Machinery and Equipment Valuation

What is an appraisal?

machinery valuation

It is an estimate of the value of a previously identified asset. The valuation process begins when the appraisal expert identifies all the elements in the appraisal environment and ends when he delivers the results of the study in an official and confidential document called the Valuation Report.

The method to obtain the estimate of value expressed in the opinion will depend on the information available on the asset to be valued and the purpose of the appraisal.

One of the purposes that is present in all types of appraisal is to obtain a documented value estimate supported by a professional, where all the elements and parameters that affect the value of the assets that are appraised have been taken into account.

The level of veracity of the valuation study will be affected by the experience of the appraiser, as well as his integrity and technical knowledge.

Machinery and equipment appraisal process

  • An appraisal is a well-established and systematized set of processes that appraisers use to achieve consistent estimates of value. The process, as well as the number of steps to follow to determine the value, will depend on the type of appraisal required by the client and the information available.
  1. Definition of the problem
    1. Property to be appraised.
    2. Purpose of the appraisal.
    3. Uses of the appraisal.
    4. Appraisal date.
    5.  Limiting or restrictive conditions.
  2. define of value
    1. What is relevant?
  3. Property Identification
    1. Assets must be properly identified.
  4. Data collection
    1. Inspection of assets.
    2. List and description of assets.
    3. Asset classification.
    4. Investigation of cost data.
    5. Market data research.
    6. Investigation of income data.
  5. Depreciation Analysis.
    1. Physical depreciation.
    2. functional obsolescence.
    3. Economic obsolescence.
  6. Methodology.
    1. Analysis for appraisal.
  7. Conclusions about the value.
  8. Report.

Types of Securities

Depending on the type of appraisal, there are different types of values that can be obtained through the Appraisal of Machinery and Equipment.

  • new replay value

It refers to the cost that is assigned to a good if it had to be replicated using similar or identical materials.

  • new replacement value

It is defined as the value assigned to a good depending on the cost that it would generate to replace it with another equal or similar, adding import, installation, engineering, freight, etc. Not including any kind of discounts on materials.

  • Net Replacement Value

It is the estimated replacement value of an asset based on the New Replacement Value by applying the depreciation percentages related to the consumed useful life, degree of obsolescence and state of conservation.

  • Trade value or fair market value

It is called the fair amount of money for which a specific good could be sold in which buyer and seller are in equal conditions, being aware of all the pertinent information regarding the goods in question.

  • Fair Market Value – In Use

It is the fair amount of money for which a specific good could be sold in which buyer and seller are in equal conditions, being aware of all the pertinent information regarding the goods in question, adding the variant in which the good is found. installed and in operation. So the estimated value must include installation costs.

  • Fair Market Value – Installed

This is the name given to the fair amount of money for which a specific good could be sold in which the buyer and seller are in equitable conditions, being aware of all the pertinent information regarding the goods in question, including the variant in which the well it is installed but not in operation.

  • Fair Market Value – Stripped

It refers to the fair amount of money for which a specific good could be sold in which the buyer and seller are in equitable conditions, being aware of all the pertinent information regarding the goods in question and with the understanding that the good will change location.

  • Settlement value on site

It is the total amount of money that is estimated to be obtained from the sale of an entire industrial facility or plant that is bankrupt. The conclusion of the transaction has a time limit.

  • Tidy Liquidation Value

It refers to the amount of money that is expected to be obtained from the sale of an asset in which the seller has the need to carry out the transaction without making repairs or modifications of any kind to the asset in question and is not able to transport it.

  • Forced Liquidation Value

It refers to the amount of money that is expected to be obtained in the public and duly announced sale of an asset, in which the seller has the need to carry out the transaction without making repairs or modifications of any kind to the asset in question and is not in possibilities to transport it. The transaction must be completed in a limited period of time.

  • Rescue value

The amount of money that is expected to be obtained from the total sale of a good or an element of it.

  • scrap value

The monetary value that could be obtained from the sale of an asset if its value is based solely on the type of materials, not including whether it is used for a productive activity.

  • Insurable replacement cost

Estimate the new replacement cost stated in an insurance policy, subtracting a figure for the excluded parts, if any, that are specifically listed within the policy.

  • depreciated insurable value

It is the insurable replacement value discounting the depreciation that has been established for the insurance.

  • Historical Value

This is the name given to the value with which an asset was added to the accounting records of the company. It is equivalent to the capitalized value, that is, the initial cost of an asset on the date it was put into service within the company for the first time.

  • Value in books

It is equivalent to the capitalized value of the asset in question less book depreciation, which is different from the appraisal.

  • original value

It is defined as the initial capitalized cost of the asset as owned by the current user.

Value Ranges

The following values are ranked from highest to lowest:

  • Reproduction Cost New
  • New Replacement Cost
  • Net Replacement Value
  • Trade Value or Fair Market Value
    • In use
    • installed
    • Unmounted
  • liquidation value
    • In construction
    • ordered
    • forced
  • Rescue value
  • scrap value

Types of use of appraisals and required values

  • Property Transfer.
    • Fair market value.
    • Liquidation value.
  • Financing.
    • Forced liquidation value.
    • Orderly liquidation value.
    • Fair market value (In some cases).
  • Alienation.
    • Fair market value.
  • Income tax.
    • Fair market value.
    • New replacement cost.
  • ad valorem tax
    • New reproduction cost.
    • New replacement cost.
    • New or reproduction replacement cost, less depreciation value.
    • Fair market value.
    • Orderly liquidation value (special circumstances).
  • Assurance
    • New reproduction cost.
    • New replacement cost.
    • New or reproduction replacement cost, less depreciation value.
    • Value at actual cash prices.
    • fair market value

Machinery and equipment valuation methods

  • Cost

The cost method is generally the starting point of any appraisal, it is based on the Substitution Principle, which establishes that a buyer who has all the necessary information about the good in question will not pay for it a price that exceeds the cost of production of an identical good or with similar functions.

When the asset is used, the value estimate must take into account all the depreciation percentages applicable to the date the appraisal is made.

  • Market

Also known as the sales comparison method, this method consists of carrying out a market analysis related to the goods that are valued. The objective of this analysis is to determine the need in the market that exists around that good, which is determined based on recent offers and sales of identical or similar goods, that is, the behavior of the market is analyzed to identify the trends. Based on these offers is how the appraiser performs the value estimate.

In the event that the assets in the current market are not identical or do not have many similarities with the asset being valued, the pertinent adjustments are made to make the most accurate estimate of value possible.

  • Income

This method determines the value of assets by calculating the value of future income that asset can generate. It is not common to use it in a Machinery and Equipment Appraisal.

Machinery Classification

The classification of machinery and equipment can vary depending on the context and specific criteria of a company or industry, but is generally organized into categories based on their function, nature and use:

  1. Production Machinery:
    • Includes equipment used directly in the manufacturing or production process of goods. Examples may be assembly machines, product manufacturing equipment, and specialized machinery for specific industrial processes.
  2. Processing Machinery:
    • It includes equipment designed to process raw materials or semi-finished products. This may include machinery used in the food, chemical, textile industries, among others.
  3. Packaging and Packaging Machinery:
    • It includes equipment used to package and package products before distribution. This includes packaging machines, labelers and packaging systems.
  4. Material Handling Equipment:
    • It involves machinery used to transport and handle materials within a facility. This may include forklifts, conveyors, cranes, and automated storage systems.
  5. Construction equipment:
    • It includes machinery used in construction projects and civil works. This includes excavators, cranes, concrete mixers and earthmoving equipment.
  6. Office Equipment:
    • Includes equipment and machinery used in office environments. This can range from computers and printers to fax machines and communication systems.
  7. Laboratory Equipment:
    • Refers to machinery used in laboratory environments for research and development. This may include spectrometers, centrifuges, and other specialized equipment.


It represents a breakdown of several accounts that must be defined by the accounting area of each company. This area is responsible for issuing the nomenclature to be used in the company's fixed assets, which can later be translated into an inventory number. Said nomenclature must be easily identifiable.

  • Stock number

It is defined by the accounting department of the company according to the classification that must be established previously, it is generally placed on the identification plate of each asset.

  • Assets outside the plant.

Included in this classification are all goods that due to necessity, convenience, repairs, loans or products that cannot be manufactured within the company, are outside its facilities.

  • Uninspected assets

It is possible that the company owns assets in remote or difficult-to-access areas in which the appraiser will not be able to carry out the corresponding inspection, in these cases the client must provide information about those assets, such as: age, physical condition and other descriptions. The appraiser will estimate the value based on that information and will place those assets in an account called “not inspected”, in case it is necessary to make clarifications in the future.

  • leased assets

This classification covers leased and rented assets, also known as Assets Acquired under Financial Leasing or Leasing. The valuation of these assets is carried out taking them into account as property of the company.

  • non-earning assets

This classification includes assets that are in inventory for later use, that are not part of the company's ongoing activities, surplus capacity of the plants and assets that are not part of those that participate in the lay out, that is, assets that are part of the company as multi-use goods, for example: yachts, airplanes, retirement facilities for workers, etc.

Concepts covered by machinery and equipment

  • Wiring for power supply
  • Process piping (plant piping)
  • General plant team.
  • Plant vehicles.
  • Laboratory equipment and tests.
  • Office furniture and accessories.
  • Data processing equipment.
  • Motor vehicles.
  • Tools
  • Special tooling.
  • Patterns and silhouettes.
  • Product diagrams.
  • Special accounts.
  • In progress constructions.


The data bank, as well as the prices of listed machinery and equipment and the references, will be gathered in a general information library from which the following information can be obtained

  • Manuals with manufacturers specifications.
  • Manufacturers catalogues.
  • Manufacturer price lists.
  • Distributor and supplier price lists.
  • Published price guides.
  • Reference guides on serial numbers.
  • Machine base prices.
  • Reference books.

In the same way, it is also possible to obtain price references from the following places:

  • Manufacturers and suppliers.
  • Distributors of new and used machines.
  • Exhibitions and fairs of various branches.
  • Price guides published in specialized magazines.
  • Customer invoices.
  • Newspapers.
  • Auctioneers.
  • old files.
  • Universities.
  • Public Libraries.
  • Computerized data banks.
  • Internet.


Currently, the Internet is a huge source of information that, if used correctly, opens the doors to a large amount of useful information in the search for a quote. However, it is sometimes difficult to find the necessary information quickly and efficiently. 

That is why we present some sites where it is possible to obtain quotes for both new and used machinery:



They are a very useful source of information in which you can find characteristics, technical specifications and equivalences in machinery of different brands, on which the appraiser makes the necessary comparison to value the machinery and equipment in question.

Importance of documentation

Documenting the appraisal process is of the utmost importance for the result. This refers to the name of the person who answered the call, date it was received, compared price, original cost, manufacturer data, index-based trend, etc. In such a way that the appraisal expert knows the complete context of the appraisal and is able to answer the questions of the client, authority or court.


It is necessary to hire the service of an auction agent to be included in the lists of buyers, since they have all the tools to access the auctions that are disclosed in publications, articles, auctions abroad, online, etc. .

It is preferable to have access to an inspection of the machinery or equipment days before the auction to confirm that the state of conservation is adequate and to review the following points:

  • Estimate condition.
  • Estimate observed physical depreciation.
  • Maintenance policy of the company that makes the sale.
  • Estimate installation costs.
  • Estimate the costs of dismantling the equipment.
  • Weigh the difficulties when acquiring the machinery.

After the auction catalog has been acquired and the auction has started, it is necessary to take note of the real value of each item that has been sold. In this way, once the auction is over, it will be possible to add a report to the catalog with the following information:

  • Number of auction participants.
  • Number of buyers.
  • Quality of the machinery that was sold.
  • Weather conditions.
  • Equipment situation, installed / dismantled.
  • Equipment removal problem.
  • Terms of referral.
  • Comments on the economic situation of the area.

The means to obtain information on new and/or used equipment are diverse, among them we can find the following:

  • Telephone directories in their commercial sections.
  • local newspapers.
  • Printed publications on specialized equipment.
  • Publications of the construction industry, metal mechanics, automotive, etc.
  • Catalog of US machinery and equipment publications and tools.
  • USA trucking publications and bulletins.
  • Advertisements posted about construction equipment.
  • Manufacturers catalogues.
  • Etc.

Some customers of this service

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