5 benefits of specialised valuations for plant and equipment

“In most instances, when the value of plant and equipment is not accurately determined, the purchaser in a transaction is most commonly disadvantaged,” says Tony Pratt, Head of Plant, Equipment, & Infrastructure Valuation Advisory at JLL NZ.

Below are just a few reasons why valuing plant and equipment accurately is essential to your business.

Increased exposure to tax risk is the key issue that arises for purchasers, due to the seller allocating values in the interest of reducing their own tax liability. These competing interests can lead to a purchaser’s future depreciation deductions, and corresponding tax savings, being more restricted. Often, this is a circumstance not realised until it’s too late. Not complying with these rules can lead to future penalties.

“It’s typically when clients are audited 3-5 years following their transactions that they’re consequently caught out and lumped with big tax bills,” explains Tony.

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 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.