Plant and Equipment Valuation Definitions
Before engaging with a plant and equipment valuer, it may be useful to create an asset valuation criteria. This simply would be determining the purpose of the valuation, what you hope to achieve and what information you would like to gain from the report. Of course, if you want to be able to communicate more effectively with your valuer about what you want from your report, it may be useful to learn some valuation terms.
At Plant and Equipment Valuation SA, we don’t expect our clients to be familiar with everything to do with plant & equipment valuations, especially if a client is new to such a process. Good communication is key to ensuring the best product and service for our clients and our team will communicate effectively and clearly. If you do, however, want to familiarise yourself with a few plant and equipment valuation definitions, we have included a glossary of terms below for your perusal.
To make finding the key terms easier, we have separated the provided definitions into three sections:
- Basic Plant and Equipment Terms: General terms that regularly appear throughout our website.
- Different Value Definitions:There are many types of value that a professional valuer may calculate depending on the type of valuation and its purpose.
- Other Useful Terms: Words and terms that may be used in more specific circumstances but may be helpful to be more familiar with.
For those who would like more information, or prefer to speak with an expert, feel free to speak with a member of our team.
Basic Plant and Equipment Terms
PLANT AND EQUIPMENT
All tangible assets that are possessed by an entity, contributing to its business operations and annual income without being consumed or sold.
PLANT AND MACHINERY
A term that is recognised as having the same meaning as plant and equipment.
PROPERTY, PLANT AND EQUIPMENT
An extended version of the term plant and equipment, meaning all fixed assets of a business including real estate and machinery.
VALUER
A qualified professional, with the training to conduct a formal appraisal of an asset.
VALUATION
An objective assessment of an item or asset to determine its value on a specific date based on evidence.
PROPERTY VALUER
A professional with the specific training and education to perform valuations of real estate.
PLANT AND EQUIPMENT VALUER
A valuing professional who specialises in the assessment of value for all fixed assets belonging to an entity.
P&E
A common abbreviation of the term plant and equipment.
PP&E
A professionally recognised initialised form of the term property, plant and equipment.
P&M
The abbreviated version of the term plant and machinery.
AUSTRALIAN PROPERTY INSTITUTE
A well-recognised body known for its maintenance and development of the standards and practices of Australia’s property professionals.
API
The official abbreviation of the Australian Property Institute, recognised by professionals and individuals.
CERTIFIED PRACTISING VALUER
An established certification from the API, given to a valuer who has passed a strict application process proving their experience, education, training, and compliance with set standards.
CPV
Abbreviation of Certified Practising Valuer, a certification provided by the API to eligible valuers.
CERTIFIED PRACTISING VALUER (PLANT AND MACHINERY)
An API certification specifically for valuers with specialised training, education and experience in valuing plant and equipment.
ROYAL INSTITUTION OF CHARTERED SURVEYORS
A globally respected organisation providing worldwide standards and guidelines for property professionals in several sectors including, development, management, construction, and valuation.
RICS
The recognised abbreviation of the Royal Institution of Chartered Surveyors.
Different Value Definitions
MARKET VALUE
An amount that is estimated to be exchanged between buyer and seller in an arm’s length transaction, when both parties are acting judiciously.
ENTERPRISE VALUE
An entity’s total value with consideration of all liabilities including long-term and short-term debts. Not including its cash and cash equivalents.
EQUITY VALUE
The value of an enterprise once debts and debt liabilities have been settled with the inclusion of its cash and cash equivalents.
FAIR MARKET VALUE
The hypothetical amount expected to be exchanged during an open and unrestricted sale of an asset or item.
GOING CONCERN VALUE
A determination of value with the fair and reasonable assumption a business will be operating as usual in many years.
INVESTMENT VALUE
The amount an asset or business is worth with the investor’s objectives in mind.
LIQUIDATION VALUE
The estimate of the complete worth of an entity’s tangible assets should the entire company be hastily sold or has gone out of business.
MARKET RENTAL VALUE
An objectively determined amount of rent to be charged to a prudent tenant.
SALVAGE VALUE
The considered value of an asset once it no longer fulfilling its original purpose but may still be recycled, sold, or serve another function.
STANDALONE VALUE
The value of an investment, asset, or business in its present condition prior to a merger or acquisition without taking into account any synergies.
SYNERGISTIC VALUE
The worth of two or more assets once they have been combined to form a total value that is greater than the sum of the asset’s values.
Other Useful Terms:
APPRAISAL
An examination of an item to form a general estimate of its value.
ARM’S LENGTH
An open market transaction performed by two unrelating parties of no affiliation or biases.
ASSET
An item or resource capable of producing positive economic value for its owner.
ASSETS REGISTER
An informative and complete list of a business’s assets.
BUSINESS
An entity that is in pursuit of economic activity by engaging in investments, commercial, industrial, or service activities.
CAPITALISATION RATE
A tool for comparing and measuring the potential of a possible investment with consideration of its net operating income.
CLASS OF ASSETS
Assets similar in nature, use or function that have been grouped together.
COST
The amount of expenditure that is needed to sell, construct, acquire or prepare an asset for use within a business.
COST APPROACH
A summation of all factors influencing the cost of replacing an asset, thus determining its value.
DEPRECIATION
Accounting method of allocating costs of a tangible asset over its useful life, considering its use and natural wear and tear.
DESKTOP ASSESSMENT
A type of valuation whereby a valuer does not inspect a property and produces their report based on data and available documentation.
EQUITY
The total amount an entity’s assets are worth minus all liabilities.
ECONOMIC OBSOLESCENCE
Reduction in an asset’s value due to external factors impacting the asset, business, or service.
FUNCTIONAL OBSOLESCENCE
The loss of asset value due to a reduction in usefulness. This may be caused by an outdated or poor design that cannot be altered.
GOING CONCERN
An assumption, logically made, that a business would be in operation in coming years.
HIGHEST AND BEST USE
The maximum potential use of an asset based on what is most financially feasible, physically possible and is legally permissible resulting in the asset’s highest value potential.
IMPAIRMENT
An asset’s unrecoverable loss of value, making the reduction permanent.
INCOME APPROACH
A valuation performed on an asset considering its income production.
INTANGIBLE ASSET
A resource or asset that is not physical in nature and has economic value for an entity. Examples include intellectual property, trademarks, or brand recognition.
LEASE
An agreement of payment or regular payment in exchange for the use or occupancy of an asset for a specified amount of time.
LESSEE
Person/s named on a lease agreement to use or occupy a property owned by the lessor. A tenant.
LESSOR
Owner of property that has been leased to a tenant. Alternatively referred to as a landlord.
MARKET APPROACH
A method of valuation examining the data from the sales of comparable assets.
MODERN EQUIVALENT ASSET
An asset designed or constructed by contemporary means serving a similar function to the subject asset.
OBSOLESCENCE
A point an asset reaches once it is no longer considered desirable or useful which in turn reduces its value.
RATE OF RETURN
An expression of the amount of an investment’s gain or loss over a specified period, represented by a percentage.
REAL PROPERTY
A defined portion of land and all its fixed attachments including improvements and structures.
REPLACEMENT COST
The expected amount to be attached to the replacement or recreation of an asset.
RENT
An agreed amount to be paid regularly for the use of an asset.
RENT REVIEW
A recurring examination of the worth of an asset with the objective of adjusting its lease.
RETURN ON INVESTMENT
A metric used to measure and weigh the potential earnings and costs of a prospective or current investment.
TANGIBLE ASSET
An asset of a physical and measurable nature. Examples include property, equipment, and machinery.
TECHNICAL OBSOLESCENCE
When an asset is no longer considered useful or desirable due to a modern item proving to be more efficient, effective, or easier to use. This is despite the subject asset’s functional and good condition.
Re-defining Expert Plant and Equipment Valuations
We understand that it can be overwhelming to learn about a new topic without any help. If you would like to learn more about plant and equipment valuations, our experts would be happy to help with any questions or queries.
Our team are highly knowledgeable, and our valuers have over 20 years of experience in conducting P&M valuations. To contact us, simply complete our online form or call us on (08) 7078 3538.