After getting the scope of work for the appraisal project, a detailed inventory audit and inspection is conducted on all the assets. With individual values, aggregate value totals, full narrative report is submitted along with all limiting conditions and critical assumptions. Value derivates and methods used to get the value, representative photographs and research methodologies are written to comply with all standard operating procedures.
This type of appraisal is most often used by financing institutions and equipment sellers as it requires a physical site visit and collateral verification. Reports submitted against Full Valuation are widely accepted because it presents the highest level of appraiser inspection, verification and assurance.
This valuation type has limited scope where the appraiser inspects the assets on a cursory basis. He concentrates only on those assets that collectively represent the majority of the aggregate value. Limited valuation involves a detail inspection of a representative portion of the asset. The inspection is used to determine the physical condition of the asset and to verify its existence.
The client provides the appraiser the details of the assets including description, original cost and age. This information is often obtained from the company's fixed asset ledger or depreciation schedule. Smaller assets are grouped together in "lots" and valued using standard industry depreciation rates.
This valuation has limited scope wherein the appraiser estimates the value of the equipment from his desk. The client provides only a list without providing the benefit of a physical inspection of the asset. Desktop valuations are common due to time, travel and cost constraints.
Desktop valuation may be used when a site visit is not required and timing is short. A detailed list must be provided by the client to the appraiser and assign one person who is familiar with the asset to discuss the asset condition. Since the equipment has not personally been verified by the appraiser the degree of assurance may be less when compared with a Complete Appraisal.
Audit and inspection are low cost alternatives to the appraisal reports listed above. It allows a client to determine specific information that is required by them. Audit and inspection is completed by an employee to verify collateral counts, condition and marketability of an asset. Many lending contracts require collateral audits to verify product condition and check if everything is in order.
Audit and inspection is primarily done to determine the value of an asset. It is based upon a physical inspection in order to determine its operating condition followed by extensive research to determine the requisite value required.