If you are looking forward to liquidating the dormant assets of your business, then participating in equipment auctions is the best way to achieve the best value for any of your assets. However, you might be wondering how is a machinery valuation actually being determined before diving into an auction. There are various types of bases utilized to determine the valuation of a certain asset. It can either be a fair value, market value, or equitable value. Choosing on which type of basis works best for your case depends on the purpose of your valuation.
Take, for example, if the valuation is intended to know the balance sheet value of your asset, then the most suitable basis should be fair value as prescribed by the accounting standards. If in another case, the valuation is needed to ascertain a projected selling price on an open market, it’s no doubt that market value is the most appropriate basis. Finally, equitable value is most suited when a closed transaction or private treaty is required where there is an identified buyer and the seller determines a fair price for the asset to be paid.
When it comes to the method of valuation to be used, it can either be an income approach, a cost approach, a market approach, or a combination of these approaches. While it may be sufficient to know which valuation basis and method is appropriate, it is also important to determine the best method of sale envisioned to get the most value of your equipment. For instance, if a sale through equipment auctions is considered to be the most effective way to maximize the end result, a market value would be the ideal option. This is assuming that a sale for the individual asset is made and the method done is to seek auction sale comparables.
Conversely, if the sale of the assets through a closed transaction is considered to be a better method, then all comparable market evidence should be taken into account where market value is more appropriate. In general, either it is a private treaty or open market is viewed as the best approach to sell assets, the very first factor to know is what it is specifically to be valued for equipment auctions. Only then when the purpose of the valuation is determined so that the correct basis and method are applied.
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