Collateral Evaluation Associates, Inc. (CEA) provides inventory appraisals for use by lenders, business owners, accountants, attorneys, and other professional users.
All CEA inventory appraisals include item detail and narrative specific to the subject inventory that describe the individual value characteristics, current market conditions, and other pertinent factors that impact value.
Inventory Value Definitions –
Appraisals that are accomplished for secured lenders or are related to a loan transaction are typically prepared on the basis of Forced Liquidation Value or Orderly Liquidation Value.
Fair Market Value and Fair Value appraisals are used for ad valorem tax and FASB (Financial Accounting Standards Board) requirements.
Commonly utilized inventory value definitions, as defined by CEA, are provided as follows:
Bulk Sale Value is defined as: The estimated gross dollar amount which could typically be realized from the sale of goods that represents all or substantially all of the subject inventory, on a negotiated basis, as of a specific date.
Forced Liquidation Value is defined as: The estimated gross dollar amount which could typically be realized from a properly advertised and conducted public sale held under forced or distressed conditions and with a sense of immediacy. Inherent in the definition is the disposal of all assets in an “as is” condition with all expenses of removal and transportation incurred by the buyer. It is assumed that the sale would be conducted by a qualified seller with experience in selling this type of equipment.
Orderly Liquidation Value is defined as: The estimated gross dollar amount which could typically be realized from an orderly sale of the subject assets on a negotiated basis, held under forced or distressed conditions, with a limited marketing period. Inherent in the definition is the disposal of all assets in an “as is” condition with all expenses of removal and transportation incurred by the buyer. It is assumed that the sale would be conducted by a qualified broker familiar with this type of equipment. Note: the specific time period for an orderly liquidation will vary based on the type and quantity of machinery & equipment involved. CEA’s formal reports will state the anticipated liquidation period.
Fair Market Value is defined as: The amount, expressed in dollars, which could reasonably be expected to exchange between a willing buyer and a willing seller with each aware of any factors affecting value or utility and with neither under compulsion to buy or sell. It is further assumed that all items would be sold “as is, where is” and without any warranties or guarantees provided.
Fair Value is defined as: The amount at which the asset or liability could be bought or sold or incurred or settled in a current transaction between willing parties (i.e., other than a forced or liquidation sale). Thus the fair value of the reporting unit refers to the amount that the whole unit could be bought or sold for in a current transaction between willing parties.
The preceding value definitions are the basis for the majority of CEA’s inventory appraisals. In instances where value is dictated by a contract, state or federal law, or other such authority, the mandated definition is used. These definitions are based on the text Valuing Machinery & Equipment (2005), published by the American Society of Appraisers. Although the exact published definition may not be used, CEA’s definitions reflect the same basis and key points of the published definitions. The exception to this is Fair Value, for which the definition published by FASB (Financial Accounting Standards Board) is used verbatim.
Inventory Industries Appraised –
CEA’s associates are experienced in appraising the inventory of a wide variety of manufacturing and industrial operations, as well as other more specialized or niche operations.
For a representative list of inventory industries appraised, please go to our inventory industries appraised page.
If you have questions about a specific inventory or would like to discuss a pending project, please contact us.