Nigerian governments at all levels are said to be paying little attention to plant and machinery valuation, a veritable revenue source that has been less-exploited. Why is this so?
Simply because of over-dependence on non-qualified professionals, who are neither estate surveyors nor valuers. And with this situation governments at the three tiers are losing enormously, revenue that should come from taxes on machinery and plants. With proper valuation of industrial machinery and plants, be it the breweries, aviation, communication outfits taxes that would be generated either by the federal, state or local governments in terms of revenues are so huge that their effective exploitation is capable of eliminating total dependence on revenue from oil, not to talk of engaging in external borrowing.
What are the process and a set of procedure used to determine the economic value of an owner’s interest in an asset?
Valuation of Assets may generally be required for following purposes: Mergers and Acquisitions – Pre Merger and Post Merger. From Financial Reporting Banking( Lending against Assets), it involves impairment studies, purchase price allocation, Distress Assets / Non Performing Asset, Court & Litigation support, including management information and strategic planning. Other processes include insurance, initial public offerings, cost investigations disinvestment, among others. The Scope of Valuer Include complete understanding of valuation purpose, collection of data and documents and understanding, physical inspection of subject assets, market survey and collection of data pertinent to the valuation exercise. Others are collection of technical details for the subject assets and analysis of technical data and the supporting information, assessment of balance economic life of the subject assets, determination of valuation parameters, methodology, basis of valuation and key assumptions from the foregoing, one will not, but admitted that only those who are professionally qualified, in this case Estate surveyors and Valuers are in position to be engaged in valuation exercise, not the lawyers, the accountants, or architects. Although, their services may be needed in other ancillary areas, but not in the nitty-gritty of plant valuation.
Why should it be so?
Plant Valuation is highly complex in nature as our practice caters for a wide spectrum of industries each having plant and machinery with its own inherent characteristics. Among the issues to be considered in the Plant Valuation are the specific utility or usefulness of industrial property, its contribution to the production of goods and services for which it is designed and deployed. Plant and machinery valuation is important to every company’s annual financial reporting. It is stated under the Non-Current Asset and was normally reported by the accountants on two basis, either Historical Cost or Revaluation basis. But as a matter of fact, independent valuers must be employed to provide the current up to date valuation on the non-current assets valuation such as property, plant, equipment and intangible assets. This is where Nigerian governments are getting it wrong by just appointing anybody from any professional background to do the job they know nothing about. Property valuations form important aspects of modern economy. They support the banking system by setting the benchmarks for collateral values. In the corporate sector, property valuations are important inputs in balance sheets and property assets are sought after for business loans. Property valuations are also important for the ordinary layman when they buy, sell or rent houses and other types of properties. Thus property valuations need to be carried out with a higher level of integrity and professional competence.
Are there things that are happening in the international scene that is not happening in Nigeria as far as valuation of plants/machinery are concerned?
Yes. It’s of utmost importance that Nigerian governments must realise that the International Valuation Standard Committee (IVSC), an international institution for the valuation and property management, has recognised the needs for the international valuation structure via the International Valuation Standards (IVS). The standard is essential as there are major concerns from auditors, bankers, financial analysts and company directors that a consistent basis of valuation is used, to enable valid comparisons to be drawn, for the valuation of fixed assets throughout the world. In essence, the emerging demands from national and international companies, financial institutions and other organisations for current valuations, reflecting the importance of asset values in new issues for shares (share prospectuses), acquisitions, mergers, takeovers, and as a basis for loans have been one of the factors for the formation of the IVS.
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