Hello there, I’m Jude Jayasingh and I am a licensed Surveyor by IRDAI and have been engaged in my practise for the past 27 years. I am also a Chartered Engineer and Valuer.
The value of an asset is defined by the Scope of the valuation.
There are different perspectives for the valuation viz., buyer, seller, financier, insurer etc.,
Today I am going to discuss about “Valuation of Depreciable Assets” from the perspective of a buyer
- As a buyer, onewilllike to more about the assest based on its offer price. He will still go further to know more details viz., original purchase documentation, AMC if any, year of manufacture, year of commissioning, used life, remaining useful life, present condition, how the asset was used – example for machineries number of shifts the asset was deployed etc.,
- The availability of similar asset in a brand newcondition will also give a comparison along with the these factors and help the buyer to decide on asset valuation.
So analysis of all these factors are critical which will enable the buyer to know more about the asset present condition and align with his business requirement, it also gives him a better negotiation with the seller, lastly he will achieve the value for the money he will be investing.
I hope you find this useful and appreciate the changing dimensions while valuating depreciable assets. As a valuer it is a cardinal duty to ensure that the valuation scope is clearly understood and approached accordingly.
My next blog will cover the perspective of a Seller.
Don’t miss it and please continue watching
- As a seller, one will decide the offer price based on the present cost of a similar new asset. But if the asset is obsolete the expected valuation metrics become favourable to the buyer rather than to the buyer.
- As a financier, they have two perspectives Loan to Value for the asset based on the valuation certificates when they fund from 60% or to upto 80% or higher depending upon the class of asset. The second perspective is the repayment capacity of the loan applicant which they analyse after going through their past financials and present business track records.
- As an Insurer assets are GENERALLY covered either on “reinstatement BASIS” OR “MARKET VALUE BASIS”
From the above you can observe that for one sample asset how the valuation differs based on different perspectives or what we call as SCOPE OF VALUATION.