M&E Appraisal Associates, Inc. (“M&EAA”) has extensive experience preparing machinery & equipment appraisals, medical equipment appraisals, and inventory appraisals under various definitions of value. The intended use of an appraisal dictates which definition of value is applicable to a specific assignment. M&EAA utilizes or bases its definitions on those published by the American Society of Appraisers (“ASA”), specifically relating to Machinery & Technical Specialties Assets.

Per the ASA, these definitions are offered to provide the fundamental value concepts; they are not the only acceptable definitions, since contracts or jurisdictions may dictate somewhat different philosophies. Therefore, these definitions may be expanded or refined as the purpose and function of an appraisal dictate, as long as the fundamental concepts are not altered. In other cases, the laws of a country, state, region, or regulatory agency may require other terms, which therefore would take precedence over the definitions shown here. Machinery & equipment value definitions, as defined by the ASA, are provided as follows:

ASA Definitions of Value –

Reproduction Cost New is the cost of reproducing a new replica of a property on the basis of current prices with the same or closely similar materials, as of a specific date.

Replacement Cost New is the current cost of a similar new property having the nearest equivalent utility as the property being appraised, as of a specific date.

Fair Market Value is an opinion expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date.

Fair Market Value in Continued Use with Assumed Earnings is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and assuming that the business earnings support the value reported, without verification.

Fair Market Value in Continued Use with an Earnings Analysis is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and supported by the earnings of the business.

Fair Market Value – Installed is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering market conditions for the asset being valued, independent of earnings generated by the business in which the property is or will be installed, as of a specific date.

Fair Market Value – Removed is an opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering removal of the property to another location, as of a specific date.

Liquidation Value in Place is an opinion of the gross amount, expressed in terms of money that typically could be realized from a properly advertised transaction, with the seller being compelled to sell, as of a specific date, for a failed, non-operating facility, assuming that the entire facility is sold intact.

Orderly Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.

Forced Liquidation Value is an opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.

Salvage Value is an opinion of the amount, expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date.

Scrap Value is an opinion of the amount, expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.

M&EAA Definitions of Value –

M&EAA relies on the ASA definitions previously stated, although the published definition is not always used verbatim. Commonly utilized machinery & equipment value definitions, as defined by M&EAA, are provided as follows:

Replacement Cost is the current cost new, including installation, of a similar new property having the nearest equivalent utility as the property being appraised. This differs from Reproduction Cost which would entail the current cost of an exact replica of the property being appraised.

Fair Market Value-Installed is the anticipated selling price which would be agreed upon between a willing buyer and a willing seller for all items under prevailing market conditions and including installation. Neither party is considered to be under duress. Both parties are assumed to be knowledgeable and aware of all relevant facts affecting the selling price. No warranties or guarantees are assumed to be provided by the seller and all items are sold on an “as is” basis. It is assumed the subject equipment would be available for continued use at its present location.

Fair Market Value-In Continued Use is the anticipated selling price which would be agreed upon between a willing buyer and a willing seller for all items under prevailing market conditions and including transportation and installation. Neither party is considered to be under duress. Both parties are assumed to be knowledgeable and aware of all relevant facts affecting the selling price. No warranties or guarantees are assumed to be provided by the seller and all items are sold on an “as is” basis. It is assumed the subject machinery & equipment would continue to be operated at its present site and that the business earnings support the concluded value.

Fair Market Value is the amount, expressed in dollars, which could reasonably be expected to exchange between a willing buyer and a willing seller with each aware of any factors affecting value or utility and with neither under compulsion to buy or sell. It is assumed that all items would be sold “as is, where is” and without any warranties or guarantees provided. The values concluded assume that all items would be removed from their existing location and that the related removal and relocation expenses would be incurred by the buyer(s).

Orderly Liquidation Value (Machinery & Equipment) is the estimated gross dollar amount which could typically be realized from an orderly sale of the subject assets on a negotiated basis, held under forced or distressed conditions, with a limited marketing period. Inherent in the definition is the disposal of all assets in an “as is” condition with all expenses of removal and transportation incurred by the buyer. It is assumed that the sale would be conducted by a qualified broker familiar with this type of equipment. The specific time period for an orderly liquidation will vary based on the type and quantity of machinery & equipment under consideration. M&EAA’s appraisal reports will state the anticipated orderly liquidation time period.

Orderly Liquidation Value (Inventory) is a professional opinion of the gross sales that the inventory would typically realize in a negotiated sale, properly advertised and professionally managed, by a seller obligated to sell, with a limited marketing period. The ability of the inventory to draw sufficient prospective buyers to assure competitive offers is considered. It is assumed that all of the inventory will be sold on a piecemeal basis “as is, where is” with the purchaser(s) being responsible for removal at their own risk and expense. In the event of sales to existing customers, shipping and terms would be consistent with the historical relationship. M&EAA’s appraisal reports will state the anticipated orderly liquidation time period. The definition of value originated from a national commercial lender, specific to inventory appraisals. The definition has been adopted and amended M&EAA for use in inventory appraisals.

Forced Liquidation Value is the estimated gross dollar amount which could typically be realized from a properly advertised and conducted public sale held under forced or distressed conditions and with a sense of immediacy. Inherent in the definition is the disposal of all assets in an “as is” condition with all expenses of removal and transportation incurred by the buyer. It is assumed that the sale would be conducted by a qualified seller with experience in selling this type of equipment. M&EAA’s appraisal reports will state the anticipated forced liquidation time period.

Fair Value is the amount at which the asset or liability could be bought or sold or incurred or settled in a current transaction between willing parties (i.e., other than a forced or liquidation sale). Thus the fair value of the reporting unit refers to the amount that the whole unit could be bought or sold for in a current transaction between willing parties. Based on recent published Financial Accounting Standards Board (“FASB”) statements, it is the opinion of M&EAA that the Fair Value of the machinery & equipment, as part of an operating business unit, is the value of all items installed and available for operation. Accordingly, Fair Value is then analogous to Fair Market Value-In Continued Use Value as defined by M&EAA. As previously stated, M&EAA’s value definition is based on the published definition of Fair Market Value-In Continued Use with Assumed Earnings as set forth by the ASA. Although the ASA definition is not used verbatim, M&EAA’s definition includes the basic tenets of the published definition, namely a willing buyer and a willing seller; values include installation; and the assumption that the concluded values are supported by the business earnings.