OF NON STANDARD PLANT AND EQUIPMENT
valuation standard consists of 4 elements:
valuation information for non standard pant and equipment
valuation analysis for non standard plant and equipment
valuation figure for non standard plant and equipment
valuation report for non standard plant and equipment.
is a high probability when valuing specialised properties that they
will include non standard plant and equipment. Although this is a
specialist valuation area this part will cover the rudimentary
concerns in the valuation of plant and machinery. Plant and equipment
are "Industrial chattels". That Is, generally movable items
used in the production, servicing or manufacturing of something.
VALUATION INFORMATION FOR NON STANDARD PLANT LAND EQUIPMENT
the absence of information on comparable plant and equipment, other
analogous sources of comparable information are investigated from
which inferences on value of the subject plant and equipment might be
drawn. Data is collected on similar but different plant and
equipment to the subject plant and equipment enabling the application
of suitable simulation methods of analysis.
starting point for the valuation of plant and equipment is market
value. Market value for plant and equipment is exactly the
same as market value for land under Spencer. The
only difference is the nature of the subject. Plant and equipment is
generally, portable, not fixed to the premises or if so, easily
removed. The intention of the parties who install the plant and
equipment is an important factor in deciding whether or not the item
is a chattel or a fixture. This is important because a chattel does
not become part of the premises unless meeting certain criteria.
a lessee's "fixture" is deemed to be "a chattel if it
can be removed without damage to the premises but even when the
removal causes damage a lessee's "chattel" is not a fixture
as the lessee did not intend that the installed chattel would be
there as long as the lease.
and consultation with appropriate engineering and other professionals
clarifies complicated and uncertain developments in technical,
social, economic, environmental, and other factors likely to
influence the value of the subject plant and equipment.
can also reveal implications and establish the most likely future
scenario and related qualifications as it applies to the subject
plant and equipment.
valuer cannot be expert in all plant and equipment, particularly non
standard plant and equipment. Therefore, and particularly in this
area of valuation he/she is more likely to liaise with and seek
technical opinions of experts in the particular industry. The
valuer's skill is in applying the expert information in finding the
market value of the plant and equipment.
and standardisation of data on similar and different plant and
equipment enables accommodation of differences between its market
context and that of the subject plant and equipment.
VALUATION ANALYSIS FOR NON STANDARD PLANT AND EQUIPMENT
purpose of the valuation is clarified with the client in order that
the most appropriate alternative forms of analysis are selected for
the assignment. Typical forms of analysis include comparing with
sales of similar equipment in the market place. Unlike real estate
there is no central record of sale and the valuer has to find and
discover sale prices within the industry. This will often require the
valuer to follow auction and disposal sales and follow advertisements
for plant and equipment.
the value will most likely become expert in the plant and equipment
applicable to certain industries. For rural properties, the valuer
should follow clearance sales.
forms of non routine analysis are selected or developed to match the
circumstances of the valuation problem. The basic method of valuation
for non standard plant and equipment is the replacement cost new less
accrued depreciation method. Accrued depreciation is largely
determined by obsolescence and depreciation caused by technological
advances. Expensive plant and equipment can be made obsolete almost
overnight by new technology. The valuer must have a good
understanding of factors causing obsolescence and depreciation
covered in part 7. All of the rules of valuation pertaining to the
use of the cost method in the valuation of non market or specialist
real estate land uses apply to the valuation of non standard plant
cases where there is a lack of comparative data and innovative
analysis approaches are used, assumptions, made are critically
scrutinised, considered for appropriateness to ensure that the
analysis is not biased to the valuer's own perceptions and
preferences. The valuer must ensure that his/her valuation is
objective at all times: The safeguard is the proper application of
market value theory as this states that market value Is the consensus
of the marketplace and not a personal decision (unlike economists).
of the reasoning and steps involved in the selection and
implementation of the analysis approach used enable replication of
the approach and/or testing of its validity. The valuer should
complete his/her assignment by recording the prices obtained for the
subject the plant and equipment on sale. This Is invaluable feedback
enabling a reverse valuation using the methods adopted to determine
whether or not variations In the approach or data is warranted. For
example, a clearing sale may indicate that the depreciation adopted
is too high or too low.
VALUATION FIGURE FOR NON STANDARD PLANT AND EQUIPMENT
of the value of the subject plant and equipment uses the selected
analysis approach in accordance with the assignment requirements.
These will most likely be the use of replacement cost new less
accrued depreciation or opportunity cost if the equipment is new and
represents highest and best use of the factory or industrial
building. For example, if the plant and equipment is new and not too
specialised its value is replacement cost new.
use of sufficient alternative methods of analysis enables the value
of the subject plant and equipment to be checked. As is the case with
the valuation of real estate, two valuations should be completed
using the primary and secondary
methods. For example, the primary
method may be direct comparison against the
results of auction and clearance sales and the secondary
method is replacement cost new less accrued depreciation.
made in the course of the analysis should be reasonable in the light
of available data. This again, requires the valuer to interpret data
in an objective manner. If he/she does this, then his/her analysis
should be reasonable. Further, the valuation should be reasonable
based on past experience of valuations of similar but different plant
and equipment The valuation should be based on a critical
consideration of the range of evidence from analyses and experience
on the costs, adjustments and standardisation of data, the analysis
approaches used and qualifications on the valuation figure, are
accurately recorded for inclusion in the valuation report.
value in situ
VALUATION REPORT FOR NON STANDARD PANT AND EQUIPMENT
valuation report on the plant and equipment is in accordance with
assignment requirements. An important assignment requirement is
whether or not the plant and equipment is to be valued in situ or on
the assumption that they will be moved to a clearing house.
the value of plant and equipment on a remote mining site may be zero
because of the prohibitive cost of removal it will have value to the
mining company in situ while the mine is
economical to work.
nature of the report can be along the same lines as that for a real
estate valuation report. It generally includes a schedule that
itemizes the plant and machinery. A depreciation schedule and
subsequent value. This is best done on a spreadsheet such as Excel or