ASA Personal Property & Machinery Valuation 2 — Questions and Answers
Question 1: Which approach to machinery and equipment valuation uses pricing from active secondary markets or dealer price guides?
- Market (sales comparison) approach (Correct answer)
- Cost approach
- Income approach
- Liquidation approach
Correct answer: Market (sales comparison) approach
The market approach for M&E draws on auction results, dealer listings, and published price guides for comparable used equipment.
Question 2: Functional obsolescence in machinery valuation most commonly arises from:
- Technological advances that make the equipment less efficient than modern alternatives (Correct answer)
- Physical wear reducing the machine's output capacity
- External market changes reducing demand for the product it makes
- Increases in energy costs for the plant
Correct answer: Technological advances that make the equipment less efficient than modern alternatives
Functional obsolescence in M&E is typically driven by technology — newer machines can produce more output, at lower cost, or with less labor.
Question 3: Economic obsolescence of machinery and equipment is caused by:
- External factors such as reduced demand for the product the equipment produces (Correct answer)
- Internal design deficiencies in the equipment itself
- Normal wear and tear from operation
- Deferred maintenance by the owner
Correct answer: External factors such as reduced demand for the product the equipment produces
Economic obsolescence originates outside the asset — such as market downturns, regulatory changes, or loss of product demand.
Question 4: The 'orderly liquidation value' of personal property assumes a sale:
- With adequate time to find a buyer, but not under typical market exposure (Correct answer)
- Immediately, under extreme time pressure, regardless of price
- Under typical market conditions with full market exposure
- In a forced auction to the highest bidder in a single day
Correct answer: With adequate time to find a buyer, but not under typical market exposure
Orderly liquidation value assumes a reasonable but limited time frame — more than a forced liquidation but less than a fully exposed market transaction.
Question 5: A 'trade fixture' differs from a standard fixture in that it:
- Remains the personal property of the tenant even though attached to the leased premises (Correct answer)
- Automatically becomes part of the real estate upon installation
- Is valued at depreciated cost rather than fair market value
- Must be appraised separately from the business enterprise
Correct answer: Remains the personal property of the tenant even though attached to the leased premises
Trade fixtures are installed by a tenant for business purposes and may be removed by the tenant at lease end without conveying with the real estate.
Question 6: When appraising antiques, the ASA recommends the appraiser determine provenance because it primarily affects:
- Authenticity and historical significance, which can materially impact value (Correct answer)
- The tax deductibility of any charitable contribution
- The shipping and insurance costs for the item
- Whether the item qualifies for replacement cost insurance
Correct answer: Authenticity and historical significance, which can materially impact value
Provenance documents an item's history, ownership chain, and authenticity, and can substantially increase or decrease the item's market value.
ASA Personal Property & Machinery Valuation 2
Which approach to machinery and equipment valuation uses pricing from active secondary markets or dealer price guides?