Delimitación del Ensayo

Most authors agree that the direct sales comparison method is the most common under the Market Approach for plant and machinery valuation (IVSC, 2010; Korner, 2009; Maninggo, 2010; Derry, 2008 and Budhbatti, 1999). The basic fundamental for this method is on the assumption that an informed purchaser would not pay more for an item than the cost of acquiring an existing one with the same utility. This method is preferred when valuing plant and machinery for which there is a known and active secondary market. In applying it under the „in-use‟ premise, an allowance then is made to reflect the costs of delivery, installation, taxes, fees and duties (Korner, 2009). In some countries, it is known as ‟additional cost‟. Differences in the premises of value require different identification of additional cost. This research is trying to identify and suggest the appropriate additional costs for different type of premise of value and valuation approaches in Malaysia.

The second method under market approach for plant and machinery valuation is the comparable match method. This technique establishes value based on the analysis of similar (but not identical) assets using some measure of utility (size, capacity, year manufactured) as the basis of comparison. The main differences from the direct sales comparison method is that the comparisons may not be similar in terms of model and year built, but has other similarities such as capacity, brand acceptance in the market or same country of origin. Some adjustments have to be made on the comparable before the value of the asset can be derived.

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Another variant of the direct sales comparison method is the use of market relationship (Korner, 2009), also known as percent of cost method (Maninggo, 2010; Derry, 2008 and Budhbhatti, 1999). Recent market prices for items of plant, machinery and equipment in a particular asset class that has an active secondary market are reviewed with respect to age and condition. Then they are compared with a benchmark price, such as the duplication (reproduction) cost new. The ratios of the market prices top benchmark amounts are applied to similar assets in the class if the specific secondary market is too thin to exhibit sufficient, appropriate and direct comparability.

The market analysis can be made on either a direct or a statistical basis:

a. Direct by comparing subject asset with identical or very similar items that have been sold (Direct comparison method and comparable match method);

b. Statistical by examining a significant sample of market transactions to establish similarities and dissimilarities of various attributes (Percent of cost method).

While direct matching provides the best indication of market value, the process of finding identical or very similar items may be somewhat lengthy and require consideration of the different items of equipment involved, distinguishing them by model, size, capacity and the like. There is no guarantee that the valuer will find any direct comparable (Korner, 2009). For unique items of plant and machinery this often requires comparison with items sold in other countries, where valuation and market condition vary.

Therefore, in practice, statistical comparisons are generally used because they have the advantage that data can be collected and analysed in advance, providing immediate information when needed for a specific assignment. Moreover, such information can also be used, where appropriate, for direct matching. Market data collected over long periods and on a global basis can supply information regarding past changes and general trends in specific markets, variations of geographically different but economically similar markets, and the identification of a lack of demand for a specific brand, thus resulting in discounted or lower price (Budhbhatti, 1999).

The most common sources of market data are published auction results and transactions reported by dealers in similar items. Maninggo (2010) highlights that price used as the basis of comparison may come from dealer‟s asking or selling price, auction, direct offer of surplus equipment, direct exchange between parties or unspecified sources. Actual sales price, such as by a dealer or a direct exchange between parties, provide reasonably reliable information about completed transactions. However, they may need adjustments, depending on the specific purpose of the valuation or the nature of the transactions.

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Derry (2008) highlights that auction price is considered the last resort before scrapping if the asset could not be disposed of through an orderly or forced liquidation process. As such, they typically represent the lower end of an item‟s value. Auctions provide reasonably information for liquidation values, but their applicability for any other purpose must be carefully considered.

The internet represents a huge source of data on equipment sales, but there is great difficulty in establishing the nature of the transactions or offerings. Reported prices for unspecific types of sales should be considered somewhat unreliable because of the impossibility of making appropriate adjustments. However, the data from internet is useful for cross checking with other methods, especially for rarely exchanged assets (Korner, 2009).

The main differences between the asking price on the internet and the actual final selling price is that the asking price normally excludes other additional costs such as cost of transportation, installation, testing, commissioning, relevant government taxes and duties, and other elements that should be determine in order to arrive at the final selling price. Valuers understanding of the specialise market requirement is essential in order to derived at the final selling price and the internet price can be used as a guidance.