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Insights Value Definitions
    

Value Definitions

The purpose of the appraisal drives the criteria considered by the appraiser in the valuation analysis. Customers often need appraisals to answer a variety of questions about the value of assets when they are subjected to different circumstances. AccuVal is frequently engaged to value assets assuming the following conditions.

Inventory Value Definitions

Machinery & Equipment Value Definitions

Inventory Value Definitions

Gross Forced Liquidation Value (GFLV)

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Forced Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Forced Liquidation Value (FLV)

“…the estimated gross amount, expressed in terms of money, that could typically be realized from a properly advertised and conducted public auction1, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis as of a specific date.”

1The term auction usually refers to forced liquidation value, but there are exceptions to this general rule; for example, in certain industries, an auction is the standard industry method for disposing of those assets, in which case it may be equal to orderly liquidation value, assuming a normal exposure time (and may be equal to fair market value under certain conditions). The essential difference between orderly liquidation value and forced liquidation value is one of exposure time.

It should be clearly understood that the GFLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis, without any further processing. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. This definition of value considers the gross proceeds of sale and does not consider any of the expenses associated with running the sale, maintaining the facility or other costs of liquidation. The appraisal gives no consideration to a buildout of the inventory to convert the existing raw materials or work-in-process inventories into finished goods. A buildout analysis is typically outside the scope of a forced liquidation appraisal.

Net Forced Liquidation Value (NFLV)

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Forced Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Forced Liquidation Value (FLV)

“…the estimated gross amount, expressed in terms of money, that could typically be realized from a properly advertised and conducted public auction1, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis as of a specific date.”

1The term auction usually refers to forced liquidation value, but there are exceptions to this general rule; for example, in certain industries, an auction is the standard industry method for disposing of those assets, in which case it may be equal to orderly liquidation value, assuming a normal exposure time (and may be equal to fair market value under certain conditions). The essential difference between orderly liquidation value and forced liquidation value is one of exposure time.

To arrive at the NFLV, the expenses of liquidation are deducted. These expenses include, but are not limited to, the liquidator’s commission and travel expenses, advertising costs, payroll, payroll taxes and fringe benefits, salesperson commissions, travel expenses for retained company personnel, building rent/mortgage payments, utility costs, building maintenance and repair, equipment rental, property insurance, and security, if applicable. The expenses do not include costs such as environmental cleanup costs or remediation, loan amortization, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale

It should be clearly understood that the NFLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis, without any further processing. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. The appraisal gives no consideration to a buildout of the inventory to convert the existing raw materials or work-in-process inventories into finished goods. A buildout analysis is outside the typical scope of a forced liquidation appraisal.

Gross Orderly Liquidation Value (GOLV) – As-Is, Where-Is

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Orderly Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Orderly Liquidation Value (OLV)

“…the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

It should be clearly understood that the GOLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis, without any further processing. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. This definition of value considers the gross proceeds of sale and does not consider any of the expenses associated with running the sale, maintaining the facility or other costs of liquidation. The appraisal gives no consideration to a buildout of the inventory to convert the existing raw materials or work-in-process inventories into finished goods. A buildout analysis is typically outside the scope of an orderly liquidation appraisal.

Selling the inventory under as-is, where-is terms requires that the buyer using its own labor force would enter the premises and remove the inventory from its current location and load it out with their own means and transportation. This where-is component adds an additional expense that buyers will consider in the price paid for the inventory.

Net Orderly Liquidation Value (NOLV) – As-Is, Where-Is

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Orderly Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Orderly Liquidation Value (OLV)

“…the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

To arrive at the NOLV, expenses of liquidation are deducted. These expenses include, but are not limited to, the liquidator’s commission, travel expenses, advertising costs, payroll, payroll taxes and fringe benefits, building rent/mortgage payments, utility costs, building maintenance and repair, equipment rental, property insurance, and security, if applicable. The expenses do not include costs such as environmental cleanup costs or remediation, loan amortization, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale.

It should be clearly understood that the NOLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis, without any further processing. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. The appraisal gives no consideration to a buildout of the inventory to convert the existing raw materials or work-in-process inventories into finished goods. A buildout analysis is typically outside the scope of an orderly liquidation appraisal.

Selling the inventory under as-is, where-is terms requires that the buyer using its own labor force would enter the premises and remove the inventory from its current location and load it out with their own means and transportation . This where-is component adds an additional expense that buyers will consider in the price paid for the inventory.

Net Orderly Liquidation Value (NOLV) – As-Is, FOB Terms

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Orderly Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Orderly Liquidation Value (OLV)

“…the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

To arrive at the NOLV, expenses of liquidation are deducted. These expenses include, but are not limited to, the liquidator’s commission, travel expenses, advertising costs, payroll, payroll taxes and fringe benefits, building rent/mortgage payments, utility costs, building maintenance and repair, equipment rental, property insurance, and security, if applicable. The expenses do not include costs such as environmental cleanup costs or remediation, loan amortization, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale.

It should be clearly understood that the NOLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis, without any further processing. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. The appraisal gives no consideration to a buildout of the inventory to convert the existing raw materials or work-in-process inventories into finished goods. A buildout analysis is typically outside the scope of an orderly liquidation appraisal.

While the definition of a NOLV scenario states that assets are to be sold on a “where-is” location basis, the inventory would actually not be liquidated in that fashion. Rather, the inventory would be loaded and/or shipped by liquidation personnel and would be sold on a “FOB company dock basis,” with the purchaser(s) being responsible for transporting the inventory at their own risk and expense. The expenses of bringing the inventory to the dock have been considered in the calculation of expenses estimated in this report.

Net Orderly Liquidation Value (NOLV) – Buildout, Where-Is

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Orderly Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Orderly Liquidation Value (OLV)

“…the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

To arrive at the NOLV, expenses of liquidation are deducted. These expenses include, but are not limited to, the liquidator’s commission, travel expenses, advertising costs, payroll, payroll taxes and fringe benefits, building rent/mortgage payments, utility costs, building maintenance and repair, equipment rental, property insurance, and security, if applicable. The expenses do not include costs such as environmental cleanup costs or remediation, loan amortization, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale.

It should be clearly understood that the NOLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. The appraisal does give consideration to further processing or a buildout of select inventory, converting the selected inventory into finished goods. A buildout analysis is outside the scope of a typical orderly liquidation appraisal.

Selling the inventory under where-is terms requires that the buyer using its own labor force would enter the premises and remove the inventory from its current location and load it out with their own means and transportation. This where-is component adds an additional expense that buyers will consider in the price paid for the inventory.

Net Orderly Liquidation Value (NOLV) –Buildout, FOB Terms

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. The American Society of Appraisers defines Orderly Liquidation Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 4) as follows:

Orderly Liquidation Value (OLV)

“…the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

To arrive at the NOLV, expenses of liquidation are deducted. These expenses include, but are not limited to, the liquidator’s commission, travel expenses, advertising costs, payroll, payroll taxes and fringe benefits, building rent/mortgage payments, utility costs, building maintenance and repair, equipment rental, property insurance, and security, if applicable. The expenses do not include costs such as environmental cleanup costs or remediation, loan amortization, legal fees, and other professional fees, which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale.

It should be clearly understood that the NOLV definition assumes a sale of duress, where all operations have been discontinued and the components making up the work-in-process (WIP) inventory are each being sold on a piecemeal basis. Furthermore, it is assumed that the raw materials and finished goods are also being sold on a piecemeal basis. The appraisal does give consideration to further processing or a buildout of select inventory, converting the selected inventory into finished goods. A buildout analysis is outside the scope of a typical orderly liquidation appraisal.

While the definition of a NOLV scenario states that assets are to be sold on a “where-is” location basis, the inventory would actually not be liquidated in that fashion. Rather, the inventory would be loaded and/or shipped by liquidation personnel and would be sold on a “FOB company dock basis,” with the purchaser(s) being responsible for transporting the inventory at their own risk and expense. The expenses of bringing the inventory to the dock have been considered in the calculation of expenses estimated in this report.

Net Orderly Liquidation via a Going Out of Business Sale

AccuVal defines Net Orderly Liquidation via a Going Out of Business Sale as follows:

Net Orderly Liquidation via a Going Out of Business Sale

“A professional opinion of the estimated most probable price expressed in terms of currency which the inventory could typically realize in a Going Out of Business (GOB) Sale, properly advertised and professionally managed, by a seller obligated to sell over a defined time period not to exceed two months, as of the Effective Date of this appraisal report. For the residual inventory not sold within the GOB, the balance will be sold under a net orderly liquidation scenario defined as the following: a professional opinion of the estimated most probable price, net of holding and selling expenses, expressed in terms of currency which the subject inventory could typically realize from a sale, properly advertised and professionally managed, by a seller obligated to sell over a period to be determined, as of the Effective Date of the appraisal report. The time period for an orderly liquidation of inventory typically ranges from three to six months. Further, the ability of the inventory to draw sufficient prospective buyers to ensure competitive offers is considered. The inventory is to be sold on a piecemeal basis, ‘as-is condition, where-is location’, with the purchaser being responsible for removal of the inventory at their own risk and expense. The sale is assumed to be a sale of duress, where manufacturing operations, if applicable, have been discontinued. All sales are for cash and are final.”

Expenses of liquidation include, but are not limited to, the liquidator’s commission and travel expenses, advertising costs, payroll, payroll taxes and fringe benefits, salesperson commissions, travel expenses for retained company personnel, building rent/mortgage payments, utility costs, building maintenance and repair, equipment rental, property insurance, and security, if applicable. The expenses do not include costs such as environmental cleanup costs or remediation, loan amortization, legal fees, and other professional fees.

It should be clearly understood the Net Orderly Liquidation Value via a GOB sale definition assumes a sale of duress. The appraisal gives no consideration to a buildout of the inventory to convert any existing raw materials and work-in-process inventories into finished goods. A buildout analysis is outside the scope of a typical orderly liquidation appraisal.

Fair Market Value (FMV)

The American Society of Appraisers views the valuation of inventory as a subset of the valuation of machinery and equipment. In Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 3), the American Society of Appraisers defines Fair Market Value as follows:

Fair Market Value (FMV)

“…the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.”

Machinery & Equipment Value Definitions

Fair Market Value – Removed

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 7), the American Society of Appraisers defines Fair Market Value - Removed as follows:

Fair Market Value – Removed
(FMV – Removed)

“An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering removal of the property to another location, as of a specific date.”

In this case, the definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer considered the risk and costs associated with dismantling and removal in the price paid.

Fair Market Value In Continued Use With Assumed Earnings

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 4), the American Society of Appraisers defines Fair Market Value In Continued Use With Assumed Earnings as follows:

Fair Market Value In Continued Use With Assumed Earnings
(FMVICU With Assumed Earnings)

“An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and assuming that the business earnings support the value reported, without verification.”

Under this definition, consideration is given to each asset’s contribution to the operating facility, or the contribution of all the assets as a whole, whichever appropriately addresses the production capabilities of the plant. It is assumed that all assets that have been specially designed or built will continue to be used in the manner for which they were originally intended.

It is further assumed under this definition, without verification, that the projected future earnings of the business are sufficient to support the appraised fair market value of all appraised assets and the other assets needed to operate the business as a going concern, thus justifying the fair market value of the individual assets appraised in this report. The most reliable means of verifying the accuracy of this assumption would be through the application of the income approach to value. A knowledgeable buyer’s decision to purchase the subject assets for Continued Use will likely be predicated on the present value of the anticipated future returns from operating the assets within a business. The income approach analyzes the historical and projected earnings or cash flow of the business, as well as many other business-related factors.

In determining the scope of this valuation assignment, the Client has been advised of the assumed earnings assumption made under this definition of value and has determined that this assumption is appropriate for the intended use of this report.

Fair Market Value In Continued Use With An Earnings Analysis

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 5), the American Society of Appraisers defines Fair Market Value In Continued Use With An Earnings Analysis as follows:

Fair Market Value In Continued Use With An Earnings Analysis
(FMVICU With An Earnings Analysis)

“An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and supported by the earnings of the business.”

Under this definition, consideration is given to each asset’s contribution to the operating facility, or the contribution of all the assets as a whole, whichever appropriately addresses the production capabilities of the plant. It is assumed that all assets that have been specially designed or built will continue to be used in the manner for which they were originally intended.

Under this definition, the projected future earnings of the business are analyzed to determine whether or not the earnings are sufficient to support the appraised value of all appraised assets and the other assets needed to operate the business as a going concern. The most reliable means of verifying if this is, in fact, the case is through the application of the income approach.

A knowledgeable buyer’s decision to purchase the subject assets for Continued Use will likely be predicated on the present value of the anticipated future returns from operating the assets and the business. The income approach analyzes the historical and projected earnings or cash flow of the business, as well as many other business-related factors, and has been considered as one of the approaches to value in this report.

In determining the scope of this valuation assignment, the Client has been advised of the approach to the value of the subject assets and has determined that this definition of value and approach to value is appropriate for the intended use of this report.

Fair Market Value – Installed

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 6), the American Society of Appraisers defines Fair Market Value - Installed as follows:

Fair Market Value - Installed
(FMV - Installed)

“An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering market conditions for the asset being valued, independent of earnings generated by the business in which the property is or will be installed, as of a specific date.”

Under this definition it is assumed, without verification, that the projected future earnings of the business are sufficient to support the appraised fair market value of all appraised assets and the other assets needed to operate the business as a going concern, thus justifying the fair market value of the individual assets appraised in this report. Since a knowledgeable buyer’s decision to purchase the personal property for Continued Use will likely be predicated on the present value of the anticipated future returns from operating the assets within a business, the most reliable means of verifying the accuracy of this assumption is through the application of the income approach to value. The income approach analyzes the historical and projected earnings or cash flow of the business, as well as many other business-related factors. In determining the scope of this valuation assignment, the Client has been advised of this significant assumption made under this definition of value and has determined that this assumption is appropriate for the intended use of this report.

Forced Liquidation Value (Gross)

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 10), the American Society of Appraisers defines Forced Liquidation Value as follows:

Forced Liquidation Value (FLV)

“An opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.”

This definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer considered the risk and costs associated with dismantling and removal in the price paid. The value conclusions further take into consideration location, difficulty of removal, condition, adaptability, specialization, marketability, overall appearance, and psychological appeal. Further, the ability of the asset group to draw sufficient prospective buyers to ensure competitive offers at an auction sale is considered. Lastly, if conditions of sale exist, such as a limit on the amount of marketing time or the seller is under duress to sell, the values of the assets can be negatively impacted. This definition does not take into account any of the expenses associated with the cost of selling the assets.

Forced Liquidation Value (Net of Liquidator’s Expenses)

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 10), the American Society of Appraisers defines Forced Liquidation Value as follows:

Forced Liquidation Value (FLV)

“An opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.”

This definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer considered the risk and costs associated with dismantling and removal in the price paid. The value conclusions further take into consideration location, difficulty of removal, condition, adaptability, specialization, marketability, overall appearance, and psychological appeal. Further, the ability of the asset group to draw sufficient prospective buyers to ensure competitive offers at an auction sale is considered. Lastly, if conditions of sale exist, such as a limit on the amount of marketing time or the seller is under duress to sell, the values of the assets can be negatively impacted.

Net of Liquidator’s Expenses

To arrive at the Net Forced Liquidation Value, certain expenses of liquidation are deducted. These expenses include, but may not be limited to, the liquidator’s commission and the liquidator’s costs associated with travel expenses, set-up costs, labor, site security, and advertising costs. The expenses do not include costs such as building rent/mortgage payments, site utilities, real or personal property taxes, real or personal property insurance, building and equipment maintenance/upkeep costs, cost of retained company personnel, environmental cleanup costs or remediation, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale.

Forced Liquidation Value (Net of Liquidator’s Expenses and Holding Costs)

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 10), the American Society of Appraisers defines Forced Liquidation Value as follows:

Forced Liquidation Value (FLV)

“An opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.”

This definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer considered the risk and costs associated with dismantling and removal in the price paid. The value conclusions further take into consideration location, difficulty of removal, condition, adaptability, specialization, marketability, overall appearance, and psychological appeal. Further, the ability of the asset group to draw sufficient prospective buyers to ensure competitive offers at an auction sale is considered. Lastly, if conditions of sale exist, such as a limit on the amount of marketing time or the seller is under duress to sell, the values of the assets can be negatively impacted.

Net of Liquidator’s Expenses and Holding Costs

To arrive at the Net Forced Liquidation Value, certain expenses of liquidation are deducted. These expenses include, but may not be limited to, the liquidator’s commission and the liquidator’s costs associated with travel expenses, set-up costs, labor, site security, and advertising costs. In addition to this, the real and personal property holding costs over the sale period are also considered. These expenses include costs such as building rent/mortgage payments, site utilities, real and/or personal property taxes, real and/or personal property insurance, building and equipment maintenance/upkeep costs, cost of retained company personnel, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale. The expenses do not include any costs associated with environmental cleanup or remediation.

Orderly Liquidation Value (Gross)

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 9), the American Society of Appraisers defines Orderly Liquidation Value as follows:

Orderly Liquidation Value(OLV)

“An opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

Given the nature of the assets being appraised, a reasonable period of time is considered to be period. The definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer will adjust the price paid to offset any risk and dismantling/removal costs. The conclusions take into consideration location, difficulty of removal, condition, adaptability, specialization, marketability, overall appearance, and psychological appeal. This is a privately negotiated sale that is properly advertised and professionally managed. Further, the ability of the asset group to draw sufficient prospective buyers to ensure competitive offers is considered. Any deletions or additions to the assets appraised could change the psychological or monetary appeal necessary to attain the value estimated. This definition does not take into account any of the expenses associated with the cost of selling the assets.

Orderly Liquidation Value (Net of Liquidator’s Expenses)

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 9), the American Society of Appraisers defines Orderly Liquidation Value as follows:

Orderly Liquidation Value (OLV)

“An opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

Given the nature of the assets being appraised, a reasonable period of time is considered to be a 3- to 6-month period. The definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer will adjust the price paid to offset any risk and dismantling/removal costs. The conclusions take into consideration location, difficulty of removal, condition, adaptability, specialization, marketability, overall appearance, and psychological appeal. This is a privately negotiated sale that is properly advertised and professionally managed. Further, the ability of the asset group to draw sufficient prospective buyers to ensure competitive offers is considered. Any deletions or additions to the assets appraised could change the psychological or monetary appeal necessary to attain the value estimated.

Net of Liquidator’s Expenses

To arrive at the Net Orderly Liquidation Value, certain expenses of liquidation are deducted. These expenses include, but may not be limited to, the liquidator’s commission and the liquidator’s costs associated with travel expenses, set-up costs, labor, site security, and advertising costs. The expenses do not include costs such as building rent/mortgage payments, site utilities, real or personal property taxes, real or personal property insurance, building and equipment maintenance/upkeep costs, cost of retained company personnel, environmental cleanup costs or remediation, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale.

Orderly Liquidation Value (Net of Liquidator’s Expenses and Holding Costs)

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 9), the American Society of Appraisers defines Orderly Liquidation Value as follows:

Orderly Liquidation Value (OLV)

“An opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.”

Given the nature of the assets being appraised, a reasonable period of time is considered to be a 3- to 6-month period. The definition assumes that the specific date is consistent with the effective date of the appraisal. It is also assumed the buyer will adjust the price paid to offset any risk and dismantling/removal costs. The conclusions take into consideration location, difficulty of removal, condition, adaptability, specialization, marketability, overall appearance, and psychological appeal. This is a privately negotiated sale that is properly advertised and professionally managed. Further, the ability of the asset group to draw sufficient prospective buyers to ensure competitive offers is considered. Any deletions or additions to the assets appraised could change the psychological or monetary appeal necessary to attain the value estimated.

Net of Liquidator’s Expenses and Holding Costs

To arrive at the Net Orderly Liquidation Value, certain expenses of liquidation are deducted. These expenses include, but may not be limited to, the liquidator’s commission and the liquidator’s costs associated with travel expenses, set-up costs, labor, site security, and advertising costs. In addition to this, the real and personal property holding costs over the sale period are also considered. These expenses include costs such as building rent/mortgage payments, site utilities, real and/or personal property taxes, real and/or personal property insurance, building and equipment maintenance/upkeep costs, cost of retained company personnel, legal fees, and other professional fees which may be incurred in the liquidation process, but are outside the control and scope of the liquidation sale. The expenses do not include any costs associated with environmental cleanup or remediation.

Liquidation Value In Place

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 8), the American Society of Appraisers defines Liquidation Value In Place as follows:

Liquidation Value In Place (LVIP)

“An opinion of the gross amount, expressed in terms of money that typically could be realized from a properly advertised transaction, with the seller being compelled to sell, as of a specific date, for a failed, non-operating facility, assuming that the entire facility is sold intact.”

This definition assumes an adequate period of time to properly advertise the assets in a commercially reasonable manner. However, it is clearly understood by both the buyer and seller that the sale of the assets is under duress and that the marketing time is limited to . It is further assumed that the assets have been evaluated at a level that would motivate speculative purchasers to buy. It is assumed that all assets that have been specially designed or built will continue to be used in the manner for which they were originally intended

Liquidation Value In-Place appraisals require a higher degree of judgment by the appraiser as a non-operating facility likely has no projections of the anticipated future earnings, and thus are more subjective valuations. By definition, they do not consider historical or future earnings potential or apply the Income Approach methodology to provide an indication of value. In-Place appraisals rarely benefit from the direct application of the Sales Comparison Approach due to the limited quantity of good sale information involving plants with similar manufacturing capacity that sold in their entirety. Given the potential of the lack of earnings projections, and appropriate sales comparables, In-Place appraisals often rely on the value indicated by the Cost Approach. When this is the case, many of the adjustments required to account for the factors of depreciation including physical, functional, and external obsolescence require a higher degree of judgment by the appraiser.

In determining the scope of this valuation assignment, the Client has been advised of the approach to the value of these assets and has determined that this approach to value is appropriate for the intended use of this report.

Salvage Value

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 11), the American Society of Appraisers defines Salvage Value as follows:

Salvage Value

“An opinion of the amount, expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date.”

Scrap Value

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 12), the American Society of Appraisers defines Scrap Value as follows:

Scrap Value

“An opinion of the amount, expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.”

Insurance Cost New

The American Society of Appraisers defines Insurance Cost New in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., pages 4 and 572) as follows:

Insurance Cost New

“The replacement or reproduction cost new as defined in the insurance policy less the cost new of the items specifically excluded in the policy, as of a specific date.”

Insurable Value

The American Society of Appraisers defines Insurable Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 572) as follows:

Insurable Value

“The value of that portion of a property covered by insurance in accordance with the terms of the insurance policy or other agreements.”

Insurable Value Depreciated

The American Society of Appraisers defines Insurable Value Depreciated in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 572) as follows:

Insurable Value Depreciated

“The insurance replacement or reproduction cost new less accrued depreciation considered for insurance purposes, as defined in the insurance policy or other agreements, as of a specific date.”

Actual Cash Value

The American Society of Appraisers defines Actual Cash Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 553) as follows:

Actual Cash Value

“A term primarily used for insurance purposes equivalent to replacement or reproduction cost new less physical depreciation.”

Replacement Cost New

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 3), the American Society of Appraisers defines Replacement Cost New as follows:

Replacement Cost New (RCN)

“The current cost of a similar new property having the nearest equivalent utility as the property being appraised, as of a specific date.”

Reproduction Cost New

In its website posting, Definitions of Value Relating to MTS Assets (http://www.appraisers.org/MTSHome/DefinitionsOfValue.aspx, number 3), the American Society of Appraisers defines Reproduction Cost New as follows:

Reproduction Cost New (CRN)

“The cost of reproducing a new replica of a property on the basis of current prices with the same or closely similar materials, as of a specific date.”

Book Value

The American Society of Appraisers defines Book Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 557) as follows:

Book Value

“The capitalized cost of an asset less the depreciation taken for financial reporting.”

Casualty Value

The American Society of Appraisers defines Casualty Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 558) as follows:

Casualty Value

“A schedule included in a lease that states the agreed value of equipment at various times during the term of the lease, and establishes the liability of the lessee to the lessor in the event the leased equipment is lost or rendered unusable during the lease term due to a casualty loss.”

Going Concern Value

The American Society of Appraisers defines Going Concern Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 570) as follows:

Going Concern Value

“The value of an operating business enterprise, or an interest therein.”

Net Book Value

The American Society of Appraisers defines Net Book Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 579) as follows:

Net Book Value

“The capitalized cost of an asset less the depreciation taken for financial reporting. (See Book Value).”

Net Realized Value

The American Society of Appraisers defines Net Realized Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 579) as follows:

Net Realized Value

“Selling price less reasonably estimable costs of completion and disposal.”

Future Value

The American Society of Appraisers defines Future Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 569) as follows:

Future Value

“The amount that an investment will be worth at a future date.”

Present Value

The American Society of Appraisers defines Present Value in Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets (2005 ed., page 582) as follows:

Present Value

“The value of a future payment or series of future payments discounted to the current date or time period zero.”

Fair Value

According to the Financial Accounting Standards Board Accounting Standards Codification Topic 820 (ASC 820; previously Statement No. 157), Fair Value is defined as:

Fair Value

“…the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market which would be the most advantageous for the asset or liability.”

Fair Market Value (Charitable Donations)

The Internal Revenue Service of the Department of Treasury defines Fair Market Value in Publication 561 (Rev. April 2007) Cat. No. 15109Q Determining the Value of Donated Property (page 2) as follows:

Fair Market Value

“Fair market value is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.”

This publication further explains that if a restriction is put on the use of the donated property, the Fair Market Value must reflect the restriction. It further explains that in making and supporting the valuation of property, all factors affecting value are relevant and must be considered. These include:

  • The cost or selling price of the item
  • Sales of comparable properties
  • Replacement cost, and
  • Opinions of experts
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