DRC Method Flashcards
When should you use the depreciated replacement cost method of valuation? And How is it calculated? What is the guidance note on DRC?
It should be used when there is limited availability of market evidence. Examples could include a listed ruin.
It is calculated in two steps
valuing the land in the current use
add cost of replacing the asset plus fees and less a discount for depreciation.
RICS Guidance Note on Depreciated Replacement Cost Method of Valuation for Financial Report, 2018.
What does the Red Book say about DRC Method of Valuation?
The Red Book says that the method should not be used for loan security valuations, but may be used for valuations to form part of a financial statement.
There is an RICS Guidance note on Depreciated Replacement Cost Method of Valuation for Financial Reporting 2018
What must a valuer include when reporting a DRC valuation?
They must state the value for any readily identifiable alternative use if it is higher than the current use if appropriate, or if appropriate a statement that the market value would be lower on cessation of the business use.
