The cost approach to determining fair value involves:
A) determining an amount which reflects the amount currently needed to replace the service capacity of an asset.
B) using prices generated by market transactions involving identical or comparable assets or liabilities.
C) converting future amounts such as cash flows to a current, discounted amount.
D) none of the above.

Question

Quizplus · Accepted Answer

The cost approach involves determining the amount currently needed to replace the service capacity of an asset, which includes estimating the cost of labor and materials needed to recreate or rebuild the asset. This approach is typically used for assets that are not frequently exchanged in the market, or for unique or specialized assets.

The Cost Approach to Determining Fair Value Involves