Machinery & Technical Specialties (MTS)
What the MTS candidate must know
Machinery and equipment valuation blends cost, market, and income approaches adapted to movable, often specialized assets. The cost approach dominates for special-purpose equipment: reproduction or replacement cost new, less physical deterioration, functional obsolescence (excess capacity, outdated technology), and economic obsolescence (external conditions). Know how to quantify depreciation using age/life methods and the observed condition method.
Concepts to hold
Understand orderly liquidation value vs. forced liquidation value vs. fair market value in continued use (with or without the business enterprise). Know that installation, freight, and rigging costs matter and that removal costs reduce liquidation values. Be familiar with market data sources (auction results, dealer quotes) and that equipment serial numbers and hours drive comparability. Understand USPAP's treatment of personal property and the need for a desktop vs. field inspection scope statement.
Traps in questions
- Using replacement cost new without deducting all forms of depreciation.
- Confusing functional with economic obsolescence.
- Forgetting to subtract removal costs in liquidation scenarios.
- Ignoring that value in continued use assumes the business enterprise exists.
Worked rule of thumb
Replacement cost new $500,000; effective age 8 yrs, economic life 20 yrs → age/life depreciation 40% → $300,000 before obsolescence. Then deduct functional and economic obsolescence separately.