Valuation of Personal Property and Fixtures
Using Assessors’ Handbook Section 581 (Equipment Index, Percent Good, and Valuation Factors)
Appraisal Training: Self-Paced Online Learning Session

Summary

The annual publication of AH 581 is intended to fulfill the Board’s mandate to issue to county assessors, data relating to costs of property and other information to promote uniformity in appraisal practices and in assessed values throughout the state (RTC §401.5) To that end, AH 581 contains several tables of index, percent good, and valuation factors to aid assessors in the mass appraisal of various types of personal property (equipment) and fixtures.

In Lesson 2, you learned that index factors are used for estimating the reproduction cost new (RCN) of equipment and fixtures, on the basis of such property’s cost and year of acquisition. You also learned that which table factors to apply depends on the type of equipment or fixtures being valued: Table 1 index factors are intended for use in estimating the RCN of commercial equipment/fixtures; Table 2 index factors are intended for use in estimating the RCN of industrial equipment/fixtures; and, Table 3 index factors are intended for use in estimating the RCN of agricultural or construction equipment/fixtures.

In Lesson 3, you learned that percent good factors are used in conjunction with index factors to estimate the reproduction cost new less normal depreciation (RCNLD) of equipment and fixtures, on the basis of such property’s RCN and age. And again, you learned that which table factors to apply depends on the type of equipment or fixtures being valued: Table 4 percent good factors are intended for use in estimating the RCNLD of commercial and industrial equipment/fixtures; Table 5 factors are intended for use in estimating the RCNLD of mobile construction equipment; and, Table 6 percent good factors are intended for use in estimating the RCNLD of mobile agricultural equipment.

In Lesson 4, you learned that valuation factors – unlike index and percent good factors – are intended to be applied directly to the historical cost of the equipment or fixture, in order to estimate its market value.  Valuation factors reflect both price changes and loss of value (depreciation) over time, in a single factor.  Similar to index factors and percent good factors, selecting the appropriate valuation factor depends on the type of equipment or fixture being valued, as well as its year of acquisition or age.  Table 7 factors are intended for use in estimating the market value of non-production computer equipment; Table 8 factors are intended for use in estimating the market value of semiconductor manufacturing equipment and fixtures; Table 9 factors are intended for use in estimating the market value of biopharmaceutical industry equipment and fixtures; Table 10 factors are intended for use in estimating the market value of document processors (copiers); and, Table 11 factors are intended for use in estimating the market value of offset lithographic printing presses.

In Lesson 5 you learned how to determine the economic life, or average service life, of equipment and fixtures, you also learned that determination of economic life is a necessary first step to selection of the correct percent good factor, which is required in order to calculate the RCNLD of equipment and fixtures using Table 4 percent good factors, in conjunction with index factors selected from Tables 1, 2, or 3.

In Lesson 6 you learned about the index factor adjustment necessary to address the effects of rapid technological changes bearing on the reproduction cost new (RCN) of equipment and fixtures: the Recommended Maximum Equipment Index Factor.  You learned that the maximum index factor currently recommended is the factor corresponding to equipment of an age equal to 125% of the estimated economic (average service) life of such equipment. In other words, a maximum index factor is recommended to be used when the equipment being valued is older – by 25% or more – than the economic life for that type of equipment.

And finally, in Lesson 7 you learned about costs and cost components that are the basis of the valuation method known as the Cost Approach to Value.  You learned that acquisition cost should include all market costs, direct and indirect, necessary to purchase or construct equipment and fixtures and make them ready for their intended use; and that typical cost components vary depending upon whether the equipment is purchased or self-constructed. You also learned that not all costs contributing to value are booked and not all costs booked contribute to value.

We hope that you have found the information presented in this learning session beneficial.



Training Credit for Certified Property Tax Appraisers

If you are a certified property tax appraiser or auditor-appraiser working for a California county assessor's office or the Board of Equalization, you can obtain training credit for taking this self-paced online learning session. If you wish to obtain training credit, you must complete the Certified Appraisers Examination at the end of this learning session and submit your answers to the State Board of Equalization's County-Assessed Properties Division using the 'Submit' button at the end of the exam. Upon successful completion of the examination you will receive twelve hours of training credit.

By submitting the examination you are attesting to the fact that you read all the lessons and performed the exercises in the "Check Your Knowledge" section of the training. Please do not share your answers with anyone.