In many appraisals, particularly for used in litigation, appraisers are frequently asked to justify the opinion of value for equipment that has outlived its expected life. Part of the general confusion can be attributed to the common misunderstanding between an accounting depreciation schedule and the practical value of machinery or equipment, including the oversimplification of the concept of depreciation as steadily and gradually continuing from the condition of new to the condition of scrap.
Both of those misunderstandings confuse an important question in appraisal: What is the value of equipment and machinery that are in operation beyond their expected economic or normal useful life and continue to contribute value to an operating business?
Learn more about this topic by Jack Young, ASA, as seen on NorCalValuation.com.
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