This financial valuation method involves estimating the amount that would need to be spent today to develop or acquire an asset offering functionality and economic utility equivalent to those of the existing asset, without necessarily being an exact copy of it.
The process generally starts with current development costs (Research & Development, patent filing or other expenses, testing, approvals, etc.), to which a discount is applied to account for the partial obsolescence or functional depreciation of the asset being valued.
This method is relatively quick to implement and not heavily dependent on market data, but it has a significant limitation: it does not reflect the economic value actually generated by the asset and can therefore lead to a valuation disconnected from commercial reality.