Machinery Valuation: What NBR 14653-5 Requires in the Field

Why Evaluation Requires Inspection

Companies need to assign value to machines and equipment to contract insurance, offer guarantee in credit operations, account for fixed assets, sell or close a unit. A reference price by manufacturer, model and year is rarely sufficient, because identical equipment in origin reach different values depending on the operating regime, repairs and adaptations, the state of preservation and the demand in the used market.

ABNT NBR 14653-5 deals with the evaluation of machines, equipment, installations and industrial assets in general and complements the general procedures of NBR 14653-1. [1] DeltaP Engineering conducts evaluations according to this standard, with individual inspection of each asset, standardized form and photographic record. This article describes how the work is conducted.

Purpose, Reference Date and Type of Value

Before the inspection, the purpose of the evaluation, the reference date and the type of value to be determined are defined. The same equipment can have market value in use, replacement value and value for sale in a short period, and each one meets a need.

The most frequent purposes are:

• inventory and reconciliation of assets;
• insurance, for defining the insured value and claim assessment;
• guarantee in credit and financing operations;
• purchase, sale and auction of used machines;
• corporate restructuring, closure or demobilization of units;
• accounting for fixed assets and test of recoverability, according to CPC 27 and CPC 01. [2] [3]

Data Collected in the Field

The DeltaP inspection form gathers data for each piece of equipment in six blocks.

Photographic Record and Identification

The photographic record follows a fixed itinerary: front, rear and side views, readable identification plate, serial number, motor, electrical panel, transmission system and main components. Specific systems of the equipment, such as the weaving system in a loom, are photographed separately.

The reading of the identification plate is verified against the asset list provided by the client. Discrepancies between the list and what is recorded on the equipment are common in old parks and are recorded in the report.

Operating Condition

The operating condition is recorded as observed during the inspection: in operation, stopped or not observed. Information provided by the client about the operation is noted and identified as received information. Stopped equipment is evaluated in the condition it is found, and this condition is stated in the conclusion.

Available and Absent Documentation

The manufacturer's manual, maintenance history and invoices are not always present. The absence of these documents does not prevent the evaluation, but increases the uncertainty of the result and is declared as a caveat in the report.

From Inspection to Value Conclusion

After the inspection, the data are analyzed in the office. The value conclusion considers:

• actual and apparent age and remaining useful life;
• physical, functional and technological obsolescence;
• availability of parts and technical assistance;
• liquidity of the equipment in the used market;
• value of new equipment equivalent and of comparable used assets, obtained through market research.

The methods used are the direct comparison of market data and the cost quantification, with depreciation, chosen according to the available data and the purpose. The standard provides the classification of the report in terms of the degree of substantiation and precision, which indicates the rigor of the data and the methodology used.

DeltaP Experience

In a recent project, we evaluated 30 industrial machines of a textile factory park in Santa Catarina, manufactured between the 1960s and 1970s and out of operation. Each machine received an individual form. The survey gathered 255 photographic records classified by purpose (identification plate, serial number, motor, transmission and panel), with verification of the identification plates against the client's asset list. The standardization of the survey allowed evaluating the lot with a uniform criterion.

Technical Note: This article is informative and does not replace the technical standard or the evaluation report prepared by a qualified professional for a specific asset and purpose. Values, methods and degrees of substantiation depend on the purpose, the reference date, the available data and the caveats of each report.

References

1. ABNT NBR 14653-5: Asset Evaluation, Part 5: Machines, Equipment, Installations and Industrial Assets in General
2. CPC 27: Fixed Asset
3. CPC 01 (R1): Reduction to Recoverable Value of Assets

Also see: Machine and Industrial Equipment Evaluation.