When appraisers look at variables in an equipment valuation, two of the key factors taken into account are useful life and depreciation. Though the process may seem straightforward, machinery & equipment appraisers look at different characteristics that assist in determining useful life and depreciation within the current market. This differs from the prescribed approach a certified accountant takes.

Accounting Methodology of Determining Depreciation and Useful life

When it comes to capitalized machinery & equipment on a company’s books, accountants treat depreciation and useful life according to accepted principles. One such principle is the Modified Accelerated Cost Recovery System (MACRS). This method is based around a uniform, straight line reduction in value, or depreciation, which starts with the acquisition price of the equipment and amortizes that price, or initial value, equally over a standardized term, usually five to seven years. The endpoint of the depreciation is typically zero.

An Appraiser’s Market Driven Methodology of Determining Depreciation and Useful Life

When appraisers value machinery & equipment, they research the market to find as much information as reasonably possible to estimate its current value. Depreciation and useful life are two components of this analysis, and can be determined through relevant third party sources that buy, sell and utilize the type of assets being appraised. This is a direct market derived approach to understanding these variables more in tune with the reality of how they are valued over time and how long they can reasonably be expected to operate effectively before needing major rebuilds/overhauls or retire from service entirely.

It is important to understand these factors and take them into account as part of a complete market analysis which will also include reviewing comparable sales of the equipment being appraised. Market comparable data can oftentimes be limited or inconsistent across different sources and a balanced understanding of market depreciation and useful life can complement this data and provide reasonableness checks to the comparable sales.

Developing Market Depreciation Curves for Asset Classes of Machinery & Equipment

Once an appraiser has completed a number of valuations in specific markets and industries, they can consider creating a database of values which results in the development of market driven depreciation curves that will further serve as a reasonable source of historical data to consider on future valuations. This would be similar to the concept of subscription databases that are publicly available in certain markets such as construction, automotive and over the road transportation in today’s resource networks.

In summary, when your business needs an updated true market assessment of value for their capital assets, always look to an accredited equipment appraiser to complete the assignment.

Dealing in the international trade business, you may have a need to carefully document the current value of used machinery & equipment, especially if the bill of sale is not available. How do you support this value to ensure your assets pass through customs. One option is to obtain an equipment appraisal to back up your transaction, however, it is important the appraiser has the accreditation and experience necessary to complete the valuation.

Here are some details on how an equipment appraisal from an accredited or certified equipment appraiser can help provide documentation that will make your customs experience go more smoothly:

To avoid potential delays and troubles with the import & export customs process involving machinery & equipment, considering an appraisal that supports the current value of your assets can go a long way to alleviating this. The appraisal report follows certain methodologies and procedures that are universally recognized, giving custom’s officials a higher comfort level, leading to less scrutiny and avoiding potential delays in clearing the machinery for transit.

The legal paperwork can be overwhelming during the Import and export process, and if not completed properly, can lead to all kinds of delays and additional expenses with customs. With an equipment valuation in hand, completed by an experienced accredited appraiser, supporting the current value, you can resolve many of these situations in a timely fashion.

An accredited or certified appraisal report is better able to stand up to scrutiny than as it is clearly independent and unbiased. Working with a less experienced appraiser could lead to a higher level of scrutiny as the report will not hold up to the accepted standards used in the valuation field. The accreditation and certification process includes instruction in standardized appraisal methodology, and the appraiser signs a certification letter as part of every valuation performed.

When your business deals with machinery in the international marketplace, consider the engagement of an experienced equipment appraiser to assist you in the documentation process. At equipmentappraisal.com, we would be happy to work with you in this endeavor.

When the economy is strong, you want to take advantage of that growth to make the best gains you can before things slow down again. But how do you know if you're using your equipment assets to their best advantage during this process? An equipment valuation can be a valuable tool to help you gain significant growth out of the good times to help you through the bad. Here's a quick look at some ways you can use a valuation report to your benefit during periods of strong economic growth.

How can an equipment valuation help you take advantage of economic growth?

• Finance: A strong economy is a common indicator that it's a good time to take out a loan to grow your business or consolidate your position. However, securing that financing for the best possible rates can be difficult, especially if your business struggled during the last recession and has a few stains on its credit report. When you know exactly what your equipment is worth, you can use it as collateral for your financing. Furthermore, an equipment appraisal report from a certified appraiser holds up to strong scrutiny, bypassing the need for having a secondary appraisal for the financial institution.
• Improved Production: Downtime is the enemy when production is running hot and you need every possible bit of outcome from your equipment. During an equipment appraisal, a qualified machinery valuation specialist may notice a number of different issues with your equipment. Because they deal with this type of equipment on a daily basis, it's much easier for them to notice when something seems a little off and may be able to provide advice with regards to potential upcoming failures. This allows you to make timely repairs before a major breakdown takes place.
• Improved Overhead Costs: As part of your overhead costs, knowing when to replace aging machinery is a vital part to ensure that you're putting out as little equity as needed when the time comes for replacement. When you know exactly what your machinery is worth at the time, it makes the replacement decision and the calculations involved much easier to determine. This allows you to make the right decision at the right time for the right cost, saving your business money in overhead costs for replacement machinery.
• Avoiding Poor Property Tax Assessments: As the economy recovers, every tax agency wants their piece of the pie. When your tax bill goes up, you end up having a lower amount of funds available for rolling into other parts of your business. This means that you need to make sure that your equipment is being accurately assessed by the tax office to ensure you're not paying too much in taxes. Because a certified appraisal holds up well to strong scrutiny, it's accepted as proof of value by many tax agencies.

By having an equipment valuation performed, you end up with the tools needed to take full advantage of the situation. But what kind of valuation should you have performed? Rather than taking the word of an appraiser who has an interest in the outcome of the valuation, such as an equipment sales representative, you'll get much better, more accurate and more actionable results from a certified equipment appraiser. Be sure to ask your appraisers whether they're certified and ask which organization they're certified with.