DRC Valuations
Accurate. Compliant. Defensible.
Specialist Depreciated Replacement Cost (DRC) valuations for Academy Trusts, Local Authorities and Public Sector organisations.
RICS Compliant
Valuations prepared in accordance with the RICS Red Book and SORP 2019.
Accurate & Reliable
Robust methodology delivering accurate, consistent and defensible results.
Audit Defensible
Clear reporting with full supporting evidence for audit and compliance.
No Obligation
Professional advice with no obligation. Free and confidential.
Understanding Depreciated Replacement Cost
The Depreciated Replacement Cost (DRC) method establishes the current cost of replacing an asset with a modern equivalent, less deductions for physical condition, functional obsolescence and economic obsolescence.
1. Rebuild Cost
The cost of constructing a new, modern equivalent school using current materials and building techniques.
Key Considerations
- Current construction costs
- Modern building standards
- Professional fees and preliminaries
- Market rates for labour and materials
2. Depreciation
The reduction in value due to the age, condition and functional obsolescence of the building.
Key Considerations
- Physical condition and wear
- Functional obsolescence
- Economic obsolescence
- Remaining useful life
3. Land Value
The value of the land on which the school sits. Typically excluded in educational valuations, but may apply in some circumstances.
Key Considerations
- Existing use value
- Market evidence
- Site characteristics
- Financial reporting standards
What is a DRC Valuation?
Academy Trusts are required to report the value of their school buildings in their financial statements. Since schools are not typically bought or sold on the open market, a different approach is needed to determine their value. This is where the Depreciated Replacement Cost (DRC) valuation method plays an essential role.
A DRC valuation estimates the cost to rebuild a school using modern construction methods and materials, less depreciation due to age, condition, and wear. The method gives a true reflection of the value of a school's physical estate, ensuring fair representation in financial statements.
Although often considered a "last resort" when market evidence is lacking, the DRC approach is recognised by the RICS Red Book as appropriate for assessing Market Value in such circumstances. It reflects the principle that a purchaser would not pay more for the existing asset than the cost of constructing a modern equivalent that meets the same functional requirements at the date of valuation.
Why is DRC Used?
The DRC method is vital for several key reasons:
- Purpose-built schools — designed specifically for education, so they are not typical commercial properties and there are few market comparables.
- No open market value — educational buildings are rarely sold, so there is no readily available market value.
- Fair, justifiable estimates — DRC provides a transparent and defensible estimate of a school's assets.
Why Do Academies Need One?
Academy Trusts must follow specific accounting standards to ensure accurate reporting:
- SORP 2019 — sets out how academy trusts should prepare financial statements, including the accounting treatment of property and asset valuations.
- FRS 102 — the key UK GAAP standard governing financial reporting, including fixed assets and the use of DRC where no open market value is available.
- Funding and audit compliance — meets the requirements of funding bodies, auditors and regulatory authorities.
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