Why a Certified Machinery Or Equipment Appraisal is Essential

If you are a business owner, CPA, attorney, insurance underwriter, lender, leasing agent or business broker, you have probably had circumstances that required valuation of tangible property such as machinery or equipment, assets that may be components of a business or investments of individuals. The purpose of this article is to explain the benefits of obtaining a certified appraisal report of the assets and to familiarize the reader with a range of purposeful uses.

A certified appraisal report means that it is compliant with USPAP (Uniform Standards of Professional Appraisal Practice) and is substantiated with personal inspection, comprehensive research, factual data, descriptive documentation and photographs. Report assignments should be composed in a summarized manner that is independent, impartial and objective, and stamped as certified. accident report munich

Here’s a way to save time, to assure that valuations are accurately researched and assessed for fair market value, and to eliminate liability risk from invalid information, book value (no comparables) or guesswork. Make sure you hire an independent third party who has the certification and professional expertise to compose your appraisal report. This person can also become an expert witness in court trial or when under IRS scrutiny, by providing a defensible valuation.

In a recent survey taken at an AICPA (American Institute of Certified Pubic Accountants) conference, more than 100 CPAs indicated that the biggest problem they faced was the possibility of liability risk when assigning a value to tangible assets such as machinery or equipment, which may include vehicles, air or watercraft as business assets. As mentioned, relying on book value or a client’s word will not hold up to the scrutiny of a court hearing. An appraisal that is certified by a trained professional will. A certified appraiser must always keep a work file of detailed documentation that supports any analysis, opinions and conclusions described in the final valuation report.

The following are typical certified machinery or equipment appraisal uses:

Business Valuation – If machinery or equipment property is not valued accurately, the entire business valuation can be skewed. Book value is often different from Fair Market Value.
Financing / Loans / Leases – These require collateral asset value.
Buy / Sell Agreements – Agreement between parties should clarify how machinery or equipment property value will be determined and agreed upon in writing.
Tax Purposes – In some jurisdictions, business equipment is assessed at its market value. Usually this is because the tax authority is either not familiar with or has not physically inspected the equipment.
Converting From C To S Corp – This tax code requires an accurate appraisal of assets.
Insurance Premium Valuation – Property assets must be appraised for insurers to cover loss or damage to the property.
Cost Segregation – Reclassifying assets to a shorter depreciable life.
Estate Planning – Trusts and wills require a value of tangible goods.
Trust Agreements – Proper valuation of machinery and /or equipment is required when a grantor transfers legal ownership of property to another person or organization.
Divorce Settlements – Assets must be valued to be divided.
Partnership Dissolution – Assets must be accurately valued for buy-out or dissolution.
Litigation Support – A certified, non-biased valuation may be required during litigation.
Gift Planning – Valuation is required when property is endowed.
1031 Exchange – Assets require a valuation for like-kind exchange.
Sarbanes-Oxley Compliance – Tangible assets must be valued and substantiated for corporate records maintenance
GASB 34 – Governmental Accounting Standards for Compliance require accurate property valuation.
Mergers and Acquisitions – Business tangible assets are part of the net worth of the enterprise.
FASB 141 & 142 – Rule141 applies to Business Combinations and 142 applies to Goodwill and Intangible Assets. They must conform to valuation standards as they apply to financial reporting.
Valuing Goodwill – When businesses or individuals donate new or used equipment to any non-profit organization, they are eligible to receive tax relief based on the assessed value of the donation (IRS Form 8283 may apply).
Bankruptcy/Foreclosures – Owners may need liquidation value of assets.
Retirement Planning – Retirement planning can include valuation of assets.
Strategic Business Planning – Business material property values must be budgeted.

The certification accreditation of the machinery equipment appraisal is essential to meeting Federal guidelines and to serving its useful purpose risk free, assuring protection for your business or assets.

 

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