Equipment valuation is the process of determining the real value of production and other equipment recorded as tangible assets in the balance sheet of enterprises and organizations, based on market data or relevant standards. This process plays an important role both in financial accounting and in legal transactions.
If proper valuation is not carried out, incorrect financial indicators may arise, disputes between parties during transactions may occur, and legal risks may increase. For this reason, the valuation procedure must be conducted in accordance with standards and by professional experts.
Purpose and Areas of Application of Equipment Valuation
Equipment valuation is required in many situations, including: sale and purchase agreements, leasing contracts, loan and collateral transactions, insurance compensation, tax calculations, financial reporting, inventories, and court disputes. When conducting valuation for these purposes, experts consider the market value of the asset, its depreciation level, and its technical condition.
The market value of the equipment is determined by an independent appraiser and may serve as a basis in legal documents.
Main Stages of Valuation
Determination of Initial Value
If the equipment has been newly acquired or entered into accounting records, its initial value is calculated including the purchase price, customs duties, taxes, and installation costs. This approach is also reflected in international accounting standards and compliance with these standards is essential.
Market-Based Comparative Approach
In many cases, a comparative approach is used during valuation, meaning that the value of the equipment is determined based on the prices at which similar equipment has been sold in the market. This method reflects the actual value of the equipment under real market conditions.
Depreciation and Technical Condition
The service life and depreciation rate of the equipment play a central role in determining its value. Older and heavily used equipment is valued lower because its remaining useful life is reduced.
Revaluation and Fair Value
Enterprises may periodically revalue equipment to reflect changes in market value. During revaluation, the carrying amount of the asset is adjusted to its fair market value, and the result is reflected in the company’s balance sheet. This procedure must be conducted in accordance with legislation and applicable standards.
Legal and Financial Significance
Financial Accounting and Reporting
Equipment valuation is essential for the accuracy of financial statements. If the value of equipment is not properly determined, incorrect asset values may be presented in the balance sheet, leading to inaccurate financial analysis.
In addition, depreciation calculations directly affect financial results, and proper valuation is mandatory for accurate accounting.
Loan and Collateral Transactions
Banks and financial institutions rely on the market value of equipment when determining loan amounts secured by assets. Overvaluation or undervaluation increases financial risk for creditors.
For this reason, equipment valuation plays an important legal role, as an objective expert opinion may be required under loan agreements.
Court Proceedings and Disputes
In civil disputes or during profit distribution between companies, the objective valuation of equipment may serve as key evidence. If valuation is not conducted in accordance with standards, this may lead to conflicts and financial losses.
Why Is Legal Support Important in Valuation?
Equipment valuation is regulated by various normative acts and must comply with established standards. Legal support is essential to ensure that these requirements are met, and that the engagement with the appraiser complies with contractual and legislative provisions.
Legal expertise assists in:
- Proper drafting of the valuation agreement
- Legal validation of the valuation report
- Protection in disputes and, where applicable, court proceedings
and helps minimize risks.
The question “How is equipment valuation conducted?” is not limited to technical calculations alone. This process is also crucial for proper legal documentation, accurate financial reporting, and risk management.
If you are seeking professional support in determining the market value of equipment, conducting revaluation, or obtaining relevant legal expertise, our legal team is ready to provide reliable services.
📞 Contact us and carry out your equipment valuation free from legal risks.
