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Assessment Approaches: The Cost Approach

Author

Listed:
  • Elena Valentina ȚILICĂ

    (Bucharest University of Economic Studies)

  • Radu CIOBANU

    (Bucharest University of Economic Studies)

Abstract

According to the International Assessment Standards, in order to obtain a certain type of value, the three approaches of the unanimously acknowledged and applied value may be used, that are substantiated on the economic principles of substitution, variable proportions or benefits anticipation: the cost, market and income approach. Within the article hereby, we present aspects regarding the cost approach (based on assets), that provide indicators on value starting with the economic principle according to which a buyer will not pay for an asset more than the cost necessary for acquiring an asset with the same utility, either by buying or by building. The assets-based approach can be applied by means of three methods which can be used in distinct cases, that we shall show in this article: the net accounting asset method, the corrected net accounting asset method and the net liquidation asset method.

Suggested Citation

  • Elena Valentina ȚILICĂ & Radu CIOBANU, 2023. "Assessment Approaches: The Cost Approach," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(2), pages 41-49, February.
    • Handle: RePEc:ahd:journl:v:4:y:2023:i:2:p:41-49
    DOI: 10.37945/cbr.2023.02.05
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    Keywords

    cost approach; net accounting asset; corrected net accounting asset; net liquidation asset;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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