4 plant, machinery & equipment[1]

INTRODUCTION TO PLANT, MACHINERY &

EQUIPMENT (PME) VALUATION

DEFINITION OF PME By Chris Derry, author of Valuation of Plant

and Machinery Hand Book : “ Can be thought as the fixed assets of a company,

other than land and building. Motor vehicle, mobile plant, ships, locomotive, aero planes and similar assets which are patently not physically fixed will normally be considered to be Plant and Machinery”.

By Edward J Watt in An Introduction to Plant and Machinery Valuation implication for building values :

“….All fixed assets other than land and building….”

DEFINITION OF PME

By Kirit Budhbhatti, India :“Plant and machinery are term used to refer to

installations and support facilities for manufacturing in industry design to perform a specific pre-determined function, whether used singly or in combination with other items to enhance the productivity or operating facility, and includes all devices in fixed or movable form, other than real estate, deployed in manufacturing processing or assembling of products from the stage raw materials to finished good”.

DEFINITION OF PME

International Valuation Standard Committee (IVSC)

Tangible assets, other than realty that : Are held by an entity for use in the production or supply of

the goods or service for rental by others, or for administrative purposes, and

Are expected to be used over a period of time

DEFINITION OF PME

The categories (IVSC Fifth edition) : Plant : Assets that are inextricably combined with

others and that may include specialized buildings, machinery and equipment.

Machinery : Individual Machine or a collection of machines. A machine is an apparatus used for a specific process in connection with the operation of the entity

Equipment : Other assets that are used to assist the operation of the enterprise or entity

DEFINITION OF PME

Factors that influence the value Physical factors

Type Make Model Size Capacity

Social factors Taste and Preference of costumer Utilizing Products Manufacture by the machine

Economic Demand and Suply Availability of Money and Credit Interest Rate

Legal Zoning Enviromental protection law Taxation Policy Regulation of industry

SCOPE OF WORK Agriculture machinery Communication equipment Computers Contractor’s machinery Engineering Food and Beverages processing Government facilities Laboratories Mining

Plastics and Rubber Printing and publishing Process Plant Pulp and Paper Textile Transportation equipment Utilities, wood working, etc

SCOPE OF WORK

1. Production machinery2. Support equipment3. Motor Control Centre and switch gear4. Power Wiring5. Process Piping6. Foundation7. Structural Support8. Material Handling and storage equipment9. General Plant equipment10. Rolling Stock11. Laboratory and test equipment12. Office furniture, Fixtures and equipment13. Computer Equipment14. Tools15. Special Tooling16. Special Classes

TYPE OF MACHINERY AND EQUIPMENT CLASSES


Production MachineryRepresent a relatively large percentage of the total

value of a plant

e.g. Palm Oil Mill, Power Plant

Support Equipment

Machinery that maintains or increases the ability and capacity of the production equipment

e.g. Scrap Grinder


Motor Control Centre and Switch Gear Unless the plant has main electrical substations the

MCC is usually the largest electrical distribution centre in the plant

Other Acronym to be familiar : PLC ; AC ; DC: Single or Three Phase Electricity


What is PLCA Specialized device used to provide high

speed, low level control of a process. It is programmed using LD or some form of structured language, so that engineers can program it. PLC hardware typically costs a lot of money, and often has very good redundancy and fail over capabilities. When you walk around a factory, the thing with all the lights and buttons and switches is the PLC or DCS

A DCS Network is an arrangement that allows multiple switches in the same or remote locations to work together as one switch.

What is Distributed Comunications System (DCS)

Power WiringThe Plant power wiring connects the plant

equipment to MCC. The equipment is strung together with wiring, controls and switches.

“ …the valuer estimate the size, number of lineal feet of conduit and wire, number of motor, supply boxes and switching between the equipment and MCC…”


Process PipingIncluding piping, valves, fittings, pumps and

process control

e.g. Oil refinery plant


FoundationSome massive machinery requires special pits or

heavy foundation


Structural SupportInstalled machenery may required structural steel,

catwalks, ladders or platform


Material Handling and storage equipment

e.g. forklift, loaders, conveyors, cranes, hoist, pallet movers, programmable inventory system, etc


General Plant EquipmentLocated in manufacturing instead of office areas

e.g. Namely benches, rack, locker, scales, hand truck, time recorder, fire extinguisher and similar assets.


Rolling Stock Two sub classes

Plant Vehicles

Trucks, cranes, tractors and mobile equipment not licensed for road use.

Licensed vehicles

Automobiles, trucks, tractors, trailers and other vehicles licensed for road use.


Laboratory and test equipmentItems necessary for the operation of a laboratory or

a test facility

Typical equipment would include microscope, clean tables, fume hoods, ventilating system, spectrograph, ovens, still, glassware and similar assets.


Office furniture, fixture and equipmente.g. Desk, tables, chairs, credenzas, filling

cabinets, portable partitions, calculators, photocopy machine, fax machines, etc


Computer equipmentThis class includes various computer, monitors,

printers, plotters, modems, scanners and similar assets that not included in “offce furniture, fixtures and equipment”.


Tools

Devided into 2 subclases :

- Permanent Tools

Portable electric and air tools, anvils, vises, gauges, chuck and similar items

- Perishable tools

Drill, Chisel, reamers, taps and other assets


Special Tooling

Sometimes called “tools, dies, jigs and fixtures” Built for specific operation or aplication

e.g. dies, jigs, molds, pattern, template and similar assets


Special Clases

e.g. Aircraft, bottles and cases (beverage industry), screens (bakery), ship and similar assets.


4 plant, machinery & equipment[1]

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