More notes on Plant and Machinery Valuations;
Machinery are often leased for the following reasons:
A lease is “the right to use” an asset rented for a period for predetermined production etc.
Specialised maintenance is more economical as per lease contract!
A lease offers a more predictable lifespan of a machine and further the renewal options and at the end of lease the options are to a greater extent.
A lease warrants constant effective production,
Please note that an “operational lease”, remains the property of a 3rd party and should not be included in a valuation. (Mention in report)
Do consider historical records, but bear in mind that these figures might include service supports, which generally are fixtures to the immovable structure and should be valued accordingly,
Mechanical assets should always be inspected to determine the physical, functionality, condition, economical obsolesce as well as the technological replacing,
The purpose and the status for/in which the machinery are to be valued is imperative,
Assets can be valued for balance sheet purposes, proposed developments, in-situ, financial mortgage or lending, forced sale, decommission of plant, reinstate or recommission of plant,
The cost valuation approach is generally the more favoured method,
The value of an asset is based on supply and demand, also the profitability which the asset can generate, also should the asset be able to be put to a better usage than the present,
Not all assets decrease in value on a linear line. The broader market will determine the market value of an asset. The Specialised Valuer must be consistent in his assumptions and be able to supply factual evidence, on which his deductive reasoning is based. In short the plant operational manager is of great value, local knowledge is king.