Understanding Equipment Appraisal Values

The motivations behind seeking an equipment appraisal varies based on specificity of need by organization. Common intended uses for equipment appraisals include transfer of ownership, internally-made financial decisions, financing, leasing, meeting liquidation needs for business insolvency, the dissolution of businesses and corporations, and tax and estate planning. It is for these reasons that individuals, different companies, firms, and financial institutions seek the help of reputable equipment appraisers to reclaim value for their assets.

 

If you are the party seeking an equipment appraisal, it is likely in your interests to ensure that your equipment is valued at the best possible number for your circumstances.

 

One way to recognize whether or not you’re getting the best possible value is by understanding the various types of value definitions used in the appraisal process.

 

What value level is placed on the equipment in the appraisal process?

 

Fair Market Value

Fair Market Value is an opinion expressed in terms of monetary value, in which the asset would be exchanged between both willing parties as buyer and seller. Both parties have a reasonable knowledge of facts and expectations when it comes to this exchange.

Fair Market Value – Removed

Fair Market Value Removed follows the same definitions as “Fair Market Value”, but both parties contemplate the removal of the asset to a different location on a specified date.

Fair Market Value in Continued Use

Fair Market Value in Continued Use also follows the same logic as “Fair Market Value” in definition, but with the additional assumption that the business earnings would support the value as reported without the requirement of verification.

Fair Market Value – Installed

Fair Market Value – Installed follows the same definition as “Fair Market Value”, but includes the consideration of market conditions on the value of the asset that is separate from the earnings produced from the business where the asset is currently or will be installed on a specified date.

Orderly Liquidation Value

An Orderly Liquidation Value is the determined value of the gross amount, expressed in terms of monetary value that could potentially be realized in a liquidation sale. A reasonable period of time is expected to find a suitable purchaser, with the seller party obliged to sell relatively quickly on an “as-is, where-is basis” on a specified date.

Forced Liquidation Value

Forced Liquidation Value is the determined value of the gross amount, expressed in terms of monetary value that could potentially be realized from a regulated, properly advertised and conducted public auction. It is in this situation that the selling party is obliged to sell relatively quickly on an “as-is, where-is basis” on a specified date.

Liquidation Value in Place

Liquidation Value in Place follows the same definition as a “Forced Liquidation Value”, except the seller is compelled to sell on a specified date due to a failed, non-operational facility with the assumption that the facility in question is still viable.

Salvage Value

Salvage Value is the appraised amount, expressed as a monetary value. It includes the assumption that the entire or part of the asset in question is no longer viable for use beyond a specified date.

Scrap Value

Scrap Value is the appraised amount, expressed as a monetary value of an asset that is to be sold for material content as opposed to productive use on a specified date.

Insurance Cost New

Insurance Cost New is the cost of replacement or reproduction as it is defined in the relevant insurance policy as of a specified date.

Insurable Value Depreciated

Insurable Value Depreciated is the insurance replacement or reproduction value based on the cost of accrued depreciation.