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Todd Harrison

A Beginner’s Guide to Equipment Appraisal

Todd Harrison

If you’re wondering what an equipment appraisal is and who equipment appraisers are, you ought to read this.

What is an Equipment Appraisal?

Equipment Appraisal is a report consistent with the Uniform Standards of Professional Appraisal Practice (USPAP). An equipment appraisal service is an accurate, irrefutable, defensible value of machinery and equipment for your business. Each report is assembled and reviewed by an accredited appraiser. This is an important distinction because assets have different values, depending on how and when sold.

Who are Certified Equipment Appraisers?

Certified equipment appraisers are an experienced, well trained and tested individuals in this specialized industry. Their designation is awarded by the American Society of Appraisers. If the appraisal report you obtain is not USPAP compliant, it is not a “qualified appraisal” prepared by a “qualified appraiser” and it will not hold up to scrutiny with the IRS, courts, or lenders.

Purpose of the Appraisal

An equipment appraisal can have many purposes including, but not limited to:

- Accounting
- Financing
- Insurance
- Leasing
- Liquidation and bankruptcy
- Management Planning
- Tax

Equipment Appraisal Steps

- Identification

Equipment appraisals can be performed for individual pieces of equipment, a production line, a complete operating facility, or multiple operating facilities. Identify the purpose of the appraisal and the client, the items needing to be valued, the appraisal purpose, intended users and definition of value.

- Collection, Classification & Description

Equipment appraisers collect facts and data related to the full life cycle of the equipment and determine how the finished product is produced. Identify all equipment assets and group similar assets together, by model or description, serial number, manufacture and hours or miles.

- Application

With the complete equipment list at their fingertips, they carefully consider all 3 equipment valuation approaches:

1) Market approach
2) Cost approach
3) Income approach

After careful consideration, the appraiser chooses one approach that he/she feels is necessary to produce the best credible assignment results.

- Valuation

Now that all necessary items are identified to produce credible results, collected all equipment characteristics, and chosen a valuation approach, it’s time to apply the value opinions and conclusion to the equipment or machinery.

- Deliver

A professional certified appraisal report in accordance with USPAP is prepared. Copies are made the equipment appraisal report is delivered to the intended users identified.

Industries which use Equipment Appraisal

- Agriculture
- Food Processing
- Healthcare
- Packaging
- Entertainment
- Electronic Devices
- Manufacturing
- Transportation
- Construction

Now that you know the importance and steps of equipment appraisal, it is more important to choose certified equipment appraisers for effective and accurate equipment appraisal.

The author is one of the leading certified equipment appraisers who have extensive knowledge in equipment appraisals. He shares his expertise about the various aspects of equipment appraisals.

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