How to Determine Fair Market Value of Medical Equipment in CA?
How to determine the fair market value of medical equipment is important to medical practice owners and physicians in California. Knowing your equipment’s fair market value (FMV) is vital in understanding your financial position and correctly fulfilling tax obligations. To help you determine this, we’ve identified three valuation methods that Certified Machinery and Equipment Appraisers (CMEAs) use to appraise used medical equipment. Get to know each one below.
Sales Comparison Calculations | Determine Medical Equipment Value
The sales comparison calculation involves determining the price of a piece of medical equipment by comparing it to recent and similar sales, which you can call comparables. Relevant data include auction prices, dealer and vendor listings, and others.
With this valuation approach, appraisers analyze specific features and characteristics of the comparables and account for their effect on medical equipment’s worth.
To arrive at more accurate appraisal numbers, appraisers can adjust comparables to match their condition to the subject equipment. For example, if the comparable has a higher quality than your medical equipment, the appraiser will adjust the price to make it lower.
Overall, a medical equipment appraiser would use this calculation if there is adequate market data as a reference since it often results in the most accurate valuation. However, if there aren’t enough sales records or the subject medical equipment is more specialized, the other methods will be more suitable.
If your medical equipment isn’t commonly sold or the market isn’t active enough to get an accurate value, the cost calculation will be more applicable. In addition, it often serves as the starting point for any medical equipment appraisal since it’s more straightforward.
The cost calculation essentially values your asset at a price needed to build the equipment with the same condition and utility. Typically, the appraiser starts at the current new replacement cost then deducts the value to account for depreciation of the subject medical equipment.
Deductions for depreciation may fall under three categories: physical deterioration, functional obsolescence, or economic obsolescence. To calculate the corresponding depreciation, the appraiser will need to use their judgment.
Final take, the cost calculation is generally not as reliable as the sales comparison approach. However, it’s the most appropriate option if there isn’t enough data to get substantial comparables to value the subject medical equipment.
The last approach is income calculation, which is suitable for appraising revenue-generating medical equipment. As its name suggests, the technique calculates the present value of the subject medical equipment’s future economic benefits.
In most cases, the income calculation assumes a particular rate of return from the income generated by the equipment of interest. The appraiser will calculate the revenue by taking the value of the medical equipment and multiplying this by the expected rate of return.
Among all the valuation calculations, this method is the most rarely used for medical equipment. One main reason is that it’s often challenging to trace back the exact amount of income you’ve earned from a particular piece of equipment.
How to Determine Fair Market Value of Medical Equipment | Appraisal Process
How to determine the fair market value of medical equipment? Medical practice owners in California often ask this at least once when managing their operations.
To answer this thoroughly, it helps to familiarize yourself with how to value used medical equipment. Here are the main steps involved in the valuation process.
- Determine the purpose of the valuation.
- Identify the equipment to be valued.
- Gather relevant information.
- Apply the chosen appraisal method.
- Exercise judgment to arrive at the final value.
Medical Equipment Appraisal Services in the Golden State
As you’ve probably noticed, the medical equipment appraisal process is complex and technical. As such, it’s essential to hire a Certified Machinery and Equipment Appraiser (CMEA) for professional medical equipment appraisal services.
A certified equipment appraiser ensures that you receive an unbiased valuation for your asset, which you can use for your intended purpose. They also comply with the Uniform Standards of Professional Appraisal Practice (USPAP), so you can rest easy knowing that they did the valuation per proper ethical and quality control standards.
Now, you might be wondering – what if you estimate the valuation yourself? Unfortunately, if you don’t have the knowledge and experience in the field, you can commit many errors and expose yourself to liabilities and risks. Moreover, even the most minor mistakes can land you in court or lead to IRS disputes, so it’s best to leave the work to a professional.
Overall, it’s critical that you hire a CMEA and not an auctioneer, dealer, or layman for medical equipment appraisal services in California since they’re the only ones that the IRS and other organizations recognize as qualified. Moreover, CMEAs are the only professionals who can help you get court-acceptable documents.
Hiring a CMEA will save you time, effort, and costs whenever you might need a medical equipment appraisal. With professional help from Rogerson Business Services in Sacramento, you can get an accurate appraisal, comply with regulations, and avoid running into pain points along the way.
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