2 CSR 60-5.050 - Acceptance of Appraisal Values on Financial Statements
(1) A grain dealer holding a Missouri grain
dealer's license or an applicant for a Missouri grain dealer's license may
submit an appraisal of fixed assets, such as land, buildings and equipment, for
consideration in computing net worth. However, if at any time the director
determines that a serious cash flow problem exists or that current liabilities
far exceed current assets, the director may disallow the use of an appraisal in
computing net worth.
(2) An
appraisal must be submitted by an individual or company competent and
experienced in conducting appraisals and in making assessments of the fair
market value of fixed assets, such as land, buildings and equipment.
(3) If only land is being appraised, the
appraisal may be completed by a real estate salesperson or broker licensed with
the Missouri State Real Estate Commission or with a comparable commission of
another state. If land is appraised by a real estate salesperson or broker, the
appraisal must include at least two (2) quotes of recent sales of similar land
in the same geographic area. In the absence of recent sales in the area, this
requirement may be waived by the director.
(4) If only transportation or farm equipment
is being appraised, the appraisal may be completed by an equipment dealer with
experience in appraising transportation and farm equipment.
(5) If a grain dealer holding a Missouri
grain dealer's license or an applicant for a Missouri grain dealer's license
desires to submit an appraisal, the director may require that the appraisal be
conducted by an individual or professional appraisal company holding the
designation Member of the Appraisal Institute (MAI) awarded by the American
Institute of Real Estate Appraisers (AIREA) of the National Association of
Realtors or that the appraisal be conducted by an individual or professional
appraisal company who is a member in good standing of the Society of Real
Estate Appraisers (SREA).
(6) For
an appraisal to be considered in computing net worth, the appraiser must state
the estimated fair market value of the items being appraised. For the purpose
of this rule, fair market value shall be defined to mean the highest price in
terms of money which a property will bring in a competitive and open market
under all conditions requisite to a fair sale, buyer and seller each acting
prudently, knowledgeable and assuming the price is not affected by undue
stimulus.
(7) If buildings,
equipment, or both, are being appraised, the appraiser shall use the cost
approach (replacement cost less depreciation) or the market data approach,
unless an alternate approach is approved by the director.
(8) If an appraiser determines fair market
value by computing the replacement cost less depreciation, the appraisal
process shall include, but not be limited to, the following steps:
(A) If land is appraised, the value of the
land as if vacant is to be estimated;
(B) If improvements on the land are
appraised, the cost to reproduce (new) the existing improvements is to be
estimated;
(C) For the
improvements, the deduction for depreciation from all causes is to be
estimated; and
(D) If applicable,
the value of the land is to be added to the cost to reproduce (new) the
existing improvements less the deduction for depreciation from all
causes.
(9) To determine
the deduction for depreciation from all causes, the appraiser should evaluate
and estimate the disadvantages and deficiencies of the existing improvements as
compared with new improvements. Depreciation, when measured as a disadvantage
or deficiency, may be one (1) or all of the following kinds:
(A) Physical deterioration-deterioration or
the physical wearing out of the property;
(B) Functional obsolescence-a lack of
desirability in layout, style and design as compared with that of a new
property serving the same function; or
(C) Economic obsolescence-relating to a loss
of value from causes outside the property itself.
(10) If an appraiser determines fair market
value by using the market data approach or comparison approach, the appraiser
shall determine fair market value by comparing known sales of similar
properties which have occurred within a recent period of time to the subject
property.
(11) All appraisals must
be accompanied by a statement of the appraiser's qualifications unless that
statement is already on file with the department. This statement should include
the appraiser's educational background, his/her experience in preparing
appraisals, memberships in professional appraisal societies and organizations
and a partial list of past clients.
(12) The appraisal must include a detailed
description of the basic method or technique by which the appraised value was
determined and must include a certification signed by the appraiser making the
following statements:
(A) The appraiser has no
present or contemplated future interest in the property appraised; and neither
the employment to make the appraisal nor the compensation for it is contingent
upon the appraised value of the property;
(B) The appraiser has no personal interest in
or bias with respect to the subject matter of the appraisal report or the
parties involved;
(C) The appraiser
has personally inspected the property, both inside and out, and has made an
exterior inspection of all comparable sales listed in the report. To the best
of the appraiser's knowledge and belief, all statements and information in the
appraisal report are true and correct and the appraiser has not knowingly
withheld any significant information;
(D) If the appraiser is affiliated with an
appraisal organization, the appraisal report has been made in conformity with
and is subject to the requirements of the Code of Professional
Ethics and the Standards of Professional Conduct of
the appraisal organization; and
(E)
All conclusions and opinions concerning the properties set forth in the
appraisal report were prepared by no one other than the appraiser unless
otherwise indicated.
(13)
The appraiser may set forth all of the limiting conditions (imposed by the
terms of the assignment or by the appraiser) affecting the analysis, opinions
and conclusions contained in the appraisal report.
(14) To assist the appraiser in setting forth
his/her qualifications, experience and other information relating to the
performance of the appraisal, the director may prepare a form for use by the
appraiser. However, in addition to the appraisal form, the appraiser shall
submit a copy of the actual appraisal.
(15) An appraisal shall be accepted for a
period of four (4) years from the date of the appraisal. However, if during the
four (4)-year period the director becomes of the opinion that there may have
been a significant reduction in the value of the appraised property, an updated
appraisal may be requested. Otherwise, once four (4) years has elapsed, a new
appraisal must be submitted with the next required financial statement or the
department shall use the book value of the appraised property.
(16) The amount by which the appraised value
exceeds the licensee's basis at the time of the appraisal shall be known as
appraisal surplus. This value shall be discounted thirty percent (30%) to allow
for possible fluctuations in market value and for capital gains taxes that
could result if the asset(s) was disposed of at the appraised value. The
discounted appraisal surplus shall be added to the book value to arrive at the
allowable value for the appraised assets.
(17) If, during the period that an appraisal
is allowed, the items included in the appraisal remain on the books or new
items are added to the books, the allowable value for fixed assets will be
determined by adding the original discounted appraisal surplus to the present
book value.
(18) If, during the
period that an appraisal is allowed, some of the items included in the
appraisal are removed from the books, the allowable value for fixed assets will
be determined by recomputing the original discounted appraisal surplus, taking
into account the items that must be removed from both the appraisal and the
list of book values and adding the adjusted discounted appraisal surplus to the
present book value.
(19) If the
book value or basis in the property cannot be determined, the director shall
discount the appraisal value thirty percent (30%) to allow for possible
fluctuations in market value and for capital gains taxes that could result if
the asset(s) was disposed of at the appraised value.
(20) An appraisal of assets will not be
accepted for a period of one (1) year after the assets are purchased.
Notes
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