The Journal of the International Machinery Volume 33, Issue 1, 1st Qtr 2017 & Technical Specialties Committee of the American Society of Appraisers

$35.00 ASA Members, MTS Discipline $50.00 ASA Members, Non-MTS Discipline THE MTS JOURNAL

Contents

MTS Journal Editorial 5 Brad Hartsburg, ASA, CPPA, CSA Governor's Bulletin 7 Richard Berkemeier, ASA and David Crick, ASA, MTS Governors Auction Theory, Game Theory, and Appraisal 8 Walter W. O’Connell, M.E., ASA, SCSP Royalties and Valuation of Mineral Rights 14 Landy A. Stinnett, ASA, P.E. ASA and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers 18 Alison Ho Depreciation of Installation Costs 19 Raymond Springer, ASA 5th Annual Equipment Valuation Conference in Cleveland 22 Jean Jackson and David Helle, ASA ASA Advanced Mining Topics Course Report - September 23- 28, 2016 - Las Vegas, Nevada 27 Charles W. “Bill” Ruth, ASA The Value of Mining Equipment Appraisal Education 36 John J. Connolly III, ASA Chairman's Corner 37 John J. Connolly III, ASA MTS Journal 2016-17 Media Kit 38 American Society of Appraisers ASA Appraisal Review and Advanced Course 201 42 Roger Durkin, J.D,. M.S., FASA Purpose and Intent of IVSC 43 Jack Beckwith, ASA, CEA Fair Competition and Fair Gain 47 Peter Bolton King 2016 Market Overview 49 Mike Clark Insurance Valuations and Loss Preparedness 52 Alex Ruden, ASA (M&TS & ARM), CG/GA FDIC Rental Value - A Nontraditional Approach 54 Larry L. Perdue, ASA, MVS Why Net Book Value Does Not Equal Fair Value 62 J. Fernando Sosa, ASA, MRICS Aircraft Residual Value Puzzle 67 Mike McCracken Valuing Assets in Extractive Industries 69 Alexander Lopatnikov, ASA, RICS American Society of Appraisers Update 73 American Society of Appraisers

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Upon Receipt of the Inspection Report 74 Amanda Applegate Demystifying Engine Terms 76 James Becker, ASA Region 2 Governor's Bulletin 79 Mike Pratt, ASA Scope of Work within Appraisal Review 80 Joel D. Gonia, ASA Journal Advertising Notice 83 American Society of Appraisers Archived Articles Available for Your Library 84 Brad Hartsburg, ASA, CPPA, CSA The MTS Journal Subscription Form 104 American Society of Appraisers

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The International Machinery & Technical Specialities Committee

MTS Committee Officers Paul Cogley, ASA – Rhode Island - Treasurer John J. Connolly III, ASA - New Jersey - Chair Robert W. Clark, ASA - Pennsylvania – Immediate Past Chair Samuel Shapiro, ASA - Massachusetts – Vice Chair Richard Berkemeier, ASA – Rhode Island - MTS Discipline Governor Karen M. Milan, ASA - Texas – Secretary David Crick, ASA – Australia - MTS Discipline Governor

MTS Committee Members William M. Engel, ASA - NY Charles W. Ruth, ASA - NM Ildefonso Acevedo Reyes, ASA - Mexico Brad Hartsburg, ASA - Canada Joseph M. Santora, ASA - OH Nuno S. Agostinho, ASA - Argentina Norberto J. Levin, ASA - Argentina Bradley Schulz, ASA - IL Jamie Allen, ASA – IL Irina Rykun, ASA - Russian Federation Garrett Schwartz, ASA - CA Keith Bransky, ASA - GA Kevin S. Reilly, ASA - WI John C. Wood, ASA – Australia Peter J. Campbell, ASA - MI Harry J. Richardson, ASA - MI Michael R. Crismyre, ASA - IL Alexander Ruden, ASA - GA

Emeritus Members Melvin Fineberg, ASA - NV H. Denis Neumann, ASA - CA Merritt Agabian, FASA - MA Alan C. Iannacito, FASA - CO Robert Podwalny, FASA - CA Kal Barrow, ASA - NY William F. Jacobs, ASA - OR Barry Savage, ASA - OH J.M. Clarkson, ASA - TX Norman F. Laskay, ASA - LA Robert Svoboda, ASA - TX John Connelly, III, ASA - NJ Leslie H. Miles, FASA - TX Victor Thompson, ASA - KY

American Society of Appraisers 11107 Sunset Hills Rd, Suite 310, Reston, VA 20190 800-272-8258 ext 125 Editorial Office: Fortress Machinery Appraisals and Consulting Inc. 24 Clover Lane, Calgary, Alberta, Canada T3Z 1G9 Business Office: Asset Valuation Source, P.O. Box 39 Rowlett, TX 75030-0039

© 2016 American Society of Appraisers. All rights reserved. For permission to reproduce in whole or in part, and for quotation privilege, contact ASA’s International Headquarters. Neither the Society nor its editors accepts responsibility for statements or opinions advanced in articles appearing herein, and their appearance does not necessarily constitute an endorsement.

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MTS Journal Editorial Brad Hartsburg, ASA, CPPA, CSA

Belated Seasons Greetings and all the best for 2017! My apologies on the tardy timing of this issue as we were busy putting out that Special Aviation Issue just as winter was upon us -- and thank you so much for all the kind comments about that Aviation Issue, your feedback was much appreciated! I welcome you to the first edition of the MTS Journal for the 2017 calendar year edition Volume 33, Issue 1, 1st Quarter 2017. I have placed a colorful late fall picture to help keep your hearts warm, wherever you are, as it should be winter? Where we are there is a couple feet of snow and the average temperature has been minus 30 degrees. Yikes! We continue to look for interesting articles our members and readers want to learn from. If there is a topic you are passionate about, please do not hesitate to contact me. There are plenty of you out there with unlimited knowledge and many looking to learn from it. I am more than willing to work with you on your article. I wish to thank all of you that assisted with interesting articles for this issue, there is a lot of great information and we hope it assists you with your daily work and activities. Our Chairman, John Connolly III, ASA has written to let us know what is happening within the MTS discipline as well as writing about The Value of Mining Equipment Appraisal Education in conjunction with Mine Expo which held in Las Vegas last fall. Our Governors, David Crick, ASA and Rick Berkemeier, ASA have updated us on the happenings of our MTS discipline and the society as a whole. Walter W. O’Connell M.E., ASA, SCSP has written an informative article about the Auction Theory, Game Theory, and Appraisal. Landy A. Stinnett, ASA, P.E., has penned an article about Royalties and Valuation of Mineral Rights

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Raymond Springer, ASA has written about Depreciation of Installation Costs The 5th Annual Equipment Valuation Conference in Cleveland Report was completed by Jean Jackson and David Helle, ASA. Charles W. “Bill” Ruth, ASA, has sent us an informative and photographic report about the course, ASA Advanced Mining Topics which was held in conjunction with Mine Expo in September 23- 28, 2016 - Las Vegas, Nevada The MTS Journal Advertising Media Kit has been included as well as 2017 ARM course dates by Yours Truly Jack Beckwith, ASA has written an article about the Purpose and Intent of IVSC Peter Bolton King reflects on the Rio Olympics and answers questions about the International Ethics Standards Coalition Mike Clark, has given us a 2016 Market Overview as he sees it from his industry Alex Ruden, ASA has written about Insurance Valuations and Loss Preparedness Larry L. Perdue, ASA has resurrected his 1989 MTS Journal article and updated it which is called: FDIC Rental Value, A Non Traditional Approach Why Net Book Value Does Not Equal Fair Value was written by: J. Fernando Sosa, ASA Mike McCracken has written about the Aircraft Residual Value Puzzle Russian member Alexander Lopatnikov, ASA has written an article about Valuing Assets in Extractive Industries Amanda Applegate has written about Business Aviation and what to do about: Upon Receipt of the Inspection Report The article titled, Demystifying Engine Terms was written by James Becker, ASA Joel D. Gonia, ASA has written an ARM textbook article titled: Scope of Work within Appraisal Review And finally, the list of Archived Articles Available for Your Library by your MTS Journal Editor -- Brad Hartsburg I hope that you enjoy this edition of the MTS Journal and all the best in 2017! Check your calendars and plan to attend the many interesting conferences and courses that are planned for this year. I will look forward to seeing you there! For more information, please see the ASA website: www.appraisers.org Respectfully submitted,

Brad Hartsburg, ASA, CPPA, CSA and MTS Journal Editor Fortress Machinery Appraisals and Consulting Inc. Calgary, Alberta, Canada - 403-650-1122 E-mail - [email protected] Website - www.fortressmachineryappraisals.com

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Governor’s Bulletin Richard Berkemeier, ASA and David Crick, ASA, MTS Governors

Dear MTS Members: What is currently on the Calendar for 2017 Embry-Riddle/ ASA Aircraft Education and USPAP Liquidity Services M&E 203, 204 Leeds England January 15 thru 21 DLL M&E 204 Philadelphia March 6, 7 and 8th M&E 203 and M&E 204, USPAP Melbourne Australia February 20-26 Conferences Cleveland ID Conference Cleveland Ohio June 6, 7, 8th Houston 2017 ASA International Appraisers Conference October 7-10 International Plant Conference Sydney, Australia September 4, 5, and 6th NAFA/Embry-Riddle/ASA 8 Hour Education Day Ft. Lauderdale March 21 Bombardier/ASA Seminar TBD Any questions or concerns for your two MTS Governor’s email or call:

Richard Berkemeier [email protected]

David Crick [email protected]

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Auction Theory, Game Theory, and Appraisal Walter W. O’Connell, M.E., ASA, SCSP

Three appraisers are lost in the desert! They are wandering through the desert, dying of thirst, when they come across a hiker with one bottle of water to spare! Each appraiser reaches into their pocket to see what they can offer the hiker in exchange for the bottle. Appraiser #1 offers 10 dollars from his pocket, Appraiser #2 offers 50 dollars from his pocket and Appraiser #3 offers a crisp new 100-dollar bill. The hiker yells “Sold to Appraiser #3 for 100 dollars”! Appraiser #3 wins and lives to appraise another day. This short parable, as funny (or tragic) as it seems, is designed to demonstrate that outcomes of an auction are based on the level of trade in which the auction participant deals. In this parable, the level of trade was three appraisers in the desert dying of thirst. If our Appraiser #3, who lived, was given an assignment to value bottled water at a supermarket, days after returning from the desert, would he value each 12-ounce bottle of water at 100 dollars? The answer of course is “No”. Less dramatic inflations in the real world can be observed based on the needs of the auction participants and/or the type of auction in which they are participating. This article will examine how auction participants and the way an auction is designed and ran by an auctioneer can deliver higher than expected final bids in auctions. Understanding the behavior of auction participants and how an auction is designed and ran, may help the Appraiser reconsider whether auction data should be used, not used, or adjusted before used in an appraisal assignment. The study of auction data and outcomes is a sub-category of Game Theory. Game Theory, a branch of mathematics and economics, is the study of strategies for dealing with competitive situations where the outcome of a participant's choice of action depends critically on the actions of other participants. Like most games, there are two major factors that determine the outcome of the game (auction): the players and the rules of the game (the auction type). The Players The players in our game are the auction participants. These participants can come from different companies, different states, different countries, and have different ideas of how the property won will be used. If they become the winning bid, will the participant use the property, resell the property, dismantle the property for its sub-components, donate the property, or warehouse the property for future use? Will the property won be used to produce immediate income, create a tax donation, or be held in a private collection? If the intent is to resell the property, will it be sold in the salvage market, wholesale market, retail market, or resold at another auction? Even if we identify the level of trade, let’s say “retail”, what level within retail level of trade will the property be sold? Will the property be resold at a salvage yard, flea market, discount store, midmarket retail store, or upscale boutique? What I am demonstrating is that there are literally hundreds, if not thousands, of factors that influence how an auction participant bids on an auctioned property! Lot Size Lot size, the quantity of identical or similar property, will influence who the auction participants are. An example demonstrating how lot size influences who the participants can be demonstrated with the three auctions flyers shown below.

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Looking at the above three flyers we could imagine the following participants attending and bidding at each auction: Lot of 1 Laptop Computer: Small Business, Student, Homeowner, or Boutique Computer Shop. Lot of 100 Laptop Computers: Small Chain of Electronic Stores, School or University, Mid-Sized Company. Lot of 1000 Laptop Computers: Large Chain of Retail Stores or National Wholesale Electronic Warehouse Company. At our 1 Laptop Computer auction we can imagine that small businesses and/or individuals would be the auction participants. We would not expect mid-sized or large institutions to participate in such an auction. The lot size of such an auction would not interest mid-sized and large institutions looking to purchase property at a discounted price, due to the larger quantities they would need to acquire to meet the institution’s needs or discount pricing one would expect for higher volume purchases. At the 100 Laptop Computers auction, lot size becomes too large for small institutions or individuals. Small institutions and individuals lack the resources ($), distribution network, and/or need for 100 units, even if a savings of $100 per unit is realized. Due to the quantity purchased participants would expect a discount and pay wholesale pricing due to the economies of scale that would be realized by high volume purchases of such units. Let’s call this level of purchasing “Wholesale Pricing”. Our 1000 Laptop Computers auction would likely be restricted to those companies needing 1000 units, or those who have the large scale distribution network. Let’s call this level of purchasing “Distributor Pricing”. As you can see, lot size and those participating in an auction will define what market level the winning bid represents. Now imagine an appraiser receives a report stating that used laptop computers recently sold at auction for $300 per unit, with no additional information detailing lot size or participants, he could conclude in error that $300 was the market price that small businesses or individuals are paying for used laptop computers. Auction Types While completing my research to write this article I found there are many different styles of auction. I stopped counting when I reached 24 styles. Auctions, like auction participants, are diverse and varied. State run lotteries, like lotto, are a type of auction. Charitable auctions like Chinese and Tricky Tray Auctions combine auction with raffle. There are all types of raffle, outcry, and sealed bid auctions. Bid pricing can start low ($) and move high ($), start high ($) and move low ($), keep the participants informed, or keep the participants in the dark. No matter what the name, or style of the auction, all auctions fall into one of four types:

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1. English Auction (outcry): An auction where bids start at a low price. Buyers call out sequentially higher prices and the participant who bids the most wins the auction. 2. Dutch Auction (outcry): An auction where bids start at an extremely high price with the auctioneer calling out successively lower prices until someone accepts the price called. 3. First Price Auction (sealed bid): All participants place a sealed bid. The highest bidder wins the auction and pays the bid price. 4. Vickrey Auction (sealed bid): All bidders place a private bid. The highest bidder wins the auction, but pays the bid price of the second highest bidder. Even in an outcry auction, other bidders during the auction do not know the strategy or final bid ($) that each auction participant is willing to place. One would assume that the final bid, regardless of the type of auction, would be at the top end of the fair market value spectrum based on the level of trade in which the final winning participant participates. What you will see is that the final bid prices have the potential to vary widely based on the strategy employed by the participant and auction type.

Let’s Play a Game Let’s see what the dynamics and outcomes would be if we played a game using consistent bidding strategies from participants in each of the four types of auction. Up for Auction: 2010 Drill Deep Piling Drilling Rig Quantity: 1 unit Bids: The auctioneer has set the bidding in $5,000 increments. Strategy: Each bidder will look to buy the rig at the lowest possible price and may not exceed the authorized maximum bid authorized by each employer. The Auction Participants: Bidder A – Wholesaler – Maximum bid authorized: $30,000 (looking to win bid and resell drill rig in the next 30 days) Bidder B – Wholesaler – Maximum bid authorized: $35,000 (looking to win bid and resell drill rig in the next 360 days) Bidder C – Retailer – Maximum bid authorized: $40,000 (looking to win bid and resell drill rig in the next 45 days) Bidder D – Retailer – Maximum bid authorized: $45,000 (looking to win bid and resell drill rig in the next 180 days) Bidder E – General Contractor – Maximum bid authorized: $60,000 (The drilling rig they own and use now is beginning to fail and needs to be replaced in the next four to six months) Bidder F – General Contractor – Maximum bid authorized: $100,000 (The Company’s current Piling Drill Rig broke yesterday! It cannot be repaired! The company is losing $10,000 a day! The company is in distress! The company does not care what the fair value is, they need to acquire a new Rig before they go out of business!) As you can see, Bidders A through E have their maximum bid ($) at a price level that we would expect to see at the level of trade in which they are participating. Our Wholesalers are bidding low, Retailers are bidding high, Bidder E, as an end user, is willing to pay even more than the retailers who need to buy low and sell high. But look at Bidder F! Bidder F is about to go out of business if they can’t acquire this drill rig! Bidder F is in distress! Let’s see what happens!

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1. English Auction (outcry): An auction where bids start at a low price. Buyers call out sequentially higher prices and the participant who bids the most wins the auction.

In the English Auction, with outcry bidding starting low and moving high, our winner; Bidder F, who was authorized to bid as high as $100,000, only bids and wins at $65,000 ($5,000 above Bidder E). Even though Bidder F’s business is in distress, and could bid as high as $100,000, he only needed to bid $65,000 to ensure a winning bid. Our appraiser, not knowing Bidder F’s company was in distress, could conclude the fair market value (end user) would be at some point in the $60,000 to $65,000 range. 2. Dutch Auction (outcry): An auction where bids start at an extremely high price with the auctioneer calling out lower successively lower prices until someone accepts the price called.

In the Dutch Auction, even with outcry bidding, Bidder F is forced to bid the full $100,000, not knowing at what price point Bidders A through E will bid. In this system Bidder F’s bid is the only bid observed by our appraiser. If not given any additional information, our appraiser could improperly conclude that $100,000 was the fair market value (end user), greatly above the $60,000 to $65,000 range observed in the English Auction.

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3. First Price Auction (sealed bid): All participants place a sealed bid. The highest bidder wins the auction.

In the First Price Auction, with sealed bidding, Bidder F is forced to bid the full $100,000, not knowing at what price levels Bidders A through E will bid. In this system non-winning bids are disclosed. Our Appraiser would have an opportunity to observe the spread between Bidder E’s $60,000 and F’s $100,000 winning bid. In this case our Appraiser may conclude that addition research is needed before concluding that the fair market value (end user) is $100,000. 4. Vickrey Auction (sealed bid): All bidders place a private bid. The highest bidder wins the auction, but pays the bid price of the second highest bidder.

In the Vickrey Auction, with sealed bidding, Bidder F will bid the full $100,000, win the bid, but only pay the next highest bid of $60,000 offered by Bidder E. Our appraiser, able to see all bids, would conclude that the fair market value (end user) would be $60,000.

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In all auctions, unless a degree of chance (raffle/lottery) is built into the auction, as in a Chinese or Lottery Auction; the highest bidder will always win. But what we have observed is that the “winning bid” can vary dramatically based on the strategy employed by the participant and the type of auction run. The final winning bid of Bidder F can be represented by $60,000, $65,000, or $100,000 based on the type of auction. If we assume that Bidder E’s maximum bid of $60,000 is the true fair market value (end user) but our appraiser improperly reports $65,000, an overstatement of 8.333%, such a mistake may never be noticed or may be considered insignificant in our assignment. But a winning bid of $100,000, an overstatement of 66.666% may cause problems for the client and/or his appraisal practice. A number of strategies can be employed in dealing with the issue of observed variances in auction data but it is clear that before such strategies can be put in place the type of auction, level of trade, and participants of an auction must be understood and properly analyzed in any appraisal assignment. About the Author Walter W. O’Connell, ME, ASA, SCSP is a Senior Consultant with Porto Leone Consulting, LLC (“PLC”) and is responsible for managing cost segregation studies and tangible asset valuations. He has provided these services to clients in a variety of industries for over ten years. Prior to joining PLC, Walter worked in the manufacturing and distribution sectors as an Inventory Control Manager for Newell Rubbermaid (NYSE:CHX) and Marcolin S.p.A.. While working as an Inventory Control Manager, Walter specialized in Material Requirements Planning (“MRP”) and Manufacturing Resource Planning (“MRP II”), in matters of national and international purchasing, the procurement of production equipment, plant and production design, cost allocation studies, and inventory accounting. He has performed and managed cost segregation studies on hundreds of properties, including hotels, senior living facilities, manufacturing facilities, research & development facilities, office buildings, hospitals, and retail properties. Walter has experience in tangible asset valuations for tax, book, insurance placement, due diligence, and business planning purposes in the Healthcare, Hospitality, Manufacturing, Chemical, Food Processing, Cable and Telecommunications industries nationally. Walter holds a Master of Arts degree in Economics from Montclair State University, Bachelor of Science degree in Finance and a Bachelor of Arts degree in Economics from Kean University. He is an Accredited Senior Appraiser (“ASA”) with the American Society of Appraisers, a member of the Association of Production and Inventory Control Supervisors (“APICS”), and is an Accredited Senior Cost Segregation Professional (“SCSP”) with the American Society of Cost Segregation Professionals (“ASCSP”) and is a member of the American Economic Association.

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Royalties and Valuation of Mineral Rights Landy A. Stinnett, ASA, P.E

Introduction An appraiser of mineral rights or interests in a property is faced with the same three approaches to valuation as with any other real estate appraisal exercise: 1) cost, 2) comparable sales, and 3) the income method. The cost approach is typically viewed as the least reliable for valuing real estate in general, and the same holds if appraising just the subsurface mineral interests.(4,6) It is extremely difficult to even estimate the amount of money spent in years past on land acquisition, geophysical prospecting, drilling, or other activities, much less distinguish between useful expenditures and those that were unwise or frivolous. As for comparable sales, this often is of little use except from a global viewpoint since the characteristics which define a given mineral deposit are unique in detail; thus attempting to compare various attributes, assign a relative worth to these characteristics (surface v. underground, room-and-pillar mining v. block caving, oxide mineralization v. sulfide, etc.) and then subjectively adjust the comparables accordingly to match the subject property is generally not prone to defensible argument. This leaves the income method as the preferred mineral valuation approach, provided sufficient understanding of the deposit is available, and there is reason to believe that development or continued production from the deposit is expected. Generally the mining enterprise is evaluated as an operating entity complete with requisite capital investment, managerial expertise, trained labor force, and so forth. This technique collectively captures the value of the minerals and of the business enterprise as well. In certain instances, however, there is a need for identifying just the value of the minerals as they repose in the ground, such as allocation of a property’s purchase price across the asset classes for tax reasons, or the mineral estate is under different ownership from that of the surface. A preferred method can be effected by capitalization of actual or imputed royalty income, as this income stream is directly tied to a mineral owner’s or lessor’s expectations of worth. Definition of Royalty The word “royalty” originally referred to the rent or tax paid to the sovereign in England for the privilege of mining. In the United States, royalty is a reservation to the owner or lessor of a certain portion of the minerals, or the proceeds from their sale, at no cost to the lessor. When the payment of a mining royalty is based on Gross Proceeds, the term typically refers to the gross sales value received from the product, less expenses for freight, smelting and refining (FS&R). This concept is often stated, in regard to metallic ores, as a royalty paid on net smelter returns to the operator or lessee (NSR).(2) Other types of royalty arrangements include Gross Revenue, Net Proceeds, and Unit-based royalties, which may or may not be based on a sliding scale depending upon product price levels.(9) Note that these methods of determining a production royalty are based on some measure of current economics; i.e., product price, present operating costs, capital investment, etc. Certain older royalties, particularly on non- metallic minerals such as aggregates, were predicated on a cents/ton mined basis, which possibly contained a provision for periodically updating the applied rate depending on some published inflation/deflation indicator such as the Producer Price Index. History The valuation of mineral properties dates back many decades. The earliest readily attainable reference work dealing with the subject is Herbert Hoover’s 1909 book, Principles of Mining, wherein the first six chapters cover the topic of valuing mines and prospects.(8) Some techniques were published earlier (such as H.D. Hoskold’s 1877 treatise, The Engineer’s Valuing Assistant), and of course there have been numerous premises and articles written subsequently, especially since the 1960s.

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Prior to the concept of discounted cash flow (DCF) analyses being accepted throughout the mining industry, the rate-of-return approach dealt with discounted net income. This was generally the case in the mid-1930s as exemplified by an American Institute of Mining and Metallurgical Engineers (AIME) committee that conducted an in-depth analysis of coal valuation.(3) However, just prior to World War II, another AIME paper was published which suggested subtracting the present value of capital investment from the discounted value of the income stream, thereby capitalizing the investment at the hazard rate for the property as a whole; this effectively would utilize discounted cash flow as the metric for valuation rather than discounted net income.(7) Gradually this concept of DCF gained acceptance until by the mid-1960s most of the major mining companies were following these precepts in assessing the worth of mining projects. Almost all the early treatments, including more recent texts by Gentry and Stermole,(5,10) discussed the valuation of mines and mining projects. Only recently has the topic of valuing just the mineral interest, separate from an enterprise as a whole, been addressed in detail (although Leith(7) did mention use of royalty rates as a standard of value for mineral in the ground). In some measure, this severance of mineral interests relates to federal court decisions and reasoning whereby the present value of the royalty income stream is accepted as a preferred, more direct measure of the mineral interests themselves, than does a DCF analysis performed on an operating mine or development-stage project. In 1984 a federal court case, Cloverport Sand & Gravel Co., Inc., vs. U.S., noted that appraisers must take care to consider only the income that the property itself could provide, and not the income produced from the business enterprise conducted on the property (i.e., the business of mining).(6) Quoting from the Uniform Appraisal Standards for Federal Land Acquisition, we see the following: In developing an estimate of value by the income capitalization approach for a mineral property, it is generally recognized that the most appropriate method of capitalization is yield capitalization, most notably discounted cash flow (DCF) analysis. The income that may be capitalized is the royalty income, and not the income or profit generated by the business of mining and selling the mineral. For this reason, the income capitalization approach, when applied to mineral properties, is sometimes referred to as the royalty income approach. (Italics in the original) The document goes on to state that the essential ingredients in developing the present value of a royalty income stream (yield capitalization) are: • A start date when production will begin • An annual production rate • The number of production years • The projected selling price of the product • A royalty rate, and • The discount rate to be applied. The first four of these factors relate to specific conditions inherent to the property itself, whereas the final two are best obtained from the market place. The federal courts believe (and therefore mineral appraisers should as well) that royalty and discount rate selection derived from, and supported by, direct market data is the preferred approach in valuing mineral interests by the royalty income method. Current Royalty Rates Comparable royalty rates can be obtained from a number of sources, with the most obvious being the rates currently paid to other owners or lessors for extracting the same commodity in the immediate region as the property at issue. Often, however, the data are not forthcoming either because of the paucity of mining and/or leasing in the area, or because the parties involved believe this information is confidential. Even if such private-party rates are obtained, care must be given in interpreting the information since there is a possibility for a disparity in the lessor/lessee understanding of reasonable royalty rates; lessees are apt to be more knowledgeable than

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lessors at the time of royalty rate negotiations simply because the lessee has more experience in this task as a normal course of business, whereas for the lessor it may be a one-time event. There is a possibility that the negotiated royalty rate may be out of date, particularly if the agreement is several years old, and an escalation clause was not included. Also it may be that the lessor controls only a partial interest in the minerals, and therefore his royalty does not reflect an overall rate normally attributable to the full mineral ownership. Each of the above conditions, should they exist, will tend to understate the current, unbiased rate considered reasonable in the industry. Another source of rate information, particularly in the western states, may be provided by federal and state agencies involved with mineral leasing. The agencies are charged with insuring that the public receives just compensation for the production of a wasting asset, and from a broad perspective there is some uniformity among these groups. A review of royalties charged by twelve of the western states in the U.S. suggests that for certain metallic minerals a royalty rate ranging from 3 – 5% of Net Smelter Returns seems appropriate. Note that some states charge differently for different minerals mined and may also apply multiple types of royalties which can be governed by varying sets of exclusions, deductions, and limitations.(9) Discount Rates The royalty interest owner generally incurs none of the liabilities of operating expense and capital outlays, nor does he carry the burden of non-profitable prospecting and exploration. His primary risk is that of reduced income (or possibly no income) in case the mine or quarry operations slow down or suspend production. As a result, the discount rate on royalty interests should be lower than the rate used in a total property appraisal.(2) The topic of discount rates in real estate valuation has received considerable attention over the years, and it is equally important in the appraisal of mineral interests. There have been a number of approaches followed in deriving or justifying the most appropriate discount rate for a particular property. The Arizona Department of Revenue (ADR) is one state agency that annually researches corporate decisions regarding discount rates for natural resource properties, reviews professional literature from security analysts, and assesses changes in components comprising the capital asset pricing model. As such, ADR's findings are believed to be a good source of data and analysis to serve as a basis in formulating a discount rate for royalty interests. The 2016 guidelines from the Arizona Department of Revenue indicate representative discount rates for large-scale projects (>$25 million) at basically 9-13%, with ranges in after-tax, equity hurdle rates from 8 to 15%.(1) Large-scale projects typically have slightly lower hurdle rates; based on commodity, precious metal projects exhibit the lowest representative rates, and new development projects with higher risk are at the upper end of the scale. It should be noted that the above figure (+/- 13%) represents the discount for an operating property where the operator carries substantial risk that is generally avoided by a royalty recipient. (Although not stated in the ADR guidelines, it is presumed here that this discount excludes inflation.) Royalty is a prior lien on operating profits and, as such, should not carry a rate as high as the more risky discount rate applied to the lessee’s operation. A lower bound for discounting might be the long-term AAA bond rate of roughly 4 - 5% pre-tax, inclusive of an inflation component. With the upper and lower limits reasonably defined, it is then up to the appraiser to identify the particular risk associated with the property of interest and to ascribe a reasonable discount rate to the annual stream of royalty revenues. Understandably, some deposits may carry extreme risk as to timing, potential expropriation, the solving of a metallurgical problem, or other condition which would require a substantial increase in the discount rate as a compensatory measure in valuation.

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Summary Of the three accepted approaches to valuation of mineral deposits, the income method is typically practiced in industry. This most often considers the project as a whole, and in an operating mode. The U.S. court system believes that a valuation of the mineral interests can best be completed if a discounted cash flow analysis is performed on just the royalty stream of income due the owner or lessor, and not on the income or profit generated by the business of mining and selling the mineral. This royalty income approach requires knowledge of the deposit characteristics as well as expected operating criteria including start date, production rate, mine life, and commodity selling price forecasts. Two factors need confirmation from the marketplace: 1) a reasonable royalty rate to allow estimation of annual receipts, and 2) a discount rate to be applied to the annual stream of royalty revenues in order to arrive at a present value estimate for the mineral interests. References 1. Arizona Department of Revenue, 2016 “Appraisal Manual for Centrally Valued Natural Resource Property for Tax Year 2017”, Property Tax Division 2. California State Board of Equalization, 1973, “Valuation of Mines and Quarries”, Property Tax Department, Assessor’s Handbook--AH560 3. Dilworth, J.B., 1934, “Report of Committee on Methods of Valuing Coal Properties”, in Transactions, A.I.M.E. 4. Evans, J.R., 1994, “Guidelines for Fair Market Value (FMV) Appraisal of Mineral Interests”, California Bureau of Land Management 5. Gentry, D.W. and O’Neil, T.J., 1984, Mine Investment Analysis, Society of Mining Engineers, New York, NY 6. Interagency Land Acquisition Conference, 2000, “Uniform Appraisal Standards for Federal Land Acquisitions”, Appraisal Institute, Washington, DC 7. Leith, C.K., 1938, 1947, Mineral Valuations of the Future, American Institute of Mining and Metallurgical Engineers, New York, NY 8. Malone, E.J., 1994, “Historical Review of Mineral Valuation Methodology”, in Proceedings, VALMIN: Mineral Valuation Methodologies 1994, The Australasian Institute of Mining and Metallurgy 9. Nazarro, R.M., “Hardrock Mining: Information on State Royalties and Trends in Mineral Imports and Exports”, U.S. Government Accountability Office, July 21, 2008 10. Stermole, F.J., and Stermole, J.M., 1996, Economic Evaluation and Investment Decision Methods, Ninth Edition About the Author Landy A. Stinnett, ASA, P.E. is a principal with FGM Consulting Group, Inc., specializing in reserves estimation, feasibility analyses, and mineral appraisals. He has advanced degrees in geological and mining engineering, is a registered professional engineer, and is an Accredited Senior Appraiser in mines and quarries. He can be contacted at [email protected].

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ASA and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers Alison Ho

American Society of Appraisers and Embry-Riddle to Offer Courses for Accredited Aircraft Appraisers at National Aircraft Finance Association Annual Conference The American Society of Appraisers (ASA) and Embry-Riddle Aeronautical University (ERAU) will offer an eight-hour course for accredited aircraft appraisers earning continuing education credits at the National Aircraft Finance Association (NAFA) annual conference, Tuesday, March 21, at the Harbor Beach Marriott in Ft. Lauderdale, Fla. This eight-hour course was designed to provide real world skills and best practices that attendees can take back to their offices and use, this year's program has been designed to create a more technical learning experience. It will feature topics such as new FAA maintenance regulations, Nextgen and mandatory equipage by 2020, insurance experts addressing appraisal issues with aircraft with damage history, and more. For those interested in applying for appraisal accreditation with ASA, ASA has partnered with ERAU for the development and implementation of a series of four courses for professional aircraft appraisers (ME201ACS – ME204ACS). Successful completion of these courses will provide participants the necessary fundamental appraisal coursework to apply for professional accreditation through ASA in the Machinery and Technical Specialties (MTS) discipline with a specialty in aircraft appraisal. The courses will also include curriculum covering commercial, business and general aviation aircraft including fixed-wing and rotorcraft, and other aerospace assets. The first of these four courses,Introduction to Aircraft Appraisal, begins October 20, 2017 at Embry-Riddle’s Daytona Beach Campus. For more information about the ASA/Embry-Riddle aircraft valuation program, visit ASA Online, email [email protected] or call (800) 272-8258. ASA Contact: Todd Paradis, Director of Marketing/Communications, ASA, Office: (703) 733-2124, [email protected] or Richard Berkdmeier, ASA, member of the Machinery & Technical Specialties Discipline Committee, [email protected]. ERAU Contact: James Roddey, Director of Communications, Embry-Riddle Aeronautical University, Daytona Beach, Fla.; (386) 226- 6198; [email protected]. American Society of Appraisers The American Society of Appraisers is a world renowned and respected international organization devoted to the appraisal profession. As the oldest and only major appraisal organization representing all appraisal specialists, ASA is devoted to providing the highest possible standards in all areas of ethics, professionalism, education and designation criteria. Visit www.appraisers.org or call (800) 272-8258. Embry-Riddle Aeronautical University Embry-Riddle Aeronautical University, the world’s largest, fully accredited university specializing in aviation and aerospace, is a nonprofit, independent institution offering more than 80 baccalaureate, master’s and Ph.D. degree programs in its colleges of Arts & Sciences, Aviation, Business, Engineering and Security & Intelligence. Embry-Riddle educates students at residential campuses in Daytona Beach, Fla., and Prescott, Ariz., through the Worldwide Campus with more than 125 locations in the United States, Europe, Asia and the Middle East, and through online programs. The university is a major research center, seeking solutions to real-world problems in partnership with the aerospace industry, other universities and government agencies. National Aircraft Finance Association The National Aircraft Finance Association is a nonprofit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; improving the industry’s service to the public; and working with government agencies to foster a greater understanding of our members’ needs. Information on the NAFA annual conference can be found here: http://www.nafa.aero/events/nafas-46th-annual-conference.

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Depreciation of Installation Costs Raymond Springer, ASA

Should installation costs be depreciated? I believe that if the appraiser clearly separates the cost approach and the sales comparison approach, then the answer is yes and no, respectively. Where many appraisers get confused is by mixing the cost approach and the sales comparison. Cost Approach In the cost approach, the appraiser typically establishes an installed replacement or reproduction cost new, then utilizes an age/life analysis to depreciate the total installed cost new to reflect fair market value in continued use. This is a pretty straight forward analysis which depends on the judgment of the appraiser to make a reasonably correct estimate of the cost new, the normal economic life, and the remaining economic life of the subject. The fair market value in continued use answer calculates from those judgments. Sales Comparison Approach In the sales comparison approach, the appraiser identifies appropriate market data, makes adjustments to that data to reflect differences between the data and the subject being appraised. When estimating fair market value in continued use, the appraiser needs to add an appropriate amount for installation and engineering. What is the appropriate amount of value for the installation costs? Stand in the buyers’ shoes. The answer is the amount that the typical market participant must invest to get the newly purchased used unit in operation to produce a cash flow (the purpose of buying the unit in the first place). Since a buyer cannot purchase used installation costs in the market, the value of the installation cost often approaches the un-depreciated replacement cost of the installation. Sales Comparison Approach Adjustments Appraisers often stop making sales comparison approach adjustments too early in the valuation process. The appraiser often truncates the depreciation analysis by comparing the FMV FOB from a Dealer to the RCN FOB from the manufacturer, and calculates the depreciation percentage. When estimating fair market value in continued use, the appraiser should fully adjust each comparable to an installed FMVCU basis before making the depreciation calculation. If we have five sales to analyze and we complete the various adjustments for date of sale location, physical condition, etc., there are still several adjustments to be made. The buyer did not purchase the machine as an ivy planter – they purchased it to generate/maintain a cash flow, therefore, we must consider the amount a typical buyer has to invest to make the unit ready for production. These adjustments might include: removal costs, auction premiums, finder/broker fees, freight, cartage, interim storage, setting, electrical hookups, piping hookups, connections to existing processes, engineering fees, etc. Some of these costs are not even present in a “green field” replacement cost estimate, but if the typical buyer will experience them, then an adjustment is demanded. The Best Indicator The buyer of used equipment is the best indicator of fair market value in continued use. The buyer researches the market, researches the reinstallation costs for his project, projects his incremental cash flows , does the negotiation/bidding, and takes the risk. All of these buyer judgments are reflected in a single number – the gross amount he pays for a used machine. The

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price he pays for the base unit is normally the only evidence the appraiser has to analyze; therefore, the appraiser has to use his best judgment to estimate the other components so he can conclude a fully adjusted comparable sale on an installed basis. The Buyer Depreciates the Installation Cost In spite of the above, installation costs in the sales comparison approach do depreciate. The real question is where that depreciation is recognized in the purchasing process. The buyer knows he cannot purchase used installation costs, i.e. used crane setting, etc. The buyer knows he will receive a foreshortened payback on his investment in installation costs; therefore, the buyer reflects that installation depreciation in the cost he pays for the uninstalled unit.This is one reason that units with very high installation cost (in relation to base unit costs) show such quick and extreme depreciation when placed on the used market. An electric steel furnace may sell for $250,000 v. a $10,000,000 replacement cost because the typical buyer will have to experience $3,500,000 to reinstall it and may well invest another $500,000 to $1,000,000 in removal, match-marking, re-engineering, freight, etc. before he can get the cash flow. The older the unit, the shorter the time frame for recovery of that reinstallation investment and the lower the offer for the used unit. A Mixed Approach A significant problem arises when the appraiser extracts depreciation from the market and applies it to the unit in the cost approach. Typical methodology would be: 1) my subject has a replacement cost new of $100,000, 2) similar units sell for $40,000 in the market, 3) the depreciation is 60% gone (1-($40,000/$$100,000)), 4) my subject has an installed replacement cost new of $150,000, 5) applying the 60% depreciation, the fair market value in continued use of my subject is concluded at $60,000 ($150,000-($150,000 x 60%)). The net effect of this calculation is to depreciate the installation costs from a replacement cost new of $50,000 to fair market value in continued use of $20,000. If the typical market participant is investing $40,000 in the base machine and $50,000 in placing the machine in service, for a total of $90,000, then the above is understating the fair market value in continued use by 50%. The higher the installation costs as a percent of replacement cost, the more erroneous the above methodology. The sales comparison approach must reflect the decisions of the typical market participants or it is clearly incorrect. Exceptions Some of the confusion comes from the old adage that “it costs just as much to install a used machine as a new one”. This adage is largely true, but in practice, the appraiser often uses the installation costs developed in the cost approach as a surrogate for installation in the sales comparison approach (whether he later depreciates them or not); this can be correct if the typical market participant will experience approximately that amount of cost, but it can be wildly incorrect if the buyer will typically have much less or more installation costs. An example might be bean snippers in a green bean processing plant. They are typically long-lived units and installed in multiple banks. If the typical buyer purchases only one, it is often for replacement of a failed unit; therefore, the buyer gets to reuse most of the old installation costs except some freight, handling, setting, and reconnection of services. If the typical used equipment buyer will only experience 30% of the green field installation cost or $X, then that is what should be reflected in the fair market value in continued use calculation (used unit + un-depreciated $X). Conclusion. Depreciation of installation costs in the sales comparison approach assumes every buyer in the “used market place” over pays for every used unit. If an appraiser appraises a plant the day after the buyer installs his newly purchased used unit, and applies a depreciated installation cost method to value the unit, then he will likely conclude a value somewhat to substantially less than what the buyer paid for the unit.

1Implicit in his purchasing decision is his version of an income approach. He reasons that the addition of this equipment and the investment in installing it in his process will yield a positive return on his investment. Or the investment will protect his past investment in the case of a replacement used unit for a failed machine.

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Are all buyers of used equipment “uninformed” novices prone to making poor business decisions? I doubt that, which indicates that the methodology of depreciating installation costs in the sales comparison approach is incorrect. If a methodology does not reflect the decisions of the typical buyer, how can it be a correct sales comparison approach? About the Author Mr. Raymond Springer, ASA is the President of Springer Appraisal & Consulting, LLC located in Seal Rock, Oregon and specializes in the appraisal of machinery and special purpose improvements with particular emphasis on process industries. He is an Accredited Senior Appraiser (ASA) in machinery valuation. He has appraised tangible assets since 1973, including many high profile complex appraisal assignments. He has performed appraisals for many of the Fortune 500 companies for a wide variety of purposes, including: ad valorem tax appeal, litigation support, bankruptcy adequate protection support, merger, acquisition, transfer pricing, financing, sale/ leaseback, allocation of purchase price, investment tax credit compliance, cost segregation, condemnation, insurance, and property record audit. Prior to establishing Springer Appraisal & Consulting in 2003, Mr. Springer was a Senior Manager at Deloitte & Touche (1995- 2003), Manager at PGP Valuations (1989-95), and Engagement Manager at American Appraisal Associates (1973-1989). He has over forty years experience appraising industrial properties. He is an editor and contributing author of Valuing Machinery and Equipment. He can be reached at 503.805.3897 or via email at [email protected] or RSpringer@Springer- Appraisal.com

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5th Annual Equipment Valuation Conference in Cleveland By Jean Jackson and David Helle, ASA

“With a larger venue for 2016, the American Society of Appraisers 5th Annual Equipment Valuation Conference held June 8-9 boasted record attendance as well as several dynamic, educational presentations on current industry trends and conditions. The new setting, boutique hotel Metropolitan at the 9, is housed in the former Cleveland Trust Bank building. The iconic building boasts larger meeting spaces as well as an opportunity to step into history: four former bank vaults have been transformed into a full service bar and a prohibition-era speakeasy. Each morning, conference attendees stepped through a large, round vault door to enjoy breakfast, catch up with colleagues and friends, and to make new acquaintances. With two opportunities for hands-on inspection of machinery and equipment in the field this year and lots of interest in the event, the widely popular Equipment Valuation Conference continues to grow from year to year. Conference organizer, Joe Santora, ASA and President of IronTrax, was “pleasantly surprised that attendance was up 20% this year considering that the conference sold out in 2015. We’ve got a recipe that seems to be working: the conference is designed for Equipment Appraisal professionals to gain a better understanding of the market conditions in many different industries all in one location. They can then take that information and use it in the field the very next day.” So, mark your calendars, folks, “we will be coming back to the same location next year with the conference scheduled for June 6-7, 2017.” After a warm welcome from Joe, John Connolly III, ASA, Chairman of the MTS Committee and Exec VP and CFO of Nationwide Consulting Company, stepped up to the podium to offer a few words of welcome and also shared ASA news and an update on the progress of the POV course rewrite. Paul Cogley, ASA and SVP of Bank of America, reminded attendees to register for the upcoming 79th annual International Appraisers Conference (IAC) at the historic Boca Raton Resort & Club in tropical South Florida. And, Rick Berkemeier, ASA and MTS Governor, also took a few moments to speak about upcoming ASA educational offerings. We then jumped right into the conference with the first speaker of the day, Mekael Teshome, an economist with PNC Financial Services Group, who sparked lively discussion with his presentation: “The Fed’s Tug of War.” Mekael addressed recent dire headlines by noting that for the 12-18 month economic outlook, consumers can expect moderate, domestically-driven growth. Mekael noted that growth rates of 1.8% and 2.3% for 2016 and 2017 respectively reflect a ‘cruising speed’ rather than the usual boom & bust. Likewise, many economists believe that the US unemployment rate has hit bottom and that the country should theoretically be back at full employment of 4.8% by the end of year. Mekael did note, however, that the US economy will need an extended time of sustained employment for complete recovery. According to Mekael, the takeaway theme of the past year is continued long term expansion. Since we are in one of the longest stretches of economic growth since WWII, the odds of a US recession are low even though the upcoming election is causing some uncertainty in the markets. While there have been bumps in the road, those speed bumps don’t necessarily indicate a downturn; consequently, the PNC economic outlook is optimistic. Next up was Mike Winterfeld, ASA and Director of Appraisal Services at Taylor & Martin, Inc. with his presentation titled, “Tractors and Trailers: When the Wheels Come Off.” Overproduction before and underproduction during the Great Recession left the transportation industry with a great deal of late model equipment on the market. As a result, used tractor values have declined over 20% since July of 2015 and, although some retail prices remain strong, supply continues to exceed demand

Volume 33, Issue 1, 1st Qtr 2017 22 THE MTS JOURNAL in the used market. Moreover, products coming off of 48 month trade cycles will soon add to the surplus in addition to underperforming loans and leases pushing even more equipment back into the market. Mike reminded his audience that as appraisers, we must keep in mind that overproduction does not go away. Mike also discussed depreciation and obsolescence as well as other factors to consider when valuing tractors and trailers such as the depression of the oil industry and its expected slow rebound and a weak agricultural sector. Appraisers should also be aware of the disconnection between retail and auction numbers. The wide division between the two can be attributed in part to the fact that auctions distinguish obsolescence factors that retail does not. As levels of trade widen, we must remember to consider all depreciation/obsolescence factors when making adjustments. And, Mike stated, as new inventory counts grow and used product continues to flood the market, “it looks like the transportation industry will have some continued stress for the foreseeable future.” Mark Craig, ASA, CSA and Principal with Craig & Associates, wrapped up the morning with “The Outlook for Mining: Effect on Equipment Value and End of Term Negotiations.” The significant contraction of coal production and consumption of the past several years has been devastating to the industry. Not only small and mid-size firms are feeling the effects, but many larger companies are also in negative cash flow as a result of the industry downturn. Although the industry faces big challenges, coal will remain an important part of the global energy mix over the next few years. Slower growth in global coal demand and lower international coal prices have contributed to a decline in U.S. coal exports but low mining costs, cheap transportation costs, and favorable exchange rates are expected to continue providing advantages to mines in other major coal-exporting countries. All things considered, the long-term viability of the coal industry may hinge partially upon the widespread uptake of clean technologies but the real driver of increased demand for coal and other mined products is the return of heavy industry and improvement of economic growth to levels beyond the complete stagnation of the past several years. During the afternoon, conference attendees had an opportunity to tour either The Great Lakes Towing Company or Exact Crane & Equipment. Those opting to tour Great Lakes Towing gathered in the conference room for a pre-tour presentation from Company Chairman, Ronald Rasmus. The Great Lakes Towing Company, part of The Great Lakes Group, is a full- service shipyard which specializes in all types of marine construction with an illustrious history. Incorporated in New Jersey in 1899, founding investors of the company included John D. Rockefeller, Jeptha H. Wade and James R. Sinclair. Mr. Rasmus entertained his audience with colorful anecdotes recounting his long maritime career and decades as a government appointee working with many eminent political figures. Once at the site, attendees donned hard hats as they embarked on a walking tour of the shipyard with Rasmus as their enthusiastic guide. The site tour included a stop in the board room, which is dominated by a conference table commissioned by Rockefeller, and a glimpse of one of The Company’s original log books. Rasmus explained that the company is currently in the last phase of a multi-year Shipyard Expansion Project which included several acres of land acquisition, construction of a new headquarters building, construction of an indoor state-of-the-art shipyard facility and acquisition and installation of a 770-ton Travelift mobile hoist – the largest of its kind on the Great Lakes, second-largest in the Western Hemisphere and third-largest in the world. The final phase involves construction of an enclosed multi-purpose facility for year-round shipyard production, classrooms, research and design laboratories, wind turbine monitoring, and job training facilities. In addition, the Company has demonstrated its commitment to Cleveland’s future through its partnership with two area high schools and Cuyahoga Community College to provide internship and on-the-job training opportunities for local students and to create over 100 new sustainable jobs after expansion. Attendees who opted for the Exact Crane & Equipment Tour met in the lobby after lunch for a chance to get out in the field and ‘kick the tires.’ Exact Crane & Equipment has sold cranes, parts and equipment from several manufacturers including Grove, Manitowoc, Link-belt and Terex since 2006. Exact also rents crawler cranes, boom trucks, carry deck cranes and rough terrain cranes as well as providing a full repair services from minor repairs to complete crane rebuilds. Jack Swan, President of Exact Crane, organized a range of crane types in the yard for identification as well as a discussion of functions and the options that

Volume 33, Issue 1, 1st Qtr 2017 23 THE MTS JOURNAL increase or decrease value. Several crane manufacturers were represented sparking discussions about original costs, which manufacturers hold superior value in certain Tier 1, Tier 2 and Tier 3 classes, and which cranes hold the best value on the secondary market. The group also discussed the types of applications in which rough, all terrain and crawler cranes can be used along with current market conditions and value drivers; for example, recent auction results have been soft for rough and all terrain cranes but the expectation in the market is for increased future demand. Participants arrived bright and early on Day Two to “Talk Frac” with Brad Hartsburg, ASA, President of Fortress Machinery Appraisals and your ASA MTS Journal Editor. Brad outlined the history and also provided an overview of the hydraulic fracturing industry in addition to addressing widespread public concerns. Hydraulic Fracturing (fracing) is not a new technology – the first commercial application of fracing occurred in Oklahoma in 1949 – and there are now approximately 2.5 million wells worldwide that have been fraced. During the fracing process, fluid is pumped at pressures that create a crack in the rock. Special sand is then placed into the cracks which stay “propped” in place to create a pathway for natural gas and oil to flow. Fracing is more attractive than conventional drilling as fewer holes need to be drilled for less surface disturbance. Brad clarified prevalent misconceptions about fracing including concerns about water usage stating that the industry often uses undrinkable water sources and is often recycled for subsequent jobs. Additionally, wellbores are cased and cemented to seal and isolate all fresh water from oil and gas areas to prevent groundwater contamination and, as fracing is performed far below the ground surface, it cannot propagate to fresh waters zones. Fracing can cause earthquakes; however, they are not large or destructive usually measuring -3 to -1 on the Richter Scale – causing vibrations similar in scale to those of passing trucks or trains. Brad also addressed common concerns regarding composition of the additives used in fracing explaining that they are composed of widely used chemicals and that additive transparency is mandatory in the industry and all part of a highly regulated process in North America. After a short break, attendees reconvened for an analysis of Business Aviation from Jeff Dunn, ASA with Citizens Asset Finance. Jeff initially focused on factors to consider when valuing corporate aircraft from common aspects including make, model, market conditions, and maintenance status to less common considerations such as damage history, configuration and available options; for example, Direct TV, avionics, or Wi-Fi. Jeff reminded his audience of the importance of log books – if a log book for an aircraft is lost, so also is the history of the aircraft lost. Jeff also discussed Power by the Hour (PBH) Programs which are comprehensive engine maintenance coverage programs at a fixed price per hour. With standard PBH programs, owners can opt to make monthly payments so that an overhaul is already paid for by the time it is due. Additionally, if the aircraft is sold, the new buyer has the option to buy into the program. Some other points to consider when valuing business aviation: It is often difficult to project a value because business aircraft are not income producing but are to a greater extent a convenience tool; aircraft values mirror the economy – when the market booms, aircraft values rise; and, with aircraft production currently high and new technology models currently being produced, old models lose some of their value. Jeff also emphasized that since market comparables are scarce, good relationships with brokers and original equipment manufacturers (OEM’s) are essential. Finally, many new aircraft will be delivered in the coming years and, as consumers demand more comfort and amenities, the value for older models will continue to decrease. Dean Siddle, Senior Valuation Analyst at Ritchie Brothers Auctioneers, next took the stage to discuss construction trends with his presentation entitled, “Sell Your Assets to the World: More Ways to Get You Maximum Results.” Dean’s analysis of how to determine value went beyond the basics of year, make, model, and serial number. He first explored how the current economic environment including local, regional, and global markets for a particular machine affect its value. The environment of the location and how a piece of equipment was used can both greatly affect its value. For example, sandy materials can devalue a machine very quickly. He also discussed the importance of a machine’s condition, appearance and maintenance history. According to Dean, some manufacturers may produce quality machines but lack support for their construction equipment. If a machine is well maintained, the value is most likely higher; consequently, OEM and dealer support should always be taken into consideration.

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Tom Hazlehurst, CSA and President of Machinery Management, LLC closed out the morning sessions with a discussion of the evolving global machine tool landscape. Tom stated that he expects the balance of 2016 to be flat for machine tool consumption which will, in turn, have an impact on both new and auction values. The impact of soft values is apparent in the fact that some manufacturers who have never discounted in past as a percent of new are currently advertising discounts. Tom touched on the pros and cons of automation. Automation provides precise and repeatable machining but also creates a reduction in labor content. As a result, many jobs are down 30-40% in the U.S. due to automation as well as off-shore outsourcing. The speaker also reminded his audience to be aware of Normal Useful Life for machine tools when financing for periods greater than five years as some machines operate on a 24/7 schedule; thus, tools in an automotive environment, for example, could be fully deteriorated within five years. Appraisers should also be cognizant of engineering and installation expenditures which can inflate the cost of an original machine but have little, if any, value for secondary buyers. After lunch on their own, attendees returned to the conference room for the first speaker of the afternoon, R. Lee Robinette, ASA and President of Collateral Evaluation Associates, Inc. with “The Ins and Outs of USPAP for the Machinery & Technical Specialties Appraiser.” The American Society of Appraisers (ASA) offers numerous full and update courses both in the classroom and online. Lee specifically discussed revisions adopted by the Appraisal Standards Board (ASB) in February of 2015 for publication to the 2016-2017 Uniform Standards of Professional Appraisal Practice (USPAP). A lively and thought-provoking discussion followed Lee’s presentation. Audience members debated individual USPAP interpretations and reached out to Lee as well as fellow ASA members for explanation and clarification of several appraisal standards as well as the current updates. The second speaker of the afternoon was Andy Decker, Director of Wholesale Operations at Flexx Corporation, with his discussion of changing factors in forklift valuation since the 2008-2009 economic downturn. The changes have been drastic – with the closing of numerous small plants, many forklifts were returned and mothballed. Those plants that remained open adjusted the way they acquire forklifts. The new model promoted by OEM dealers is a lease with guaranteed maintenance. Under this model, lessees have a predictable cost that can be expensed and forecast and the dealer has a predictable stream of revenue from scheduled maintenance. Andy also discussed the life cycle of a forklift stating that the amount of hours are critical with reductions in value at 6000, 8000 and 10,000 hours and steep discounts expected for machines with more than 10,000 hours. The third speaker of the afternoon, David Helle, ASA with PNC Financial Services Group, examined “What Should Be in Your Workfile” should you ever be required to submit a file for audit or simply to support your values. Per USPAP guidelines, an appraiser must prepare a workfile for each appraisal or appraisal review assignment prior to the issuance of the report. David’s presentation included a thorough review of the Record Keeping Rule requirement as it is applied to appraisals, appraisal review, and consulting assignments. He noted that while it is not always necessary to include copies of all documentation, the file must be retrievable during the retention period and, if you state in your appraisal that a particular piece of documentation was reviewed, it must also be retrievable in the workfile. David also reminded his audience to keep in mind that “an appraiser who willfully or knowingly fails to comply with the obligations of the Record Keeping Rule is in violation of the Ethics Rule.” Finally, Bob Mercogliano Managing Director and Head of Asset Management at SunTrust Robinson Humphrey, Kevin Sensenbrenner ASA/Senior Managing Director with Stonebriar Commercial Finance and William Tefft SVP of Equipment Management at Capital Source, took the stage for a joint presentation on Residual Setting developed by the ASA and the Equipment Leasing and Finance Association (ELFA). The panel first defined the concept of residual setting as the investment of a lease transaction at maturity and also clarified that, among other things, it is not a defined appraisal concept. Although residual value is not a defined USPAP term, the panel explained that USPAP compliant, ASA developed appraisals should be utilized in the development of residual values. The panel also explored risk appetite noting that the most accurate measure of success in residual setting is longevity. According to the panelists, setting residual value is a delicate balance between art and science to find an acceptable level of both value and profit.

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Once again, the two-day conference afforded invaluable opportunities to “ask the expert” amid engaging glimpses into several diverse and frequently evolving industries. A HUGE thank you goes out to April Acuna, Operations Manager at IronTrax, for her tireless efforts toward bringing together another flawlessly organized and memorable conference. The event would not be possible without her hard work. In conjunction with the conference, attendees received 16 continuing education and accreditation hours and also had the opportunity to attend a Pre-Conference 7-Hour USPAP Update class taught by David Cole, ASA. Plans are already underway for the 2017 Equipment Identification Seminar in Cleveland in June of next year. A big thank you to all event sponsors: Azure, ELFA, Exact Crane & Equipment, Gordon Brothers/AccuVal, Irontrax, The MTS Journal, Ritchie Brothers, Taylor & Martin and, Sencer Appraisal Associates. As a reminder, sponsorships will be available for the 2017 seminar. For more information, contact Joseph Santora, ASA or call (440) 552-1369. For more information, please contact Jean Jackson at e-mail [email protected] or David Helle of PNC Financial Services Group at 440-225-3032 or e-mail [email protected] About the Authors Jean Jackson began her career with PNC Bank eight years ago in the residential Mortgage Division and has handled PNC's commercial construction inspection process for the past several years. Jean has a BA from Duquesne University in Pittsburgh and is currently working toward full ASA Accreditation in the Machinery & Technical Specialties Discipline. David Helle, ASA has been with PNC or one of its predecessors since 1992. He is currently the head of Machinery & Equipment and Inventory appraisals for PNC's Commercial Credit, Middle Market, and Small Business Sectors. He has held the designation of Accredited Senior Appraiser with ASA's Machinery &Technical Specialties Discipline since 2006.

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ASA Advanced Mining Topics Course Report Charles W. “Bill” Ruth, ASA

September 23-28, 2016 - Las Vegas, Nevada Twenty students attended, (3) from Australia, (3) from Canada, (2) from the United Kingdom (12) from the US. Fourteen were ASA’s. The experience of the class ranged from 5 years to over 20 years. Eighteen of the students attended the Mine Expo; two, from the Baden Tax Management, did not attend the Expo.

During the class, I asked Gerald L. Fangman, ASA, to give the class an introduction to the use of drone technology which he uses for site inspections and to view operating equipment during his inspections.

Craig Bowring, President of the Australia Chapter, who works for Westpac Institution Bank in Australia, talked to the class on what the financial institutions look for in an appraisal and the need for ASA qualified appraisers.

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The three-day class was concluded with an exam which all the students passed. The next part of the course was to visit the International Mine Expo which is held every four years. The Expo drew a crowd of between 40,000 and 50,000 attendees. Educational sessions started with the Opening Session which was moderated by Fox News analyst and chair, Nina Easton, Fortunes Most Powerful Women International. The participants: Phillips S. Baker, president and CEO, Hecla Mining Co.; Harry “Red” Conger, president, and COO Americas and Africa Mining, Freeport-McMoRan Inc.; Kevin S, Crutchfield, CEO, Contuar Energy, Inc.; Ted L. Doheny, president and CEO, Joy Global, Inc.; Gary J. Goldberg, president and CEO, Newmont Mining Corp. and Denise C. Johnson, group president for resource industries, Caterpillar Inc.

Educational sessions Tuesday through Wednesday included topics of Maintenance, Processing, Research, Safety, Surface Mining, Automation, Markets, U.S. Mine Projects, Underground Mining, International Projects, Reclamation, Bulk Materials Handling, Coal, Exploration, and Water. All of the above were led by 20 expert-led individuals in the mining industry. The Mine Expo had a great deal available for individuals to see and attend, with 12 halls, and 10 pavilions, over 840,000 square feet of exhibit space and 1,900 exhibitors from 37 countries.

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This portion of the class gave the students the opportunity to see firsthand, to sit in the cabs, and experience the sheer size of the latest mining equipment offered to the mining industry in the world.

Technology is the key to the future of mining, and simulators were available for attendees to sit and experience the controls of these mining giants.

Meet the fully autonomous haul truck offered by Komatsu.

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Life Cycle Costing of component parts is a reality.

Miners are pretty strong, too, as seen below.

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The expo also gave impressive demonstrations of the equipment’s’ capabilities with the emphasis on safety, and matching the right size equipment with the process to insure a consistent through put of material and product.

Process equipment was shown as cutaway models allowing the viewer to see the inside of large process equipment. Here is a view of a thickener, used in mining process.

Flotation cells are also shown in a cutaway model, as shown below.

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The Mining Expo is a great place to explore new equipment, talk to the equipment providers about the industry, and see and experience new technology that will keep the industry moving forward. What a great event for the mining industry and the mining appraiser. From models to full scale processing equipment, like this cone crusher, much was available there for the students to see and learn about from the various manufacturers.

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Underground mining equipment was also well represented for the students to explore.

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37 countries were represented at the 2016 Mine Expo

The Great Experience

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About the Author Charles W. (Bill) Ruth, ASA, Machinery & Equipment Professional Appraisal Services, Inc. PO Box 542, Tyrone, NM 88065 | Phone: 575-956-5294 | E-mail: [email protected] I retired from Phelps Dodge Corporation / Freeport McMoRan Copper & Gold on January 30, 2009, after being employed for 38 years. My appraisal activity has, for the most part, been as an in-house appraiser of mining equipment and process plants for the company. The focus has been primarily in the southwestern United States at sites in Arizona, New Mexico, Texas and Colorado with additional assignments in Mexico and South America. I began appraising machinery and equipment for Phelps Dodge in 1988, and specialized in the appraisal of mining equipment and material processes for both open pit and underground operations. I completed appraisal assignments for a variety of departments within the company, including Resource Management (process plants & equipment), Global Supply Chain (asset recovery, liquidation and transfers of machinery & equipment and other capital assets,) Risk Management (insurance values), Land & Water (ranches & water rights), Corporate Finance (lease options, residual values at end of mine life, values for bond issues). In 1992 I earned an Accredited Senior Appraiser with a Machinery & Equipment designation from the American Society of Appraisers. In 2004 I became a senior instructor for the Principles of Value courses Level 201 & 202, and have taught these classes throughout the United States. I am the course developer and author of ME217 Advanced Mining Class, which was taught for the first time in May 2011 in Australia. I have also taught ME201, 202 and 214 (Mining course) in Australia in 2010. I am the developer of an ASA Webinar for the ASA on Life Cycle Costing of Mining Assets. Professional Appraisal Services Inc. was formed in 1995, and I am the current president. Military experience/history: Retired Senior Chief Petty Officer with the United States Navy, 28 years of service, Submarine Warfare, Navy Diver, Instructor NEC 5345 and 9502. Last Duty station Expedition Logistic Support Group, Naval Supply Support Battalion One. *Served “In Country” Republic of Vietnam 1967, 1968, 1969, Operation Iraq Freedom 2004*

Volume 33, Issue 1, 1st Qtr 2017 35 THE MTS JOURNAL The Value of Mining Equipment Appraisal Education John J. Connolly III, ASA

Increased attention for advanced the oldest and only major appraisal specialty valuation education is on organization representing all appraisal the rise due to the growing demand specialist, providing leading educational for accredited mining and mineral offerings and accreditation programs, is processing equipment appraisers. at the forefront of this movement. According to a 2016 report by Deloitte, the mining sector faces a host of New for 2016, ASA has prepared a John J. Connolly III, ASA unresolved challenges. With weakening special offering of itsAdvanced Mining prices and a sluggish outlook for course that includes a bonus paring demand growth, many companies with MINExpo 2016. The course offers are struggling to address productivity three days of classroom work plus declines, improve capital efficiency, an additional two full days of expo revive sinking shareholder returns, and attendance, combining for forty-eight service mounting debt and interest (48) hours of continuing education. obligations. “Appraisers serve an important role “As companies move to address when it comes to analyzing, assessing in Australia, along with other offerings in these challenges and implement and valuing mining equipment and Europe, Asia Africa and South America.” innovations and cost reduction measures operations” said accredited senior by investing in new technology and appraiser, says Ruth, who adds “their For more information about upcoming equipment, the demand for educated, knowledge, experience and ethics are ASA mining educational offerings visit tested and accredited mining and crucial and can have serious financial, www.appraisers.org, e-mail asainfo@ mineral processing equipment tax and legal consequences.” appraisers.org or call +1 (703) 478-2228. appraisers is anticipated to increase”, To host an ASA onsite offering locally, says accredited senior appraiser, Students are updated on the latest contact Mr. Ruth or Mr. Berkemeier at Charles W. Ruth. mining, milling, smelting and solvent [email protected] or richardberkemeier@ extraction techniques, along with gmail.com. Ruth, who has worked in the mining other current mining innovations and world since 1971, is the instructor for the equipment life and value trends. — John J. Connolly III, ASA is Chair American Society of Appraisers (ASA) of the American Society of Appraisers Advanced Mining course, which provides “We also focus heavily on mining Machinery & Technical Specialties students with a comprehensive look at appraisal terminology, methods and discipline and serves as Executive Vice the latest valuation issues and mining concepts; functions and purposes of President, Chief Financial Officer and equipment innovations. appraisals; approaches to value; capital Director of Machinery and Equipment/ mining equipment costs; depreciation; Special Assignment Appraisals for He adds that ASA, a world renowned field inspection techniques and safety; Nationwide Consulting Company . and respected international organization and more”, notes Ruth. Mr. Connelly may be reached at +1 (201) devoted to the appraisal profession and 670-7400 or [email protected]. The course is generally limited to approximately 20 students, who are typically made up of professional appraisers, accountants, tax assessors and county officials.

“Demand for ASA’s onsite advanced specialty valuation educational courses is seen from around the world, says Richard Berkemeier, ASA, education chair for the Society’s Machinery & Technical Specialties discipline. “Our Bonus offer includes option to attend MINExpo ASA mining valuation course students past advanced mining course took place 2016

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Chairman’s Corner John J. Connolly, III, ASA

This year has moved faster than any that I can remember. Rather than saying “as we get older” - I prefer to say -- “As we mature in our profession” time seems to go by at a much more rapid rate. As we approach the Holiday season I would like to extend my best wishes to all for a happy and Healthy season and a great New Year. As I write this at 2:45 AM EST on November 9, I just heard that we have a new President elect in the United States and to everyone’s surprise it is a newcomer. It is time for some major changes and we will see them and they could have a dramatic effect on our profession. Possibly more work! The MTS committee is hard at work rewriting the Valuation Book, I didn’t want to call it a text book because some take offense to that terminology, we are a little behind schedule but will have it done before the end of my Chairmanship June 30, 2017. Our education program and offerings have advanced significantly over the past year with a complete rewrite of our core courses and the addition of many new offerings in Aviation and many other fields. I would like to thank Richard Berkemeier and his Committee and all those who have made these offerings a tremendous success. It has taken a lot of hard work and endless hours. All of this donated to our Profession. They all should be recognized for their efforts. The committee is having a telephone conference to approve the new Rules of Procedure that we help us govern the Discipline better in the future. I would like to Thank Gary Trugman and his Committee for their efforts. Each discipline had a representative that had input to the changes and would be fair to all Disciplines and for the Society overall. Finally we are looking for new Candidates to serve on the MTS Committee as well as Officers for the upcoming year. If you are interested please contact Bob Clark with your Qualifications and brief summary on how you feel you can contribute to the Committee. I only have 7 months left in this term as chairman, my second time around and last, and look for the support and help of the committee members and all in the profession to make it a success for all of us. Have a great Holiday Season and a Successful New Year!

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The MTS Journal 2016-17 Media Kit American Society of Appraisers

6 d Qtr 201 ssue 2, 2n me 32, I Volu

isers Appra ry Society of hine n l Mac America ationa ntern nal of the Ilties Committee of the The Jour al Specia hnic & Tec

Our Profession. Your Opportunity

The Leading voice for machinery & equipment valuers

e iplin Disc e , MTS iplin bers c Mem ASA , Non-MTS Dis 5.00 s $3 Member 2016-17 Media Kit | www.appraisers.org/mtsjournal 0 ASA $50.0

Volume 33, Issue 1, 1st Qtr 2017 38 THE MTS JOURNAL

Reader demographics

1,710+ Total Circulation Breakdown by Years Subscribed Breakdown by Years Credentialed Total reach from 50% bonus distribution at aSa classes & conference 66% More than five years 50% 15% Three to five years 19% Two years or less Subscribers 882 40%

Breakdown by Credentials Specialty Markets Serviced 30% 23% • aircraft 20% 1% 18% • Cost Surveys 32% 67% 10% • Machinery & equipment 7% 2%

• Marine Survey 0% • Mines & Quarries 40 yearsOver 31-40 years 21-30 years 11-20 years 0-10 years Credentialed Members • Oil & gas Candidate Members non-Members • Public Utilities

Breakdown by Location

85% north america

3% europe

2% asia

10% australia

Volume 33, Issue 1, 1st Qtr 2017 39 THE MTS JOURNAL

advertising Opportunities

Why Advertise? 2016-17 Rates 1X 4X (10% discount) Full Page $200 $720 • Published since 1984 • exclusive access to credentialed experts 1/2 Page Horizontal or Vertical $125 $450 • Targeted readers in all major industrial markets 1/4 Page Horizontal or Vertical $75 $270 • Bonus distribution at aSa classes and conferences • Comprehensive technical articles Business Card $11.25 $50 • expert columnists Classified $10 $36 • extensive industry news coverage

Editorial Calendar (subject to change) Ad Size Width Height

• 1st Quarter 2016 issue Closes: January 15 | Materials due: January 30 Full page 8.5" 11" • 2nd Quarter 2016 issue Closes: April 15 | Materials due: April 30 Bonus distribution: ASA Equip. Valuation Conf. 1/2 page horizontal 8.5" 5.5" • 3rd Quarter 2016 issue Closes: July 15 | Materials due: July 30 Bonus distribution: ASA Intl. Appraisers Conf.

• 4th Quarter 2016 1/2 page vertical 4.25" 11" issue Closes: October 15 | Materials due: October 30 • 1st Quarter 2017 issue Closes: January 15 | Materials due: January 30 • 2nd Quarter 2017 1/4 page horizontal 8.5" 2.75" issue Closes: April 15 | Materials due: April 30 Bonus distribution: ASA Equip. Valuation Conf. • 3rd Quarter 2017 1/4 page vertical 2.125" 11" issue Closes: July 15 | Materials due: July 30 Bonus distribution: ASA Intl. Appraisers Conf. • 4th Quarter 2017 Business card 3.5" 2" issue Closes: October 15 | Materials due: October 30 Classified 500 characters or less

Volume 33, Issue 1, 1st Qtr 2017 40 L O U RNA T S J T H E M

THE MTS JOURNAL

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Volume 33, Issue 1, 1st Qtr 2017 41 THE MTS JOURNAL

ASA Appraisal Review and Advanced Course 201 Roger Durkin, J.D., M.S., FASA

American Society of Appraisers Appraisal Review and Advanced Course 201

State Certified Real Estate Appraisers begin your path to earning both an ASA Real Property Designation and simultaneously obtain an Appraisal Review Specialty Designation. REGISTER NOW OR Learn More/ Go to www.appraisers.org or call (800) 272-8258 Proprietary Knowledge is a Powerful Appraisal Tool! 27 Hours of State Approved CEs ASA is opening the door to professional Review Designation status for state certified residential and state certified general real estate appraisers. You can take this first of two courses (ARM201 and ARM204) and earn an ARM Review specialty Designation in real property while being given a fast and easy path to an ASA real property designation. All ASA designated members currently can take ARM201 and ARM204 and obtain a second specialized Designation in their discipline. This path is now open. Every real property appraiser should be aware that Dodd Frank mandated that every bank related appraisal be reviewed under USPAP Standard 3 Rules. Consider this question: Are you aware of the potential liabilities the appraiser exposes his/herself to in doing an appraisal review? Increased litigation, new legislation, pressure from regulators has created a large demand for “qualified” appraisal reviewers in all specialties. This course provides the necessary training, education and experience on how to conduct effective objective appraisal review. ASA Accredited Senior Appraisers can take this first of two courses (ARM201 and ARM204) and earn an ARM specialty Review Designation in their own discipline. Upcoming classes include:

ARM201 - Appraisal Review and Management, 11/3-6/16, Chicago, IL ARM204 - Appraisal Review and Management, 1/12-15/17, Las Vegas, NV ARM201 - Appraisal Review and Management, 5/4-7/17, Herndon, VA ARM204 - Appraisal Review and Management, 6/8-11/17, Chicago, IL

Roger Durkin, J.D., M.S., FASA • 234 Lewis Wharf | Boston | MA 02110 (617)-720-0332 • http://www.durkinvaluation.com • http://www.durkinlawpc.com

NE NY Tel: 781-878-4540 PROOF REAL ESTATE JOURNAL Changes New Proof Proof Approved Size: 3x5 Section: Ap Spot

From:JK crop 2” Run Date: 10-21 Volume 33, Issue 1, 1st Qtr 2017 42 THE MTS JOURNAL

Purpose and Intent of IVSC Jack Beckwith, ASA, CEA

As your representative on the International Valuation Standards Committee (IVSC) Advisory Forum Working Group (AFWG), the following is a synopsis of the purpose and the intent of the IVSC. Please let me know how this may impact your appraisal practice moving forward. The AFWG is comprised of senior representatives from the following entities (Participating Entities):

• American Society of Appraisers • Appraisal Institute • Appraisal Institute of Canada • Asociación Profesional de Sociedades de Valoración • Australian Property Institute • Canadian Institute of Chartered Business Valuators • China Appraisal Society • Fédération Française des Experts en Evaluation • Hong Kong Institute of Surveyors • Royal Institution of Chartered Surveyors • The Appraisal Foundation The Participating Entities are primarily Valuation Professional Organizations (VPOs). I have participated since June with monthly conference calls and an in-person meeting in Chicago addressing the challenges of monitoring and voicing each representative's concerns with the new 2017 IVS Exposure Draft. The objective of the AFWG is to provide advice to the IVSC Board of Trustees, Standards Board, and Professional Board from the perspective of the VPOs regarding the ongoing activities of the IVSC. The premise of the IVSC is that the world of business is becoming increasingly global in nature with continuous changing flows of investment and cash compounded by the different standards and levels of professionalism in relation to valuation existing within different countries. Markets have expanded to become global and stakeholders do not always get reliable information for decision making and for comparative purposes. There can be a wide variation in valuation methodologies and approaches across markets making it difficult to compare valuations, potential investments, and secured lending decisions on a like for like basis. Valuations form a key part of audited accounts which should provide transparency and comparability in relation to the value of companies and therefore impact share prices. This may not be achievable without a consistent approach to performing quality valuations.

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IVSC is working in partnership with VPOs and co-operating with other key stakeholders to serve our profession. The IVSC's commitment is to the public interest by expanding the use of IVS as the primary core set of standards used for property, business, and financial instrument valuations. IVSC will do this by increasing the quality of its standards by working in partnership with national valuation standard setters such as the Uniform Standards of Professional Appraisal Practice, the Canadian Uniform Standards of Professional Appraisal Practice, the European Valuation Standards, and the Chinese Valuation Standards. By being seen as a strong partner to these valuation organizations, it increases IVS's legitimacy by cooperating closely with other institutions representing the public interest. The vision of the IVSC is to unite and bring credibility to the global valuation profession, and bring transparency, comparability, and confidence to valuations through quality IVS support. In order to accomplish this, the core strategic objectives of the IVSC are to: 1. Develop high quality international valuation standards which underpin consistency, transparency, and confidence in valuations across the world; and 2. Be seen and referred to as the standard setter for international valuation standards which are recognized and over time adopted by key stakeholders around the world. The IVSC recognizes that VPOs are at different stages of development around the world, some are mature professional organizations, others are recently formed, which creates a variety of stakeholder needs. The IVSC is working in collaboration with VPOs and other key stakeholders. The IVSC is really a platform to create consistent International Valuation Standards. In order to achieve that respect, input, and buy in, it is necessary from participating VPOs to provide relevant guidance, education, qualifications, and quality control. The following is the IVSC organization structure 1:

1IVSC Purpose, Structure and Strategy published October 2015.

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As mentioned, the AFWG has had monthly meetings to: • Focus on meeting the needs of end users of valuations; • Discuss common issues and a channel to share best practices; • Use VPO specialists to interact in a coordinated way with relevant Standards Board sections; • Engage with the Membership and Standards Recognition Board; • Strengthen the global valuation profession; and • Play a key role in development and adoption of International Valuation Standards. We will conduct forums to engage with other key stakeholders including: • Sponsors; • Regulatory Bodies; and • End Users.

• Primary Stakeholders: Other Stakeholders: • Valuation professionals Financial statement users • Clients Legal professionals • VPOs (AFWG) Academics • Audit Firms/Accounting Professionals • Banks and Insurers • Regulators and Accounting Standards Boards

Standard Setting Process: The flowchart below provides a brief overview of a six stage consultation process. Further details on each stage are contained below:

Stage 1 – Determine IVS areas of improvement and agree level of detail required by stakeholders CONSULTEES

Primary Stakeholders Stage 2 – Draft changes to IVS • Valuation Professional Organizations • Advisory Forum Working Group • Valuation professionals • Clients Stage 3 - Issue IVS Exposure Draft for stakeholder • Audit firms/Accounting professionals consultation to get buy-in and ensure it can be • Banks & Insurers implemented • Regulators and Acct. Standards Boards

Other Stakeholders Stage 4 - Re-deliberation • Financial statement users • Legal professionals • Academics Stage 5 - Issue IVS

Stage 6 - Post Implementation Review of IVS

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To date, the 2017 IVS Exposure Draft has made significant progress, including adding Standards IVS 300 applicable to our Machinery and Technical Specialties Discipline, as well as: 1. The development of Standards contributable to the following categories: a. IVS 101 Scope of Work b. IVS 104 Basis of Value c. IVS 105 Valuation Approaches 2. The development of a governance and organizational structure that includes the involvement of capable and influential executives from all over the world. 3. The establishment of an internet website that allows for internal and external communication and development of the IVSs. 4. International notoriety among valuation profession stakeholders and the adoption of IVSs worldwide by various VPOs. IVSC is still in a work in progress mode to revise and complete the standards structure by June 2017. Hopefully this will help to facilitate the primary objectives of the ASA on an International scale. Again, please let me know as your representative if the following primary objectives meet your needs and/or concerns: 1. Benefit the public by contributing to the improvement of valuation analysis and reporting; 2. Keep governmental entities from regulating the profession; 3. Improve the public perception of the valuation profession; 4. Increase the stature of the ASA as an influential worldwide valuation organization; and 5. Permit the ASA to influence the structure of Valuation Standards that may affect its members both domestically and internationally. About the Author Jack Beckwith, ASA, CEA Mr. Beckwith’s career began in 1976 distributing internationally new and refurbished machinery and equipment in the healthcare industry. Mr. Beckwith has performed and supervised valuations throughout the United States, Canada, Mexico, and Europe. He has published articles for various valuation topics in Equipment Finance Advisor, The MTS Journal, and the ASA Professional. In addition, Mr. Beckwith has been an instructor for the American Society of Appraisers teaching Principle of Valuation courses. Honorariums include: ASA International Appraisal Conferences Presenter and ELFA Annual Conventions Presenter. Mr. Beckwith can be reached at [email protected] should you have any inquiries to this subject.

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industry’s future, with greater education and awareness across our sectors. Ethical values are important because: b they are an anchor to appropriate behaviours b they ensure consistency and clarity, irrespective of changing factors such as the state of the economy or varied business practices in different marketplaces.

People tell me that continuing scandals in businesses and sport are evidence that ethical values do not work. If they did, they argue, we would not have so many corporate failures and individuals who feel they need to cheat the system. While I can understand this cynicism, the current context highlights the need for more education about business ethics, not less. Membership has grown One RICS member dramatically since this photo was commented that Enron’s taken outside the UN last year code of ethics did not stop the huge scandal that caused its collapse: but if Enron had implemented the code Fair competition properly and business ethics had played a more central role in its corporate culture, would the organisation still be here? and fair gain It certainly might have had a better chance of survival. Peter Bolton King reflects on the Rio Olympics and answers Education about ethics and related issues is as important questions about the International Ethics Standards Coalition as enforcement in terms of reducing the risk of poor Brazil that hit the headlines in land, real estate, construction conduct. Without it, dark the run-up to the tournament. and infrastructure, and corners in large and complex These included corruption, major Brazilian organisations companies have a stronger political turmoil and the Zika working in our sectors have chance of persisting. public health crisis. now joined us. A colleague reminded I have visited the country me of the similarities and several times, both for Why are ethics differences between the RICS and as chair of the important? nature of competition in sport International Ethics Standards To err is human. Organisations and business, referring to a (IES) Coalition, most recently operating in hyper-competitive little-reported incident that for a major conference to talk commercial environments occurred during the 2012 about international standards. are under intense pressure London games. After winning By the time you read this, the Great interest has been to make money, and there is a gold medal, a swimmer Rio Olympics will have long shown in the coalition and thus a greater risk of ethical confessed to breaking the Bfinished, with thousands of how this fast-growing group breaches. Some situations rules: although he was only column inches written about of almost 100 professional faced by built environment allowed a single dolphin the achievements, the events, bodies, associations professionals may not always kick in the breaststroke, he the winners and the losers. and standards-setting have clear responses. admitted to doing several The 2016 games were organisations is working to This strengthens my belief deliberately. He justified his hosted against a backdrop create the first set of globally that professional ethics must actions by saying the rule was of complex challenges facing applicable ethics principles for play a stronger role in our poorly policed and had to be

20 NOVEMBER/DECEMBER 2016 *First published in RICS’ Property Journal, November/December 2016 www.rics.org/journals

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broken by any competitor retain their own more detailed who wanted to win. He was codes if they wish, on the right about the first point, Organisations operating in understanding that they do and arguably the second; the not conflict with IES. authorities didn’t take any hyper-competitive commercial action against him. Having Comments from trained all his life for his environments are under intense coalition trustees moment of glory, he ultimately pressure to make money and One of the UK-based IES put personal gain first, Coalition trustees, Peter devaluing both his status as there is a greater risk that Robinson of the Association a sportsman and the Olympic of International Property ideal of fair play. ethical breaches may occur Professionals, commented: “In the fast-moving and Winning in our world Ethics Standards Board for but does not have a direct ever-changing world of Do we promise a potential Accountants (IESBA), which enforcement role. international property sales, client that we will carry out issues ethical standards for All the existing IES Coalition ethics are vitally important to work in a certain way, with the professional accountants and members already have their remind the profession where unspoken intention of cutting its member bodies. Those own code or rules of ethics. the true ‘North Star’ of fixed corners to save costs? such as the Association It will be up to individual standards lies. The justification for winning of Chartered and Certified organisations to ensure “These should be a contract in this way is that Accountants and Institute compliance with the ethics transparent and unify trade the client got what they paid of Chartered Accountants standard and each will have and consumers, underwriting for – if unwittingly – which in England and Wales are different disciplinary and any sensible company.” was no less than a competitor required to comply with the enforcement mechanisms. Trust can mean different would have delivered. IESBA code of ethics. things in different cultures, Depending on specific details, How can global principles but another IES Trustee, such behaviour could well The IES document was be applied across complex lawyer Eric Finn from the be unethical and a breach of drafted by an independent world regions? International Right of Way contract. Any surveyor acting standards-setting committee International standards Association in the USA, in this way has forgotten what (SSC), which was appointed such as those operated commented: “Of primary it means to be a professional, by the coalition. How did they by the IESBA are based interest to all real-estate and devalues our profession. decide on its scope? on principles, not rules. professionals is to be a This is the first global exercise This makes them globally trusted advisor to their clients Questions and of its kind for these sectors, applicable: professionals have and the general public. answers and the IES SSC sought to to think carefully about their “A common grounding in Who belongs to the IES align and identify universal specific application and must ethical behaviour, at the local Coalition and why? fundamental principles as a exercise sound professional community level and on a Representative built basis on which to develop judgement in deciding on the global scale, is essential to environment and related the first international correct behaviour and action. establish such trust.” C professional bodies exist to ethics standards for land, The IES SSC undertook guide, enhance and promote real estate, construction a three-month global peter Bolton King fRICS is RICS the professional, technical and and infrastructure. Each consultation, which attracted Property Standards Director ethical expertise of members. organisation that belongs nearly 400 formal responses [email protected] As a founding member of to the coalition agreed to from many countries. We the coalition, RICS believes implement the final standard believe this feedback and that bringing together and is likely to provide advice proactive consultation will non-profit organisations from to their members about help ensure that the final across the sectors creates related ethics issues. standard can be understood www.ies-coalition.org a powerful way to undertake by all. RICS has issued comprehensive extensive consultation, Don’t ethics codes need guidance at combining ethical knowledge a central enforcement Are the participating www.rics.org/ about the built environment authority in order to organisations expected to responsiblebusiness A full toolkit about RICS’ existing and related disciplines. By work successfully? give up the codes of conduct ethics principles can be found at harmonising many existing Of course enforcement plays that they already have in www.rics.org/ethics codes of conduct, the a strong role in regulation. favour of the IES? Extensive guidance on conflicts of coalition aims to establish an Setting ethics standards for The coalition aims to interest is forthcoming. overarching standard. 2.5m accountants globally has introduce, at an international been a crucial role performed level, one shared set of Do other professions have by IESBA since it was set up values reflecting principles on global ethics standards? in 1977. Its board provides which the entire profession Related competencies include The global accountancy adoption and implementation can agree, and to which all Conduct rules, ethics and profession, for instance, is support and promotes good existing codes of conduct will professional practice governed by the International ethical practices globally, conform. They will be free to

NOVEMBER/DECEMBER 2016 21

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2016 Market Overview Mike Clark

By Mike Clark, President of L & M Publications which publishes a series of pricing and data guides such as DataRef, The Book, and The CNC Serial Number Reference Guide. The Book publishes a series of pricing guides for used machinery & equipment. These pricing guides cover many different industries. Since 1984, The Book has been reporting values on used machinery and equipment that has sold at public auction throughout North America. Website: http://www.thebooklm.com As 2016 draws to a close, let’s reflect on the year in the used machinery market. Metalworking The market for used metalworking machinery was strong through 2015. Commodity CNC machines like Mazak, Hass, and Mori Seiki that were manufactured in the mid to late ‘90’s held their value pretty well -- but since the beginning of the year, these mid-nineties’ commodity machines have lost about 40% of their value compared to last year. One example: Mazak Quick Turn 20 S … manufactured in the mid ‘90s sold last year, averaging $28,000. Today, similar Quick Turn 20S are selling for an average of $16,000. CNC machines less than 10 years old are holding their value pretty well. Plastics Not many sales this year. A recent September sale with large capacity machines brought good prices for injection molders between 8 and 12 years old. Woodworking Market’s been soft for quite some time. Printing Similarly, the printing industry is in trouble. As you would expect, big web presses, both commercial and newspaper, can’t find a market. The newspaper industry has been switching to online for years and auction prices reflect that. When these web presses sell, it’s pretty much for scrap value. Also, despite our own personal love of books here at The Book, bindery equipment such as stitchers, trimmers, perfect binders, folders and inserters aren’t in high demand. Interestingly, paper cutters, particularly Polar Mohr, are doing well. And speaking of trends, digital presses are the hot item in the printing industry right now; however, they depreciate quickly, at rates comparable to computer equipment. Finally, Heidelberg and Komori sheet fed presses are still marketable – while their values may be down from 2015, there are still buyers out there for these presses.

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Processing No matter what the economic trends look like, people still eat and take their medicine, so the value of used food and chemical processing equipment is holding up well. The merger of Kraft and Heinz dumped some excess equipment on the market, and that trend may continue through the next few years as large consumer packaged goods companies consolidate, but for the most part these liquidations have not negatively affected the value of this equipment. Americans also eat more packaged convenience foods in times of economic uncertainty, so these industries will tend to be less subject to wild valuation swings. Oilfield With the decline in oil prices comes a decline in the prices for oilfield equipment. Items at recent Kruse and Canon sales are going for less than half of what they sold in 2015. The equipment value will recover if and when oil prices rebound. To give you an idea of the auction activity in North America: Overall, the number of auctions are down from 2014 to 2015. Through the third quarter of this year (2016), the number of sales is just about equal to the YTD third quarter of 2015. Historically, a recap of the sales by industry is:

INDUSTRY 2013 2013 2014 2014 2015 2015 # SALES % # SALES % # SALES % Metal 931 55% 869 56% 802 59% Wood 122 7% 87 6% 76 6% Plastic 64 4% 70 4% 47 3% Print 104 6% 102 7% 89 6% Processing 206 12% 169 11% 173 13% Hi Tech 149 9% 149 10% 66 5% Medical 77 4% 64 4% 63 5% Audio/Video 39 2% 20 1% 26 2% Textile 15 1% 13 1% 15 1% ------1707 100% 1543 100% 1357 100%

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2013 2013 2014 2014 2015 2015 # SALES % # SALES % # SALES % Location Only 46 3% 35 2% 16 1% Timed Sale 753 46% 731 49% 737 55% Webcast 824 51% 727 49% 584 44% ------1623 100% 1493 100% 1337 100%

About the Author Mike Clark is the president of L & M Publications which publishes a series of pricing and data guides such as DataRef, The Book, and The CNC Serial Number Reference Guide. L&M has been publishing pricing guides for industrial machinery and equipment since 1993. He has also been a presenter at various conferences including several ASA conferences. His company is based in Gainesville Georgia. Mike has held executive positions with industrial printers and publishers since 1971. He was controller and then general manager of Industrial Machinery News in Detroit from 1976 through 1989. IMN was a national publication for used metalworking machinery. From 1990-1992, he worked at Black Book (publisher of pricing guides for automobiles). Both IMN and Black Book were owned by The Hearst Corporation. While at IMN, Mike developed the concept for the IMN Auction Report, which became The Book. He carried the IMN Auction Report to Black Book. In 1993, Mike acquired the machinery pricing division from Hearst and started The Book. Mike attends and participates in many conventions and seminars for and with industrial auctioneers, appraisers and machinery dealers. Mike has a B.A. in Finance from Western Michigan University and an MBA in Accounting from University of Detroit. He resides in Gainesville, GA and is married with one daughter.

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Insurance Valuations and Loss Preparedness Alex Ruden, ASA (M&TS & ARM), CG/GA, and Business Valuer

An insurance appraisal fulfills only three needs: these are independence, placement value data, and proof of loss preparedness. Differing levels and types of insurance appraisals fulfill each of these needs to differing degrees. Addressing each need in turn below: Independence The insurance company would like to see an appraisal from an outside firm. This is somewhat obvious so that there is not fraud perpetrated by the insured. Yes some insurance companies now have their own appraisers but nasty loss situations may still occur. Placement An independent valuation will inform the insured about the amount of insurance to carry. Such an analysis may be completed in great detail with say a +/-10% possible variance or in an overview manner with a +/-20% or greater variance. Be wary, just because the insurance carrier does an insurance placement value analysis, as stated before a very nasty loss situation may occur, with the insurance company denying the proper amount of insurance is carried. Proof of Loss Along with having the appropriate amount of insurance, this is the most important element of an insurance appraisal. Directly stated, if one is not prepared to prove one’s loss instantly 10% of a fair settlement is gone. If not prepared this lost amount may be 25%. The strategy is to get a balanced “fair/equitable and timely” settlement. These thoughts are directly linked. Yes one can get a fair settlement say 5 years hence, but it is not timely. Or one can get a timely settlement if one accepts 75 cents on the dollar. Again, not good. One wants the fair settlement at full value in say 6-12 months or whatever time is appropriate for the loss situation, balancing the wishes of “fair” and “timely” is the critical concept. So let’s address what is adequate Proof of Loss. The fixed asset accounting record most often is grossly inadequate for a loss situation.Without going into a long explanation, many systems contain data that includes intangibles in the values, non-value entries, allocated values from acquisitions, “ghost” assets, and on and on. Flow diagrams help. Photographs and movies / videos of specific assets and systems help. Files that have original purchase costs and descriptive detail are wonderful (but rarely are available). Engineering records may help. Sorry, but in the instance of most facilities / operations the assured is not prepared. Oversight in this regard is strongly suggested. Why do I say that? Because I was one of the insurance company bad guys for many years, and my father and grandfather as well. No we were not “mean”, yes helping assureds as professionally / sensitively possible, but ultimately to reasonably prove one’s loss is the assured’s responsibility. Again, it is the assured’s responsibility to prove the loss, that is, the assets that are/were in place and the values of the assets. Yes, for those facilities where the appraiser has had the opportunity to prepare a detailed valuation for fair value accounting the information may be very good, at that instant. This assumes that physical verification of the assets in place has been completed, yes perhaps even inter-related with a “trend and bend” work effort. No, a sloppy trend and bend job will not provide adequate proof of loss. Yes, the information must be kept up to date. The asset listings and value information must be kept up to date either within the fixed asset accounting system or as a separate aside record, incorporating inflation / deflation adjustments, changes in depreciation if appropriate for the policy /contract form, and of course additions or deletions.

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Critical property and casualty insurance thoughts: • One may rather deal with the IRS than fight an insurance battle. • Understand the insurance policy (“contract”) coinsurance clause where assured shares in the settlement to the extent of the insurance that should have been carried, say 80%. • The fixed asset accounting record is not adequate proof of loss, I repeat, the fixed asset accounting record is not adequate proof of loss. • Understand the difference between a Replacement Cost policy and an Actual Cash Value policy • Replacement Cost policies are “repair or replace” often up to Actual Cash Value (a litigious issue, also considering the issues of Market Value, depreciation or betterment). • Further, if Replacement Cost, usually the insurance policy (contract) states that Actual Cash Value will be paid until or if the covered assets are replaced (language varies per differing forms), then if replaced the full Replacement Cost is paid. • Actual Cash Value generally considers the current cost new for the same functional utility, less physical depreciation/ deterioration. But in some instances ACV is considered to mean the cost of replacing the asset at Market Value (another litigious issue). • Being unprepared to prove one’s loss may prove to be extremely costly, particularly if one had not gone through the exercise and cost of perpetually being prepared in advance. • The insurance company will not pay for betterments, meaning if you have an old Model A asset and now a Model B is only available you will not receive the settlement for a Model B loss. Check insurance contracts in this regard concerning betterments. • The insurance company may well not pay for engineering or intangible assets relating to specific tangible assets. Check the policy and/or discuss this matter with the broker. • Understand what the insurance policy says. One can under-insure as well as over-insure. A personal note. Are you prepared for a loss at your home? Do you have the proof of value and listing of the assets, or at least photos or a movie/video of the residence and the contents? Is this information somewhere else other than in your residence? All are encouraged to get prepared for an unfortunate insured event. But imagine in a loss situation how much less of a fair settlement you would receive if such data is not available. Then project this thought into your business situation. Not good? You are encouraged to cure this situation in all regards. About the Author Alex Ruden, ASA (M&TS & ARM), CG/GA, Business Valuer, is the fourth generation of his family in the appraisal/valuation business. His great grandfather was a Public Adjuster being a partner in a well known Manhattan insurance district firm. Both his grandfather and father were “machinery experts” assisting staff and independent insurance adjusters with their loss work. Alex worked within the firm but eventually moved on into marketing and providing multi-disciplined appraisal/valuation and fixed asset accounting services for financial and tax reporting, property taxation, financing, insurance, fixed asset accounting, and so forth.

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FDIC Rental Value - A Nontraditional Approach Larry L. Perdue, ASA, MVS

The following article was published in the 1989 Winter Edition of the MTS Journal. As stated in the article, at that time there was no established methodology for calculating the market rental rate for assets of a failed FDIC insured institution. When I was retained to value the property of failed banks and asked to calculate a rental value, I searched many sources looking for an equitable rental rate between the FDIC and the purchasing bank. After a conversation with my FDIC contact, it was clear that the FDIC was only interested in recovering a loss in value to those assets during that period in which the assuming bank had care, custody, and control prior to actually obtaining ownership. It came to mind that a time value of money calculation could be utilized for this purpose. Once the market value of an asset was derived (which at that time was the "Forced Liquidation Value"), the loss in value could be calculated over a pre-determined period of time by projecting a residual value at the end of that period. The FDIC provided the fund rate relative to the transaction between themselves and the assuming bank. I have utilized this method to calculate the rental rate of other assets over the past 27 years and, in those cases, the assets are not rented or leased on a regular basis. In order to facilitate calculating the rental rate, the assets have to be segregated into the various classes (i.e. furniture, computer equipment, telephone systems, banking equipment, etc.). Once the assets are segregated and subtotaled in their various categories, then a loss in value can be anticipated over the coming period of time. As exhibited in the article, you can see how the calculations may either be computed manually or on a Hewlett-Packard 18B at that time. At the current time, I am utilizing a Hewlett-Packard 10BII Plus. Over the last two months, I have utilized this method to determine the rental rate for equipment in a doctor's office where a hospital is acquiring that office or renting equipment from that doctor over a given period of time. As stated previously, the goal is to recover the loss in value of that asset over a pre-determined period of time and arrive at a rate of return commensurate with the current interest rate and rate of risk. Quite simply put: a return of and a return on an investment. Upon the closure of a federally insured bank by the Control of the Currency or State Banking Commission, and during its control by the Federal Deposit Insurance Corporation (FDIC), the furniture, fixtures, and equipment of the failed bank are normally appraised. The objective of the appraisal is to determine market value (which equates to Forced Liquidation Value) and, in some instances, rental value of those assets during the period of use from the date of the bank closing to final disposition of the assets, either through purchase by an assuming bank or sale at absolute public auction. Market value is defined in the “Uniform Appraisal Instructions to Appraisers for FDIC Personal Properties” as “... the value that can be obtained at a well advertised auction or bid sale or whatever method of sale is typical for the property.” (Addendum A, Paragraph 4.) In July 1987, rental value was not addressed or defined in the FDIC’s instructions. The letter of authorization accompanying the instructions stated that: In your finished report you are to show the FDIC sticker number, description, condition, pictures, and valuation. The value is to be shown as “Market Value” as of the bank closing date of ... You are to show a “Rental Value” also. The rental value will be a monthly rental on the entire contents. FDIC Letter of Authorization, July 30, 1987. (Addendum B.) In the absence of a definition of “Rental Value” from the FDIC, it was necessary to develop a procedure for computing FDIC “Rental Value” which would satisfy the requirements of the Uniform Commercial Code, be consistent with the Uniform Appraisal

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Instructions to Appraisers for FDIC Personal Properties, and be reasonable and appropriate for the nontraditional renting arrangement between the assuming bank and the FDIC. Traditionally, in establishing the rental or lease price of an item, the calculated cost of that item is capitalized at the appropriate rate, as indicated by the total rate of return necessary to meet investors’ objectives. Suggested by Dr. Shannon P. Pratt, ASA, CFA, in “Understanding Capitalization Rates,” Valuation, June 1986. An example of additional factors to be considered in determining fair rental value is illustrated by Peter K. Nevitt and Frank J. Fabozzi in their discussion of “Consideration in Establishing and Operating a Leasing Company”: Pricing A leasing company should establish pre-tax and after-tax target rates of return on its equity and assets. Such targets must compare favorably with rates of return available to the parent company from other uses of funding and tax shelter resources. Pricing strategies are then formulated to achieve these objectives. The pricing of a lease should take the following factors into consideration: 1. The cost of funds. 2. The expected residual value, if any. 3. The current and future federal and state income tax rates and liability of the lessor. 4. The timing of the delivery of the leased equipment. 5. The timing of actual receipt of cash flows attributable to tax benefits. 6. The timing of the payment of the purchase price. 7. The general overhead expense attributable to the leasing operations. 8. The cost of booking the transaction. 9. The servicing costs during the lease for billing, collecting, inspecting, insuring, and answering inquiries regarding the lessee or the equipment. 10. The cost of disposition of the equipment (if a true lease) at the end of the lease. 11. The special expenses attributable to the transaction. 12. The risk or loss reserve on the portfolio. 13. The special risk or loss reserve attributable to the transaction. Equipment Leasing, 3rd ed. p. 185. Nevitt and Fabozzi’s thirteen items to be considered are too narrow in scope and do not give adequate consideration to the very important effects of functional and economic, “external” obsolescence on rental value. The Associated Equipment Distributors provide a very useful guideline for estimating rental cost and rates: Factors which may affect rental costs and rates ... In order for any enterprise, including the rental of construction equipment, to be successful, it is essential total costs involved be understood. Many distributors have, over the years, undertaken to fully appreciate the costs associated with rental of equipment. What follows is not a formula for arriving at an estimate of each distributor’s cost, but rather a guide to each of those elements which may or may not affect the cost of rental equipment. 1. New Equipment Value Product cost f.o.b. factory (exclusive of cash discount Freight from factory Unloading and assembly costs Inspection and servicing costs

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2. Less Equipment Value – End Of Useful Rental Life Number of years useful rental life anticipated Salvage value or sale price end of useful rental life 3. Net Depreciable Cost – Over Useful Rental Life Net amount of investment to be recovered through depreciation (Total of item 1 less total of item 2) Amount sufficient to cover future replacement cost which may be higher Yearly Costs 4. Depreciation Item 3 divided by number of years useful rental life anticipated (Stated in item 2) 5. Insurance Property damage Comprehensive liability 6. Taxes Applicable to Unit Ad Valorem or Personal Property Sales, Use, or Occupational Licenses 7. Interest on Investment Interest expense (Item 1 times annual interest rate) 8. Repairs and Maintenance Maintenance – preventative Maintenance – normal wear and tear Inspection – In, out, and on job Major repairs – engine overhaul, undercarriage overhaul, etc. Repair or recap tires Steam cleaning Painting Fuel, lubricants, hydraulic oil Expendable parts – cutting edges, teeth, cable, filters, “V” belts, etc. Non-recoverable warranty costs Preparation for delivery 9. Rental Department Costs – Pro-Rata Share Payroll (Department personnel, salesmen’s commissions, payroll, taxes, payroll insurance, fringe benefits) Advertising and rental promotion Free delivery and pick up Uncollectible charges Policy adjustments Billing costs Records and forms Filing Fees Handling within yard or between departments (loading, unloading, warehousing, moving) Occupancy costs Share of general overhead Contingencies

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10. Overhead Costs Not Included in Above Items (Pro-Rata Cost of Overhead) Utilities Building Depreciation Payroll Taxes Insurance 11. Other Costs Losses due to damage, vandalism, conversion, or theft, etc. 12. Total Annual Costs Total Items 4 through 11 13. Approximate Cost for Each Month of Rental Probable number of months of rental per year Total annual cost (item 12) divided by probable months of rental during yeae 14. Profit Profit you wish to realize Consider value of machine to customer 15. Monthly Rental Rate Add totals of Items 13 and 14 34th Edition Rental Rates Compilation. Associated Equipment Distributors. (March 1983) p. iv As may be seen from the two previous examples, fair rental value calculations require consideration of many variables necessary to produce the appropriate yield. The goal of the FDIC in its corporate capacity as insurer and unique position as receiver of a failed bank is to derive the maximum number of net dollars from the management of the bank’s assets. Revenues generated under their control are used to pay insured depositors and holders of receiver certificates. Through this effort, the FDIC charges an assuming bank for the use of the furniture, fixtures, and equipment of the failed bank during the period of use from the date of the bank closing to final disposition of the assets, either through purchase by an assuming bank or sale at public auction. The information necessary to accurately calculate fair rental value in the traditional sense is not available and therefore a total rate of return, capitalization rate, may not be feasibly determined, making the traditional capitalized cost approach inappropriate. As previously stated, in accordance with the FDIC Letter of Authorization, Rental Value is to be calculated as a monthly rental value on the entire contents of the subject bank. Because furniture, fixtures, and equipment of the failed banks consist of many items not normally leased or rented on a regular basis, comparable rates may not be available from the market. Additionally, determination of a normal monthly rental rate for each and every individual item appraised would be inexpedient, impractical, and unreasonable. One method of calculating FDIC Rental Value that we developed has been used and accepted by the FDIC utilizes a common rental calculation, to determine the rent payment necessary to achieve a specified yield. The specific yield required is equal to the recovery of the anticipated loss in value from all causes, during the period of use from date of bank closing to final disposition of the assets, plus the cost of money during the same period which is reflected in the charged interest rate. The charged interest rate is the applicable federal funds rate provided by the FDIC. The anticipated loss in value from physical depreciation, plus functional and economic “external” obsolescence, is projected by the appraiser utilizing historical data, age life estimates and personal experience. In that the assuming bank is only renting and not renting the assets in the traditional sense, only loss in value (depreciation from all causes) and the cost of money (interest rate) need to be considered in this calculation.

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Using the “Time Value of Money” leasing calculation formula found on many financial calculators, the value may be computed as follows: Present Value “PV”= FDIC Market Value as defined in the Uniform Appraisal Instructions to Appraisers for FDIC Personal Properties Future Value “FV” = Anticipated depreciated value of assets at end of rental period, i.e. if estimated depreciation from all causes during period of rental is equal to 20%, then FM = PV minus 20% depreciation Rental Period “N” = Rental period in months Interest Rate “I% YR” = Applicable federal funds rate as of bank closing date Payment “PMT”= Monthly payment required

Example Present Value: $ 400,000.00 Anticipated Depreciation During Rental Period: < 100,000.00> (25% over 12 months) Future Value 300,000.00 (Value at end of rental period) Interest Rate Per Year 6.5% (Applicable Fed Funds Rate) Rental Period in Months: 12.00 Payment Required: $ 10,199.40

Note: This is a net rental with periodic payments due in advance.

0 = PV + (1+I%xS) x PMT x USPV (I%:N) + FV x SPPV (I%:N) 100 S = payment mode factor (0 for End mode; 1 for Begin mode).

I% = I%YR #P/Y

USPV (I%:N) Present value of a uniform series of $1.00 payments; equivalent to USFV (I%:N). N is the number of payments and I% is the periodic interest rate expressed as a percentage. SPPV (I%:N) Present value of a single $1.00 payment; equivalent to 1 divided by SPFV (I%:N). N is the number of compounding periods and I% is the interest rate per compounding period expressed as a percentage. SPFV (I%:N) Future value of a single $1.00 payment; equivalent to (1 + I% divided by 100)N. N is the number of compounding periods and I% is the interest rate per compounding period expressed as a percentage. HP-18C Business Consultant Owner’s Manual, Hewlett-Packard. (April 1986), pp. 145, 180.

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When calculating FDIC Market Value, either as the objective of an appraisal of assets or determination of Rental Value, the finished report should contain a complete definition of that value concept and an explanation of the purpose and method of appraisal. It is not the intent of this writer to indicate that this is the only proper procedure for calculating FDIC rental value, but rather a reasonable solution to a unique appraisal problem. Although a non-traditional approach, the presented procedure is reasonable and gives an opposite value which considers the three historic and accepted approaches to value, namely: income, cost, and market. Works Cited FDIC Letter of Authorization, July 30, 1987 HP-18C Business Consultant Owner’s Manual. Hewlett-Packard. April 1986, p. 145, 180. Nevitt, Peter K. and Frank J. Fabozzi, “Consideration in Establishing and Operating a Leasing Company” Equipment Leasing. 3rd ed. Illinois: Dow Jones-Irwin, 1988 Pratt, Dr. Shannon P., ASA, CFA, “Understanding Capitalization Rates.” Valuation. American Society of Appraisers, 1986. Vol. 31, No. 1 34th Edition Rental Rates Compilation. Associated Equipment Distributors, March 1983, p. iv Uniform Appraisal Instructions to Appraisers for FDIC Personal Properties Company Profile Biography Asset Appraisal Corporation was founded as Asset Management in 1984 and has been performing a complete spectrum of appraisal and consulting services nationwide since 1984 and internationally since 1993. We specializes in Furniture, Trade Fixtures, Machinery, Equipment, and Inventory Appraisals; Commercial and Industrial Real Estate Appraisals; complete Business Valuations; Property Management, Asset Management in the forms of Collateral Control, Liquidation Services, Security, Operational Consulting, Field Operations, etc. Our appraisers are highly educated professionals with specialized valuation training and we have extensive experience in the utilization of all value concepts and maintain international affiliates qualified to appraise any type of asset anywhere. Asset Appraisal Corporation’s clients include local, national and international banks, accounting firms, financial planners, governmental agencies and many prestigious legal firms. An appraiser’s primary obligation to a client is to reach complete, accurate and pertinent conclusions and numerical results. The valuation services of Asset Appraisal Corporation are governed by the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers (ASA) and the Uniform Standards of Professional Appraisal Practice (USPAP). Typically, appraisal fees are calculated on an hourly and analytical services rendered basis plus actual incurred expenses. Overall fees will vary depending upon the nature and complexity of the assignment as well as the type and quality of financial information that is available. Professionalism Valuation is a complex and demanding field requiring training, experience and judgment, and the professional appraiser is fully committed to the field. The professional appraiser is able to keep abreast of changes in appraisal theory and techniques; markets; economics; legal procedures and rulings, as well as regulatory agency standards. The professional is familiar with IRS valuation guidelines and the necessity of performing an appraisal to comply with applicable Revenue Rulings. The professional appraiser will work closely with owners, attorneys, accountants and other specialized appraisers in a team effort to prepare a valuation suitable for each situation. This dedication yields accurate, defendable, cost effective service for the client.

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Appraisers will develop replacement and/or reproduction cost, market values, as well as liquidation values. Further, they provide estimates determining effective age and future residual values to the leasing, financial and accounting markets. If the valuation is challenged, the professional appraiser will be experienced and capable of providing expert witness testimony. A professional appraiser will provide an unbiased, knowledgeable “third-party” viewpoint for the court to use in rendering decisions. Asset Appraisal Corporation not only offers furniture, fixtures, machinery and equipment appraisal services, commercial and industrial real estate appraisal services, complete business valuations, but also asset management in the forms of collateral control, liquidation services, security and operational consulting, field operations, etc. Valuation It is essential that an independent, unbiased professional determine value in many situations including: New Loans And Asset-Based Lending A value must be determined to establish collateral requirements Divorces A fair and independent value which can be supported with testimony is essential to ensure settlement and distribution of community assets. Litigation Measure of damages, Ad Valorem tax appeal, any area where a True Value must be determined. Employee Stock Option Plans (ESOPS) Closely-held businesses that offer ESOP plans require an annual valuation to meet IRS and ERISA requirements. Mergers And Acquisitions When buying or selling a business, a fair market value must be determined including consideration of value for minority interests. Financial Planning For planning and funding future personal and business financial needs and meeting potential tax liabilities. Estate And Gift Taxes, Donations A well-documented value is necessary to support reported information to the Internal Revenue Service. Other Reasons Buy/sell agreements, fairness opinions, partnership dissolutions, leveraged buy outs, “squeeze out” mergers, bankruptcy proceedings, and insurance valuation. About the Author Larry L. Perdue, ASA, M.V.S. | Resume & Qualifications Experience July 2006-Present Asset Appraisal Corporation - Executive Director, appraiser, expert witness, liquidation consultant, field operations, court-appointed receiver. Extensive background in furniture, trade fixtures, machinery and equipment appraisals nationally and internationally. 2000-Present Business Valuators & Appraisers, LLC - Director of Appraisal & Brokerage Services, a sister professional service company to D.R. Payne & Associates. April 1999-July2005 Asset Development & Management Corporation - President & Owner February 1991-1995 Asset Auctioneers Incorporated - President & Owner May 1988-July 2006 Asset Appraisal Corporation - President, senior appraiser, expert witness, liquidation consultant, field operations, court-appointed receiver. Extensive background in furniture, trade fixtures, machinery and equipment appraisals nationally and internationally. October 1984-Present Asset Management - Owner, responsible for machinery and equipment appraisals, sales, liquidation consulting, auctioneer, and court-appointed receiver. Extensive background in sales and liquidation of machinery, equipment, furniture, fixtures and inventory; (October 1984 to present) machinery and equipment appraiser, liquidation consultant, court-appointed receiver.

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Education Master’s Degree in Valuation Sciences (M.V.S.) - Lindenwood College, St. Charles, Missouri (1992); Bachelor of Science Degree - Central State University, Edmond, OK (1979); Numerous appraisal classes and seminars on a continuing basis Professional Memberships, Associations American Society of Appraisers - Accredited Senior Appraiser (ASA), Machinery/Technical Specialties: Machinery and Equipment, Certified January 1988; Past State Director, President, and Treasurer (in addition to other chair positions) of the Oklahoma/Arkansas Chapter of American Society of Appraisers Areas of Expertise Appraisal of assets for any purpose; asset tagging and database management of assets; banking and computer equipment; construction and contractor's equipment; electric generating equipment - steam/gas turbines, natural gas, etc.; farm machinery and feed mills - grain elevators; fiberglass mfg. - tanks, fittings, boats, swimming pools, etc.; firearms; food processing and packaging equipment; heat treating facilities - metal and glass; hotels, motels, amusement parks, and recreational facilities; inventories - raw materials, work in process, parts and components, finished goods; laboratory instruments and testing equipment; manufacturing plants - all industries; medical equipment - conventional and high-tech; medicine and pharmaceuticals; metal production; metalworking, plastics, and woodworking equipment; office furniture, trade fixtures, machines, and equipment; oil and gas industry exploration - seismic mapping, drilling, completion, production and refining; printing plants, pre-press, sheet fed, web, binary, etc.; radio/broadcast/telecommunications/fiber optics transmission equipment; restaurant and food service equipment; service equipment-automotive, truck, etc.; vehicles, transportation, aircraft, marine - all classes; and, video/arcade game equipment and vending machines; and including many other categories and/ or types of assets; court - appointed receiver and liquidator; expert witness - local, state, and U.S. district courts - Oklahoma, New Mexico, Texas, Kansas, Maryland, and Arkansas; asset liquidator - U.S. Bankruptcy Court, Western District of Oklahoma; equipment sales and liquidation consultant Value Concept Experience Reproduction Cost, New; Replacement Cost, New; Insurance Replacement Cost; Insurable Value Depreciated; Fair Market Value (Exchange); Fair Market Value In Continued Use; Fair Market Value Installed / In Place; Fair Market Value (Removal); Liquidation Value Installed / In Place; Orderly Liquidation Value; Forced Liquidation Value; Salvage Value; Scrap Value Miscellaneous Instructor and speaker for FDIC's "Understanding and Interpreting Appraisals," and State of Oklahoma/County Assessors Conference's "Appraisal of Oil Field and Related Machinery and Equipment"; Instructor - American Society of Appraisers, Machinery and Technical Specialties Valuation Courses MTS 201, 202, 203, and 204; Former instructor and committee member "Curriculum Development": International Valuation Sciences Institute, Lindenwood College, St. Charles, Missouri; Published Author: The M&E Appraiser "Crash of '87 - Capital Spending for Machines & Equipment," October 1988, The M&E Appraiser "Fixtures: Realty or Personalty?,” Spring 1989, The M&E Appraiser - "FDIC Rental Value: A Non-Traditional Approach," Winter 1989, The M&E Appraiser "The Impact of Ownership and Transfer of Rights on the Valuation of Software Programs," co-author, Winter 1991; Developer of Market Value Rental Methodology for the Federal Deposit Insurance Corporation; Former Instructor - International Valuation Sciences Institute, Lindenwood College, St. Charles, Missouri; Past Member - Curriculum Development Committee, International Valuation Sciences Institute, Lindenwood College, St. Charles, Missouri; Member - Educational Committee, International Valuation Sciences Institute, Lindenwood College, St. Charles, Missouri (a subcommittee of the American Society of Appraisers' International Education Committee); Co-author - The American Society of Appraisers, Course IDEV200, Principles of Valuation

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Why Net Book Value Does Not Equal Fair Value J. Fernando Sosa, ASA, MRICS

In valuing assets for financial reporting purposes, it is critical to understand that Net Book Value (“NBV”) is NOT an appropriate measure of fair value for machinery & equipment (“M&E” or “Asset”) related to financial reporting. To begin this discussion, it is important to define several important terms and have a clear understanding of their place when debating the application of NBV as an appropriate measure of fair value for assets. Net Book Value1 “The cost of an asset (the amount that was paid for it) minus accumulated depreciation for financial reporting purposes.” Fair Value (ASC 805)2 “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketplace participants at the measurement date. (This statement also explains that a fair value measurement of an asset assumes its highest and best use by market participants. Such use would maximize the value of the asset or group of assets within which the asset would be used, regardless of the intended use of the asset by the reporting entity.” Normal Useful Life3 “The physical life, usually estimated in terms of years that a new property will be actually be used before it is retired from service. A property’s normal useful life relates to how long similar properties actually tend to be used, as opposed to the more theoretical economic life calculation of how long a property can profitably be used.” As previously mentioned, NBV and fair value are two very different concepts. NBV is the result of a depreciated asset minus its original cost. Accounting depreciation does not consider the following: • Physical condition of the assets • Improvements or partial retirements made to the assets • Changes in the effective age of the assets • Functional or economic obsolescence factors The following three examples related to tax accounting, GAAP accounting, and valuation demonstrate the differences between NBV vs. Fair Value. Example 1 Tax Accounting Perspective In tax accounting, NBV calculates the annual depreciation of the assets with the purpose of reducing the taxpayer’s tax liability. Once the normal useful life of the asset has been fully depreciated, the NBV goes to zero and, as a result, there is no longer a tax benefit to the taxpayer. In the case of tax accounting, Modified Accelerated Cost Recovery System (“MACRS”) lives, which are published by the IRS, are typically used. MACRS lives are designed to recapture the cost of assets used in the operation of a business at an accelerated pace. This increases cash flow and, as a result, provides opportunities to reinvest the additional cash flow.

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MACRS lives are divided into the following categories: 5 YR. Assets used in the direct operation of a business (i.e. a conveyor belt, fork lift, production line, etc.) 7 YR. Assets used in support of a business (i.e. desks, chairs, etc.) 15 YR. Land improvement assets (i.e. concrete and asphalt paving, site lighting, landscaping, etc.) 20 YR. Specialty assets (i.e. transmission, interconnect systems, substation, etc.) 27.5 YR. Residential / multi-unit family housing (residential homes, apartments, etc.) 39 YR. Commercial building (i.e. office buildings, warehouses, distribution center, etc.) Suppose a vehicle was acquired at an original cost of $30,000 in 2008 and used in the operation of a business as a delivery van. The appropriate MACRS life would be five years. Since the asset has an effective age (“EA”) (2016-2008 = Eight Years) of eight years, and the MACRS life is five years, there is a negative three years remaining useful life (“RUL”). The asset is therefore fully depreciated, and there is no longer a tax benefit resulting in a NBV of $0.00. Table 1 below illustrates the calculation applied in arriving at a NBV of zero. Table 1: Sample NBV Calculation for Tax Accounting as of December 2016 Asset Historic Cost Placed in MACRS Life EA RUL Depreciation NBV Description Service Year Delivery Van $30,000 2008 5 8 -3 100% $0.00

Example GAAP Accounting Perspective From an accounting perspective, the calculation of NBV follows guidelines set forth by US GAAP. The overall principle is the same as in tax accounting in the sense that a normal useful life is identified utilizing either MACRS lives, accounting lives, or lives determined by the business owner. Once the asset has surpassed its normal useful life, the NBV goes to zero - regardless of whether the asset is still in use and generating income. Table 2 considers the same example as in Table 1, but from an accounting perspective under US GAAP. Table 2: Sample NBV Calculation for TUS GAAP Reporting as of December 2016 Asset Historic Cost Placed in Client EA RUL Depreciation NBV Description Service Year Provided Normal Useful Life Delivery Van $30,000 2008 8 8 0 100% $0.00 In Table 2, the business owner has determined an eight-year normal useful life for the asset. The effective age is eight years, leaving a remaining useful life of zero. As in Example 1, the asset is fully depreciated resulting in a NBV of zero. Initial Observations In examples 1 and 2, two different normal useful lives have been applied. Five years was applied related to the tax accounting example and eight years was applied for US GAAP reporting. But both examples show an end result of NBV zero. However, the asset still exists and is producing an income. Maintenance expenditures are still being applied to this asset. Is it reasonable to assume that the fair value of the asset is also zero?

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Example 3 Valuation Perspective In valuation for financial reporting, the purpose is to calculate fair value. In doing this, a valuation specialist must consider the three approaches to value which are the income, cost, and market approach. Table 3 provides a simplified indirect cost approach to calculate the fair value of the asset. Table 3: Sample Fair Value Calculation as of December 2016 Asset Historic Placed in Trend RCN Normal EA RUL Depreciation Fair Value Description Cost Service Factor4 Useful Held at (Rounded) Year Life5 Salvage Value6 Delivery Van $30,000 2008 1.0940 $32,820 8 8 0 10% $3,300

As previously stated, we have applied the indirect method of the cost approach where:

Historic Cost x Trend Factor = Reproduction Cost New (“RCN”) RCN x Depreciation = Fair Value.

In performing M&E valuation, there are other factors that can impact the fair value. Factors that can increase the fair value are: • Upgrading a production line or piece of equipment • Standard maintenance procedures • Replacing key components of an asset. On the flip side, a number of factors can decrease the fair value of an asset. These would be identified through decreases in the effective age, as well as functional or economic obsolescence penalties. Examples of these penalties include, but are not limited to, a poorly maintained asset reflecting a higher rate of physical deterioration than a well-maintained one. Examples of functional obsolescence would include: • Excess operating costs • Excess construction costs • Over-capacity • Inadequacy • Lack of utility or similar conditions Examples of economic obsolescence would include: • Economics of the industry • Availability of financing • Loss of material and/or labor sources • Passage of new legislation • Changes in ordinances • Increased cost of raw materials, labor, or utilities • Reduced demand for the product • Increased competition • Inflation or high interest rates or similar factors

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In the application of the cost approach, the three forms of depreciation (physical deterioration, functional obsolescence, and economic obsolescence) should be considered when calculating the fair value of assets. Additionally, as discussed above, there are many factors that must be considered when performing a valuation, in addition to what is typically expressed within the NBV. It is important to reinforce that among the three approaches to value, the income approach is rarely applied by M&E appraisers. However, depending on the type of asset, the market approach or a combination of the market and cost approach can be more applicable in determining the fair value of the asset. Application of the Market Approach The market approach is most reliable when there is an active market yielding a sufficient number of sales of comparable properties that can be independently verified through reliable sources. This approach focuses on the actions of real buyers and sellers. In theory, the market approach measures the loss in value from all forms of appraisal depreciation and obsolescence that are inherent in the asset. This is assuming that proper adjustments are made to the comparables reflecting the difference between them and subject assets. Table 4 compares the NBV versus the fair value of the delivery van mentioned earlier in this article: Table 4: Comparison Table NBV vs. Fair Value Applied Method NBV Fair Value Table 1: Tax Accounting Perspective $0.00 $0.00 Table 2: Audit Accounting Perspective $0.00 $0.00 Table 3: Valuation Perspective $0.00 $3,200 If the NBV is zero, does this mean that we now have a delivery van that is eight years old and worthless? Does this mean that we cannot trade this in for a new delivery van? Couldn’t we sell this van to a third party? Using NBV as fair value is not reasonable in this example. If we were to sell this delivery van after eight years, what may be some selling points to advertise? • Low miles (adding life – changing the effective age and value) • Clean interior (adding life – changing the effective age and value) • Maintenance records available (adding life – changing the effective age and value) • Original Owner (adding life – changing the effective age and value) • Never been in an accident (No increased physical deterioration) In essence, what are we really discussing? This is an attempt to mimic the market’s interpretation of the effective age of the asset and, as a result, potentially increasing the fair value of the asset. Another factor is the normal useful life used in the calculation of the fair value. Whereas the owners may possibly apply their own normal useful life or use MACRS lives, appraisers use actual service lives. In the case of a delivery van, actual service lives can range from five to eight years. As mentioned in the selling points above, appraisers will also consider adjustments to the effective age. Appraisers consider the income, cost, and market approaches to value when performing a valuation. Whereas the calculation of net book value is an accounting function, this does not provide a true representation of the fair value of an asset. Conclusion The delivery van is a simplified example to illustrate the differences between NBV and fair value. One must consider that, for an asset-intensive business, the differences can be more severe, showing a significant difference between NBV and fair value. It is important to have a professional machinery and equipment specialist - someone who understands the many factors affecting

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the fair value - perform the valuation of the assets. A professional valuation specialist will calculate the fair value of an asset, ensuring that an accurate representation of the asset has been considered and applied in the final conclusion of fair value. About the Author J. Fernando Sosa, ASA, MRICS, is the manager of machinery and equipment appraisals for Cohn Reznick Advisory Group’s Valuation Advisory Services practice who is based in the Chicago. Fernando is an Accredited Senior Appraiser (“ASA”) designated in the discipline of Machinery and Technical Specialties with the American Society of Appraisers and a Member of the Royal Institution of Chartered Surveyors (“MRICS”). With 15 years of experience, Fernando specializes in appraisals of tangible assets in both domestic and international appraisal projects. These appraisals are performed for a variety of purposes, including asset based financing, purchase price allocations, insurance purposes, personal property tax, gift, estate, International Financial Reporting Standards (“IFRS”), mergers and acquisitions, feasibility study, and litigation support. Fernando is fluent in Spanish and has performed appraisals for clients throughout the United States and for multinational clients in England, Spain, México, Panamá, Dominican Republic, Chile, El Salvador, Colombia, and Puerto Rico. For more information, please contact Fernando Sosa, ASA, MRICS, Senior Manager in CohnReznick’s Valuation Advisory Services Practice, and machinery and equipment appraiser, at [email protected] or 312-508-5443.

1Machinery and Technical Specialties Committee of the American Society of Appraisers, Valuing Machinery and Equipment: The Fundamentals Appraising Machinery and Technical Assets, 3rd ed. (Washington DC.: American Society of Appraisers, 2011), page 522

2Machinery and Technical Specialties Committee of the American Society of Appraisers, Valuing Machinery and Equipment: The Fundamentals of Appraising Machineryand Technical Assets, 3rd ed. (Washington DC.: American Society of Appraisers, 2011), page 523 3Ibid, 545 54http://data.bls.gov/pdq/SurveyOutputServlet;jsessionid=31E0ABC421E474437BBC05DC3E890879.tc_instance4. Accessed September 20, 2016. 5Machinery and Technical Specialties Committee of the American Society of Appraisers, Estimated Normal Useful Life Study (Herndon, VA: American 7Society of Appraisers, 2010), page 8 of 94 6Corelogic: Marshall Valuation Service, September 2016 (Los Angeles, CA, 2016), Section 97 Page 26

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We have the puzzle put together, but what does it tell us adjustment based on the supply/demand pressures, so you about today and more importantly tomorrow? should be positioned for a possible higher residual the next If inflation stays lower than your period of reference, you time given the typical cycles and historic inflation. Aircraft Residual can expect lower resale value percentages. Adjusting for A recession could slow the recovery of values and if it hap- inflation can help you determine how much of the resale pens during or prior to 2018, will make prices feel downward percentage is due to inflation or outside sources. pressure, however by this time, the 5 year old aircraft will Value Puzzle Looking back at production rates can help you determine already be coming from the lower production rate time period. how much potential over supply is out there versus the cur- What down turn would come from a recession in the next cou- by Mike McCracken rent demand. This means price pressure until the supply side ple of years will be tempered that it isn’t coming after a high is reduced or the demand goes up. Buying in the low produc- demand and supply as it has in previous recessions, but in a tion side is typically more advantageous. When buying in high low supply/low demand cycle which should make the drop in demand understanding the potential price pressures and what our industry less severe. New models that offer improvements the low band of the market can be will help lower the future that the market places value on will also allow for the OEM to shock value. As the industry absorbs the high supply years maintain a better pricing strategy. It should take several years up to the fourth quarter of 2008, (with 2009 being the year the for the OEM’s to ramp up production and perhaps save them- OEM’s started getting the pipeline slowed), given the current selves from a drastic over supply situation. demand expect price pressure from below. The new normal is going to be more reflective of a mature A Perspective on the New Normal for the Aircraft Market. All of the OEM’s have made significant production reduc- market that has products that last 25+ years. Demand may tions to hopefully meet the current demand. If nothing not get to another bubble and be steadier which will be good here are three major components to aircraft market to be hired, engine makers have to up production, avionics negative happens, we should see the new demand and sup- for everyone in the long run. More analysts will pay atten- values and to name just a few, several less influential manufacturers have to ramp up. All of these major compo- ply match up more evenly in the next couple of years. This tion to adjusting for inflation in doing residual value analysis Tfactors such as brand reputation, product support, and nents take highly trained workers, materials and many of should allow for stable prices to an uptick in the ability to resulting in a clearer picture of the true depreciation. Business current production. The major three are: Inflation, Supply/ these are aviation specific. Chances are if the aviation market hold margin on new prices. aviation will survive and flourish, as even with the best tech- Demand, List Price/Discount. The three are highly inter- demand is going up the overall world economy is going up It is a good time to be a buyer. Prices may dip a little nology, there isn’t anything like being there in person. • twined and need to be examined together. creating completion for resources between our industry and more in the next year or so, however, not enough to make Lets start with inflation. Recently a very popular price commercial products. a difference if you are buying to own for 5-10 years. Your ABOUT THE AUTHOR index book used a plane that had a value of $3.7M new The end result is large swings in the supply/demand equa- resale value on anything you have to trade is lower than Mike McCracken, owner of Hawkeye in 1978 and now was selling for 12% of new at $450,000. tion, which makes for large swings in pricing. The secondary you predicted, however adjusting for inflation, the current Aircraft Acquisitions, is a 30+ year Doesn’t sound too bad until you factor in the inflation adjust- problem is how the demand cycles match up over time and market whether new or used, has made the same percentage aviation veteran. ment since 1978. After adjusting for inflation the real resale normal replacement aircraft cycles. Typically, new aircraft percentage is 3.3% of new! Using another example, a 2000 are traded either every 5 or 10 years. If a high demand cycle G lV in 2005 sold for 77.5% of new, however adjusting for coincides with a previous 5 or 10 year low supply, then inflation it was really selling for 68.8% of new. used planes will enjoy higher prices. If it happens that the Looking at the history of inflation rates, from 1996 to 2006 low demand cycle is matched with a 5-10 year high supply inflation went up 28.5%, or on average 2.85% per year. 2006 period then there is pressure on the residual values due to to 2016 the rate was 18.7%, or 1.87% per year. And finally over supply of late model aircraft. looking at 2009 to 2016 only 11.5% or 1.43% per year. Over The third major leg of the stool is the OEM’s and their pric- the last 14 years, the first 7 of those the rate of inflation was ing/discounting. There are two elements to the pricing. OEM’s just over twice what it has been in the last 7 years. typically raise prices at a rate close to inflation. However, the Without any supply/demand issues in the equation, a first pricing pressure comes when OEM’s are continuing to person with a frame of reference for resale values based on raise prices faster than the real inflation rate. From the first 1996 to 2006 would see a reduction in value expectations of part of this article on inflation, if the inflation rate slows the 9.8% from 2006 to the first quarter of 2016. This expectation appearance of residual values going down also happens. If is based solely on not considering the inflation adjustment there isn’t significant improvements in the aircraft, this makes when considering residual value percentages. late model used planes appear more appealing. Therefore, when looking back, it is important to calculate The OEM finds themselves with a high list price, the fall- residual value percentages adjusted to inflation. Your expec- ing of residual values due to a slow down in inflation. We tations will be more in line with the real depreciation figures. now add low demand and high supply and the OEM’s have Supply/Demand is basic economics 101. Due to long lead only a couple of choices, sit on white tails or discount to times for ramping up production in good times and slowing keep the white tails off the ramp and as quickly as possible production in lean times this obviously has a high influence start lowering production rates. to pricing. Supply takes long periods of time to turn on or off, Accordingly, residual values are further impacted. The dis- while demand can be a seismic event like 9/11, stock market counting by the OEM directly affects the resale value of the crash, banking crisis or any major world economic event and used plane. The percentage of new just a few years ago when literally the demand can be reduced drastically within days. planes were selling at full list can be easily be lowered 10% On the increased demand side, while it takes longer for or more just because of new aircraft actual sales prices. All the demand side to heat up, it takes years in some cases for of your residual value projections have gone out the window the production side to meet the new demand. Workers have unless you have factored in a bad cycle.

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We have the puzzle put together, but what does it tell us adjustment based on the supply/demand pressures, so you about today and more importantly tomorrow? should be positioned for a possible higher residual the next If inflation stays lower than your period of reference, you time given the typical cycles and historic inflation. Aircraft Residual can expect lower resale value percentages. Adjusting for A recession could slow the recovery of values and if it hap- inflation can help you determine how much of the resale pens during or prior to 2018, will make prices feel downward percentage is due to inflation or outside sources. pressure, however by this time, the 5 year old aircraft will Value Puzzle Looking back at production rates can help you determine already be coming from the lower production rate time period. how much potential over supply is out there versus the cur- What down turn would come from a recession in the next cou- by Mike McCracken rent demand. This means price pressure until the supply side ple of years will be tempered that it isn’t coming after a high is reduced or the demand goes up. Buying in the low produc- demand and supply as it has in previous recessions, but in a tion side is typically more advantageous. When buying in high low supply/low demand cycle which should make the drop in demand understanding the potential price pressures and what our industry less severe. New models that offer improvements the low band of the market can be will help lower the future that the market places value on will also allow for the OEM to shock value. As the industry absorbs the high supply years maintain a better pricing strategy. It should take several years up to the fourth quarter of 2008, (with 2009 being the year the for the OEM’s to ramp up production and perhaps save them- OEM’s started getting the pipeline slowed), given the current selves from a drastic over supply situation. demand expect price pressure from below. The new normal is going to be more reflective of a mature A Perspective on the New Normal for the Aircraft Market. All of the OEM’s have made significant production reduc- market that has products that last 25+ years. Demand may tions to hopefully meet the current demand. If nothing not get to another bubble and be steadier which will be good here are three major components to aircraft market to be hired, engine makers have to up production, avionics negative happens, we should see the new demand and sup- for everyone in the long run. More analysts will pay atten- values and to name just a few, several less influential manufacturers have to ramp up. All of these major compo- ply match up more evenly in the next couple of years. This tion to adjusting for inflation in doing residual value analysis Tfactors such as brand reputation, product support, and nents take highly trained workers, materials and many of should allow for stable prices to an uptick in the ability to resulting in a clearer picture of the true depreciation. Business current production. The major three are: Inflation, Supply/ these are aviation specific. Chances are if the aviation market hold margin on new prices. aviation will survive and flourish, as even with the best tech- Demand, List Price/Discount. The three are highly inter- demand is going up the overall world economy is going up It is a good time to be a buyer. Prices may dip a little nology, there isn’t anything like being there in person. • twined and need to be examined together. creating completion for resources between our industry and more in the next year or so, however, not enough to make Lets start with inflation. Recently a very popular price commercial products. a difference if you are buying to own for 5-10 years. Your ABOUT THE AUTHOR index book used a plane that had a value of $3.7M new The end result is large swings in the supply/demand equa- resale value on anything you have to trade is lower than Mike McCracken, owner of Hawkeye in 1978 and now was selling for 12% of new at $450,000. tion, which makes for large swings in pricing. The secondary you predicted, however adjusting for inflation, the current Aircraft Acquisitions, is a 30+ year Doesn’t sound too bad until you factor in the inflation adjust- problem is how the demand cycles match up over time and market whether new or used, has made the same percentage aviation veteran. ment since 1978. After adjusting for inflation the real resale normal replacement aircraft cycles. Typically, new aircraft percentage is 3.3% of new! Using another example, a 2000 are traded either every 5 or 10 years. If a high demand cycle G lV in 2005 sold for 77.5% of new, however adjusting for coincides with a previous 5 or 10 year low supply, then inflation it was really selling for 68.8% of new. used planes will enjoy higher prices. If it happens that the Looking at the history of inflation rates, from 1996 to 2006 low demand cycle is matched with a 5-10 year high supply inflation went up 28.5%, or on average 2.85% per year. 2006 period then there is pressure on the residual values due to to 2016 the rate was 18.7%, or 1.87% per year. And finally over supply of late model aircraft. looking at 2009 to 2016 only 11.5% or 1.43% per year. Over The third major leg of the stool is the OEM’s and their pric- the last 14 years, the first 7 of those the rate of inflation was ing/discounting. There are two elements to the pricing. OEM’s just over twice what it has been in the last 7 years. typically raise prices at a rate close to inflation. However, the Without any supply/demand issues in the equation, a first pricing pressure comes when OEM’s are continuing to person with a frame of reference for resale values based on raise prices faster than the real inflation rate. From the first About the Author 1996 to 2006 would see a reduction in value expectations of part of this article on inflation, if the inflation rate slows the Mike McCracken is President of Hawkeye Aircraft Acquisitions, a boutique aviation consulting, 9.8% from 2006 to the first quarter of 2016. This expectation appearance of residual values going down also happens. If acquisition firm and valuation firm. He is a 38 year veteran of the industry, is a current ATP pilot with is based solely on not considering the inflation adjustment there isn’t significant improvements in the aircraft, this makes when considering residual value percentages. late model used planes appear more appealing. 3 type ratings, 28 years selling for two major OEM’s and an ASA Senior Aircraft Appraiser. Hawkeye is Therefore, when looking back, it is important to calculate The OEM finds themselves with a high list price, the fall- based out of the Tampa Bay area. He can be reached at [email protected] residual value percentages adjusted to inflation. Your expec- ing of residual values due to a slow down in inflation. We tations will be more in line with the real depreciation figures. now add low demand and high supply and the OEM’s have Supply/Demand is basic economics 101. Due to long lead only a couple of choices, sit on white tails or discount to times for ramping up production in good times and slowing keep the white tails off the ramp and as quickly as possible production in lean times this obviously has a high influence start lowering production rates. to pricing. Supply takes long periods of time to turn on or off, Accordingly, residual values are further impacted. The dis- while demand can be a seismic event like 9/11, stock market counting by the OEM directly affects the resale value of the crash, banking crisis or any major world economic event and used plane. The percentage of new just a few years ago when literally the demand can be reduced drastically within days. planes were selling at full list can be easily be lowered 10% On the increased demand side, while it takes longer for or more just because of new aircraft actual sales prices. All the demand side to heat up, it takes years in some cases for of your residual value projections have gone out the window the production side to meet the new demand. Workers have unless you have factored in a bad cycle. Volume 33, Issue 1, 1st Qtr 2017 68 THE MTS JOURNAL

Valuing Assets in Extractive Industries Alexander Lopatnikov, ASA, RICS

Extractive industries showcase for an appraiser the importance of understanding the market, composition of assets of a mine, or oil and gas deposit, and their economic contribution to value of the project, or company they are part of. A brief introduction to valuation in extractive industries provided in the following sections addresses four major topics illustrated using mining industry as an example. • What is special about extractive activities • Unit of valuation in extractive industries • Challenges in valuing a mineral company • Valuation best practices and international valuation standards for extractive industries The growing interest in valuation of extractive industries assets in recent years coincided with a so called golden age of commodities, largely driven by an unprecedented growth of China’s economy, the world’s largest producer and consumer of metals. For appraisers, assets of extractive industries companies may be challenging to value due to their specific attributes and the fact that analysis of these assets involves use of methods from various valuation disciplines, and requires specific industry expertise. Interestingly, all new topics added to the latest 2011 edition of the authoritative MTS book1, are very relevant for valuation of assets in extractive industries, including valuation of process plants, appraising assets in groups, valuation for financial reporting, cost segregation studies, and international valuations. This breadth of knowledge and competencies required to value tangible assets of companies in extractive industries is reflected “Mineral Assets means all property including in the unit of valuation typically used by the mining industry - mineral but not limited to real property, intellectual property, mining and exploration tenements asset2. held or acquired in connection with the What is special about extractive industries may be seen by simply exploration of, the development of and the looking at their key investment attributes. Mineral properties evidence: production from those tenements together with global dislocation of mining assets and their consumers; typically all plant, equipment and infrastructure owned owned by international investors; they are subject to specific regulation or acquired for the development, extraction as host countries require a fair level of mineral rent; and, what could and processing of minerals in connection with be appreciated by plant and machinery appraisers, they are very those tenements” capital intensive and are subject to market risks, in other words Valmin change in value due to external factors, of which commodity prices are among most significant ones. Another important consideration when analyzing mining industry assets is risk profile of projects in the industry that changes as mining project evolves from a prospect, to an exploration project, to a resource property, to an undeveloped reserves property, to a built and producing mine. During early stages such project is primarily a speculative undertaking with most costs representing intangible or information assets. Whereas at later stages it is primarily an indivisible combination of tangible assets, including plant and machinery, structures, mine development costs and value attributable to mineral reserves. Assigning values to individual items of plant and machinery for a developed and producing mine is essentially an allocation of value of a mine to specific elements, primarily required for purposes of financial reporting, or asset management. It is worth nothing that unlike an industrial manufacturing plant, a mine, or an oil and gas deposit earns income by depleting (or liquidating) their core tangible asset, e.g. its mineral reserves. It is also important to remember that reserves estimates are not

Volume 33, Issue 1, 1st Qtr 2017 69 THE MTS JOURNAL constant, and are changing depending on expected commodity prices. This makes reserves component of the tangible assets value of a mine to be more volatile than value of fixed assets in other asset heavy industries, say utilities. Any valuation due diligence starts with a question of what a mining company consists of? It generally will have all asset classes appraisers typically consider: land, buildings and structures, plant and machinery, communication and office equipment. There may also be some intangible assets, typically related to exploration activities, such as maps, surveys, logs, drawings, samples, cores, packages of data on prospects or projects, and other costs related to unproved properties. At the end of mine’s life its mineral assets turn into liability related to closure and site remediation costs. Financial reporting in extractive activities require both such obligations, called asset retirement obligations, or ARO, and a counterbalancing asset to be recognized and accounted. Many companies report tangible assets of a mine as one mining asset, but most also separately show value of plant and machinery assets, primarily for accounting or asset management purposes. Most plant and machinery assets used by mining companies are purpose built to produce specific commodity in a remote location. This implies that plant and machinery delivered to the site would have no alternative use value (other than some pieces of equipment and vehicles, that could have some secondary market). A debate on whether value of mineral A rare and instructive example of significant goodwill rights is an intangible, or tangible asset has been settled by reported in a mining acquisition. All goodwill was written Financial Accounting Standards Board, or FASB, which instructed off in just two years after the purchase. that for accounting purposes they should be considered tangible Asset 2010 assets3. (acquisition) The asset that is very rarely seen on a mining company’s balance Cash and cash equivalents $742.6 sheet is goodwill. Although there is no explicit prohibition to Accounts receivable and other assets $27.0 reporting goodwill in extractive industries, it is generally believed not to be present at the level of a mine, or be immaterial. The Inventories $115.2 logic may be understood by analogy with real estate properties, PPE (including mineral interests) $1,765.8 which derive value from unique location, and supply and demand Accounts payable and accrued liabilities $(103.4) situation, rather than some going concern element, or unique synergies of several assets that are traditionally captured by Future income and mining tax liabilities $(311.5) goodwill. In those very rare instances were companies reported Other long-term liabilities $(34.3) large goodwill as a result of acquisitions these were typically followed by write-offs of goodwill in subsequent reporting Non-controlling interest $(3.9) periods. One will often find it explained by external factors, i.e. Goodwill $5,161.1 deterioration of market conditions, price corrections and costs Total purchase price $ 7,358.6 inflation. However, in no small part it is a result of incorrect valuations and exuberant optimism of buyers often resulting in Source: Kinross Gold Annual Report 2011 overpayments. Kinross Gold acquisition of Red Back in 2010

Volume 33, Issue 1, 1st Qtr 2017 70 THE MTS JOURNAL which resulted in recognition and subsequent write-off of some $5bn of goodwill well explains reluctance of the extractive industries to consider goodwill a relevant element of value of a mineral asset. That said, the fact that extractive industries are dominated by complex and specialized assets, as well as their endemic cyclicality means that extensive risk-return analysis is mandatory in order to understand value of their assets. In appraisers’ parlance this means these assets are prone to functional and economic obsolescence. Where and when this is the case, it brings an interesting and sometimes confusing question - what class of assets the related economic obsolescence loss, if present, should be applied? Or more specifically, should value of the mineral reserves be adjusted before any loss is allocated to plant and machinery assets? Since extractive industries are special and issues confronting appraisers are many, it may be expected that there have to be special standards to guide valuation in extractive industries? Unfortunately, there are none provided by either ASA, or IVSC (International Valuation Standards Council). Some may remember that from 2005 until 2011 IVSs included, what we believe was a quite meaningful Guidance Note #14 “Valuation of Properties in the Extractive industries”. However, it was later removed from IVS (International Valuation Standards) to be improved and updated by a group of international experts4, including the author of this publication. Sadly, subsequent changes in IVS and discontinuation of extractive industries project by International Accounting Standards Boards or IASB, resulted in a situation where instead of possibly an imperfect guidance, appraisers now have no guidance at all developed by the international valuation industry. Absent international valuation standards produced by IVSC most practitioners use or refer to the mining standards developed in Australia, Canada and South Africa, known as Valmin5, Cimval6 and Samval7, respectively. A cautionary note for an appraiser of plant and machinery – these industry specific standards have been largely developed by geologists, so they may not be fully consistent with the International Valuation Standards, USPAP, or financial reporting standards, such as US GAAP, or IFRS (International Financial Reporting Standards). The most controversial to many valuers is, so called, technical value - an unobservable and subjective indication that these Components of the Cost Overrun of a Mining Project standards consider as a major basis of value. Evolution of cost estimates for Pascua-Lama Project At the same time, it goes without saying that every mining 2001 - $950 million (initial estimate) valuation is reliant on resources, or reserves statements 2009 - $3bn (go ahead decision was made) prepared by a competent person, a geologist, in accordance 2013 - $8bn-$8.5bn (including 25% contingency) with some national or internationally recognized code, such The key factors contributing to the capital cost increase: as JORC8, NI43-1019, or Samrec10. Appraisers undertaking valuation of assets in extractive industries need to understand the requirements of the above reporting codes, the definitions used, including the difference between exploration results, resources and reserves. With their remote location and lack of alternative use most and often all of plant and machinery deployed at a mine are typically considered specialized assets. In such situations the appraiser often relies on historical costs and data from feasibility studies, or project design documentation. These costs however need to be reviewed critically and require additional due diligence. A common belief of the mining industry (as well as many other asset heavy industries) that feasibility studies are a good proxy of project replacement costs is unfortunately not supported by evidence with many Source: Barrick-2012-Second-Quarter-Report mining projects facing significant time and budget overruns.

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Location and access differences, geological and mining peculiarities, as well as other salient attributes of mining projects make their comparison extremely difficult, which has long been recognized in the industry often claiming that no two mines are similar. When reviewing replacement costs of a mining project an appraiser should also mind significant difference in parameters of specific equipment, its manufacturer and origin, as well as currency the costs are nominated in. It would not be unusual to see a large difference in costs for what may seem very similar mining equipment provided by manufacturers from different countries. There is also a significant impact on the project’s costs of the local currency exchange rate to the US dollar, which in major mining countries tends to correlate with the price of commodity produced in and exported from that country. The latter includes currencies of not only emerging economies, but currencies of developed countries with a significant mining sector, such as Australia, or Canada. In most cases a mine could be considered as a separate business, or cash generating unit (or CGU – terminology widely used in IFRS), it would not be unusual to see several mines delivering run of mine to a common beneficiation plant, or a mill owned and operated by an unrelated third party. When the industry enters a downturn phase of the economic cycle, estimation and allocation of economic obsolescence to mine and mill may become tricky and will require professional judgement and industry expertise. Conclusion This very brief introduction was intended to give a feel of complexity and challenges related to valuation of assets in extractive industries, as well as the need to promote best practices and develop valuation guidance for the industry. For further information, interested appraisers are advised to refer to various publications which discuss numerous specific questions related to valuation of mining and oil and gas companies. About the Author Alexander Lopatnikov ASA, RICS is a managing director of American Appraisal in Russia and the CIS focused at providing valuation opinion and advisory services to publicly listed and private mining companies. Mr. Lopatnikov is a frequent speaker at international conferences. His recent speeches and publications addressed emerging issues in mineral economics, mining finance, international valuation and reporting standards for extractive activities. He is a member of the group of international experts developing international valuation standard for extractive industries and the groups that developed various guidance notes for International Valuation Standards Committee (IVSC) and RICS. He is also a member of ASA, RICS, and a deputy chairman of the Mineral Economics chapter of the Russian Natural Resources Experts Association (OERN).

1American Society of Appraisers (2011). Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets. 2Valmin is a set of valuation standards for mineral and petroleum assets developed in Australia and used in many other countries. 3http://www.fasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175820903901&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs 4http://www.valmin.org/code2015.asp 5http://web.cim.org/standards/documents/Block487_Doc69.pdf 6http://www.samcode.co.za/codes/category/8-reporting-codes 7http://www.jorc.org/docs/JORC_code_2012.pdf 8http://web.cim.org/standards/MenuPage.cfm?sections=177,181&menu=229 9http://www.samcode.co.za/codes?download=120:10082016-samrec

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American Society of Appraisers - Update ASA Reaccreditation Program Change Announcement

Dear Members, Reaccreditation processes are moving ONLINE. This new feature will be available in January 2017! What Does this Mean for You? All designated members (AM, ASA, FASA) due in/after January 2017 will now be completing their reaccreditation application processes online. There is no longer a need to submit your CE/OP documentation to ASA’s International Headquarters. Instead, you will now retain all information for your own personal records and use it as a reference when completing your online reaccreditation application. How Will You Know How to Reaccredit Online? There will be a FREE instructional video available on ASA’s website for you to view which will guide you through the entire process. We will also be sending you updates and reminders over the next few months to help you prepare for the transition. What do You Need to do to Prepare for this New Feature? Not much! You will use the same login information you currently use to login to ASA’s website to access the new online reaccreditation feature and you will follow the steps from there. As a reminder, for everyone who is due to reaccredit in/after January 2017, you no longer need to submit CE/OP documentation to ASA’s International Headquarters. Stay tuned for updates as we approach the launch date! Questions about this program change may be directed to [email protected] or (800) 272-8258.

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Upon Receipt of the Inspection Report Amanda Applegate

Originally published in Business Air Magazine, October 2016, Volume 26, No. 10. In most cases, when purchasing a pre-owned aircraft, the buyer pays for a pre-purchase inspection in order to evaluate the condition of the aircraft. A pre-purchase inspection normally consists of a complete review of the aircraft’s records and a survey of the aircraft’s current condition. Depending on the type of aircraft and, in some cases, where the aircraft has been located or stored, additional inspection items may be added to the standard survey. Upon completion of the inspection, the inspection facility issues an inspection report. This report includes a list of discrepancies or “squawks” found during the inspection in both the aircraft and the records. The inspection report also includes an estimate as to the cost of correcting each of the discrepancies found. What Does a Buyer do Upon Receipt of the Inspection Report? It is my firm conviction that the foundation for successful use of an inspection report starts before the aircraft even arrives at the inspection facility. Laying that foundation includes all of the following: 1. Clear language in the purchase agreement as to what a discrepancy is, who pays to repair the discrepancy, and, if there is a dispute between the parties as to whether an item really is a discrepancy or who pays for the discrepancies, a clear provision for how such disputes are resolved. 2. With regard to selection of the inspection facility, first the facility must be familiar with the type of aircraft being purchased – but beyond that, it must be a neutral party. If the inspection facility chosen is also the same servicecenter that has been maintaining the aircraft, there is an inherent conflict and a different facility ought to be selected. 3. Buyer should hire a full-time technical representative to oversee the entire inspection process. Spending the money to have a technical representative present for all, or the majority of the inspection, is money well spent. If the proper foundation has been established, then when the inspection report is received, the next steps should be clear. The discrepancies listed on the inspection report may include items that must be remedied by the seller prior to closing at seller’s expense. Items that don’t meet the definition of a discrepancy under the carefully crafted purchase agreement are, therefore, the buyer’s responsibility. Assuming the purchase agreement is clear and a technical representative who understands how to read the discrepancy report is available, sorting the discrepancy list would seem easy. However, my experience is that many items on the report are not necessarily black-or-white. More often than not, there is some amount of negotiation that occurs between the seller and buyer regarding responsibility for squawks. The aircraft consultants, brokers, technical representatives and attorneys often play an important role in these negotiations. On occasion, the two parties can’t agree on who must pay for a discrepancy. In such a situation, having a clear dispute resolution mechanism included in the purchase agreement is critical and often allows a neutral party to make the appropriate determination, enabling the deal to move forward. Once the responsible party has been identified for each discrepancy, the parties will sign a technical acceptance form and the necessary repairs will be completed. There is often ambiguity on the responsibility for certain discrepancies – regardless of how carefully the purchase agreement is drafted. Having the right team of negotiators, the right language in the agreement and an appropriate dispute resolution clause can sometimes be the difference between keeping a deal going and having a deal fall apart. Laying the foundation before the aircraft arrives will allow for more success and, as a result, happier buyers.

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About the Author Amanda Applegate As a partner at Aerlex Law Group, Amanda Applegate brings her outstanding legal expertise as well as impressive negotiating skills and business savvy to the service of the firm’s clients. Ms. Applegate joined the firm as Senior Transactional Attorney in 2011 and was named partner in 2016. She specializes in whole aircraft transactions and has successfully closed hundreds of sales and purchases for aircraft around the world. Additionally, she has a unique understanding of fractional ownership due to her previous experience in that industry. For over two years, she represented 25 Avantair fractional owner groups following the grounding of the Avantair fleet and subsequent bankruptcy proceedings, managing the disposition and assessment of all planes and parts, and devising successful sales opportunities for aircraft and associated equipment, including “as-is” live auctions and recertified brokered sales. Ms. Applegate graduated from Oklahoma City University School of Law in 1998. Prior to joining Aerlex, she served as Associate General Counsel and Vice President of Net Jets Services, Inc., where she spent twelve very productive years with the company that pioneered fractional jet ownership. As the company’s Associate General Counsel, Ms. Applegate directed a diverse range of business, including multimillion-dollar contract negotiations, contract enforcement, and fractional ownership and leasing, and daily business matters. She also worked with Net Jets’ sister company, Executive Jet Management, and gained insight and experience into the field of whole aircraft ownership, management and operations. Ms. Applegate speaks frequently on business aviation topics to organizations including the National Business Aviation Association. Since 2012, she has been a featured columnist for Business Air Magazine, writing monthly on key topics regarding the acquisition, ownership and operation of business aircraft. Please contact Amanda Applegate at 310-392-5200 or [email protected].

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Demystifying Engine Terms James Becker, ASA

Navigating an aircraft transaction can be challenging, but valuing an aircraft can be even more difficult. A simple aircraft price guide lookup can give you a broad range of potential values for your aircraft, but everything from the number of hours to the condition of the interior affect the value. However, the one area that can have a substantial impact on your aircraft value is the engines. Not only can engines greatly influence the value of the aircraft, but the terminology can be very confusing. Terms like hot section, TBO, rotables and engine programs can not only be difficult to understand, but each one has a bearing on how much you can realistically expect to receive for your aircraft. To give you a better understanding, an explanation of some of the most common terms you are likely to encounter regarding aircraft engines follows. TBO - Time Between Overhauls This refers to the time period specified by the manufacturer of an aircraft engine as the maximum length of time an engine should be operated between overhauls. However, the overhaul of an engine once it reaches its TBO hours is not mandatory, except for certain commercial operators that have the requirement written into their operations manual. It is important to be familiar with a particular engine’s TBO. Engine overhaul costs for turbine engines can range anywhere from $250,000 to well over $1,000,000 per engine. Even though the overhaul requirement may not be mandatory, the aircraft market places a significant deduction in value that equals or exceeds the cost for overhauling the engines. It is critically important to know what the TBO is for a particular engine. The TBO may vary by thousands of hours between the different engine manufacturers. On some aircraft, there is the potential to have a different TBO on two otherwise similar aircraft that use the same engine model. There are also some manufacturers that have a calendar life on the engine, as well as a usage limit. Engine Overhaul As defined by the Federal Aviation Administration (FAA), a major overhaul consists of the complete disassembly of an engine, inspection, repairs as necessary, reassembly, testing, and approval for return to service within the fits and limits specified by the manufacturer's overhaul data. This could refer to new fits or limits, or serviceable limits. When reviewing the time since overhaul, it is also vital to ask questions about the overhaul facility. Not all engine overhaul facilities are viewed equally in the used aircraft market. Although all overhaul facilities must be FAA approved, there are only a select few that are factory owned or factory authorized engine overhaul facilities. The factory owned or factory authorized overhaul facilities will only use parts that are approved by and manufactured for the engine maker. This assures that you are getting the highest quality parts made by vendors who meet the engine manufacturer’s criteria and specifications. The factory owned or authorized overhaul facilities also have a greater support network with more support personnel and greater resources than an independent FAA approved repair facility would have. Therefore, there are also more options when it comes to warranty service with a factory owned or authorized overhaul facility. Although an engine overhaul performed by a facility that is only FAA approved is perfectly legal, the used aircraft market will usually give that particular aircraft a reduction in value for engines having been overhauled by a non-factory owned or authorized facility. Landings/Cycles According to Beechcraft, a flight cycle is defined as an engine start-up with increase to full or partial power (as required during normal flight), one landing gear retraction and extension, and a complete shutdown. It is important to know that landings/cycles

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and engine hours are usually different. On one hand, an engine may have plenty of hours remaining before an overhaul is necessary, but before it reaches that point it may require internal component replacement due to the engine cycle count. Rotables This refers to parts in the engine that have specific serial numbers tracked by the operator. This is done because these parts have a finite life and must be replaced based on usage or age limits. It is essential to be aware of this because you may have an engine that has been recently overhauled, but has major components that need to be replaced before the next overhaul. Hot Section A hot section refers to the portion of a gas turbine engine that operates at a high temperature. The hot section includes the combustion, turbine and exhaust sections. Mid-Life Inspection: This is an inspection for which the scope and frequency are determined by the engine manufacturer. This is usually an inspection of the engine hot section. Such an inspection may also be referred to as a Major Periodical Inspection (MPI), or a hot section inspection (HSI). Engine Programs Most aircraft engine manufacturers offer some type of an engine coverage program. This is basically an insurance policy/ savings account for your engines. This works by having the owner pay a predetermined amount of money to the coverage provider for every hour that the engines are used. This benefits the operator in a couple of ways. First, it is an insurance policy against a catastrophic failure of an engine. If something unexpected, such as a turbine wheel crack were to happen, the service provider would pay for the expense of repairing the engine and returning it to service. The second benefit is that the operator doesn’t have to produce a large sum of money when it comes time for the engine overhauls or mid-life inspections. Since they have been paying the coverage provider for every hour they have operated the engines, these costs are amortized over the life of the engines. Some of the better known engine manufacturer coverage programs are: Corporate Care by Rolls Royce, ESP by Pratt & Whitney, TAP by Williams International and MSP by Honeywell. Plans that are not sponsored by engine manufacturers include Jet Support Services, Inc. (JSSI) and Power Advantage from Cessna Aircraft. When assessing an aircraft’s value it is important to note whether the engines are enrolled in a coverage program, and if so, what that program covers. Most engine coverage programs do not cover engine corrosion, or external foreign object damage (FOD). Some programs cover only the actual parts used to overhaul an engine, leaving the operator to pay the remaining portion of the bill, which usually averages 20% - 30% of the total cost. Additionally, just because an aircraft is enrolled in a program, does not mean that it is 100% covered at the time of overhaul. Several coverage programs allow the operator to enroll the engine at anytime, regardless of the time since last overhaul. Often, it is not required for the operator to go back and pay for the hours used before the enrollment. This will give the operator the benefit of the insurance program with a pro-rated amount of coverage at overhaul, depending on when in the cycle the engines were enrolled. This is essential, because an aircraft may be advertised with its engines on a coverage program, but the current operator will have to make a significant contribution at overhaul time to cover the deficit. The only way to know for sure what is covered is to obtain a copy of the service contract from the service provider, and to make sure the payments are not in arrears. It should also be noted that if the operator hasn’t been operating the aircraft under the guidelines of the engine manufacturer, this could void any insurance coverage program. For example, during the economic turmoil of the past several years, hundreds of aircraft have been repossessed by their lien holders. Many of these aircraft were more or less abandoned by their operators. As a result, these aircraft were left unattended for months or even years in some cases. All turbine engine manufacturers have requirements for engine low utilization and storage. Failure to follow these guidelines exactly could very likely lead to engine corrosion and would most certainly void the coverage program. So it is critically important to find out how the aircraft has been operated prior to making a purchase.

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Putting it All Together Whether you are appraising or purchasing a used aircraft, the points of concern are the items that affect the price. Special attention must be paid to the engines, as this is where a significant amount of the aircraft’s value lies. A full understanding of the aircraft’s engines is crucial to determining its overall value. Although we only touched on engines in this article, there are a great deal of other items that determine the aircraft value that and each one carries its own terminology. Being an expert in determining how they influence the price takes many years of experience but will ultimately get you the most out of your aircraft. About the Author James Becker, ASA is a graduate of the Aviation Institute at the University of Nebraska at Omaha, and also holds a FAA Airframe & Power Plant Mechanic license. With over 20 years in the aviation industry, 17 of those years have been with Elliott Aviation in the capacity of valuing aircraft. In 2011, he completed and obtained his certification as an Accredited Senior Appraiser with the American Society of Appraisers (ASA). With experience in aircraft market analysis, he has an extensive knowledge of the aircraft market and has tracked and analyzed thousands of aircraft transactions. Under his Aircraft Specific designation with the ASA, he specializes in developing current and projected market values for turbine-powered aircraft.

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Governor's Bulletin Mike Pratt, ASA

Happy Holidays from Region 2 Governor Mike Pratt, ASA I wish you peace, prosperity, health and great happiness this joyous holiday season and during the year ahead. Online On-Demand POV Courses http://www.appraisers.org/Education/national-asa-courses/eLearning/ondemand-class-schedule Principles of Valuation (POV) courses Business Valuation, Gems & Jewelry and Personal Property Courses BV 201-GJ/PP 201 This means candidates and interested parties may learning at home or in their office, and start and stop the course instruction anytime over a 90-day period. The same materials and pre-eminent instructors will be offered. Pre-recorded lecture modules and downloadable course materials result in students earning a certificate of completion after 27 hours of instruction and passing a 3-hour proctored exam. To learn more about online On Demand POV courses, see ASA’s eLearning National ASA Courses at appraisers.org, call (877) 252-8258, or email Todd Paradis at [email protected] More Education Opportunities National Education Schedule http://www.appraisers.org/Education/national-asa-courses/national-class-schedule Know Your ASA Representatives by Regions and Chapters http://www.appraisers.org/About/regions-and-chapters ASA International Conference Schedule (Plan To Attend) 2017 International Appraisers Conference Houston, TX October 7-10, 2017 2018 International Appraisers Conference Anaheim, CA October 7-10, 2018 2019 International Appraisers Conference New York, NY August 25-28, 2019 2020 International Appraisers Conference Chicago, IL October 11-14, 2020

Governor's Bulletin Region 2 Governor - Mike Pratt, ASA

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Scope of Work Within Appraisal Review Joel D. Gonia, ASA

The Scope of Work allows us to fine tune each review to specific criteria based on the intended use. The burden for determining the Scope of Work is on the appraiser ... and often we forget this. Also, the Scope of Work must be disclosed in the report – The appraiser must disclose what he or she did not do as well as what he or she did do. This article will focus on the Scope of Work disclosure for use within the Review Report. The review process allows for broad flexibility in how the review is performed. USPAP provides minimum requirements with limited explanation and discussion. Review Appraisers are encouraged to supplement / expand this process based on their unique application, knowledge, and expertise. We are attempting to insure, as part of the overall review process, that the level of detail within the original report is sufficient for the intended user to understand the methodologies employed to reach the stated value conclusions. The foundation for our appraisal review, including the development and reporting requirements, are contained within USPAP. I will address the key Standards that deal specifically with Scope of Work issues and have included comments regarding each. Footnotes are provided so you can quickly review USPAP. Standard 3 / 3-3(iii) / 3-5(g) (Disclosure) In developing an appraisal review assignment, an appraiser acting as a reviewer must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete research and analyses to produce a credible appraisal review.1 Consistent with the reviewer’s scope of work, the reviewer is required to develop an opinion as to the completeness, accuracy, adequacy, relevance, and reasonableness of the analysis in the work under review given law, regulations, or intended user requirements applicable to the work under review.2 Because intended user’s reliance on an appraisal review may be affected by the scope of work, the appraisal review report must enable them to be properly informed and not misled. Sufficient information includes disclosure of research and analyses performed and may also include disclosure of research and analyses not performed.3 It is our responsibility as the review appraiser to identify the appropriate scope of work and disclose within the report. Is it an administrative review for internal procedures? Is it to be used externally within financial reporting per SEC requirements? Who are the intended users? Is the reviewer to include an opinion of value? These are all scope of work elements to be disclosed within the review report. Otherwise, a reader may be misled and not fully understand the intended use. I recommend locating the scope of work discussion toward the front of the report, either immediately after the Letter of Transmittal or Executive Summary or after the Table of Contents. It is equally important to state what we did not do, or have not been requested, as what we did. These disclosures help to eliminate questions that may arise regarding the extent of the review and services provided. Research and / or analyses may be further limited or restricted by use of an Extraordinary Assumption or Hypothetical Condition. The scope of work should provide reference to the validity of these assumptions. Standard 3-1(a) (Competency) The reviewer must have the knowledge and experience needed to identify and perform the scope of work necessary to produce credible assignment results. Aspects of competency for an appraisal review, depending on the review assignment’s scope of work, may include, without limitation, familiarity with the specific type of property or asset, market, geographic area, analytic method, and applicable laws regulations and guidelines.4 The review appraiser must be competent to adequately perform the assignment based on conditions set forth within the scope of work. The appraisal review report includes a quality of work statement regarding whether the content, analyses, and

Volume 33, Issue 1, 1st Qtr 2017 80 THE MTS JOURNAL conclusions stated in the report under review are (or are not) in compliance with applicable standards and requirements, and if the value conclusions are accepted or rejected. If the scope of work includes a separate opinion of value, then obviously, the review appraiser must have the necessary knowledge and experience to complete the appraisal, even if on a limited or restricted basis. If it does not, he or she should be familiar with the methodologies typically used to appraise the subject. For this reason, very few review appraisers are competent to appraise multiple types of assets. An appraiser who is experienced in commercial real estate typically isn’t familiar with the unique methodologies used to appraise metalworking machine tools. Nor is the business appraiser familiar with the jewelry market, and so on. It is not enough to understand that multiple approaches to value are used, you must understand how to correctly employ each to the market for subject assets. Additionally, very few appraisers have a good understanding of USPAP beyond their primary appraisal practice. The American Society of Appraisers encourages its membership to only provide appraisal services within their personal expertise. And with the threat of lawsuit, it is good common sense. Standard 3-5(i) (Development of an Opinion of Value) When the scope of work includes the reviewer’s development of an opinion of value, review opinion, or appraisal consulting conclusion related to the work under review, the reviewer must: • State which information, analyses, opinions, and conclusions in the work under review that the reviewer has accepted as credible and used in developing the reviewer’s opinion and conclusions; • At a minimum, summarize any additional information relied on and the reasoning for the reviewer’s opinion of value, review opinion, or appraisal consulting conclusion related to the work under review; and • Clearly and conspicuously state all extraordinary assumptions and hypothetical conditions connected with the reviewer’s opinion of value, review opinion, or appraisal consulting conclusion related to the work under review and state that their use might have affected the assignment results.5 When this service is requested, make sure to identify it within the Scope of Work section of your report as a unique service. Further, it should be referenced prominently within the Letter of Transmittal or Executive Summary. This is a separate service apart from providing a quality of work statement. If including both services, review and opinion of value, within one review report, is important that you identify the two services within separate sections. Each service must be fully discussed within the report and comply with all applicable USPAP Standards: • Real property – Standards Rule 2-2(a) • Personal Property – Standards Rule 8-2(a) • Review – Standards Rule 3-5 • Mass Appraisal – Standards Rule 6-8 • Business Appraisal – Standards Rule 10-2(a) Personally, including a separate opinion of value within the overall review report can become problematic and confusing to the reader, and I typically submit two separate reports: One for the review and one for the appraisal. Additionally, any limitations, restrictions or assumptions should be disclosed within the scope of work. It is critical to state what you did and did not do. As an example, if the original bundle of assets under review includes multiple assets, you may be requested to only appraise a sampling of assets, and report your conclusion as compared to the original appraisal. Disclosure of the extent of research and analyses performed to develop your conclusion of value is important as well, particularly if you use different data than the original appraisal. Scope Of Work Rule6 I encourage you to read the entire USPAP Scope of Work Rule, accompanying Advisory Opinions and discussion regarding appraisal review and scope of work. This knowledge will assist in preparing review reports that are understood and not misleading, including research and analyses used to develop your quality of work statement and value conclusion.

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• Scope of Work Rule on pages 14 – 15 • Advisory Opinion 28, Scope of Work Decision, Performance and Disclosure, page 170 – 173 Advisory Opinion 29, An Acceptable Scope of Work, page 174 – 176 • FAQ – Appraisal Development – Scope of Work Issues, page 279 – 306 About the Author Joel D. Gonia, ASA is one of the few appraisers to spend his entire career within the valuation industry – 30 years and counting! His expertise within the Machinery & Equipment Appraisal industry began with a contract with the U.S. Small Business Administration providing equipment appraisals to update their portfolio throughout the Southeastern US – Over 600 loans on all types of assets!! He has considerable knowledge regarding numerous types of equipment and has established a solid reputation for providing straight-forward “real world” values. Mr. Gonia received his initial professional credentials from the American Society of Appraisers in 1989, as an Accredited Senior Appraiser (ASA) within the discipline of Machinery / Technical Specialties, with emphasis in Industrial and Commercial Machinery & Equipment. He received the accreditation for Appraisal Review & Management in 2016. As the Senior Review Appraiser at KATS M & E, LLC, Mr. Gonia is responsible for all work performed by the firm, including value accuracy and consistency, USPAP compliance, internal policies and procedures, and continuing education. Clientele consist primarily of professional service providers for middle market firms, providing valuation and consulting services for financial reporting, commercial lending, tax and litigation purposes. Joel D. Gonia, ASA - ARM & MTS / M & E Senior Review Appraiser KATS Machinery & Equipment Appraisals, LLC www.katsme.com www.facebook.com/katsmellc www.linkedin.com/in/joelgonia 502 235-0727 cell 855 466-4200 toll free

1The Appraisal Foundation. “Uniform Standards of Professional Appraisal Practice 2016-2017 Edition.” (Jan 2016): Standard 3, page 29. Print 2Ibid. Std 3-3(iii), page 32 3Ibid. Std 3-5(g), page 34 4Ibid. Std 3-1(a), page 29 5Ibid. Std 3-5(i), page 34 6Ibid. Scope of Work Rule, page 14 – 15; Advisory Opinion 28, Scope of Work Decision, Performance and Disclosure, page 170 – 173: Advisory Opinion 29, An Acceptable Scope of Work, page 174 – 176; FAQ – Appraisal Development – Scope of Work Issues, page 279 – 306.

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ASA MTS Journal Advertising Exclusive Access to Leading Valuation Professionals

Promote your services through the leading voice for machinery & equipment valuers Reach key decision makers throughout the world and specialty A variety of advertising opportunities to fit your unique needs ASA’s MTS Journal is the leading voice for machinery & equipment valuers. Published since 1984, the quarterly publication provides exclusive access to credentialed experts. Its targeted readers are comprised in all major industrial markets. Known and respected for its comprehensive technical articles and expert columnists, as well as its extensive industry news coverage. • Display Ads, Business Card Ads and Classified Ads • Prices range from $10-$200; Frequency Discounts Available • Ad Specifications, Submission Guidelines and Deadlines Available Online View 2016-17 Media Kit on page 38 of this issue To place your ad for more information visit www.appraisers.org/mtsjournal or call (800) 272-8258.

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Archived Articles Available for Your Library

Missing recent MTS Journal articles? Need ideas or direction? Archived articles are available for your library. Below is an index for the last several years of articles. See an article or issue that interests you? Just let me know what you need and I will get back to you with pricing. Brad Hartsburg, ASA, CPPA, CSA [email protected]

THE MTS Journal # VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW 24 20 1 2003 04 Edward D. Biggs Railroads: It’s Not Just Nostalgia P. 4-6 A Resurgent Interest In Passenger Trains To Relieve Highway Congestion Has Revitalized The Segment Of The Industry. Kenneth Howard, ASA Relationship Between Equipment P. 7-8 Funding Institution’s Return On Financing & Appraising:” Intricacies Investment Is Highly Dependent Upon Of Residual Setting” The Market Information Provided By An Appraiser. Leslie H. Miles, Jr., Depreciated Installation P. 9-11 Discussion Of The Argument Of ASA Depreciating Installation. Leslie H. Miles, Jr., A Review Of Functional P. 12-15 Open Concerns As To How You ASA Obsolescence Convert Functional Depreciation That Can Be Defended And Explained. Michael J. Remsha, Intangibles Assets: What Makes A P. 16-23 When Valuing A Business, Just ASA, PE, CMI Business A Going Concern Adding All The Tangible And Intangible Assets Together Does Not Necessarily Equal The Value Of The Business Enterprise. John S. Ferguson, The Use Of Scaling Factors For P. 29-33 Discusses Iowa-Type And Weibull ASA, PE Measuring Obsolescence In Distribution Survivor Curves. Industrial Property-A Rebuttal Frank Stern Valuing Generation Assets In P. 34-40 Presents A Warning To Appraisers Today’s Distressed Markets And The Users Of Appraisals On The Misuse Of Scale Factors And The Six-Tenths Rule Gerald L. Huether, ASA What’s A Machinery & Technical P. 41-52 Attention To USPAP Rules Regarding Specialties Appraiser To Do? A Definition Of Value And How To Apply Highest And Best Use. 25 20 2 2003-04 Robert B. Podwalny, Typical Problems With Appraisal P. 6-9 Explanation Of Report Writing As ASA Reports Related To Standard 8 Of Uspap. J. Michael Clarkson, For What It’s Worth-Dynamic P. 10-13 Dynamic Obsolescence Is Particular ASA Obsolescence To Certain Industries And Predictable. Jack J. Landesberg Training The MTS Appraiser P. 14-17 Discusses Short Falls Of Not Enough Appraisal Training.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Dr. Charles Gililand The Business Enterprise Valuation P. 18-22 Determining A Firm’s Value By Controversy: Intangible Value In Capitalizing The Entire Income Going Concern Generated. H. Denis Neumann, The Used Car Business (And P. 23-29 In Pursuit Of A Dealer’s License ASA Values) Discovered The Car Business Is Highly Regulated. Steven C. Tatro, ASA Tangible Personal Property Tax P. 30-33 The Value Adjustment Board Is Appeals: A Special Master’s Enjoined To Protect The Public Trust Perspective By Providing Fair And Impartial Hearings. Raymond Springer Depreciation Of Installation Costs P. 34-36 Argues The Methodology Of Depreciating Installation Costs In The Sales Comparison Approach. 26 20 3 2003-04 Harry Richardson, ASA A Short History Of Cat Type Tooling P. 5-8 Development Of HSK Tooling May And J. Barry Savage, Mark The Beginning Of The End For ASA CAT Type Tooling.

R. Lee Robinette, ASA Inventory Valuation P. 13-17 Discussion The Impact Of “Level Of Trade” In The Inventory Valuation Process. J. Michael Clarkson, For What It’s Worth-Spacecraft P. 18-20 The Appraisal Of The Soviet ASA Appraisal Spacecraft Proved A Challenging But Interesting Assignment. William S. Ingles An Analysis Of Flaws In The Direct P. 21-29 Discussion Of Issues Surrounding Capitalization Model Applied To The Application Of The Direct Merchant Coal-Fired Electric Capitalization Model Or Variations Of The Gordon Growth Model. Generating Plants Leslie H. Miles, Jr., Value Of Ad Valorem Tax P. 30-37 Ad Valorem Tax Value Depends Upon ASA The Definition Within The Tax Code Or Prevailing Case Law. 27 20 4 2003-04 Robert F. Reilly, ASA Illustrative Personal Property P. 5-22 Complete Overview Of What Should Appraisal Report Outline Be Included In An Appraisal Report That Will Be In Compliance With USPAP.

Michael J. Remsha, Valuation Of A Nuclear Power P. 24-37 Overview Of Nuclear Power Plant ASA, PE, CMI Generating Facility And Government Policy Dictating Better Understanding By The Appraiser Using The Market Approach. 28 21 1 2004-05 Steven C. Tatro, ASA Florida Department Of Revenue P. 5 December 2004, Florida Department Holds Hearing On Proposed Of Revenue Conducted A Public Rule Modifications To Depreciation Table Development Workshop Regarding Potential Modifications To Their Depreciation Tables. Douglas R. Krieser, Identifying And Measuring P. 6-15 Overseas Expansion By Corporations ASA, Marcus A. Economic Obsolescence With Are Encountering Issues Associated EWALD, CFA Underperforming Global Assets With Both Financial Reporting And Related Tax Matters.

International MTS Asa Mts Candidate-Report Review P. 16-21 Checklist For Submitting MTS Committee Checklist Appraisal Reports For Accreditation.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Edward D. Biggs III, Appraising Railcar Movers P. 25-26 Sources For Appraising Railcar ASA Movers. Leslie H. Miles, Jr., Highest And Best Use For Personal P. 27-30 Consideration Of USPAP Standard 7 FASA Property And 8 Related To Highest And Best Use. Merritt Agabian, FASA True Value P. 31-32 Discussion Of Continued Use Of Items In Place And In Use. 29 21 2 2005 Franklin D. Reid, ASA Appraisal Considerations In Third P. 5-8 Issues To Understand When Applying World Countries USPAP In Developing Nations. Robert Neumuller Measuring Economic Obsolescence P. 9-22 Article Describes How Economic In Oil Refineries Obsolescence Fits Into Value Estimates Using The Cost Approach. Alan C. Iannacito, ASA Valuations Of Patterns P. 23-28 Patterns Have Value Based On The “Level Of Trade”. 30 21 3 2005 Tom Sexton, ASA Rail Equipment P. 4-16 Rail Industry Is Dealing With Changes In A Recovering Economy. Douglas R. Krieser, The Changing World Of Insurance P. 17-24 Performing An Insurance Appraisal ASA Valuation Is Becoming More Difficult. The Appraiser Needs To Consider A Variety Of Tools To Arrive At Their Conclusion. V. Neil Thompson, ASA Hurricane Runs The Table P. 25-26 Overview Of Hurricane Katrina To The Gulf Coast Casino Industry. Leslie H. Miles, Jr. True Value Rebuttal P. 27-32 Rebuttal To Fair Value Issues In Ad FASA Valorem Cases. Mike Clark, L&M Market Conditions P. 33 Overview Of Market Conditions As Of Publications July 2005. Edward D. Biggs, III, Trusted Counselor P. 34 Mentoring Is A Win-Win Endeavor ASA For The Society. 31 21/22 4&1 2005-06 Lee Robinette, ASA Letter To Chief Counsel: Missouri P. 35-37 Official Position Of The MTS Tax Commission Committee Regarding The Proposed Appraisal Requirements. J. Barry Savage, Hydroformng P. 10-11 Explanation Of How Sheet Metal ASA and Harry J. Hydroforming Works And The Richardson, ASA Advantages. Daniel L. Lagace, ASA How Exponents Work P. 12-20 Article With Intent To Diminish The Perceived Mystery Associated With The Use Of Exponents In The Cost To Capacity Formula. Art Narverud, ASA A MTS Appraiser’s War Story P. 21 Surprise Encounter To A Small Fish Cannery In Alaska. Alan C. Iannacito, ASA Basic Machinery Identification P. 22 Update Of Id Seminar Held In Los Seminar Angeles In October 2005. Robert D. Podwalny, Managing A Portfolio Of Leased P. 24-32 Why The Corporate And Commercial FASA Aircraft Aircraft Industries Rely On Leasing. Steven C. Tatro, ASA Divorce-Appraisal Style P. 33-35 Issues To Be Considered Before Accepting An Divorce Settlement Case.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Charles Dixon, ASA 2005 Membership Report P. 36-40 The Latest Membership Numbers By Disciplines As Of 2005. Leslie H. Miles, ASA USPAP Will Be Changing P. 41-44 Uspap Changes Are A Recognition Of Economic Realities. Douglas R. Krieser, FASB Releases Fair Value P. 45-51 Fair Value Is In The Process Refined ASA Measurement Working Draft And Clarified By The Fasb. 32 22 2&3 2005-06 Jack Washbourn, ASA MTS Governor’s Report P. 5 Written Awareness Of What Asa Board Of Governor’s Activities In 2006. China Appraisal Valuation Of Machinery And P. 7-13 Focus On Imported Second-Hand Society Equipment In China Equipment. Robert S. Svoboda, PE, Value In Use VS. Value In Exchange P. 14-30 Definition Overview Of Fair Market ASA Value In Use Vs. In Exchange From Several Appraisal Societies. John A. Matthies, ASA A Forgotten Research Tool P. 31 The Yellow Pages Can Be An Excellent Information Source. Nicole Stango ASA: Strength In Numbers P. 32-34 Article On How Efforts Can Be Made To Increase MTS Membership. Charles Dixon, ASA AMTDA Trade Show P. 35-36 Overview Of American Machine Tool Distributor’s Association Trade Show. Daniel L. Lagace, ASA Machinery Identification And Cost P. 37 Overview Of ID Workshop Conducted Approach Seminar In Chicago In March 2006. Leslie H. Miles, Jr. Aircraft Maintenance Care And P. 45 Discussion Of The Rapid World FASA Overhaul Growth Rate Of Maintenance, Repair, And Overhaul (Mro). 33 22/23 4&1 2006-07 Dong W. Cho Average Prices Of New Business P. 5-14 Dr. Cho Explains The Importance Aircraft Of Index Reflecting Real Price Vs. Nominal Price. Ken Dufour/Wade The Truth About Fractional Aircraft P. 15-18 Overview Of Getting Maximum Value Young Shares For Investment In Aircraft. Douglas R. Krieser, FASB Releases Final Version Of Fair P. 19-28 Mr. Krieser Recommends An ASA Value Measurement Understanding Of Sfas 157 When Performing Sfas 141 And Sfas 142 Alan C. Iannacito, ASA Appraising Clutter P. 30-35 Dealing With An Industrial Category That Can Be Overlooked But Needs To Be Addressed By The Appraiser. John S. Ferguson, ASA Depreciation Based On Observed P. 36-41 Discussion Of The Observed Condition Condition Being More Interest As An Historical Reference. Jack Beckwith, ASA A Case To Determine Lost Value For P. 42-49 Importance Of Market Influences New Series Equipment May Cause An Adjustment To Both The Functional And Economical Obsolescence In The Cost Approach. David Fawcett FRICS ASA Annual Conference July 2006 P. 50-53 Outsiders Perspective Of The International Conference.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW MTS Board Of What Does Your Report Say About P. 54 - The MTS Board Of Examiners Give Examiners You, Your Company, And The Asa? 62 A Checklist And Overview Of What Should Matter In The Appraisal Reports That Are Evaluated. 34 23 2 2007 Dale H. Bracken, ASA How Movies Are Really Made P. 6-9 Article Describes All The Steps, Equipment, And Techniques That Allows The Film To Go From The Camera To What Is Seen On The Screen. Sharon Desfor The Sun Sets On Fas 13 - Will We P. 10-11 Discussion As To How Recent Fasb Be Left In The Dark? Definitionn For Value May Be A Concern For Leasing. Joel B. Levinson, ASA, Valuing Manufacturers' Secret P. 12-15 Article Discusses Phraseology That CSA Weapons Against Costs Should Be Used In Describing The Scope Of Work For The Client To Sign. Catherine J. Rein An Overview Of Photovoltaic P. 16-21 Overview Of World Market Demand Equipment & Issues Affecting Its For Photovoltaic Equipment And Value Reasons For The Growth. H. Denis Neumann, Mobile Homes And Their Value P. 22-25 Mobile Homes May Be Considered ASA Personal Property Or Real Property. Article Is Another Method To Determine Value. Terry L. Duda, P.E., Boiler Valuation P. 26-30 Basic Knowledge Of What To Know ASA, CEA About Valuing Boilers. Jeffrey W. Brend Attorney Tricks-Witness Traps The P. 31-43 Insight To The Four Stage Process In Abc's Of Testifying Preparing As An Expert Witness. 35 23/24 4 & 1 2007-08 Alan C. Iannacito, ASA Letter From MTS Governor P. 4-5 Details On Various Subjects Including: Proposed Unification Between Asa, Appraisal Institute, And American Society Of Farm Managers And Rural Appraisers. Norman F. Laskay, ASA Identification and Appraisal Of P. 6-18 Identification Of And Valuation Marine Dredging Equipment Of “Technical Real Property” For Taxation Purposes. J.P ("Buck") Ward III, Some Thoughts On The Valuation Of P. 19-21 Various Considerations And Market ASA Office Furniture Discussions On Furniture. Dennis C. Neilson, CMI, Technical Real Property Issues P. 22-31 Identification Of And Valuation P.E. ASA and Michael And Property Taxation: Heavy Of “Technical Real Property” For J. Remsha, CMI, P.E., Manufacturing, Utilities, And Taxation Purposes. ASA Process Industries Sharon Desfor, ASA The Convention On International P. 32-35 Discussion Of The Capetown Interests In Mobile Equipment And Convention And Its Application To The International Registry Mobile Equipment (Including Rail, Aircraft, And Other “Mobile” Assets). Alan C. Iannacito, ASA Growing A Machinery And Technical P. 36-38 The Importance Of Mentoring Valuation Appraiser And Knowledge Transfer When Developing New Valuation Talent.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Osato Osawaye Emerging Markets In Nigeria And P. 39-41 Economic And Business The Opportunities For Specialist Development In Nigeria And The Valuation Practices Potential Opportunities For Valaution Professionals Within That Area Of The World. Bob Clark, ASA Industrial Pumps - The Basics P. 42-44 General Overview Of Various Pumps And Their Uses. Joe Santora Mobile Cranes - Is The Sky The P. 45-46 Observations Of The Current Used Limit? Market For Large Mobile Cranes. Mike Clark, L&M Buyer’s Premium P. 47-48 Discussion On Buyer’s Premium In Publications Auctions. Dave Evans, ASA Appraisal Matters P. 49 Discussion Of Various Industries And The Current State Of The Auction Markets For These Industries. Les Miles, ASA; Ed International Plant And Machinery P. 51-53 Overview Of The October 2007 Raether, ASA And Conference International Plant And Machinery Douglas Krieser ASA Conference Held In London. MRICS 36 24 2 & 3 2008 Jack Washbourn, ASA Board Of Governor's Report P. 6 Discussion On ASA Headquarters It Proposal For Service And Various Other Pertinent Subjects. Jack Beckwith, ASA Mentoring P. 7-11 General Discussion About Mentoring And Why Mentoring Is Important To The ASA. Ed Biggs, ASA What Will Be Under Your Hood? P. 12-13 Discussion About Converting And Rebulding Locomotives. Richard Ellsworth, PE, Scale Factor Estimates For P. 14-20 Scaling Factors For Use In Valuing ASA, CCE Infrastructure Assets Infrastructure Assets Including Use Of Cost To Capacity. Micheal J. Remsha, The Complete Cost Approach And P. 21-29 Discussion Regarding The Current PE, ASA, CMI The Order Of Deductions Order Of Depreciation Taught By The ASA And An Introduction To An Alternate Approach Based On The Experience Of The Author. Philip L. Burk, ASA, Valuation Of Public Utility And Other P. 30-39 Discussion On How Limited CMA, PE Property With Limited Earning Earnings Effect The Value Of Ability Various Regulated And Unregulated Industries. Richard Scuster, ASA The Fractional Aircraft Ownership P. 40-42 Valuing Fractional Ownership Of Value Conundrum Aircraft Under Various Scenarios. Editor Recent MTS M&E Identification P. 43-44 Outline Of The Recent MTS Seminar And Report Writing Machinery And Equipment Seminar Identification Seminar And Report Writing Class Given In Detroit. Editor Los Angeles Chapter Provides P. 45-46 Outline Of The Recent Seminar Given Seminar On Tangible Asset In Los Angeles. Valuations For Financial Reporting Purposes

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Mike Clark, L&M Selecting And Publishing Sales P. 47-50 Outline Of Some Of The Data Publications Comps From Auction And Items Considered By L&M Publications When Listing Sales Comps. Dave Evans, ASA Appraisal Matters P. 51-53 Discussion Of Various Industries And The Current State Of The Auction Markets For These Industries. Editor Planning Begins For 2009 P. 53 Announcement And Update On The International Plant And Machinery Planning For The Joint ASA/RICS/ Conference AAI Plant And Machinery Conference In 2009. 37 24/25 4 & 1 2008 Douglas R. Krieser, Editor’s Corner P. 4-5 General Overview Of The Current ASA MRICS Issue And Recent MTS Committee Meetings. V. Neil Thompson, ASA Chairman’s Prospective P. 6 Neil Thompson Outlines Various Accomplishments Of The MTS Committee And Other Issues Such As The Recent Merger Discussions With AS, ASFMRA And RICS. Jack Washbourn , ASA Letter From MTS Governor P. 7 Jack Washbourn Discusses The Importance Of Being An Active And Not “Simply A Dues Paying Member” And Some Ideas On The Asa’s Goal Of Becoming “Discipline Centric”. Alan C. Iannacito, ASA Letter From MTS Governor Alan C. P. 8 -9 Alan C. Iannacito Discusses The Iannacito, ASA Evolvement Of The Asa MTS Committee And Recent Issues Important To Members Of The ASA. Stephen L. Barreca, Proper Consideration Of Future Net P. 10-18 Discusses The Considerations That ASA, CDP, PE Salvage In An Appraisal Of Value An Appraiser Should And Should Not Give To The Future Net Salvage Value Of A Tangible Asset When Applying The Various Approaches To Value. Mark S. Buettner, ASA One Appraiser’s Perspective of P. 19-20 Comments On The Bi-Annually IMTS 2008 International Machinery Technology Show In Chicago In 2008. Richard K. Ellsworth, Survivor Curves And Equipment Life P. 21-27 Insight And Commentary On The PE, ASA, CFA Expectancy Development Of Iowa Curves. Phillip Kolczynski Ethical Challengers For Expert P. 28-39 2008 International Conference Witnesses Presenter Provides Commentary On Some Of The Challenges Faced By The Expert Witness. Mr. Kolczynski Is An Attorney Based Out Of Southern California. Roman Karpov External Obsolescence. Value P. 40-44 Roman Karpov Presents A Change Factor Of Industrial Methodology For Quantifying And Personal Property Entering Qualifying External (Economic) Secondary Market Obsolescence.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Roman Karpov Russian Version Of The Article P. 45-50 Russian Version Of The Article Listed Listed Above Above. Sharon Desfor, ASA, The Banking Liquidity Crisis P. 51-53 Sharon Desfor Discusses How The MRICS Liquidity Crisis Can Effect Borrowers, Lenders And Appraisers. John S. Fergusen, PE, Valuation Of Public Utility And Other P. 54-56 Mr. Fergusson’s Response To ASA, CDP Property With Limited Earning And “Valuation Of Public Utility And Other Ability - A Commentary Property With Limited Earning Ability” Published In The Last Issue Of The Journal. Michael J. Remsha, Electrical Generating Plant Valuation P. 57-67 Mike Remsha PE, ASA, CMI Offers P.E., ASA, CMI Some Interesting Insight Into Valuing A Variety Of Different Power Plants Using All Three Approaches To Value. Mike Clark Valuation In Time Of Turmoil P. 68-69 Mike Clark Discusses The Effects Of The Current Economy On The Auction Market. Dave Evans, ASA - Appraisal Matters... With Wells P. 70-71 Discussion Of Various Industries And Chief Appraisal Officer Fargo Business Credit & Wholesale The Current State Of The Auction Bank D Markets For These Industries. 38 25 2 & 3 2009 Douglas R. Krieser, Editor’s Corner P. 4 General Overview Of The Current ASA MRICS Issue. V. Neil Thompson, ASA Chairman’s Perspective P. 5 Neil Thompson Outlines The Importance Of Education And Some New MTS Courses The ASA Has Developed. Alan C. Iannacitto, ASA P. 6 Alan C. Iannacito Discusses The Recent ASA/AMEA Seminar, The New ASA Website, And Other Issues. John S. Ferguson, PE, The Value of Writing P. 8 John Ferguson Discusses The ASA, CDP Strategic Reasons For Writing Articles For The MTS Journal And Other Publications. Catherine J. Rein MBA, Don’t Forget the Website in Asset P 10-13 Catherine Rein Discusses The AM Appraisal Importance Of Valuing The Web Site Name When Valuing A Company And Some Considerations The Appraiser Should Consider When Valuing These Assets. Alan C. Iannacitto, ASA Principles of Mining Processing P. 14-18 Alan C. Iannacito Discusses Various Listing and Valuing Continuous Mills Factors In The Valuation Of Ball And Rod Mills Including Differentiating Between The Two, The Data Required To Value Each, And Various Reference Materials Regarding Mills. John S. Ferguson, PE, On Survivor Curves and Equipment P. 19-20 John Ferguson Commentary Of ASA, CDP Life Expectancy An Article Written By Richard K. Ellsworth Regarding Survivor Curves.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Michael J. Remsha, Fair Market Value in Continues Use P. 21 - Mike Remsha Discussed The PE, ASA, CMI 26 Intricacies Of Fair Market Value In Continued Use And What The Appraiser Needs To Consider When Using This Value Premise. Joseph M. Santora, Mobile Cranes - Is the Sky Falling? P. 27-28 Joseph M. Santora Discusses The ASA Market Observations Current Market For Mobile Cranes And How It Has Changed Since His Article In Late 2007. Richard K. Ellsworth, Retirement Dispersion and P. 29-33 Richard K. Ellsworth Continues His PE, ASA, CFA Appraisal Depreciation Discussion Of The Use Of Iowa Curves And How They Are Utilized To Estimate Depreciation. Dennis C. Neilson, Cmi, Personal Property Tax Appeal/ P. 34-41 Dennis C. Neilson And Michael J. P.E. Asa And Michael J. Valuation Remsha Outline Various Issues Remsha, Cmi, P.E., Asa The Personal Property Appraiser Has To Consider When Performing A Tax Appeal Appraisal Including: The Three Approaches To Value; Classifying Real Vs. Personal Property; Highest And Best Use (Inuse Vs. In Exchange); Mass Appraisal; Assessor Approaches To Value; Excess Depreciation; And Other Relevant Topics. Mike Clark Random Thoughts on the Market P. 42-43 Mike Clark (L&M Publications) Discusses Various Markets In General Including Metal Working, Plastic Equipment, Food Processing Equipment, Printing Equipment, Etc. Also, He Discusses How The Number Of Auctions Have Varied In The Past Year. Dave Evans, ASA - Appraisal Matters...With Wells P. 45-46 Discussion Of Various Industries And Chief Appraisal Officer Fargo Business Credit & Wholesale The Current State Of The Auction Bank Markets For These Industries. 39 25/26 4 & 1 2010 Sharon Desfor, ASA, Editor’s Corner P. 4 MRICS Peter Campbell, ASA Chairman’s Prospective P. 5 Alan C Iannacito, FASA Letter From MTS Governor P. 6 Robert S Risbridger The Perfect Storm P. 8-11 and Kenneth M Heyse, ASA Leslie H Miles, Jr, Physical Life Explained P. 12-17 FASA Alexander Skorniakov, Second-Hand Value And Financial P. 18-20 ASA Reporting

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Douglas R Krieser, International Conference On The P. 24-25 ASA, FRICS Valuation Of Plant Machinery And Equipment William M Engel, ASA Making Valuation Research More P. 26-34 Dynamic Richard K Ellsworth, Depreciation Methods In Theory P. 35-42 PE, ASA, CFA, CCE And Practice Alan C Iannacito, FASA ME214 - The Identification and P. 43-48 Appraisal of Mining and Mineral Processing Equipment Mike Clark Random Thoughts on the Market P. 49-50 Dave Evans, ASA Appraisal Matters… With Wells P. 53-54 Fargo Business Credit & Wholesale Bank In Memoriam - Leroy L Ackermann- P. 55 Ackermann & Tinker Appraisal Specialties, Paul Rice, ASA - The Rice Group 40 26 2 & 3 2010 Sharon Desfor, ASA, Editor's Corner P. 4-5 MRICS Peter Campbell, ASA Chairman’s Prospective P. 6 Alan C Iannacito, FASA Letter from MTS Governor P. 7 Tom Sexton, ASA Machine Tool Market P. 9-12 Joseph M Santora, 2009 Crane Market Conditions…Is P. 13-14 ASA and David Helle, The Sky Falling? ASA Mike Clark The Market Is Rebounding P. 15 Jack Young, ASA, CPA An Overview Of The California Air P. 16-18 Resources Board Diesel Regulations Edward D Biggs, III, Appraised Fair Market Value And P. 19 LLC, ASA AAR Interchange Rule 107 Jack Beckwith, ASA 2010 Changes & Challenges In P. 20-23 Healthcare Alan C Iannacito, FASA M&E Local P. 24-26 Norman Laskay, ASA The Life Of A Ship P. 27-33 Paul Wride, ASA What An Equipment Lessor Looks P. 34-36 For In An Appraiser Robert A Davis, MBA, Applications Of The Inutility Model P. 37-41 AVA Michael J Remsha, PE, Economic Obsolescence: Real Life P. 42-47 ASA, Cmi And Kevin S Stories Reilly, ASA 41 26/27 4 & 1 2011 Sharon Desfor, ASA, Editor's Corner P. 4 MRICS

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Charles C Dixon, ASA Excerpt From Governor Charlie P. 5-6 Dixon's January Report To The MTSC MTS Committee Definitions Of Value Relating To P. 7-8 MTS Assets Robert S Risbridger The Aftermath Of The Perfect Storm P. 9-12 and Kenneth M Hyse, ASA Leslie H Miles Jr, FASA What Is Orderly Liquidation Value? P. 13-15 Douglas R Krieser, Financial Reporting Process P. 16-21 ASA, FRICS Alexander F Rudin, Valuation Modeling P. 22-28 ASA, CG/GA and Shelby St John Alan C Iannacito, Fasa ME214 Class Report P. 29-24 Peter Daley, ASA Calculating The Economic Useful P. 35-39 Life And Forecasting Residual Value For It Equipment Barry Gunderson, CPA, Reducing Banker Lending Risk: P. 40-44 CMA, CIA, CCM, CPIM, Inventory Valuations - More Science CSCP Than Art Michael J Remsha, PE, Functional Obsolescence: Real Life P. 45-55 ASA, CMI and Kevin S Stories Reilly, ASA 42 27 2 2011 Richard A Berkemeier, Chairman's Perspective P. 4 ASA William M Engel, ASA Editor's Corner P. 5 Danial Lagace, ASA Machinery And Technical P. 6-8 and Sharon Desfor, Specialties Discipline Governors' ASA Commentary Jack Beckwith, ASA Medical Imaging Report P. 9-12 Discussion Of The Technologies And Market For Medical Imaging Equipment. Alan C Iannacito, FASA When Values Hibernate P. 13-15 Explains How The Intrinsic Value Of Equipment Impacts Value Fluctuation. Mike Clark Premises Of Value: What Is Forced P. 16-17 Discusses How Some Sales Labled Liquidation? As Auctions Don’t Always Fit The Definition Of “Forced Liqudation Value”. MTS Journal Interview with Michael Makin, P. 18-22 An Overview Of The Printing Industry CEO and President of the Printing Including It’s Health And Them Industries of America Market For Used Equipment. Alan C Iannacito, FASA ME214 Identification And Appraisal P. 23-26 A Review Of ME214 Identification Of Mining And Mineral Processing And Appraisal Of Mining And Mineral Equipment Processing Equipment Class.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW William M Engel, ASA How Do You Use Technology In Your P. 27 Appraisal Practice? 43 28 1 2012 William M Engel, ASA, Editor's Corner P. 4 Dan Lagace, ASA and Governor’s Report P. 5 Sharon Desfor, ASA Thomas A. Sexton, ASA Food Processing Equipment P. 6-10 Discusses Values, Considerations And Trends In The Food Processing Equipment Market. Richard Buckner, Sheetfed Printing Presses In The P. 11-12 An Overview Of The Current Market President, Fair Market Current Marketplace For Sheetfed Offset Presses. Graphics, Inc. Les Miles & Robert China Plant and Machinery P. 14-16 Review Of The ICVPME Held In Clark Conference a Resounding Success China. Norm Laskay, ASA Understanding the Marine P. 17-30 An Overview Of The Different Types Marketplace Of Vessels And Their Characteristics Along With Considerations When Determining Value. Gregory W. Kort, P.E., Environmental Issues – Impacts on P. 31-36 A Discussion On How Environmental ASA, CMI Industrial Property Value Issues Impact Industrial Property Along With Ideas On Quantification And Accounting For Them. Michael Rikon Condemnation of Machinery and P. 37-46 History Of Condemnation Along Equipment: A Case Study With How It Is Treated In Different Countries And States And A Case Study That Demonstrates How A Court Views It. Kenneth R. Loso, Lessons Learned, Warning Signs, P. 47-50 Reviews Warning Signs Of Economic and “Banana Skins” Crisis. 44 28 2 2012 Richard Berkemeier, Chairman’s Perspective P. 4 ASA Danial Lagace, ASA Machinery And Technical P. 5-6 and Sharon Desfor, Specialties ASA Discipline Governors’ Commentary William M Engel, ASA Editor’s Corner P. 7 Rob Schlegel, ASA, The Nexus Of Business Valuation P. 8 -10 The Differences Between MTS And MCBA And Valuation Of Equipment Bv And How Bv And MTS May Work Together. Douglas R Krieser, Gn6 Depreciated Replacement Cost P. 11-13 A Summary Of RICS Standards ASA,FRICS Method Of Valuation For Financial Guidance Note 6 Which States, Reporting - A Summary In Part, Market Approach Should Be Used Over Cost Approach For Financial Reporting. Bruce Leister, ASA Forward To The Past With P. 14 Explains The Market And Sales For Semiconductor Market -16 Older 200MM Equipment Versus Newer 300MM.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Richard Zhang, MBA, How Should We Perform Equipment P. 17-22 Explores Why Equipment Appraisals ASA, MRICS, CPV Appraisals Are Necessary And Considerations The Appraiser Should Keep In Mind. Kevin S Reilly, ASA A Market Perspective: Identifying, P. 23-31 An Overview Of Economic Quantifying, And Applying Economic Obsolescence Providing A Case Obsolescence Study Explaining The Application And Theory. Alan C Iannacito, FASA Eminent Domain And Personal P. 32-34 Discusses How To Work On An Property Eminent Domain Assignment. 45 28 3 2012 Richard A Berkemeier, Chairman’s Perspective P. 4 ASA Daniel Lagace, Asa Machinery And Technical P. 5-6 And Sharon Desfor, Specialties Discipline Governors’ ASA Commentary William M Engel, ASA Editor’s Corner P. 7 Simon Landy The Value Of Valuations: New P. 8-9 Current Status And Explanation Of International Standards To Benefit The International Valuation Standards Investors Tammy Blackburn, ASA Do I Need An Appraisal To Reduce P. 10-11 The First In A Series Of Articles My Ad Valorem Tpp Tax? - A Explaining The Burdens Of Magistrate’s Perspective Appraising For Tangible Personal Property Tax Appeal Purposes Along With Explanations Of The Appeal Process And Selecting An Appraiser. William M. Engel, ASA The Art Of The Interview P. 14-16 An Overview Of Questions That An Appraiser May Ask A Subject Company To Assist An Appraisers Knowledge Of The Industry, Equipment, And General Edification. 46 28 4 2012 Daniel Lagace, ASA Machinery And Technical P. 4 and Sharon Desfor, Specialties Discipline Governors' ASA Commentary William M Engel, ASA Editor's Corner P. 7 Lee P. Hackett, FASA, International Opportunities For P. 8 A Glimpse Into The Word Of FRICS, CRE Appraisal And Valuation International Appraising And Advice On How To Get Started Steven J. Sherman Raising The Bar For The Valuation P. 10 The Author Shares The Progress Of Profession The IVSC Robert A. Davis, MBA, Inutility Model Scaling Factor - What P. 12 Determining Economic Obsolesence ACA, ASA If The Factor Is Not Six-Tenths? And An Alternative Method Rather Than Using Six- Or Seven-Tenths Scaling Factors Tammy Blackburn, ASA Preparing For The Vab Hearing - A P. 16 Insights Into What Steps An Magistrate’s Perspective Appraiser Can Take To Strengthen Their Ad Valorem Appeal Appraisals J. P. “Buck” Ward, ASA What Color Is Your Blanket P. 19 Gives The M&E Appraiser Points To Consider When Working With Asset- Based Lenders As Clients.

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Alan C Iannacito, FASA The Richest Desposit of Mining P. 22 A Review of MINExpo 2012 Knowledge 47 29 1 2013 Richard A Berkemeier, Chairman's Perspective P 4 ASA Daniel Lagace, ASA Machinery And Technical P 5 And Sharon Desfor, Specialties Discipline Governors' ASA Commentary William M Engel, ASA Editor's Corner P 7 James Matthews, ASA Biodiesel Industry Expansion Phase P 8 An Outline Of The Biodiesel Industry In The United States, An Overview And The Equipment Involved And Its Process Machinery And Equipment Jack Beckwith, ASA How Will The Ppaca Affect P 23 How Equipment Use And Value Are Diagnostic Imaging Equipment Impacted By The Patient Protection Moving Forward? And Affordable Care Act Tammy Blackburn, ASA Considering The Evidence - A P 25 Insights Into The Evidence A Magistrate's Perspective Magistrate Sees When Considering Ad Valorem Appeal Appraisals Martin L. King, CR, Actual Cash Value In Property P 27 Appraisals From An Insurance ASA Losses Perspective Jack Young, ASA, CPA Appraising Equipment For Retail P 29 What To Look For When Appraising Propane Companies The Equipment Of Retail Propane Firms Kevin S. Reilly, ASA; Valuation Of Cogenration Plants; P 33 What To Consider When Appraising Clayton T. Baumann, Things To Consider Cogeneration Facilities PE Letters To The Editor P 41 48 29 2 2013 Daniel Lagace, ASA Discipline Governors’ Commentary and Sharon Desfor, ASA William M Engel, ASA Editor's Corner P 6

Christina Chojnacki, Implications Of Economic P 7 Implications, Indentification, ASA and Leslie Vitale, Obsolescence In Fixed Assets For And Quantification Of Economic ASA Financial Reporting Purposes Obsolescence John Martin, Chairman The Role Of The Ivsc Advisory P 11 Discusses The Progress Made By Of The IVSC- Advisory Forum In Developing A Valuation The Forum And The Challenges That Forum Profession Globally It Faces Austrailian ASA Review Of Equipment ID Seminar P 14 Reviews The Equipment ID Seminar Chapter Held In Australia, March 2013 Garrett Schwartz, Asa, MTS Equipment ID Seminar: P 17 Reviews The Equipment ID Seminar Cea Premiere Speakers, Networking And Held In Cleveland, OH In June 2012 Education Leslie H Miles Jr, Fasa Nigeria And The ASA P19 Reviews Mr. Miles Trip To Nigeria And Explains The Growing Market For ASA

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW 49 29 3 2013 Roger Durkin, J.D., The Top Twelve Mistakes Appraisers P10 M.S., FASA Make in Court Preparation Richard Buckner, Sheetfed Printing Presses and P13 President of Fair Today’s Marketplace Market Graphics, Inc. Garrett Schwartz, ASA MTS Appraisers Return to Cleveland P15 for Networking & Equipment Education Les Miles, FASA ASA’s International Demand – Three P18 Weeks in Japan Nancy Stacy, GG, ASA In Memoriam P36 50 29 4 2013 Liu Ping Achieve Collaborative Development of P12 the Valuation Profession Aleksey Shaskolsky Ethic Dilemmas in Russian Appraisal P21 Practice

Алексей Дилеммы этики в российской P22 Шаскольский оценочной практике A. Shaskolsky, V. Federal Appraisal Standard FAS-0 P24 Romanovsky, S. “Paid-for Valuation” Edomsky, V. Biryukov, A. Timkov А. Шаскольским, Федеральный стандарт оценки P27 В. Романовского, ФСО-0 “Заказная оценка” С. Эдомского, В. Бирюкова , А. Тимкова Thomas Boyle, MAI Banks Run on Standards P31 Alan C. Iannacito, FASA The Class of 2013, ME214 P33 51 30 1 2014 Park Johnson, ASA, Editor’s Letter P4 MRICS Robert W. Clark, ASA Chairman’s Corner P5 Michael J. Remsha, ASA, The Cost Approach and its P6 P.E., CMI Relationship to the Sales Comparison and Income Approaches

Jack West, ASA Assessors and Independent Fee P32 Appraisers P. Barton DeLacy, ASA, Wind Power and the Tax Base: P35 MAI, CRE, FRICS Reliable as the Resource? Robert B. Podwalny, USPAP Reports and Reports in P46 FASA Submitted for Advancement Clayton T. Baumann, P.E. Cost to Capacity Method: Applications P49 and Considerations 52 30 2 2014 Park Johnson, ASA, Editor’s Letter P4 MRICS Robert W. Clark, ASA Chairman’s Report P5

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Daniel Lagace, ASA and Governor’s Bulletin P6 Sharon Desfor, ASA Robert F. Reilly, CPA The Unit Valuation of Taxpayer Assets P15 for Protpery Taxx Purposes Alan C, Iannacito, FASA What Do Value-Added Businesses P33 Pffer and What are Their Affecs on the Market? 53 30 3 2014 Park Johnson, ASA, Editor’s Letter P4 MRICS Robert W. Clark, ASA Chairman’s Report P5 Robert W. Clark, ASA ICVPME Report P6 Daniel Lagace, ASA and Governor’s Bulletin P7 Sharon Desfor, ASA Norman Laskay, ASA Marine Asset Appraisal and the Three P10 Approaches to Value Thomas Sexton, ASA Current Trends in Energy Use and P13 Their Effect on Railcars Barbara A. Spoor, ASA, Appraisal Review and Management P15 (MTS – Aircraft, MTS – M&E, ARM) David Helle, ASA MTS Appraisers Attend Equipment P17 Identification Seminar Park Johnson, ASA, The Tools We Use: Marshall Valuation P20 MRICS Service (MVS) 54 30/31 4/1 2014/15 Park Johnson, ASA, Editor’s Corner P4 MRICS Robert W. Clark, ASA Chariman’s Report P5 Richard Berkemeier, Governor’s Bulletin P6 ASA, MTS Governor In Memroiam P7 Samuel F. Lucerno, FASA Mike Clark, ASA Asking Price is Not Selling Price P8 J.P. (Buck) Ward, ASA What Color is Your Blanket? Collateral P10 Documentation and Asset Recovery for Asset Based Loans Jim Becker, ASA Demystifying New Paint & Interior... P14 Assessing Aircraft Value Stephen L. Barreca, ASA, Modeling the Life-Cycle of Multiple P18 PE, CDP Forces of Depreciation Founder & President, BCRI Valuation Services BCRI Inc. Charlie Burkhardt, ASA, Development of a Replacement Cost P42 CAE, Senior Consultant, New for Wireline Communication CostQuest Associates Property and Luis A. Rodriguez, Program Manager, CostQuest Associates

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW 55 31 2 2015 Park Johnson, ASA, Editor’s Corner P4 MRICS Robert W. Clark, ASA Chariman’s Report P5 Sharon Desfor, ASA, Governor’s Bulletin P6 MRICS, Richard Berkemeier, ASA, MTS Governor Anthony Kioussis, Used Citation Xs from NetJets are P9 President, Asset Insight Rebranded by Guardian Jet as Elites

Nathan J. Arnold Appraising Chemical-Processing P16 Machinery and Equipment

Les Miles, FASA and P17 Park Johnson, ASA ME202 Taught in Japan

Joseph Feldman, Acquisition Surprises: Best Practices P18 President, Joseph for Preparation and Risk Management Feldman Associates Joe Santora, ASA Compliance P20

56 31 3 2015 Brad Hartsburg, ASA, MTS Editorial P4 CPPA, CSA John J. Connolly, III, ASA Chairman’s Report P5 Richard Berkemeier, ASA Governor’s Bulletin P6 and David Crick, ASA, MTS Governors William Engel, ASA Memorial Tribute to Park Johnson, P7 ASA

J. Fernando Sosa, ASA, The Scary Truth about Ghosts Assets P9 MRICS Bob Zuskin of Jet Corporate Aircraft: Valuing The P14 Perspectives Intangibles

Joseph Santora, ASA of Choose Your Equipment Appraiser P17 Irontrax, LLC Wisely Jean Jackson and David 4th Annual Equipment Valuation P19 Helle of PNC Financial Conference in Cleveland Services Group Brad Hartsburg, ASA, Identifying Heavy Equipment and P23 CPPA, CSA of Fortress Serial Number Locations Machinery Appraisals and Consulting Inc. Keith M. Bransky, ASA, Damaged Aircraft and Diminution in P30 ARM-MTS Value Back-to-Basics

Barrie Roesler, ASA Are your Comparables Really Real? P36

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW 57 32 1 2016 Brad Hartsburg, ASA, MTS Editorial P5 CPPA, CSA John J. Connolly, III, ASA Chairman’s Report P6 Richard Berkemeier, ASA Governor’s Bulletin P7 and David Crick, ASA, MTS Governors Richard Berkemeier, ASA Finding the Right Appraiser is as Easy P9 as ASA

Sharon Desfor, ASA State of the Helicopter Market P11

Tony Grant, FRICS Ethics in the Global Real Estate P19 Market - A New International Coalition

John Mathe, ASA Supportable Evidence in Appraisals P25 Alan C. Iannacito, FASA MTS214 Identification and Appraisal P29 and Allan K. Bowles, PE of Mining and Mineral Processing Equipment Course

American Society of Virtual Chapter News P37 Appraisers

Joseph Santora, ASA IRONTRAX LLC Mining Industry P39 Insight (Winter 2015) Mining Industry Statistics

Leslie H. Miles, Jr. FASA, 9th International Conference of Plant P44 FAPI and Machinery and Equipment

Peter J. Turecek The Past and Future of Compliance P46 and Fraud in Aviation: Don’t Fly Blind

Harry J. Richardson, Technological Obsolescence Finally P50 ASA / Edited by: J. Barry Arrives in the Metal Stamping Press Savage ASA, Emeritus Industry

Walter W. O’Connell The Ideal Pricing Index P53 M.E., ASA, SCSP

Tom Sexton, ASA Freight Railcar Basics P56

Jack Beckwith, ASA, ASA Trains ODR Analysts on P64 CEA Machinery and Equipment Valuation Methodology

58 32 2 2016 Brad Hartsburg, ASA, MTS Editorial P5 CPPA, CSA John J. Connolly, III, ASA Chairman’s Report P7

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Richard Berkemeier, ASA Governor’s Bulletin P8 and David Crick, ASA, MTS Governors J. Richardson, ASA New Automotive Hot Stamping P12 / Edited By: J. Barry Presses Makes For More Efficient Savage, ASA Emeritus & Safer Cars and Technological Obsolescence Walter W. O’Connell, To Trend in Microsoft Excel™, or P14 M.E., ASA, SCSP Forecast in Microsoft Excel™, That is the Question Norman F. Laskay, ASA What Does a Buyer Want? P20 Emeritus Dexter D. MacBride, Who Gets the Credit? P23 CAE, FASA, Submitted by Norman F. Laskay, ASA Emeritus Douglas R. Krieser, ASA Do Audit Reviews Fall Under USPAP P24 FRICS Standard 3? Interviewer: Raymond Interview with Liying Han – China P32 Moran, ASA, MRICS Appraisal Society The Appraisal Revisions to the USPAP and USPAP P34 Foundation Advisory Opinions Alan C. Iannacito, FASA Coal Is King No More: When Do You P36 Determine Economic Obsolescence? Art Pincomb, ASA, CPG Mineral Appraisals: What is the Value P41 of a Quarry or Mine? Leslie H. Miles, FASA & Inutility Exponent Development P49 Karen Milan, ASA Keith M. Bransky, ASA, Bransky - Ruden Meeting and 40+ P53 NSCA Years of ASA Journals Roman Karpov and Anna Obsolesce and Depreciation – P64 Levleva International Style Douglas R. Krieser, ASA How Asset Tracking Can Potentially P61 FRICS; Jack Beckwith, Save Money ASA, CEA, William Engel, ASA and Richard Tondre 59 32 3 2016 Brad Hartsburg, ASA, MTS Editorial P5 CPPA, CSA Louis C. Seno, Jr., ASA, Foreword P7 Chairman Emeritus, JSSI Rolland Vincent Pilatus PC-­12 Enduring P8

Sharon Desfor, ASA, Helicopters: A Different Type of Asset P13 MRICS Sharon Desfor, ASA, Regulatory Impact on Helicopter P19 MRICS Leasing

Keith M. Bransky, ASA, Damaged Aircraft and Diminution in P25 ARM-MTS Value - Back to Basics Richard A. Berkemeier, Finding the Right Appraiser is as Easy P32 ASA as ASA

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# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW Peter J. Turecek The Past and Future of Compliance P34 and Fraud in Aviation: Don’t Fly Blind Gordon R. Page, ASA Some Pitfalls of Aircraft Field P38 Inspections Gordon R. Page, ASA The TEMCO TF-51D Mustang - A Truly P40 Rare Breed Daniel Hall, ASA Bizjets not Business as Usual P44 The MTS Journal Spotlight on New Aircraft Appraisal P48 Education Program Bill Dodrill, ASA Do Business Jets have a Pedigree? P51 Barbara A. Spoor, ASA Aircraft Maintenance Condition and P54 Asset Value David Wyndham The Key to Your Aircraft’s (Future) P56 Value Carls Janssens Valuing the Gulfstream G550 P59 George Kleros Aircraft- Identifying a Properly P63 Preserved Aircraft Barrie Roesler, ASA Double Registration Change in the P68 USA: Is It Worth the Hassle? Chris Wills Market Turmoil for Heavy Offshore P70 Helicopters Bob Zuskin Corporate Aircraft: Valuing The P74 Intangibles David Crick, BSC, ASA Appraising Corporate Aircraft & P77 Helicopters – Survey Inspections – What Is Required? Kim Seward Oil Price – What Is It Going To Take P82 To Get The Civilian Helicopter Market Back On Track? Stephen Friedrich and LTSAs: the Hottest Trend in Aerospace P85 Kyra Nyman

Volume 33, Issue 1, 1st Qtr 2017 103 The MTS Journal is a publication of the International Machinery & Technical Specialties Committee of the American Society of Appraisers, the only multi-discipline testing/accrediting appraisal society in America. The MTS Journal is written both for the appraisers who value equipment on a regular basis, and for those others who may have a professional interest in the subject. These include attorneys, bankers, business brokers, estate planners, used equipment dealers, real property and business valuation appraisers. The MTS Committee is a nonprofit organization with a goal to standardize and educate all in our profession. Letters from readers are encouraged. Letters will be printed without editing, in the sequence received, subject only to space limitations. Subscriptions & Renewals ASA MTS Members & Candidates $35.00 | ASA Members, Non-MTS Discipline $50.00 MTS Journal subscriptions are delivered electronically, so please be certain that ASA headquarters has your current and correct email address in their records.

Send all editorial inquiries to: Send all Subscription inquiries to: The MTS Journal The MTS Journal c/o Brad Hartsburg, ASA (Editor) c/o Paul Cogley, ASA (Treasurer) Fortress Machinery Appraisals and Consulting Inc. Bank of America Merrill Lynch Calgary, Alberta, Canada Providence, Rhode Island 02903 [email protected] [email protected] Display Ads Accepted for publication in one issue only and should reach the Treasurer not later than the 15th of the month prior to publication. Rates: Full page - $200. One half page - $125. One quarter page - $75. Advertising must be sent in PDF format and sized in the proper proportion based upon an 8½ x 11 format. Advertising will be accepted or rejected based upon editorial approval. Advertising should be submitted at least one month prior to publication to the editor at the address above. Professional Services Advertising To raise additional funds for the MTS Committees educational efforts, we offer both fee appraisers and companies an opportunity to advertise their services in this journal. For the reasonable sum of $50.00 we will run your business card for one year. Please send your check, in the amount of $50.00 (US FUNDS) and either 2 clean business cards PDF to the Treasurer, Paul Cogley, ASA at the address on the subscription form. Indices Indices for many years’ MTS Journal and Machinery & Equipment / Technical Valuation Journal articles are available. Please contact the editor for copies of these indices.

Subscription Form The MTS Journal c/o Paul Cogley, ASA Bank of America Merrill Lynch One Financial Plaza, 5th Floor RI1-537-05-06 Checks should be made payable to the MTS Committee Providence, Rhode Island 02903 E-mail - [email protected]

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