Reset Cost Knowledge

Replacement cost refers to the same purchase now. Assets Or the total cost of remanufacturing the same product.

Replacement cost refers to enterprise Cash or cash equivalents to be paid for assets that are the same or equivalent to their assets.

Replacement cost is a kind of current cost, which is consistent with the original cost at the time of asset acquisition. Then, due to price changes, the same asset or its equivalent may require more or less exchange price. Therefore, replacement cost represents the exchange price needed to obtain the same asset or its equivalent at that time. The exchange price should be the cost price obtained from the enterprise assets or labor market, rather than the selling price in the market where the assets or services are usually sold during the normal operation of the enterprise.

The cost method is also a method of replacement cost, which refers to a value index that is deducted from the estimated cost of updating or replacement of the current cost of assets.

The replacement cost method is to choose a price index, such as CPI, to make assets. Purchase The value of the year is converted to the current value, or a better way is to adjust each asset separately to reflect the real replacement cost of the assets, which simultaneously reflects the two factors of inflation and obsolete depreciation. The biggest disadvantage of the replacement cost method is that it neglects organizational capital. According to the replacement cost assessment, no matter how perfect the replacement cost of each asset is, it will also overlook such an additional coordination value.

In the replacement cost measurement, assets are measured according to the amount of cash or cash equivalents required to purchase the same or similar assets now; liabilities are measured according to the amount of cash or cash equivalents that are currently payable for the debt.

Replacement costs are divided into two types: recovery replacement cost and replacement cost.

1, recovery replacement cost refers to the cost of reusing the same new assets at the current price level with the same material, building or manufacturing standard, design, specification and technology as the assessment object.

2, the replacement cost refers to the cost of purchasing new assets with the same function at the current price level by adopting new materials, modern buildings or manufacturing standards, new designs, specifications and technologies.

In the replacement cost measurement, assets are measured according to the amount of cash or cash equivalents required to purchase the same or similar assets now. Liabilities are measured on the basis of the amount of cash or cash equivalents required to pay the debt.