Equipment Appraisal Reasons

When Will You Need an Appraisal?

Reasons for an equipment appraisal can be varied and multiple. Will the equipment appraisal be used for collateral values in a loan, in an attempt to settle a loss claim with an insurance company, or to resolve a family law matter? Or will the equipment appraisal be used for due diligence, a tax appeal or charitable donation tax deduction? Whatever the reason for an equipment appraisal, we provide each client a comprehensive report designed to fit the scope of a specific project. We provide independent and unbiased services with the highest level of responsiveness to your particular equipment valuation need.

Loans: Collateral Valuation, Verification & Inspection
Due Diligence and Management Decisions
Tax Appeal for Business Property Tax
Insurance
Tax Deduction for Charitable Donations
Equitable Distribution of Assets in Divorce
Estate Taxes and Step-up in Basis
FAS 141 and 142 Appraisal
FAS 157 Fair Value Accounting Appraisal
Other Reasons for an Appraisal

Loans: Collateral Valuation, Verification & Inspection

A large portion of our equipment appraisal practice involves valuing, verifying and inspecting collateral for banks and other lending institutions. Typically, lenders are looking for an equipment appraisal of orderly liquidation value and fair market value in continued use. Valuations of these types provide the lender with a useful range of values to make lending decisions.

Due Diligence and Management Decisions

More and more businesses are insisting on an equipment appraisal for fair market value in continued use as part of due diligence involved in mergers or acquisitions. Such an equipment appraisal provides a detailed listing of the underlying machinery and equipment in an acquisition and their relative values.

Tax Appeal for Business Property Tax

County assessment records can be inaccurate, causing over-taxation. A current equipment appraisal that reports equipment depreciation, quality rates, and equipment condition can lead to significant annual tax savings to you. Current market conditions also have a large impact on how your property is valued and therefore affect the final assessment. Millions of dollars worth of taxes are reduced annually through the Value Adjustment Board petition process. Call us to investigate how you can join the many other commercial property owners who have substantially reduced their taxes with a professional equipment appraisal.

Insurance

If you or your client have extensive equipment holdings it is prudent to have those assets scheduled out in their insurance policy. In the case of a loss claim, the insured will often need to protect their interests by having an equipment appraisal done after the loss has occurred. Doesn’t it make more sense to schedule a proactive equipment appraisal for equipment before it is lost or damaged?

Tax Deduction for Charitable Donations

In general, if you contribute equipment or machinery worth more than $5,000, you must obtain a qualified written equipment appraisal of the property’s fair market value. The IRS has designated USPAP as the standard in qualified appraisals.

Equitable Distribution of Assets in Divorce

The date of the filing of the Complaint for Divorce historically has been the date that assets are valued for purposes of equitable distribution. Usually fair market value is used. If the asset increases or decreases in value due to fluctuating market conditions, the gain or loss is realized by both parties at the time of the actual distribution or sale of the asset. However, when an asset has increased in value due to the sole efforts and industry of one party, the gain usually will be awarded to the person responsible for the increase in value. Whatever the case, since the matter may likely be subject to a legal review, it is prudent to obtain a USPAP equipment appraisal for any equipment or machinery is part of the assets.

Estate Taxes and Step-up in Basis

In an inheritance situation, the value of equipment and machinery in the estate must be adjusted from book value to fair market value as defined by the IRS, of an appreciated asset for tax purposes upon inheritance. With a step-up in basis, the value of the asset is determined to be the higher market value of the asset at the time of inheritance, not the value at which the original party purchased the asset. The IRS now recognizes USPAP as the standard qualified appraisals, so be sure to use a qualified equipment appraiser for any equipment and machinery included in the estate.

FAS 141 and 142 Appraisal

The Financial Accounting Standards Board (FASB) has issued two financial accounting standards: FAS 141 and FAS 142. These standards were established 1) to better reflect investments made in acquired companies, and 2) to provide additional information regarding acquired intangible assets. FAS 141 mandates that all assets acquired and liabilities assumed are valued at their fair value. FAS 142 states that the value of economic goodwill is volatile and may be subject to impairment. As such, value should be tested annually, at a minimum; this value should also include an equipment and machinery appraisal.

FAS 157 Fair Value Accounting Appraisal

FAS 157 became effective for entities with fiscal years beginning after November 15, 2007. It is intended to bring clarity on the definition of fair value, defined as “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” FAS 157 only applies when another accounting rule requires or permits a fair value measure for that item. While FAS 157 does not introduce any new requirements mandating the use of fair value, the definition as outlined is based on the asset’s bid price rather than its asking price, regardless of whether the entity plans to hold the asset for investment or resell it later. FAS 157 emphasizes that fair value is market-based rather than entity-specific.

Other Reasons for an Equipment Appraisal Include

Eminent domain
1031 exchanges
Loss claims litigation
Estate settlements
Partnership dissolution
Foreclosures / bankruptcy / restructuring
Retirement planning /trust planning
“C” Corp. to “S” Corp. conversion

Although we work with auctioneers and equipment dealers for market research and trends, we are not an auction firm, equipment dealers or jobbers. We never take a financial interest in anything that we appraise.

Have More Questions about Equipment Appraisals? Call us at 530-795-5536.

We’re happy to answer any questions you may have regarding your equipment appraisal situation.