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Business equipment valuation checklist

Business equipment valuation checklist

For many businesses, equipment is the highest-value asset. Knowing its actual value is essential if you are planning to sell, take out insurance, calculate depreciation for tax purposes, or use it as collateral for securing a loan. Here are some ways to check how much your gear is worth.

 

What is the current state of the item?

If the equipment being valued is expensive or complex, there are likely to be quite a few factors affecting its current resale or replacement value.

If it’s a motor vehicle, for example, such factors could include age and model, manufacturer (premium models often depreciate less quickly), service and repair history, condition of the chassis and rust – even the colour can be important. An equipment performance evaluation by a service professional, such as a qualified mechanic, may be worth the investment.

Knowing your equipment inside out (and its current condition) should be your very first step to help ensure your valuation is as accurate as possible.

What are similar items selling for?

The next step is referred to as the ‘sales comparison approach’. For specialised equipment, arriving at an accurate figure using this method can be difficult, because such items are often sold as a part of a collection or portfolio of assets.

There are, however, often several ways in which you can conduct equipment evaluation independently, such as:

  • Checking winning bids at recent auctions (whether online or off) where comparable items were sold
  • Using a business equipment valuation resource such as RedBook, or an equivalent resource applicable to your industry
  • Scanning classified ads in local newspapers, the Trading Post, online buy/sell sites, etc.

What is its replacement value?

If you are taking out insurance, you will need to know how much it will cost to replace the equipment. If you want to know the current market value of the asset, you will need to subtract from this figure any loss in value caused by physical deterioration or obsolescence. The Australian Property Institute (API)’s market value guide explains the types of obsolescence that can apply.

Do you need to calculate depreciation for tax purposes?

Even recently purchased, ‘near new’ equipment is likely to have already declined in value from its original purchase price. To simplify calculation of deductions derived from the depreciation in value of business equipment, the ATO provides a set of standard deduction rules.

Small businesses – defined by the ATO as those with turnover of less than $2 million a year – can use the simplified depreciation rules, under which most newly acquired assets are subject to a 15 per cent depreciation in value in the first year after purchase.

Getting professional assistance

Sometimes you will need the help of an external valuation professional for an accurate equipment valuation. This is especially true if public listings of similar items of equipment, or their final sale price, are not easily obtained.

In Australia, the API is the peak governing body representing plant and machinery valuers, and can help you find a certified valuation professional.

Knowing the value of your equipment will save you from leaving money on the table, whether taking out insurance, selling the business or entering into a partnership. And at the end of the day, it’s simply good accounting.

Use this handy checklist to help make sure you have all your assets covered.

Find out more reasons you should stay on top of your equipment’s value.

Once you have determined how much your equipment is worth, make sure you have the proper level of coverage for peace of mind. Speak to an Adviser to find out how.

Why Speak to an Adviser?

  • Tailored expert advice with your best interests at heart
  • Get the right Resilium Insurance suited to your needs
  • Personalised service from quotes to claims

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