Plant and machinery valuation is described as the process of estimating the worth of a plant and machinery asset, undertaken by professional valuators. Financial institutions, banks and moneylenders insist on valuation of immovable property to ascertain the margin available, worth of the security offered to Loans. Plant machinery asset valuation is carried out for several reasons:
1. Purchasing: Buyers want to know the worth of the plant and machinery assets in order to make a reasonable offer or bid. They need to ascertain whether the price tag of the immovable property/asset they are considering investing in, is worth it and a true representation of its price.
2. For sale: In order to come up with price of the immovable assets, professional valuators seek for comparables of recent sale of like assets of similar make, capacity, condition and year of manufacture. Allowances are made for outstanding features not prevalent on the subject of immovable assets to arrive at a fair price.
3. Equipment financing: Equipment financiers need valuation on immovable property to determine the collateral value which justifies the loan amount. Plant machinery being financed through equipment finance include heavy machinery, construction, manufacturing, transportation, IT and office equipment.
4. Financial reporting: Here the machinery valuation is required for various financial purposes such as for balance sheet; accounting; auditing and internal management. The bottom line is these assets are valued in order to determine the economic worthiness of the plant machinery to the company as part of an ongoing business concern.
Further benefits:
Additional advantages gained along the valuation of immovable property comprises of asset verification, estimation, estimated remaining useful life of each immovable asset.
A. Asset verification: This necessitates inspecting the existence of plant machinery assets against an existing inventory list.
B. Estimated Remaining Useful Life (ERUL): Physical life of machinery is often not the life which must be considered in establishing the period up to which the machinery will probably be operated upon, on an economical basis, the entire amount of depreciation should be written off during the economic life for the immovable asset.
Factors Affecting Valuation
The price of immovable property is not always associated with its inherent value. The cost might depreciate, but its value to the prospective buyer or owner may appreciate and vice-versa, based upon the following factors:
- Current and actual price
- Prospective future use
- Availability of the similar machinery
- Replacement cost
- Cost of similar properties
- Age and condition of equipment
- Relocation cost
Proper valuation of fixed industrial assets, machinery, plants and other assets prevents the buyer and the seller from wrong trade practices. It provides you better understanding of where your business stands in the market. Also, it enables you to estimate the revenue and profit/loss while preparing you for the future business risks. Only a failing venture ignores the advantages that valuation offers. With big choice of trade, people have tendency to follow internationally recognized, distinctive technique for each and every trade. The professional team of RNC provides quantitative and qualitative approach within the required field.
Rakesh Narula & Co. is a prestigious valuation services provider for immovable properties and assets. Having completed numerous reputed projects for the same, no assignment is too small or big for us. Consult us today!
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