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March 14, 2012
by EquipNet News
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The Differences Between Depreciation for Appraisal and Depreciation for Accounting Purposes

Depreciation, from an appraisal perspective, is rather different than an accounting or finance perspective. If machinery or equipment is still functional, being used, or if there is an active market for similar types of equipment, it still has value. In accounting and finance, depreciation means the allocation of the cost of an asset over time. It is a way of allocating the purchase price of an asset across its useful life, which takes into account what is considered normal wear and tear over the life of an asset.

For an asset that is 20 years old, if the owner of the asset were to sell the asset, it would have some value. From an accounting perspective and for tax purposes, the value would be $0; but from an appraisal perspective, the value likely would be greater than $0. Depreciation with regard to machinery and equipment appraisal is the estimated decrease in value from the initial purchase price of an asset based on a number of criteria, including physical, functional, and economic factors.

It can be somewhat challenging to understand the differences between what depreciation means in accounting terms and what it means in appraisal terms. If you have questions or are looking to sell your machinery or equipment, it’s always best to speak to a professional certified machinery and equipment appraiser (CMEA) about the depreciation of your machinery and equipment.


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March 12, 2012
by Julie Baker
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How to Inspect a Reactor

We at EquipNet highly encourage you to perform your due diligence and inspect any used glass-lined reactor that you are considering purchasing.

First, confirm that what you saw online is what you see in person.

Look at the nameplate to ensure that it reads the correct national board number, serial number, capacity, type of glass, temperatures, and pressures. If some of the information is not legible you can call the National Board directly to request a copy of the U1 form.  The U1 form will include this as well as additional information.

Visually inspect the equipment’s exterior, looking for signs of corrosion or cracks on the manway cover and around lip of the manway cover, looking under any gaskets and inspecting any plugs or patches.

No matter how good the exterior looks, every reactor should be professional spark tested. In this test, a technician will use a 5000 watt wire brush “spark tester” to sweep all glass parts looking for pinholes. Though these pinholes will be too small to see, they will spark during this test and may be plugged. A reactor should not have too many plugs or it will not be good for the service, but this depends on the size of the reactor. The larger it is the more plugs it could have.

The technician will also inspect the agitator, back flow, and dip tubes for cracks, corrosion or chips in the glass.

Inspect the mechanical seal.  Ensure that the seal is free of seal fluids both inside the agitator shaft and outside.  Ensure that the seal pot is holding both seal fluid and pressure.

When inspecting the bottom of the vessel, look to see that the valves are not corroded, remove insulation to do so if necessary.  You can also pull out an inspection port to look inside at the jacket and see if there is any pitting, rust, or leakage.

The jacket should also be hydro tested at one and a half times the jacket pressure rating to make sure there are no leaks in the jacket.

Also inspect the drive, gearbox, and seal to see if there is any leakage. You can often detect leakage if there is anything running along the underside of the seal.

Please let us know if you have any questions about this inspection process.


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March 6, 2012
by EquipNet News
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Price Versus Value

The concepts of price and value are often treated as though they were the same thing, but they’re not. Price is the cost of what you’re buying. Generally it is not set by you, the buyer, but by the seller. The value of the item is much more abstract. It is determined by the buyer, and can vary widely depending on the buyer’s perceptions and needs.

Imagine a valuable painting. If it’s sold, a specific price is put on it and the buyer pays it. But if that painting is exceedingly rare, or was painted by the buyer’s favorite artist, or is the last piece needed to complete the buyer’s collection, then the value to the buyer is likely to be much higher than the seller’s price.

So it is in any industry. The price of a piece of machinery may be one thing, but the value of it – especially if that piece of machinery is used in the manufacture of thousands or even millions of goods – is quite another.

What about the reverse? What if a business buys a piece of machinery or equipment, only to discover that it’s of little, if any, value to the business? That’s when it’s a good time to call a company like EquipNet, which can arrange to sell, redeploy, or auction off the equipment in question. The equipment may not have value for one business or facility, but may be invaluable to another.

Remember — price is what you pay, value is what you get.


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February 29, 2012
by Julie Baker
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How to Inspect a Heat Exchanger

We at EquipNet highly encourage you to perform your due diligence and inspect any used heat exchanger that you are considering purchasing.

First, confirm that what you saw online is what you see in person.

Look at the nameplate to ensure that it reads the correct temperature range, pressures, capacity, square footage, serial number, national board number, and material of construction. Check the supply lines. What is the heating and cooling medium? Some service fluids will negatively affect the shell (especially if it’s made of carbon steel).

Closely inspect the equipment’s exterior, looking for signs of corrosion or cracks in the heat exchanger’s shell.

If the unit has insulation, open up an inspection port, remove the insulation to look inside for corrosion and scaling.

Next, In order to ensure that there are no cracks in the tubing, you will need to perform a hydrostatic test.

In this test, the shell cavity and tubing are flanged off and filled with water or air and then the internal pressure is raised to one and a half times the working pressure. Perform the pressure test on the tube side first then the shell side. (This test should be done by a code shop if the unit is National board rated or by a professional). The heat exchanger should hold the water/pressure for 1 hour, but if there is any leakage you will see it almost immediately. If only 1 or 2 tubes are leaking, they may be plugged instead of repaired, which is cost effective and won’t lose you much square footage.

Check out our previous post about Inspecting a Heat Exchanger and please let us know if you have any questions about this inspection process.


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February 28, 2012
by EquipNet News
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Getting an Appraisal When Making a Gift or Donation

 According to the IRS tax code, a gift is any type of property that changes hands either with nothing given in return, or with payment that is less than the property\’s value. Gifts are subject to a gift tax, which is usually paid by the gift giver. The gift tax is one of the more complex pieces of tax law, so it is a good idea to speak with an accountant to see if your gifts are taxable or tax exempt. Some of the gifts that are exempt are gifts between spouses, gifts made to pay for educational expenses, and charitable gifts. There is also an allowable value of gifts you can give before you are required to pay a gift tax. If, after speaking to your accountant, you determine that your gift/donation is subject to the gift tax, you will need to hire an appraiser.

If you owe the IRS a gift tax, you must submit a copy of the appraisal report along with your tax return, in addition to the date of the exchange and the identity of the recipient. Ask your appraiser to give y ou the fair market value of the piece of property that you are gifting. The fair market value is the value of the property if it were sold by a willing seller and purchased by a willing buyer.

If you need a machinery or equipment appraisal performed before tax time, EquipNet can help. Check out our Asset Accuracy Resource Center for more information about appraisal and valuation services provided by EquipNet. For other tips about donating your pre-owned equipment, visit the Equipment Donations Resource Center.


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