Definition: Current replacement cost

Category: National accounts

All capital goods are valued at the price prevailing in the current year. The gross capital stock shows the value of the capital goods assuming that all goods were purchased new in the year considered. The net capital stock at current replacement cost is the value of the capital stock assuming that all goods were purchased in their current state in the year considered. As the capital goods purchased in previous years have to be revalued year by year, changes in the capital stock value appear as a new booking item in capital stock accounts. 
The value of the gross capital stock at the end of the year is calculated as: Gross capital stock at current replacement cost at the end of the year (t-1) + investment during the year (t) - retirements during the year (t) + changes in value gross of capital stock during the year (t) = gross capital stock at current replacement cost at the end of the year (t). 

The value change item has to be recorded as return or loss on capital investment. This is required to maintain consistency of both wealth and income. The changes in value also effect the definition of capital consumption. The data at current replacement cost in the report under "Source" were expressed in ECU.