The future for the replacement cost in the International Public Sector Accounting Standards
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Teresa Izzo 
, Francesco Paolone , Matteo Pozzoli
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
The purpose of this paper is to review academic literature and professional practice guidance in relation to the replacement cost (RC) method of valuation in public sector financial accounting. The replacement cost is regarded as being the most appropriate basis for the determination of fair value when the fair value of the asset could not be reliably determined using market-based evidence (Wyatt, 2009). However, several problems persist in RC definition and application, underlining the lack of a uniform approach in the current valuation standards. The paper explores the current adoption of RC by performing a content analysis of the latest financial statements published by International Public Sector Accounting Standards (IPSAS) adopter jurisdictions across the globe. The analysis highlights interesting patterns in the use of RC and provides an empirical base for further investigations. Additionally, the research offers useful insights to stimulate professional and academic debate on the replacement cost method, particularly in view of amendments proposed by the recently published Exposure Draft.
Keywords: Replacement Cost, Fair Value, Public Sector Accounting Standards, Financial Statement
Authors’ individual contribution: Conceptualization — F.P. and M.P.; Methodology — T.I.; Writing — Original Draft — T.I., F.P., and M.P.; Project Administration — M.P.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: M41, M48
Received: 16.06.2021
Accepted: 07.09.2021
Published online: 10.09.2021
How to cite this paper: Izzo, T., Paolone, F., & Pozzoli, M. (2021). The future for the replacement cost in the International Public Sector Accounting Standards. Risk Governance and Control: Financial Markets & Institutions, 11(3), 8–15. https://doi.org/10.22495/rgcv11i3p1
