Machinery and Equipment Appraisals

Collateral Evaluation Associates, Inc. (CEA) provides machinery and equipment appraisals for use by lenders, business owners, accountants, attorneys, and other professional users.

All CEA machinery and equipment appraisals include item detail and narrative specific to the subject machinery and equipment that describe the individual value characteristics, current market conditions, and other pertinent factors that impact value.

Machinery and Equipment 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, Fair Market Value in Continued Use and Fair Value appraisals are used for lease transactions, purchase price allocation, ad valorem tax, and FASB (Financial Accounting Standards Board) requirements.

Commonly utilized machinery and equipment value definitions, as defined by CEA, are provided as follows:

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 Market Value-In Continued Use is defined as:  The anticipated selling price which would be agreed upon between a willing buyer and a willing seller for all items under prevailing market conditions and including transportation and installation. Neither party is considered to be under duress.  Both parties are assumed to be knowledgeable and aware of all relevant facts affecting the selling price.  No warranties or guarantees are assumed to be provided by the seller and all items are sold on an “as is” basis.  It is assumed the subject equipment would continue to be operated at its present site and that the business earnings support the concluded value.

Fair Market Value-Installed is defined as:  The anticipated selling price which would be agreed upon between a willing buyer and a willing seller for all items under prevailing market conditions and including installation.  Neither party is considered to be under duress.  Both parties are assumed to be knowledgeable and aware of all relevant facts affecting the selling price.  No warranties or guarantees are assumed to be provided by the seller and all items are sold on an “as is” basis.  It is assumed the subject equipment would be available for continued use at its present location.

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.*

*In the case of the purchase an ongoing enterprise, Fair Value is typically further defined as Fair Market Value-In Continued Use.

Replacement Cost is defined as:  The current cost new, including installation, of a similar new property having the nearest equivalent utility as the property being appraised.  This differs from Reproduction Cost which would entail the current cost of an exact replica of the property being appraised.

The preceding value definitions are the basis for the majority of CEA’s machinery and equipment 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.

Machinery and Equipment Industries Appraised –

CEA’s associates are experienced in appraising the machinery and equipment of a wide variety of manufacturing and industrial operations, as well as other more specialized or niche operations.  We have completed literally thousands of machinery and equipment appraisals.

For a representative list of machinery and equipment industries appraised, please go to our machinery and equipment industries appraised page.

If you have questions about a specific type of machinery and equipment or would like to discuss a pending project, please contact us.