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April 10, 2012
by EquipNet News
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International Financial Reporting Standards (IFRS) and Machinery and Equipment Appraisal

The International Financial Reporting Standards (IFRS) is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. More than 100 countries, including countr

ies in the European Union, use the IFRS rules put forth by the International Accounting Standards Board (IASB). While the U.S. Securities and Exchange Commission (SEC) has not decided whether to adopt IFRS, it’s likely that some of the IFRS rules will be incorporated into the U.S. Generally Accepted Accounting Principles (GAAP).

As it pertains to appraisal, IFRS requires that public companies’ assets, including machinery and equipment, are recorded according to fair market value, and requires that an independent appraiser be used in the majority of cases to determine a fair market value of the assets. The valuation is required in order to adequately depict the financial status of the company. Below are some of the key differences between IFRS and GAAP.

Inventory


The last-in-first-out (LIFO) methodology for inventory is prohibited under IFRS. The change to IFRS would force a company to adopt the first-in-first-out (FIFO) methodology, or weighted average cost method. The adoption of a new costing method could significantly impact the operating results of an entity.

Carrying Value of Assets
 Under GAAP, assets are generally carried at historical cost (with a few exceptions for certain financial instruments), whereas under IFRS, historical cost is the primary basis of accounting. The ability to revalue assets (to fair market value) is allowed, though. By revaluing assets, there may be significant differences in the carrying value of these assets versus GAAP. Depreciation
 IFRS requires that separate, significant components of an item of property, plant, or equipment be recorded and depreciated separately. If an asset has multiple aspects, each with different “lives,” the asset must be depreciated in segments, rather than as a whole. IFRS annually evaluates the residual value of an asset at the balance sheet date.

To learn more about IFRS and appraisal and EquipNet’s appraisal services, visit The Asset Accuracy Resource Center.


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April 6, 2012
by EquipNet News
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Accountants and Certified Machinery and Equipment Appraisals (CMEAs)

In our last few posts, we’ve talked about why business owners, auctioneers, attorneys, and lenders, among others, need certified machinery and equipment appraisals (CMEAs). In this post, we’ll look at why accountants should always secure a CMEA.

We’re right in the heart of tax time, and accountants are busier than at any other time of the year. Since accountants are so frequently acting in the best interests of their clients, the best thing they can do is to make sure that they are compliant with laws and best practices when dealing with the IRS. It’s hard to imagine another entity that acts with as much scrutiny as the IRS does!

If an accountant does not rely on a certified machinery and equipment appraisal to determine the value of a piece of machinery or equipment, he or she is putting clients at a significant risk. Oftentimes, the IRS will not accept the value of a piece of equipment that is not substantiated.

Here are situations in which accountants should always secure a certified machinery or equipment appraisal to avoid penalties and help eliminate risk of liability for their clients:

  • • Converting from C Corp to S Corp
  • • 1031 Exchanges
  • • Gifting
  • • Sarbanes-Oxley Compliance
  • • Determining Property Taxes

To learn more about EquipNet’s appraisal services, take a look at The Asset Accuracy Resource Center to learn more.


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April 5, 2012
by Julie Baker
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Lenders Need Certified Machinery and Equipment Appraisals

This is our third post in a series discussing how a certified machinery and equipment appraisal can protect different parties from liability. We’ve discussed business owners and auctioneers; in this post, we’ll discuss lenders.

Businesses that struggled over the last couple of years sometimes were unable to repay loans. Bankers and lenders who were hurt by these situations sought ways to reduce their liability when lending money. If a business is seeking a loan to purchase a large piece of machinery or equipment, the lending institution will have to make a loan decision based on the equipment’s value. Guessing at the equipment’s value is a mistake, as is using a depreciation schedule, which would be worthless in the event of a sale due to a loan default. The best way a lending institution can protect itself from liability in this case is to use the services of a certified machinery and equipment appraiser. An appraisal professional can help the lending institution make its lending decisions based on the fair market, orderly liquidation, and forced liquidation values of the piece of equipment to be purchased, and make sure that the borrowing business has collateral of high enough value to secure loan repayment.    

If you are a lender in need of a certified machinery and equipment appraiser, EquipNet can help. Take a look at The Asset Accuracy Resource Center to learn more about our services.

 


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April 3, 2012
by EquipNet News
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Attorneys and Certified Machinery and Equipment Appraisals (CMEAs)

 In our last few posts, we’ve talked about why business owners, auctioneers, and lenders need certified machinery and equipment appraisals (CMEAs).

Frequently, attorneys work on cases that involve the value of a business’s assets, including physical assets like machinery and equipment. But relying on a client’s estimates, following a depreciation schedule, or guessing at the value of assets can leave attorneys and their clients open to liability. Asset value estimates put forth by uncertified appraisers will not hold up to scrutiny. To protect themselves and their clients, attorneys should work with a certified machinery and equipment appraiser to ensure that a client’s assets are valued accurately. Being able to present values that are accurate, substantiated, irrefutable, and defensible will only strengthen a client’s case.

These are a few of the instances in which a CMEA can help strengthen a client’s case:

  • Loans/Leases
  • Property Taxes
  • Insurable Value
  • Divorce
  • Converting from C to S Corp
  • Cost Segregation
  • Taxes
  • 1031 Exchanges
  • Trust Agreements
  • Buy/Sell Agreements
  • Estate Planning
  • Bankruptcy
  • Retirement Planning
  • Partnership Dissolution
  • Strategic Planning
  • Litigation Support
  • GASB 34
  • Sarbanes-Oxley
  • Gifting

Without a CMEA, a client’s divorce or partnership dissolution could exclude the value of their machinery and equipment because the opposing counsel has a CMEA.

An appraisal report from a certified appraiser arms attorneys with a defensible and substantiated value of machinery and equipment that will stand up to scrutiny from the IRS, courts, lenders, attorneys, CPAs, and others.

To learn more about EquipNet’s appraisal services, take a look at The Asset Accuracy Resource Center.


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April 1, 2012
by EquipNet News
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Certified Machinery and Equipment Appraisals and Auctioneers

We continue our series of posts discussing the situations in which a certified machinery or equipment appraisal can protect different types of parties from liability. In this post, we’ll discuss auctioneers.

In a challenging economy like the one we’re in now, some businesses are forced to close; others auction off items to free up cash. Auctions are a quickly growing business, and it’s therefore vital to ensure that auctioneers are USPAP compliant. EquipNet auctioneers are USPAP compliant and offer a wide array of auction solutions.

Often, auctioneers will use their prior experience to estimate of the value of a piece of machinery or equipment up for auction, but these estimates aren’t USPAP compliant. Lenders and courts require USPAP-compliant appraisals from auctioneers, and if auctioneers are simply making estimates, their liability increases. As a result of the requirement for USPAP compliancy, many auctioneers are losing business because they aren’t securing certified appraisals.

An auctioneer can limit liability and increase profits by obtaining a certified machinery and equipment appraisal. With a certified appraisal in hand, an auctioneer’s estimate becomes defensible, irrefutable, and substantiated.

If you are already sold on the importance of obtaining certified appraisals, and would like to know how EquipNet can help, take a look at The Asset Accuracy Resource Center to learn more about our appraisal and valuation services.


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