5 benefits of specialised valuations for plant and equipment

If you’re buying or selling a property or business, you’ll know that commercial asset valuations are an integral step in the transaction process. However, since new tax rules were introduced in 2021, market awareness of purchase price allocations (PPA), in the context of plant and equipment, is still varied. When PPA is misunderstood, it can have significant consequences on your ongoing tax liabilities, among other challenges.

An inaccurate PPA value can also have a material impact on reported earnings in future periods.

“This can affect market valuations, lending, insurance, and the sale of said assets down the line,” Tony adds. “A PPA ensures the accurate reporting of the acquired company's assets and liabilities on the purchaser’s financial statements. This information is crucial for investors, stakeholders, and regulatory bodies to evaluate the economic worthiness of the assets and financial outcome of the acquisition.”

The transaction process can be time-consuming and tedious for both the buyer and the seller. Time is always of the essence and unforeseen delays frustrate all parties involved and could jeopardise the sale. A drawn-out transaction can also lead to mounting service costs such as deal advisors, lawyers, and accountants. A definitive PPA is just one of the ways to avoid surprises late in the piece.

The challenges that can arise from an incorrect valuation highlight the importance of seeking independent, professional valuation advice early in the transaction cycle. 

Alongside the expertise of a global network and 35 years of local experience, JLL has New Zealand’s largest team of specialist plant and machinery valuers. This specific knowledge ensures all valuations and assumptions are representative of the industry, competition, and market conditions.

As one of the leading valuation firms, JLL can assess and determine fair PPAs and help you to understand all of the conflicting interests and tax implications pertaining specifically to plant and equipment acquisitions.