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Machinery and Equipment Depreciation

May 9, 2012

The word “depreciation” means different things to different people. To an accountant, depreciation is a way of allocating the purchase price of an asset across its useful life. This method takes into account normal wear and tear when the asset is in use. Machinery and equipment appraisers assign a different meaning to the term. To them, depreciation is the estimated decrease in value of an asset from the initial purchase price. The estimated decrease is based on many different criteria, such as physical, functional, and/or economic factors.

If a company has an asset that is several years old, but is still functional and still being used, or if there is an active market for the asset, it still has value from an appraisal perspective. Even though the asset may not have value from an accounting perspective, if the asset was sold, it would have worth in its selling price. From an accounting perspective, the selling price would be the asset’s worth.

Depreciation is not always straightforward, so it is always best to speak to a Certified Machinery & Equipment Appraiser (CMEA) if you have questions about the depreciation of your machinery and equipment. It is also a good idea to speak to a professional as you make a plan to sell your machinery or equipment.

The NEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

By: NEBB Institute


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