CERTYNEX IFRS ACADEMY

For a highly specialised machine, a valuer estimates what it would cost today to replace its service capacity, then allows for the wear and obsolescence of the unit being valued. Which approach is being applied?

The cost approach, based on current replacement cost, after obsolescence.

The income approach, because the wear of the machine reduces its future cash flows.

The market approach, because it rests on the machine's original acquisition cost.

No approach: a replacement cost is used to account for the asset, not to estimate its fair value.