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Developing a methodological approach to the identification and quantification of physical obsolescence during the inspection of plant, machinery and equipment

Manaf, Zaharah and Mohd Razali, Muhammad Najib and Marzuki, Mohammad Al-Bukhari (2007) Developing a methodological approach to the identification and quantification of physical obsolescence during the inspection of plant, machinery and equipment. In: 10th Asian Real Estate Society Conference, 18 - 21 July 2007, Sydney, Australia.

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Abstract

One of the crucial factors to be considered during the process of valuation of plant, machinery and equipment (PME) is the depreciation factor. This is due to the fact that most PME have pre-determined economic life and majority of them are already in use. Most PME are subjected to at least three different types of depreciation which will affect the value of each PME. Hence, there is a dire need for the Valuer to be able to identify and quantify depreciation factors which should be done during the inspection of PME. Depreciation of PME could be in the form of physical obsolescence, economic obsolescence or functional (technological) obsolescence. Physical obsolescence (PO) is one of the categories of depreciation that affect PME most, due to wear and tear and exposure to the elements and specifically with regard to the climate of a particular country where PME is located. At present, it seems there is no standard procedure or a methodological approach to identify and quantify PO during the inspection. This paper concerns the identification and quantification of the PO. The preliminary study done among a group of valuers with different background found that, much guess work take place during the inspection itself. Further study needs to be done to eliminate this problem and perhaps to come up with a methodological approach to enable valuers to identify and quantify PO while carrying out the inspection of PME. The methodological approach will not only strengthen the basis on the depreciation given on PME but also a standardized format that can be used as part of the valuation process of PME where PO is part of the depreciation that needs to be considered. The approach once developed, will remove the guess work of identifying and quantifying of PO and hence giving the valuation reports added credibility.

Item Type: Conference or Workshop Item (Paper)
Uncontrolled Keywords: plant; machinery and equipment; depreciation; physical obsolescence
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Faculty of Technology Management and Business > Department of Real Estate Management
Depositing User: Normajihan Abd. Rahman
Date Deposited: 04 Oct 2011 07:48
Last Modified: 04 Oct 2011 07:50
URI: http://eprints.uthm.edu.my/id/eprint/1884
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