Property, machinery and equipment in general are in the market must be distinguished from the specific property.
Classification of assets as the specific property does not always have to use the valuation method with Depreciation Replacement Cost (DRC). Although the property is a special property, in certain cases be possible to do the special use property Market Data Approach, Cost Approach and / or income approach.
In case there is no market data, DRC is considered as an acceptable method to determine the value of specific properties, but the methodology is applied assessors should conduct the observation in market to estimation of reproduction / replacement and new levels of depreciation. This methodology is based on the theoretical transaction between parties who have an understanding of concepts such as market value.
Valuer estimated cost equivalent modern asset on the relevant valuation date. This may include estimated cost to make the property ready for operation. Reflect the cost of all relevant costs that will be issued. For example, design, transportation, installation and operation preparation (commissioning)
In the valuation of specific properties, the cost to purchase land suitable for development of special facilities that equivalent should be included with the cost required for the development of land.
In determining the amount of depreciation, Valuer should compare with modern asset equivalent assessed against assets. Level of depreciation can be analyzed separately or as a whole include: Depreciation physical, functional or technical obsolescence, economic obsolescence, or external
Depreciation due to physical age usage, and lack of maintenance, the valuation of different methods can be used in estimated cost required to improve the physical condition of assets. Estimation of the depreciation component and a specific cost or contractors can be used to compare directly with the condition of a similar unit.
Functional or technical obsolescence may be caused by the progress in technology, because of new assets that can be more efficient in producing goods and services.
Modern production technology that may cause the assets that have previously experienced dryness, either in whole or in part the cost of the new equivalent. Obsolescence and optimization may be considered to adopt the New Replacement Cost of Asset Equivalent that is different from modern reproduction cost of a new asset.
External or economic obsolescence due to external influences can affect the value of the asset. External factors include changes in economic conditions, which affect demand for goods and services, and potential benefits of business entities. In addition you can also change due to the influence of government regulation rules, and social environment.
When the method DRC values of the material is lower than the value of a property for the use of alternative, Market Value of the use of alternatives should be reported, together with the statement that the value for the use of alternative ignore things such as termination of business interruption or and cost required to use it.
In the case of an entity can not continue business or operations based on information management, and the assessors argued that the property value will decrease when the material business activity or cease, then the statement about this should be loaded in the valuation report.
In the implementation of DRC, assessors need to ensure that the main elements of the transaction market is considered, which include: the understanding of the asset, its function and the environment; study to determine the remaining physical age (for estimation physical depreciation) and the age of economic assets; understanding of changes in market trends, innovations and techniques or standards that affect the market asset (for estimation function or technical obsolescence)
For private sector an entity with specific properties, valuation is done with DRC should meet the test of adequate potential advantage in relation to an entity or unit of income.