The written down replacement cost of an asset is its current replacement cost less accumulated depreciation. In general, this value reflects a partial reduction in the balance of an asset due to occurrence of some economic event that negatively impacted the asset’s value. Main reasons include depreciation, destruction, or obsolescence. The reduction is charged as an expense or loss account. In this sense, it is a partial write-off such as that resulting from the destruction or obsolescence of part of the inventory.
This cost measure may also involve other types of assets that are subject to amortization (amortizable assets): it is the net book value of the asset, or its original value minus amortization. The reduction in the book value arises when the asset’s fair value (or fair market value) falls below its book value.
The written down replacement cost of an asset varies over time, in a manner depending on depreciation method, as well as on any maintenance and repair works that may be carried out on the asset.
This cost is also known as the written down replacement value or for short as WDRC.
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