Equipment valuation is a determination of market value of different types of property: from standard office equipment to machine tools and high-tech production lines.
How much does the evaluation cost?
The term and cost of the expert evaluation of the equipment is determined by the number of items in the evaluation task, as well as the type of equipment. It is the type of asset, not the quantity, that has more impact. For example, 50 pieces of modern computers and standard furniture are much easier to evaluate than one of the few specialized machines. Unfortunately, there is no average cost per unit. Therefore, in order to calculate the cost of our work, we ask for the list of equipment to us by e-mail, viber or telegram.
For what would you need valuation of equipments, what documents are required?
Most often, an expert evaluation of the market value of equipment is carried out for the purposes of accounting and tax accounting: for the sale of fixed assets or their deposit in the authorized fund of the enterprise. We recommend you a selection of articles on the subject evaluation of fixed assets. It does not provide only general information on the valuation process. But also give recommendations on what to pay attention when choosing appraisal company, to avoid falling victim to scams.
The following documents are required for the evaluation:
- A list of equipment indicating the make and model, date of commissioning and cost of each asset. In some cases we also ask for the status of the equipment being evaluated.
- Technical documentation required for some equipment.
Please note that in most cases under property evaluation means determination of its market value.
Market value – the cost for which the valuation subject may be disposed of in the market of such property on the valuation date of the contract concluded between the buyer and the seller, after appropriate marketing, provided that each party acted knowingly, judiciously and without coercion.
Resolution of Cabinet of Ministers of Ukraine of 10th of September, 2003 №1440 «On the approval of the National Standard №1 «General provisions for the valuation of property and property rights»
The residual (book) value has nothing to do with the market! The machine can be fully amortized, but is in good working condition and have a high market value. It is also possible that the equipment has become unusable and should be disposed of (scrap metal) and the book value of the equipment has been overstated.
How the market value of the equipment is evaluated
There are two principal approaches to determining the value of fixed assets that do not apply to real estate or cars:
- We find information about the sale of similar or with similar technical characteristics of the equipment. It is important, however, that the condition of the property being sold corresponds to that of the property being valued. This approach usually gives the most accurate result. The only problem is that for specific machines or production lines it is often not possible to find similar items for sale.
- Focus on the market prices of new equipment. It is important to move from this price to the cost of our facility, taking into account its technical condition. The most difficult approach is precisely the transition from the price of the new to the cost of used ones. For this, appraisers calculate various types of wear. We have written about this in detail below.
How to calculate the wear of fixed assets
Once again, we pay your attention that everything below is not related to real estate evaluation or determination of market value of cars. For these groups of assets, including valuation of land plots developed their methods that work according to other algorithms and principled approaches.
Equipment wear and tear in terms of market value (not to be confused with accounting depreciation) can be calculated in two ways:
- The wear by residual service life. This approach is very similar to the well known linear depreciation accountants. Most types of property, plant and equipment have reference data on their standard service lives. For example, if the standard term for office furniture is 10 years, and it has stood for 3 years in the office, then the wear will be 30%. It is quite clear and obvious that such an approach often produces results that are very far from reality. For example, the same desk could have been in perfect condition for three years at the office, like a new one. And could survive several «heavy» moves and sloppy employees and be in a deplorable state without prospects of sale.
- Accounting of all types of wear: physical, functional (moral), external (economic). Usually this approach to calculation of wear leads to the best quality estimation of the market value of the equipment, which was already in work, participated in production processes. Let’s briefly describe what each of the three types of wear and tear represents.
Physical wear
This is the most understandable and obvious type of impairment of fixed assets which comes from their technical condition. In the simplest and roughest form, physical wear can be determined from the table below:
| Physical wear scale for equipment evaluation | |||
|---|---|---|---|
| Condition | Characteristics of the state | Wear and tear, % | |
| from | to | ||
| New | New, unused, in excellent condition | 0 | 5 |
| Very good | Used equipment, fully repaired or reconstructed in excellent condition | 10 | 15 |
| Good | Used equipment, repaired or reconstructed in good condition | 20 | 35 |
| Satisfactory | Minor repairs or replacement of selected fine elements or parts required | 40 | 60 |
| Usable | Major parts such as engine or other key components require significant repair or replacement | 65 | 80 |
| Bad | Major repairs, replacement of main units required | 85 | 90 |
| Unsuitable or scrap | Equipment suitable only for scrap metal | 95 | 98 |
Of course, in some cases it is difficult to determine the exact amount of physical wear. If the equipment is out of working condition, it is often necessary to connect specialists of service centers for carrying out diagnostics. To be able to understand how complex and expensive repairs may be required. Such issues are dealt with individually for each problematic position during the expert evaluation of fixed assests.
Functional, also moral, wear and tear.
This type of wear occurs when, as technical progress in the market, more modern equipment counterparts emerge that can perform their functions more efficiently.
Often it happens that the equipment is in excellent physical condition, even may be new, but the prospects of its sale are not optimistic. For example, bought a few years ago by the expensive 3G modem now no one needs, because there are analogues of 4G. Which, at with not high price, work much more productively.
Or you can remember amateur digital cameras «soap boxes» or a variety of audio players. Now no one needs such equipment, as any smartphone replaces both devices.
External wear and tear or economic obsolescence.
Rather specific type of wear, which is due more not to the equipment itself, but to external factors that affect its usefulness. Such factors may include, for example, changes in legislation that prohibit the conduct of the business for which the equipment was purchased.
External wear is quite rare uses by appraisers when it comes to determining the market value of highly specialized equipment.
We will be glad to see you among our regular customers, so you are welcome to call or write us!
Our appraisal company has experience in valuating equipment of any complexity. We have in place framework agreements for regular expert evaluation of fixed assets with a number of large international companies. For more than 12 years of work our appraisers have accumulated important experience on successful performance of such works. Of course, we also give maximum attention to cooperation with individual customers or single orders, for example, for office equipment evaluation!
