Equipment Appraisal Blog | Understanding Machinery Appraisals

What are standards of value in equipment appraisal?

Posted by Equipment Appraisal Services on Wed, Feb 03, 2016 @ 10:30 AM


One of the key concepts used in equipment appraisal is that of standards of value. Though that term is often bandied about, what does it actually mean? In this piece, we'll investigate what standards of value are, how it affects your equipment's value and what types of standard is used based on your end goals.

How standards of value affect your equipment appraisal

What are standards of value?

Standards of value is a term that can be somewhat confusing, as it refers to two different concepts. One is the machinery valuation in a particular currency or medium of exchange, which can be of vital importance on the international market. But it can also refer to the type of valuation that is performed by a qualified equipment appraiser on your machinery. For the purposes of this article, we'll discuss the second standards of value referring to the value of a piece of business equipment that needs to be appraised and how the different values can affect your bottom line. Depending on your end purpose for the equipment in question, you may need a significantly different valuation method used, so it's of vital importance that you discuss your intentions with the equipment appraiser before the machine appraisal process is started.

How do different standards affect your equipment appraisal value?

Businesses have many different reasons for having an equipment appraisal performed for their company. They may be trying to determine when it becomes more cost-effective to sell off older machinery that is no longer keeping up with demand. They could be determining the salvage value on older equipment to determine whether it makes better economical sense to continue repairing older equipment or to replace it, and how much the salvage of the older equipment may offset the cost of the replacement equipment. They may need to know the replacement value in case of a fire or other disaster for insurance purposes. 

What standard is best for your purposes?

Unless you're considering a forced asset sale due to financial difficulties, most standards of value are used for a few specific purposes. The first is to get a more accurate financial picture for the business by updating the actual value of equipment that has been completely depreciated, whether it's because you're considering a merger, buy out,  sale of the business or other ownership change. The second is to prove the value of machinery in case of a loss, so that insurance claims can be filed in a timely manner, ensuring your company is able to recover from the los and continue operations effectively and with minimal down time. The third scenario involves expanding or reinventing the business' direction, with the appraised equipment standing as collateral for a potential financial loan to make the expansion or change more feasible. Of course, any of these types of standards will also provide you with a better view of your business' financial health, making it much easier to make smart investment decisions.

By keeping these different standards in mind, you can have a machine appraisal completed that is in line with where your intentions lay. At Equipment Appraisal Services, our valuation specialists are certified through the American Society of Appraiser's Machinery & Technical Specialties designation, so they deal only with heavy equipment on a regular basis. This helps our appraisers give you the most accurate equipment appraisals in the industry. Please contact us today to discover exactly what your equipment values are and to get a better picture of your business' bottom line.

Tags: standards of value, appraisal