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Depreciation of Machinery and Equipment

July 24, 2014

Different industries assign different meanings to the word depreciation. Accountants say that it’s the allocation of the cost of an asset across its useful life. Depreciation takes into account normal wear and tear over the asset’s life.

Machinery and equipment appraisers, however, assign a different meaning to the term. To appraisers, depreciation is the estimated decrease in value of an asset from its initial purchase price. The estimated decrease is based on a number of criteria, such as physical, functional, and/or economic factors.

From an appraiser’s perspective, even if an asset is 20 years old, as long as it is still functional or still in use, or if there is an active market for it, the asset has value. From an accounting perspective, its worth would be zero, but if the asset owner sold it, it would be worth more than zero.

Because it has different definitions, depreciation can be confusing. If you want to sell an asset or discuss its depreciation, it’s always best to speak to a Certified Machinery & Equipment Appraiser (CMEA).

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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