n IMFO : Official Journal of the Institute of Municipal Finance Officers - To revalue or not - measuring property, plant and equipment at historic cost or depreciated replacement cost?

Volume 15, Issue 1
  • ISSN : 1607-520X



GRAP 17 requires municipalities to recognise and measure Property, Plant and Equipment (PPE) at the component level, and to depreciate assets over their useful lives. PPE may be measured on either the historic cost or fair value basis. When assets are measured on the historic cost basis, value is determined by the original purchase price of the asset. The most popular method for assessing the fair value of PPE is the Depreciated Replacement Cost (DRC) method. DRC is the replacement cost of an existing asset after deducting an allowance for wear or consumption to reflect the remaining economic life of the existing asset. GR AP states that once a municipality has adopted the revaluation model, it may not revert back to the cost model in accounting for assets.

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