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PLANT & MACHINERY VALUATION

When one pauses to reflect upon the immense variety of plant at work in our factories, producing a vast array of products, ranging from miniature printed circuits to ocean going cargo ships, the prospect of becoming a plant valuer must surely be both challenging and exciting. There is a saying that 'the wealth of any great industrial nation lies within the boundary walls of its factories and manufacturing plants'. How many careers offer one the opportunity of unlocking the doors, contained within those walls, and inspecting, without encumbrance, the detailed workings of the plant which produces the Nation's Wealth! Valuation of Plant & Machinery is required for insurance, financial and market purposes etc. Let us now consider the approach to each of these aspects of plant valuation :-

Insurance:

Valuations for insurance purposes are undertaken in order to establish the value of all property which is intended to be covered by a policy of insurance. The valuation is carried out by compiling an inventory of the plant, machinery and all other contents (excluding stock and materials-in-trade) which is at risk in the factory, and then pricing hte itiems on the basis of either reinstatement with new or indemnity, according to the requirement of the client. All the insurance policies have certain stipulation, and this must be meticulously studied and any conditions which will affect the valuation must be taken into account in arriving at the figures shown in the final report to the client.
Preparing an insurance valation, so that both under-insurance and over-insurance are avoided, is a complex task, requiring not only an understanding of plant in the factory, but also a thorough knowledge of insurance principles and law. Many firms of specialist valuers offer a comprehensive loss assessing service, which entails compiling and settling claims in respect of both material damage and also loss of profits.

Financial Valuations:

Financial Valuations are carried out for a variety of reasons including, amongst others, balance sheet purposes, bank loans and other funding activites, company takeovers and mergers, compulsory purchase, and taxation. In essence, the valuer is required to assess the true worth for a company of its plant and machinery in its present location and role, as part of the existing business. Following a valuation, the specialist valuer may well be instructed to negotiate on behalf of his client; therefore, in addition to his technical knowledge and valuation skills, an understanding of company law and other relevant legislation is vital. Financial valuation is undoubtedly the most demanding aspect of plant and machinery valuation, utilising most of the valuer's skills and often resulting in vast sums of money changing hands.

Valuation for Disposal:

Plant and machinery generally becomes available for disposal following rationalisation or modernisation programmes and in cases of company insolvency. When valuation advice is sought in such cases, the valuer is required to be fully conversant with price levels and market trends, and a thorough knowledge of the practice and structure of the industry in question is essential.
Plant may be sold by private treaty, tender or auction sale, and advice in respect of the best method of disposal will usually be required. Following valuation for open market purposes, firms of specialist valuers are often instructed to undertake the disposal of plant and machinery, and the plant and machinery valuer, in his capacity as auctioneer, will manage the sale, including organising and conducting the presentation of the machinery, drafting and organising the advertising programme, preparing the sale catalogue and supervision of viewing and delivery of lots. Auctioneering skills can only be learnt from experience, but the auctioneer must be completely conversant with legislation governing the sale of goods.

Deciding Equity at the time of Foreign Collaboration:

Due to liberalisation there is inward flow of foreign exchange and many companies enter into collaboration with foreign companies. The valuation of assets plays an important role in deciding share of foreign company in matters of collaboration.