Value Definitions
The purpose of the appraisal, along with the type of value definition, determines the criteria the appraiser considers in developing the valuation opinion. Since clients often have questions about the value of assets under various circumstances and conditions, we have compiled a list of the most common value definitions.
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- Fair Market ValueAn 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 – InstalledAn 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 – RemovedAn 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.
- Fair Market Value in Continued Use with an Earnings AnalysisAn 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.
- Fair Market Value in Continued Use with Assumed EarningsAn 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 without Assumed Earning (Going Concern)An opinion, expressed in the form of money, where the asset is installed to function in the place where it is used by the company in the way it is intended. It is based on what a similar asset can be purchased for in the free market, or could be manufactured for in the current state, including any costs for transport, installation and running-in to operational condition. (Definition of Jens Lynderup).
- Forced Liquidation ValueAn 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.
- Liquidation Value in PlaceAn 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 LiquidationAn 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.
- Replacement Cost NewThe current cost of a similar new property having the nearest equivalent utility as the property being appraised, as of a specific date.
- Reproduction Cost NewThe 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.
- Salvage ValueAn 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 ValueAn 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: Machinery & Technical Specialties Committee of the American Society of Appraisers – July 25, 2018
