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In this articleThis article explains the process to update the replacement costs and insured values for fixed assets. Periodically, you might be notified that the cost to replace or insure specific fixed assets has changed. For example, your manager might inform you that inflation was 3 percent last year, so you need to increase the replacement cost of all fixed assets by 3 percent. Although you can edit the replacement cost and insured value for individual fixed assets in the Fixed assets page, you can use the Update replacement costs and insured values page to update these values for a group of assets at one time. This information describes how to update values for fixed asset groups or for specific assets in the groups. How values are updatedTo recalculate replacement costs and insured values for fixed asset groups, you must first specify the percentage by which to change the existing replacement costs and insured values, and then perform the periodic update to actually recalculate the values. You specify the percentage in the Replacement cost factor and Insured value factor fields in the Fixed asset groups page. Although you specify these factors for the fixed asset group, when you use the Update replacement costs and insured values page, you can select to recalculate the replacement cost and insured value for only specific fixed assets in a group. When you use the Update replacement costs and insured values page to recalculate the replacement cost and insured value for the assets, the following formulas are used:
Note When you use the Update replacement costs and insured values page, both the replacement cost and insured value are updated for the selected assets; you cannot specify that only one value be updated. To leave one value the same and update the other value, enter 0 (zero) as the factor in the Fixed asset groups page. A zero or blank factor causes the calculation to be skipped in the update. The book value and net book value of fixed assets are not affected by the periodic update. How to use a date to select which items to updateBy default, the update process updates the selected assets that have not been updated on the current day, but that might have been updated on previous days. For example, < current date means “before today.” You can change the date in the Update replacement costs and insured values page by clicking the Select button. The date criteria that you specify is compared to the date of the last periodic update for the asset (the Last periodic value/cost update field in the Fixed assets page). Each time that you successfully update the replacement cost or insured value for a fixed asset, the Last periodic value/cost update field is automatically updated with the current date. Example You updated the replacement cost of the Vehicles, Office Furniture, and Buildings groups by 5 percent yesterday, and you now consider these assets to be accurately updated. To exclude these assets when you update all other fixed assets today, you enter a date in the Last periodic value/cost update field that is before yesterday (< yesterday's date), because the last update for the Vehicles, Office Furniture, and Buildings groups occurred outside the date criteria you entered. Cumulative effect of each updateEach update has a cumulative effect. Therefore, you should plan your updates carefully. For example, if you increase all assets by 3 percent on Tuesday and then increase office furniture by 4 percent on Friday, office furniture will increase by a total of 7.12 percent. ScenarioYour manager notifies you of the following changes to fixed assets:
You make the following changes:
The next day, your manager informs you that computers decreased 8 percent instead of 10 percent, so that you have to correct the replacement costs and insured values. To fix the error, you can use either of two methods:
Note You cannot reverse the -10 factor by entering a factor of positive 10 (or a factor of 2, the difference between -10 and -8), because the amounts will not be calculated as you intend. FeedbackSubmit and view feedback for What is the replacement cost of an asset?Replacement cost is a term referring to the amount of money a business must currently spend to replace an essential asset like a real estate property, an investment security, a lien, or another item, with one of the same or higher value.
What is the replacement value method?Replacement value is a method for determining what an insurance company will pay you in case your property is stolen or destroyed. It equals the cost of replacing the property.
What is replacement method?Definition. 1. The replacement cost method involves arriving at an asset's value by reference to the present-day cost, in an arms-length transaction, of replacing that asset with a similar asset in a similar condition 1 (plus, if appropriate, payment of any taxes due).
Is affected by asset age size and its competitive advantage?Replacement value is affected by asset age, size and its competitive advantage. ___13. Insurance companies uses replacement value as basis to determine the appropriate insurance premium to be charged to their clients.
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