Dictionary of Accounting Terms: replacement cost
replacement cost
- current cost to replace the service potential of an existing asset. Emphasis is placed on obtaining an asset with identical future service capabilities.
- current cost to replace property in a particular geographic area.
Dictionary of Business Terms: replacement cost
replacement cost
cost of erecting a building to serve the functions of a previous structure; cost of replacing lost or stolen personal property. Compare reproduction cost.
Dictionary of Finance and Investment Terms: replacement cost
replacement cost
cost to replace an asset with another of similar utility at today's prices. Also called current cost and replacement value.
Dictionary of Real Estate Terms: replacement cost
replacement cost
the cost of erecting a building to replace or serve the functions of a previous structure.
Example: Abel wishes to insure a building against accidental destruction. The policy should be written so that in the event of destruction of the building, Abel may replace it with a structure that serves an identical function. Therefore, Abel should insure the building in an amount equal to its replacement cost, which is likely to be greater than its market value.
