Mts Journal v33 q1 Jan2017

The Journal of the International Machinery Volume 33, Issue 1, 1st Qtr 2017
& Technical Specialties Committee of the American Society of Appraisers
$35.00 ASA Members, MTS Discipline

$50.00 ASA Members, Non-MTS Discipline
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Contents
MTS Journal Editorial 5

Brad Hartsburg, ASA, CPPA, CSA
Governor's Bulletin 7
Richard Berkemeier, ASA and David Crick, ASA, MTS Governors
Auction Theory, Game Theory, and Appraisal 8
Walter W. O’Connell, M.E., ASA, SCSP
Royalties and Valuation of Mineral Rights 14
Landy A. Stinnett, ASA, P.E.
ASA and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers 18
Alison Ho
Depreciation of Installation Costs 19
Raymond Springer, ASA
5th Annual Equipment Valuation Conference in Cleveland 22
Jean Jackson and David Helle, ASA
ASA Advanced Mining Topics Course Report - September 23- 28, 2016 - Las Vegas, Nevada 27
Charles W. “Bill” Ruth, ASA
The Value of Mining Equipment Appraisal Education 36

John J. Connolly III, ASA
Chairman's Corner 37
MTS Journal 2016-17 Media Kit 38
American Society of Appraisers
ASA Appraisal Review and Advanced Course 201 42
Roger Durkin, J.D,. M.S., FASA
Purpose and Intent of IVSC 43
Jack Beckwith, ASA, CEA
Fair Competition and Fair Gain 47
Peter Bolton King
2016 Market Overview 49
Mike Clark
Insurance Valuations and Loss Preparedness 52
Alex Ruden, ASA (M&TS & ARM), CG/GA
FDIC Rental Value - A Nontraditional Approach 54
Larry L. Perdue, ASA, MVS
Why Net Book Value Does Not Equal Fair Value 62
J. Fernando Sosa, ASA, MRICS
Aircraft Residual Value Puzzle 67
Mike McCracken
Valuing Assets in Extractive Industries 69
Alexander Lopatnikov, ASA, RICS
American Society of Appraisers Update 73
Volume 33, Issue 1, 1st Qtr 2017 2

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Upon Receipt of the Inspection Report 74

Amanda Applegate
Demystifying Engine Terms 76
James Becker, ASA
Region 2 Governor's Bulletin 79
Mike Pratt, ASA
Scope of Work within Appraisal Review 80
Joel D. Gonia, ASA
Journal Advertising Notice 83
Archived Articles Available for Your Library 84
The MTS Journal Subscription Form 104
Your trusted Appraisers in Israel
Ran Greenberg Eli El Al

Mech. Eng. CPA
ASA – MTS ASA - BV
Fair Value Group, 20 Lincoln St. Tel Aviv, Israel,

Tel: +972.3767.6966, fax: +972.3767.6964
E mail: office@fairvalue.co.il

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The International Machinery & Technical Specialities Committee
MTS Committee Officers Paul Cogley, ASA – Rhode Island - Treasurer

John J. Connolly III, ASA - New Jersey - Chair Robert W. Clark, ASA - Pennsylvania – Immediate Past Chair
Samuel Shapiro, ASA - Massachusetts – Vice Chair Richard Berkemeier, ASA – Rhode Island - MTS Discipline Governor
Karen M. Milan, ASA - Texas – Secretary David Crick, ASA – Australia - MTS Discipline Governor
MTS Committee Members William M. Engel, ASA - NY Charles W. Ruth, ASA - NM

Ildefonso Acevedo Reyes, ASA - Mexico Brad Hartsburg, ASA - Canada Joseph M. Santora, ASA - OH
Nuno S. Agostinho, ASA - Argentina Norberto J. Levin, ASA - Argentina Bradley Schulz, ASA - IL
Jamie Allen, ASA – IL Irina Rykun, ASA - Russian Federation Garrett Schwartz, ASA - CA
Keith Bransky, ASA - GA Kevin S. Reilly, ASA - WI John C. Wood, ASA – Australia
Peter J. Campbell, ASA - MI Harry J. Richardson, ASA - MI
Michael R. Crismyre, ASA - IL Alexander Ruden, ASA - GA
Emeritus Members Melvin Fineberg, ASA - NV H. Denis Neumann, ASA - CA

Merritt Agabian, FASA - MA Alan C. Iannacito, FASA - CO Robert Podwalny, FASA - CA
Kal Barrow, ASA - NY William F. Jacobs, ASA - OR Barry Savage, ASA - OH
J.M. Clarkson, ASA - TX Norman F. Laskay, ASA - LA Robert Svoboda, ASA - TX
John Connelly, III, ASA - NJ Leslie H. Miles, FASA - TX Victor Thompson, ASA - KY

11107 Sunset Hills Rd, Suite 310, Reston, VA 20190
800-272-8258 ext 125
Editorial Office:
Fortress Machinery Appraisals and Consulting Inc. 24 Clover Lane, Calgary, Alberta, Canada T3Z 1G9
Business Office:
Asset Valuation Source, P.O. Box 39 Rowlett, TX 75030-0039
© 2016 American Society of Appraisers. All rights reserved. For permission to reproduce in whole or in part, and for quotation privilege, contact ASA’s International
Headquarters. Neither the Society nor its editors accepts responsibility for statements or opinions advanced in articles appearing herein, and their appearance
does not necessarily constitute an endorsement.

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MTS Journal Editorial

Belated Seasons Greetings and all the best for 2017! My apologies on the tardy timing of this issue as
we were busy putting out that Special Aviation Issue just as winter was upon us -- and thank you so
much for all the kind comments about that Aviation Issue, your feedback was much appreciated!
I welcome you to the first edition of the MTS Journal for the 2017 calendar year edition Volume 33,
Issue 1, 1st Quarter 2017. I have placed a colorful late fall picture to help keep your hearts warm,
wherever you are, as it should be winter? Where we are there is a couple feet of snow and the
average temperature has been minus 30 degrees. Yikes!
We continue to look for interesting articles our members and readers want to learn from. If there is a
topic you are passionate about, please do not hesitate to contact me. There are plenty of you out there
with unlimited knowledge and many looking to learn from it. I am more than willing to work with you
on your article. I wish to thank all of you that assisted with interesting articles for this issue, there is a
lot of great information and we hope it assists you with your daily work and activities.
Our Chairman, John Connolly III, ASA has written to let us know what is happening within the MTS discipline as well as writing
about The Value of Mining Equipment Appraisal Education in conjunction with Mine Expo which held in Las Vegas last fall.
Our Governors, David Crick, ASA and Rick Berkemeier, ASA have updated us on the happenings of our MTS discipline and the
society as a whole.
Walter W. O’Connell M.E., ASA, SCSP has written an informative article about the Auction Theory, Game Theory, and Appraisal.
Landy A. Stinnett, ASA, P.E., has penned an article about Royalties and Valuation of Mineral Rights

THE MTS JOURNAL
Raymond Springer, ASA has written about

Depreciation of Installation Costs
The 5th Annual Equipment Valuation
Conference in Cleveland Report was
completed by Jean Jackson and David
Helle, ASA.
Charles W. “Bill” Ruth, ASA, has sent us an
informative and photographic report about
the course, ASA Advanced Mining Topics
which was held in conjunction with Mine
Expo in September 23- 28, 2016 - Las
Vegas, Nevada
The MTS Journal Advertising Media Kit
has been included as well as 2017 ARM
course dates by Yours Truly
Jack Beckwith, ASA has written an article about the Purpose and Intent of IVSC
Peter Bolton King reflects on the Rio Olympics and answers questions about the International Ethics Standards Coalition
Mike Clark, has given us a 2016 Market Overview as he sees it from his industry
Alex Ruden, ASA has written about Insurance Valuations and Loss Preparedness
Larry L. Perdue, ASA has resurrected his 1989 MTS Journal article and updated it which is called: FDIC Rental Value, A Non
Traditional Approach
Why Net Book Value Does Not Equal Fair Value was written by: J. Fernando Sosa, ASA
Mike McCracken has written about the Aircraft Residual Value Puzzle
Russian member Alexander Lopatnikov, ASA has written an article about Valuing Assets in Extractive Industries
Amanda Applegate has written about Business Aviation and what to do about: Upon Receipt of the Inspection Report
The article titled, Demystifying Engine Terms was written by James Becker, ASA
Joel D. Gonia, ASA has written an ARM textbook article titled: Scope of Work within Appraisal Review
And finally, the list of Archived Articles Available for Your Library by your MTS Journal Editor -- Brad Hartsburg
I hope that you enjoy this edition of the MTS Journal and all the best in 2017! Check your calendars and plan to attend the
many interesting conferences and courses that are planned for this year. I will look forward to seeing you there! For more
information, please see the ASA website: www.appraisers.org
Respectfully submitted,
Brad Hartsburg, ASA, CPPA, CSA and MTS Journal Editor

Fortress Machinery Appraisals and Consulting Inc.
Calgary, Alberta, Canada - 403-650-1122
E-mail - brad@fortressappraisals.ca
Website - www.fortressmachineryappraisals.com

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Governor’s Bulletin
R i c h a r d B e r k e m e i e r, A S A a n d D a v i d C r i c k , A S A , M T S G o v e r n o r s
Dear MTS Members:

What is currently on the Calendar for 2017
Embry-Riddle/ ASA Aircraft Education and USPAP
Liquidity Services M&E 203, 204 Leeds England January 15 thru 21
DLL M&E 204 Philadelphia March 6, 7 and 8th
M&E 203 and M&E 204, USPAP Melbourne Australia February 20-26
Conferences
Cleveland ID Conference Cleveland Ohio June 6, 7, 8th
Houston 2017 ASA International Appraisers Conference October 7-10
International Plant Conference Sydney, Australia September 4, 5, and 6th
NAFA/Embry-Riddle/ASA 8 Hour Education Day Ft. Lauderdale March 21
Bombardier/ASA Seminar TBD
Any questions or concerns for your two MTS Governor’s email or call:
Richard Berkemeier
richardaberkemeier@gmail.com
David Crick
david@davairgroup.com
O r d e r Y o u r C o p y T o d a y !
Topics included:
• Process plant Valuing Machinery
The Fundamental of Appraising Machinery and Technical Assets
Valuing Machinery and Equipment: The Fundamentals

Valuing Machinery Valuing Machinery
Valuing Machinery
and Equipment:
appraising
and Equipment: and Equipment:
and Equipment:
The Fundamentals The Fundamentals The Fundamentals
The Fundamentals
of Appraising
of Appraising of Appraising of Appraising
of Appraising Machinery and Technical Assets • Appraising assets in

Valuing Machinery and Equipment
Machinery and
Machinery and Machinery and Machinery and
Third Edition • American Society of Appraisers
Technical Assets
Technical Assets Technical Assets Technical Assets
groups
Third Edition
Third Edition Third Edition Third Edition
• Valuation for financial

American Society of Appraisers American Society of Appraisers American Society of Appraisers
Get the latest information on inventory valuation, aviation, marine appraisal reporting
techniques and report writing and ethics.
• Cost segregation
Hard copy and/or e-Book versions available studies
• International 11107 Sunset Hills Road, Suite 310
Order online at www.appraisers.org or by phone at (800) 272-8258

Reston, Virginia 20190
valuations
Tel (800) ASA-VALU • Fax (703) 742-8471
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The International Society of Professional Valuers

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Auction Theory, Game Theory, and Appraisal

W a l t e r W. O ’ C o n n e l l , M . E . , A S A , S C S P
Three appraisers are lost in the desert! They are wandering through the desert, dying of thirst, when
they come across a hiker with one bottle of water to spare! Each appraiser reaches into their pocket
to see what they can offer the hiker in exchange for the bottle. Appraiser #1 offers 10 dollars from his
pocket, Appraiser #2 offers 50 dollars from his pocket and Appraiser #3 offers a crisp new 100-dollar
bill. The hiker yells “Sold to Appraiser #3 for 100 dollars”! Appraiser #3 wins and lives to appraise
another day.
This short parable, as funny (or tragic) as it seems, is designed to demonstrate that outcomes of an
auction are based on the level of trade in which the auction participant deals. In this parable, the level
of trade was three appraisers in the desert dying of thirst. If our Appraiser #3, who lived, was given
an assignment to value bottled water at a supermarket, days after returning from the desert, would
he value each 12-ounce bottle of water at 100 dollars? The answer of course is “No”. Less dramatic
inflations in the real world can be observed based on the needs of the auction participants and/or the
type of auction in which they are participating.
This article will examine how auction participants and the way an auction is designed and ran by an auctioneer can deliver
higher than expected final bids in auctions. Understanding the behavior of auction participants and how an auction is designed
and ran, may help the Appraiser reconsider whether auction data should be used, not used, or adjusted before used in an
appraisal assignment.
The study of auction data and outcomes is a sub-category of Game Theory. Game Theory, a branch of mathematics and
economics, is the study of strategies for dealing with competitive situations where the outcome of a participant's choice of
action depends critically on the actions of other participants. Like most games, there are two major factors that determine the
outcome of the game (auction): the players and the rules of the game (the auction type).
The Players
The players in our game are the auction participants. These participants can come from different companies, different states,
different countries, and have different ideas of how the property won will be used. If they become the winning bid, will the
participant use the property, resell the property, dismantle the property for its sub-components, donate the property, or
warehouse the property for future use? Will the property won be used to produce immediate income, create a tax donation, or
be held in a private collection? If the intent is to resell the property, will it be sold in the salvage market, wholesale market, retail
market, or resold at another auction? Even if we identify the level of trade, let’s say “retail”, what level within retail level of trade
will the property be sold? Will the property be resold at a salvage yard, flea market, discount store, midmarket retail store, or
upscale boutique? What I am demonstrating is that there are literally hundreds, if not thousands, of factors that influence how
an auction participant bids on an auctioned property!
Lot Size
Lot size, the quantity of identical or similar property, will influence who the auction participants are. An example demonstrating
how lot size influences who the participants can be demonstrated with the three auctions flyers shown below.

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Looking at the above three flyers we could imagine the following participants attending and bidding at each auction:
Lot of 1 Laptop Computer: Small Business, Student, Homeowner, or Boutique Computer Shop.
Lot of 100 Laptop Computers: Small Chain of Electronic Stores, School or University, Mid-Sized Company.
Lot of 1000 Laptop Computers: Large Chain of Retail Stores or National Wholesale Electronic Warehouse Company.
At our 1 Laptop Computer auction we can imagine that small businesses and/or individuals would be the auction participants.
We would not expect mid-sized or large institutions to participate in such an auction. The lot size of such an auction would not
interest mid-sized and large institutions looking to purchase property at a discounted price, due to the larger quantities they
would need to acquire to meet the institution’s needs or discount pricing one would expect for higher volume purchases.
At the 100 Laptop Computers auction, lot size becomes too large for small institutions or individuals. Small institutions and
individuals lack the resources ($), distribution network, and/or need for 100 units, even if a savings of $100 per unit is realized.
Due to the quantity purchased participants would expect a discount and pay wholesale pricing due to the economies of scale
that would be realized by high volume purchases of such units. Let’s call this level of purchasing “Wholesale Pricing”.
Our 1000 Laptop Computers auction would likely be restricted to those companies needing 1000 units, or those who have the
large scale distribution network. Let’s call this level of purchasing “Distributor Pricing”.
As you can see, lot size and those participating in an auction will define what market level the winning bid represents. Now
imagine an appraiser receives a report stating that used laptop computers recently sold at auction for $300 per unit, with no
additional information detailing lot size or participants, he could conclude in error that $300 was the market price that small
businesses or individuals are paying for used laptop computers.
Auction Types
While completing my research to write this article I found there are many different styles of auction. I stopped counting when I
reached 24 styles. Auctions, like auction participants, are diverse and varied. State run lotteries, like lotto, are a type of auction.
Charitable auctions like Chinese and Tricky Tray Auctions combine auction with raffle. There are all types of raffle, outcry, and
sealed bid auctions. Bid pricing can start low ($) and move high ($), start high ($) and move low ($), keep the participants
informed, or keep the participants in the dark.
No matter what the name, or style of the auction, all auctions fall into one of four types:

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1. English Auction (outcry): An auction where bids start at a low price. Buyers call out sequentially higher prices and the
participant who bids the most wins the auction.
2. Dutch Auction (outcry): An auction where bids start at an extremely high price with the auctioneer calling out
successively lower prices until someone accepts the price called.
3. First Price Auction (sealed bid): All participants place a sealed bid. The highest bidder wins the auction and pays the
bid price.
4. Vickrey Auction (sealed bid): All bidders place a private bid. The highest bidder wins the auction, but pays the bid
price of the second highest bidder.
Even in an outcry auction, other bidders during the auction do not know the strategy or final bid ($) that each auction
participant is willing to place. One would assume that the final bid, regardless of the type of auction, would be at the top end of
the fair market value spectrum based on the level of trade in which the final winning participant participates. What you will see
is that the final bid prices have the potential to vary widely based on the strategy employed by the participant and auction type.
Let’s Play a Game

Let’s see what the dynamics and outcomes would be if we played a game using consistent bidding strategies from participants
in each of the four types of auction.
Up for Auction: 2010 Drill Deep Piling Drilling Rig
Quantity: 1 unit
Bids: The auctioneer has set the bidding in $5,000 increments.
Strategy: Each bidder will look to buy the rig at the lowest possible price and may not exceed the authorized maximum bid
authorized by each employer.
The Auction Participants:
Bidder A – Wholesaler – Maximum bid authorized: $30,000 (looking to win bid and resell drill rig in the next 30 days)
Bidder B – Wholesaler – Maximum bid authorized: $35,000 (looking to win bid and resell drill rig in the next 360 days)
Bidder C – Retailer – Maximum bid authorized: $40,000 (looking to win bid and resell drill rig in the next 45 days)
Bidder D – Retailer – Maximum bid authorized: $45,000 (looking to win bid and resell drill rig in the next 180 days)
Bidder E – General Contractor – Maximum bid authorized: $60,000 (The drilling rig they own and use now is beginning to fail
and needs to be replaced in the next four to six months)
Bidder F – General Contractor – Maximum bid authorized: $100,000 (The Company’s current Piling Drill Rig broke
yesterday! It cannot be repaired! The company is losing $10,000 a day! The company is in distress! The company
does not care what the fair value is, they need to acquire a new Rig before they go out of business!)
As you can see, Bidders A through E have their maximum bid ($) at a price level that we would expect to see at the level of
trade in which they are participating. Our Wholesalers are bidding low, Retailers are bidding high, Bidder E, as an end user, is
willing to pay even more than the retailers who need to buy low and sell high. But look at Bidder F! Bidder F is about to go out
of business if they can’t acquire this drill rig! Bidder F is in distress! Let’s see what happens!

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1. English Auction (outcry): An auction where bids start at a low price. Buyers call out sequentially higher prices and the
participant who bids the most wins the auction.
In the English Auction, with outcry bidding starting low and moving high, our winner; Bidder F, who was authorized to bid
as high as $100,000, only bids and wins at $65,000 ($5,000 above Bidder E). Even though Bidder F’s business is in
distress, and could bid as high as $100,000, he only needed to bid $65,000 to ensure a winning bid. Our appraiser, not
knowing Bidder F’s company was in distress, could conclude the fair market value (end user) would be at some point in
the $60,000 to $65,000 range.
2. Dutch Auction (outcry): An auction where bids start at an extremely high price with the auctioneer calling out lower
successively lower prices until someone accepts the price called.
In the Dutch Auction, even with outcry bidding, Bidder F is forced to bid the full $100,000, not knowing at what price
point Bidders A through E will bid. In this system Bidder F’s bid is the only bid observed by our appraiser. If not given any
additional information, our appraiser could improperly conclude that $100,000 was the fair market value (end user), greatly
above the $60,000 to $65,000 range observed in the English Auction.

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3. First Price Auction (sealed bid): All participants place a sealed bid. The highest bidder wins the auction.
In the First Price Auction, with sealed bidding, Bidder F is forced to bid the full $100,000, not knowing at what price levels
Bidders A through E will bid. In this system non-winning bids are disclosed. Our Appraiser would have an opportunity to
observe the spread between Bidder E’s $60,000 and F’s $100,000 winning bid. In this case our Appraiser may conclude
that addition research is needed before concluding that the fair market value (end user) is $100,000.
4. Vickrey Auction (sealed bid): All bidders place a private bid. The highest bidder wins the auction, but pays the bid price of
the second highest bidder.
In the Vickrey Auction, with sealed bidding, Bidder F will bid the full $100,000, win the bid, but only pay the next highest
bid of $60,000 offered by Bidder E. Our appraiser, able to see all bids, would conclude that the fair market value (end user)
would be $60,000.

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In all auctions, unless a degree of chance (raffle/lottery) is built into the auction, as in a Chinese or Lottery Auction; the highest
bidder will always win. But what we have observed is that the “winning bid” can vary dramatically based on the strategy
employed by the participant and the type of auction run. The final winning bid of Bidder F can be represented by $60,000,
$65,000, or $100,000 based on the type of auction. If we assume that Bidder E’s maximum bid of $60,000 is the true fair
market value (end user) but our appraiser improperly reports $65,000, an overstatement of 8.333%, such a mistake may never
be noticed or may be considered insignificant in our assignment. But a winning bid of $100,000, an overstatement of 66.666%
may cause problems for the client and/or his appraisal practice.
A number of strategies can be employed in dealing with the issue of observed variances in auction data but it is clear that
before such strategies can be put in place the type of auction, level of trade, and participants of an auction must be understood
and properly analyzed in any appraisal assignment.
About the Author

Walter W. O’Connell, ME, ASA, SCSP is a Senior Consultant with Porto Leone Consulting, LLC (“PLC”) and is responsible
for managing cost segregation studies and tangible asset valuations. He has provided these services to clients in a variety of
industries for over ten years.
Prior to joining PLC, Walter worked in the manufacturing and distribution sectors as an Inventory Control Manager for Newell
Rubbermaid (NYSE:CHX) and Marcolin S.p.A.. While working as an Inventory Control Manager, Walter specialized in Material
Requirements Planning (“MRP”) and Manufacturing Resource Planning (“MRP II”), in matters of national and international
purchasing, the procurement of production equipment, plant and production design, cost allocation studies, and inventory
accounting.
He has performed and managed cost segregation studies on hundreds of properties, including hotels, senior living facilities,
manufacturing facilities, research & development facilities, office buildings, hospitals, and retail properties. Walter has
experience in tangible asset valuations for tax, book, insurance placement, due diligence, and business planning purposes in
the Healthcare, Hospitality, Manufacturing, Chemical, Food Processing, Cable and Telecommunications industries nationally.
Walter holds a Master of Arts degree in Economics from Montclair State University, Bachelor of Science degree in Finance
and a Bachelor of Arts degree in Economics from Kean University. He is an Accredited Senior Appraiser (“ASA”) with the
American Society of Appraisers, a member of the Association of Production and Inventory Control Supervisors (“APICS”), and
is an Accredited Senior Cost Segregation Professional (“SCSP”) with the American Society of Cost Segregation Professionals
(“ASCSP”) and is a member of the American Economic Association.

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Royalties and Valuation of Mineral Rights

L a n d y A . S t i n n e t t , A S A , P. E
Introduction
An appraiser of mineral rights or interests in a property is faced with the same three approaches to
valuation as with any other real estate appraisal exercise: 1) cost, 2) comparable sales, and 3) the
income method. The cost approach is typically viewed as the least reliable for valuing real estate in
general, and the same holds if appraising just the subsurface mineral interests.(4,6) It is extremely
difficult to even estimate the amount of money spent in years past on land acquisition, geophysical
prospecting, drilling, or other activities, much less distinguish between useful expenditures and those
that were unwise or frivolous. As for comparable sales, this often is of little use except from a global
viewpoint since the characteristics which define a given mineral deposit are unique in detail; thus
attempting to compare various attributes, assign a relative worth to these characteristics (surface v.
underground, room-and-pillar mining v. block caving, oxide mineralization v. sulfide, etc.) and then
subjectively adjust the comparables accordingly to match the subject property is generally not prone
to defensible argument.
This leaves the income method as the preferred mineral valuation approach, provided sufficient understanding of the deposit is
available, and there is reason to believe that development or continued production from the deposit is expected. Generally the
mining enterprise is evaluated as an operating entity complete with requisite capital investment, managerial expertise, trained
labor force, and so forth. This technique collectively captures the value of the minerals and of the business enterprise as well.
In certain instances, however, there is a need for identifying just the value of the minerals as they repose in the ground, such
as allocation of a property’s purchase price across the asset classes for tax reasons, or the mineral estate is under different
ownership from that of the surface. A preferred method can be effected by capitalization of actual or imputed royalty income, as
this income stream is directly tied to a mineral owner’s or lessor’s expectations of worth.
Definition of Royalty
The word “royalty” originally referred to the rent or tax paid to the sovereign in England for the privilege of mining. In the United
States, royalty is a reservation to the owner or lessor of a certain portion of the minerals, or the proceeds from their sale, at no
cost to the lessor.
When the payment of a mining royalty is based on Gross Proceeds, the term typically refers to the gross sales value received
from the product, less expenses for freight, smelting and refining (FS&R). This concept is often stated, in regard to metallic
ores, as a royalty paid on net smelter returns to the operator or lessee (NSR).(2) Other types of royalty arrangements include
Gross Revenue, Net Proceeds, and Unit-based royalties, which may or may not be based on a sliding scale depending upon
product price levels.(9) Note that these methods of determining a production royalty are based on some measure of current
economics; i.e., product price, present operating costs, capital investment, etc. Certain older royalties, particularly on non-
metallic minerals such as aggregates, were predicated on a cents/ton mined basis, which possibly contained a provision for
periodically updating the applied rate depending on some published inflation/deflation indicator such as the Producer Price
Index.
History
The valuation of mineral properties dates back many decades. The earliest readily attainable reference work dealing with the
subject is Herbert Hoover’s 1909 book, Principles of Mining, wherein the first six chapters cover the topic of valuing mines and
prospects.(8) Some techniques were published earlier (such as H.D. Hoskold’s 1877 treatise, The Engineer’s Valuing Assistant),
and of course there have been numerous premises and articles written subsequently, especially since the 1960s.

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Prior to the concept of discounted cash flow (DCF) analyses being accepted throughout the mining industry, the rate-of-return
approach dealt with discounted net income. This was generally the case in the mid-1930s as exemplified by an American
Institute of Mining and Metallurgical Engineers (AIME) committee that conducted an in-depth analysis of coal valuation.(3)
However, just prior to World War II, another AIME paper was published which suggested subtracting the present value of capital
investment from the discounted value of the income stream, thereby capitalizing the investment at the hazard rate for the
property as a whole; this effectively would utilize discounted cash flow as the metric for valuation rather than discounted net
income.(7) Gradually this concept of DCF gained acceptance until by the mid-1960s most of the major mining companies were
following these precepts in assessing the worth of mining projects.
Almost all the early treatments, including more recent texts by Gentry and Stermole,(5,10) discussed the valuation of mines and
mining projects. Only recently has the topic of valuing just the mineral interest, separate from an enterprise as a whole, been
addressed in detail (although Leith(7) did mention use of royalty rates as a standard of value for mineral in the ground). In some
measure, this severance of mineral interests relates to federal court decisions and reasoning whereby the present value of the
royalty income stream is accepted as a preferred, more direct measure of the mineral interests themselves, than does a DCF
analysis performed on an operating mine or development-stage project.
In 1984 a federal court case, Cloverport Sand & Gravel Co., Inc., vs. U.S., noted that appraisers must take care to consider only
the income that the property itself could provide, and not the income produced from the business enterprise conducted on the
property (i.e., the business of mining).(6) Quoting from the Uniform Appraisal Standards for Federal Land Acquisition, we see the
following:
In developing an estimate of value by the income capitalization approach for a mineral property, it is generally recognized
that the most appropriate method of capitalization is yield capitalization, most notably discounted cash flow (DCF) analysis.
The income that may be capitalized is the royalty income, and not the income or profit generated by the business of
mining and selling the mineral. For this reason, the income capitalization approach, when applied to mineral properties, is
sometimes referred to as the royalty income approach. (Italics in the original)
The document goes on to state that the essential ingredients in developing the present value of a royalty income stream (yield
capitalization) are:
• A start date when production will begin
• An annual production rate
• The number of production years
• The projected selling price of the product
• A royalty rate, and
• The discount rate to be applied.
The first four of these factors relate to specific conditions inherent to the property itself, whereas the final two are best obtained
from the market place. The federal courts believe (and therefore mineral appraisers should as well) that royalty and discount
rate selection derived from, and supported by, direct market data is the preferred approach in valuing mineral interests by the
royalty income method.
Current Royalty Rates

Comparable royalty rates can be obtained from a number of sources, with the most obvious being the rates currently paid to
other owners or lessors for extracting the same commodity in the immediate region as the property at issue. Often, however,
the data are not forthcoming either because of the paucity of mining and/or leasing in the area, or because the parties involved
believe this information is confidential.
Even if such private-party rates are obtained, care must be given in interpreting the information since there is a possibility
for a disparity in the lessor/lessee understanding of reasonable royalty rates; lessees are apt to be more knowledgeable than

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lessors at the time of royalty rate negotiations simply because the lessee has more experience in this task as a normal course
of business, whereas for the lessor it may be a one-time event.
There is a possibility that the negotiated royalty rate may be out of date, particularly if the agreement is several years old,
and an escalation clause was not included. Also it may be that the lessor controls only a partial interest in the minerals, and
therefore his royalty does not reflect an overall rate normally attributable to the full mineral ownership.
Each of the above conditions, should they exist, will tend to understate the current, unbiased rate considered reasonable in the
industry.
Another source of rate information, particularly in the western states, may be provided by federal and state agencies involved
with mineral leasing. The agencies are charged with insuring that the public receives just compensation for the production of
a wasting asset, and from a broad perspective there is some uniformity among these groups. A review of royalties charged by
twelve of the western states in the U.S. suggests that for certain metallic minerals a royalty rate ranging from 3 – 5% of Net
Smelter Returns seems appropriate. Note that some states charge differently for different minerals mined and may also apply
multiple types of royalties which can be governed by varying sets of exclusions, deductions, and limitations.(9)
Discount Rates
The royalty interest owner generally incurs none of the liabilities of operating expense and capital outlays, nor does he carry the
burden of non-profitable prospecting and exploration. His primary risk is that of reduced income (or possibly no income) in case
the mine or quarry operations slow down or suspend production. As a result, the discount rate on royalty interests should be
lower than the rate used in a total property appraisal.(2)
The topic of discount rates in real estate valuation has received considerable attention over the years, and it is equally
important in the appraisal of mineral interests. There have been a number of approaches followed in deriving or justifying the
most appropriate discount rate for a particular property.
The Arizona Department of Revenue (ADR) is one state agency that annually researches corporate decisions regarding
discount rates for natural resource properties, reviews professional literature from security analysts, and assesses changes in
components comprising the capital asset pricing model. As such, ADR's findings are believed to be a good source of data and
analysis to serve as a basis in formulating a discount rate for royalty interests.
The 2016 guidelines from the Arizona Department of Revenue indicate representative discount rates for large-scale projects
(>$25 million) at basically 9-13%, with ranges in after-tax, equity hurdle rates from 8 to 15%.(1) Large-scale projects typically
have slightly lower hurdle rates; based on commodity, precious metal projects exhibit the lowest representative rates, and new
development projects with higher risk are at the upper end of the scale.
It should be noted that the above figure (+/- 13%) represents the discount for an operating property where the operator carries
substantial risk that is generally avoided by a royalty recipient. (Although not stated in the ADR guidelines, it is presumed here
that this discount excludes inflation.)
Royalty is a prior lien on operating profits and, as such, should not carry a rate as high as the more risky discount rate applied
to the lessee’s operation. A lower bound for discounting might be the long-term AAA bond rate of roughly 4 - 5% pre-tax,
inclusive of an inflation component. With the upper and lower limits reasonably defined, it is then up to the appraiser to identify
the particular risk associated with the property of interest and to ascribe a reasonable discount rate to the annual stream of
royalty revenues. Understandably, some deposits may carry extreme risk as to timing, potential expropriation, the solving of a
metallurgical problem, or other condition which would require a substantial increase in the discount rate as a compensatory
measure in valuation.

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Summary
Of the three accepted approaches to valuation of mineral deposits, the income method is typically practiced in industry. This
most often considers the project as a whole, and in an operating mode. The U.S. court system believes that a valuation of the
mineral interests can best be completed if a discounted cash flow analysis is performed on just the royalty stream of income
due the owner or lessor, and not on the income or profit generated by the business of mining and selling the mineral.
This royalty income approach requires knowledge of the deposit characteristics as well as expected operating criteria
including start date, production rate, mine life, and commodity selling price forecasts. Two factors need confirmation from the
marketplace: 1) a reasonable royalty rate to allow estimation of annual receipts, and 2) a discount rate to be applied to the
annual stream of royalty revenues in order to arrive at a present value estimate for the mineral interests.
References
1. Arizona Department of Revenue, 2016 “Appraisal Manual for Centrally Valued Natural Resource Property for Tax Year
2017”, Property Tax Division
2. California State Board of Equalization, 1973, “Valuation of Mines and Quarries”, Property Tax Department, Assessor’s
Handbook--AH560
3. Dilworth, J.B., 1934, “Report of Committee on Methods of Valuing Coal Properties”, in Transactions, A.I.M.E.
4. Evans, J.R., 1994, “Guidelines for Fair Market Value (FMV) Appraisal of Mineral Interests”, California Bureau of Land
Management
5. Gentry, D.W. and O’Neil, T.J., 1984, Mine Investment Analysis, Society of Mining Engineers, New York, NY
6. Interagency Land Acquisition Conference, 2000, “Uniform Appraisal Standards for Federal Land Acquisitions”, Appraisal
Institute, Washington, DC
7. Leith, C.K., 1938, 1947, Mineral Valuations of the Future, American Institute of Mining and Metallurgical Engineers, New
York, NY
8. Malone, E.J., 1994, “Historical Review of Mineral Valuation Methodology”, in Proceedings, VALMIN: Mineral Valuation
Methodologies 1994, The Australasian Institute of Mining and Metallurgy
9. Nazarro, R.M., “Hardrock Mining: Information on State Royalties and Trends in Mineral Imports and Exports”, U.S.
Government Accountability Office, July 21, 2008
10. Stermole, F.J., and Stermole, J.M., 1996, Economic Evaluation and Investment Decision Methods, Ninth Edition
About the Author

Landy A. Stinnett, ASA, P.E. is a principal with FGM Consulting Group, Inc., specializing in reserves estimation, feasibility
analyses, and mineral appraisals. He has advanced degrees in geological and mining engineering, is a registered professional
engineer, and is an Accredited Senior Appraiser in mines and quarries. He can be contacted at landystinnett@yahoo.com.

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ASA and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers

Alison Ho
American Society of Appraisers and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers
at National Aircraft Finance Association Annual Conference
The American Society of Appraisers (ASA) and Embry-Riddle Aeronautical University (ERAU) will offer an eight-hour course for
accredited aircraft appraisers earning continuing education credits at the National Aircraft Finance Association (NAFA) annual
conference, Tuesday, March 21, at the Harbor Beach Marriott in Ft. Lauderdale, Fla.
This eight-hour course was designed to provide real world skills and best practices that attendees can take back to their offices and
use, this year's program has been designed to create a more technical learning experience. It will feature topics such as new FAA
maintenance regulations, Nextgen and mandatory equipage by 2020, insurance experts addressing appraisal issues with aircraft
with damage history, and more.
For those interested in applying for appraisal accreditation with ASA, ASA has partnered with ERAU for the development and
implementation of a series of four courses for professional aircraft appraisers (ME201ACS – ME204ACS). Successful completion
of these courses will provide participants the necessary fundamental appraisal coursework to apply for professional accreditation
through ASA in the Machinery and Technical Specialties (MTS) discipline with a specialty in aircraft appraisal. The courses will
also include curriculum covering commercial, business and general aviation aircraft including fixed-wing and rotorcraft, and other
aerospace assets. The first of these four courses, Introduction to Aircraft Appraisal, begins October 20, 2017 at Embry-Riddle’s
Daytona Beach Campus.
For more information about the ASA/Embry-Riddle aircraft valuation program, visit ASA Online, email asainfo@appraisers.org or call
(800) 272-8258.
ASA Contact: Todd Paradis, Director of Marketing/Communications, ASA, Office: (703) 733-2124, tparadis@appraisers.org or
Richard Berkdmeier, ASA, member of the Machinery & Technical Specialties Discipline Committee, richardberkemeier@gmail.com.
ERAU Contact: James Roddey, Director of Communications, Embry-Riddle Aeronautical University, Daytona Beach, Fla.; (386) 226-
6198; james.roddey@erau.edu.
The American Society of Appraisers is a world renowned and respected international organization devoted to the appraisal
profession. As the oldest and only major appraisal organization representing all appraisal specialists, ASA is devoted to providing the
highest possible standards in all areas of ethics, professionalism, education and designation criteria. Visit www.appraisers.org or call
(800) 272-8258.
Embry-Riddle Aeronautical University
Embry-Riddle Aeronautical University, the world’s largest, fully accredited university specializing in aviation and aerospace, is a
nonprofit, independent institution offering more than 80 baccalaureate, master’s and Ph.D. degree programs in its colleges of Arts
& Sciences, Aviation, Business, Engineering and Security & Intelligence. Embry-Riddle educates students at residential campuses in
Daytona Beach, Fla., and Prescott, Ariz., through the Worldwide Campus with more than 125 locations in the United States, Europe,
Asia and the Middle East, and through online programs. The university is a major research center, seeking solutions to real-world
problems in partnership with the aerospace industry, other universities and government agencies.
National Aircraft Finance Association
The National Aircraft Finance Association is a nonprofit corporation dedicated to promoting the general welfare of individuals and
organizations providing aircraft financing and loans secured by aircraft; improving the industry’s service to the public; and working
with government agencies to foster a greater understanding of our members’ needs. Information on the NAFA annual conference can
be found here: http://www.nafa.aero/events/nafas-46th-annual-conference.

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Depreciation of Installation Costs

R a y m o n d S p r i n g e r, A S A
Should installation costs be depreciated? I believe that if the appraiser clearly separates the cost
approach and the sales comparison approach, then the answer is yes and no, respectively. Where
many appraisers get confused is by mixing the cost approach and the sales comparison.
Cost Approach
In the cost approach, the appraiser typically establishes an installed replacement or reproduction cost
new, then utilizes an age/life analysis to depreciate the total installed cost new to reflect fair market
value in continued use. This is a pretty straight forward analysis which depends on the judgment of
the appraiser to make a reasonably correct estimate of the cost new, the normal economic life, and
the remaining economic life of the subject. The fair market value in continued use answer calculates
from those judgments.
Sales Comparison Approach

In the sales comparison approach, the appraiser identifies appropriate market data, makes adjustments to that data to reflect
differences between the data and the subject being appraised. When estimating fair market value in continued use, the
appraiser needs to add an appropriate amount for installation and engineering.
What is the appropriate amount of value for the installation costs? Stand in the buyers’ shoes. The answer is the amount
that the typical market participant must invest to get the newly purchased used unit in operation to produce a cash flow (the
purpose of buying the unit in the first place). Since a buyer cannot purchase used installation costs in the market, the value of
the installation cost often approaches the un-depreciated replacement cost of the installation.
Sales Comparison Approach Adjustments

Appraisers often stop making sales comparison approach adjustments too early in the valuation process. The appraiser often
truncates the depreciation analysis by comparing the FMV FOB from a Dealer to the RCN FOB from the manufacturer, and
calculates the depreciation percentage. When estimating fair market value in continued use, the appraiser should fully adjust
each comparable to an installed FMVCU basis before making the depreciation calculation. If we have five sales to analyze and
we complete the various adjustments for date of sale location, physical condition, etc., there are still several adjustments to be
made.
The buyer did not purchase the machine as an ivy planter – they purchased it to generate/maintain a cash flow, therefore, we
must consider the amount a typical buyer has to invest to make the unit ready for production. These adjustments might include:
removal costs, auction premiums, finder/broker fees, freight, cartage, interim storage, setting, electrical hookups, piping
hookups, connections to existing processes, engineering fees, etc. Some of these costs are not even present in a “green field”
replacement cost estimate, but if the typical buyer will experience them, then an adjustment is demanded.
The Best Indicator

The buyer of used equipment is the best indicator of fair market value in continued use. The buyer researches the market,
researches the reinstallation costs for his project, projects his incremental cash flows , does the negotiation/bidding, and takes
the risk. All of these buyer judgments are reflected in a single number – the gross amount he pays for a used machine. The

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price he pays for the base unit is normally the only evidence the appraiser has to analyze; therefore, the appraiser has to use
his best judgment to estimate the other components so he can conclude a fully adjusted comparable sale on an installed basis.
The Buyer Depreciates the Installation Cost

In spite of the above, installation costs in the sales comparison approach do depreciate. The real question is where that
depreciation is recognized in the purchasing process. The buyer knows he cannot purchase used installation costs, i.e. used
crane setting, etc. The buyer knows he will receive a foreshortened payback on his investment in installation costs; therefore,
the buyer reflects that installation depreciation in the cost he pays for the uninstalled unit. This is one reason that
units with very high installation cost (in relation to base unit costs) show such quick and extreme depreciation when placed
on the used market. An electric steel furnace may sell for $250,000 v. a $10,000,000 replacement cost because the typical
buyer will have to experience $3,500,000 to reinstall it and may well invest another $500,000 to $1,000,000 in removal,
match-marking, re-engineering, freight, etc. before he can get the cash flow. The older the unit, the shorter the time frame for
recovery of that reinstallation investment and the lower the offer for the used unit.
A Mixed Approach
A significant problem arises when the appraiser extracts depreciation from the market and applies it to the unit in the cost
approach. Typical methodology would be: 1) my subject has a replacement cost new of $100,000, 2) similar units sell for
$40,000 in the market, 3) the depreciation is 60% gone (1-($40,000/$$100,000)), 4) my subject has an installed replacement
cost new of $150,000, 5) applying the 60% depreciation, the fair market value in continued use of my subject is concluded
at $60,000 ($150,000-($150,000 x 60%)). The net effect of this calculation is to depreciate the installation costs from a
replacement cost new of $50,000 to fair market value in continued use of $20,000. If the typical market participant is investing
$40,000 in the base machine and $50,000 in placing the machine in service, for a total of $90,000, then the above is
understating the fair market value in continued use by 50%. The higher the installation costs as a percent of replacement cost,
the more erroneous the above methodology. The sales comparison approach must reflect the decisions of the typical market
participants or it is clearly incorrect.
Exceptions
Some of the confusion comes from the old adage that “it costs just as much to install a used machine as a new one”. This
adage is largely true, but in practice, the appraiser often uses the installation costs developed in the cost approach as a
surrogate for installation in the sales comparison approach (whether he later depreciates them or not); this can be correct if
the typical market participant will experience approximately that amount of cost, but it can be wildly incorrect if the buyer will
typically have much less or more installation costs. An example might be bean snippers in a green bean processing plant. They
are typically long-lived units and installed in multiple banks. If the typical buyer purchases only one, it is often for replacement
of a failed unit; therefore, the buyer gets to reuse most of the old installation costs except some freight, handling, setting, and
reconnection of services. If the typical used equipment buyer will only experience 30% of the green field installation cost or $X,
then that is what should be reflected in the fair market value in continued use calculation (used unit + un-depreciated $X).
Conclusion. Depreciation of installation costs in the sales comparison approach assumes every buyer in the “used market
place” over pays for every used unit. If an appraiser appraises a plant the day after the buyer installs his newly purchased used
unit, and applies a depreciated installation cost method to value the unit, then he will likely conclude a value somewhat to
substantially less than what the buyer paid for the unit.
Implicit in his purchasing decision is his version of an income approach. He reasons that the addition of this equipment and the investment in installing it in his process
1
will yield a positive return on his investment. Or the investment will protect his past investment in the case of a replacement used unit for a failed machine.

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Are all buyers of used equipment “uninformed” novices prone to making poor business decisions? I doubt that, which indicates
that the methodology of depreciating installation costs in the sales comparison approach is incorrect. If a methodology does not
reflect the decisions of the typical buyer, how can it be a correct sales comparison approach?
About the Author

Mr. Raymond Springer, ASA is the President of Springer Appraisal & Consulting, LLC located in Seal Rock, Oregon and
specializes in the appraisal of machinery and special purpose improvements with particular emphasis on process industries. He
is an Accredited Senior Appraiser (ASA) in machinery valuation. He has appraised tangible assets since 1973, including many
high profile complex appraisal assignments.
He has performed appraisals for many of the Fortune 500 companies for a wide variety of purposes, including: ad valorem
tax appeal, litigation support, bankruptcy adequate protection support, merger, acquisition, transfer pricing, financing, sale/
leaseback, allocation of purchase price, investment tax credit compliance, cost segregation, condemnation, insurance, and
property record audit.
Prior to establishing Springer Appraisal & Consulting in 2003, Mr. Springer was a Senior Manager at Deloitte & Touche (1995-
2003), Manager at PGP Valuations (1989-95), and Engagement Manager at American Appraisal Associates (1973-1989). He
has over forty years experience appraising industrial properties. He is an editor and contributing author of Valuing Machinery
and Equipment. He can be reached at 503.805.3897 or via email at Springer_Appraisal@yahoo.com or RSpringer@Springer-
Appraisal.com

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5th Annual Equipment Valuation Conference in Cleveland

By Jean Jackson and David Helle, ASA
“With a larger venue for 2016, the American Society of Appraisers 5th
Annual Equipment Valuation Conference held June 8-9 boasted record
attendance as well as several dynamic, educational presentations on
current industry trends and conditions. The new setting, boutique hotel
Metropolitan at the 9, is housed in the former Cleveland Trust Bank
building. The iconic building boasts larger meeting spaces as well as
an opportunity to step into history: four former bank vaults have been
transformed into a full service bar and a prohibition-era speakeasy. Each
morning, conference attendees stepped through a large, round vault door
to enjoy breakfast, catch up with colleagues and friends, and to make
new acquaintances.
With two opportunities for hands-on inspection of machinery and equipment in the field this year and lots of interest in the
event, the widely popular Equipment Valuation Conference continues to grow from year to year. Conference organizer, Joe
Santora, ASA and President of IronTrax, was “pleasantly surprised that attendance was up 20% this year considering that the
conference sold out in 2015. We’ve got a recipe that seems to be working: the conference is designed for Equipment Appraisal
professionals to gain a better understanding of the market conditions in many different industries all in one location. They can
then take that information and use it in the field the very next day.” So, mark your calendars, folks, “we will be coming back to
the same location next year with the conference scheduled for June 6-7, 2017.”
After a warm welcome from Joe, John Connolly III, ASA, Chairman of the MTS Committee and Exec VP and CFO of Nationwide
Consulting Company, stepped up to the podium to offer a few words of welcome and also shared ASA news and an update
on the progress of the POV course rewrite. Paul Cogley, ASA and SVP of Bank of America, reminded attendees to register for
the upcoming 79th annual International Appraisers Conference (IAC) at the historic Boca Raton Resort & Club in tropical South
Florida. And, Rick Berkemeier, ASA and MTS Governor, also took a few moments to speak about upcoming ASA educational
offerings.
We then jumped right into the conference with the first speaker of the day, Mekael Teshome, an economist with PNC Financial
Services Group, who sparked lively discussion with his presentation: “The Fed’s Tug of War.” Mekael addressed recent dire
headlines by noting that for the 12-18 month economic outlook, consumers can expect moderate, domestically-driven growth.
Mekael noted that growth rates of 1.8% and 2.3% for 2016 and 2017 respectively reflect a ‘cruising speed’ rather than the
usual boom & bust. Likewise, many economists believe that the US unemployment rate has hit bottom and that the country
should theoretically be back at full employment of 4.8% by the end of year. Mekael did note, however, that the US economy will
need an extended time of sustained employment for complete recovery.
According to Mekael, the takeaway theme of the past year is continued long term expansion. Since we are in one of the longest
stretches of economic growth since WWII, the odds of a US recession are low even though the upcoming election is causing
some uncertainty in the markets. While there have been bumps in the road, those speed bumps don’t necessarily indicate a
downturn; consequently, the PNC economic outlook is optimistic.
Next up was Mike Winterfeld, ASA and Director of Appraisal Services at Taylor & Martin, Inc. with his presentation titled,
“Tractors and Trailers: When the Wheels Come Off.” Overproduction before and underproduction during the Great Recession
left the transportation industry with a great deal of late model equipment on the market. As a result, used tractor values have
declined over 20% since July of 2015 and, although some retail prices remain strong, supply continues to exceed demand

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in the used market. Moreover, products coming off of 48 month trade cycles will soon add to the surplus in addition to
underperforming loans and leases pushing even more equipment back into the market. Mike reminded his audience that as
appraisers, we must keep in mind that overproduction does not go away.
Mike also discussed depreciation and obsolescence as well as other factors to consider when valuing tractors and trailers such
as the depression of the oil industry and its expected slow rebound and a weak agricultural sector. Appraisers should also be
aware of the disconnection between retail and auction numbers. The wide division between the two can be attributed in part
to the fact that auctions distinguish obsolescence factors that retail does not. As levels of trade widen, we must remember to
consider all depreciation/obsolescence factors when making adjustments. And, Mike stated, as new inventory counts grow and
used product continues to flood the market, “it looks like the transportation industry will have some continued stress for the
foreseeable future.”
Mark Craig, ASA, CSA and Principal with Craig & Associates, wrapped up the morning with “The Outlook for Mining: Effect on
Equipment Value and End of Term Negotiations.” The significant contraction of coal production and consumption of the past
several years has been devastating to the industry. Not only small and mid-size firms are feeling the effects, but many larger
companies are also in negative cash flow as a result of the industry downturn.
Although the industry faces big challenges, coal will remain an important part of the global energy mix over the next few years.
Slower growth in global coal demand and lower international coal prices have contributed to a decline in U.S. coal exports but
low mining costs, cheap transportation costs, and favorable exchange rates are expected to continue providing advantages
to mines in other major coal-exporting countries. All things considered, the long-term viability of the coal industry may hinge
partially upon the widespread uptake of clean technologies but the real driver of increased demand for coal and other mined
products is the return of heavy industry and improvement of economic growth to levels beyond the complete stagnation of the
past several years.
During the afternoon, conference attendees had an opportunity to tour either The Great Lakes Towing Company or Exact
Crane & Equipment. Those opting to tour Great Lakes Towing gathered in the conference room for a pre-tour presentation
from Company Chairman, Ronald Rasmus. The Great Lakes Towing Company, part of The Great Lakes Group, is a full-
service shipyard which specializes in all types of marine construction with an illustrious history. Incorporated in New Jersey
in 1899, founding investors of the company included John D. Rockefeller, Jeptha H. Wade and James R. Sinclair. Mr. Rasmus
entertained his audience with colorful anecdotes recounting his long maritime career and decades as a government appointee
working with many eminent political figures.
Once at the site, attendees donned hard hats as they embarked on a walking tour of the shipyard with Rasmus as their
enthusiastic guide. The site tour included a stop in the board room, which is dominated by a conference table commissioned by
Rockefeller, and a glimpse of one of The Company’s original log books.
Rasmus explained that the company is currently in the last phase of a multi-year Shipyard Expansion Project which included
several acres of land acquisition, construction of a new headquarters building, construction of an indoor state-of-the-art
shipyard facility and acquisition and installation of a 770-ton Travelift mobile hoist – the largest of its kind on the Great
Lakes, second-largest in the Western Hemisphere and third-largest in the world. The final phase involves construction of an
enclosed multi-purpose facility for year-round shipyard production, classrooms, research and design laboratories, wind turbine
monitoring, and job training facilities. In addition, the Company has demonstrated its commitment to Cleveland’s future through
its partnership with two area high schools and Cuyahoga Community College to provide internship and on-the-job training
opportunities for local students and to create over 100 new sustainable jobs after expansion.
Attendees who opted for the Exact Crane & Equipment Tour met in the lobby after lunch for a chance to get out in the field and
‘kick the tires.’ Exact Crane & Equipment has sold cranes, parts and equipment from several manufacturers including Grove,
Manitowoc, Link-belt and Terex since 2006. Exact also rents crawler cranes, boom trucks, carry deck cranes and rough terrain
cranes as well as providing a full repair services from minor repairs to complete crane rebuilds. Jack Swan, President of Exact
Crane, organized a range of crane types in the yard for identification as well as a discussion of functions and the options that

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increase or decrease value. Several crane manufacturers were represented sparking discussions about original costs, which
manufacturers hold superior value in certain Tier 1, Tier 2 and Tier 3 classes, and which cranes hold the best value on the
secondary market. The group also discussed the types of applications in which rough, all terrain and crawler cranes can be
used along with current market conditions and value drivers; for example, recent auction results have been soft for rough and
all terrain cranes but the expectation in the market is for increased future demand.
Participants arrived bright and early on Day Two to “Talk Frac” with Brad Hartsburg, ASA, President of Fortress Machinery
Appraisals and your ASA MTS Journal Editor. Brad outlined the history and also provided an overview of the hydraulic fracturing
industry in addition to addressing widespread public concerns. Hydraulic Fracturing (fracing) is not a new technology – the
first commercial application of fracing occurred in Oklahoma in 1949 – and there are now approximately 2.5 million wells
worldwide that have been fraced. During the fracing process, fluid is pumped at pressures that create a crack in the rock.
Special sand is then placed into the cracks which stay “propped” in place to create a pathway for natural gas and oil to flow.
Fracing is more attractive than conventional drilling as fewer holes need to be drilled for less surface disturbance.
Brad clarified prevalent misconceptions about fracing including concerns about water usage stating that the industry often
uses undrinkable water sources and is often recycled for subsequent jobs. Additionally, wellbores are cased and cemented to
seal and isolate all fresh water from oil and gas areas to prevent groundwater contamination and, as fracing is performed far
below the ground surface, it cannot propagate to fresh waters zones. Fracing can cause earthquakes; however, they are not
large or destructive usually measuring -3 to -1 on the Richter Scale – causing vibrations similar in scale to those of passing
trucks or trains. Brad also addressed common concerns regarding composition of the additives used in fracing explaining that
they are composed of widely used chemicals and that additive transparency is mandatory in the industry and all part of a highly
regulated process in North America.
After a short break, attendees reconvened for an analysis of Business Aviation from Jeff Dunn, ASA with Citizens Asset Finance.
Jeff initially focused on factors to consider when valuing corporate aircraft from common aspects including make, model,
market conditions, and maintenance status to less common considerations such as damage history, configuration and available
options; for example, Direct TV, avionics, or Wi-Fi. Jeff reminded his audience of the importance of log books – if a log book for
an aircraft is lost, so also is the history of the aircraft lost.
Jeff also discussed Power by the Hour (PBH) Programs which are comprehensive engine maintenance coverage programs at
a fixed price per hour. With standard PBH programs, owners can opt to make monthly payments so that an overhaul is already
paid for by the time it is due. Additionally, if the aircraft is sold, the new buyer has the option to buy into the program.
Some other points to consider when valuing business aviation: It is often difficult to project a value because business aircraft
are not income producing but are to a greater extent a convenience tool; aircraft values mirror the economy – when the market
booms, aircraft values rise; and, with aircraft production currently high and new technology models currently being produced,
old models lose some of their value. Jeff also emphasized that since market comparables are scarce, good relationships with
brokers and original equipment manufacturers (OEM’s) are essential. Finally, many new aircraft will be delivered in the coming
years and, as consumers demand more comfort and amenities, the value for older models will continue to decrease.
Dean Siddle, Senior Valuation Analyst at Ritchie Brothers Auctioneers, next took the stage to discuss construction trends with
his presentation entitled, “Sell Your Assets to the World: More Ways to Get You Maximum Results.” Dean’s analysis of how to
determine value went beyond the basics of year, make, model, and serial number. He first explored how the current economic
environment including local, regional, and global markets for a particular machine affect its value. The environment of the
location and how a piece of equipment was used can both greatly affect its value. For example, sandy materials can devalue
a machine very quickly. He also discussed the importance of a machine’s condition, appearance and maintenance history.
According to Dean, some manufacturers may produce quality machines but lack support for their construction equipment. If a
machine is well maintained, the value is most likely higher; consequently, OEM and dealer support should always be taken into
consideration.

THE MTS JOURNAL
Tom Hazlehurst, CSA and President of Machinery Management, LLC closed out the morning sessions with a discussion
of the evolving global machine tool landscape. Tom stated that he expects the balance of 2016 to be flat for machine tool
consumption which will, in turn, have an impact on both new and auction values. The impact of soft values is apparent in the
fact that some manufacturers who have never discounted in past as a percent of new are currently advertising discounts.
Tom touched on the pros and cons of automation. Automation provides precise and repeatable machining but also creates
a reduction in labor content. As a result, many jobs are down 30-40% in the U.S. due to automation as well as off-shore
outsourcing. The speaker also reminded his audience to be aware of Normal Useful Life for machine tools when financing
for periods greater than five years as some machines operate on a 24/7 schedule; thus, tools in an automotive environment,
for example, could be fully deteriorated within five years. Appraisers should also be cognizant of engineering and installation
expenditures which can inflate the cost of an original machine but have little, if any, value for secondary buyers.
After lunch on their own, attendees returned to the conference room for the first speaker of the afternoon, R. Lee Robinette,
ASA and President of Collateral Evaluation Associates, Inc. with “The Ins and Outs of USPAP for the Machinery & Technical
Specialties Appraiser.” The American Society of Appraisers (ASA) offers numerous full and update courses both in the
classroom and online. Lee specifically discussed revisions adopted by the Appraisal Standards Board (ASB) in February of 2015
for publication to the 2016-2017 Uniform Standards of Professional Appraisal Practice (USPAP).
A lively and thought-provoking discussion followed Lee’s presentation. Audience members debated individual USPAP
interpretations and reached out to Lee as well as fellow ASA members for explanation and clarification of several appraisal
standards as well as the current updates.
The second speaker of the afternoon was Andy Decker, Director of Wholesale Operations at Flexx Corporation, with his
discussion of changing factors in forklift valuation since the 2008-2009 economic downturn. The changes have been drastic
– with the closing of numerous small plants, many forklifts were returned and mothballed. Those plants that remained open
adjusted the way they acquire forklifts. The new model promoted by OEM dealers is a lease with guaranteed maintenance.
Under this model, lessees have a predictable cost that can be expensed and forecast and the dealer has a predictable stream
of revenue from scheduled maintenance. Andy also discussed the life cycle of a forklift stating that the amount of hours are
critical with reductions in value at 6000, 8000 and 10,000 hours and steep discounts expected for machines with more than
10,000 hours.
The third speaker of the afternoon, David Helle, ASA with PNC Financial Services Group, examined “What Should Be in Your
Workfile” should you ever be required to submit a file for audit or simply to support your values. Per USPAP guidelines, an
appraiser must prepare a workfile for each appraisal or appraisal review assignment prior to the issuance of the report. David’s
presentation included a thorough review of the Record Keeping Rule requirement as it is applied to appraisals, appraisal review,
and consulting assignments. He noted that while it is not always necessary to include copies of all documentation, the file
must be retrievable during the retention period and, if you state in your appraisal that a particular piece of documentation was
reviewed, it must also be retrievable in the workfile. David also reminded his audience to keep in mind that “an appraiser who
willfully or knowingly fails to comply with the obligations of the Record Keeping Rule is in violation of the Ethics Rule.”
Finally, Bob Mercogliano Managing Director and Head of Asset Management at SunTrust Robinson Humphrey, Kevin
Sensenbrenner ASA/Senior Managing Director with Stonebriar Commercial Finance and William Tefft SVP of Equipment
Management at Capital Source, took the stage for a joint presentation on Residual Setting developed by the ASA and the
Equipment Leasing and Finance Association (ELFA). The panel first defined the concept of residual setting as the investment
of a lease transaction at maturity and also clarified that, among other things, it is not a defined appraisal concept. Although
residual value is not a defined USPAP term, the panel explained that USPAP compliant, ASA developed appraisals should be
utilized in the development of residual values. The panel also explored risk appetite noting that the most accurate measure of
success in residual setting is longevity. According to the panelists, setting residual value is a delicate balance between art and
science to find an acceptable level of both value and profit.

THE MTS JOURNAL
Once again, the two-day conference afforded invaluable opportunities to “ask the expert” amid engaging glimpses into several
diverse and frequently evolving industries. A HUGE thank you goes out to April Acuna, Operations Manager at IronTrax, for her
tireless efforts toward bringing together another flawlessly organized and memorable conference. The event would not be
possible without her hard work.
In conjunction with the conference, attendees received 16 continuing education and accreditation hours and also had the
opportunity to attend a Pre-Conference 7-Hour USPAP Update class taught by David Cole, ASA. Plans are already underway
for the 2017 Equipment Identification Seminar in Cleveland in June of next year. A big thank you to all event sponsors: Azure,
ELFA, Exact Crane & Equipment, Gordon Brothers/AccuVal, Irontrax, The MTS Journal, Ritchie Brothers, Taylor & Martin and,
Sencer Appraisal Associates. As a reminder, sponsorships will be available for the 2017 seminar. For more information, contact
Joseph Santora, ASA or call (440) 552-1369.
For more information, please contact Jean Jackson at e-mail Jean.Jackson@pnc.com or David Helle of PNC Financial Services
Group at 440-225-3032 or e-mail david.helle@pnc.com
About the Authors

Jean Jackson began her career with PNC Bank eight years ago in the residential Mortgage Division and has handled PNC's
commercial construction inspection process for the past several years. Jean has a BA from Duquesne University in Pittsburgh
and is currently working toward full ASA Accreditation in the Machinery & Technical Specialties Discipline.
David Helle, ASA has been with PNC or one of its predecessors since 1992. He is currently the head of Machinery &
Equipment and Inventory appraisals for PNC's Commercial Credit, Middle Market, and Small Business Sectors. He has held the
designation of Accredited Senior Appraiser with ASA's Machinery &Technical Specialties Discipline since 2006.

THE MTS JOURNAL
ASA Advanced Mining Topics Course Report

C h a r l e s W. “ B i l l ” R u t h , A S A
September 23-28, 2016 - Las Vegas, Nevada

Twenty students attended, (3) from Australia, (3) from Canada, (2) from the United Kingdom (12) from the US. Fourteen were
ASA’s. The experience of the class ranged from 5 years to over 20 years. Eighteen of the students attended the Mine Expo; two,
from the Baden Tax Management, did not attend the Expo.
During the class, I asked Gerald L. Fangman, ASA, to give the class an introduction to the use of drone technology which he
uses for site inspections and to view operating equipment during his inspections.
Craig Bowring, President of the Australia Chapter, who works for Westpac Institution Bank in Australia, talked to the class on
what the financial institutions look for in an appraisal and the need for ASA qualified appraisers.

THE MTS JOURNAL
The three-day class was concluded with an exam which all the students passed. The next part of the course was to visit the
International Mine Expo which is held every four years. The Expo drew a crowd of between 40,000 and 50,000 attendees.
Educational sessions started with the Opening Session which was moderated by Fox News analyst and chair, Nina Easton,
Fortunes Most Powerful Women International. The participants: Phillips S. Baker, president and CEO, Hecla Mining Co.; Harry
“Red” Conger, president, and COO Americas and Africa Mining, Freeport-McMoRan Inc.; Kevin S, Crutchfield, CEO, Contuar
Energy, Inc.; Ted L. Doheny, president and CEO, Joy Global, Inc.; Gary J. Goldberg, president and CEO, Newmont Mining Corp.
and Denise C. Johnson, group president for resource industries, Caterpillar Inc.
Educational sessions Tuesday through Wednesday included topics of Maintenance, Processing, Research, Safety, Surface
Mining, Automation, Markets, U.S. Mine Projects, Underground Mining, International Projects, Reclamation, Bulk Materials
Handling, Coal, Exploration, and Water. All of the above were led by 20 expert-led individuals in the mining industry. The Mine
Expo had a great deal available for individuals to see and attend, with 12 halls, and 10 pavilions, over 840,000 square feet of
exhibit space and 1,900 exhibitors from 37 countries.

THE MTS JOURNAL
This portion of the class gave the students the opportunity to see firsthand, to sit in the cabs, and experience the sheer size of
the latest mining equipment offered to the mining industry in the world.
Technology is the key to the future of mining, and simulators were available for attendees to sit and experience the controls of
these mining giants.
Meet the fully autonomous haul truck offered by Komatsu.

THE MTS JOURNAL
Life Cycle Costing of component parts is a reality.
Miners are pretty strong, too, as seen below.

THE MTS JOURNAL
The expo also gave impressive

demonstrations of the equipment’s’
capabilities with the emphasis on
safety, and matching the right size
equipment with the process to insure
a consistent through put of material
and product.
Process equipment was shown as

cutaway models allowing the viewer
to see the inside of large process
equipment. Here is a view of a
thickener, used in mining process.
Flotation cells are also shown in a

cutaway model, as shown below.

THE MTS JOURNAL
The Mining Expo is a great place to explore new equipment, talk to the equipment providers about the industry, and see and
experience new technology that will keep the industry moving forward. What a great event for the mining industry and the
mining appraiser. From models to full scale processing equipment, like this cone crusher, much was available there for the
students to see and learn about from the various manufacturers.

THE MTS JOURNAL
Underground mining equipment was

also well represented for the students
to explore.

THE MTS JOURNAL
37 countries were
represented at the
2016 Mine Expo
The Great Experience

THE MTS JOURNAL
About the Author

Charles W. (Bill) Ruth, ASA, Machinery & Equipment Professional Appraisal Services, Inc. PO Box
542, Tyrone, NM 88065 | Phone: 575-956-5294 | E-mail: pasi@aznex.net
I retired from Phelps Dodge Corporation / Freeport McMoRan Copper & Gold on January 30, 2009,
after being employed for 38 years. My appraisal activity has, for the most part, been as an in-house
appraiser of mining equipment and process plants for the company. The focus has been primarily in
the southwestern United States at sites in Arizona, New Mexico, Texas and Colorado with additional
assignments in Mexico and South America.
I began appraising machinery and equipment for Phelps Dodge in 1988, and specialized in the
appraisal of mining equipment and material processes for both open pit and underground operations.
I completed appraisal assignments for a variety of departments within the company, including
Resource Management (process plants & equipment), Global Supply Chain (asset recovery, liquidation and transfers of
machinery & equipment and other capital assets,) Risk Management (insurance values), Land & Water (ranches & water rights),
Corporate Finance (lease options, residual values at end of mine life, values for bond issues).
In 1992 I earned an Accredited Senior Appraiser with a Machinery & Equipment designation from the American Society of
Appraisers. In 2004 I became a senior instructor for the Principles of Value courses Level 201 & 202, and have taught these
classes throughout the United States. I am the course developer and author of ME217 Advanced Mining Class, which was
taught for the first time in May 2011 in Australia. I have also taught ME201, 202 and 214 (Mining course) in Australia in 2010.
I am the developer of an ASA Webinar for the ASA on Life Cycle Costing of Mining Assets.
Professional Appraisal Services Inc. was formed in 1995, and I am the current president.
Military experience/history: Retired Senior Chief Petty Officer with the United States Navy, 28 years of service, Submarine
Warfare, Navy Diver, Instructor NEC 5345 and 9502. Last Duty station Expedition Logistic Support Group, Naval Supply Support
Battalion One.
*Served “In Country” Republic of Vietnam 1967, 1968, 1969, Operation Iraq Freedom 2004*

THE MTS JOURNAL
The Value of Mining

Equipment Appraisal
Education
Increased at tention for advanced the oldest and only major appraisal
specialty valuation education is on organization representing all appraisal
the rise due to the growing demand specialist, providing leading educational
for accredited mining and mineral offerings and accreditation programs, is
processing equipment appraisers. at the forefront of this movement.
According to a 2016 report by Deloitte,
the mining sec tor faces a hos t of New for 2016, ASA has prepared a John J. Connolly III, ASA
unresolved challenges. With weakening special offering of its Advanced Mining
prices and a sluggish outlook for course that includes a bonus paring
demand grow th, many companies with MINExpo 2016. The course offers
are struggling to address productivity three days of classroom work plus
declines, improve capital efficiency, an additional two full days of expo
revive sinking shareholder returns, and attendance, combining for forty-eight
service mounting debt and interest (48) hours of continuing education.
obligations.
“Appraisers serve an important role
“As companies move to address when it comes to analyzing, assessing in Australia, along with other offerings in
these challenges and implement and valuing mining equipment and Europe, Asia Africa and South America.”
innovations and cost reduction measures operations” said accredited senior
by investing in new technology and appraiser, says Ruth, who adds “their For more information about upcoming
equipment, the demand for educated, knowledge, experience and ethics are ASA mining educational offerings visit
tested and accredited mining and crucial and can have serious financial, www.appraisers.org, e-mail asainfo@
mineral processing equipment tax and legal consequences.” appraisers.org or call +1 (703) 478-2228.
appraisers is anticipated to increase”, To host an ASA onsite offering locally,
says accredited senior appraiser, Students are updated on the latest contact Mr. Ruth or Mr. Berkemeier at
Charles W. Ruth. mining, milling, smelting and solvent pasi@aznex.net or richardberkemeier@
ex trac tion techniques, along with gmail.com.
Ruth, who has worked in the mining other current mining innovations and
world since 1971, is the instructor for the equipment life and value trends. — John J. Connolly III, ASA is Chair
American Society of Appraisers (ASA) of the American Society of Appraisers
Advanced Mining course, which provides “We also focus heavily on mining Machinery & Technical Specialties
students with a comprehensive look at appraisal terminology, methods and discipline and serves as Executive Vice
the latest valuation issues and mining concepts; functions and purposes of President, Chief Financial Officer and
equipment innovations. appraisals; approaches to value; capital Director of Machinery and Equipment/
mining equipment costs; depreciation; Special Assignment Appraisals for
He adds that ASA, a world renowned field inspection techniques and safety; Nationwide Consulting Company.
and respected international organization and more”, notes Ruth. Mr. Connelly may be reached at +1 (201)
devoted to the appraisal profession and 670-7400 or jconnolly@nccpes.com.
The course is generally limited to
approximately 20 students, who are
t ypically made up of professional
appraisers, accountants, tax assessors
and county officials.
“Demand for ASA’s onsite advanced

specialty valuation educational courses
is seen from around the world, says
Richard Berkemeier, ASA, education
chair for the Society’s Machinery &
Technical Specialties discipline. “Our Bonus offer includes option to attend MINExpo
ASA mining valuation course students past advanced mining course took place 2016

THE MTS JOURNAL
Chairman’s Corner
J o h n J . C o n n o l l y, I I I , A S A
This year has moved faster than any that I can remember. Rather than saying “as we get older” - I
prefer to say -- “As we mature in our profession” time seems to go by at a much more rapid rate.
As we approach the Holiday season I would like to extend my best wishes to all for a happy and
Healthy season and a great New Year. As I write this at 2:45 AM EST on November 9, I just heard that
we have a new President elect in the United States and to everyone’s surprise it is a newcomer. It
is time for some major changes and we will see them and they could have a dramatic effect on our
profession. Possibly more work!
The MTS committee is hard at work rewriting the Valuation Book, I didn’t want to call it a text book
because some take offense to that terminology, we are a little behind schedule but will have it done
before the end of my Chairmanship June 30, 2017.
Our education program and offerings have advanced significantly over the past year with a complete
rewrite of our core courses and the addition of many new offerings in Aviation and many other fields. I would like to thank
Richard Berkemeier and his Committee and all those who have made these offerings a tremendous success. It has taken a lot
of hard work and endless hours. All of this donated to our Profession. They all should be recognized for their efforts.
The committee is having a telephone conference to approve the new Rules of Procedure that we help us govern the Discipline
better in the future. I would like to Thank Gary Trugman and his Committee for their efforts. Each discipline had a representative
that had input to the changes and would be fair to all Disciplines and for the Society overall.
Finally we are looking for new Candidates to serve on the MTS Committee as well as Officers for the upcoming year. If you
are interested please contact Bob Clark with your Qualifications and brief summary on how you feel you can contribute to the
Committee.
I only have 7 months left in this term as chairman, my second time around and last, and look for the support and help of the
committee members and all in the profession to make it a success for all of us.
Have a great Holiday Season and a Successful New Year!

THE MTS JOURNAL
The MTS Journal 2016-17 Media Kit

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$5

THE MTS JOURNAL
Reader demographics
1,710+
Total Circulation Breakdown by Years Subscribed Breakdown by Years Credentialed
50%
882
Total reach from
bonus distribution at
aSa classes & conference 66% More than five years 50%
15% Three to five years
19% Two years or less
Subscribers
40%
Breakdown by Credentials Specialty Markets Serviced 30%

23%
1% • aircraft 20%
18%
• Cost Surveys
32% 67% 10%
• Machinery & equipment 2%
7%
• Marine Survey 0%
• Mines & Quarries
Over 40 years
31-40 years
21-30 years
11-20 years
0-10 years
Credentialed Members • Oil & gas
Candidate Members
non-Members • Public Utilities
Breakdown by Location
85% north america
3% europe
2% asia
10% australia

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advertising Opportunities
Why Advertise? 2016-17 Rates 1X 4X (10% discount)

Full Page $200 $720
• Published since 1984
• exclusive access to credentialed experts 1/2 Page Horizontal or Vertical $125 $450
• Targeted readers in all major industrial markets
1/4 Page Horizontal or Vertical $75 $270
• Bonus distribution at aSa classes and conferences
• Comprehensive technical articles Business Card $11.25 $50
• expert columnists
Classified $10 $36
• extensive industry news coverage
Editorial Calendar (subject to change) Ad Size Width Height
• 1st Quarter 2016

issue Closes: January 15 | Materials due: January 30 Full page 8.5" 11"
• 2nd Quarter 2016
issue Closes: April 15 | Materials due: April 30
Bonus distribution: ASA Equip. Valuation Conf.
1/2 page horizontal 8.5" 5.5"
• 3rd Quarter 2016
issue Closes: July 15 | Materials due: July 30
Bonus distribution: ASA Intl. Appraisers Conf.
• 4th Quarter 2016 1/2 page vertical 4.25" 11"
issue Closes: October 15 | Materials due: October 30
• 1st Quarter 2017
issue Closes: January 15 | Materials due: January 30
• 2nd Quarter 2017 1/4 page horizontal 8.5" 2.75"
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Bonus distribution: ASA Equip. Valuation Conf.
• 3rd Quarter 2017
1/4 page vertical 2.125" 11"
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• 4th Quarter 2017 Business card 3.5" 2"
issue Closes: October 15 | Materials due: October 30 Classified 500 characters or less

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• (800) 272-8258
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ASA Appraisal Review and Advanced Course 201

R o g e r D u r k i n , J . D . , M . S . , FA S A

Appraisal Review and Advanced Course 201
State Certified Real Estate Appraisers begin your path to earning both an ASA Real Property Designation and
simultaneously obtain an Appraisal Review Specialty Designation. REGISTER NOW OR Learn More/ Go to
www.appraisers.org or call (800) 272-8258 Proprietary Knowledge is a Powerful Appraisal Tool! 27 Hours
of State Approved CEs
ASA is opening the door to professional Review Designation status for state certified residential and state certified
general real estate appraisers. You can take this first of two courses (ARM201 and ARM204) and earn an ARM Review
specialty Designation in real property while being given a fast and easy path to an ASA real property designation. All
ASA designated members currently can take ARM201 and ARM204 and obtain a second specialized Designation in their
discipline. This path is now open. Every real property appraiser should be aware that Dodd Frank mandated that every
bank related appraisal be reviewed under USPAP Standard 3 Rules.
Consider this question: Are you aware of the potential liabilities the appraiser exposes his/herself to in doing an
appraisal review? Increased litigation, new legislation, pressure from regulators has created a large demand for
“qualified” appraisal reviewers in all specialties. This course provides the necessary training, education and experience
on how to conduct effective objective appraisal review. ASA Accredited Senior Appraisers can take this first of two courses
(ARM201 and ARM204) and earn an ARM specialty Review Designation in their own discipline. Upcoming classes include:
ARM201 - Appraisal Review and Management, 11/3-6/16, Chicago, IL

ARM204 - Appraisal Review and Management, 1/12-15/17, Las Vegas, NV
ARM201 - Appraisal Review and Management, 5/4-7/17, Herndon, VA
ARM204 - Appraisal Review and Management, 6/8-11/17, Chicago, IL
Roger Durkin, J.D., M.S., FASA • 234 Lewis Wharf | Boston | MA 02110
(617)-720-0332 • http://www.durkinvaluation.com • http://www.durkinlawpc.com
PROOF NE NY Tel: 781-878-4540

REAL ESTATE JOURNAL
Changes New Proof Proof Approved
crop 2”
Size: 3x5 Section: Ap Spot

From:JK
Run Date: 10-21 Volume 33, Issue 1, 1st Qtr 2017 42
THE MTS JOURNAL
Purpose and Intent of IVSC

Jack Beckwith, ASA, CEA
As your representative on the

International Valuation Standards
Committee (IVSC) Advisory Forum
Working Group (AFWG), the following
is a synopsis of the purpose and the
intent of the IVSC. Please let me know
how this may impact your appraisal
practice moving forward.
The AFWG is comprised of senior
representatives from the following
entities (Participating Entities):
• American Society of Appraisers

• Appraisal Institute
• Appraisal Institute of Canada
• Asociación Profesional de Sociedades de Valoración
• Australian Property Institute
• Canadian Institute of Chartered Business Valuators
• China Appraisal Society
• Fédération Française des Experts en Evaluation
• Hong Kong Institute of Surveyors
• Royal Institution of Chartered Surveyors
• The Appraisal Foundation
The Participating Entities are primarily Valuation Professional Organizations (VPOs). I have participated since June with
monthly conference calls and an in-person meeting in Chicago addressing the challenges of monitoring and voicing each
representative's concerns with the new 2017 IVS Exposure Draft. The objective of the AFWG is to provide advice to the IVSC
Board of Trustees, Standards Board, and Professional Board from the perspective of the VPOs regarding the ongoing activities
of the IVSC.
The premise of the IVSC is that the world of business is becoming increasingly global in nature with continuous changing flows
of investment and cash compounded by the different standards and levels of professionalism in relation to valuation existing
within different countries. Markets have expanded to become global and stakeholders do not always get reliable information
for decision making and for comparative purposes. There can be a wide variation in valuation methodologies and approaches
across markets making it difficult to compare valuations, potential investments, and secured lending decisions on a like for like
basis.
Valuations form a key part of audited accounts which should provide transparency and comparability in relation to the value of
companies and therefore impact share prices. This may not be achievable without a consistent approach to performing quality
valuations.

THE MTS JOURNAL
IVSC is working in partnership with VPOs and co-operating with other key stakeholders to serve our profession. The IVSC's
commitment is to the public interest by expanding the use of IVS as the primary core set of standards used for property,
business, and financial instrument valuations. IVSC will do this by increasing the quality of its standards by working in
partnership with national valuation standard setters such as the Uniform Standards of Professional Appraisal Practice, the
Canadian Uniform Standards of Professional Appraisal Practice, the European Valuation Standards, and the Chinese Valuation
Standards. By being seen as a strong partner to these valuation organizations, it increases IVS's legitimacy by cooperating
closely with other institutions representing the public interest.
The vision of the IVSC is to unite and bring credibility to the global valuation profession, and bring transparency, comparability,
and confidence to valuations through quality IVS support.
In order to accomplish this, the core strategic objectives of the IVSC are to:
1. Develop high quality international valuation standards which underpin consistency, transparency, and confidence in
valuations across the world; and
2. Be seen and referred to as the standard setter for international valuation standards which are recognized and over
time adopted by key stakeholders around the world.
The IVSC recognizes that VPOs are at different stages of development around the world, some are mature professional
organizations, others are recently formed, which creates a variety of stakeholder needs.
The IVSC is working in collaboration with VPOs and other key stakeholders. The IVSC is really a platform to create consistent
International Valuation Standards. In order to achieve that respect, input, and buy in, it is necessary from participating VPOs to
provide relevant guidance, education, qualifications, and quality control.
The following is the IVSC organization structure 1:
1
IVSC Purpose, Structure and Strategy published October 2015.

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As mentioned, the AFWG has had monthly meetings to:

• Focus on meeting the needs of end users of valuations;
• Discuss common issues and a channel to share best practices;
• Use VPO specialists to interact in a coordinated way with relevant Standards Board sections;
• Engage with the Membership and Standards Recognition Board;
• Strengthen the global valuation profession; and
• Play a key role in development and adoption of International Valuation Standards.
We will conduct forums to engage with other key stakeholders including:
• Sponsors;
• Regulatory Bodies; and
• End Users.
• Primary Stakeholders: Other Stakeholders:

• Valuation professionals Financial statement users
• Clients Legal professionals
• VPOs (AFWG) Academics
• Audit Firms/Accounting Professionals
• Banks and Insurers
• Regulators and Accounting Standards Boards
Standard Setting Process: The flowchart below provides a brief overview of a six stage consultation process. Further details
on each stage are contained below:
Stage 1 – Determine IVS areas of improvement

and agree level of detail required by stakeholders
CONSULTEES
Primary Stakeholders
Stage 2 – Draft changes to IVS • Valuation Professional Organizations
• Advisory Forum Working Group
• Valuation professionals
• Clients
Stage 3 - Issue IVS Exposure Draft for stakeholder
• Audit firms/Accounting professionals
consultation to get buy-in and ensure it can be • Banks & Insurers
implemented • Regulators and Acct. Standards Boards
Other Stakeholders
Stage 4 - Re-deliberation • Financial statement users
• Legal professionals
• Academics
Stage 5 - Issue IVS
Stage 6 - Post Implementation Review of IVS

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To date, the 2017 IVS Exposure Draft has made significant progress, including adding Standards IVS 300 applicable to our
Machinery and Technical Specialties Discipline, as well as:
1. The development of Standards contributable to the following categories:
a. IVS 101 Scope of Work
b. IVS 104 Basis of Value
c. IVS 105 Valuation Approaches
2. The development of a governance and organizational structure that includes the involvement of capable and influential
executives from all over the world.
3. The establishment of an internet website that allows for internal and external communication and development of the
IVSs.
4. International notoriety among valuation profession stakeholders and the adoption of IVSs worldwide by various VPOs.
IVSC is still in a work in progress mode to revise and complete the standards structure by June 2017. Hopefully this will help
to facilitate the primary objectives of the ASA on an International scale. Again, please let me know as your representative if the
following primary objectives meet your needs and/or concerns:
1. Benefit the public by contributing to the improvement of valuation analysis and reporting;
2. Keep governmental entities from regulating the profession;
3. Improve the public perception of the valuation profession;
4. Increase the stature of the ASA as an influential worldwide valuation organization; and
5. Permit the ASA to influence the structure of Valuation Standards that may affect its members both domestically and
internationally.
About the Author
Jack Beckwith, ASA, CEA Mr. Beckwith’s career began in 1976 distributing internationally new and refurbished machinery
and equipment in the healthcare industry. Mr. Beckwith has performed and supervised valuations throughout the United States,
Canada, Mexico, and Europe. He has published articles for various valuation topics in Equipment Finance Advisor, The MTS
Journal, and the ASA Professional. In addition, Mr. Beckwith has been an instructor for the American Society of Appraisers
teaching Principle of Valuation courses. Honorariums include: ASA International Appraisal Conferences Presenter and ELFA
Annual Conventions Presenter. Mr. Beckwith can be reached at beckwith@eagi.com should you have any inquiries to this
subject.

RICS BUILDING EThICS THE MTS JOURNAL
CONTROL JOURNAL
industry’s future, with greater

education and awareness
across our sectors. Ethical
values are important because:
b they are an anchor to
appropriate behaviours
b they ensure consistency
and clarity, irrespective of
changing factors such as
the state of the economy or
varied business practices in
different marketplaces.
People tell me that continuing

scandals in businesses and
sport are evidence that ethical
values do not work. If they did,
they argue, we would not have
so many corporate failures
and individuals who feel they
need to cheat the system.
While I can understand this
cynicism, the current context
highlights the need for more
education about business
ethics, not less.
Membership has grown One RICS member
dramatically since this photo was commented that Enron’s
taken outside the UN last year code of ethics did not stop
the huge scandal that caused
Fair competition
its collapse: but if Enron
had implemented the code
properly and business ethics
and fair gain

had played a more central role
in its corporate culture, would
B
the organisation still be here?
It certainly might have had a
better chance of survival.
Peter Bolton King reflects on the Rio Olympics and answers Education about ethics and
related issues is as important
questions about the International Ethics Standards Coalition as enforcement in terms of
reducing the risk of poor
Brazil that hit the headlines in land, real estate, construction conduct. Without it, dark
the run-up to the tournament. and infrastructure, and corners in large and complex
These included corruption, major Brazilian organisations companies have a stronger
political turmoil and the Zika working in our sectors have chance of persisting.
public health crisis. now joined us. A colleague reminded
I have visited the country me of the similarities and
several times, both for Why are ethics differences between the
RICS and as chair of the important? nature of competition in sport
International Ethics Standards To err is human. Organisations and business, referring to a
(IES) Coalition, most recently operating in hyper-competitive little-reported incident that
for a major conference to talk commercial environments occurred during the 2012
about international standards. are under intense pressure London games. After winning
By the time you read this, the Great interest has been to make money, and there is a gold medal, a swimmer
Rio Olympics will have long shown in the coalition and thus a greater risk of ethical confessed to breaking the
finished, with thousands of how this fast-growing group breaches. Some situations rules: although he was only
column inches written about of almost 100 professional faced by built environment allowed a single dolphin
the achievements, the events, bodies, associations professionals may not always kick in the breaststroke, he
the winners and the losers. and standards-setting have clear responses. admitted to doing several
The 2016 games were organisations is working to This strengthens my belief deliberately. He justified his
hosted against a backdrop create the first set of globally that professional ethics must actions by saying the rule was
of complex challenges facing applicable ethics principles for play a stronger role in our poorly policed and had to be
20 NOVEMBER/DECEMBER 2016
*First published in RICS’ Property Journal, November/December 2016 www.rics.org/journals

RICS BUILDING
CONTROL JOURNAL
THE MTS JOURNAL
broken by any competitor retain their own more detailed

who wanted to win. He was codes if they wish, on the
right about the first point,
and arguably the second; the
Organisations operating in understanding that they do
not conflict with IES.
authorities didn’t take any hyper-competitive commercial
Comments from
action against him. Having
trained all his life for his
environments are under intense coalition trustees
moment of glory, he ultimately
put personal gain first,
pressure to make money and One of the UK-based IES
Coalition trustees, Peter
devaluing both his status as there is a greater risk that Robinson of the Association
a sportsman and the Olympic
ideal of fair play.
ethical breaches may occur of International Property
Professionals, commented:
“In the fast-moving and
Winning in our world Ethics Standards Board for but does not have a direct ever-changing world of
Do we promise a potential Accountants (IESBA), which enforcement role. international property sales,
client that we will carry out issues ethical standards for All the existing IES Coalition ethics are vitally important to
work in a certain way, with the professional accountants and members already have their remind the profession where
unspoken intention of cutting its member bodies. Those own code or rules of ethics. the true ‘North Star’ of fixed
corners to save costs? such as the Association It will be up to individual standards lies.
The justification for winning of Chartered and Certified organisations to ensure “These should be
a contract in this way is that Accountants and Institute compliance with the ethics transparent and unify trade
the client got what they paid of Chartered Accountants standard and each will have and consumers, underwriting
for – if unwittingly – which in England and Wales are different disciplinary and any sensible company.”
was no less than a competitor required to comply with the enforcement mechanisms. Trust can mean different
would have delivered. IESBA code of ethics. things in different cultures,
Depending on specific details, How can global principles but another IES Trustee,
such behaviour could well The IES document was be applied across complex lawyer Eric Finn from the
be unethical and a breach of drafted by an independent world regions? International Right of Way
contract. Any surveyor acting standards-setting committee International standards Association in the USA,
in this way has forgotten what (SSC), which was appointed such as those operated commented: “Of primary
it means to be a professional, by the coalition. How did they by the IESBA are based interest to all real-estate
and devalues our profession. decide on its scope? on principles, not rules. professionals is to be a
This is the first global exercise This makes them globally trusted advisor to their clients
Questions and of its kind for these sectors, applicable: professionals have and the general public.
answers and the IES SSC sought to to think carefully about their “A common grounding in
Who belongs to the IES align and identify universal specific application and must ethical behaviour, at the local
Coalition and why? fundamental principles as a exercise sound professional community level and on a
Representative built basis on which to develop judgement in deciding on the global scale, is essential to
environment and related the first international correct behaviour and action. establish such trust.” C
professional bodies exist to ethics standards for land, The IES SSC undertook
guide, enhance and promote real estate, construction a three-month global
peter Bolton King fRICS is RICS
the professional, technical and and infrastructure. Each consultation, which attracted
Property Standards Director
ethical expertise of members. organisation that belongs nearly 400 formal responses pboltonking@rics.org
As a founding member of to the coalition agreed to from many countries. We
the coalition, RICS believes implement the final standard believe this feedback and
that bringing together and is likely to provide advice proactive consultation will
non-profit organisations from to their members about help ensure that the final
across the sectors creates related ethics issues. standard can be understood www.ies-coalition.org
a powerful way to undertake by all. RICS has issued comprehensive
extensive consultation, Don’t ethics codes need guidance at
combining ethical knowledge a central enforcement Are the participating www.rics.org/
about the built environment authority in order to organisations expected to responsiblebusiness
A full toolkit about RICS’ existing
and related disciplines. By work successfully? give up the codes of conduct
ethics principles can be found at
harmonising many existing Of course enforcement plays that they already have in www.rics.org/ethics
codes of conduct, the a strong role in regulation. favour of the IES? Extensive guidance on conflicts of
coalition aims to establish an Setting ethics standards for The coalition aims to interest is forthcoming.
overarching standard. 2.5m accountants globally has introduce, at an international
been a crucial role performed level, one shared set of
Do other professions have by IESBA since it was set up values reflecting principles on
global ethics standards? in 1977. Its board provides which the entire profession Related competencies include
The global accountancy adoption and implementation can agree, and to which all Conduct rules, ethics and
profession, for instance, is support and promotes good existing codes of conduct will professional practice
governed by the International ethical practices globally, conform. They will be free to
NOVEMBER/DECEMBER 2016 21

THE MTS JOURNAL
2016 Market Overview

Mike Clark
By Mike Clark, President of L & M Publications which publishes a series of pricing and data guides
such as DataRef, The Book, and The CNC Serial Number Reference Guide. The Book publishes a
series of pricing guides for used machinery & equipment. These pricing guides cover many different
industries. Since 1984, The Book has been reporting values on used machinery and equipment that
has sold at public auction throughout North America. Website: http://www.thebooklm.com
As 2016 draws to a close, let’s reflect on the year in the used machinery market.
Metalworking
The market for used metalworking machinery was strong through 2015. Commodity CNC machines
like Mazak, Hass, and Mori Seiki that were manufactured in the mid to late ‘90’s held their value
pretty well -- but since the beginning of the year, these mid-nineties’ commodity machines have lost
about 40% of their value compared to last year.
One example: Mazak Quick Turn 20 S …
manufactured in the mid ‘90s sold last year,
averaging $28,000.
Today, similar Quick Turn 20S are selling for
an average of $16,000.
CNC machines less than 10 years old are
holding their value pretty well.
Plastics
Not many sales this year. A recent
September sale with large capacity
machines brought good prices for injection
molders between 8 and 12 years old.
Woodworking
Market’s been soft for quite some time.
Printing
Similarly, the printing industry is in trouble.
As you would expect, big web presses,
both commercial and newspaper, can’t find a market. The newspaper industry has been switching to online for years and
auction prices reflect that. When these web presses sell, it’s pretty much for scrap value. Also, despite our own personal love
of books here at The Book, bindery equipment such as stitchers, trimmers, perfect binders, folders and inserters aren’t in high
demand. Interestingly, paper cutters, particularly Polar Mohr, are doing well. And speaking of trends, digital presses are the hot
item in the printing industry right now; however, they depreciate quickly, at rates comparable to computer equipment. Finally,
Heidelberg and Komori sheet fed presses are still marketable – while their values may be down from 2015, there are still
buyers out there for these presses.

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Processing
No matter what the economic trends look
like, people still eat and take their medicine,
so the value of used food and chemical
processing equipment is holding up well.
The merger of Kraft and Heinz dumped
some excess equipment on the market,
and that trend may continue through
the next few years as large consumer
packaged goods companies consolidate,
but for the most part these liquidations
have not negatively affected the value of
this equipment. Americans also eat more
packaged convenience foods in times of
economic uncertainty, so these industries
will tend to be less subject to wild valuation
swings.
Oilfield
With the decline in oil prices comes a decline in the prices for oilfield equipment. Items at recent Kruse and Canon sales are
going for less than half of what they sold in 2015. The equipment value will recover if and when oil prices rebound.
To give you an idea of the auction activity in North America:
Overall, the number of auctions are down from 2014 to 2015. Through the third quarter of this year (2016), the number of
sales is just about equal to the YTD third quarter of 2015.
Historically, a recap of the sales by industry is:
INDUSTRY 2013 2013 2014 2014 2015 2015

# SALES % # SALES % # SALES %
Metal 931 55% 869 56% 802 59%
Wood 122 7% 87 6% 76 6%
Plastic 64 4% 70 4% 47 3%
Print 104 6% 102 7% 89 6%
Processing 206 12% 169 11% 173 13%
Hi Tech 149 9% 149 10% 66 5%
Medical 77 4% 64 4% 63 5%
Audio/Video 39 2% 20 1% 26 2%
Textile 15 1% 13 1% 15 1%
-------- -------- -------- -------- -------- --------
1707 100% 1543 100% 1357 100%


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2013 2013 2014 2014 2015 2015

# SALES % # SALES % # SALES %
Location Only 46 3% 35 2% 16 1%
Timed Sale 753 46% 731 49% 737 55%
Webcast 824 51% 727 49% 584 44%
-------- -------- -------- -------- -------- --------
1623 100% 1493 100% 1337 100%

About the Author
Mike Clark is the president of L & M Publications which publishes a series of pricing and data guides such as DataRef, The
Book, and The CNC Serial Number Reference Guide. L&M has been publishing pricing guides for industrial machinery and
equipment since 1993. He has also been a presenter at various conferences including several ASA conferences. His company
is based in Gainesville Georgia.
Mike has held executive positions with industrial printers and publishers since 1971. He was controller and then general
manager of Industrial Machinery News in Detroit from 1976 through 1989. IMN was a national publication for used
metalworking machinery. From 1990-1992, he worked at Black Book (publisher of pricing guides for automobiles). Both IMN
and Black Book were owned by The Hearst Corporation.
While at IMN, Mike developed the concept for the IMN Auction Report, which became The Book. He carried the IMN Auction
Report to Black Book. In 1993, Mike acquired the machinery pricing division from Hearst and started The Book.
Mike attends and participates in many conventions and seminars for and with industrial auctioneers, appraisers and machinery
dealers.
Mike has a B.A. in Finance from Western Michigan University and an MBA in Accounting from University of Detroit. He resides
in Gainesville, GA and is married with one daughter.


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Insurance Valuations and Loss Preparedness

Alex Ruden, ASA (M&TS & ARM), CG/GA, and Business Valuer
An insurance appraisal fulfills only three needs: these are independence, placement value data, and
proof of loss preparedness. Differing levels and types of insurance appraisals fulfill each of these
needs to differing degrees. Addressing each need in turn below:
Independence
The insurance company would like to see an appraisal from an outside firm. This is somewhat
obvious so that there is not fraud perpetrated by the insured. Yes some insurance companies now
have their own appraisers but nasty loss situations may still occur.
Placement
An independent valuation will inform the insured about the amount of insurance to carry. Such an
analysis may be completed in great detail with say a +/-10% possible variance or in an overview
manner with a +/-20% or greater variance. Be wary, just because the insurance carrier does an
insurance placement value analysis, as stated before a very nasty loss situation may occur, with the insurance company
denying the proper amount of insurance is carried.
Proof of Loss
Along with having the appropriate amount of insurance, this is the most important element of an insurance appraisal. Directly
stated, if one is not prepared to prove one’s loss instantly 10% of a fair settlement is gone. If not prepared this lost amount may
be 25%. The strategy is to get a balanced “fair/equitable and timely” settlement. These thoughts are directly linked. Yes one
can get a fair settlement say 5 years hence, but it is not timely. Or one can get a timely settlement if one accepts 75 cents on
the dollar. Again, not good. One wants the fair settlement at full value in say 6-12 months or whatever time is appropriate for
the loss situation, balancing the wishes of “fair” and “timely” is the critical concept.
So let’s address what is adequate Proof of Loss.
The fixed asset accounting record most often is grossly inadequate for a loss situation. Without going into a long explanation,
many systems contain data that includes intangibles in the values, non-value entries, allocated values from acquisitions,
“ghost” assets, and on and on. Flow diagrams help. Photographs and movies / videos of specific assets and systems help.
Files that have original purchase costs and descriptive detail are wonderful (but rarely are available). Engineering records may
help. Sorry, but in the instance of most facilities / operations the assured is not prepared. Oversight in this regard is strongly
suggested. Why do I say that? Because I was one of the insurance company bad guys for many years, and my father and
grandfather as well. No we were not “mean”, yes helping assureds as professionally / sensitively possible, but ultimately to
reasonably prove one’s loss is the assured’s responsibility. Again, it is the assured’s responsibility to prove the loss, that is, the
assets that are/were in place and the values of the assets.
Yes, for those facilities where the appraiser has had the opportunity to prepare a detailed valuation for fair value accounting
the information may be very good, at that instant. This assumes that physical verification of the assets in place has been
completed, yes perhaps even inter-related with a “trend and bend” work effort. No, a sloppy trend and bend job will not provide
adequate proof of loss. Yes, the information must be kept up to date. The asset listings and value information must be kept
up to date either within the fixed asset accounting system or as a separate aside record, incorporating inflation / deflation
adjustments, changes in depreciation if appropriate for the policy /contract form, and of course additions or deletions.

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Critical property and casualty insurance thoughts:

• One may rather deal with the IRS than fight an insurance battle.
• Understand the insurance policy (“contract”) coinsurance clause where assured shares in the settlement to the extent
of the insurance that should have been carried, say 80%.
• The fixed asset accounting record is not adequate proof of loss, I repeat, the fixed asset accounting record is not
adequate proof of loss.
• Understand the difference between a Replacement Cost policy and an Actual Cash Value policy
• Replacement Cost policies are “repair or replace” often up to Actual Cash Value (a litigious issue, also considering the
issues of Market Value, depreciation or betterment).
• Further, if Replacement Cost, usually the insurance policy (contract) states that Actual Cash Value will be paid until or
if the covered assets are replaced (language varies per differing forms), then if replaced the full Replacement Cost is
paid.
• Actual Cash Value generally considers the current cost new for the same functional utility, less physical depreciation/
deterioration. But in some instances ACV is considered to mean the cost of replacing the asset at Market Value
(another litigious issue).
• Being unprepared to prove one’s loss may prove to be extremely costly, particularly if one had not gone through the
exercise and cost of perpetually being prepared in advance.
• The insurance company will not pay for betterments, meaning if you have an old Model A asset and now a Model
B is only available you will not receive the settlement for a Model B loss. Check insurance contracts in this regard
concerning betterments.
• The insurance company may well not pay for engineering or intangible assets relating to specific tangible assets.
Check the policy and/or discuss this matter with the broker.
• Understand what the insurance policy says. One can under-insure as well as over-insure.
A personal note. Are you prepared for a loss at your home? Do you have the proof of value and listing of the assets, or at least
photos or a movie/video of the residence and the contents? Is this information somewhere else other than in your residence?
All are encouraged to get prepared for an unfortunate insured event. But imagine in a loss situation how much less of a fair
settlement you would receive if such data is not available. Then project this thought into your business situation. Not good? You
are encouraged to cure this situation in all regards.
About the Author
Alex Ruden, ASA (M&TS & ARM), CG/GA, Business Valuer, is the fourth generation of his family in the appraisal/valuation
business. His great grandfather was a Public Adjuster being a partner in a well known Manhattan insurance district firm. Both
his grandfather and father were “machinery experts” assisting staff and independent insurance adjusters with their loss work.
Alex worked within the firm but eventually moved on into marketing and providing multi-disciplined appraisal/valuation and
fixed asset accounting services for financial and tax reporting, property taxation, financing, insurance, fixed asset accounting,
and so forth.

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FDIC Rental Value - A Nontraditional Approach

Larry L. Perdue, ASA, MVS
The following article was published in the 1989 Winter Edition of the MTS Journal. As stated in the
article, at that time there was no established methodology for calculating the market rental rate for
assets of a failed FDIC insured institution. When I was retained to value the property of failed banks
and asked to calculate a rental value, I searched many sources looking for an equitable rental rate
between the FDIC and the purchasing bank.
After a conversation with my FDIC contact, it was clear that the FDIC was only interested in recovering
a loss in value to those assets during that period in which the assuming bank had care, custody, and
control prior to actually obtaining ownership. It came to mind that a time value of money calculation
could be utilized for this purpose.
Once the market value of an asset was derived (which at that time was the "Forced Liquidation
Value"), the loss in value could be calculated over a pre-determined period of time by projecting a
residual value at the end of that period. The FDIC provided the fund rate relative to the transaction
between themselves and the assuming bank.
I have utilized this method to calculate the rental rate of other assets over the past 27 years and, in those cases, the assets
are not rented or leased on a regular basis. In order to facilitate calculating the rental rate, the assets have to be segregated
into the various classes (i.e. furniture, computer equipment, telephone systems, banking equipment, etc.). Once the assets are
segregated and subtotaled in their various categories, then a loss in value can be anticipated over the coming period of time.
As exhibited in the article, you can see how the calculations may either be computed manually or on a Hewlett-Packard 18B at
that time. At the current time, I am utilizing a Hewlett-Packard 10BII Plus. Over the last two months, I have utilized this method
to determine the rental rate for equipment in a doctor's office where a hospital is acquiring that office or renting equipment
from that doctor over a given period of time.
As stated previously, the goal is to recover the loss in value of that asset over a pre-determined period of time and arrive at
a rate of return commensurate with the current interest rate and rate of risk. Quite simply put: a return of and a return on an
investment.
Upon the closure of a federally insured bank by the Control of the Currency or State Banking Commission, and during its control
by the Federal Deposit Insurance Corporation (FDIC), the furniture, fixtures, and equipment of the failed bank are normally
appraised. The objective of the appraisal is to determine market value (which equates to Forced Liquidation Value) and, in some
instances, rental value of those assets during the period of use from the date of the bank closing to final disposition of the
assets, either through purchase by an assuming bank or sale at absolute public auction. Market value is defined in the “Uniform
Appraisal Instructions to Appraisers for FDIC Personal Properties” as “... the value that can be obtained at a well advertised
auction or bid sale or whatever method of sale is typical for the property.” (Addendum A, Paragraph 4.)
In July 1987, rental value was not addressed or defined in the FDIC’s instructions. The letter of authorization accompanying the
instructions stated that:
In your finished report you are to show the FDIC sticker number, description, condition, pictures, and valuation. The value is
to be shown as “Market Value” as of the bank closing date of ... You are to show a “Rental Value” also. The rental value will
be a monthly rental on the entire contents.
FDIC Letter of Authorization, July 30, 1987. (Addendum B.)
In the absence of a definition of “Rental Value” from the FDIC, it was necessary to develop a procedure for computing FDIC
“Rental Value” which would satisfy the requirements of the Uniform Commercial Code, be consistent with the Uniform Appraisal

THE MTS JOURNAL
Instructions to Appraisers for FDIC Personal Properties, and be reasonable and appropriate for the nontraditional renting
arrangement between the assuming bank and the FDIC.
Traditionally, in establishing the rental or lease price of an item, the calculated cost of that item is capitalized at the appropriate
rate, as indicated by the total rate of return necessary to meet investors’ objectives. Suggested by Dr. Shannon P. Pratt, ASA,
CFA, in “Understanding Capitalization Rates,” Valuation, June 1986.
An example of additional factors to be considered in determining fair rental value is illustrated by Peter K. Nevitt and Frank J.
Fabozzi in their discussion of “Consideration in Establishing and Operating a Leasing Company”:
Pricing
A leasing company should establish pre-tax and after-tax target rates of return on its equity and assets. Such targets
must compare favorably with rates of return available to the parent company from other uses of funding and tax shelter
resources. Pricing strategies are then formulated to achieve these objectives.
The pricing of a lease should take the following factors into consideration:
1. The cost of funds.
2. The expected residual value, if any.
3. The current and future federal and state income tax rates and liability of the lessor.
4. The timing of the delivery of the leased equipment.
5. The timing of actual receipt of cash flows attributable to tax benefits.
6. The timing of the payment of the purchase price.
7. The general overhead expense attributable to the leasing operations.
8. The cost of booking the transaction.
9. The servicing costs during the lease for billing, collecting, inspecting, insuring, and answering inquiries regarding the
lessee or the equipment.
10. The cost of disposition of the equipment (if a true lease) at the end of the lease.
11. The special expenses attributable to the transaction.
12. The risk or loss reserve on the portfolio.
13. The special risk or loss reserve attributable to the transaction.
Equipment Leasing, 3rd ed. p. 185.
Nevitt and Fabozzi’s thirteen items to be considered are too narrow in scope and do not give adequate consideration to the very
important effects of functional and economic, “external” obsolescence on rental value. The Associated Equipment Distributors
provide a very useful guideline for estimating rental cost and rates:
Factors which may affect rental costs and rates ...
In order for any enterprise, including the rental of construction equipment, to be successful, it is essential total costs
involved be understood. Many distributors have, over the years, undertaken to fully appreciate the costs associated with
rental of equipment. What follows is not a formula for arriving at an estimate of each distributor’s cost, but rather a guide to
each of those elements which may or may not affect the cost of rental equipment.
1. New Equipment Value
Product cost f.o.b. factory (exclusive of cash discount
Freight from factory
Unloading and assembly costs
Inspection and servicing costs

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2. Less Equipment Value – End Of Useful Rental Life

Number of years useful rental life anticipated
Salvage value or sale price end of useful rental life
3. Net Depreciable Cost – Over Useful Rental Life
Net amount of investment to be recovered through depreciation
(Total of item 1 less total of item 2)
Amount sufficient to cover future replacement cost which may be higher
Yearly Costs
4. Depreciation
Item 3 divided by number of years useful rental life anticipated
(Stated in item 2)
5. Insurance
Property damage
Comprehensive liability
6. Taxes Applicable to Unit
Ad Valorem or Personal Property Sales, Use, or Occupational Licenses
7. Interest on Investment
Interest expense
(Item 1 times annual interest rate)
8. Repairs and Maintenance
Maintenance – preventative
Maintenance – normal wear and tear
Inspection – In, out, and on job
Major repairs – engine overhaul, undercarriage overhaul, etc.
Repair or recap tires
Steam cleaning
Painting
Fuel, lubricants, hydraulic oil
Expendable parts – cutting edges, teeth, cable, filters, “V” belts, etc.
Non-recoverable warranty costs
Preparation for delivery
9. Rental Department Costs – Pro-Rata Share
Payroll (Department personnel, salesmen’s commissions, payroll, taxes, payroll insurance, fringe benefits)
Advertising and rental promotion
Free delivery and pick up
Uncollectible charges
Policy adjustments
Billing costs
Records and forms
Filing Fees
Handling within yard or between departments (loading, unloading, warehousing, moving)
Occupancy costs
Share of general overhead
Contingencies

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10. Overhead Costs Not Included in Above Items

(Pro-Rata Cost of Overhead)
Utilities
Building Depreciation
Payroll
Taxes
Insurance
11. Other Costs
Losses due to damage, vandalism, conversion, or theft, etc.
12. Total Annual Costs
Total Items 4 through 11
13. Approximate Cost for Each Month of Rental
Probable number of months of rental per year
Total annual cost (item 12) divided by probable months of rental during yeae
14. Profit
Profit you wish to realize
Consider value of machine to customer
15. Monthly Rental Rate
Add totals of Items 13 and 14
34th Edition Rental Rates Compilation.
Associated Equipment Distributors. (March 1983) p. iv
As may be seen from the two previous examples, fair rental value calculations require consideration of many variables necessary
to produce the appropriate yield.
The goal of the FDIC in its corporate capacity as insurer and unique position as receiver of a failed bank is to derive the
maximum number of net dollars from the management of the bank’s assets. Revenues generated under their control are used
to pay insured depositors and holders of receiver certificates. Through this effort, the FDIC charges an assuming bank for the
use of the furniture, fixtures, and equipment of the failed bank during the period of use from the date of the bank closing to final
disposition of the assets, either through purchase by an assuming bank or sale at public auction.
The information necessary to accurately calculate fair rental value in the traditional sense is not available and therefore a total
rate of return, capitalization rate, may not be feasibly determined, making the traditional capitalized cost approach inappropriate.
As previously stated, in accordance with the FDIC Letter of Authorization, Rental Value is to be calculated as a monthly rental
value on the entire contents of the subject bank. Because furniture, fixtures, and equipment of the failed banks consist of many
items not normally leased or rented on a regular basis, comparable rates may not be available from the market. Additionally,
determination of a normal monthly rental rate for each and every individual item appraised would be inexpedient, impractical,
and unreasonable.
One method of calculating FDIC Rental Value that we developed has been used and accepted by the FDIC utilizes a common
rental calculation, to determine the rent payment necessary to achieve a specified yield. The specific yield required is equal
to the recovery of the anticipated loss in value from all causes, during the period of use from date of bank closing to final
disposition of the assets, plus the cost of money during the same period which is reflected in the charged interest rate. The
charged interest rate is the applicable federal funds rate provided by the FDIC.
The anticipated loss in value from physical depreciation, plus functional and economic “external” obsolescence, is projected by
the appraiser utilizing historical data, age life estimates and personal experience. In that the assuming bank is only renting and
not renting the assets in the traditional sense, only loss in value (depreciation from all causes) and the cost of money (interest
rate) need to be considered in this calculation.

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Using the “Time Value of Money” leasing calculation formula found on many financial calculators, the value may be computed
as follows:
Present Value “PV”= FDIC Market Value as defined in the Uniform Appraisal Instructions to Appraisers
for FDIC Personal Properties
Future Value “FV” = Anticipated depreciated value of assets at end of rental period, i.e. if estimated
depreciation from all causes during period of rental is equal to 20%, then
FM = PV minus 20% depreciation
Rental Period “N” = Rental period in months
Interest Rate “I% YR” = Applicable federal funds rate as of bank closing date
Payment “PMT”= Monthly payment required
Example Present Value: $ 400,000.00

Anticipated Depreciation During Rental Period: < 100,000.00>
(25% over 12 months)
Future Value 300,000.00
(Value at end of rental period)
Interest Rate Per Year 6.5%
(Applicable Fed Funds Rate)
Rental Period in Months: 12.00
Payment Required: $ 10,199.40

Note: This is a net rental with periodic payments due in advance.

0 = PV + (1+I%xS) x PMT x USPV (I%:N) + FV x SPPV (I%:N)
100
S = payment mode factor (0 for End mode; 1 for Begin mode).
I% = I%YR
#P/Y
USPV (I%:N) Present value of a uniform series of $1.00 payments; equivalent to USFV (I%:N). N is the number of
payments and I% is the periodic interest rate expressed as a percentage.
SPPV (I%:N) Present value of a single $1.00 payment; equivalent to 1 divided by SPFV (I%:N). N is the number of
compounding periods and I% is the interest rate per compounding period expressed as a percentage.
SPFV (I%:N) Future value of a single $1.00 payment; equivalent to (1 + I% divided by 100)N. N is the number of
compounding periods and I% is the interest rate per compounding period expressed as a percentage.
HP-18C Business Consultant Owner’s Manual,
Hewlett-Packard. (April 1986), pp. 145, 180.

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When calculating FDIC Market Value, either as the objective of an appraisal of assets or determination of Rental Value, the
finished report should contain a complete definition of that value concept and an explanation of the purpose and method of
appraisal.
It is not the intent of this writer to indicate that this is the only proper procedure for calculating FDIC rental value, but rather a
reasonable solution to a unique appraisal problem. Although a non-traditional approach, the presented procedure is reasonable
and gives an opposite value which considers the three historic and accepted approaches to value, namely: income, cost, and
market.
Works Cited
FDIC Letter of Authorization, July 30, 1987
HP-18C Business Consultant Owner’s Manual. Hewlett-Packard.
April 1986, p. 145, 180.
Nevitt, Peter K. and Frank J. Fabozzi, “Consideration in Establishing and Operating a Leasing Company” Equipment
Leasing. 3rd ed. Illinois: Dow Jones-Irwin, 1988
Pratt, Dr. Shannon P., ASA, CFA, “Understanding Capitalization Rates.”
Valuation. American Society of Appraisers, 1986. Vol. 31, No. 1
34th Edition Rental Rates Compilation. Associated Equipment Distributors,
March 1983, p. iv
Uniform Appraisal Instructions to Appraisers for FDIC Personal Properties
Company Profile
Biography
Asset Appraisal Corporation was founded as Asset Management in 1984 and has been performing a complete spectrum of
appraisal and consulting services nationwide since 1984 and internationally since 1993. We specializes in Furniture, Trade
Fixtures, Machinery, Equipment, and Inventory Appraisals; Commercial and Industrial Real Estate Appraisals; complete Business
Valuations; Property Management, Asset Management in the forms of Collateral Control, Liquidation Services, Security,
Operational Consulting, Field Operations, etc. Our appraisers are highly educated professionals with specialized valuation
training and we have extensive experience in the utilization of all value concepts and maintain international affiliates qualified
to appraise any type of asset anywhere. Asset Appraisal Corporation’s clients include local, national and international banks,
accounting firms, financial planners, governmental agencies and many prestigious legal firms.
An appraiser’s primary obligation to a client is to reach complete, accurate and pertinent conclusions and numerical results.
The valuation services of Asset Appraisal Corporation are governed by the Principles of Appraisal Practice and Code of Ethics
of the American Society of Appraisers (ASA) and the Uniform Standards of Professional Appraisal Practice (USPAP). Typically,
appraisal fees are calculated on an hourly and analytical services rendered basis plus actual incurred expenses. Overall fees
will vary depending upon the nature and complexity of the assignment as well as the type and quality of financial information
that is available.
Professionalism
Valuation is a complex and demanding field requiring training, experience and judgment, and the professional appraiser is
fully committed to the field. The professional appraiser is able to keep abreast of changes in appraisal theory and techniques;
markets; economics; legal procedures and rulings, as well as regulatory agency standards. The professional is familiar with IRS
valuation guidelines and the necessity of performing an appraisal to comply with applicable Revenue Rulings.
The professional appraiser will work closely with owners, attorneys, accountants and other specialized appraisers in a team
effort to prepare a valuation suitable for each situation. This dedication yields accurate, defendable, cost effective service for
the client.

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Appraisers will develop replacement and/or reproduction cost, market values, as well as liquidation values. Further, they provide
estimates determining effective age and future residual values to the leasing, financial and accounting markets.
If the valuation is challenged, the professional appraiser will be experienced and capable of providing expert witness testimony.
A professional appraiser will provide an unbiased, knowledgeable “third-party” viewpoint for the court to use in rendering
decisions.
Asset Appraisal Corporation not only offers furniture, fixtures, machinery and equipment appraisal services, commercial and
industrial real estate appraisal services, complete business valuations, but also asset management in the forms of collateral
control, liquidation services, security and operational consulting, field operations, etc.
Valuation
It is essential that an independent, unbiased professional determine value in many situations including:
New Loans And Asset-Based Lending A value must be determined to establish collateral requirements
Divorces A fair and independent value which can be supported with testimony is
essential to ensure settlement and distribution of community assets.
Litigation Measure of damages, Ad Valorem tax appeal, any area where a True Value
must be determined.
Employee Stock Option Plans (ESOPS) Closely-held businesses that offer ESOP plans require an annual valuation
to meet IRS and ERISA requirements.
Mergers And Acquisitions When buying or selling a business, a fair market value must be determined
including consideration of value for minority interests.
Financial Planning For planning and funding future personal and business financial needs and
meeting potential tax liabilities.
Estate And Gift Taxes, Donations A well-documented value is necessary to support reported information to
the Internal Revenue Service.
Other Reasons Buy/sell agreements, fairness opinions, partnership dissolutions, leveraged buy outs,
“squeeze out” mergers, bankruptcy proceedings, and insurance valuation.
About the Author
Larry L. Perdue, ASA, M.V.S. | Resume & Qualifications
Experience
July 2006-Present Asset Appraisal Corporation - Executive Director, appraiser, expert witness, liquidation consultant, field
operations, court-appointed receiver. Extensive background in furniture, trade fixtures, machinery and
equipment appraisals nationally and internationally.
2000-Present Business Valuators & Appraisers, LLC - Director of Appraisal & Brokerage Services, a sister
professional service company to D.R. Payne & Associates.
April 1999-July2005 Asset Development & Management Corporation - President & Owner
February 1991-1995 Asset Auctioneers Incorporated - President & Owner
May 1988-July 2006 Asset Appraisal Corporation - President, senior appraiser, expert witness, liquidation consultant, field
operations, court-appointed receiver. Extensive background in furniture, trade fixtures, machinery and
equipment appraisals nationally and internationally.
October 1984-Present Asset Management - Owner, responsible for machinery and equipment appraisals, sales, liquidation
consulting, auctioneer, and court-appointed receiver. Extensive background in sales and liquidation
of machinery, equipment, furniture, fixtures and inventory; (October 1984 to present) machinery and
equipment appraiser, liquidation consultant, court-appointed receiver.

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Education
Master’s Degree in Valuation Sciences (M.V.S.) - Lindenwood College, St. Charles, Missouri (1992); Bachelor of Science Degree
- Central State University, Edmond, OK (1979); Numerous appraisal classes and seminars on a continuing basis
Professional Memberships, Associations
American Society of Appraisers - Accredited Senior Appraiser (ASA), Machinery/Technical Specialties: Machinery and
Equipment, Certified January 1988; Past State Director, President, and Treasurer (in addition to other chair positions) of the
Oklahoma/Arkansas Chapter of American Society of Appraisers
Areas of Expertise
Appraisal of assets for any purpose; asset tagging and database management of assets; banking and computer equipment;
construction and contractor's equipment; electric generating equipment - steam/gas turbines, natural gas, etc.; farm
machinery and feed mills - grain elevators; fiberglass mfg. - tanks, fittings, boats, swimming pools, etc.; firearms; food
processing and packaging equipment; heat treating facilities - metal and glass; hotels, motels, amusement parks, and
recreational facilities; inventories - raw materials, work in process, parts and components, finished goods; laboratory
instruments and testing equipment; manufacturing plants - all industries; medical equipment - conventional and high-tech;
medicine and pharmaceuticals; metal production; metalworking, plastics, and woodworking equipment; office furniture, trade
fixtures, machines, and equipment; oil and gas industry exploration - seismic mapping, drilling, completion, production and
refining; printing plants, pre-press, sheet fed, web, binary, etc.; radio/broadcast/telecommunications/fiber optics transmission
equipment; restaurant and food service equipment; service equipment-automotive, truck, etc.; vehicles, transportation, aircraft,
marine - all classes; and, video/arcade game equipment and vending machines; and including many other categories and/
or types of assets; court - appointed receiver and liquidator; expert witness - local, state, and U.S. district courts - Oklahoma,
New Mexico, Texas, Kansas, Maryland, and Arkansas; asset liquidator - U.S. Bankruptcy Court, Western District of Oklahoma;
equipment sales and liquidation consultant
Value Concept Experience
Reproduction Cost, New; Replacement Cost, New; Insurance Replacement Cost; Insurable Value Depreciated; Fair Market Value
(Exchange); Fair Market Value In Continued Use; Fair Market Value Installed / In Place; Fair Market Value (Removal); Liquidation
Value Installed / In Place; Orderly Liquidation Value; Forced Liquidation Value; Salvage Value; Scrap Value
Miscellaneous
Instructor and speaker for FDIC's "Understanding and Interpreting Appraisals," and State of Oklahoma/County Assessors
Conference's "Appraisal of Oil Field and Related Machinery and Equipment"; Instructor - American Society of Appraisers,
Machinery and Technical Specialties Valuation Courses MTS 201, 202, 203, and 204; Former instructor and committee
member "Curriculum Development": International Valuation Sciences Institute, Lindenwood College, St. Charles, Missouri;
Published Author: The M&E Appraiser "Crash of '87 - Capital Spending for Machines & Equipment," October 1988, The
M&E Appraiser "Fixtures: Realty or Personalty?,” Spring 1989, The M&E Appraiser - "FDIC Rental Value: A Non-Traditional
Approach," Winter 1989, The M&E Appraiser "The Impact of Ownership and Transfer of Rights on the Valuation of Software
Programs," co-author, Winter 1991; Developer of Market Value Rental Methodology for the Federal Deposit Insurance
Corporation; Former Instructor - International Valuation Sciences Institute, Lindenwood College, St. Charles, Missouri; Past
Member - Curriculum Development Committee, International Valuation Sciences Institute, Lindenwood College, St. Charles,
Missouri; Member - Educational Committee, International Valuation Sciences Institute, Lindenwood College, St. Charles,
Missouri (a subcommittee of the American Society of Appraisers' International Education Committee); Co-author - The
American Society of Appraisers, Course IDEV200, Principles of Valuation

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Why Net Book Value Does Not Equal Fair Value

J. Fernando Sosa, ASA, MRICS
In valuing assets for financial reporting purposes, it is critical to understand that Net Book Value
(“NBV”) is NOT an appropriate measure of fair value for machinery & equipment (“M&E” or “Asset”)
related to financial reporting.
To begin this discussion, it is important to define several important terms and have a clear
understanding of their place when debating the application of NBV as an appropriate measure of fair
value for assets.
Net Book Value1
“The cost of an asset (the amount that was paid for it) minus accumulated depreciation for financial
reporting purposes.”
Fair Value (ASC 805)2
“The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between marketplace participants at the measurement date. (This statement also explains that a fair value measurement of an
asset assumes its highest and best use by market participants. Such use would maximize the value of the asset or group of
assets within which the asset would be used, regardless of the intended use of the asset by the reporting entity.”
Normal Useful Life3
“The physical life, usually estimated in terms of years that a new property will be actually be used before it is retired from
service. A property’s normal useful life relates to how long similar properties actually tend to be used, as opposed to the more
theoretical economic life calculation of how long a property can profitably be used.”
As previously mentioned, NBV and fair value are two very different concepts. NBV is the result of a depreciated asset minus its
original cost. Accounting depreciation does not consider the following:
• Physical condition of the assets
• Improvements or partial retirements made to the assets
• Changes in the effective age of the assets
• Functional or economic obsolescence factors
The following three examples related to tax accounting, GAAP accounting, and valuation demonstrate the differences between
NBV vs. Fair Value.
Example 1
Tax Accounting Perspective
In tax accounting, NBV calculates the annual depreciation of the assets with the purpose of reducing the taxpayer’s tax liability.
Once the normal useful life of the asset has been fully depreciated, the NBV goes to zero and, as a result, there is no longer a
tax benefit to the taxpayer. In the case of tax accounting, Modified Accelerated Cost Recovery System (“MACRS”) lives, which
are published by the IRS, are typically used. MACRS lives are designed to recapture the cost of assets used in the operation of
a business at an accelerated pace. This increases cash flow and, as a result, provides opportunities to reinvest the additional
cash flow.

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MACRS lives are divided into the following categories:

5 YR. Assets used in the direct operation of a business (i.e. a conveyor belt, fork lift, production line, etc.)
7 YR. Assets used in support of a business (i.e. desks, chairs, etc.)
15 YR. Land improvement assets (i.e. concrete and asphalt paving, site lighting, landscaping, etc.)
20 YR. Specialty assets (i.e. transmission, interconnect systems, substation, etc.)
27.5 YR. Residential / multi-unit family housing (residential homes, apartments, etc.)
39 YR. Commercial building (i.e. office buildings, warehouses, distribution center, etc.)
Suppose a vehicle was acquired at an original cost of $30,000 in 2008 and used in the operation of a business as a delivery
van. The appropriate MACRS life would be five years. Since the asset has an effective age (“EA”) (2016-2008 = Eight Years) of
eight years, and the MACRS life is five years, there is a negative three years remaining useful life (“RUL”). The asset is therefore
fully depreciated, and there is no longer a tax benefit resulting in a NBV of $0.00. Table 1 below illustrates the calculation
applied in arriving at a NBV of zero.
Table 1:
Sample NBV Calculation for Tax Accounting as of December 2016
Asset Historic Cost Placed in MACRS Life EA RUL Depreciation NBV
Description Service Year
Delivery Van $30,000 2008 5 8 -3 100% $0.00
Example GAAP
Accounting Perspective
From an accounting perspective, the calculation of NBV follows guidelines set forth by US GAAP. The overall principle is the
same as in tax accounting in the sense that a normal useful life is identified utilizing either MACRS lives, accounting lives, or
lives determined by the business owner. Once the asset has surpassed its normal useful life, the NBV goes to zero - regardless
of whether the asset is still in use and generating income.
Table 2 considers the same example as in Table 1, but from an accounting perspective under US GAAP.
Table 2:
Sample NBV Calculation for TUS GAAP Reporting as of December 2016
Asset Historic Cost Placed in Client EA RUL Depreciation NBV
Description Service Year Provided
Normal
Useful Life
Delivery Van $30,000 2008 8 8 0 100% $0.00
In Table 2, the business owner has determined an eight-year normal useful life for the asset. The effective age is eight years,
leaving a remaining useful life of zero. As in Example 1, the asset is fully depreciated resulting in a NBV of zero.
Initial Observations
In examples 1 and 2, two different normal useful lives have been applied. Five years was applied related to the tax accounting
example and eight years was applied for US GAAP reporting. But both examples show an end result of NBV zero. However, the
asset still exists and is producing an income. Maintenance expenditures are still being applied to this asset. Is it reasonable to
assume that the fair value of the asset is also zero?

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Example 3
Valuation Perspective
In valuation for financial reporting, the purpose is to calculate fair value. In doing this, a valuation specialist must consider the
three approaches to value which are the income, cost, and market approach.
Table 3 provides a simplified indirect cost approach to calculate the fair value of the asset.
Table 3:
Sample Fair Value Calculation as of December 2016
Asset Historic Placed in Trend RCN Normal EA RUL Depreciation Fair Value
Description Cost Service Factor 4
Useful Held at (Rounded)
Year Life5 Salvage
Value6
Delivery Van $30,000 2008 1.0940 $32,820 8 8 0 10% $3,300
As previously stated, we have applied the indirect method of the cost approach where:
Historic Cost x Trend Factor = Reproduction Cost New (“RCN”)

RCN x Depreciation = Fair Value.
In performing M&E valuation, there are other factors that can impact the fair value. Factors that can increase the fair value are:
• Upgrading a production line or piece of equipment
• Standard maintenance procedures
• Replacing key components of an asset.
On the flip side, a number of factors can decrease the fair value of an asset. These would be identified through decreases in
the effective age, as well as functional or economic obsolescence penalties. Examples of these penalties include, but are not
limited to, a poorly maintained asset reflecting a higher rate of physical deterioration than a well-maintained one.
Examples of functional obsolescence would include:
• Excess operating costs
• Excess construction costs
• Over-capacity
• Inadequacy
• Lack of utility or similar conditions
Examples of economic obsolescence would include:
• Economics of the industry
• Availability of financing
• Loss of material and/or labor sources
• Passage of new legislation
• Changes in ordinances
• Increased cost of raw materials, labor, or utilities
• Reduced demand for the product
• Increased competition
• Inflation or high interest rates or similar factors

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In the application of the cost approach, the three forms of depreciation (physical deterioration, functional obsolescence, and
economic obsolescence) should be considered when calculating the fair value of assets.
Additionally, as discussed above, there are many factors that must be considered when performing a valuation, in addition to
what is typically expressed within the NBV.
It is important to reinforce that among the three approaches to value, the income approach is rarely applied by M&E appraisers.
However, depending on the type of asset, the market approach or a combination of the market and cost approach can be more
applicable in determining the fair value of the asset.
Application of the Market Approach
The market approach is most reliable when there is an active market yielding a sufficient number of sales of comparable
properties that can be independently verified through reliable sources. This approach focuses on the actions of real buyers and
sellers. In theory, the market approach measures the loss in value from all forms of appraisal depreciation and obsolescence
that are inherent in the asset. This is assuming that proper adjustments are made to the comparables reflecting the difference
between them and subject assets.
Table 4 compares the NBV versus the fair value of the delivery van mentioned earlier in this article:
Table 4:
Comparison Table NBV vs. Fair Value
Applied Method NBV Fair Value
Table 1: Tax Accounting Perspective $0.00 $0.00
Table 2: Audit Accounting Perspective $0.00 $0.00
Table 3: Valuation Perspective $0.00 $3,200
If the NBV is zero, does this mean that we now have a delivery van that is eight years old and worthless? Does this mean
that we cannot trade this in for a new delivery van? Couldn’t we sell this van to a third party? Using NBV as fair value is not
reasonable in this example.
If we were to sell this delivery van after eight years, what may be some selling points to advertise?
• Low miles (adding life – changing the effective age and value)
• Clean interior (adding life – changing the effective age and value)
• Maintenance records available (adding life – changing the effective age and value)
• Original Owner (adding life – changing the effective age and value)
• Never been in an accident (No increased physical deterioration)
In essence, what are we really discussing? This is an attempt to mimic the market’s interpretation of the effective age of the
asset and, as a result, potentially increasing the fair value of the asset.
Another factor is the normal useful life used in the calculation of the fair value. Whereas the owners may possibly apply their
own normal useful life or use MACRS lives, appraisers use actual service lives. In the case of a delivery van, actual service lives
can range from five to eight years. As mentioned in the selling points above, appraisers will also consider adjustments to the
effective age.
Appraisers consider the income, cost, and market approaches to value when performing a valuation. Whereas the calculation of
net book value is an accounting function, this does not provide a true representation of the fair value of an asset.
Conclusion
The delivery van is a simplified example to illustrate the differences between NBV and fair value. One must consider that, for an
asset-intensive business, the differences can be more severe, showing a significant difference between NBV and fair value. It is
important to have a professional machinery and equipment specialist - someone who understands the many factors affecting

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the fair value - perform the valuation of the assets. A professional valuation specialist will calculate the fair value of an asset,
ensuring that an accurate representation of the asset has been considered and applied in the final conclusion of fair value.
About the Author
J. Fernando Sosa, ASA, MRICS, is the manager of machinery and equipment appraisals for Cohn Reznick Advisory Group’s
Valuation Advisory Services practice who is based in the Chicago. Fernando is an Accredited Senior Appraiser (“ASA”)
designated in the discipline of Machinery and Technical Specialties with the American Society of Appraisers and a Member
of the Royal Institution of Chartered Surveyors (“MRICS”). With 15 years of experience, Fernando specializes in appraisals of
tangible assets in both domestic and international appraisal projects. These appraisals are performed for a variety of purposes,
including asset based financing, purchase price allocations, insurance purposes, personal property tax, gift, estate, International
Financial Reporting Standards (“IFRS”), mergers and acquisitions, feasibility study, and litigation support. Fernando is fluent in
Spanish and has performed appraisals for clients throughout the United States and for multinational clients in England, Spain,
México, Panamá, Dominican Republic, Chile, El Salvador, Colombia, and Puerto Rico. For more information, please contact
Fernando Sosa, ASA, MRICS, Senior Manager in CohnReznick’s Valuation Advisory Services Practice, and machinery and
equipment appraiser, at fernando.sosa@cohnreznick.com or 312-508-5443.
1
Machinery and Technical Specialties Committee of the American Society of Appraisers, Valuing Machinery and Equipment: The Fundamentals Appraising Machinery and
Technical Assets, 3rd ed. (Washington DC.: American Society of Appraisers, 2011), page 522
2
Machinery and Technical Specialties Committee of the American Society of Appraisers, Valuing Machinery and Equipment: The Fundamentals of Appraising Machineryand
Technical Assets, 3rd ed. (Washington DC.: American Society of Appraisers, 2011), page 523
Ibid, 545
3
54
http://data.bls.gov/pdq/SurveyOutputServlet;jsessionid=31E0ABC421E474437BBC05DC3E890879.tc_instance4. Accessed September 20, 2016.
5
Machinery and Technical Specialties Committee of the American Society of Appraisers, Estimated Normal Useful Life Study (Herndon, VA: American 7Society of
Appraisers, 2010), page 8 of 94
Corelogic: Marshall Valuation Service, September 2016 (Los Angeles, CA, 2016), Section 97 Page 26
6

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A Perspective on the New Normal for the Aircraft Market. All of
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here are three major components to aircraft market to be hired, engine makers have to up production, avionics negative
values and to name just a few, several less influential manufacturers have to ramp up. All of these major compo- ply matc
factors such as brand reputation, product support, and nents take highly trained workers, materials and many of should a
current production. The major three are: Inflation, Supply/ these are aviation specific. Chances are if the aviation market hold ma
Demand, List Price/Discount. The three are highly inter- demand is going up the overall world economy is going up It is a
twined and need to be examined together. creating completion for resources between our industry and more in
Lets start with inflation. Recently a very popular price commercial products. a differe
index book used a plane that had a value of $3.7M new The end result is large swings in the supply/demand equa- resale v
in 1978 and now was selling for 12% of new at $450,000. tion, which makes for large swings in pricing. The secondary you pre
Doesn’t sound too bad until you factor in the inflation adjust- problem is how the demand cycles match up over time and market w
ment since 1978. After adjusting for inflation the real resale normal replacement aircraft cycles. Typically, new aircraft
percentage is 3.3% of new! Using another example, a 2000 are traded either every 5 or 10 years. If a high demand cycle
G lV in 2005 sold for 77.5% of new, however adjusting for coincides with a previous 5 or 10 year low supply, then
inflation it was really selling for 68.8% of new. used planes will enjoy higher prices. If it happens that the
Looking at the history of inflation rates, from 1996 to 2006 low demand cycle is matched with a 5-10 year high supply
inflation went up 28.5%, or on average 2.85% per year. 2006 period then there is pressure on the residual values due to
to 2016 the rate was 18.7%, or 1.87% per year. And finally over supply of late model aircraft.
looking at 2009 to 2016 only 11.5% or 1.43% per year. Over The third major leg of the stool is the OEM’s and their pric-
the last 14 years, the first 7 of those the rate of inflation was ing/discounting. There are two elements to the pricing. OEM’s
just over twice what it has been in the last 7 years. typically raise prices at a rate close to inflation. However, the
Without any supply/demand issues in the equation, a first pricing pressure comes when OEM’s are continuing to
person with a frame of reference for resale values based on raise prices faster than the real inflation rate. From the first
1996 to 2006 would see a reduction in value expectations of part of this article on inflation, if the inflation rate slows the
9.8% from 2006 to the first quarter of 2016. This expectation appearance of residual values going down also happens. If
is based solely on not considering the inflation adjustment there isn’t significant improvements in the aircraft, this makes
when considering residual value percentages. late model used planes appear more appealing.
Therefore, when looking back, it is important to calculate The OEM finds themselves with a high list price, the fall-
residual value percentages adjusted to inflation. Your expec- ing of residual values due to a slow down in inflation. We
tations will be more in line with the real depreciation figures. now add low demand and high supply and the OEM’s have
Supply/Demand is basic economics 101. Due to long lead only a couple of choices, sit on white tails or discount to
times for ramping up production in good times and slowing keep the white tails off the ramp and as quickly as possible
production in lean times this obviously has a high influence start lowering production rates.
to pricing. Supply takes long periods of time to turn on or off, Accordingly, residual values are further impacted. The dis-
while demand can be a seismic event like 9/11, stock market counting by the OEM directly affects the resale value of the
crash, banking crisis or any major world economic event and used plane. The percentage of new just a few years ago when
literally the demand can be reduced drastically within days. planes were selling at full list can be easily be lowered 10%
On the increased demand side, while it takes longer for or more just because of new aircraft actual sales prices. All
the demand side to heat up, it takes years in some cases for of your residual value projections have gone out the window
the production side to meet the new demand. Workers have unless you have factored in a bad cycle.

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We have the puzzle put together, but what does it tell us adjustment based on the supply/demand pressures, so you
about today and more importantly tomorrow? should be positioned for a possible higher residual the next
If inflation stays lower than your period of reference, you time given the typical cycles and historic inflation.
can expect lower resale value percentages. Adjusting for A recession could slow the recovery of values and if it hap-
inflation can help you determine how much of the resale pens during or prior to 2018, will make prices feel downward
percentage is due to inflation or outside sources. pressure, however by this time, the 5 year old aircraft will
Looking back at production rates can help you determine already be coming from the lower production rate time period.
how much potential over supply is out there versus the cur- What down turn would come from a recession in the next cou-
rent demand. This means price pressure until the supply side ple of years will be tempered that it isn’t coming after a high
is reduced or the demand goes up. Buying in the low produc- demand and supply as it has in previous recessions, but in a
tion side is typically more advantageous. When buying in high low supply/low demand cycle which should make the drop in
demand understanding the potential price pressures and what our industry less severe. New models that offer improvements
the low band of the market can be will help lower the future that the market places value on will also allow for the OEM to
shock value. As the industry absorbs the high supply years maintain a better pricing strategy. It should take several years
up to the fourth quarter of 2008, (with 2009 being the year the for the OEM’s to ramp up production and perhaps save them-
OEM’s started getting the pipeline slowed), given the current selves from a drastic over supply situation.
demand expect price pressure from below. The new normal is going to be more reflective of a mature
All of the OEM’s have made significant production reduc- market that has products that last 25+ years. Demand may
tions to hopefully meet the current demand. If nothing not get to another bubble and be steadier which will be good
negative happens, we should see the new demand and sup- for everyone in the long run. More analysts will pay atten-
ply match up more evenly in the next couple of years. This tion to adjusting for inflation in doing residual value analysis
should allow for stable prices to an uptick in the ability to resulting in a clearer picture of the true depreciation. Business
hold margin on new prices. aviation will survive and flourish, as even with the best tech-
It is a good time to be a buyer. Prices may dip a little nology, there isn’t anything like being there in person. •
more in the next year or so, however, not enough to make
a difference if you are buying to own for 5-10 years. Your ABOUT THE AUTHOR
resale value on anything you have to trade is lower than Mike McCracken, owner of Hawkeye
you predicted, however adjusting for inflation, the current Aircraft Acquisitions, is a 30+ year
market whether new or used, has made the same percentage aviation veteran.
About the Author

Mike McCracken is President of Hawkeye Aircraft Acquisitions, a boutique aviation consulting,
acquisition firm and valuation firm. He is a 38 year veteran of the industry, is a current ATP pilot with
3 type ratings, 28 years selling for two major OEM’s and an ASA Senior Aircraft Appraiser. Hawkeye is
based out of the Tampa Bay area. He can be reached at mike@hawkeye-aircraft.com

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Valuing Assets in Extractive Industries

A l e x a n d e r L o p a t n i k o v, A S A , R I C S
Extractive industries showcase for an appraiser the importance of understanding the market,
composition of assets of a mine, or oil and gas deposit, and their economic contribution to value
of the project, or company they are part of. A brief introduction to valuation in extractive industries
provided in the following sections addresses four major topics illustrated using mining industry as an
example.
• What is special about extractive activities
• Unit of valuation in extractive industries
• Challenges in valuing a mineral company
• Valuation best practices and international valuation standards for extractive industries
The growing interest in valuation of extractive industries assets in recent years coincided with a so
called golden age of commodities, largely driven by an unprecedented growth of China’s economy,
the world’s largest producer and consumer of metals.
For appraisers, assets of extractive industries companies may be challenging to value due to their specific attributes and the
fact that analysis of these assets involves use of methods from various valuation disciplines, and requires specific industry
expertise. Interestingly, all new topics added to the latest 2011 edition of the authoritative MTS book1, are very relevant
for valuation of assets in extractive industries, including valuation of process plants, appraising assets in groups, valuation
for financial reporting, cost segregation studies, and international
valuations. This breadth of knowledge and competencies required to
value tangible assets of companies in extractive industries is reflected “Mineral Assets means all property including
in the unit of valuation typically used by the mining industry - mineral but not limited to real property, intellectual
property, mining and exploration tenements
asset2.
held or acquired in connection with the
What is special about extractive industries may be seen by simply exploration of, the development of and the
looking at their key investment attributes. Mineral properties evidence: production from those tenements together with
global dislocation of mining assets and their consumers; typically all plant, equipment and infrastructure owned
owned by international investors; they are subject to specific regulation or acquired for the development, extraction
as host countries require a fair level of mineral rent; and, what could and processing of minerals in connection with
be appreciated by plant and machinery appraisers, they are very those tenements”
capital intensive and are subject to market risks, in other words Valmin
change in value due to external factors, of which commodity prices are
among most significant ones.
Another important consideration when analyzing mining industry assets is risk profile of projects in the industry that changes
as mining project evolves from a prospect, to an exploration project, to a resource property, to an undeveloped reserves
property, to a built and producing mine. During early stages such project is primarily a speculative undertaking with most costs
representing intangible or information assets. Whereas at later stages it is primarily an indivisible combination of tangible
assets, including plant and machinery, structures, mine development costs and value attributable to mineral reserves. Assigning
values to individual items of plant and machinery for a developed and producing mine is essentially an allocation of value of a
mine to specific elements, primarily required for purposes of financial reporting, or asset management.
It is worth nothing that unlike an industrial manufacturing plant, a mine, or an oil and gas deposit earns income by depleting (or
liquidating) their core tangible asset, e.g. its mineral reserves. It is also important to remember that reserves estimates are not

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constant, and are changing depending

on expected commodity prices. This
makes reserves component of the
tangible assets value of a mine to be
more volatile than value of fixed assets
in other asset heavy industries, say
utilities.
Any valuation due diligence starts with
a question of what a mining company
consists of? It generally will have all
asset classes appraisers typically
consider: land, buildings and structures,
plant and machinery, communication
and office equipment. There may also
be some intangible assets, typically
related to exploration activities, such as maps, surveys, logs, drawings, samples, cores, packages of data on prospects or
projects, and other costs related to unproved properties. At the end of mine’s life its mineral assets turn into liability related
to closure and site remediation costs. Financial reporting in extractive activities require both such obligations, called asset
retirement obligations, or ARO, and a counterbalancing asset to be recognized and accounted.
Many companies report tangible assets of a mine as one mining asset, but most also separately show value of plant and
machinery assets, primarily for accounting or asset management purposes. Most plant and machinery assets used by mining
companies are purpose built to produce specific commodity in a remote location. This implies that plant and machinery
delivered to the site would have no alternative use value (other than some pieces of equipment and vehicles, that could have
some secondary market). A debate on whether value of mineral
A rare and instructive example of significant goodwill rights is an intangible, or tangible asset has been settled by
reported in a mining acquisition. All goodwill was written Financial Accounting Standards Board, or FASB, which instructed
off in just two years after the purchase. that for accounting purposes they should be considered tangible
Asset 2010 assets3.
(acquisition)
The asset that is very rarely seen on a mining company’s balance
Cash and cash equivalents $742.6 sheet is goodwill. Although there is no explicit prohibition to
Accounts receivable and other assets $27.0 reporting goodwill in extractive industries, it is generally believed
not to be present at the level of a mine, or be immaterial. The
Inventories $115.2 logic may be understood by analogy with real estate properties,
PPE (including mineral interests) $1,765.8 which derive value from unique location, and supply and demand
Accounts payable and accrued liabilities $(103.4) situation, rather than some going concern element, or unique
synergies of several assets that are traditionally captured by
Future income and mining tax liabilities $(311.5) goodwill. In those very rare instances were companies reported
Other long-term liabilities $(34.3) large goodwill as a result of acquisitions these were typically
followed by write-offs of goodwill in subsequent reporting
Non-controlling interest $(3.9)
periods. One will often find it explained by external factors, i.e.
Goodwill $5,161.1 deterioration of market conditions, price corrections and costs
Total purchase price $ 7,358.6 inflation. However, in no small part it is a result of incorrect
valuations and exuberant optimism of buyers often resulting in
Source: Kinross Gold Annual Report 2011
overpayments. Kinross Gold acquisition of Red Back in 2010

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which resulted in recognition and subsequent write-off of some $5bn of goodwill well explains reluctance of the extractive
industries to consider goodwill a relevant element of value of a mineral asset.
That said, the fact that extractive industries are dominated by complex and specialized assets, as well as their endemic
cyclicality means that extensive risk-return analysis is mandatory in order to understand value of their assets. In appraisers’
parlance this means these assets are prone to functional and economic obsolescence. Where and when this is the case, it
brings an interesting and sometimes confusing question - what class of assets the related economic obsolescence loss, if
present, should be applied? Or more specifically, should value of the mineral reserves be adjusted before any loss is allocated
to plant and machinery assets?
Since extractive industries are special and issues confronting appraisers are many, it may be expected that there have to be
special standards to guide valuation in extractive industries? Unfortunately, there are none provided by either ASA, or IVSC
(International Valuation Standards Council). Some may remember that from 2005 until 2011 IVSs included, what we believe
was a quite meaningful Guidance Note #14 “Valuation of Properties in the Extractive industries”. However, it was later removed
from IVS (International Valuation Standards) to be improved and updated by a group of international experts4, including the
author of this publication. Sadly, subsequent changes in IVS and discontinuation of extractive industries project by International
Accounting Standards Boards or IASB, resulted in a situation where instead of possibly an imperfect guidance, appraisers now
have no guidance at all developed by the international valuation industry.
Absent international valuation standards produced by IVSC most practitioners use or refer to the mining standards developed
in Australia, Canada and South Africa, known as Valmin5, Cimval6 and Samval7, respectively. A cautionary note for an appraiser
of plant and machinery – these industry specific standards have been largely developed by geologists, so they may not be
fully consistent with the International Valuation Standards, USPAP, or financial reporting standards, such as US GAAP, or IFRS
(International Financial Reporting Standards). The most
controversial to many valuers is, so called, technical value
- an unobservable and subjective indication that these Components of the Cost Overrun of a Mining Project
standards consider as a major basis of value. Evolution of cost estimates for Pascua-Lama Project
At the same time, it goes without saying that every mining 2001 - $950 million (initial estimate)
valuation is reliant on resources, or reserves statements 2009 - $3bn (go ahead decision was made)
prepared by a competent person, a geologist, in accordance 2013 - $8bn-$8.5bn (including 25% contingency)
with some national or internationally recognized code, such
The key factors contributing to the capital cost increase:
as JORC8, NI43-1019, or Samrec10. Appraisers undertaking
valuation of assets in extractive industries need to
understand the requirements of the above reporting codes,
the definitions used, including the difference between
exploration results, resources and reserves.
With their remote location and lack of alternative use most
and often all of plant and machinery deployed at a mine are
typically considered specialized assets. In such situations
the appraiser often relies on historical costs and data from
feasibility studies, or project design documentation. These
costs however need to be reviewed critically and require
additional due diligence. A common belief of the mining
industry (as well as many other asset heavy industries) that
feasibility studies are a good proxy of project replacement
costs is unfortunately not supported by evidence with many Source: Barrick-2012-Second-Quarter-Report
mining projects facing significant time and budget overruns.

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Location and access differences, geological and mining peculiarities, as well as other salient attributes of mining projects
make their comparison extremely difficult, which has long been recognized in the industry often claiming that no two mines are
similar.
When reviewing replacement costs of a mining project an appraiser should also mind significant difference in parameters of
specific equipment, its manufacturer and origin, as well as currency the costs are nominated in. It would not be unusual to
see a large difference in costs for what may seem very similar mining equipment provided by manufacturers from different
countries. There is also a significant impact on the project’s costs of the local currency exchange rate to the US dollar, which in
major mining countries tends to correlate with the price of commodity produced in and exported from that country. The latter
includes currencies of not only emerging economies, but currencies of developed countries with a significant mining sector,
such as Australia, or Canada.
In most cases a mine could be considered as a separate business, or cash generating unit (or CGU – terminology widely used
in IFRS), it would not be unusual to see several mines delivering run of mine to a common beneficiation plant, or a mill owned
and operated by an unrelated third party. When the industry enters a downturn phase of the economic cycle, estimation and
allocation of economic obsolescence to mine and mill may become tricky and will require professional judgement and industry
expertise.
Conclusion
This very brief introduction was intended to give a feel of complexity and challenges related to valuation of assets in extractive
industries, as well as the need to promote best practices and develop valuation guidance for the industry. For further
information, interested appraisers are advised to refer to various publications which discuss numerous specific questions
related to valuation of mining and oil and gas companies.
About the Author
Alexander Lopatnikov ASA, RICS is a managing director of American Appraisal in Russia and the CIS focused at providing
valuation opinion and advisory services to publicly listed and private mining companies.
Mr. Lopatnikov is a frequent speaker at international conferences. His recent speeches and publications addressed emerging
issues in mineral economics, mining finance, international valuation and reporting standards for extractive activities.
He is a member of the group of international experts developing international valuation standard for extractive industries and
the groups that developed various guidance notes for International Valuation Standards Committee (IVSC) and RICS.
He is also a member of ASA, RICS, and a deputy chairman of the Mineral Economics chapter of the Russian Natural Resources
Experts Association (OERN).
American Society of Appraisers (2011). Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets.
1
2
Valmin is a set of valuation standards for mineral and petroleum assets developed in Australia and used in many other countries.
http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175820903901&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs
3
http://www.valmin.org/code2015.asp
4
http://web.cim.org/standards/documents/Block487_Doc69.pdf
5
http://www.samcode.co.za/codes/category/8-reporting-codes
6
7
http://www.jorc.org/docs/JORC_code_2012.pdf
8
http://web.cim.org/standards/MenuPage.cfm?sections=177,181&menu=229
9
http://www.samcode.co.za/codes?download=120:10082016-samrec

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American Society of Appraisers - Update

ASA Reaccreditation Program Change Announcement
Dear Members,
Reaccreditation processes are moving ONLINE. This new feature will be available in January 2017!
What Does this Mean for You?
All designated members (AM, ASA, FASA) due in/after January 2017 will now be completing their reaccreditation application
processes online. There is no longer a need to submit your CE/OP documentation to ASA’s International Headquarters.
Instead, you will now retain all information for your own personal records and use it as a reference when completing your online
reaccreditation application.
How Will You Know How to Reaccredit Online?
There will be a FREE instructional video available on ASA’s website for you to view which will guide you through the entire
process. We will also be sending you updates and reminders over the next few months to help you prepare for the transition.
What do You Need to do to Prepare for this New Feature?
Not much! You will use the same login information you currently use to login to ASA’s website to access the new online
reaccreditation feature and you will follow the steps from there.
As a reminder, for everyone who is due to reaccredit in/after January 2017, you no longer need to submit CE/OP
documentation to ASA’s International Headquarters.
Stay tuned for updates as we approach the launch date!
Questions about this program change may be directed to asainfo@appraisers.org or (800) 272-8258.

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Upon Receipt of the Inspection Report

Amanda Applegate
Originally published in Business Air Magazine, October 2016, Volume 26, No. 10.
In most cases, when purchasing a pre-owned aircraft, the buyer pays for a pre-purchase inspection
in order to evaluate the condition of the aircraft. A pre-purchase inspection normally consists of a
complete review of the aircraft’s records and a survey of the aircraft’s current condition. Depending
on the type of aircraft and, in some cases, where the aircraft has been located or stored, additional
inspection items may be added to the standard survey. Upon completion of the inspection, the
inspection facility issues an inspection report. This report includes a list of discrepancies or “squawks”
found during the inspection in both the aircraft and the records. The inspection report also includes an
estimate as to the cost of correcting each of the discrepancies found.
What Does a Buyer do Upon Receipt of the Inspection Report?
It is my firm conviction that the foundation for successful use of an inspection report starts before the
aircraft even arrives at the inspection facility. Laying that foundation includes all of the following:
1. Clear language in the purchase agreement as to what a discrepancy is, who pays to repair the discrepancy, and, if there
is a dispute between the parties as to whether an item really is a discrepancy or who pays for the discrepancies, a clear
provision for how such disputes are resolved.
2. With regard to selection of the inspection facility, first the facility must be familiar with the type of aircraft being purchased
– but beyond that, it must be a neutral party. If the inspection facility chosen is also the same servicecenter that has been
maintaining the aircraft, there is an inherent conflict and a different facility ought to be selected.
3. Buyer should hire a full-time technical representative to oversee the entire inspection process. Spending the money to have
a technical representative present for all, or the majority of the inspection, is money well spent.
If the proper foundation has been established, then when the inspection report is received, the next steps should be clear. The
discrepancies listed on the inspection report may include items that must be remedied by the seller prior to closing at seller’s
expense. Items that don’t meet the definition of a discrepancy under the carefully crafted purchase agreement are, therefore,
the buyer’s responsibility.
Assuming the purchase agreement is clear and a technical representative who understands how to read the discrepancy report
is available, sorting the discrepancy list would seem easy. However, my experience is that many items on the report are not
necessarily black-or-white. More often than not, there is some amount of negotiation that occurs between the seller and buyer
regarding responsibility for squawks. The aircraft consultants, brokers, technical representatives and attorneys often play an
important role in these negotiations.
On occasion, the two parties can’t agree on who must pay for a discrepancy. In such a situation, having a clear dispute
resolution mechanism included in the purchase agreement is critical and often allows a neutral party to make the appropriate
determination, enabling the deal to move forward. Once the responsible party has been identified for each discrepancy, the
parties will sign a technical acceptance form and the necessary repairs will be completed.
There is often ambiguity on the responsibility for certain discrepancies – regardless of how carefully the purchase agreement is
drafted. Having the right team of negotiators, the right language in the agreement and an appropriate dispute resolution clause
can sometimes be the difference between keeping a deal going and having a deal fall apart. Laying the foundation before the
aircraft arrives will allow for more success and, as a result, happier buyers.

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About the Author

Amanda Applegate As a partner at Aerlex Law Group, Amanda Applegate brings her outstanding legal expertise as well
as impressive negotiating skills and business savvy to the service of the firm’s clients. Ms. Applegate joined the firm as
Senior Transactional Attorney in 2011 and was named partner in 2016. She specializes in whole aircraft transactions and
has successfully closed hundreds of sales and purchases for aircraft around the world. Additionally, she has a unique
understanding of fractional ownership due to her previous experience in that industry. For over two years, she represented
25 Avantair fractional owner groups following the grounding of the Avantair fleet and subsequent bankruptcy proceedings,
managing the disposition and assessment of all planes and parts, and devising successful sales opportunities for aircraft and
associated equipment, including “as-is” live auctions and recertified brokered sales.
Ms. Applegate graduated from Oklahoma City University School of Law in 1998. Prior to joining Aerlex, she served as Associate
General Counsel and Vice President of Net Jets Services, Inc., where she spent twelve very productive years with the company
that pioneered fractional jet ownership. As the company’s Associate General Counsel, Ms. Applegate directed a diverse range
of business, including multimillion-dollar contract negotiations, contract enforcement, and fractional ownership and leasing,
and daily business matters. She also worked with Net Jets’ sister company, Executive Jet Management, and gained insight
and experience into the field of whole aircraft ownership, management and operations. Ms. Applegate speaks frequently on
business aviation topics to organizations including the National Business Aviation Association. Since 2012, she has been a
featured columnist for Business Air Magazine, writing monthly on key topics regarding the acquisition, ownership and operation
of business aircraft.
Please contact Amanda Applegate at 310-392-5200 or aapplegate@aerlex.com.

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Demystifying Engine Terms

J a m e s B e c k e r, A S A
Navigating an aircraft transaction can be challenging, but valuing an aircraft can be even more
difficult. A simple aircraft price guide lookup can give you a broad range of potential values for your
aircraft, but everything from the number of hours to the condition of the interior affect the value.
However, the one area that can have a substantial impact on your aircraft value is the engines.
Not only can engines greatly influence the value of the aircraft, but the terminology can be very
confusing. Terms like hot section, TBO, rotables and engine programs can not only be difficult to
understand, but each one has a bearing on how much you can realistically expect to receive for your
aircraft. To give you a better understanding, an explanation of some of the most common terms you
are likely to encounter regarding aircraft engines follows.
TBO - Time Between Overhauls
This refers to the time period specified by the manufacturer of an aircraft engine as the maximum
length of time an engine should be operated between overhauls. However, the overhaul of an engine
once it reaches its TBO hours is not mandatory, except for certain commercial operators that have the requirement written into
their operations manual. It is important to be familiar with a particular engine’s TBO. Engine overhaul costs for turbine engines
can range anywhere from $250,000 to well over $1,000,000 per engine. Even though the overhaul requirement may not
be mandatory, the aircraft market places a significant deduction in value that equals or exceeds the cost for overhauling the
engines.
It is critically important to know what the TBO is for a particular engine. The TBO may vary by thousands of hours between the
different engine manufacturers. On some aircraft, there is the potential to have a different TBO on two otherwise similar aircraft
that use the same engine model. There are also some manufacturers that have a calendar life on the engine, as well as a
usage limit.
Engine Overhaul
As defined by the Federal Aviation Administration (FAA), a major overhaul consists of the complete disassembly of an engine,
inspection, repairs as necessary, reassembly, testing, and approval for return to service within the fits and limits specified by
the manufacturer's overhaul data. This could refer to new fits or limits, or serviceable limits.
When reviewing the time since overhaul, it is also vital to ask questions about the overhaul facility. Not all engine overhaul
facilities are viewed equally in the used aircraft market. Although all overhaul facilities must be FAA approved, there are only
a select few that are factory owned or factory authorized engine overhaul facilities. The factory owned or factory authorized
overhaul facilities will only use parts that are approved by and manufactured for the engine maker. This assures that you are
getting the highest quality parts made by vendors who meet the engine manufacturer’s criteria and specifications. The factory
owned or authorized overhaul facilities also have a greater support network with more support personnel and greater resources
than an independent FAA approved repair facility would have. Therefore, there are also more options when it comes to warranty
service with a factory owned or authorized overhaul facility. Although an engine overhaul performed by a facility that is only
FAA approved is perfectly legal, the used aircraft market will usually give that particular aircraft a reduction in value for engines
having been overhauled by a non-factory owned or authorized facility.
Landings/Cycles
According to Beechcraft, a flight cycle is defined as an engine start-up with increase to full or partial power (as required during
normal flight), one landing gear retraction and extension, and a complete shutdown. It is important to know that landings/cycles

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and engine hours are usually different. On one hand, an engine may have plenty of hours remaining before an overhaul is
necessary, but before it reaches that point it may require internal component replacement due to the engine cycle count.
Rotables
This refers to parts in the engine that have specific serial numbers tracked by the operator. This is done because these parts
have a finite life and must be replaced based on usage or age limits. It is essential to be aware of this because you may have
an engine that has been recently overhauled, but has major components that need to be replaced before the next overhaul.
Hot Section
A hot section refers to the portion of a gas turbine engine that operates at a high temperature. The hot section includes the
combustion, turbine and exhaust sections.
Mid-Life Inspection:
This is an inspection for which the scope and frequency are determined by the engine manufacturer. This is usually an
inspection of the engine hot section. Such an inspection may also be referred to as a Major Periodical Inspection (MPI), or a hot
section inspection (HSI).
Engine Programs
Most aircraft engine manufacturers offer some type of an engine coverage program. This is basically an insurance policy/
savings account for your engines. This works by having the owner pay a predetermined amount of money to the coverage
provider for every hour that the engines are used. This benefits the operator in a couple of ways. First, it is an insurance policy
against a catastrophic failure of an engine. If something unexpected, such as a turbine wheel crack were to happen, the service
provider would pay for the expense of repairing the engine and returning it to service. The second benefit is that the operator
doesn’t have to produce a large sum of money when it comes time for the engine overhauls or mid-life inspections. Since they
have been paying the coverage provider for every hour they have operated the engines, these costs are amortized over the life
of the engines.
Some of the better known engine manufacturer coverage programs are: Corporate Care by Rolls Royce, ESP by Pratt &
Whitney, TAP by Williams International and MSP by Honeywell. Plans that are not sponsored by engine manufacturers include
Jet Support Services, Inc. (JSSI) and Power Advantage from Cessna Aircraft.
When assessing an aircraft’s value it is important to note whether the engines are enrolled in a coverage program, and if so,
what that program covers. Most engine coverage programs do not cover engine corrosion, or external foreign object damage
(FOD). Some programs cover only the actual parts used to overhaul an engine, leaving the operator to pay the remaining portion
of the bill, which usually averages 20% - 30% of the total cost. Additionally, just because an aircraft is enrolled in a program,
does not mean that it is 100% covered at the time of overhaul. Several coverage programs allow the operator to enroll the
engine at anytime, regardless of the time since last overhaul. Often, it is not required for the operator to go back and pay for
the hours used before the enrollment. This will give the operator the benefit of the insurance program with a pro-rated amount
of coverage at overhaul, depending on when in the cycle the engines were enrolled. This is essential, because an aircraft may
be advertised with its engines on a coverage program, but the current operator will have to make a significant contribution at
overhaul time to cover the deficit. The only way to know for sure what is covered is to obtain a copy of the service contract from
the service provider, and to make sure the payments are not in arrears.
It should also be noted that if the operator hasn’t been operating the aircraft under the guidelines of the engine manufacturer,
this could void any insurance coverage program. For example, during the economic turmoil of the past several years, hundreds
of aircraft have been repossessed by their lien holders. Many of these aircraft were more or less abandoned by their operators.
As a result, these aircraft were left unattended for months or even years in some cases. All turbine engine manufacturers have
requirements for engine low utilization and storage. Failure to follow these guidelines exactly could very likely lead to engine
corrosion and would most certainly void the coverage program. So it is critically important to find out how the aircraft has been
operated prior to making a purchase.

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Putting it All Together

Whether you are appraising or purchasing a used aircraft, the points of concern are the items that affect the price. Special
attention must be paid to the engines, as this is where a significant amount of the aircraft’s value lies. A full understanding of
the aircraft’s engines is crucial to determining its overall value. Although we only touched on engines in this article, there are
a great deal of other items that determine the aircraft value that and each one carries its own terminology. Being an expert
in determining how they influence the price takes many years of experience but will ultimately get you the most out of your
aircraft.
About the Author
James Becker, ASA is a graduate of the Aviation Institute at the University of Nebraska at Omaha, and also holds a FAA
Airframe & Power Plant Mechanic license. With over 20 years in the aviation industry, 17 of those years have been with Elliott
Aviation in the capacity of valuing aircraft.
In 2011, he completed and obtained his certification as an Accredited Senior Appraiser with the American Society of Appraisers
(ASA). With experience in aircraft market analysis, he has an extensive knowledge of the aircraft market and has tracked and
analyzed thousands of aircraft transactions. Under his Aircraft Specific designation with the ASA, he specializes in developing
current and projected market values for turbine-powered aircraft.

THE MTS JOURNAL
Governor's Bulletin
Mike Pratt, ASA
Happy Holidays from Region 2 Governor Mike Pratt, ASA

I wish you peace, prosperity, health and great happiness this joyous holiday season and during the year ahead.
Online On-Demand POV Courses
http://www.appraisers.org/Education/national-asa-courses/eLearning/ondemand-class-schedule
Principles of Valuation (POV) courses
Business Valuation, Gems & Jewelry and Personal Property Courses BV 201-GJ/PP 201
This means candidates and interested parties may learning at home or in their office, and start and stop the course instruction
anytime over a 90-day period. The same materials and pre-eminent instructors will be offered. Pre-recorded lecture modules
and downloadable course materials result in students earning a certificate of completion after 27 hours of instruction and
passing a 3-hour proctored exam. To learn more about online On Demand POV courses, see ASA’s eLearning National ASA
Courses at appraisers.org, call (877) 252-8258, or email Todd Paradis at tparadis@appraisers.org
More Education Opportunities
National Education Schedule
http://www.appraisers.org/Education/national-asa-courses/national-class-schedule
Know Your ASA Representatives by Regions and Chapters
http://www.appraisers.org/About/regions-and-chapters
ASA International Conference Schedule (Plan To Attend)
2017 International Appraisers Conference Houston, TX October 7-10, 2017
2018 International Appraisers Conference Anaheim, CA October 7-10, 2018
2019 International Appraisers Conference New York, NY August 25-28, 2019
2020 International Appraisers Conference Chicago, IL October 11-14, 2020
Governor's Bulletin
Region 2 Governor - Mike Pratt, ASA

THE MTS JOURNAL
Scope of Work Within Appraisal Review

Joel D. Gonia, ASA
The Scope of Work allows us to fine tune each review to specific criteria based on the intended use.
The burden for determining the Scope of Work is on the appraiser ... and often we forget this. Also,
the Scope of Work must be disclosed in the report – The appraiser must disclose what he or she did
not do as well as what he or she did do. This article will focus on the Scope of Work disclosure for use
within the Review Report.
The review process allows for broad flexibility in how the review is performed. USPAP provides
minimum requirements with limited explanation and discussion. Review Appraisers are encouraged
to supplement / expand this process based on their unique application, knowledge, and expertise.
We are attempting to insure, as part of the overall review process, that the level of detail within the
original report is sufficient for the intended user to understand the methodologies employed to reach
the stated value conclusions.
The foundation for our appraisal review, including the development and reporting requirements, are
contained within USPAP. I will address the key Standards that deal specifically with Scope of Work issues and have included
comments regarding each. Footnotes are provided so you can quickly review USPAP.
Standard 3 / 3-3(iii) / 3-5(g) (Disclosure)
In developing an appraisal review assignment, an appraiser acting as a reviewer must identify the problem to be solved,
determine the scope of work necessary to solve the problem, and correctly complete research and analyses to produce a
credible appraisal review.1 Consistent with the reviewer’s scope of work, the reviewer is required to develop an opinion as to
the completeness, accuracy, adequacy, relevance, and reasonableness of the analysis in the work under review given law,
regulations, or intended user requirements applicable to the work under review.2 Because intended user’s reliance on an
appraisal review may be affected by the scope of work, the appraisal review report must enable them to be properly informed
and not misled. Sufficient information includes disclosure of research and analyses performed and may also include disclosure
of research and analyses not performed.3
It is our responsibility as the review appraiser to identify the appropriate scope of work and disclose within the report. Is it an
administrative review for internal procedures? Is it to be used externally within financial reporting per SEC requirements? Who
are the intended users? Is the reviewer to include an opinion of value? These are all scope of work elements to be disclosed
within the review report. Otherwise, a reader may be misled and not fully understand the intended use. I recommend locating
the scope of work discussion toward the front of the report, either immediately after the Letter of Transmittal or Executive
Summary or after the Table of Contents.
It is equally important to state what we did not do, or have not been requested, as what we did. These disclosures help to
eliminate questions that may arise regarding the extent of the review and services provided. Research and / or analyses may be
further limited or restricted by use of an Extraordinary Assumption or Hypothetical Condition. The scope of work should provide
reference to the validity of these assumptions.
Standard 3-1(a) (Competency)
The reviewer must have the knowledge and experience needed to identify and perform the scope of work necessary to produce
credible assignment results. Aspects of competency for an appraisal review, depending on the review assignment’s scope of
work, may include, without limitation, familiarity with the specific type of property or asset, market, geographic area, analytic
method, and applicable laws regulations and guidelines.4
The review appraiser must be competent to adequately perform the assignment based on conditions set forth within the
scope of work. The appraisal review report includes a quality of work statement regarding whether the content, analyses, and

THE MTS JOURNAL
conclusions stated in the report under review are (or are not) in compliance with applicable standards and requirements, and
if the value conclusions are accepted or rejected. If the scope of work includes a separate opinion of value, then obviously,
the review appraiser must have the necessary knowledge and experience to complete the appraisal, even if on a limited or
restricted basis. If it does not, he or she should be familiar with the methodologies typically used to appraise the subject.
For this reason, very few review appraisers are competent to appraise multiple types of assets. An appraiser who is
experienced in commercial real estate typically isn’t familiar with the unique methodologies used to appraise metalworking
machine tools. Nor is the business appraiser familiar with the jewelry market, and so on. It is not enough to understand that
multiple approaches to value are used, you must understand how to correctly employ each to the market for subject assets.
Additionally, very few appraisers have a good understanding of USPAP beyond their primary appraisal practice. The American
Society of Appraisers encourages its membership to only provide appraisal services within their personal expertise. And with
the threat of lawsuit, it is good common sense.
Standard 3-5(i) (Development of an Opinion of Value)
When the scope of work includes the reviewer’s development of an opinion of value, review opinion, or appraisal consulting
conclusion related to the work under review, the reviewer must:
• State which information, analyses, opinions, and conclusions in the work under review that the reviewer has accepted
as credible and used in developing the reviewer’s opinion and conclusions;
• At a minimum, summarize any additional information relied on and the reasoning for the reviewer’s opinion of value,
review opinion, or appraisal consulting conclusion related to the work under review; and
• Clearly and conspicuously state all extraordinary assumptions and hypothetical conditions connected with the
reviewer’s opinion of value, review opinion, or appraisal consulting conclusion related to the work under review and
state that their use might have affected the assignment results.5
When this service is requested, make sure to identify it within the Scope of Work section of your report as a unique service.
Further, it should be referenced prominently within the Letter of Transmittal or Executive Summary. This is a separate service
apart from providing a quality of work statement. If including both services, review and opinion of value, within one review
report, is important that you identify the two services within separate sections. Each service must be fully discussed within the
report and comply with all applicable USPAP Standards:
• Real property – Standards Rule 2-2(a)
• Personal Property – Standards Rule 8-2(a)
• Review – Standards Rule 3-5
• Mass Appraisal – Standards Rule 6-8
• Business Appraisal – Standards Rule 10-2(a)
Personally, including a separate opinion of value within the overall review report can become problematic and confusing to the
reader, and I typically submit two separate reports: One for the review and one for the appraisal.
Additionally, any limitations, restrictions or assumptions should be disclosed within the scope of work. It is critical to state
what you did and did not do. As an example, if the original bundle of assets under review includes multiple assets, you may be
requested to only appraise a sampling of assets, and report your conclusion as compared to the original appraisal. Disclosure
of the extent of research and analyses performed to develop your conclusion of value is important as well, particularly if you
use different data than the original appraisal.
Scope Of Work Rule 6
I encourage you to read the entire USPAP Scope of Work Rule, accompanying Advisory Opinions and discussion regarding
appraisal review and scope of work. This knowledge will assist in preparing review reports that are understood and not
misleading, including research and analyses used to develop your quality of work statement and value conclusion.

THE MTS JOURNAL
• Scope of Work Rule on pages 14 – 15

• Advisory Opinion 28, Scope of Work Decision, Performance and Disclosure, page 170 – 173 Advisory Opinion 29, An
Acceptable Scope of Work, page 174 – 176
• FAQ – Appraisal Development – Scope of Work Issues, page 279 – 306
About the Author
Joel D. Gonia, ASA is one of the few appraisers to spend his entire career within the valuation industry – 30 years and
counting! His expertise within the Machinery & Equipment Appraisal industry began with a contract with the U.S. Small
Business Administration providing equipment appraisals to update their portfolio throughout the Southeastern US – Over 600
loans on all types of assets!! He has considerable knowledge regarding numerous types of equipment and has established a
solid reputation for providing straight-forward “real world” values.
Mr. Gonia received his initial professional credentials from the American Society of Appraisers in 1989, as an Accredited
Senior Appraiser (ASA) within the discipline of Machinery / Technical Specialties, with emphasis in Industrial and Commercial
Machinery & Equipment. He received the accreditation for Appraisal Review & Management in 2016.
As the Senior Review Appraiser at KATS M & E, LLC, Mr. Gonia is responsible for all work performed by the firm, including value
accuracy and consistency, USPAP compliance, internal policies and procedures, and continuing education. Clientele consist
primarily of professional service providers for middle market firms, providing valuation and consulting services for financial
reporting, commercial lending, tax and litigation purposes.
Joel D. Gonia, ASA - ARM & MTS / M & E
Senior Review Appraiser
KATS Machinery & Equipment Appraisals, LLC
www.katsme.com
www.facebook.com/katsmellc
www.linkedin.com/in/joelgonia
502 235-0727 cell
855 466-4200 toll free
1
The Appraisal Foundation. “Uniform Standards of Professional Appraisal Practice 2016-2017 Edition.” (Jan 2016): Standard 3, page 29. Print
2
Ibid. Std 3-3(iii), page 32
3
Ibid. Std 3-5(g), page 34
Ibid. Std 3-1(a), page 29
4
5
Ibid. Std 3-5(i), page 34
6
Ibid. Scope of Work Rule, page 14 – 15; Advisory Opinion 28, Scope of Work Decision, Performance and Disclosure, page 170 – 173: Advisory Opinion 29, An
Acceptable Scope of Work, page 174 – 176; FAQ – Appraisal Development – Scope of Work Issues, page 279 – 306.

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Archived Articles Available for Your Library
Missing recent MTS Journal articles? Need ideas or direction? Archived articles are available for your library. Below is an index
for the last several years of articles. See an article or issue that interests you? Just let me know what you need and I will get
back to you with pricing.
bradhartsburg@telus.net
THE MTS Journal

# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW
24 20 1 2003 04 Edward D. Biggs Railroads: It’s Not Just Nostalgia P. 4-6 A Resurgent Interest In Passenger
Trains To Relieve Highway
Congestion Has Revitalized The
Segment Of The Industry.
Kenneth Howard, ASA Relationship Between Equipment P. 7-8 Funding Institution’s Return On
Financing & Appraising:” Intricacies Investment Is Highly Dependent Upon
Of Residual Setting” The Market Information Provided By
An Appraiser.
Leslie H. Miles, Jr., Depreciated Installation P. 9-11 Discussion Of The Argument Of
ASA Depreciating Installation.
Leslie H. Miles, Jr., A Review Of Functional P. 12-15 Open Concerns As To How You
ASA Obsolescence Convert Functional Depreciation That
Can Be Defended And Explained.
Michael J. Remsha, Intangibles Assets: What Makes A P. 16-23 When Valuing A Business, Just
ASA, PE, CMI Business A Going Concern Adding All The Tangible And
Intangible Assets Together Does Not
Necessarily Equal The Value Of The
Business Enterprise.
John S. Ferguson, The Use Of Scaling Factors For P. 29-33 Discusses Iowa-Type And Weibull
ASA, PE Measuring Obsolescence In Distribution Survivor Curves.
Industrial Property-A Rebuttal
Frank Stern Valuing Generation Assets In P. 34-40 Presents A Warning To Appraisers
Today’s Distressed Markets And The Users Of Appraisals On The
Misuse Of Scale Factors And The
Six-Tenths Rule
Gerald L. Huether, ASA What’s A Machinery & Technical P. 41-52 Attention To USPAP Rules Regarding
Specialties Appraiser To Do? A Definition Of Value And How To
Apply Highest And Best Use.
25 20 2 2003-04 Robert B. Podwalny, Typical Problems With Appraisal P. 6-9 Explanation Of Report Writing As
ASA Reports Related To Standard 8 Of Uspap.
J. Michael Clarkson, For What It’s Worth-Dynamic P. 10-13 Dynamic Obsolescence Is Particular
ASA Obsolescence To Certain Industries And Predictable.
Jack J. Landesberg Training The MTS Appraiser P. 14-17 Discusses Short Falls Of Not Enough
Appraisal Training.

THE MTS JOURNAL

Dr. Charles Gililand The Business Enterprise Valuation P. 18-22 Determining A Firm’s Value By
Controversy: Intangible Value In Capitalizing The Entire Income
Going Concern Generated.
H. Denis Neumann, The Used Car Business (And P. 23-29 In Pursuit Of A Dealer’s License
ASA Values) Discovered The Car Business Is
Highly Regulated.
Steven C. Tatro, ASA Tangible Personal Property Tax P. 30-33 The Value Adjustment Board Is
Appeals: A Special Master’s Enjoined To Protect The Public Trust
Perspective By Providing Fair And Impartial
Hearings.
Raymond Springer Depreciation Of Installation Costs P. 34-36 Argues The Methodology Of
Depreciating Installation Costs In The
Sales Comparison Approach.
26 20 3 2003-04 Harry Richardson, ASA A Short History Of Cat Type Tooling P. 5-8 Development Of HSK Tooling May
And J. Barry Savage, Mark The Beginning Of The End For
ASA CAT Type Tooling.
R. Lee Robinette, ASA Inventory Valuation P. 13-17 Discussion The Impact Of “Level Of
Trade” In The Inventory Valuation
Process.
J. Michael Clarkson, For What It’s Worth-Spacecraft P. 18-20 The Appraisal Of The Soviet
ASA Appraisal Spacecraft Proved A Challenging But
Interesting Assignment.
William S. Ingles An Analysis Of Flaws In The Direct P. 21-29 Discussion Of Issues Surrounding
Capitalization Model Applied To The Application Of The Direct
Merchant Coal-Fired Electric Capitalization Model Or Variations Of
The Gordon Growth Model.
Generating Plants
Leslie H. Miles, Jr., Value Of Ad Valorem Tax P. 30-37 Ad Valorem Tax Value Depends Upon
ASA The Definition Within The Tax Code
Or Prevailing Case Law.
27 20 4 2003-04 Robert F. Reilly, ASA Illustrative Personal Property P. 5-22 Complete Overview Of What Should
Appraisal Report Outline Be Included In An Appraisal Report
That Will Be In Compliance With
USPAP.
Michael J. Remsha, Valuation Of A Nuclear Power P. 24-37 Overview Of Nuclear Power Plant
ASA, PE, CMI Generating Facility And Government Policy Dictating
Better Understanding By The
Appraiser Using The Market
Approach.
28 21 1 2004-05 Steven C. Tatro, ASA Florida Department Of Revenue P. 5 December 2004, Florida Department
Holds Hearing On Proposed Of Revenue Conducted A Public Rule
Modifications To Depreciation Table Development Workshop Regarding
Potential Modifications To Their
Depreciation Tables.
Douglas R. Krieser, Identifying And Measuring P. 6-15 Overseas Expansion By Corporations
ASA, Marcus A. Economic Obsolescence With Are Encountering Issues Associated
EWALD, CFA Underperforming Global Assets With Both Financial Reporting And
Related Tax Matters.
International MTS Asa Mts Candidate-Report Review P. 16-21 Checklist For Submitting MTS
Committee Checklist Appraisal Reports For Accreditation.

THE MTS JOURNAL

Edward D. Biggs III, Appraising Railcar Movers P. 25-26 Sources For Appraising Railcar
ASA Movers.
Leslie H. Miles, Jr., Highest And Best Use For Personal P. 27-30 Consideration Of USPAP Standard 7
FASA Property And 8 Related To Highest And Best
Use.
Merritt Agabian, FASA True Value P. 31-32 Discussion Of Continued Use Of
Items In Place And In Use.
29 21 2 2005 Franklin D. Reid, ASA Appraisal Considerations In Third P. 5-8 Issues To Understand When Applying
World Countries USPAP In Developing Nations.
Robert Neumuller Measuring Economic Obsolescence P. 9-22 Article Describes How Economic
In Oil Refineries Obsolescence Fits Into Value
Estimates Using The Cost Approach.
Alan C. Iannacito, ASA Valuations Of Patterns P. 23-28 Patterns Have Value Based On The
“Level Of Trade”.
30 21 3 2005 Tom Sexton, ASA Rail Equipment P. 4-16 Rail Industry Is Dealing With Changes
In A Recovering Economy.
Douglas R. Krieser, The Changing World Of Insurance P. 17-24 Performing An Insurance Appraisal
ASA Valuation Is Becoming More Difficult. The
Appraiser Needs To Consider A
Variety Of Tools To Arrive At Their
Conclusion.
V. Neil Thompson, ASA Hurricane Runs The Table P. 25-26 Overview Of Hurricane Katrina To The
Gulf Coast Casino Industry.
Leslie H. Miles, Jr. True Value Rebuttal P. 27-32 Rebuttal To Fair Value Issues In Ad
FASA Valorem Cases.
Mike Clark, L&M Market Conditions P. 33 Overview Of Market Conditions As Of
Publications July 2005.
Edward D. Biggs, III, Trusted Counselor P. 34 Mentoring Is A Win-Win Endeavor
ASA For The Society.
31 21/22 4&1 2005-06 Lee Robinette, ASA Letter To Chief Counsel: Missouri P. 35-37 Official Position Of The MTS
Tax Commission Committee Regarding The Proposed
Appraisal Requirements.
J. Barry Savage, Hydroformng P. 10-11 Explanation Of How Sheet Metal
ASA and Harry J. Hydroforming Works And The
Richardson, ASA Advantages.
Daniel L. Lagace, ASA How Exponents Work P. 12-20 Article With Intent To Diminish The
Perceived Mystery Associated With
The Use Of Exponents In The Cost To
Capacity Formula.
Art Narverud, ASA A MTS Appraiser’s War Story P. 21 Surprise Encounter To A Small Fish
Cannery In Alaska.
Alan C. Iannacito, ASA Basic Machinery Identification P. 22 Update Of Id Seminar Held In Los
Seminar Angeles In October 2005.
Robert D. Podwalny, Managing A Portfolio Of Leased P. 24-32 Why The Corporate And Commercial
FASA Aircraft Aircraft Industries Rely On Leasing.
Steven C. Tatro, ASA Divorce-Appraisal Style P. 33-35 Issues To Be Considered Before
Accepting An Divorce Settlement
Case.

THE MTS JOURNAL

Charles Dixon, ASA 2005 Membership Report P. 36-40 The Latest Membership Numbers By
Disciplines As Of 2005.
Leslie H. Miles, ASA USPAP Will Be Changing P. 41-44 Uspap Changes Are A Recognition Of
Economic Realities.
Douglas R. Krieser, FASB Releases Fair Value P. 45-51 Fair Value Is In The Process Refined
ASA Measurement Working Draft And Clarified By The Fasb.
32 22 2&3 2005-06 Jack Washbourn, ASA MTS Governor’s Report P. 5 Written Awareness Of What Asa
Board Of Governor’s Activities In
2006.
China Appraisal Valuation Of Machinery And P. 7-13 Focus On Imported Second-Hand
Society Equipment In China Equipment.
Robert S. Svoboda, PE, Value In Use VS. Value In Exchange P. 14-30 Definition Overview Of Fair Market
ASA Value In Use Vs. In Exchange From
Several Appraisal Societies.
John A. Matthies, ASA A Forgotten Research Tool P. 31 The Yellow Pages Can Be An
Excellent Information Source.
Nicole Stango ASA: Strength In Numbers P. 32-34 Article On How Efforts Can Be Made
To Increase MTS Membership.
Charles Dixon, ASA AMTDA Trade Show P. 35-36 Overview Of American Machine Tool
Distributor’s Association Trade Show.
Daniel L. Lagace, ASA Machinery Identification And Cost P. 37 Overview Of ID Workshop Conducted
Approach Seminar In Chicago In March 2006.
Leslie H. Miles, Jr. Aircraft Maintenance Care And P. 45 Discussion Of The Rapid World
FASA Overhaul Growth Rate Of Maintenance, Repair,
And Overhaul (Mro).
33 22/23 4&1 2006-07 Dong W. Cho Average Prices Of New Business P. 5-14 Dr. Cho Explains The Importance
Aircraft Of Index Reflecting Real Price Vs.
Nominal Price.
Ken Dufour/Wade The Truth About Fractional Aircraft P. 15-18 Overview Of Getting Maximum Value
Young Shares For Investment In Aircraft.
Douglas R. Krieser, FASB Releases Final Version Of Fair P. 19-28 Mr. Krieser Recommends An
ASA Value Measurement Understanding Of Sfas 157 When
Performing Sfas 141 And Sfas 142
Alan C. Iannacito, ASA Appraising Clutter P. 30-35 Dealing With An Industrial Category
That Can Be Overlooked But Needs
To Be Addressed By The Appraiser.
John S. Ferguson, ASA Depreciation Based On Observed P. 36-41 Discussion Of The Observed
Condition Condition Being More Interest As An
Historical Reference.
Jack Beckwith, ASA A Case To Determine Lost Value For P. 42-49 Importance Of Market Influences
New Series Equipment May Cause An Adjustment To Both
The Functional And Economical
Obsolescence In The Cost Approach.
David Fawcett FRICS ASA Annual Conference July 2006 P. 50-53 Outsiders Perspective Of The
International Conference.

THE MTS JOURNAL

MTS Board Of What Does Your Report Say About P. 54 - The MTS Board Of Examiners Give
Examiners You, Your Company, And The Asa? 62 A Checklist And Overview Of What
Should Matter In The Appraisal
Reports That Are Evaluated.
34 23 2 2007 Dale H. Bracken, ASA How Movies Are Really Made P. 6-9 Article Describes All The Steps,
Equipment, And Techniques That
Allows The Film To Go From The
Camera To What Is Seen On The
Screen.
Sharon Desfor The Sun Sets On Fas 13 - Will We P. 10-11 Discussion As To How Recent Fasb
Be Left In The Dark? Definitionn For Value May Be A
Concern For Leasing.
Joel B. Levinson, ASA, Valuing Manufacturers' Secret P. 12-15 Article Discusses Phraseology That
CSA Weapons Against Costs Should Be Used In Describing The
Scope Of Work For The Client To
Sign.
Catherine J. Rein An Overview Of Photovoltaic P. 16-21 Overview Of World Market Demand
Equipment & Issues Affecting Its For Photovoltaic Equipment And
Value Reasons For The Growth.
H. Denis Neumann, Mobile Homes And Their Value P. 22-25 Mobile Homes May Be Considered
ASA Personal Property Or Real Property.
Article Is Another Method To
Determine Value.
Terry L. Duda, P.E., Boiler Valuation P. 26-30 Basic Knowledge Of What To Know
ASA, CEA About Valuing Boilers.
Jeffrey W. Brend Attorney Tricks-Witness Traps The P. 31-43 Insight To The Four Stage Process In
Abc's Of Testifying Preparing As An Expert Witness.
35 23/24 4&1 2007-08 Alan C. Iannacito, ASA Letter From MTS Governor P. 4-5 Details On Various Subjects
Including: Proposed Unification
Between Asa, Appraisal Institute, And
American Society Of Farm Managers
And Rural Appraisers.
Norman F. Laskay, ASA Identification and Appraisal Of P. 6-18 Identification Of And Valuation
Marine Dredging Equipment Of “Technical Real Property” For
Taxation Purposes.
J.P ("Buck") Ward III, Some Thoughts On The Valuation Of P. 19-21 Various Considerations And Market
ASA Office Furniture Discussions On Furniture.
Dennis C. Neilson, CMI, Technical Real Property Issues P. 22-31 Identification Of And Valuation
P.E. ASA and Michael And Property Taxation: Heavy Of “Technical Real Property” For
J. Remsha, CMI, P.E., Manufacturing, Utilities, And Taxation Purposes.
ASA Process Industries
Sharon Desfor, ASA The Convention On International P. 32-35 Discussion Of The Capetown
Interests In Mobile Equipment And Convention And Its Application To
The International Registry Mobile Equipment (Including Rail,
Aircraft, And Other “Mobile” Assets).
Alan C. Iannacito, ASA Growing A Machinery And Technical P. 36-38 The Importance Of Mentoring
Valuation Appraiser And Knowledge Transfer When
Developing New Valuation Talent.

THE MTS JOURNAL

Osato Osawaye Emerging Markets In Nigeria And P. 39-41 Economic And Business
The Opportunities For Specialist Development In Nigeria And The
Valuation Practices Potential Opportunities For Valaution
Professionals Within That Area Of
The World.
Bob Clark, ASA Industrial Pumps - The Basics P. 42-44 General Overview Of Various Pumps
And Their Uses.
Joe Santora Mobile Cranes - Is The Sky The P. 45-46 Observations Of The Current Used
Limit? Market For Large Mobile Cranes.
Mike Clark, L&M Buyer’s Premium P. 47-48 Discussion On Buyer’s Premium In
Publications Auctions.
Dave Evans, ASA Appraisal Matters P. 49 Discussion Of Various Industries And
The Current State Of The Auction
Markets For These Industries.
Les Miles, ASA; Ed International Plant And Machinery P. 51-53 Overview Of The October 2007
Raether, ASA And Conference International Plant And Machinery
Douglas Krieser ASA Conference Held In London.
MRICS
36 24 2&3 2008 Jack Washbourn, ASA Board Of Governor's Report P. 6 Discussion On ASA Headquarters
It Proposal For Service And Various
Other Pertinent Subjects.
Jack Beckwith, ASA Mentoring P. 7-11 General Discussion About Mentoring
And Why Mentoring Is Important To
The ASA.
Ed Biggs, ASA What Will Be Under Your Hood? P. 12-13 Discussion About Converting And
Rebulding Locomotives.
Richard Ellsworth, PE, Scale Factor Estimates For P. 14-20 Scaling Factors For Use In Valuing
ASA, CCE Infrastructure Assets Infrastructure Assets Including Use
Of Cost To Capacity.
Micheal J. Remsha, The Complete Cost Approach And P. 21-29 Discussion Regarding The Current
PE, ASA, CMI The Order Of Deductions Order Of Depreciation Taught By
The ASA And An Introduction To An
Alternate Approach Based On The
Experience Of The Author.
Philip L. Burk, ASA, Valuation Of Public Utility And Other P. 30-39 Discussion On How Limited
CMA, PE Property With Limited Earning Earnings Effect The Value Of
Ability Various Regulated And Unregulated
Industries.
Richard Scuster, ASA The Fractional Aircraft Ownership P. 40-42 Valuing Fractional Ownership Of
Value Conundrum Aircraft Under Various Scenarios.
Editor Recent MTS M&E Identification P. 43-44 Outline Of The Recent MTS
Seminar And Report Writing Machinery And Equipment
Seminar Identification Seminar And Report
Writing Class Given In Detroit.
Editor Los Angeles Chapter Provides P. 45-46 Outline Of The Recent Seminar Given
Seminar On Tangible Asset In Los Angeles.
Valuations For Financial Reporting
Purposes

THE MTS JOURNAL

Mike Clark, L&M Selecting And Publishing Sales P. 47-50 Outline Of Some Of The Data
Publications Comps From Auction And Items Considered By L&M
Publications When Listing Sales
Comps.
Dave Evans, ASA Appraisal Matters P. 51-53 Discussion Of Various Industries And
The Current State Of The Auction
Markets For These Industries.
Editor Planning Begins For 2009 P. 53 Announcement And Update On The
International Plant And Machinery Planning For The Joint ASA/RICS/
Conference AAI Plant And Machinery Conference
In 2009.
37 24/25 4&1 2008 Douglas R. Krieser, Editor’s Corner P. 4-5 General Overview Of The Current
ASA MRICS Issue And Recent MTS Committee
Meetings.
V. Neil Thompson, ASA Chairman’s Prospective P. 6 Neil Thompson Outlines Various
Accomplishments Of The MTS
Committee And Other Issues Such
As The Recent Merger Discussions
With AS, ASFMRA And RICS.
Jack Washbourn , ASA Letter From MTS Governor P. 7 Jack Washbourn Discusses The
Importance Of Being An Active And
Not “Simply A Dues Paying Member”
And Some Ideas On The Asa’s Goal
Of
Becoming “Discipline Centric”.
Alan C. Iannacito, ASA Letter From MTS Governor Alan C. P. 8 -9 Alan C. Iannacito Discusses The
Iannacito, ASA Evolvement Of The Asa MTS
Committee And Recent Issues
Important To Members Of The ASA.
Stephen L. Barreca, Proper Consideration Of Future Net P. 10-18 Discusses The Considerations That
ASA, CDP, PE Salvage In An Appraisal Of Value An Appraiser Should And Should Not
Give To The Future Net Salvage Value
Of A Tangible Asset When Applying
The Various Approaches To Value.
Mark S. Buettner, ASA One Appraiser’s Perspective of P. 19-20 Comments On The Bi-Annually
IMTS 2008 International Machinery Technology
Show In Chicago In 2008.
Richard K. Ellsworth, Survivor Curves And Equipment Life P. 21-27 Insight And Commentary On The
PE, ASA, CFA Expectancy Development Of Iowa Curves.
Phillip Kolczynski Ethical Challengers For Expert P. 28-39 2008 International Conference
Witnesses Presenter Provides Commentary On
Some Of The Challenges Faced By
The Expert Witness. Mr. Kolczynski Is
An Attorney Based Out Of Southern
California.
Roman Karpov External Obsolescence. Value P. 40-44 Roman Karpov Presents A
Change Factor Of Industrial Methodology For Quantifying And
Personal Property Entering Qualifying External (Economic)
Secondary Market Obsolescence.

THE MTS JOURNAL

Roman Karpov Russian Version Of The Article P. 45-50 Russian Version Of The Article Listed
Listed Above Above.
Sharon Desfor, ASA, The Banking Liquidity Crisis P. 51-53 Sharon Desfor Discusses How The
MRICS Liquidity Crisis Can Effect Borrowers,
Lenders And Appraisers.
John S. Fergusen, PE, Valuation Of Public Utility And Other P. 54-56 Mr. Fergusson’s Response To
ASA, CDP Property With Limited Earning And “Valuation Of Public Utility And Other
Ability - A Commentary Property With Limited Earning Ability”
Published In The Last Issue Of The
Journal.
Michael J. Remsha, Electrical Generating Plant Valuation P. 57-67 Mike Remsha PE, ASA, CMI Offers
P.E., ASA, CMI Some Interesting Insight Into Valuing
A Variety Of Different Power Plants
Using All Three Approaches To Value.
Mike Clark Valuation In Time Of Turmoil P. 68-69 Mike Clark Discusses The Effects
Of The Current Economy On The
Auction Market.
Dave Evans, ASA - Appraisal Matters... With Wells P. 70-71 Discussion Of Various Industries And
Chief Appraisal Officer Fargo Business Credit & Wholesale The Current State Of The Auction
Bank D Markets For These Industries.
38 25 2&3 2009 Douglas R. Krieser, Editor’s Corner P. 4 General Overview Of The Current
ASA MRICS Issue.
V. Neil Thompson, ASA Chairman’s Perspective P. 5 Neil Thompson Outlines The
Importance Of Education And Some
New MTS Courses The ASA Has
Developed.
Alan C. Iannacitto, ASA P. 6 Alan C. Iannacito Discusses The
Recent ASA/AMEA Seminar, The New
ASA Website, And Other Issues.
John S. Ferguson, PE, The Value of Writing P. 8 John Ferguson Discusses The
ASA, CDP Strategic Reasons For Writing
Articles For The MTS Journal And
Other Publications.
Catherine J. Rein MBA, Don’t Forget the Website in Asset P 10-13 Catherine Rein Discusses The
AM Appraisal Importance Of Valuing The Web Site
Name When Valuing A Company And
Some Considerations The Appraiser
Should Consider When Valuing These
Assets.
Alan C. Iannacitto, ASA Principles of Mining Processing P. 14-18 Alan C. Iannacito Discusses Various
Listing and Valuing Continuous Mills Factors In The Valuation Of Ball And
Rod Mills Including Differentiating
Between The Two, The Data
Required To Value Each, And Various
Reference Materials Regarding Mills.
John S. Ferguson, PE, On Survivor Curves and Equipment P. 19-20 John Ferguson Commentary Of
ASA, CDP Life Expectancy An Article Written By Richard K.
Ellsworth Regarding Survivor Curves.

THE MTS JOURNAL

Michael J. Remsha, Fair Market Value in Continues Use P. 21 - Mike Remsha Discussed The
PE, ASA, CMI 26 Intricacies Of Fair Market Value
In Continued Use And What The
Appraiser Needs To Consider When
Using This Value Premise.
Joseph M. Santora, Mobile Cranes - Is the Sky Falling? P. 27-28 Joseph M. Santora Discusses The
ASA Market Observations Current Market For Mobile Cranes
And How It Has Changed Since His
Article In Late 2007.
Richard K. Ellsworth, Retirement Dispersion and P. 29-33 Richard K. Ellsworth Continues His
PE, ASA, CFA Appraisal Depreciation Discussion Of The Use Of Iowa
Curves And How They Are Utilized To
Estimate Depreciation.
Dennis C. Neilson, Cmi, Personal Property Tax Appeal/ P. 34-41 Dennis C. Neilson And Michael J.
P.E. Asa And Michael J. Valuation Remsha Outline Various Issues
Remsha, Cmi, P.E., Asa The Personal Property Appraiser
Has To Consider When Performing
A Tax Appeal Appraisal Including:
The Three Approaches To Value;
Classifying Real Vs. Personal
Property; Highest And Best Use
(Inuse Vs. In Exchange); Mass
Appraisal; Assessor Approaches To
Value; Excess Depreciation; And
Other Relevant Topics.
Mike Clark Random Thoughts on the Market P. 42-43 Mike Clark (L&M Publications)
Discusses Various Markets In
General Including Metal Working,
Plastic Equipment, Food Processing
Equipment, Printing Equipment, Etc.
Also, He Discusses How The Number
Of Auctions Have Varied In The Past
Year.
Dave Evans, ASA - Appraisal Matters...With Wells P. 45-46 Discussion Of Various Industries And
Chief Appraisal Officer Fargo Business Credit & Wholesale The Current State Of The Auction
Bank Markets For These Industries.
39 25/26 4&1 2010 Sharon Desfor, ASA, Editor’s Corner P. 4
MRICS
Peter Campbell, ASA Chairman’s Prospective P. 5
Alan C Iannacito, FASA Letter From MTS Governor P. 6
Robert S Risbridger The Perfect Storm P. 8-11
and Kenneth M Heyse,
ASA
Leslie H Miles, Jr, Physical Life Explained P. 12-17
FASA
Alexander Skorniakov, Second-Hand Value And Financial P. 18-20
ASA Reporting

THE MTS JOURNAL

Douglas R Krieser, International Conference On The P. 24-25
ASA, FRICS Valuation Of Plant Machinery And
Equipment
William M Engel, ASA Making Valuation Research More P. 26-34
Dynamic
Richard K Ellsworth, Depreciation Methods In Theory P. 35-42
PE, ASA, CFA, CCE And Practice
Alan C Iannacito, FASA ME214 - The Identification and P. 43-48
Appraisal of Mining and Mineral
Processing Equipment
Mike Clark Random Thoughts on the Market P. 49-50
Dave Evans, ASA Appraisal Matters… With Wells P. 53-54
Fargo Business Credit & Wholesale
Bank
In Memoriam - Leroy L Ackermann- P. 55
Ackermann & Tinker Appraisal
Specialties, Paul Rice, ASA - The
Rice Group
40 26 2&3 2010 Sharon Desfor, ASA, Editor's Corner P. 4-5
MRICS
Peter Campbell, ASA Chairman’s Prospective P. 6
Alan C Iannacito, FASA Letter from MTS Governor P. 7
Tom Sexton, ASA Machine Tool Market P. 9-12
Joseph M Santora, 2009 Crane Market Conditions…Is P. 13-14
ASA and David Helle, The Sky Falling?
ASA
Mike Clark The Market Is Rebounding P. 15
Jack Young, ASA, CPA An Overview Of The California Air P. 16-18
Resources Board Diesel Regulations
Edward D Biggs, III, Appraised Fair Market Value And P. 19
LLC, ASA AAR Interchange Rule 107
Jack Beckwith, ASA 2010 Changes & Challenges In P. 20-23
Healthcare
Alan C Iannacito, FASA M&E Local P. 24-26
Norman Laskay, ASA The Life Of A Ship P. 27-33
Paul Wride, ASA What An Equipment Lessor Looks P. 34-36
For In An Appraiser
Robert A Davis, MBA, Applications Of The Inutility Model P. 37-41
AVA
Michael J Remsha, PE, Economic Obsolescence: Real Life P. 42-47
ASA, Cmi And Kevin S Stories
Reilly, ASA
41 26/27 4&1 2011 Sharon Desfor, ASA, Editor's Corner P. 4
MRICS

THE MTS JOURNAL

Charles C Dixon, ASA Excerpt From Governor Charlie P. 5-6
Dixon's January Report To The
MTSC
MTS Committee Definitions Of Value Relating To P. 7-8
MTS Assets
Robert S Risbridger The Aftermath Of The Perfect Storm P. 9-12
and Kenneth M Hyse,
ASA
Leslie H Miles Jr, FASA What Is Orderly Liquidation Value? P. 13-15
Douglas R Krieser, Financial Reporting Process P. 16-21
ASA, FRICS
Alexander F Rudin, Valuation Modeling P. 22-28
ASA, CG/GA and
Shelby St John
Alan C Iannacito, Fasa ME214 Class Report P. 29-24
Peter Daley, ASA Calculating The Economic Useful P. 35-39
Life And Forecasting Residual Value
For It Equipment
Barry Gunderson, CPA, Reducing Banker Lending Risk: P. 40-44
CMA, CIA, CCM, CPIM, Inventory Valuations - More Science
CSCP Than Art
Michael J Remsha, PE, Functional Obsolescence: Real Life P. 45-55
ASA, CMI and Kevin S Stories
Reilly, ASA
42 27 2 2011 Richard A Berkemeier, Chairman's Perspective P. 4
ASA
William M Engel, ASA Editor's Corner P. 5
Danial Lagace, ASA Machinery And Technical P. 6-8
and Sharon Desfor, Specialties Discipline Governors'
ASA Commentary
Jack Beckwith, ASA Medical Imaging Report P. 9-12 Discussion Of The Technologies
And Market For Medical Imaging
Equipment.
Alan C Iannacito, FASA When Values Hibernate P. 13-15 Explains How The Intrinsic Value
Of Equipment Impacts Value
Fluctuation.
Mike Clark Premises Of Value: What Is Forced P. 16-17 Discusses How Some Sales Labled
Liquidation? As Auctions Don’t Always Fit The
Definition Of “Forced Liqudation
Value”.
MTS Journal Interview with Michael Makin, P. 18-22 An Overview Of The Printing Industry
CEO and President of the Printing Including It’s Health And Them
Industries of America Market For Used Equipment.
Alan C Iannacito, FASA ME214 Identification And Appraisal P. 23-26 A Review Of ME214 Identification
Of Mining And Mineral Processing And Appraisal Of Mining And Mineral
Equipment Processing Equipment Class.

THE MTS JOURNAL

William M Engel, ASA How Do You Use Technology In Your P. 27
Appraisal Practice?
43 28 1 2012 William M Engel, ASA, Editor's Corner P. 4
Dan Lagace, ASA and Governor’s Report P. 5
Sharon Desfor, ASA
Thomas A. Sexton, ASA Food Processing Equipment P. 6-10 Discusses Values, Considerations
And Trends In The Food Processing
Equipment Market.
Richard Buckner, Sheetfed Printing Presses In The P. 11-12 An Overview Of The Current Market
President, Fair Market Current Marketplace For Sheetfed Offset Presses.
Graphics, Inc.
Les Miles & Robert China Plant and Machinery P. 14-16 Review Of The ICVPME Held In
Clark Conference a Resounding Success China.
Norm Laskay, ASA Understanding the Marine P. 17-30 An Overview Of The Different Types
Marketplace Of Vessels And Their Characteristics
Along With Considerations When
Determining Value.
Gregory W. Kort, P.E., Environmental Issues – Impacts on P. 31-36 A Discussion On How Environmental
ASA, CMI Industrial Property Value Issues Impact Industrial Property
Along With Ideas On Quantification
And Accounting For Them.
Michael Rikon Condemnation of Machinery and P. 37-46 History Of Condemnation Along
Equipment: A Case Study With How It Is Treated In Different
Countries And States And A Case
Study That Demonstrates How A
Court Views It.
Kenneth R. Loso, Lessons Learned, Warning Signs, P. 47-50 Reviews Warning Signs Of Economic
and “Banana Skins” Crisis.
44 28 2 2012 Richard Berkemeier, Chairman’s Perspective P. 4
ASA
Danial Lagace, ASA Machinery And Technical P. 5-6
and Sharon Desfor, Specialties
ASA Discipline Governors’ Commentary
William M Engel, ASA Editor’s Corner P. 7
Rob Schlegel, ASA, The Nexus Of Business Valuation P. 8 -10 The Differences Between MTS And
MCBA And Valuation Of Equipment Bv And How Bv And MTS May Work
Together.
Douglas R Krieser, Gn6 Depreciated Replacement Cost P. 11-13 A Summary Of RICS Standards
ASA,FRICS Method Of Valuation For Financial Guidance Note 6 Which States,
Reporting - A Summary In Part, Market Approach Should
Be Used Over Cost Approach For
Financial Reporting.
Bruce Leister, ASA Forward To The Past With P. 14 Explains The Market And Sales For
Semiconductor Market -16 Older 200MM Equipment Versus
Newer 300MM.

THE MTS JOURNAL

Richard Zhang, MBA, How Should We Perform Equipment P. 17-22 Explores Why Equipment Appraisals
ASA, MRICS, CPV Appraisals Are Necessary And Considerations
The Appraiser Should Keep In Mind.
Kevin S Reilly, ASA A Market Perspective: Identifying, P. 23-31 An Overview Of Economic
Quantifying, And Applying Economic Obsolescence Providing A Case
Obsolescence Study Explaining The Application And
Theory.
Alan C Iannacito, FASA Eminent Domain And Personal P. 32-34 Discusses How To Work On An
Property Eminent Domain Assignment.
45 28 3 2012 Richard A Berkemeier, Chairman’s Perspective P. 4
ASA
Daniel Lagace, Asa Machinery And Technical P. 5-6
And Sharon Desfor, Specialties Discipline Governors’
ASA Commentary
William M Engel, ASA Editor’s Corner P. 7
Simon Landy The Value Of Valuations: New P. 8-9 Current Status And Explanation Of
International Standards To Benefit The International Valuation Standards
Investors
Tammy Blackburn, ASA Do I Need An Appraisal To Reduce P. 10-11 The First In A Series Of Articles
My Ad Valorem Tpp Tax? - A Explaining The Burdens Of
Magistrate’s Perspective Appraising For Tangible Personal
Property Tax Appeal Purposes Along
With Explanations Of The Appeal
Process And Selecting An Appraiser.
William M. Engel, ASA The Art Of The Interview P. 14-16 An Overview Of Questions That
An Appraiser May Ask A Subject
Company To Assist An Appraisers
Knowledge Of The Industry,
Equipment, And General Edification.
46 28 4 2012 Daniel Lagace, ASA Machinery And Technical P. 4
and Sharon Desfor, Specialties Discipline Governors'
ASA Commentary
William M Engel, ASA Editor's Corner P. 7
Lee P. Hackett, FASA, International Opportunities For P. 8 A Glimpse Into The Word Of
FRICS, CRE Appraisal And Valuation International Appraising And Advice
On How To Get Started
Steven J. Sherman Raising The Bar For The Valuation P. 10 The Author Shares The Progress Of
Profession The IVSC
Robert A. Davis, MBA, Inutility Model Scaling Factor - What P. 12 Determining Economic Obsolesence
ACA, ASA If The Factor Is Not Six-Tenths? And An Alternative Method Rather
Than Using Six- Or Seven-Tenths
Scaling Factors
Tammy Blackburn, ASA Preparing For The Vab Hearing - A P. 16 Insights Into What Steps An
Magistrate’s Perspective Appraiser Can Take To Strengthen
Their Ad Valorem Appeal Appraisals
J. P. “Buck” Ward, ASA What Color Is Your Blanket P. 19 Gives The M&E Appraiser Points To
Consider When Working With Asset-
Based Lenders As Clients.

THE MTS JOURNAL

Alan C Iannacito, FASA The Richest Desposit of Mining P. 22 A Review of MINExpo 2012
Knowledge
47 29 1 2013 Richard A Berkemeier, Chairman's Perspective P4
ASA
Daniel Lagace, ASA Machinery And Technical P5
And Sharon Desfor, Specialties Discipline Governors'
ASA Commentary
William M Engel, ASA Editor's Corner P7
James Matthews, ASA Biodiesel Industry Expansion Phase P8 An Outline Of The Biodiesel Industry
In The United States, An Overview And The Equipment Involved
And Its Process Machinery And
Equipment
Jack Beckwith, ASA How Will The Ppaca Affect P 23 How Equipment Use And Value Are
Diagnostic Imaging Equipment Impacted By The Patient Protection
Moving Forward? And Affordable Care Act
Tammy Blackburn, ASA Considering The Evidence - A P 25 Insights Into The Evidence A
Magistrate's Perspective Magistrate Sees When Considering
Ad Valorem Appeal Appraisals
Martin L. King, CR, Actual Cash Value In Property P 27 Appraisals From An Insurance
ASA Losses Perspective
Jack Young, ASA, CPA Appraising Equipment For Retail P 29 What To Look For When Appraising
Propane Companies The Equipment Of Retail Propane
Firms
Kevin S. Reilly, ASA; Valuation Of Cogenration Plants; P 33 What To Consider When Appraising
Clayton T. Baumann, Things To Consider Cogeneration Facilities
PE
Letters To The Editor P 41
48 29 2 2013 Daniel Lagace, ASA Discipline Governors’ Commentary
and Sharon Desfor,
ASA
William M Engel, ASA Editor's Corner P6
Christina Chojnacki, Implications Of Economic P7 Implications, Indentification,

ASA and Leslie Vitale, Obsolescence In Fixed Assets For And Quantification Of Economic
ASA Financial Reporting Purposes Obsolescence
John Martin, Chairman The Role Of The Ivsc Advisory P 11 Discusses The Progress Made By
Of The IVSC- Advisory Forum In Developing A Valuation The Forum And The Challenges That
Forum Profession Globally It Faces
Austrailian ASA Review Of Equipment ID Seminar P 14 Reviews The Equipment ID Seminar
Chapter Held In Australia, March 2013
Garrett Schwartz, Asa, MTS Equipment ID Seminar: P 17 Reviews The Equipment ID Seminar
Cea Premiere Speakers, Networking And Held In Cleveland, OH In June 2012
Education
Leslie H Miles Jr, Fasa Nigeria And The ASA P19 Reviews Mr. Miles Trip To Nigeria
And Explains The Growing Market
For ASA

THE MTS JOURNAL

49 29 3 2013 Roger Durkin, J.D., The Top Twelve Mistakes Appraisers P10
M.S., FASA Make in Court Preparation
Richard Buckner, Sheetfed Printing Presses and P13
President of Fair Today’s Marketplace
Market Graphics, Inc.
Garrett Schwartz, ASA MTS Appraisers Return to Cleveland P15
for Networking & Equipment
Education
Les Miles, FASA ASA’s International Demand – Three P18
Weeks in Japan
Nancy Stacy, GG, ASA In Memoriam P36
50 29 4 2013 Liu Ping Achieve Collaborative Development of P12
the Valuation Profession
Aleksey Shaskolsky Ethic Dilemmas in Russian Appraisal P21
Practice
Алексей Дилеммы этики в российской P22

Шаскольский оценочной практике
A. Shaskolsky, V. Federal Appraisal Standard FAS-0 P24
Romanovsky, S. “Paid-for Valuation”
Edomsky, V. Biryukov, A.
Timkov
А. Шаскольским, Федеральный стандарт оценки P27
В. Романовского, ФСО-0 “Заказная оценка”
С. Эдомского,
В. Бирюкова , А.
Тимкова
Thomas Boyle, MAI Banks Run on Standards P31
Alan C. Iannacito, FASA The Class of 2013, ME214 P33
51 30 1 2014 Park Johnson, ASA, Editor’s Letter P4
MRICS
Robert W. Clark, ASA Chairman’s Corner P5
Michael J. Remsha, ASA, The Cost Approach and its P6
P.E., CMI Relationship to the Sales Comparison
and Income Approaches
Jack West, ASA Assessors and Independent Fee P32

Appraisers
P. Barton DeLacy, ASA, Wind Power and the Tax Base: P35
MAI, CRE, FRICS Reliable as the Resource?
Robert B. Podwalny, USPAP Reports and Reports in P46
FASA Submitted for Advancement
Clayton T. Baumann, P.E. Cost to Capacity Method: Applications P49
and Considerations
MRICS
Robert W. Clark, ASA Chairman’s Report P5

THE MTS JOURNAL

Daniel Lagace, ASA and Governor’s Bulletin P6
Sharon Desfor, ASA
Robert F. Reilly, CPA The Unit Valuation of Taxpayer Assets P15
for Protpery Taxx Purposes
Alan C, Iannacito, FASA What Do Value-Added Businesses P33
Pffer and What are Their Affecs on the
Market?
MRICS
Robert W. Clark, ASA Chairman’s Report P5
Robert W. Clark, ASA ICVPME Report P6
Daniel Lagace, ASA and Governor’s Bulletin P7
Sharon Desfor, ASA
Norman Laskay, ASA Marine Asset Appraisal and the Three P10
Approaches to Value
Thomas Sexton, ASA Current Trends in Energy Use and P13
Their Effect on Railcars
Barbara A. Spoor, ASA, Appraisal Review and Management P15
(MTS – Aircraft, MTS –
M&E, ARM)
David Helle, ASA MTS Appraisers Attend Equipment P17
Identification Seminar
Park Johnson, ASA, The Tools We Use: Marshall Valuation P20
MRICS Service (MVS)
54 30/31 4/1 2014/15 Park Johnson, ASA, Editor’s Corner P4
MRICS
Robert W. Clark, ASA Chariman’s Report P5
Richard Berkemeier, Governor’s Bulletin P6
ASA, MTS Governor
In Memroiam P7
Samuel F. Lucerno, FASA
Mike Clark, ASA Asking Price is Not Selling Price P8
J.P. (Buck) Ward, ASA What Color is Your Blanket? Collateral P10
Documentation and Asset Recovery
for Asset Based Loans
Jim Becker, ASA Demystifying New Paint & Interior... P14
Assessing Aircraft Value
Stephen L. Barreca, ASA, Modeling the Life-Cycle of Multiple P18
PE, CDP Forces of Depreciation
Founder & President,
BCRI Valuation Services
BCRI Inc.
Charlie Burkhardt, ASA, Development of a Replacement Cost P42
CAE, Senior Consultant, New for Wireline Communication
CostQuest Associates Property
and Luis A. Rodriguez,
Program Manager,
CostQuest Associates

THE MTS JOURNAL

55 31 2 2015 Park Johnson, ASA, Editor’s Corner P4
MRICS
Robert W. Clark, ASA Chariman’s Report P5
Sharon Desfor, ASA, Governor’s Bulletin P6
MRICS, Richard
Berkemeier, ASA, MTS
Governor
Anthony Kioussis, Used Citation Xs from NetJets are P9
President, Asset Insight Rebranded by Guardian Jet as Elites
Nathan J. Arnold Appraising Chemical-Processing P16

Machinery and Equipment
Les Miles, FASA and P17

Park Johnson, ASA ME202 Taught in Japan
Joseph Feldman, Acquisition Surprises: Best Practices P18

President, Joseph for Preparation and Risk Management
Feldman Associates
Joe Santora, ASA Compliance P20
56 31 3 2015 Brad Hartsburg, ASA, MTS Editorial P4

CPPA, CSA
John J. Connolly, III, ASA Chairman’s Report P5
Richard Berkemeier, ASA Governor’s Bulletin P6
and David Crick, ASA,
MTS Governors
William Engel, ASA Memorial Tribute to Park Johnson, P7
ASA
J. Fernando Sosa, ASA, The Scary Truth about Ghosts Assets P9

MRICS
Bob Zuskin of Jet Corporate Aircraft: Valuing The P14
Perspectives Intangibles
Joseph Santora, ASA of Choose Your Equipment Appraiser P17

Irontrax, LLC Wisely
Jean Jackson and David 4th Annual Equipment Valuation P19
Helle of PNC Financial Conference in Cleveland
Services Group
Brad Hartsburg, ASA, Identifying Heavy Equipment and P23
CPPA, CSA of Fortress Serial Number Locations
Machinery Appraisals
and Consulting Inc.
Keith M. Bransky, ASA, Damaged Aircraft and Diminution in P30
ARM-MTS Value Back-to-Basics
Barrie Roesler, ASA Are your Comparables Really Real? P36

THE MTS JOURNAL

CPPA, CSA
MTS Governors
Richard Berkemeier, ASA Finding the Right Appraiser is as Easy P9
as ASA
Sharon Desfor, ASA State of the Helicopter Market P11
Tony Grant, FRICS Ethics in the Global Real Estate P19

Market - A New International Coalition
John Mathe, ASA Supportable Evidence in Appraisals P25

Alan C. Iannacito, FASA MTS214 Identification and Appraisal P29
and Allan K. Bowles, PE of Mining and Mineral Processing
Equipment Course
American Society of Virtual Chapter News P37

Appraisers
Joseph Santora, ASA IRONTRAX LLC Mining Industry P39

Insight (Winter 2015) Mining Industry
Statistics
Leslie H. Miles, Jr. FASA, 9th International Conference of Plant P44

FAPI and Machinery and Equipment
Peter J. Turecek The Past and Future of Compliance P46

and Fraud in Aviation: Don’t Fly Blind
Harry J. Richardson, Technological Obsolescence Finally P50

ASA / Edited by: J. Barry Arrives in the Metal Stamping Press
Savage ASA, Emeritus Industry
Walter W. O’Connell The Ideal Pricing Index P53

M.E., ASA, SCSP
Tom Sexton, ASA Freight Railcar Basics P56
Jack Beckwith, ASA, ASA Trains ODR Analysts on P64

CEA Machinery and Equipment Valuation
Methodology

CPPA, CSA

THE MTS JOURNAL

MTS Governors
J. Richardson, ASA New Automotive Hot Stamping P12
/ Edited By: J. Barry Presses Makes For More Efficient
Savage, ASA Emeritus & Safer Cars and Technological
Obsolescence
Walter W. O’Connell, To Trend in Microsoft Excel™, or P14
M.E., ASA, SCSP Forecast in Microsoft Excel™, That is
the Question
Norman F. Laskay, ASA What Does a Buyer Want? P20
Emeritus
Dexter D. MacBride, Who Gets the Credit? P23
CAE, FASA, Submitted by
Norman F. Laskay, ASA
Emeritus
Douglas R. Krieser, ASA Do Audit Reviews Fall Under USPAP P24
FRICS Standard 3?
Interviewer: Raymond Interview with Liying Han – China P32
Moran, ASA, MRICS Appraisal Society
The Appraisal Revisions to the USPAP and USPAP P34
Foundation Advisory Opinions
Alan C. Iannacito, FASA Coal Is King No More: When Do You P36
Determine Economic Obsolescence?
Art Pincomb, ASA, CPG Mineral Appraisals: What is the Value P41
of a Quarry or Mine?
Leslie H. Miles, FASA & Inutility Exponent Development P49
Karen Milan, ASA
Keith M. Bransky, ASA, Bransky - Ruden Meeting and 40+ P53
NSCA Years of ASA Journals
Roman Karpov and Anna Obsolesce and Depreciation – P64
Levleva International Style
Douglas R. Krieser, ASA How Asset Tracking Can Potentially P61
FRICS; Jack Beckwith, Save Money
ASA, CEA, William Engel,
ASA and Richard Tondre
CPPA, CSA
Louis C. Seno, Jr., ASA, Foreword P7
Chairman Emeritus, JSSI
Rolland Vincent Pilatus PC-12 Enduring P8
Sharon Desfor, ASA, Helicopters: A Different Type of Asset P13
MRICS
Sharon Desfor, ASA, Regulatory Impact on Helicopter P19
MRICS Leasing
Keith M. Bransky, ASA, Damaged Aircraft and Diminution in P25

ARM-MTS Value - Back to Basics
Richard A. Berkemeier, Finding the Right Appraiser is as Easy P32
ASA as ASA

THE MTS JOURNAL

Peter J. Turecek The Past and Future of Compliance P34
and Fraud in Aviation: Don’t Fly Blind
Gordon R. Page, ASA Some Pitfalls of Aircraft Field P38
Inspections
Gordon R. Page, ASA The TEMCO TF-51D Mustang - A Truly P40
Rare Breed
Daniel Hall, ASA Bizjets not Business as Usual P44
The MTS Journal Spotlight on New Aircraft Appraisal P48
Education Program
Bill Dodrill, ASA Do Business Jets have a Pedigree? P51
Barbara A. Spoor, ASA Aircraft Maintenance Condition and P54
Asset Value
David Wyndham The Key to Your Aircraft’s (Future) P56
Value
Carls Janssens Valuing the Gulfstream G550 P59
George Kleros Aircraft- Identifying a Properly P63
Preserved Aircraft
Barrie Roesler, ASA Double Registration Change in the P68
USA: Is It Worth the Hassle?
Chris Wills Market Turmoil for Heavy Offshore P70
Helicopters
Bob Zuskin Corporate Aircraft: Valuing The P74
Intangibles
David Crick, BSC, ASA Appraising Corporate Aircraft & P77
Helicopters – Survey Inspections –
What Is Required?
Kim Seward Oil Price – What Is It Going To Take P82
To Get The Civilian Helicopter Market
Back On Track?
Stephen Friedrich and LTSAs: the Hottest Trend in Aerospace P85
Kyra Nyman

The MTS Journal is a publication of the International Machinery & Technical Specialties Committee of the American Society of
Appraisers, the only multi-discipline testing/accrediting appraisal society in America. The MTS Journal is written both for the
appraisers who value equipment on a regular basis, and for those others who may have a professional interest in the subject.
These include attorneys, bankers, business brokers, estate planners, used equipment dealers, real property and business
valuation appraisers. The MTS Committee is a nonprofit organization with a goal to standardize and educate all in our profession.
Letters from readers are encouraged. Letters will be printed without editing, in the sequence received, subject only to space
limitations.
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THE MTS JOURNAL

THE MTS JOURNAL
Sharon Desfor, ASA President Jason Kmiecik, ASA Vice President Operations
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Ben Moore, ASA Senior Appraiser Carol Busch, AM Associate Appraiser
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1001 N. Old Rand Road, Unit 101 • Wauconda IL 60084-0575 1001 N. Old Rand Road, Unit 101 • Wauconda IL 60084-0575

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The Journal of the International Machinery Volume 33, Issue 1, 1st Qtr 2017

& Technical Specialties Committee of the American Society of Appraisers

$35.00 ASA Members, MTS Discipline

MTS Journal Editorial 5

The Value of Mining Equipment Appraisal Education 36

Volume 33, Issue 1, 1st Qtr 2017 2

Upon Receipt of the Inspection Report 74

Your trusted Appraisers in Israel

Ran Greenberg Eli El Al

Fair Value Group, 20 Lincoln St. Tel Aviv, Israel,

Volume 33, Issue 1, 1st Qtr 2017 3

The International Machinery & Technical Specialities Committee

MTS Committee Officers Paul Cogley, ASA – Rhode Island - Treasurer

MTS Committee Members William M. Engel, ASA - NY Charles W. Ruth, ASA - NM

Emeritus Members Melvin Fineberg, ASA - NV H. Denis Neumann, ASA - CA

American Society of Appraisers

Volume 33, Issue 1, 1st Qtr 2017 4

MTS Journal Editorial

Volume 33, Issue 1, 1st Qtr 2017 5

Raymond Springer, ASA has written about

Brad Hartsburg, ASA, CPPA, CSA and MTS Journal Editor

Volume 33, Issue 1, 1st Qtr 2017 6

Dear MTS Members:

Valuing Machinery and Equipment: The Fundamentals

of Appraising Machinery and Technical Assets • Appraising assets in

• Valuation for financial

Order online at www.appraisers.org or by phone at (800) 272-8258

Volume 33, Issue 1, 1st Qtr 2017 7

Auction Theory, Game Theory, and Appraisal

Volume 33, Issue 1, 1st Qtr 2017 8

Volume 33, Issue 1, 1st Qtr 2017 9

Let’s Play a Game

Volume 33, Issue 1, 1st Qtr 2017 10

Volume 33, Issue 1, 1st Qtr 2017 11

Volume 33, Issue 1, 1st Qtr 2017 12

About the Author

Volume 33, Issue 1, 1st Qtr 2017 13

Royalties and Valuation of Mineral Rights

Volume 33, Issue 1, 1st Qtr 2017 14

Current Royalty Rates

Volume 33, Issue 1, 1st Qtr 2017 15

Volume 33, Issue 1, 1st Qtr 2017 16

About the Author

Volume 33, Issue 1, 1st Qtr 2017 17

ASA and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers

Volume 33, Issue 1, 1st Qtr 2017 18

Depreciation of Installation Costs

Sales Comparison Approach

Sales Comparison Approach Adjustments

The Best Indicator

Volume 33, Issue 1, 1st Qtr 2017 19

The Buyer Depreciates the Installation Cost

Volume 33, Issue 1, 1st Qtr 2017 20

About the Author

Volume 33, Issue 1, 1st Qtr 2017 21

5th Annual Equipment Valuation Conference in Cleveland

Volume 33, Issue 1, 1st Qtr 2017 22

Volume 33, Issue 1, 1st Qtr 2017 23

Volume 33, Issue 1, 1st Qtr 2017 24

Volume 33, Issue 1, 1st Qtr 2017 25

About the Authors

Volume 33, Issue 1, 1st Qtr 2017 26

ASA Advanced Mining Topics Course Report

September 23-28, 2016 - Las Vegas, Nevada