Plant and machinery cannot be valued through a single formula. The appropriate methodology depends on the equipment's specialisation, condition, secondary-market activity, productive utility and income-generating capacity.
Depreciated Replacement Cost
The DRC methodology is the primary approach for the majority of industrial plant and machinery valuations, particularly where equipment is specialised, old or site-specific and reliable secondary-market comparables are limited.
Secondary Market Evidence
Appropriate for equipment categories with active secondary markets where direct price comparisons can be identified and adjusted for make, model, age, condition and specification.
Attributable Income Stream
Applicable where specific equipment generates an identifiable income stream, such as leased captive power plants, toll equipment and equipment rental arrangements.
The primary valuation framework for specialised plant and machinery where an active secondary market does not provide sufficient direct comparables.
Current cost of procuring equivalent new equipment from the OEM or authorised distributor, including applicable freight, basic installation and commissioning.
Reduction arising from actual physical wear and condition. Age is an input — not the output.
Site inspection, maintenance records and mechanical condition assessment help establish the equipment's Remaining Useful Life (RUL).
Reduction caused by the performance gap between existing equipment and current equivalents.
For energy-intensive equipment, the energy efficiency gap can become a significant component.
Reduction caused by external market or regulatory conditions that reduce productive utility.
The resulting DRC represents the equipment's Fair Market Value on a going-concern basis at the valuation date, subject to the applicable valuation assumptions and assessment.
Physical depreciation is not determined by age alone. The assessment considers the equipment's condition, maintenance history and estimated Remaining Useful Life (RUL).
Heavy industrial frames
Presses · MillsMachine tools
CNC centres · LathesHVAC & utilities
Chillers · Compressors · BoilersIT & electronics
Servers · Electronic systemsMarket comparison works best where sufficient secondary-market evidence exists. Each comparable is adjusted for the specific equipment's make, model, year, specification, condition and usage.
A secondary-market listing does not automatically represent the value of the subject equipment. The valuation requires comparison with the specific asset and appropriate adjustments for condition, vintage, specification, utilisation and marketability.
The Income Approach is applicable where specific plant and machinery generates an identifiable and attributable income stream independent of the broader business.
Where a manufacturing company owns a captive power plant and leases capacity to neighbouring industrial units, the net income from the leasing arrangement can be capitalised at an appropriate yield.
Equipment such as weighbridges and scanning systems that generate identifiable fee income may be valued through capitalised Net Operating Income.
Where equipment is leased to third parties, the lease income may be capitalised at an appropriate yield to determine the income-based value.
The Income Approach is a secondary methodology for most P&M assignments. The DRC and Market Comparison approaches remain primary where applicable.
Limited secondary-market evidence or equipment whose value is strongly linked to its technical condition, remaining life and productive capability.
Cost ApproachEquipment categories where reliable market comparables exist and meaningful adjustments can be made.
Market ComparisonEquipment capable of generating an identifiable income stream through leasing, tolls or other fee-generating arrangements.
Income ApproachDiscuss your equipment, valuation purpose and applicable methodology with a Government Approved P&M Valuer.