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Seminar Penyelidikan JPPH ke-12 2021/ INSPEN

A STUDY ON BENCHMARKING OF MALAYSIAN PLANT,
MACHINERY AND EQUIPMENT (PME) VALUATION WITH
INTERNATIONAL STANDARDS AND PRACTICES: A REVIEW
OF MARKET APPROACH FRAMEWORK

ABSTRACT

The importance of PME valuation become a limelight when the needs of the
application of 2005 International Financial Reporting Standard (IFRS) has a
subsequent impact on the financial sector as a whole whereby accountants have
to choose between the Historical Cost Approach and Market Value Approach in
determining value of client’s assets. The need and importance of accuracy and
reliability in PME need to be acknowledged. Currently, there are a few of study
carried out in Malaysia to examine the conduct of PME valuation exercise. This
research will be among the pioneer attempt to study about market approach
framework for PME valuation in Malaysia. The objectives of this study are to
identify purposes and bases, to outline method of data collection, to examine
principles of market approach framework and to examine factors affecting value
for market approach in PME valuation. Qualitative approach are adopted as
research methodology. Primary data and secondary data have been analysed
using content analysis. Findings of this study amongst other are to show
relationship between purpose, premise of valuer and bases of PME valuations for
comprehensive and matrix understanding. Macro and micro identification are
recognised worldwide as methods of data collection for PME valuation. There are
four (4) steps of general principles and additional three (3) principles specifically
for market approach in PME valuation. 21 factors affecting value for PME market
approach from the desktop study have been recognised and compiled for easy
reference in the future. From this study, it is pertinent to note that market approach
for PME valuation can be adopted for assets that are actively transacted or offered
in the market with homogeneous or almost homogeneous characteristics. If
comparable are not available in the market, Cost Method is more suitable option.

Keywords: Plant, machinery and equipment valuation, PME Market Approach,
PME Standards, PME Practice

1.0 INTRODUCTION

Plant, machinery and equipment (PME) valuation is a highly specialised discipline
within the surveying profession (Derry, 2008). Otegbulu and Babawale (2011)
stated that although valuation of PME has existed within the general appraisal
practice since nineteenth century based upon the textile industry in North of
England, it has not received appropriate attention in appraisal as real estate in
spite of its pervasive influence on the economy and the standard of living of people.
Malaysian Valuation Standard (2019) explains that PME valuations are specialised
and before accepting any instructions for PME valuation, valuers are advised to
ensure that they have requisite experience and training to carry out the task. Earlier

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