For accounting purposes, depreciation is defined as a decrease in the value of an asset as a result of wear and tear, age, or obsolescence. Thus most assets lose value or depreciate over the course of their lifetime and need to be replaced once they reach the end of their lifecycle. However when machinery and equipment assets are appraised, depreciation is handled in a slightly different manner.
The NEBB Institute, who among
other things certifies professionals in the art of machinery/equipmentappraisals, explains that depreciation has a different meaning to machinery and
equipment appraisers. They add that, “To
appraisers, depreciation is the estimated decrease in value of an asset from
its initial purchase price. The
estimated decrease is based on a number of criteria, such as physical,
functional, and/or economic factors.” In
other words it may not matter what the actual age is of a piece of equipment,
but rather if it is operational and still used in the industry. Finally the most important fact that impacts the
value of the asset is, “How strong is the market demand”?
By having a professional appraisal
done before you try to market your surplus equipment, will help to ensure you get
the maximum value for your assets. Additionally
there are some circumstances where it is not only a good idea but may be
required for insurance purposes, mergers and acquisitions and in orderly or
forced liquidations.
Another reason that certified
appraisals make sense is they are more readily accepted by financial
institutions and corporations as well as the IRS and the courts. Keep
in mind that appraisals are defined by factors such as replacement cost for new
or used equipment or machinery, fair market value, geographic location and
specialized design and/or modification.
Other considerations that impact value are technological obsolescence
and industry trends as well as economic fluctuations.
Sources: nebbinstitute.wordpress.com/
Rabin Worldwide is an
international company that specializes in creating liquidity for complex
manufacturing facilities with idle or marginally productive assets. Rabin’s operations include selling entire
plants, multiple plant locations, or surplus individual items by auction or
liquidation and much more. Past auctions include names such as Hostess, Braniff
Airlines, Montgomery Ward, and the Railway Express Agency. Please contact us to discover how we may
assist with your asset liquidation process.
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