Within the cost approach, what does reconciliation involve?
Correct Answer
D) Resolving differing cost and depreciation estimates
Why this is correct: Within the cost approach, reconciliation is the process of analyzing and resolving differing estimates for cost new and accrued depreciation from various sources (e.g., cost services, contractor estimates, breakdown methods) to arrive at a single, supported conclusion. Why the other choices are wrong: "Comparing the result with the other two approaches" describes final reconciliation, not internal cost approach reconciliation. "Averaging replacement and reproduction cost figures" is not a required or proper reconciliation method. "Selecting whichever site value is the highest one" is arbitrary and unsupported. Exam tip: Remember that reconciliation happens within each valuation approach before the final value conclusion.
Why This Is the Correct Answer
Why this is correct: Within the cost approach, reconciliation is the process of analyzing and resolving differing estimates for cost new and accrued depreciation from various sources (e.g., cost services, contractor estimates, breakdown methods) to arrive at a single, supported conclusion. Why the other choices are wrong: "Comparing the result with the other two approaches" describes final reconciliation, not internal cost approach reconciliation. "Averaging replacement and reproduction cost figures" is not a required or proper reconciliation method. "Selecting whichever site value is the highest one" is arbitrary and unsupported. Exam tip: Remember that reconciliation happens within each valuation approach before the final value conclusion.
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