Depreciated Replacement Cost (DRC) is the amount of money to replace the item(s) under consideration, having the like or equivalent utility and less any physical depreciation. It is a method of valuation that is based on an estimate of:
a) In the case of property:
(i) the fair value of land; plus
(ii) the current gross replacement costs of improvements less allowances for physical deterioration, and optimisation for obsolescence and relevant surplus capacity;
b) In the case of plant and equipment, the current gross replacement cost less allowances for physical deterioration, and optimisation for obsolescence and relevant surplus capacity (FRS-3, paragraph 4.10).
DRC is based on an estimate of the Market Value for the existing use of the land, plus the current gross replacement (reproduction) costs of the improvements, less allowances for physical deterioration and all relevant forms of obsolescence and optimisation.
- Insurance Replacement Cost is the replacement cost new as defined in the insurance policy less the replacement cost new of the items specifically excluded in the policy, if any, as of a specific date.
- Insurance Value Depreciated is the insurance replacement cost new less accrued depreciation considered for insurance purposes as defined in the insurance policy or other agreements, as of a specific date.
DESKTOP OPINION
A professional opinion of the appropriately defined value, expressed in terms of currency to be realised by the sale of assets, in which the opinion is generated from lists and/or other informational materials supplied to the Appraiser and evaluated without the benefit of an actual onsite inspection. This opinion is not recommended for use in credit decisions. A desktop opinion could be used to determine the need for an appraisal or the scope of an appraisal.
