Equipment Appraisal Definitions

Appraisal Terms

Most Equipment & Machinery appraisal terms refer to Appraised Value or Approaches to Value.
For more information on any of the following terms, visit our Equipment Appraisal Blog.

Definitions of Value in Equipment Appraisals

Fair Market Value – Installed
Fair Market Value – Removal
Fair Market Value in Continued Use
Fair Market Value
Forced Liquidation Value
Liquidation Value in Place
Orderly Liquidation Value
Replacement Cost New
Reproduction Cost New
Salvage Value
Scrap Value

Approaches to Value in Equipment Appraisals

Cost Approach
Income Approach
Sales Comparison Approach

Definitions of Value in Equipment Appraisals

Fair Market Value – Installed

FMV-I is the estimated amount, expressed in terms of money, that may reasonably be expected for an installed property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date. (This amount includes all normal direct and indirect costs, such as installation and other assemblage costs, to make the property fully operational but does not have to be supported by the business earnings.)

Fair Market Value – Removal

FMV-R is the estimated amount, expressed in terms of money, that may reasonably be expected for a property, between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell and both fully aware of all relevant facts, as of a specific date, considering the cost of removal of the property to another location.

Fair Market Value in Continued Use

FMV-CU is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date, and assuming that the earnings support the value reported. (This amount includes all normal direct and indirect costs to make the property fully operational and may not readily pertain to aircraft.)

Fair Market Value

FMV is the estimated amount, expressed in terms of money that may be reasonably expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.

Forced Liquidation Value

FLV is the estimated gross amount expressed in terms of money that could be typically realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.

Liquidation Value in Place

LV in Place is the estimated gross amount expressed in terms of money that could typically be realized from a failed facility, assuming that the entire facility would be sold intact within a limited time to complete the sale, as of a specific date.

Orderly Liquidation Value

OLV is the estimated gross amount expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser(s) with the seller being compelled to sell on an as-is, where-is basis as of a specific date.

Replacement Cost New

Replacement Cost New is the current cost new, of a similar new property having the nearest equivalent utility as the property being appraised.

Reproduction Cost New

Reproduction Cost New is the current cost of reproducing a new replica of a property with the same or closely similar materials.

Salvage Value

Salvage Value is the estimated amount expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for use elsewhere, as of a specific date.

Scrap Value

Scrap Value is the estimated amount expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.



The above definitions are from Valuing Machinery and Equipment, the American Society of Appraisers (2000).

Approaches to Value in Equipment Appraisals

USPAP requires that an appraiser consider all approaches to value even if they are not used. The three recognized approaches to value are:

Cost Approach

Cost Approach measures value by determining the current cost of an asset and deducting for depreciation or adding for appreciation, physical deterioration, functional and economic obsolescence. Cost Approach is based on the premise that a knowledgeable buyer will not pay more for an asset than the cost to produce a substitute asset with the same utility as the subject.

Income Approach

Income Approach measures value based on the assumption that value is related to the economic income that the asset can be expected to earn. The income approach is the present worth of future benefits (income) of ownership. It is not usually applied to individual items of personal property since it is difficult, if not impossible, to identify individual income streams.

Sales Comparison Approach

Sales Comparison Approach measures value by researching recent sales and offering prices of similar assets, which are analyzed to arrive at an indication of the most probable selling price of the asset being appraised. Market Approach is based on the premise that the asset is continuing to be used, so that a knowledgeable purchaser can go to the market place and buy an existing one. The market is an established means of buying and selling assets through channels including auctions, second hand dealers, public and private sales.

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