Cost approach

Financial reporting - fair value.

IFRS 13 Fair Value Measurement defines a 'cost approach' as a valuation technique that reflects the amount that would be required currently to replace an asset with a comparable asset which would provide the same future stream of services.

A cost approach to fair value identifies the price that would be received for the asset based on the cost to a market participant buyer to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.

This is sometimes known as the current replacement cost.

See also

• Expected cash flow
• Fair value
• IFRS 13
• Income approach