Riverside Research Institute (Riverside) appeals from the decision of the Armed Services Board of Contract Appeals (ASBCA or Board) holding that Riverside did not incur an allowable cost based on the acquisition of new leasehold improvements which were paid for by Riverside’s former landlord in consideration of its surrender of its leasehold interest in that landlord’s building prior to the end of the lease term. We reverse.
Background
Riverside is a not-for-profit corporation which performs research, development and experimental work for the government. Government contracts account for between 95 and 99 percent of Riverside’s business. In 1970 Riverside leased premises at 80 West End Avenue in New York City from Warwick Investors (Warwick) for a ten-year term. Riverside had an option to extend the lease for five years. Riverside exercised this option, thus securing the right to remain in the leased premises until September 30, 1985.
In March of 1981, Warwick (Riverside’s landlord) offered Riverside one million dollars to vacate the 80 West End Avenue premises (the former location) before expiration of the lease and move to another building in Brooklyn. Riverside rejected this offer but independently looked for replacement office space. Suitable space, owned by Newmark Realty Company (Newmark), was found at 330 West 42nd Street in New York City (the Newmark location).
On September 21, 1981, after negotiations, simultaneous agreements were executed between Riverside, Warwick, and Newmark whereby: (1) Riverside and Warwick agreed that Riverside would terminate its lease at 80 West End Avenue and vacate those premises approximately three and one-half years before expiration of that lease; (2) Riverside leased space from New-mark for a ten-year term; and (3) Warwick agreed to pay for the construction of leasehold improvements at the Newmark location. Warwick subsequently spent approximately $1,700,000 in construction of the leasehold improvements at the Newmark location.
Riverside reported a “gain” on termination of the lease in the amount of $2,573,-079 by recording on its books an increase in fund balances in that amount. It also recorded a corresponding increase in its assets for the new leasehold improvements. It arrived at this figure by using a valuation of $2,750,000 for the new leasehold improvements at the Newmark location and subtracting the unamortized value of the improvements at its former location, plus other directly related moving costs totaling $177,000.
Warwick had appraised the fair market value of the improvements it had made at 2.97 million dollars, and this estimate had been confirmed as “reasonable” by the construction manager retained by Riverside to oversee the project, and by the architect.
Riverside then amortized the new leasehold improvements over the ten-year period of the lease and charged them against its government contracts. When it charged $1,981 of the amortized amount against *422contract F19628-79-C-001, the propriety of the charge was questioned and, in a final decision dated February 4, 1983, the contracting officer denied it as an allowable cost.
Riverside appealed to the Board which affirmed the contracting officer’s decision. The Board reasoned that “Riverside did not incur the costs claimed for the improvements ... The contract and the [Defense Acquisition Regulations] permit reimbursement only for costs actually incurred.” As to Riverside’s argument that it gave up a valuable asset in return for the leasehold improvements and that it therefore incurred a cost which it should be permitted to amortize, the Board reasoned that “the leasehold ... at 80 West End Avenue, was not an asset ... and had no value.”
OPINION
This court’s review of a decision of the ASBCA is limited by statute. Findings of fact by the Board may not be overturned unless those findings are found to be arbitrary, capricious, based upon less than substantial evidence, or rendered in bad faith. 41 U.S.C. § 609(b) (1982); American Elec. Laboratories, Inc. v. United States, 774 F.2d 1110, 1112 (Fed.Cir.1985). Decisions of the Board on questions of law are reviewable by this court for error. Id.
The Board determined that Riverside incurred no cost in the construction of improvements at the Newmark location and that therefore “there is nothing to charge against its government contracts.” The Board erred by misinterpreting the definition of cost in the Defense Acquisition Regulations (DAR). United States v. Boeing Co., 802 F.2d 1390, 1393 (Fed.Cir.1986) (“The interpretation of regulations which are incorporated into government contracts is a question of law which this court is free to resolve.”) The Board’s fundamental error was in concluding that the remaining term of Riverside’s former leasehold interest was not an asset and had no value. In its decision the Board ignored the economic reality of the transaction at issue.
The DAR, which were incorporated into Riverside’s contract with the government, define “costs” in DAR § 7-203.4(a) as follows:
the term “costs ” shall include only those recorded costs which result, at the time of the request for reimbursement, from payment by cash, check, or other form of actual payment for items or services purchased directly for the contract, together with ... costs incurred, but not necessarily paid, for materials which have been issued from the Contractor’s stores inventory and placed in the production process for use on the contract, for direct labor, for direct travel, for other direct inhouse costs, and for properly allocable and allowable indirect costs, as is shown by the records maintained by the Contractor for purposes of obtaining reimbursement under Government contracts____ (Emphasis added.)
Further, both the parties and the Board accepted the definition of “cost” as provided in Financial Accounting Concepts No. 3 (CON 3), issued by the Financial Accounting Standards Board:
Cost is the sacrifice incurred in economic activities — that which is given up or foregone to consume, to save, to exchange, to produce, etc. For example, the value of cash or other resources given up (or the present value of an obligation incurred) in exchange for a resource measures the cost of the resource acquired. Similarly, the expiration of future benefits caused by using a resource in production is the cost of using it.
The import of these provisions is that “cost” is equated with the amount a contractor forgoes or gives up, i.e., its economic sacrifice, to obtain goods or services. Thus the relevant inquiry is whether there was an economic sacrifice here by Riverside.
The Board found, and the parties do not dispute, that the improvements to the Newmark location were paid for by Warwick in return for the early surrender by Riverside of its leasehold rights at its former location and its legally enforceable agreement to vacate those premises. Therefore the value of the remaining term *423of the lease owned by Riverside (together with the relatively minimal value of leasehold improvements at that location) is the economic sacrifice of Riverside.
Ordinarily property is valued at what an unrelated willing buyer is willing to exchange for it in a bona fide arm’s-length transaction proximate in time. See 29 Am. Jur.2d Evidence §§ 395-399 (1967). Here, it is unnecessary to estimate the value of Riverside’s remaining lease term of three and one-half years. For the termination of the lease and vacation of the premises, Riverside was first offered a payment of $1,000,000 by Warwick, the owner of the building. After further negotiations, an agreement was reached whereby the amount of the offer was increased and the form of the consideration was changed.1 Under this new arrangement, it is apparent that the amount expended by Warwick on Riverside’s behalf and the value of this property right (together with the nominal value of the improvements) was the consideration that Riverside gave up, or sacrificed, to acquire leasehold improvements at the Newmark location.2
The Board, however, did not accept this value because it found that “the leasehold ... at 80 West End Avenue [the former location], was not an asset under [Generally Accepted Accounting Principles] and had no value, or a negative value, except to Warwick.” The Board reasoned that “the leasehold was not carried on [Riverside’s] books as an asset and in the exchange it was treated as having no value since the ‘gain’ Riverside reported on its financial statement was not adjusted or reduced by any value assignable to the leasehold.”
The Board’s conclusion that there was no economic sacrifice because “Riverside accounted for the West End lease as an operating lease which had zero value, not as an asset” is unpersuasive. The Board found that Riverside’s treatment of the lease “was consistent with generally accepted accounting principles related to lease accounting.” The lease was not capitalized as an asset nor was a liability recognized for the associated lease payments. Instead, in accordance with standard accounting treatment for an operating lease, no asset or liability was shown on Riverside’s balance sheet. This accounting convention, however, does not change the fact that Riverside had valuable property — the right to occupy the premises for the remaining term of the lease — which was used as the consideration (or cost) of acquiring the new *424leasehold improvements. The Board’s conclusion that Riverside incurred no cost appears to be based on the erroneous assumption that a property interest can have value only if that value is reflected on the balance sheet.
*423Negotiations with Warwick continued. Eventually an agreement in principle was reached. In exchange for Riverside’s agreement to terminate its lease some 31/2 years before it expired, Warwick agreed to pay for Riverside’s leasehold improvements at its new location at 330 West 42nd Street plus certain relocation costs. Riverside desired that Warwick perform its part of the bargain by cash payments direct to Riverside, but Warwick refused and insisted that Riverside enter into a contract with Flintlock Realty and Construction Company, Inc. (Flintlock) to construct the leasehold improvements. Flintlock was affiliated with Warwick and the available evidence indicates that they were commonly owned or controlled.
*424Further corroboration that Riverside’s property interest had value are the Board’s findings that Riverside’s “financial statement shows an increase in its ‘Research Facilities, Equipment, and Furniture’ account and an increase in its ‘Fund Activity’ account” by an entry for “Gain on termination of lease.” Riverside thus recognized that it had gain on disposition of the leasehold estate to Warwick and that an equivalent amount was expended as a cost to obtain leasehold improvements in its new location.
The Board also erred in relying on Marquardt Co. v. United States, 822 F.2d 1573 (Fed.Cir.1987), and viewing this transaction as an attempt by Riverside to convert “ ‘an expenditure by a third party into a “cost” incurred by itself.’ ” Id. at 1577 (quoting The Marquardt Co., 86-3 BCA ¶ 19,100 at 96,549 (ASBCA 1986)). Marquardt stands for the unexceptional proposition that a cost may not be charged against the government unless that cost is actually incurred by the contractor. Marquardt was a subsidiary company whose stock was sold by its parent to another corporation. Id. at 1574. Marquardt attempted to write up the cost basis of its assets to reflect the acquiring corporation’s cost of the Mar-quardt stock and then charge depreciation computed on the increased cost basis against its existing government contracts. Id. This court held that such charges were not allowable because Marquardt had not incurred any additional costs with respect to its assets. Moreover, Marquardt’s assets remained exactly the same. Id. at 1580.
In this case, however, there was a change in Riverside’s assets — its leasehold estate and leasehold improvements at its former location were disposed of and leasehold improvements at the Newmark location were acquired. The change occurred as the result of an exchange of properties, but this is no reason to treat the transaction as if there had been no change of assets. Unlike Marquardt, therefore, Riverside was not attempting to write up the cost basis of old assets. The increased cost it reflected was for newly acquired assets.
We thus conclude that Riverside did incur a cost to acquire the leasehold improvements at the Newmark location, which is properly amortizable by Riverside against its government contracts.3
COSTS
Costs to Riverside.
REVERSED.
. The Board observed as a factual matter that:
. We disagree with the dissent that the price actually paid for the leasehold interest by Warwick in a bona fide arm’s-length transaction is not indicative of the fair market value of the property interest. The cases cited by the dissent are inapposite. They hold only that when the government takes by eminent domain (i.e., where an actual sale has not occurred), a special value of the property to the owner will not be taken into account in determining just compensation. Miller v. United States, 620 F.2d 812, 825, 223 Ct.Cl. 352 (1980) (special value to the owner of old-growth redwood timber is not taken into account in determining just compensation); United States v. 564.54 Acres of Land, 441 U.S. 506, 511, 513, 516, 99 S.Ct. 1854, 1857, 1858, 1859, 60 L.Ed.2d 435 (1970) (just compensation for the taking of summer camps is adequately determined by factors such as the "recent sales of comparable facilities in the vicinity” and not the owner's "unique need for the property”). Moreover, it is apparent that a willing buyer "being reasonably informed as to all relevant facts,” including the fact that Warwick would pay more than a million dollars to acquire the leasehold estate at the date of valuation, would not place a zero value on the lease, even though its value solely for purposes of occupancy might be zero.
Contrary to the dissent’s characterization of the testimony of Riverside’s expert, he determined that "there was a clear indication of value ... (i.e., the leasehold improvements at 330 West 42nd Street [the Newmark location])” for the leasehold right given up by Riverside. 87-2 BCA ¶ 19,693 at 99,704.
. We note that Riverside erred in attempting to amortize $2,573,074, which it arrived at by subtracting from its estimate valued of the leasehold improvements ($2,750,000) the unam-ortized value of the old improvements, plus other directly related moving costs (in total, $177,-000). The $177,000 figure should have been subtracted from the amount Warwick paid, the latter being the “cost" of the improvements.