VGV MGV PlantEquipment August-2011

Valuer-General Victoria and Municipal Group of Valuers

Specialist Property Guidelinesfor Plant and Equipment

August 2011

For more information about DSE visit www.dse.vic.gov.au or contact the DSE Customer Service Centre on 136 186 For information about the Municipal Group of Valuers visit www.mgv.com.au Published by the Victorian Government Department of Sustainability and Environment, Melbourne, August 2011.

© This publication is copyright. No part may be reproduced by any process except in accordance with the provision of the Copyright Act 1968.

Disclaimer: This publication may be of assistance to you but the State of Victoria and its employees do not guarantee that the publication is without flaw of any kind or is wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication.

Victorian Statutory Revaluation

Guidelines on Valuation Methodology for Plant and Equipment – August 2011 Page 1 of 18

Valuer-General Victoria and Municipal Group of Valuers

Guidelines on Valuation Methodology for

Plant and Equipment

Introduction

These guidelines are to be used when assessing plant and equipment for rating and taxation purposes. Plant and equipment assets have particular characteristics that distinguish them from other types of real property. Those characteristics are important when determining if the plant is a fixture or a chattel. If the plant and equipment is found to be a fixture it forms part of the land and should be included in the rateable assessment. A fixture refers to an object that is permanently or indefinitely fixed to the real property and intended to be part of the property. In this context, a fixture is then included in the rateable assessment. These guidelines need to be used in conjunction with the General Provisions Specialist Guidelines, which refer to the general requirements, legislation and procedures relating to all statutory valuations. Definition

Plant – Assets that are inextricably combined with others and that may include specialised buildings, machinery, and equipment.1

Machinery – Individual machines or a collection of machines. A machine is an apparatus used for a specific process in connection with the operation of the entity.2

Equipment – Other assets that are used to assist the operation of the enterprise or entity.3

1 International Valuation Standards Council, 2007, International Valuation Guidance Notes, 6.3: Valuation Plant & Equipment, http://www.api.org.au/menuitem/professional-and-technical-standards/valuation-property-standards, p.17 2 ibid. p.17 3 ibid.

http://www.api.org.au/menuitem/professional-and-technical-standards/valuation-property-standards



Other definitions and industry terms Fixtures Fixtures are items attached to land in such a way that they become, in law, part of the land: quicquid plantatur solo, solo cedit – “whatever is affixed to the soil, becomes part of the soil”.4 Fixtures in a rating context are items of plant and equipment attached to the land and intended to remain that way. However in determining this, there are many issues involved and the overall tests are complex. Chattel A chattel is essentially a tangible object that is movable. There are many extracts and definitions of what is a chattel, some definitions are as follows:

1. Personal property, as distinct from real property.

2. Any property which is not freehold land. The property may be a leasehold (chattel real) or a movable article of property such as household furniture and jewellery (chattel personal) ... As a matter of interpretation or construction, the word 'chattel' in appropriate contexts in deeds, wills, statutes and other instruments can include intangible property (chooses in action) as well an tangible property.5

The expressions "chattels real" and "chattels personal" are the subject of paragraphs 1203 and 1204 of volume 35 of Halsbury's Laws of England (4th ed. re-issue, 1994). The former "are interests concerning or savouring of realty, such as a term of years in land ... which have the quality of immobility which makes them akin to realty, but lack indeterminate duration." They are probably now confined to leaseholds. The latter: "... are, strictly speaking, things movable, but in modern times the expression is used to denote any kind of property other than real property and chattels real. ‘Personalty' or 'personal property' includes many kinds of property unknown to the common law, such as bills of exchange, bank notes and cheques, land improvement charges, copyrights, patents, shares in joint stock companies, debentures, government annuities and stock in the public funds, goodwill, and the exclusive right of burial in a particular place; but does not include title deeds relating to real estate, heirlooms in the strict sense, fixtures or wild animals, and does not always include growing crops or trees.6

In situ

In situ is a Latin phrase that literally means ‘in position’. In a property context its meaning is often referring to an object been ‘in place’.

Real property

Real property and personal property are two of the main terms used in English common law.

Real property refers to the land and tangible fixtures such as buildings.

Personal property refers to personal or private items that are generally chattels i.e. movable items. They may be tangible in form (such as livestock, furniture, clothes, jewellery etc.) or intangible items such as securities and leases.

4 Peter Butt, Land Law , 6th edn, Lawbook Co., Sydney, 2010 p. 41 5 P.E Nygh & P.J. Butt, Concise Australian Legal Dictionary, 1st edn, Butterworths, 1997 6 Australian Rice Holdings Pty Ltd v Commissioner of State Revenue (2001) VSC 486



Hereditaments

Real property comprises two distinct elements, corporeal hereditaments and incorporeal hereditaments. The term hereditaments refers to property that descended to a person’s heir upon their death if they died intestacy (without a will) prior to 1926. That is realty as opposed to personalty.7

Corporeal hereditaments – are lands, buildings, minerals, trees and all things which are part of or affixed to the land – in other words, the physical matter over which ownership is exercised. 8

Incorporeal hereditaments – are not things ... but rights. Certain rights were classified as real property, so that on intestacy before 1926 they also descended to the heir rather than the relatives entitled to personalty.9

Examples of incorporeal hereditaments are easements and profits.

7 Sir Robert Megarry and H.W.R Wade, The Law of Real Property , 5th edn, Stevens & Sons Limited, London, 1984, p 11 8 ibid. 9 ibid.



Additional Victorian legislation and cases applicable to plant and equipment Victorian legislation Duties Act 2000 Court cases The law in relation to the rateability of plant and equipment has been dealt with by the courts over a considerable period of time. Early English case law provides some assistance in understanding the principles adopted in Australia and in particular Victoria. The United Kingdom legislation was amended in 1925 (Rating and Valuation Act 1925) to legislate that specified plant and equipment shall be deemed to be part of the heriditament. This followed various decisions on plant and equipment including R. v. St. Nicholas, Gloucester (1783), I.T.R 723, Kirby v Hunslet Union [1906] A.C 43 and Smith V Willesden Union (1919), 89 L.J.K.B 137.

The effect of the decision of the House of Lords in Kirby v. Hunslet Union was to sweep away the principles on which a discrimination had previously be made between machinery and plant which was to be “taken into account” in valuation, and that which was not...and practically to direct the rating authority to value the hereditament equipped with machinery and plant as it appears to the eye. In Smith v. Willesden Union, it was decided that in valuing that hereditament, the net annual value must be ascertained by estimating the rent which would be given for land, building, and machinery, on the assumption that the hypothetical landlord provides at his own expense the machinery and plant as well as the land and building, and that the hypothetical tenant pays rent for all that he provides.10

There are numerous cases that refer to plant and equipment in many jurisdictions. The following cases are a collection of the more recent decisions and more frequently cited historic cases. It is important that the cases are read in their entirety as each decision is based on the facts pertaining to the individual property and the particular circumstances of the dispute. The preamble of the case has been included where available, otherwise the reference to the “The Valuer” has been provided. Australian Gas Light co. v The Valuer General (1938) - The Valuer, Vol. 5, f.241.

Australian Gas Light Company v The Valuer General (1969) - The Valuer, Vol. 21,

f.297.

City of Montreal v Sun Life Assurance Co. Of Canada - The Valuer, Vol. 13, f.116.

Levitus v City Mutual Life Assurance Society Ltd - The Valuer, Vol. 4, f.166.

Australian Oil Refining Pty Ltd v Metropolitan Water Sewerage and Drainage Board NSW(1958) - The Valuer, Vol. 15, f.255.

Alpine Shire Council v MHSC Transportation Services Pty [2002] VSC 22 (25

February 2002) VALUATION OF LAND for rating purposes of an operating commercial airport at the alpine site of Mount Hotham – where four separate valuations were presented to the Court, differently based and leading to different assessments of the capital improved value of the improved airport land – what was the correct methodology for valuing the airport?

10 H.B Williams, W.L Roots, D. Widdicombe, D.T Eve, Ryde on Rating, 11th edn, Butterworths London,1963, p 399.



Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue [2004] VSCA 10 (17 February 2004) REVENUE - Stamp Duties – Value of land on which fixtures erected - Stamps Act 1958 s.63(3)(b)(i)(B) – (1) Effect on value of trade fixtures affixed by tenant under s.28(2) of Landlord and Tenant Act 1958 – (2) Effect on value of other trade fixtures affixed by vendor of land before relevant transfer, where fixtures sold to (but not removed by) third party before sale – Whether right under fixtures contract gave equitable interest enforceable against land – Relationship of interest in fixtures to "estate" transferred.

REAL PROPERTY – Fixtures – Whether tenant retains "property" in trade fixtures affixed by tenant in accordance with s.28(2) of Landlord and Tenant Act 1958 – History and meaning of s.28(2).

Snowy Hydro Limited v Commissioner of State Revenue [2010] VSC 221 (27 May 2010) DUTIES ACT 2000 (VIC) – Acquisition of an interest in a “landholder” – “Landholder” entitled to land and other property though a “linked entity” – “Linked entity” held land and other property under the terms of a joint venture – Construction of joint venture agreement – Joint venture parties owned the joint venture assets as tenants in common in proportion to their interests in the joint venture – Construction of s 74 of the Duties Act 2000 (Vic) – Application of s 74 of the Duties Act to the joint venture – Joint venture not a “linked entity” – Joint venture not to be treated as if terminated – “Landholder” holds only the percentage interest in land and other property held by the “linked entity” under the joint venture – Unencumbered value of that interest – “Landholder” not “land rich” – No liability for duty – Ss 71(2), 74, 78, 79 of the Duties Act 2000 (Vic)

WORDS AND PHRASES – “winding up”, “linked entity”

FIXTURES – Whether electricity generator units and ancillary plant chattels or fixtures – Applicable principles – Plant held to be fixtures

Vicgrain Assets Pty Ltd v Hindmarsh City Council [1999] VSC 47 (5 March 1999) Valuation of land for rating purposes. Grain storage facilities. Objection to valuation treated as an appeal to the Court under section 40 Valuation of Land Act 1960 (Vic). Determination of capital improved value. Basis of valuation – stand-alone or state-wide? Methodology of stand-alone valuations. Weighbridge – fixture or chattel?

Bradford (Valuation Officer) v Vtesse Networks Ltd, Court of Appeal - Civil Division, January 28, 2010, [2010] EWCA Civ 16 Rates – Rateable occupation – Hereditament – Fibre optic telecommunications network – Network contained in cables partly owned by network provider and partly owned by third parties – Whether entire network constituting rateable hereditament – Whether network provider in exclusive occupation.

Australian Provincial Assurance Co Limited v Coroneo [1938] 38 SR (NSW) 700

The test for determining whether an item was a fixture was stated by Jordan CJ in Australian Provincial Co Ltd v Coroneo: A fixture is a thing once a chattel which has become in law land through having been fixed to the land. The question whether a chattel has become a fixture depends upon whether it has been fixed to the land, and if so for what purpose. If a chattel is actually fixed to land to any extent by any means other than its own weight then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is.11

11 (1938) 38 SR (NSW) 700 at 712



Other cases of reference Kay’s Leasing Corporation Pty Ltd v Csr Provident Fund Nominees Pty Ltd [1962]

VicRp 62; [1962] VR 429

Holland v Hodgson (1872) LR 7 CP 328

Hobson v Gorringe [1897] 1 Ch 182

Metal Manufacturers Ltd v Federal Commission of Taxation [1999] AC 5229

Waratah Gypsum lty Ltd v Commissioner of Taxation [1999] 112 C.L.R 152

A.G Leech Pty Ltd v Shire of Talbot (1969) Valuation Board of Review John Sharp & Sons Ltd v City of South Melbourne (1925)


Identification of plant and equipment

To appropriately identify properties with plant and equipment refer to the Australian Valuation Property Classification Codes (AVPCC) available at www.dse.vic.gov.au/valuation. Categories include:

Residential Rural

o Rural Production Commercial

o Community Services o Sport, Heritage and Culture

Industrial o Extractive Industries o Infrastructure and Facilities

Cancelled/Non-Active Assessments Where the plant and equipment is valued as a separate line item in the valuation, an explanation of the plant and equipment and how its added value has been derived is required. Where the contractors’ method is used in valuing plant and equipment, the asset and depreciation template should be utilised.


http://www.dse.vic.gov.au/property-titles-and-maps/valuation-home-page/the-valuation-profession/resources-for-valuers/valuation-property-classification-codes


Rental questionnaire – specific rental requirements applicable to plant and equipment In conjunction with the general rental questionnaire the following questions are a guide for valuers about the type of questions pertaining to plant and equipment and those that are critical in the analysis of sales.

1. Provide list of plant and equipment, this may be referred to on an asset schedule or a depreciation schedule.

2. Details on age and economic life (if not provided in asset or depreciation schedule).

3. Is the plant and equipment leased? If so provide lease particulars referred to in general provisions.



Property inspection – specific requirements applicable to plant and equipment

In conjunction with the general procedure to carry out a property inspection for statutory purposes the inspection needs to be carried out with the owner/representative who has full knowledge of the operation and functions of the plant and equipment. The following should be considered when carrying out a valuation of plant and equipment (for statutory purposes):

The type, nature, age and life of the plant and equipment. How was the plant and equipment installed? Ascertain where it was manufactured,

and the time, process and cost of installation.

If, how and why the plant and equipment is installed, fixed or secured to the building and/or land.

What is the intention of the fixture, is it of a temporary nature or indefinitely fixed?

The function of the plant and equipment and the integration of that function in the

whole process.

At what capacity is the plant and equipment operating? What is the potential capacity?

The maintenance requirements, i.e. timing, on or off site.

Replacement options and changes in technology.

Is the plant and equipment relevant in the property achieving its highest and best

use?

Is the plant and equipment installed for the better enjoyment of the land?

Ascertain the time, process and cost of removal.

What market sector is the plant and equipment used for and what are the market conditions for the product produced? Are there any contracts in place and are there any surrounding uses that support the product?

Is/are the building/s purpose-built to accommodate the plant and equipment or do/does the building/s have other uses? (A planning/building permit may assist.)

Most operations that have plant and equipment will have an asset schedule or a

depreciation schedule. This document will be essential when determining the added value of the fixtures.

o Verify the physical assets on site with the assets in the schedule as the schedules can frequently be out of date. If this is not available, the valuer will need to determine this information (such as replacement cost, date installed, expected life etc.). Plant and equipment usually have a compliance plate (steel plate with manufacturing data) that may assist.

o Does the installation of the plant and equipment equate to significant

expenditure? How does this compare to the value of land and improvements? That is if the plant and equipment can be easily and inexpensively installed it indicates that it may not have a high component of in situ value. (This can be measured by comparing installation costs with total in situ value.) Plant that has a high installation value is a strong indicator of fixture which will be destroyed by removal.




Fixture or chattel The question of whether an object is fixture or chattel has been addressed in the following publications as general principles: Distinction between Fixtures and Chattels

A physical object will usually be either land or a chattel, but its nature may change according to the use made of it. The materials used for building a house are thereby converted from chattels into land, and so automatically pass out of the ownership of the person who owned them as chattels and become the property of the owner of the land to which they are attached;...Conversely, when a house is pulled down, the person who severs the materials from the building converts them from land into chattels.12

Chattel or Fixture? General Principles

In determining whether an item, previously a chattel, has become a fixture, the common law formerly looked only to the degree of annexation of the item to the real estate. If substantially annexed, the item was a fixture; otherwise, it remained a chattel. In time, however, the importance of the degree of annexation declined and the present rule evolved. Under the present rule, whether an item has become a fixture depends primarily upon the intention with which the item was put in place. If the intention was the better use or enjoyment of the land, the item is likely to be a fixture; but if the intention was the better use or enjoyment of the item itself (as distinct from the land), the item is likely to be a chattel. The degree of annexation remains a factor, but chiefly as a pointer to the relevant intention.13

Halsbury’s Laws of England

Whether an object that has been brought onto the land has been affixed to the premises as to become a fixture (or a permanent part of the land) is a question of fact which principally depends first on the mode and extent of the annexation, and especially on whether the object can easily be removed without injury to itself or to the premises; and secondly on the purpose of the annexation, that is to say, whether it was for the permanent and substantial improvement of the premises or merely for a temporary purpose or for the more complete enjoyment and use of the object as a chattel.14

12 Megarry & Wade, op.cit., p. 731 13 Butt, op. cit., p.42 14 Halsbury’s Laws of England (4th ed, 2006) [174]



Fixtures Test The critical question as to whether or not the plant and equipment forms part of CIV and EAV is dependent upon whether the plant and equipment is deemed to be part of the land, namely whether they are fixtures as distinct from chattels. The two considerations which are commonly regarded as relevant in determining the intention with which an item has been fixed to the land are:

1. The degree of annexation 2. The object of annexation.

Degree of Annexation When determining the degree of annexation the following factors are considered relevant:

(a) If an item is fixed to the land to any extent by means other than its own weight prima facie it is a fixture.

(b) The mode, style and extent of the annexation. The more permanent the more likely it is a fixture.

(c) Whether it can be detached without substantial damage to itself or that to which it is attached.

(d) The time and complexity required to remove the items. (e) Costs of removal and whether it would exceed the value of the attached property.

Purpose of Annexation When determining the purpose of annexation the following factors are considered relevant:

(a) Whether the item has been affixed for the better enjoyment of the land, building or the enjoyment of the fixed item.

(b) The nature of the property subject to the annexation. (c) Function to be served by the annexation of the item. (d) The degree of integration and reliance on other items at the same location or

whether such equipment has significant characteristics or are a significant part of a whole system that it cannot be characterised as separate parts ignoring the function of the system as a whole.

(e) Whether items in question are of a type inherently likely to become redundant within a fixed period of time.

(f) Whether the item is affixed permanently or for an indefinite or substantial period of time or for some temporary purpose.

While the authorities support the purpose of annexation and the degree of annexation as two important considerations they also affirm the necessity to have regard to all the relevant facts and circumstances when making a determination. It is important to note that single test criteria are usually not conclusive and it is a combination of tests that determines the fixtures versus chattel question. Hence the inclusion of plant and equipment in the CIV and EAV should be assessed on a ‘case by case’ basis.

The following flowchart is designed to assist when determining whether or not plant and equipment is to be treated as a fixture or chattel.


Methodology Capital improved value

The methodologies for assessing value are complex. The following are summaries of the three main methods used to value plant and equipment – they are not a substitute for understanding the methods in detail. These methods rely upon accurate information, and accurate analysis and interpretation of that information.

The three main methods include:

1. Sales In conjunction with the general sales analysis provisions, the following specific issues relate to plant and equipment:

If available, sales comparison is potentially the prime methodology, however, frequently sales information is limited, if at all available.

In the event that sales information is available then the main aim is to identify the plant and equipment component/contribution in the sale price and identify the quality of the plant and equipment.

‘Quality’ refers to issues such as function, age, utilisation, economic life etc.

Productivity/profitability of plant is important in sales transactions. Sales that do not reflect the productivity and/or profitability such as liquidator sales are not helpful in ascertaining this element.

Plant and equipment sold for break-up or removal without the associated property is usually not considered relevant when ascertaining or assessing an in situ value.

2. Contractors method Contractors method is the replacement cost less depreciation (age) and underutilisation/obsolescence factor. Contractors method = cost – (depreciation + underutilisation/obsolescence) The Current Replacement Costs (New) is used in the valuation calculation because a market value as at the relevant date is required. The purchase price in the owners Asset Schedule, if not circa the relevant date, is a historic value. It is recommended the valuer make enquiries with the owner, occupier, manufacturers or suppliers to ascertain the Current Replacement Costs (New). If the Plant and Equipment is highly specialised they may consider obtaining advice from a plant and equipment valuer. Alternatively the valuer can refer to industry standards and escalate the purchase price for inflation. When carrying out this approach, the following information is useful:

Owner/ratepayer depreciation schedule and asset register

Obsolescence/book values While the book values of the plant and equipment (the values that appear in the owner’s accounting records/asset schedules) will provide very useful information on historic cost and age, those values have two key limitations:



a) They are based on historic cost, less depreciation based (usually) only on age. The depreciation allowances under financial reporting regimes are designed to align with the expected useful life of each plant and equipment type, however they can sometimes result in anomalies. For example if the plant and equipment is in a harsh environment, or poorly maintained.

b) Importantly, standard depreciation rates do not take account of economic obsolescence – a critical factor in determining current market value. Economic obsolescence occurs when technology or trading circumstances render the particular plant items less profitable than when they were installed or, in a worst case scenario, no longer useful.

Economic obsolescence is becoming more prevalent as global markets become more mobile and technology changes more rapidly. Any valuation of plant and equipment should be supported by income/trading trends. Some further points to consider: o Ask whether the plant is operating (on average) at full capacity.

There may be cyclical changes to capacity but it is important to determine the current and likely future average utilisation rate (a percentage of full capacity). The valuer needs to distinguish between the capacity of the plant and the expected future operator’s utilisation of the plant.

o Larger organisations will tend to take obsolescence into account by

doing one-off write-downs in their book values. These will usually be identified as ‘impairment charges’, or be referred to using similar terminology. If you are relying on book values as an input to the plant and equipment values then you should ask whether there have been any impairment write-downs (or write-ups) in recent years.

o In the normal course of events a plant and equipment item will be

depreciated each year according to an approved rate of tax depreciation for that type of item. There will however be instances where the VALUE of an item is less than its remaining Book Value because it has either deteriorated faster than normal or because (more commonly), the business environment has reduced its ability to contribute to profits.

o Conversely, there will be instances where the VALUE of an item is

more than its remaining Book Value because it has either endured in its role longer than normal. These items may, for example, have been written down to nil Book Value, and they also have been deleted entirely from the Asset Schedule even though they are still in full use.




3. Profits method The value of the freehold interest is generally derived by capitalising an assessed market. The market rental is normally a percentage of the EBITDA. In principle the profits method involves allocating rental to the assets employed in earning them. An example of the breakup of assets is:

The value of the business + The value of the freehold (land and buildings) + The value of plant and equipment

= Total going concern

Once the land and building and plant and equipment contribution to profit estimates are ascertained, and a rental value ascribed, then the rental value of each component needs to be capitalised at an appropriate market rate to ascertain the CIV.

Land and building rental value @ cap rate

+ Plant and equipment rental Value @ cap rate

= Total value $_________________

For rating and taxation valuations, the value attributed to the business is not included.

The capitalisation rate applied to plant and equipment is usually much higher than capitalisation rates applied to land and building because of the faster depreciation of plant and equipment.

When carrying out this approach, the following information is a guide to the type of information that is useful:

Full operating profit and loss statements and balance sheet for last three years to assess medium term sustainable profit i.e. EBITDA and EBIT level.

Asset register and depreciation schedule for all assets. Accounting information for goodwill in accounts.


Industry information

Other relevant material: The Internet is a valuable resource and the following references may be of use:

Australia & New Zealand Valuation and Property Standards, ANZ Valuation Property Standards, www.api.org.au/

This professional practice manual sets out the duties, responsibilities and professional standards of members of the Australian Property Institute and of the Property Institute of New Zealand.

Australasian Legal Information Institute www.austlii.edu.au/databases.html


http://www.api.org.au/

http://www.austlii.edu.au/databases.html


The following is an example of an Asset and Depreciation Schedule.1 Valuers Workings2

DESCRIPTION OF ASSET

DATE OF AQUISITION

COST PURCHASED

FROM New or

Secondhand Year of

Manufacture

No. of hours, KMS etc Worked

Current CONDITION

Economic Useful Life at purchase

Economic Life

Remaining at 30/6/11

Depreciation to 30/6/2011

Book Value Current

Replacement Cost (New)3 as at relevant

date

Depreciation to 1/1/2012

Depreciated Replacement Cost

ADOPTED ADDED VALUE

Conveyor 1/1/2010 $1,500,000 AAA P/L New 2009 2700hrs As New 25 23.5 $90,000 $1,410,000 $1,550,000 $124,000 $1,426,000 $1,425,000

Weighbridge 1/1/2008 $150,000 123 P/L

New 2007 - As New 25 22.5

$21,000 $129,000 $168,000

$26,880 $141,120 $140,000

Site Preparation Works

1/7/2006 $350,000 SITE PREP

P/L

New n/a Serviceable 50 45

$35,000 $315,000

$400,000

$44,000 $356,000 $355,000

Crushing Plant4 1/7/06 $600,000 ABC P/L New 2006 Obsolete 15 Nil $200,000 $400,000

$750,000

$750,000 $0 $0

Concrete Storage Bays5 1/7/00 $450,000 XYZ P/L Second hand 1995 Serviceable 10 5 $450,000 $0 $550,000 $275,000 $275,000 $275,000

Total

Notes: 1. The above is an example of information that is included on an asset register. It is noted however that schedules and registers do vary. Further information can be obtained from a physical inspection. 2. An example of valuers workings have been included to illustrate an added value calculation. 3. The Current Replacement Costs (New) is used in the valuation calculation as a market value as at the relevant date is required. The Purchase Price in the owners Asset Schedule, if not circa the relevant date, is a historic value and needs to be updated 4. An asset may have an unexpired life and a remaining book value for tax purposes, but could actually be obsolete as a result of exhaustion, functionality or superseded technology. 5. An asset may be already written off to $zero as a result of the expiry of the initial economic life estimate however may still be functional and utilised. 5. Straight Line depreciation has been used in this example.


VGV MGV PlantEquipment August-2011

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