Machinery and Equipment Assets Common Definitions of Value

In July, we wrote a blog series that defined some common machinery and equipment appraisal terms: fair market value, forced liquidation value, and orderly liquidation value. But there are many more terms the industry uses that can be confusing if you don’t have your own working definition of them, and it’s important that you understand what all of the terms mean when you engage a machinery and equipment appraiser. Below are some common definitions for different appraisal values as they apply to machinery and equipment, as defined by the American Society of Appraisers. 

Fair Market Value – Removal is the estimated amount of money that may reasonably be expected for an item of property in a sale between a willing buyer and a willing seller that considers removal of the property to another location.

Fair Market Value in Continued Use is the estimated amount of money that may reasonably be expected for a property in a sale between a willing buyer and a willing seller that includes installation, and assumes that the business earnings support the value reported. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs to make the property fully operational. 

Fair Market Value – Installed is the estimated amount of money that may reasonably be expected for an installed property in a sale between a willing buyer and a willing seller that includes installation, as of a specific date. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs, necessary to make the property fully operational. 

Liquidation Value in Place is the estimated gross amount of money that could typically be realized from a failed facility, assuming that the entire facility would be sold intact with a limited time to complete the sale, as of a specific date.

Salvage Value is the estimated amount of money that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date. 

Scrap Value is the estimated amount of money that could be realized for the property if it were sold for its material content rather than for a productive use, as of a specific date. 

Insurance Cost New is the replacement or reproduction cost new as defined in the insurance policy less the cost new of the items specifically excluded in the policy, as of a specific date.

Insurable Value Depreciated is the insurance replacement or reproduction cost new less accrued depreciation considered for insurance purposes, as defined in the insurance policy or other agreements, as of a specific date. 

If you have questions about any of these terms, feel free to contact the NEBB Institute. Please also keep in mind that our database of certified appraisers is always available to help you find an appraisal professional who can meet all of your appraising needs. 

By: NEBB Institute