The valuation of machinery and equipment (M&E) assets is distinct from the valuation of other assets since the value of an item can vary depending on the particular inspection circumstances, such as liquidation value, going concern value, and/or installation costs. The language and process used by qualified Machinery & Equipment appraisers to form a judgement of value will be discussed in this article.

The appraiser must choose which of the three standards of value—Fair Market Value, Fair Value (ASC 820), and Fair Value (Statutory)—to apply when valuing all assets, as well as which of the three generic approaches to value to use when arriving at an opinion of value. It is crucial that a client tell the appraiser exactly how the appraisal will be used as a result.

Techniques for Valuation
In appraisal analysis, there are three acknowledged approaches to establish value:
The Cost Approach, which often serves as the foundation for assessments, is founded on the principle of substitution, which states that the highest possible worth of a property to an informed buyer would be the amount currently needed to build or acquire a new asset of equivalent utility. If the subject asset is not brand-new, the current cost must be modified to account for all types of depreciation as of the appraisal’s effective date.
The Direct Market or Sales Comparison Approach is predicated on the idea that the worth of an asset may be ascertained by looking at sales of identical or comparable goods occurring in a secondary or used market, and then adjusting for differences in Relevant factors include age, capacity, utility, location, date, and kind of the transaction, as well as the cost of transportation, assembly, and installation at a new location.
The Income Approach is the approach that is least frequently utilised to estimate the worth of specific machinery and equipment. It evaluates the earning potential of the under-researched corporate assets.

It is important to keep in mind that using just one method does not always result in a reliable assessment of worth. When paired with the knowledge and experience of a qualified, impartial, competent, and certified professional appraiser, proper surveying, inspection, and application of these methods on the subject property provide a high-quality evaluation.

Classification
The assets that need to be appraised must first be correctly classified into one of two categories as part of the M&E evaluation process:
Because market estimates for its reproduction or replacement costs are supported by facts, marketable equipment is easier to value than special purpose equipment. The value of the subject asset can be determined, supported, and bracketed using points of reference that can be constructed.

Only Replacement Cost New is used as a benchmark for Special Purpose Equipment valuation. Any specific shortcomings in usefulness or obsolescence must be taken into account and examined on an individual basis with the loss in value reflecting appropriately.

Premises to value
We provide a non-exhaustive list of sixteen (16) definable premises of value for each of the three Standards of Value listed above:
Replacement Cost New
Reproduction Cost New
Historical Cost
Insurance Replacement Cost New
Insurance Reproduction Cost New
Original Cost
Fair Market Value Severed
Fair Market Value In Place (VIP)
Fair Market Value In Use (VIU)
Actual Cash Value
Liquidation Value In Place (LVIP)
Orderly Sale Value (OSV)
Forced Liquidation Value (FLV)
Orderly Liquidation Value (OLV)
Scrap Value
Salvage Value
  the 3 steps in equipment valuation
No of the rationale for the assessment, equipment is valued using these three processes by appraisers:
Identify the equipment that has to be appraised and gather the pertinent data for each item, such as the purchase date, price, carrying value on the balance sheet, and accrued depreciation.
Use the proper valuation technique or techniques. The sales comparison technique, which is equivalent to the market approach, and the cost approach are two methods that are helpful for valuing equipment.
Use your discretion to determine the worth. The sales comparison approach will give the most realistic value for the equipment, assuming a moderately active market for that sort of equipment. The value derived using the sales comparison approach is the default for a piece of equipment where there is an active market since ASC 820 gives the highest weight to quoted prices in active markets for identical assets.