A method for determining sequential hardware equivalence between two designs and whether one design can replace another design is disclosed whereby the designs are compared utilizing OBDD representations of the designs. The set of states in each of the designs that are equivalent to each other, equivalent-state-pairs, is first determined and it is then determined whether there exists a sequence of inputs that can take all states pairs to the equivalent-state-pair set. This results in a declaration of equivalence in the two designs. An essential reset sequence is then determined, which is then represented by the sequence of inputs to move the designs to a reset state. This, therefore, gives an essential reset sequence for the design and also gives the essential reset states for the design. The essential reset states of the design can then be compared to all states of the designs and, if they are equal, the design is replaceable.