Depreciation calculation at replacement cost or net book value

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Posted on by CapsLock

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Hi experts,

Does anyone have an explanation on how these two work? And what is the standard way? I would say at net book value but can anyone confirm? If we choose at replament cost, we need to inform about this cost somewhere right? Where? Thanks!

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Charlotte X on at

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Hi CapsLock,

Replacement cost is a cost that is required to replace any existing asset having similar characteristics. An organization often chooses to replace its assets when the repair and maintenance costs increase beyond an acceptable level over some time.

Net book value refers to the net worth or the carrying value of the company’s assets as per its books of account, which is reported on its balance sheet. It is calculated by subtracting the accumulated depreciation from the original purchase price of the company’s asset.

Replacement costs typically occur when you recalculate replacement costs and insured value for fixed asset groups. You can view the following documentation:

Recalculate replacement costs and insured values for fixed asset groups - Finance | Dynamics 365 | Microsoft Docs

Best Regards,

Charlotte

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