What do plant and equipment valuers look for?
Plant and equipment (P&E) valuations play a pivotal role in determining the worth and financial stability of a company. This is especially true for businesses in industries such as construction and agriculture, where plant, equipment and machinery assets are crucial to success. Plant & equipment valuers in Victoria apply proven methods to calculate the true market value of your P&E assets.
This service comes in handy for the likes of:
- insurance applications
- mergers and acquisitions
- financial reporting./li>
So, what do valuers look for when reviewing your company’s assets?
Core aspects of a valuation include looking at the condition and age of the equipment, as well as market demand, maintenance history and technological advancements.
Other key points include the economic climate, industry trends and the various regulatory requirements valuers must adhere to in order to provide accurate and up-to-date valuations. They consider every element that can potentially affect an asset’s fair market value.
This process relies on a unique set of skills and expertise, combining industry knowledge, appraisal techniques and a keen eye for detail. Valuers will need to conduct extensive research, perform deep analysis and apply broad knowledge of various industries and asset types.
When used correctly, a certified valuation report can help a business effectively manage, maintain and improve the value of its assets.
How far back do valuers look?
At times, the valuation process may require a valuer to consider historical data to ensure accuracy.
When this applies, valuers look at years’ worth of financial records such as:
- income statements
- balance sheets
- tax returns.
This information helps valuers identify trends and patterns that contribute to market value. A valuer’s primary consideration here is the specific time period to be examined. This largely depends on the nature of the assets being valued and the purpose of the valuation.
When it comes to new equipment, valuers focus on recent records, as they provide a more accurate reflection of the asset's current value. For older machinery with longer useful lives, valuers consider longer historical periods to assess depreciation and maintenance costs over time.
Going back in time also allows valuers to account for changes in market conditions and industry trends. These include technological advancements, regulatory changes and market demand.
By accounting for historical data, valuers can anticipate the future performance and value of assets.
The time frame considered by valuers for plant and equipment valuations is not fixed. Instead, it varies based on the specific circumstances and requirements of each valuation, ensuring a comprehensive assessment of the assets' worth.
How do valuers consider asset type?
One of the foremost considerations of a P&E valuer is asset type. Whether an asset is classed as a property, machine or niche item will influence the valuation process. From there, valuers look for specific factors and characteristics to determine the value of these assets accurately.
When it comes to vehicles, key points include:
- make and model
- year of manufacturing
- condition and mileage
- any modifications or upgrades.
This involves reviewing maintenance and service history too, as well as any existing warranties or certifications. Market demand and resale value will also need to be determined.
In the case of machinery, the most important factors valuers examine include age, brand, capacity, condition and functionality. As with vehicles, this involves looking at maintenance records, service history and any warranties or certifications.
Again, they look at demand and technological advancement as well.
The market value of furniture is determined by reviewing factors like the brand, material, design, condition, age, functionality and aesthetic appeal. That means researching similar furniture types, trends in interior design and any unique features or collectability.
Finally, ensuring accuracy means accounting for regional or local market dynamics, economic conditions and industry-specific factors, as well as comparable sales data on similar assets.
What do valuers look for regarding purpose?
The purpose or use of P&E assets is a crucial factor in any valuation service.
For instance, purpose impacts the utility and demand of these assets within certain industries or sectors. Heavy-duty equipment used in the context of industrial operations might be valued higher than similar equipment used in less demanding applications.
If equipment has a niche or specialised purpose, its value may be significantly affected as well.
Purpose also impacts an asset’s useful life and depreciation rate. Certain high-intensity operations may incur greater wear and tear and faster depreciation rates, leading to decreases in value.
Naturally, assets serving a limited or specific purpose might have a shorter economic life.
Additionally, P&E valuers will use market data and comparable sales to determine the fair market value of an asset. If the purpose of an asset meets the needs of potential buyers, it will most likely be valued more highly.
Summary
Licensed plant and equipment valuers must account for a wealth of dynamic factors when determining the true market value of a company’s assets. These assets include various vehicles, furniture and machinery used across a diverse range of industries and business types.
Valuers consider physical attributes like make, model and condition, as well as more abstract concepts like the economy and market demand dynamics.
The type of asset in question, as well as its specific purpose, are extremely important considerations in a P&E valuation. These points have a significant effect on the final determination of value.
For all your questions, reach out to one of our qualified P&E valuers today.