Why Plant & Machinery Valuation Matters:

Followings are the reasons why plants and machineries are needed to be appraised periodically:

1. Financial Reporting:

Accurate valuation ensures that assets are reported correctly on the balance sheet, impacting depreciation, taxation, and overall financial health. 

2.               2    Insurance and Risk Management:

Accurate machinery and equipment appraisal assists in reducing any financial losses. It eliminates the impact of loss or theft by enabling to secure sufficient insurance coverage for plant & equipment.

Furthermore, knowing the depreciation rate of assets enables to anticipate their declining value and plan accordingly, reducing the financial burden of future replacements.

3. Investment Decisions:

Valuations are essential for making informed decisions about investments, acquisitions, and disposals of machinery. Accurate valuations enable to make informed choices when buying or selling equipment. Knowing their true market value will help negotiate the best price. 

4. Fundraising:

Accurate valuations are crucial for securing loans or attracting investors, as lenders and investors rely on the value of assets as collateral. 

5. Mergers and Acquisitions:

Valuations are vital in determining the fair market value of machinery during mergers and acquisitions. 

6. Asset Management:

By understanding the value of machinery, companies can optimize its utilization, maintenance, and replacement, maximizing return on investment. By tracking the value of assets over time, one can monitor their performance and make informed decisions about their economic lifespan and replacement. 

This allows to maximize the return on investment of machinery and equipment while ensuring their continued functionality and productivity.

Note: Point 1, 4 &5 are better to be left on Company’s Chartered Accountants.

 

The above interpretations are absolutely personal in nature and are not binding on any individual/ organization in particular.