— Data hub · Cost data sources
Cost data for the cost approach
• Part 1 of 4 · Free indices
• Part 2 of 4 · Cost guides
Producer price indices from FRED and the BLS for the US, Eurostat for Europe, and national statistics offices.
Marshall & Swift (Cotality) and RSMeans (Gordian) publish unit costs; a subscription is required.
• Part 3 of 4 · Local evidence
• Part 4 of 4 · Documentation
Quotes and tenders
Record every input
Supplier quotes, contractor tenders and quantity surveyor rates for the subject's market.
Index series, base period, source and access date for each cost input.
■ Cost data · Indexing
Indexing historical cost (trending)
Trending converts a historical cost to the valuation date with a price index. It estimates reproduction cost, not replacement cost.
Method
Choosing the index
Formula: trended cost = historical cost × index at valuation date ÷ index at acquisition date.
Asset class: match the index to the asset, for example machinery, vehicles or buildings.
Components: trend each major component separately when they follow different indices.
Country: use the index of the country where the asset was bought, then convert currency.
Installation: include freight, installation and indirect costs if they were capitalised.
Limit: trending loses reliability over long periods and for technology assets.
Avoid CPI: consumer price inflation rarely reflects equipment or construction costs.
Example: a machine bought for USD 500,000 when the index was 180 trends to about USD 611,000 when the index reaches 220.
Practice tip: show the index values and dates in the working papers so the result can be reproduced.
■ Cost data · Replacement cost
Replacement cost new
Replacement cost estimates the cost of a modern equivalent asset with the same utility. Direct pricing usually beats trending.
Direct pricing
Unit-cost guides
Supplier quotes: current prices for a modern equivalent asset.
Marshall & Swift: building and equipment cost data used widely in North America.
Tenders: recent contract prices for similar buildings or plant.
RSMeans: construction cost data by component and location.
Adjustments: freight, installation, taxes, professional fees and financing costs.
Local factors: adjust guide costs for location and currency.
Modern equivalent: capacity and efficiency differences need an adjustment.
Listed for information: Valuvix has no relationship with these providers.
Example: a 2015 packaging line is replaced by a faster modern line; the valuer starts from the modern quote and adjusts for the capacity difference.
Practice tip: use trending only as a cross-check when quotes are available.
■ Cost data · Standards
How it links to IVS
IVS 103 sets out the cost approach; the asset standards add specific requirements.
Requirements
Depreciation
IVS 103: the cost approach, including the replacement and reproduction cost methods.
Physical deterioration: wear and tear relative to total life.
IVS 300: plant, equipment and infrastructure.
Functional obsolescence: excess capital or operating costs compared with a modern asset.
IVS 400: real property interests, where land is valued separately.
Economic obsolescence: external factors such as weak demand or regulation.
IVS 106: documentation of the inputs and sources used.
Cross-check: test the result against the income or market approach where possible.
Example: replacement cost new of USD 2.0 million less 40% physical deterioration and then 10% economic obsolescence gives USD 1.08 million.
Practice tip: apply deductions in sequence and document each one; see the Cost Approach calculator.
■ Cost data · Quality control
Reliance and common pitfalls
Cost data are easy to find but easy to misuse.
Reliance
Pitfalls
Primary data first: quotes and invoices beat indices.
General CPI: using consumer inflation instead of a producer or construction index.
Index metadata: read the scope, base year and revisions.
Long periods: trending very old costs over decades.
Currency: index in the original currency, then convert.
Imported equipment: domestic indices may not reflect import prices.
Working papers: save the series with the access date.
Double counting: obsolescence counted both in the cost and in the deductions.
Example: equipment imported from Germany is indexed with the German producer price index in euro, then converted at the exchange rate on the valuation date.
Practice tip: explain why each index fits the asset.
✱ Source and attribution
Information from official statistics and cost guides
Federal Reserve Bank of St. Louis, FRED (producer price indices from the US Bureau of Labor Statistics). Eurostat, construction producer price and construction cost indices. Cotality, Marshall & Swift. Commercial guides are listed for information only. Valuvix links to the originals and does not reproduce their data.
Related Valuvix calculators: Cost Approach, Adjusted Net Assets.