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Plant, Equipment & Asset Valuations for Accounting Purposes

Experts in valuation of all forms of plant, equipment, vehicles or any income producing asset.  Assessment of market value or fair value measurement for accounting purposes - AASB13 and AASB116.

Valuations for Financial Reporting Compliance

Minsol Group provide professional property, plant and equipment valuation services for financial reporting purposes.
The benefits of obtaining an independent valuation include:

  • Declaration of the correct fair values;
  • Compliance with accounting standards;
  • Compliance with Directors' responsibilities; and
  • Satisfying auditors and avoiding qualified opinions

Are you 100% confident that your carrying values comply with your reporting requirements?
Valuations are often required for compliance with the following Australian accounting standards or international equivalents:

  • AASB3 Business Combinations
  • AASB13 Fair Value Measurement
  • AASB116 Property, Plant and Equipment

Fair Value and Market Value

Fair Value is the key basis of value required for financial reporting purposes.  It is defined in AASB116 Property, Plant and Equipment as "the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties in an arm's length transaction".

In preparing a value for financial reporting purposes, the basis of value adopted is market value with specific underlying assumptions based upon whether the asset is specialised or non-specialised and operational or non-operational.

The International Valuation Standards (http://www.ivsc.org/) defines market value as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion".

Approaches to Determining Market Value:

There are three approaches to determining market value, namely:

  • The market comparison approach;
  • The income approach; and
  • The depreciated replacement cost approach.

The market comparison approach seeks to determine the current value of an asset by reference to recent comparable transactions involving the sale of similar assets.

Market Value Assessments

Minsol Group's commitment is to deliver independent, accurate and supportable valuation advice to our clients. We deliver on our commitment by understanding our clients' business operations, their asset requirements and the intended use of the valuation.

Value is defined as "an economic concept referring to the monetary relationship between goods and services available for purchase and those who buy and sell them."

The definition of Market Value is expressed in universal terms to reflect a general concept rather than specific circumstances. On its own the definition of Market Value doesn't describe how a particular asset is to be presented for sale or any of the other specific circumstances that could have a significant impact on the valuation.  Application of the appropriate basis of value will depend on the purpose for which a valuation is required and the circumstances.  Below are some commonly used market value definitions.

Market Value

Market Value is defined as "the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion."

Market Value Existing Use

Market Value Existing Use is defined as "the estimate amount for which an asset or group of assets should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion assuming the assets could be sold in the open market for their continued existing use, and that the earnings support the value reported."

Market Value Existing Use gives consideration to the in-situ nature of the asset or assets and associated installation costs where the assets are valued as part of the continuation of the existing 'going concern' business operation to which they are employed.

Market Value In-Situ

Market Value In-Situ is defined as "the estimated amount for which an asset or assets should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion whereby the assets will be sold by way of a private treaty sale as a whole where the assets will remain in their existing place and location (In-Situ) following sale."
Market Value In-Situ gives consideration to the in-situ nature of the asset or assets and associated installation costs but not as part of the continuation of the existing 'going concern' business operation.

Market Value Ex-Situ

Market Value Ex-Situ is defined as "the estimate amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion with the assumption that the assets will be sold by way of a private treaty sale where the subject assets will be removed from their existing location (Ex-Situ) following sale."

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Orderly Liquidation Value

The amount of gross proceeds which could be expected from the sale of the appraised assets, held under orderly sale conditions, given a reasonable period of time in which to find a purchaser(s) considering a completed sale of all assets, "as is and where is," with the buyer assuming all costs of removal, with all sales made free and clear of all liens and encumbrances, with the seller acting under compulsion.

Forced Liquidation Value

The estimated gross amount, expressed in terms of money, that could be typically realised from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is where-is basis, as of a specific date.

Replacement with New Value (Insurance Replacement Value)

Replacement with New Value has been determined as at the date of valuation to allow for replacement by similar property in a condition equal to, but not better nor more extensive than, its condition when new.

For plant and equipment assets the valuation has regard to costs associated with the following:

  • replacement of the asset including specialised equipment
  • land or sea cartage and freight
  • duty
  • delivery
  • design and commissioning
  • engineering fees
  • installation
  • betterment or optimisation (if any)

Property, Plant and Equipment

Property, Plant and Equipment are tangible items that are:

  • Held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and
  • Expected to be used during more than one period

Valuer

Property Valuer

A person who is registered / Certified Practising Valuer to carry out property valuations (real property) under the relevant State, Territory or Commonwealth legislation.

Plant and Machinery Valuer

A person who is sufficiently qualified and experienced to carry out plant and machinery valuations. Although not subject to State, Territory or Commonwealth legislation the qualification of Australian Property Institute Certified Practicing Plant and Machinery Valuer and AVAA Certified Practising Valuer is highly regarded within Australia.

Property, Plant and Machinery Valuer

A person who is both registered to carry out property valuations and is also sufficiently qualified and experienced to carry out plant and machinery valuations - certified practising valuer - AAPI & AVAA.

 

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