The valuation of tangible assets relating to a purchase price allocation generally is completed through the Cost Approach, with adjustments as appropriate considering the Sales (Market) Comparison and the Income Capitalization Approaches. Cost Approach is the Basis of the Appraisal Effort Under the basic Cost Approach the fixed asset system of the business entity serves as the basis of the asset inventory, that is, the schedule of the land, land improvements, buildings or structures, leasehold improvements, electronic data processing equipment, handling equipment, office furniture, office machines, machinery and equipment, rolling stock, special assets, systems and utilities, and so forth. Such an asset classification schedule will vary from business to business depending upon its type. The very first stage of the appraisal, therefore, is to work with the facilities manager to ascertain the most appropriate and cost effective manner to optimally utilize the type of data available within the business that is the subject of the appraisal effort. The Inventory Stage An initial step of the appraisal is to ascertain the validity and accuracy of the fixed asset schedule as it relates to the assets actually in place. The appraiser assesses if the assets scheduled are actually on site, or conversely, if assets on site are not on the asset schedule. If there is reasonable acceptance that the fixed asset schedule is accurate then the valuation effort may proceed, otherwise a determination is made if the inventory must be corrected through field work, and/or by sending the fixed asset listings to each location for asset verification (addition and deletion modification). Further, there may be required a new listing of certain assets with a substitution of the newly scheduled assets into the prior fixed asset record. Should the fixed asset record reflect allocated values rather than historical cost information, facility modeling approaches may be warranted. Appraisal Classification of the Asset With an acceptable fixed asset record, usually downloaded into an Excel spreadsheet, the appraiser begins an appraisal based asset classification process. Whereas assets are already classified for accounting purposes, classification of assets for application of appraisal factors is required. For example, a pressure cooker and a serving counter, while each being restaurant equipment for accounting, for appraisal purposes have differing normal useful lives as well as differing values change over time. In the Excel spreadsheet therefore, the appraiser often will add a column for the appraisal classification of the assets, should such a level of accuracy be warranted. It is important to note that the appraisal classification of assets may be by-passed, using macro adjustments by accounting classification, yet the asset by asset accuracy of the resulting valuation record is compromised. Development and Application of the Appraisal Classification The appraiser, often working in conjunction with the facilities manager for multi-location similar unit operations, will develop models of value change for the appraisal classifications. Such models will at least mirror the accounting classifications for the business, expanded by the appraisal classifications. As a check on the reasonableness of the approach, or as an alternative, the appraiser and the facilities manager may develop models based on square footage by type of unit, productive capacity by type of unit, etc. Regardless of the approach to model development, field inspection and testing of the process is warranted. Report Generation Once developed, the appraiser applies the factors on an age / normal life basis by appraisal classification to each asset. Certain assets, based upon their level of materiality and cost, may also require direct valuation. By appropriate report organization the appraisal firm generates the asset detail report as well as prepares the necessary narrative information concerning value definitions, procedures, assumptions and limiting conditions, and certification relating to the appraisal assignment. Further, the asset detail may be uploaded into the businesses’ fixed asset file for adjustment of the asset values on a unique asset basis. Alternative / Additional Economic Analysis If determined as appropriate and warranted, the appraiser working again with the facilities manager may modify value information based on the level of economic return for each unit. Such an approach may be developed in lieu of individual asset valuation efforts and be applied on a unit by unit basis. Or, such information may be developed and applied subsequent to asset by asset value modification on a unit by unit basis. For example, unit A with a complement of assets the same as unit B may be twice as profitable, with downward valuation adjustment being fully applicable to the weaker unit rather than being split equally to each. Summary In summary, each business tends to structure their fixed asset accounting in differing manners relating to capitalization policy, organizational structure, addition / deletion monitoring, physical correlation, and so forth. Therefore, each valuation effort is different depending upon the information available, yet all are based on certain principles as noted above. It is the task of the experienced accountant / appraiser / engineer / data processing specialist to develop the most cost effective and appropriate solution to the valuation effort.