Equipment Appraisal Blog | Understanding Machinery Appraisals

Top Benefits of a Professional Machinery Valuation

Posted by Equipment Appraisal Services on Wed, Jul 29, 2015 @ 11:30 AM



Machinery valuation is often a missed opportunity. While Equipment Appraisal Services knows most business owners appreciate the importance of properly functioning equipment for producing a revenue stream, it is difficult for them to go beyond that assessment and think of their machinery as a valued business asset. Many managers believe they can run their machinery until it is no longer useful, and then simply buy a replacement.

That approach is all well and good until an event occurs which requires the business owner to provide an equipment value. This could be related to an insurance claim or a potential sale, or an equipment appraisal may be required to allocate property as part of a divorce settlement. It can be difficult at that point to find a company that is capable of performing an accurate machinery and equipment appraisal within a limited timeframe.

Our equipment appraisers at Equipment Appraisal Services provide an unbiased and professional opinion of the value of a tangible asset. We may look at the original cost of the equipment less any accumulated depreciation, assess its age and current condition, calculate its estimated earning capability, and try to determine the cost to replace or reproduce it. Values may range from what it would cost to reproduce the equipment with new machinery all the way down to what its value would be as scrap. This provides accurate information on which to base further actions and decisions. There are three approaches we may use when determining equipment values:

  • Cost Approach: This machine appraisal approach may be used most often for such purposes as an outright sale or for tax reporting purposes. It begins with as assessment of what it could cost to reproduce or replace the machine, deducts all forms of depreciation, and takes such factors as age and condition into consideration to determine an estimated value. For example, if you have a lathe that you want to sell, our equipment appraiser would determine what a knowledgeable buyer might reasonably pay for a new piece of equipment, and then make appropriate adjustments to account for the existing wear and tear, in order to justify a realistic sales price.
  • Sales Comparison Approach: In this instance our appraiser will compare the value of your machinery to recent sales and offering prices for similar pieces of equipment. We will then make an upward or downward adjustment, depending on the particular condition of your equipment.
  • Income Approach: This approach tries to determine the present worth of the future benefits that might be derived from a piece of equipment as the result of ownership.

Equipment Appraisal Services is a nationwide provider of certified machinery and equipment appraisals for litigation, bank financing collateral, allocation of assets, divorce and partnership dissolutions, property tax appeals, insurance recovery claims, mergers and acquisitions, gifting and donation justifications, estate settlements, financial reporting, and risk management.

Tags: Equipment Appraisal, machinery valuation