Current cost

Current cost refers to the amount that has to be paid for an asset to be replaced with another. The replacement should have the same present market value of that being changed. The level of service must also match that of the item being replaced.

Other factors, such as the age and condition, should be as close as possible to the original. Despite these similarities, though, the actual cost of the replacement may not be exactly the same, since allowances will have to be made for inflation on the asset’s value. Depreciation should also be taken into consideration.

Therefore, an asset’s current cost may be very far from its historical cost, which is the amount that was paid for the asset to be replaced. Simply focusing on the current cost means that since only the original investment is considered, the current value of the asset is unknown.

To determine the present market value of an asset, one must first consider the condition it is in. For a piece of office equipment, for instance, it is important to take note of general wear and any scratches or flaws it may have accumulated over the period of use.