Allocation of Assets - Machinery and Equipment Appraisals
Oftentimes with unit purchases containing multiple assets there is a need to separate, or allocate, the individual components of the unit for a number of accounting purposes. Examples include the need for accurate asset records and depreciation schedules, in addition to other, similar purposes. A certified equipment appraisal report conducted by a qualified appraiser may be needed depending on the reason for the allocation.
For example, a certified equipment appraisal report would be needed for the allocation of purchase price in the following example. ABC Cleaning Company plans to purchase XYZ Cleaning Services, mainly for their customer base in Western Pennsylvania where ABC plans to expand its current operations. Since the assets of XYZ include a warehouse and vans, in addition to the goodwill of their customer base, an allocation of assets would be required in order to maintain proper accounting records for depreciation and tax purposes. One would not want the value of goodwill included in the book value of a tangible asset.
In addition to customer lists, other items with value such as covenants, leases, training and transition costs, as well as Inventory when included with tangible personal property, may make the allocation of purchase price necessary. This allows for tangible assets to be properly accounted for in accounting records as well as for tax purposes. One would not want assets being depreciated from any value higher than needed.
Whether you are purchasing another company and need assets allocated as described above, or are facing liquidation, please contact Equipment Appraisal Services for more information regarding the allocation of assets and the role of a certified equipment appraisal report.