From acquisition value for
equipment to current value for machinery

4th May 2021 by P. Merker

Market value, fair value or insured value? What distinguishes fair value from the time value of machinery? And what exactly is fair value?

In valuation practice there are a multitude of different value terms – depending on the industry, depending on the purpose of the valuation, depending on the legal basis and context. The real estate appraiser knows different terms than the machinery appraiser. No wonder that companies are often not quite clear which value they need for what.

Therefore, we have summarised all the essential terms and definitions from valuation practice in a glossary. We explain the three most important ones right here.

And everything else is available by telephone!

Here your find the glossery: Value terminology in the machinery evaluation (in German)


DEFINITION OF TIME VALUE MACHINES

The time or current value of machinery is calculated to obtain, for example, the opening balance sheet value of technical and commercial operating equipment. The current market value is therefore used for

  • Company formations,
  • Spin-off of subsidiaries or
  • Transformations of corporate forms.

The current value in this context is the condition of the asset for its intended use, assuming that the company will continue in the same manner. The diminished value existing between the new value and the current value is not determined by a depreciation rate; it is estimated according to the condition determined in particular by age and wear and tear.

Our appraisals are recognised by the tax authorities as a basis for valuation.

DEFINITION OF NEW VALUE MACHINES

The new or replacement value is the replacement price for the item (in new condition) including all ancillary costs for procurement and assembly until it is ready for operation. In cases where the current value of an item is less than 40% of its new value, only the lower value (current value) applies.

The value as new is required in particular for determining the correct sum insured.

DEFINITION OF MARKET VALUE MACHINES

The market value is defined in the Valuation Act (as the so-called common value according to §9 BewG). This is determined according to the price that would be attainable in the ordinary course of business and depending on the nature of the asset in the event of a sale. All circumstances influencing the price are to be taken into account – but not unusual or personal circumstances. The market value assumes the continuation of the business – in contrast to the liquidation value.

The correct determination of the market value requires extensive market knowledge and experience and is based on the observation of a sufficient number of current transactions on the market.

You usually need the market value for purchases and sales or for financing purposes.