Cost of Replacement

Definition

The estimated cost to create an intangible asset with equivalent utility to the subject asset as of the valuation date, using current materials, standards, design, and technology. Cost of replacement differs from cost of reproduction in that it does not replicate the exact original asset but rather achieves the same functional capability, thereby automatically eliminating curable functional obsolescence. Deductions for economic obsolescence and any remaining incurable functional obsolescence are applied to arrive at fair value.