Global Capital Spends
Within the Metrix Asset Management system, a Capital Spend refers to an amount of money that has been incurred against a specific project (Budget Bucket) and will be Capitalised to the underlying Asset Components at the conclusion of the project.
A Global Capital Spend is one of two types of Capital Spends that can be allocated to a Budget Bucket (the other being a Linked Capital Spend). A spend type of Global or Linked simply controls how the Capital Spend is capitalised/recognised against the underlying Asset Components at the end of the project. In either spend type, the total Capital Spend amount is the total amount of all Capital Spends that have been incurred against the Budget Bucket.
The term “Global” refers to the fact that the Capital Spend is not linked to a specific Asset Component, but rather is attributed to the entire Budget Bucket. When it comes to capitalising/recognising the Capital Spends at the end of the project, Global Capital Spends are distributed evenly (based on Cost Units) across all Budget Bucket Items that are assigned to the Budget Bucket.
In the above example, the Budget Bucket has three items (Component A, Component B, and Component C) with differing cost unit values. Altogether, they combine with a total cost unit value of 6000. The Budget Bucket also has two (2) Global Capital Spends allocated to it, one for $15,000 and the other for $2,000. The total Global Capital Spend for the Budget Bucket is $17,000.
To calculate the ‘share’ of the Global Capital Spend that each item will receive, the following formula is used:
$$ [Share of Spend] = \frac{[ Item Cost Units ]}{[ Total Cost Units of all Items ]} \times [ Total Global Spend ] $$How this breaks down for each Component Item is shown in the table below.
| Bucket Item | Cost Units Share | Total Global Spend | Share of Spend |
|---|---|---|---|
| Component A | 2000 / 6000 = 33% | $17,000 | $5,610 |
| Component B | 3000 / 6000 = 50% | $17,000 | $8,500 |
| Component C | 1000 / 6000 = 17% | $17,000 | $2,890 |
This means, when it comes to capitalising/recognising the Global Capital Spend, Component A will incur $5,610 of the overall spent amount.