Reasons for considering Machinery & Equipment valuation on a regular basis. By their very nature, companies are established to generate wealth, and to quantify the income they gain, they must account for the expenses they pay while doing their business. Hence, they must keep detailed records of all their assets, especially those that cost a lot of money.
Undoubtedly, fixed assets, such as manufacturing facilities and heavy machinery, account for the company’s highest expenditure. Therefore, the need to determine their price and value regularly through plant and equipment valuation is necessary for any business.
A plant and equipment valuation is a comprehensive assessment of the fair market value of facilities and machinery intended to produce and distribute products and services. Certified valuers can only conduct such detailed evaluations since various factors must be considered for the assessment. Hence, it is essential for businesses, especially those with high capital costs, to work with these experts.
Various reasons for plant and equipment valuation include:
The valuation of plant and machinery ascertains the fair value of the assets and allows the business to compare their value to that of the market. This enables the company to intelligently and definitively decide if they should purchase the assets. In addition, this evaluation helps the company determine if these investments will be helpful and profitable in the long run if they purchase them. Plant and equipment verification is essential for a company’s long-term success, especially for those with high capital costs.
Estimation of an asset’s remaining useful lifespan
Purchasing a manufacturing facility and its associated equipment requires a sizeable capital for any business. As a result, the company must ensure that the assets that it buys will produce a greater return on its initial investment. A plant and equipment valuation can help estimate how long the asset will be useful. Moreover, such an appraisal can also aid in optimizing the plant’s operational performance by providing insight into when machine maintenance should be performed and when equipment replacement is necessary. So, the company can set up regular maintenance for its equipment and allocate funds to buy new equipment.
Arguably, one of the most important benefits of performing plant and equipment valuation is ascertaining logical and financial risks that could come from the assets. Knowing the causes and effects of these threats greatly assists businesses in preparing for their possible occurrence and mitigating their consequences. It also ensures the plant’s operational efficiency and personnel safety.
Buying and Selling Equipment
The purchase and sale of equipment can be for several different reasons. Perhaps a company wants to purchase new machinery because the one that they have has reached the end of its useful life or it is now inferior in quality to the newer one. Maybe the company is in the business of buying and selling different kinds of equipment. Companies facing financial woes may liquidate fixed assets to supplement their cash flows.
Regardless of the reason, a company that wants to buy or sell machinery must use the services of a certified equipment appraiser to get an accurate estimate of the asset’s fair market value concerning the current state of the market, the condition of the assets, and the present supply and demand for the equipment. Doing so ensures the business receives the best offer at the best time.
From a financial standpoint, accurately appraising manufacturing facilities and operating equipment benefits the companies and stakeholders. This is because the result of the assessment offers vital information about the worth of the company’s most important assets and provides a sufficient understanding of the company’s overall value. In particular, plant and equipment valuations assist in the assessment of the asset’s carrying value, which aids in the determination of losses from depreciation and impairment. The disclosure of this information in the financial report aids stakeholders in estimating the fair value of tangible assets, which ultimately allows them to make clear and informed decisions about their investments in the business. In addition, it gives potential investors a glimpse of a factor that affects a company’s financial performance. Furthermore, legal and regulatory organizations can evaluate the company’s compliance with their standards.
Growth and Expansion of Operation
A company generally constructs new production facilities and acquires new equipment to increase its manufacturing capacity, improve efficiency, optimize its process, and elevate its overall performance. To achieve these objectives, careful financial planning is required, and to do so, the company needs an accurate assessment of the fixed assets it will need to acquire. In this situation, plant and equipment valuation is essential because it provides insight into the costs of the assets and the amount of funds that must be raised.
Credence & Co. is a real estate valuation and advisory firm that provides Plant and equipment Valuation services for Manufacturing companies and others. We follow the international valuation standards (IVS) and international financial reporting standards (IFRS). Our wealth of experience, knowledge, expertise and significant valuation resources, including access to comprehensive databases, historical data sources and tools, help us provide an expert opinion of value for all types of industrial assets. Clients value our technical knowledge and specialist advice. Whether for financial reporting, insurance, corporate transactions or pre-sale advice, we have the depth of expertise to help you make informed decisions.
For plant and machinery appraisal requirements, you may email us at firstname.lastname@example.org, or call us at +971 (4) 8790 747, +971 (58) 985 5344