Replacement cost

The replacement cost is an amount that a company pays to replace an essential asset that is priced at the same or equal value.

Sudha Reddy

CA Final

★ 20K+

11-Jan-22 11:14

Net realizable value (NRV) is the value for which an asset can be sold, minus the estimated costs of selling

Sudha Reddy

CA Final

★ 20K+

11-Jan-22 11:16

Replacement cost is the price in market for which it can be bought. Say product X can be bought at Rs.10 NRV is the selling price - selling costs so if we plan to incur selling cost Rs.1 and add 5% margin then NRV = (10+1)105%-1=10.55

Sudha Reddy

CA Final

★ 20K+

11-Jan-22 11:28

If the NRV of the asset which is replaced is Rs.10 and the cost of the new asset is Rs.50, then we will have to pay only Rs.40. Is this Rs.40 called the replacement cost?

Thread Starter

Sibi Srinivasan

CA Inter

★ 22K+

11-Jan-22 11:43

No. The replacement cost is an amount that a company pays to replace an essential asset that is priced at the same or equal value.

Sudha Reddy

CA Final

★ 20K+

12-Jan-22 09:49