Applying Value to Equipment
When your facility decommissions assets and is looking to sell surplus equipment it is important to understand how value is being applied to the equipment you are selling. This helps both the seller and buyer agree on an acceptable purchase price. Outlined below are a few different definitions that are used for capital assets:
Fair Market Value (This is the standard definition applied when appraising an asset)
FMV is the estimated amount, expressed in terms of money that may be reasonably expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.
Forced Liquidation Value (This definition is applied for facilities under bankruptcy or a buyer with an immediate need to sell)
FLV is the estimated gross amount expressed in terms of money that could be typically realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.
Orderly Liquidation Value (This definition is commonly used when selling surplus equipment)
OLV is the estimated gross amount expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser(s) with the seller being compelled to sell on an as-is, where-is basis as of a specific date.
When selling surplus medical equipment buyers are typically applying some form of liquidation value with understanding that the asset is being sold in “As-is, where-is condition.” Understanding how fair market values are being applied to your equipment allow for a smoother transition during the sale process.