C. Valuation of Machinery and
Where they are valued for removal,
Equipment:
C.1 Assumptions:
The most appropriate basis of
value is Market Value. However, Market
Value simply stipulates that an
exchange is assumed to take place on an
arm’s length basis between
knowledgeable and willing parties; it is
silent as to how the particular asset is to
be presented for sale or any of the other
specific circumstances that could have a
fundamental effect on the valuation
When undertaking a valuation of
plant, machinery and equipment, the
Valuer must therefore, establish and
state the additional assumptions that
are appropriate, having regard to the
nature of the asset and the purpose of
the valuation.
1. That the plant, machinery and
equipment are valued as a whole, insitu
(in place) and as part of the business as
a going concern. (Value for Continued
Use)
2. That the plant, machinery and
equipment are valued in-situ but on the
assumption that the business is closed.
3. That the plant, machinery and
equipment are valued as individual
items for removal from their current
location.
C.2 Other Factors that Can Affect the
Market Value of Plant, Machinery and
Equipment.
1. The costs of installation and
commissioning where plant, machinery
and equipment are valued in situ.
2.
any allowance made for the costs of
decommissioning, removal, and possible
reinstatement following removal, and
which party is to bear those costs.
3. Factors such as finite sources or raw
materials, the limited life of the
buildings or limited tenure of the land
and buildings housing the plant, and
statutory restrictions or environmental
legislation can also have a significant
impact on the value of plant and
equipment.
C.3 Approaches to Valuation:
Valuations of plant, machinery
and equipment can be carried out using
any of the following approaches:
1. Sales Comparison Approach.
- Due to the lack of direct sales
evidence the use of the sales comparison
approach is often limited to individual
freestanding machines such as
generators, and motor vehicles.
2. Cost Approach
- Machinery and Equipment
valuations are usually carried out using
the Depreciated Replacement Cost
approach to reach a valuation
conclusion.
- International Guidance Note
No.8 provides guidance in the use of the
Cost Approach for Financial Reporting.
It states that depreciated replacement
cost is an application of the cost
approach used in assessing the value of
specialized assets for financial reporting
purposes, where direct market evidence
is limited. In the absence of direct
market evidence depreciated
replacement cost is regarded as an
acceptable method of determining value
and since the publication of the IVS
seventh edition (2005) depreciated
replacement cost is recognized as a
market-based methodology.
3. Insurance Valuations
- It is recognized that where the
cost approach is adopted for valuations
for insurance purposes, the approach
and assumptions used will be different
to those adopted when undertaking
valuations for financial reporting. The
valuation conclusion using the cost
approach for insurance valuations will
therefore not equate to Market Value.

4. Income capitalization
approach.
- In practice, this approach in the
valuation of machinery and equipment
is not adopted. It is recognized that it is
rarely possible to identify an income
stream and allocate it to individual
assets. As a result, it is generally very
difficult, if not impossible, to determine
values for individual assets by reference
to the income approach.