Please note: This practice guidance was originally published in November 2018 but was amended in March 2026 following the HM Treasury review.
HM Treasury’s thematic review of non-investment asset valuation has confirmed minor but material changes affecting Depreciated Replacement Cost (DRC) valuations used for UK public sector financial reporting.
The amended DRC practice guidance does not prohibit the use of Alternative Site assumptions at the present time. Valuers and preparers should continue to apply a Modern Equivalent Asset (MEA) approach, including the use of an alternative site where appropriate, in accordance with existing guidance.
The requirement to adopt an “actual site” basis of valuation, reflecting Existing Use Value (EUV), will apply from the 2028/29 financial reporting period. From this point, the use of MEA alternative site assumptions will no longer be permitted.
The 2026/27 FReM provides an option for entities to adopt an “actual site” approach in advance of this date. Such adoption is subject to HM Treasury approval and is not expected to be widely implemented.
The purpose of this UK practice guidance is to draw attention to matters relevant to the use of the depreciated replacement cost (DRC) method of valuation. RICS’ existing guidance has now been updated to fully reflect these new requirements, with changes made to maintain consistency, auditability, and regulatory compliance.
The ‘cost approach’ and DRC method are regarded as synonymous terms; both are in common use around the world to describe a method of valuation of all types of assets. This practice guidance also highlights the reporting requirements outlined in RICS Valuation – Global Standards – UK national supplement 2023 that are particularly relevant when the DRC method has been used.
Published date: 07 April 2026
