personal property

[L.A. Romsa]

Anybody like personal property and depr.??
My question:
A company buys a business. The personal property has a 10 year life and is 5 years old. Cost new was 80,000 and depreciated to a value of 20,000.
Their accounting books show they paid 80,000 for this personal property.
Should this now be valued at 80,000 or 20,000. There are several items from heavy equipment to office supplies. Thanks for any help!!!
By the way,,,I HATE PERSONAL PROPERTY.
L.A.

 

[Joker]

L.A.
If you are doing a real property appraisal, the equipment should be valued at present market value. See Standard 4 and the definition section of USPAP. Present market value is NOT necessarily book value. Book value is an accounting value and not an economic value. Market value can be more or less than book value. The property should be valued based on the correct methods (i.e. comparable sales, or income capitalization). If you are appraising equipment, you should speak with dealers of that equipment type, see what the sales price of similar equipment with similar features, condition, and age is. Attend auctions where that type of equipment is sold. There are trade publications for selling many different types of equipment, new and used, and some publications which list actual sales prices of equipment sold at public auctions.
Are you familiar with the type of equipment you are appraising? Have you bought, sold, used, or appraised it before? If not, make sure you are compling with the Competency Rule of USPAP.

 

[Anonymous]

There are some rules of thumb about personal property contributions to on-going businesses. A book called "What's it Worth?" by Manning has a list of good rules of thumb.

He contends, in general, the market often values used equipment at about 1/2 its value if it is in use and sold with an on-going business, while if sold off separately, could be much less. My own experience suggests he has a good handle on it.

Again, the type of pers. property matters. Farm animals and equipment like tractors are basically auction prices, as this is the typical market way of disposing of these items. Items like feed lines, bulk milk tanks, etc. are trade fixtures and are of significant value only if in use.

Restaurant equipment may be very difficult to value. Some machines are proprietory. So, say KFC building and equipment is being sold as a unit, but KFC says they will not transfer the franchise. In that case, certain specialized equipment that can only be used by KFC may exist and have to be disposed of to a KFC franchise, i.e.- would be illegal to use it without KFC permission.

You might value Little Debbie's (McKee Baking) Swiss Roll machine but it is a one of a kind machine designed for McKee and no one else. Even taking a camera into their plant will get you escorted out the door post-haste. There is no market for the machine because there is no seller.

ter

 

[Restrain]

Be aware that there are several different approaches to valuation of such personal property. Value "in place" vs. "auction value" vs. "liquidation value". Each of these values can vary significantly. All of these values will be different from the accounting value which reflects government guidelines for depreciation, not the actions of the market.