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Replacement Asset Value (RAV) Definition

June 4, 2010
(Reliability Engineering)

The monetary value that would be required to replace the production capability of the present assets in the plant. Includes production or process equipment, as well as utilities, support, and related assets.  It should not be based on the insured value or depreciated value of the assets. It includes the replacement value of the buildings and the grounds if these assets are maintainted by the maintenance expenditures. It does not include value of real esate - only improvements. Synonymous with estimated replacement value (ERV).

Tip excerpted from The Professional’s Guide To Maintenance And Reliability

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Comments (5)

  • It should include: asset purchase cost, delivery and insurance costs, construction and/or installations costs (adaptations if not equal to old one: foundations, anchors, electrical,instrumentation, etc.), commisioning and start up, new procedures (maintenance and operations), training,etc.

    1) Posted 9:10 am, 10 June 2010 by Francisco Elicer

  • To arrive a simple and logical decision making replacement value for any asset following methodology also can be thought of.
    Three attributes shall be considered.
    1. Depreciated value of asset
    2. Operating cost (operation, Maintenance, consumables etc.)
    3. Cost of production delivered by the asset
    In case the operating cost is consistently higher than sum of deprecated cost and delivered production cost, then the asset is liable for replacement as it would not contribute in organizations business and growth.
    Sourav Kumar Chatterjee
    Chief Manager Rotary
    HPCL Mumbai India

    2) Posted 11:48 pm, 10 June 2010 by Sourav Kumar Chatterjee

  • First of all I apologize for the typographical error of putting word “deprecated” instead of “depreciated”. Kindly read it as depreciated.
    As far as I my understanding goes, all the cost heads starting from design , manufacturing , transportation , installation , commissioning up to GTR are consolidated to a single term i.e acquisition cost. It is the cost incurred on any new asset or assets joining the production chain.
    Many a times it is recorded as “First cost” in asset register book, and depreciation is calculated on this first cost, updating book value time to time.
    So the attribute “depreciated cost” represents the instant book value of asset in all counts.
    To be more precise, the operating cost shall also include the inventory carrying cost on spares/consumables for the particular asset.
    To calculate depreciated cost for repairable asset which can be repaired to the state of “As Good As New”, the book value shall be sum of depreciated cost at the time of repair and cost incurred on repair. Same to be updated in asset register book.
    Kindly correct me if my understanding is not within track.
    Sourav Kumar Chatterjee

    3) Posted 11:40 pm, 12 June 2010 by Sourav Kumar Chatterjee

  • Very interesting discussion, and if I may, could I ask your view on 'when' these cost are included in the RAV? Is it from the moment of purchase, or once the asset has become operational?

    4) Posted 6:08 am, 04 May 2012 by Andy watts

  • What is the best in class method for knowing when breakdown cost are high enough to replace a production asset?

    5) Posted 2:48 pm, 10 April 2014 by Joseph Burke

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