david hornby

This valuation standard consists of 4 elements:
There 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.


Given 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.

The 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.

Generally, 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.

Research 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.

Research can also reveal implications and establish the most likely future scenario and related qualifications as it applies to the subject plant and equipment.

The 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.

Adjustments 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.


The 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.

Further, 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.

Appropriate 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 and equipment.

In 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).

Records 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.


Determination 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.

The 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. ,

Assumptions 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 based judgments.

Limitations 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.

See value in situ


The 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.

Where 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.

The 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 Open Office.