Equipment Appraisal Blog | Understanding Machinery Appraisals

When You Need a Business Appraisal, Don’t Forget About Equipment Value

Posted by Equipment Appraisal Services on Mon, Aug 23, 2021 @ 08:00 AM

Equipment Appraisal Appraiser Business Valuation Together

When it comes time to have a business appraised, whether it’s for a potential sale, purchase, re-financing, new partner investment, or even for internal planning and accounting, if the company owns personal property, machinery & equipment, it makes sense to consider valuing these assets as well.

A business appraisal will involve a review of the company’s financial statements, which include these tangible assets listed at some depreciated cost basis, and may not accurately reflect current market value. Especially if the property was purchased years ago and subject to a short-term, accelerated form of depreciation. This will lead to a likelihood that the net book value on the account ledgers for the personal property and equipment will be at or close to $0.

If the company being appraised will, in part, be affected by re-establishing the current value of the personal property and equipment, then engaging in a distinct appraisal for these assets should accompany the business valuation.

As an example, if the business appraiser is valuing a machine shop and, while reviewing the financial statements, finds a net book value of $100,000 in depreciated machinery & equipment, this is the figure he will use for the overall asset valuation analysis. If, however, an equipment appraisal is completed in conjunction with the valuation effort, and the current market value for these same assets is estimated at $500,000, then this figure will override the internal depreciated number, realizing a significant increase in overall tangible asset value.

This adjustment to the company’s books will truly reflect the overall value of the business and can be used for any of the purposes discussed earlier. It will also provide peace of mind to all parties involved in the larger transaction being reviewed, knowing that an independent third-party appraiser has updated the key components of the business that drive overall value.

There are a handful of appraisers in the marketplace who can value both the machinery & equipment and overall business for their clients. Many of them are larger, conglomerate-type companies who may overcharge you. Equipment Appraisal Services and our sister company, Business Valuation Specialists, can provide this capability to you at an affordable cost while delivering the highest level of service available. Contact us in the comments section below, at equipmentappraisal.com, or businessvaluations.net to see what we can do for you and your business.

Tags: machinery appraisal, equipment appraiser, accredited appraisers, equipment valuation, machinery appraiser, certified business appraisers, business valuation, business appraisal

What is USPAP and Why is it Important in Appraisal Reports?

Posted by Equipment Appraisal Services on Mon, Aug 09, 2021 @ 08:00 AM

Machinery Equipment Appraisal Appraiser USPAP Compliance

When you speak with potential appraisers about engaging in a valuation effort, whether it’s for machinery & equipment, personal or real property, business, or anything else, you should be asking if their work complies with USPAP standards. Before you ask the question, though, here is an overview of what USPAP means so you can better understand the importance of this appraisal requirement.

What is USPAP

USPAP is short for Universal Standards of Professional Appraisal Practice and is considered a type of quality control to a formal valuation process. It was established prior to the Savings and Loan Crisis in the late 1980s and then taken over by a committee called The Appraisal Foundation (TAF) to ensure that artificial inflation of an appraisal did not grow out of control again as it did during that period.

The standards that comprise USPAP are updated every year which allows it to stay current with changes in the industry and any new regulations. Though it's mainly used in the US, it has been adopted in whole or part by a large number of professional appraisal organizations in other countries. Its focus is not on controlling the actual methods an appraiser utilizes but on specific standards for the appraiser’s qualifications, ethics, scope-of-work rules, report writing requirements, record-keeping, client disclosures, signed certifications, and related topics.

There are specific standards that pertain to all types of appraisals and can vary by valuation discipline, including machinery & equipment, business, real property, and personal property. As an accredited appraiser, whether you are a Senior ASA with the American Society of Appraisers (ASA) or affiliated with another valuation group, you are required to meet the qualifications for USPAP. This begins with a 15-hour course for first-time professionals, with continued compliance every two years to ensure the appraiser stays abreast of new developments. The follow-up courses are 7 hours long, however, if you miss one of these 2 year periods, you are required to go back and take the 15-hour course again.

The appraiser is issued a certificate after each course, which can be provided to you upon request. Once you have confirmed the valuation professional is USPAP compliant, you will have confidence that he or she is well-educated and experienced in the appraisal profession, and can deliver a well-researched, supportable report.

Becoming an accredited appraiser requires continuing education not only in USPAP but as an ASA professional as well. By understanding the USPAP Appraisal Standards and how they impact your valuation in terms of the individuals involved in the work effort, you gain valuable insight into the importance of engaging with the right people to complete this for you.

Tags: USPAP compliant appraisal, machinery & equipment appraisal, ASA accredited appraiser, USPAP appraisal standards