Equipment Appraisal Blog | Understanding Machinery Appraisals

Protect Against a Volatile Market with an Oilfield Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Jan 26, 2016 @ 10:30 AM

oilfield_equipment_appraisals

Though the current price at the pumps may have most Americans smiling, those in the petroleum business know just how difficult a downturn in this volatile market can be to their business. From keeping the crew happy to making fast decisions on whether a possibility is a go or a no-go, the fast changes in this market is enough to make anyone a little stressed. In this post, we'll take a good look at how you can protect your company against volatile changes in the market  and position yourself for the next boom by making wise business decisions based on a proper oilfield equipment appraisal.

Protect your interests with an oilfield equipment appraisal

Know your bottom line

By knowing exactly what your equipment values are, you're able to know exactly where you sit in terms of assets. A qualified equipment appraiser can include an estimated remaining useable life as part of your machine appraisal, giving you a good heads-up on when you can expect to replace aging equipment. They can also point out areas where you may want to start the replacement process, by leaving long-term machine equity until the last for replacement, ensuring you'll get more from your machinery in the used equipment market.

Have a solid grasp of your business' actual worth

Equipment appraisals provide you with a better idea of what your equipment is actually worth, rather than the depreciated value counted on your taxes. During a market upswing, the cost of a particular piece of equipment can rapidly increase, which a qualified appraisal specialist takes into account when providing you with a quality oilfield equipment appraisal. Because you know exactly where your assets stand, you know exactly where you stand to make better business decisions. Even better, a quality machine appraisal is prepared to a specific set of standards, which makes it easier to secure financing using your machinery as collateral, because the bank knows it can trust the machine appraisal as part of an accurate picture of your business' net worth.

Avoid risky propositions

When the guy on the next rig comes along to tell you he's quitting and ask if you're interested in buying him out, do you know whether it's a good idea or not? A machinery valuation is a great way to determine your bottom line, so you know whether you're in a good or bad financial position to take advantage of these situations as they arise. Depending on how your books are set up, you may have a financial picture that is either too optimistic that puts you in danger of losing your business to a bad investment or is too conservative, keeping you from taking advantage of new business and business expansion opportunities when they arise.  Knowing your financial state helps you make intelligent business decisions.

The oil & gas industry is volatile, but your business doesn't need to be. Instead of risking everything on a gut feeling gamble, why not look at having a quality equipment appraisal performed on your oilfield machinery? Position yourself to take advantage of the next upturn and you'll be ready to go while your competitors are still catching up with the market change. By using an ASA-certified appraiser who has received the standards board's Machinery & Technical Specialties, you're ensuring that you'll get a professional machinery valuation that will meet your needs. Contact us today for more details on getting started on the path to making wise and informed business decisions.

Tags: machinery appraisal, oilfield equipment appraisal

What you can learn from the appraisal work file

Posted by Equipment Appraisal Services on Tue, Jan 19, 2016 @ 09:00 AM

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An appraiser keeps a work file of all documents and information reviewed during an appraisal so that regulators or appraisal colleagues can review it if necessary. Learn more about what the typical appraisal work file contains and how you can understand its significance as a lay person.  

What is in the appraisal work file? 

According to USPAP, the Uniform Standards of Professional Appraisal Practice, appraisers must maintain a work file that includes all of the data, information, and documentation that supports the appraiser's conclusions about equipment values and opinions relevant to the machinery appraisal. 

Any document that the appraiser used in determining the machinery value must be included in the work file. For example, if the machinery appraiser reviewed a technical manual for a piece of equipment, then a physical copy of the manual must be included. If the appraiser photographed the item to research its value and show its condition at the time of the appraisal, these photos then become part of the records kept in the work file.

Copies of any equipment appraisals, and appendices included with the appraisals, must also be included in the work file. This is good to know in case your copy of the report becomes lost or you lose an appendix or chart included in the appraisal.

If the document cannot be included in the work file, then the appraiser must be able to access it quickly.

In some states, the appraiser must include their professional certifications in the work file.  This protects the appraiser and protects you, the owner of the equipment. After all, you will use your machinery valuation for equipment sales, machinery insurance, or another purpose. It is in your best interests to know that the appraiser who conducted your machine appraisal was knowledgeable, informed, and current with professional credentials. It provides peace of mind for you that your assets are protected and your appraisal represents the item's fair value. 

An appraiser should open the work file when they begin conducting the appraisal and add to the work file as they gather the information needed to develop the report. They cannot gather information after the appraisal report has been issued and put it in the file. 

What you can learn from the work file 

Typically, machine appraisers use dedicated formulas to calculate the value of an item. For example, appraisers will calculate the normal useful life of a piece of equipment to determine how much longer it will be of value to the business. Charts used to make this calculation will be in the work file. By reviewing this, a business owner can learn how valuable their item would be if they wished to sell it, plan for replacement before the machinery becomes obsolete, and make a decision on whether to repair or replace the item. Understanding the item's condition and history, and how those affect value, help you plan for sale or disposal of the item. 

A knowledgeable appraiser will be more than happy to discuss the appraisal work file with you, explain anything you do not understand, and answer questions you have about the machinery valuation. So don't be afraid to ask your equipment appraiser for an explanation if there is something in the file that confuses you. 

Tags: USPAP appraisal, appraisal work file

Know Your Equity: Office Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Jan 12, 2016 @ 10:30 AM

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When it comes to office equipment, most office workers will tell you that it has three phases: working, not working and kind of working. But the truth of the matter is that knowing the office equipment values can help you decide when it's time to retire older equipment in favor of newer models, because it's easier to tell how the equipment impacts your company's assets and equity. Here are some things to consider when looking at an office equipment appraisal:

Office Equipment Appraisal and Your Equity

  • One method many business owners use to determine if it's time to get new equipment is the point where the cost for repairs needed to keep the older machinery operational exceeds the cost to pay for new equipment. Unfortunately, by this point your business will have lost most of the equity in the equipment because if you're not willing to pay for additional repairs, people purchasing the equipment will not be willing to pay a pay the additional costs either.
  • The first area to consider when your business is considering keeping and repairing old equipment versus purchasing new equipment is what the equipment value is right now. Having a quality machinery and equipment appraisal performed helps you determine the starting point in your decision-making process and helps you support your decision with a standardized logical methodology.
  • Once your equipment appraiser provides you with a solid machinery valuation, the next thing to consider is how much longer you can expect the equipment to run reasonably and whether the loss of equity from depreciation over the remaining life is worth waiting to replace the equipment. An office equipment appraisal can also include an estimated remaining useful life calculation, which should help in this situation.
  • On the opposite side of that argument, consider whether you're replacing the equipment too quickly and are costing yourself working capital. As an example, if you purchase a new car and drive it off the lot, it immediately loses value. Purchasing a new piece of equipment just to sell it a few months down the road can quickly deplete your equity. You'll want to wait until you can get you money's worth out of selling the used equipment if at all possible.
  • Another option is to consider what you can get out of your existing office equipment. If the machine appraiser comes up with a value that makes it worth replacing the machine, that means part of your office upgrades are paid for from the sale of the older equipment. This can help make a great selling point for an upgrade when budgets are being strictly controlled and monitored.
  • An additional consideration to bear in mind is whether the new equipment will have features that are not available on the existing equipment that will make your business more productive or will help it keep up with the competition.

By knowing your office machine appraisal value, you're getting a much better idea of where you stand in terms of office performance, continuing costs and equity in assets. Because office machinery is so vital to your business' productivity and continued success, having quality equipment appraisals performed helps you make smart business decisions. If you need to have your office equipment appraised by one of our highly-trained, certified equipment appraisers, please contact us today. At Equipment Appraisal Services, we're always happy to help your business be everything it possibly can be.

Tags: equipment appraiser, office equipment appraisal

Effective Age of an Asset in Machinery Valuation

Posted by Equipment Appraisal Services on Tue, Jan 05, 2016 @ 09:30 AM

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What are your company's equipment values? Though you could guess, a machinery and equipment appraisal can give you a better idea of the value of your company's machinery. But beyond making a quick guess based on what you've seen sell lately or where it is compared to new models of older machinery, the only way to make sure by having a quality machine appraisal performed, during which time the effective age of the machinery will come strongly into play. Let's take a look at what equipment appraisers concentrate on when determining equipment value.

Effective Age of an Asset in Machinery Valuation

Though you can try to determine the value of a piece of machinery, there are a few techniques that don't really work well. Using standardized depreciation formats instead of considering the long-term viability of the equipment means you may have completely depreciated the assets you are still using on a regular basis, which provides an inaccurate view of your business' financial outlook. At the same time, basing the value on local sale prices or dealership offerings may also wreak havoc on your financial outlook, as other machines being offered for sale may be of higher or lower quality and maintenance than the machinery you own and need to appraise.

When an equipment appraiser looks at your business' equipment, he or she is not just looking at the age, manufacturer and model. Because machinery can be kept in a wide range of conditions and levels of maintenance and repair, a much closer approach must be undertaken to determine what the effective age of a machine is as well as the expected remaining useful life from that machinery. But what kind of details are considered during equipment appraisals? Let's continue on for a look.

How Machinery Valuation Specialists Determine Effective Life

So how do machinery appraisers determine the effective useful life of your equipment? They take a good look at the machinery, to see whether it has had excessive wear and tear or other signs of abuse, such as dents, welded repairs or similar concerns. Other areas they'll consider is the working environment and how well the machine has been protected from the elements. They'll take a look at your maintenance and repair logs to ensure that the equipment has received proper care or whether there are outstanding issues that could lead to further problems down the road. They'll consider the hours meter and whether the degree of wear matches up to what they'd expect from machinery with that amount of use. Beyond the machines you own and hare having appraised, they'll also take into consideration similar machines they've appraised in the area and how long they tend to last, basing your machine's potential effective life on all these factors.

By knowing your company's equipment appraisals are accurate and based on solid methodology, you're able to make better decisions in the future that will benefit your company, such as determining when to plan for expected machinery changes as older assets reach end of life. By having a quality, certified machine appraiser take a good look at your machinery and determining its effective age and potential future lifespan, you have legal documentation of the condition of your machinery for financial or insurance purposes if needed. If you have any further questions on how effective life is determined or want to schedule an equipment appraisal, please contact us today. Our highly-trained, certified staff are always happy to help with your equipment appraisal needs.

Tags: Asset Depreciation, normal useful life, effective age, remaining useful life