Quick answer
A plant and equipment valuation estimates the value of machinery, equipment and fixed installations for a stated purpose such as insurance, finance, financial reporting or insolvency. The basis of value (market, replacement cost or liquidation value) is chosen to suit the purpose, and the valuer usually inspects the assets and reports them asset by asset.
Plant and equipment valuation covers the machines, vehicles, equipment and fixed installations a business uses, from minor plant and machinery to full production lines and mining and processing plants. This guide explains how it works and when you need one, and it links to our plant and equipment valuation service.
Monita's plant and equipment valuations go through a Certified Practising Valuer (Plant & Machinery). We value plant and equipment in Sydney, Melbourne and across Australia. The aim of this guide is to help you ask for the right kind of report.
In this guide
What counts as plant and equipment?
Plant and machinery, also called plant and equipment, is the physical equipment a business operates with. It ranges from a single machine or a vehicle fleet to whole production lines, fixed installations and mining and processing plants. Valuers report each item or group of items in an asset schedule, so auditors, insurers, lenders and liquidators can use it.
Which value do you need?
The value depends on the purpose, so the basis is agreed before the work starts.
| Basis of value | What it means | Often used for |
|---|---|---|
| Market or fair value | What the asset would sell for between a willing buyer and seller | Finance, sale and financial reporting |
| Replacement cost | What it would cost to replace the asset with an equivalent one | Insurance |
| Orderly liquidation value | What the asset is likely to realise in a managed sale over a reasonable period | Insolvency and recovery |
| Forced sale value | What the asset is likely to realise in a rapid sale, such as an auction at short notice | Insolvency and urgent sales |
How a plant and equipment valuation is done
The usual steps are:
- Review the asset register: or build one from your records
- Inspect the assets: to assess condition, age and how heavily they are used (an inspection is normally part of the work)
- Apply the right approach: market, cost or income, depending on the asset and the purpose
- Report: an asset-by-asset schedule with a summary, stating the basis of value
Need plant and equipment valued?
Tell us the assets, the purpose and your location and we will confirm the scope and the fee before any work begins.
What affects the value of plant and equipment
Age, condition, hours or kilometres used, maintenance history, make and model, how easy the item is to move and re-sell, whether it is part of a working line, and current market demand all affect the value. The report records what was relied on so the result can be explained to a third party.
When do you need one?
A plant and equipment valuation is commonly needed for:
- An insurance valuation, so the sum insured reflects the cost to replace the assets
- Finance and security, when a lender wants an independent value
- Financial reporting, where assets are revalued or reported at fair value
- Insolvency and recovery, where orderly and forced sale values are needed
- Sale and asset disposal, so the reserve and sale method are realistic
- Mergers, acquisitions and purchase price allocation
What to have ready
A little preparation makes the valuation faster. Gather what you can of the following:
- An asset register, if you have one
- Purchase invoices, serial numbers, make and model details
- Maintenance records and hours or kilometres used
- The location of each asset and how it will be accessed
- The purpose of the valuation and the date you need the value for
Mistakes to avoid
Common mistakes:
- Asking for a value without saying what it is for. The right basis of value depends on the purpose.
- Using depreciated book value. Book value is an accounting figure and often differs from market or replacement cost.
- Relying on a dealer's opinion for a formal purpose. A lender, insurer or auditor usually wants an independent report.
- Treating replacement cost and market value as the same. They answer different questions.
Key terms explained
- Plant and machinery
- The machines, equipment, vehicles and fixed installations a business uses to operate. Also called plant and equipment.
- Replacement cost
- The cost to replace an asset with an equivalent one, often used for insurance.
- Orderly liquidation value
- The value expected from a managed sale over a reasonable period.
- Forced sale value
- The value expected from a rapid sale, such as an auction at short notice.
- Asset register
- A list of a business's assets with details such as description, serial number, location and cost.
Need a Plant and equipment valuation? Talk to a valuer.
Tell us the property, the date you need the value for and what it is for. We will tell you what is needed and what it involves.
Free first call. Fee confirmed before work starts. Certified Practising Valuer. Australia-wide.
Sources and further reading
This is general information, not tax advice. Speak to your accountant or tax adviser about your own position. A valuation sets out market value at a stated date. It does not work out your tax.