Replacement Value: An Overview

The starting point for the calculation of Replacement Value is an asset's Acquired Value. This is multiplied by a Replacement Value index that you enter in the system. An RV index is applied to a group of assets based on using one of the General Information fields in the application.

For example, you can associate the RV indices with the entries in the Class field. If all widget machines, Class ww, will appreciate in value by 10% after one year and 5% in the following year, you enter an index of 1.10 in year one and 1.05 in year two. You enter the appropriate indices for each class of assets. The actual calculation of Replacement Value, however, is made at the individual asset level.

The system automatically calculates Replacement Value on an asset every time depreciation is calculated (using the Depreciate command on the Depreciation menu) for the Sage Fixed Assets book established as the Replacement Value book. Therefore, if you want to calculate Replacement Value, you simply calculate depreciation.

Note: The Thru Date field is extremely important. It indicates the year that the Replacement Value amount displayed represents. (Remember, just like depreciation, the application allows you to calculate RV amounts for earlier periods.) For example, if the current Thru Date is 2/97, the 1997 RV Index has been applied and Replacement Value has been calculated for the 1997 year.

The application provides two ways to calculate an annual Replacement Value for your assets. In the first method, the system multiplies the Acquired Value of an asset by a value (called an index) that you specify for each year. In the second method, the system multiplies the asset’s prior year Replacement Value by the index that you specify. Here is an example .