Marketplace Machinery

Machinery and Technical Specialty Asset Value Premises and Definitions

Value Premises and Standards are often defined by specific financial and accounting rules or by statute.  Many terms are used to describe the notion of value. The definitions offered here are intended to provide examples of fundamental concepts of value and are not the only acceptable definitions.  Unique circumstances may demand specific definitions not found here.  These definitions may be expanded or redefined as the purpose and function of an appraisal dictates as long as the fundamental concept is not altered. The underlying theme and elements of the definitions below are based in standard appraisal theory and are accepted by the Machinery and Technical Specialties (MTS) Committee of the American Society of Appraisers (ASA).

• Reproduction Cost New 
  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
  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
  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
  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
  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 
  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 
  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
  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 
  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 
  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
  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 
  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.

Source for definitions: Machinery & Technical Specialties Committee of the American Society of Appraisers – July 25, 2010