Are you looking forward to liquidate the idle assets of your business? Then participating in commercial auctions is the best way to achieve the best value for any of your asset. But how exactly is a machinery valuation being determined before diving into an auction? There are different bases used to determine the valuation of a given asset. It can either be a fair value, market value or equitable value. Deciding on which type of basis works best depends on the purpose of the valuation.
For instance, if the valuation is made to know the balance sheet value of the asset, then the most appropriate basis should be fair value as dictated by the accounting standards. If, on other case, the valuation is for the purpose of ascertaining a projected selling price on an open market, it’s no question that market value is the suitable basis. Finally, equitable value is applicable when a closed transaction or private treaty is preferred where there is an identified buyer and the seller determines a fair price for the asset to be paid. When it comes to the method of valuation to be adopted, it can either be an income approach, a cost approach, a market approach, or a combination.
While it may be enough to determine which valuation basis and method is appropriate, it also helps to know the best method of sale envisioned to get the most value of the asset. For instance, if a sale by commercial auctions is considered to be greatest way to maximise the end result, a market value in-situ would be the most appropriate. This is with the assumption that a sale for individual asset is made and the method done is to seek auction sale comparables. If, on the other hand, the sale of the assets through a closed transaction is deemed to be a better choice, then all comparable market evidence should be considered where market value ex-situ is more appropriate.
Overall, regardless of whether a private treaty or open market during commercial auctions is seen as the best approach to sell assets, the very first thing to know is what it is specifically to be valued. Only after then when the purpose of the valuation is then determined so that correct basis and method is applied.