Replacement Cost New Less Depreciation

Definition

A cost approach valuation technique that estimates the fair value of an intangible asset as the current cost to create a functionally equivalent asset, less deductions for all forms of depreciation including physical deterioration (not applicable to intangibles), functional obsolescence, technological obsolescence, and economic obsolescence. The method is commonly applied to software, assembled workforce (when valued), and databases where the cost to recreate can be estimated from development effort, labour rates, and project timelines.