget restraints or lack of expected cash flow. Further, it is relatively easy for a financial planner to make a decision for repair of plant facility components, rather than replacement, in view of the fact that such repairs may “appear” to be significantly less expensive in the near future. However, if such repairs do not sufficiently increase the “useful life” of the system components, or the entirety of the plant system, the actual cost to the business organization in the long term may be substantially greater than the long-term cost of a replacement option.
A further problem exists with respect to the impact of repair or replacement decisions on the “apparent” financial status of a business organization. For example, a business-organization may have a plant facility system, such as the aforedescribed HVAC system, currently being amortized over its useful life. Immediately following the end of its useful life, and depletion of the system as an asset on the financial records of the business organization, significant repairs or replacement may be required. However, by deferring repairs or other maintenance, the business organization may be able to show an apparent “positive” effect on its financia
Building Technology Associates, Inc.
Chung-Trans Xuong
Sheikh Ayaz R.
Varnum Riddering Schmidt Howlett LLP
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