Posted in Finance, Accounting and Economics Terms, Total Reads: 1062
Definition: Reproduction Cost New
Reproduction Cost New is the cost to duplicate an asset or a property by using same materials and following same specifications. It is used by insurance firms to replace the asset with its exact replica. There is an allowance for depreciation in the reproduction cost. The cost incurred in present to create a 1980 building would not be equal. Thus, the reproduction cost would account for depreciation too.
While the Reproduction cost is used to evaluate the costs involved with the risk of creating an exact copy of the asset, Replacement costs are used to measure the risks associated with replacing the asset with a similarly-functioning asset. (Not the exact replica)
Many buildings like the UNESCO heritage sites, are repaired and restored and are made as close to their original self. A building having colored windows are replaced by a glass of similar shape, size, color, specifications etc