The Correct Classification of Assets

When undertaking a valuation exercise for insurance purposes it is important to understand the distinction between building assets and plant & equipment assets.

As a company we regularly value both buildings and plant & equipment assets for our clients. One of the common reasons why clients are often incorrectly insured is the incorrect classification of assets. The incorrect classification of assets can lead to double counting or worse omission of assets from the insurance valuation exercise.

Rushton International provides a valuation service that includes the valuation of both building and plant & equipment assets. Our valuers are experienced in valuing both buildings and plant & equipment assets for insurance and financial purposes and understand the correct approach to adopt when valuing these assets.

Over the years many of our valuers have worked with the RICS to help establish the correct approach when valuing production assets together with buildings.  The RICS Red Book provides guidance on the correct approach and the general rule of thumb is as follows:

Assets that are installed primarily to provide services to the buildings should be valued as part of the property interest if they would normally be included in the sale of the property.  Assets that are installed primarily for the commercial practice of the building occupier should be included as part of the plant & equipment assets.

 

Note on Buildings Valuations

The buildings valuation should include assets that are installed primarily to provide service to the building (building service or HVAC). A buildings valuation would include the following building service or installation as part of the buildings:

  •  Electricity
  • Gas
  • Water
  • Space Heating and Hot Water
  • Air Conditioning and Ventilation
  • Fire and Safety, Drainage
  • Lifts and Gantries
  • Structures (including chimneys;  plant housings; pits; stagings and mezzanine floors;  internal buildings;  permanent partitions;  railway track;  bridges and housings for conveyors; fences)
  • Communications cabling

 

Note On Plant & Equipment Valuations

A valuation of plant & equipment would include any production or commercial assets that are used as part of the commercial process or services provided by the occupier of the building.   Plant and Equipment may broadly be divided into the following categories:

  •  Plant – assets that are inextricably combined with others and that may include items that form part of the building services installations specialised buildings, machinery and equipment;
  • Machinery – individual, or a collection of, machines that may have been installed wholly in connection with the occupiers’ industrial or commercial processes (a machine is an apparatus used for a specific process in connection with the operation of the entity); or.
  • Equipment – other assets such as furniture and furnishings, tenants’ fixtures and fittings, vehicles and loose tools that are used to assist the operation of the enterprise or entity.

 

For further details on the above topic or to speak to one of our experts please contact us on

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