No development ever replaces a component inventory all at once, but these individual and total component replacement cost(s) as established during a current fiscal-year, are the only way that we have to set up reserve fund planning that allows for the comparison of two developments.
It is best to understand current replacements as the cost to replace, repair, or restore a component to a functional state during a current fiscal-year. This includes demolition, disposal, profit, contingencies, and taxes.
Current replacements do not refer to the value of a component when it was constructed – that would reflect accounting that sets assets and liabilities at the amount at which they were originally acquired.
Similarly, current replacements is not about the value of an asset at its re-sale price.
And certainly, a current replacements are not the same as the cost of replacing, repairing, or restoring all components to their original condition – CRN is a very broad third-party based value that appraisers and insurers use.
Simply put, reserve fund planning focuses on the cost of remediation and renewal – the foundation of fiscal-year benchmark analysis – that is often more expensive then new construction cost(s).
Current replacements are based on work standards that could be warranted by a third-party insurer – no council member freebies or your-uncle-the-contractor pricing allowed.
Current replacements are costs that all strata council would be faced with – although these costs may be lowered if a proactive council acquired inspections and quotes in a fiscal-year or two before the work was done.