What is Valuation Cost?

Valuation cost is only used if you are using some sort of deflation to calculate historical cost.

When is Valuation Cost Used?

Valuation cost is utilized when you need to re-report financials and you do not have the actual historical cost available.

How Municipalities Use Valuation Cost

When actual historical costs are unavailable, municipalities will:

1. Obtain a current replacement cost or reproduction cost
2. Apply deflation using methods such as:
   • CPI (Consumer Price Index)
   • Percentage-based deflation
   • Other deflation methods
3. Calculate an approximate historical cost

Relationship to Replacement Costs

Neither Valuation Cost nor Historical Cost are particularly tied to replacement costs unless they serve as the valuation basis for an inflation measure for replacement cost calculations.

For more information on how to define an asset's valuation cost, click here.