Plant and machinery valuation

• Power or water plant / equipment
• All kinds of production plant / machinery / electrical equipment / tooling
• Furniture / office equipment / devices
• All kinds of computer hardware / software
• Car / tractor / motor vehicle
• Cruise ships / Fishing vessels

Circular:

According to HKEx Listing Rule, fair value of acquisition consideration is required before / when the following transactions happen: 1) Major Transaction or 2) Very Substantial Transaction or 3) Connected Transaction or 4) Reverse Takeover

According to HKEx Listing Rule chapter 14.67 and 14.69, a circular issued for Major Transaction or Very Substantial Acquisition or Very Substantial Disposal circulars or Reverse Takeover on an acquisition or disposal of any revenue-generating assets must contain a Valuation Report. Valuation Report must be reviewed by the auditors or reporting accountants to ensure that such information has been properly compiled and derived from the underlying books and records. Valuation report regarding infrastructure project or an infrastructure or project company (s) must clearly set out: (1) all fundamental underlying assumptions including discount rate or growth rate used; and (2) a sensitivity analysis based on the various discount rates and growth rates.

Accounting:

According to IAS16.7, the cost of an item of plant and equipment shall be recognized as an asset if, and only if: (a) it is probable that future economic benefits associated with the item will flow to the entity; and (b) the cost of the item can be measured reliably.

M&A-related inventory, plant and machinery.

According to International Accounting Standard, fair value of M&A-related inventory, plant and machinery need to be recorded on balance sheet of financial statement.

Tax declaration:

Gift Tax, Estate Duty, Shareholding Transfer of vehicle or cruise ship…etc.

Internal Reference:

Loan Mortgage, Cost survey, Depreciation allowance allocation, Machinery and equipment procurement and disposal etc.

Market Approach:

An asset being valued is compared with similar items that have been transacted in the market or that are listed or offered for sale, with appropriate adjustment to reflect different state or characteristics.

Income approach:

It considers the income that an asset will generate over its remaining useful life and estimates value through a capitalization process. This process applies an appropriate yield, or discount rate, to the projected income stream to arrive at a capital value.

Cost Approach:

It is an estimate of the new replacement costs of the subject, including professional fees and finance charges, from which deductions are then made to allow for age, physical and functional obsolescence.