Depreciated replacement cost : consistent methodology?
Plimmer, Frances and Sarah Sayce
In the UK, Depreciated Replacement Cost (DRC) is a cost-based method of arriving at a value for assets which are normally never exposed to the open market. The DRC value is used primarily as an entry into the balance sheet (financial statements) of occupiers and, in the case of public sector occupiers, as a device for charging the occupier for the benefits of occupation. It is evident that year-on-year variations in the DRC value has significant financial implications for public sector occupiers and the services they are able to afford to provide. It has therefore been necessary to provide specific guidelines to valuers to ensure that any yearon- year variation in the DRC value is the result of market-based factors and not the result of variation in the valuation methodology. This paper discusses the issues involved in establishing a more consistent methodology for valuers, including the major topics of land value, costing of buildings, and depreciation in building costs. Recommendations to valuers include comprehensive and continuing discussions with the client and clearly distinguishing DRC from a potential Market Value sale price. Although the details are specific to the UK, the paper raises issues of international application.
Event: XXIII International FIG Congress : Shaping the change
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