Personal Property Tax Services:Capital Asset Review & Evaluation

Marshall & Stevens, Inc.

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Our teams are comprised of seasoned valuation, banking and legal professionals - experts who speak the language of your industry or practice; who grasp its nature, subtleties and dynamics; and who understand your unique concerns. 

We take great pride in our people, our independence and our ability to remain on the cutting edge of issues affecting our clients.

Quality Valuation

Quality Decision making

Independence & Integrity Los Angeles■

Chicago■

■St. Louis ■Philadelphia■New York

■Tampa

LOS ANGELES • NEW YORK • CHICAGO • PHILADELPHIA • ST LOUIS • TAMPA

Quality Valuation

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Valuation Advisory

Tax Valuation

Real Estate Valuation Corporate Finance

Restructuring Advisory Litigation Support

Capital Asset Valuation

• Business Valuation• Goodwill & Intangible

Asset Impairment• Fair Value Analysis• Purchase Price Allocation• ESOP• Equity, Stock, Option

and Debt Valuations

• FDIC failed bank F,F&E• Machinery & Equipment• Ghosts Assets• Structured Finance • Insurance• Inventory and personal

Property Register

• Real Estate Valuations & Consulting

• Property Tax Consulting• Collateralized Loan

Valuations• PPA for Real Estate

Allocation

• Mergers & Acquisitions• Fairness & Solvency Advice• Buy-Side, Sell-Side Consulting• Private Debt & Equity Placement• Purchase Price Allocations and Fresh Start Accounting

• Expert Witness• Dispute Analysis• Infringement Damages• Insurance Claims• Contract Disputes• Bankruptcy Litigation

• Chapter 11 Restructurings• Solvency Analyses• Fresh Start Accounting• 363 Marketplace Services• Fraudulent Transfers &

Preference Analyses• Expert Testimony

• Business Valuation• Tax Restructuring• Property Tax• Estate & Gift Tax• Intellectual Property

Valuation• Discount Studies

Quality Decision making

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VISION

PROJECT MANAGEMENT

EXPERTISE

Independence & Integrity Without conflicts of interest, Marshall & Stevens is an appropriate choice in providing the

important work that must pass the scrutiny of the IRS, SEC, shareholders, and other stakeholders

Providing valuation services without contingencies like an investment banker or property tax consultant, we avoid biases.

We understand that “this is the way we’ve always done it” is rarely the right answer to a complex question.

We have a stringent quality control process, overseen by our Board of Directors, all of whom are significant shareholders in our company

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Experienced Marshall & Stevens’ valuation leaders are qualified at the highest level of their profession

FinancialAl King, Vice Chairman, CMA • Financial Accounting Standards expert

Chris Louis, ASA, MAI• Certified specialist in Finance and Real Estate

John Ryan, ASA John Spude, ASAA. Kendall Raine III, Series 7

The Marshall & Stevens’ team includes professionals trained and experienced in:LawAccounting and audit practiceReal estate development, management and finance

We have established strategic relations with a wide range of specialist firms to provide advice, as part of the M&S team, on areas where we may lack specific in-house expertise

Real Estate Lance Biernbaum, MAI, CCIMChris Louis, ASA, MAI• Certified specialists in Finance and Real Estate

Equipment Carl Bloomquist, ASA David Koller, ASA Robert Owens, ASA Shane Park, ASA

Investment bankingCommercial banking

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Fixed Assets

Ghost Assets are assets that no longer physically exist within an organization yet remain on the books. These assets can negatively impact:

• Insurance premiums• Personal property tax basis• Depreciation schedules and earnings

Fixed assets are a significant portion of most companies’ Balance Sheet.

Companies retire assets, purchase replacements and perform repairs on an ongoing basis.

Over time, book and tax values reported for a plant or facility may not truly reflect the assets at a location.

A detailed fixed asset study will determine that a percentage of the assets, studies have shown 10-15%, on the books are no longer are in use, cannot be located, or are being cannibalized for parts.

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Asset Control Issues Failure to manage fixed assets results in:

Inability of management to adhere to the SEC’s definition of internal controls over financial reporting• Potential for a “Significant Deficiencies” or “Material Weakness”

Inaccurate financial reporting

Inefficient use of capital resources

Excess property tax liability

Potential overpayment of insurance premiums

Inability to manage corporate risk

Wasting of corporate assets

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Corporate Considerations

All companies – public, private, non-profit - are affected by Ghost Assets.

Any company adhering to or basing financial reporting standards on Sarbanes-Oxley must ensure that all assets are accounted for and reported in an accurate manner.

Public companies by SEC rule must account for all assets.

Private companies acquired in transaction with another company will need to account for all assets.

Non-profit organizations are being required in many states to provide more accurate financials with greater transparency.

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Corporate Concerns

When was the last time the physical assets were verified against the corporate fixed asset record? What were the results?

How have business combinations been booked?

Are the depreciable and amortizable lives reasonable for the asset costs being written off?

Has the company now or at any time in the past exercised practices that would cause the fixed asset record to incorrectly represent the physical assets employed in the business?

Any response that reveals inaccuracy in the asset records should be reviewed in a comprehensive manner in order to be corrected.

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Marshall & Stevens’ Capital Asset Review and Evaluation Services The Capital Asset Review and Evaluation Services (CARES) solution is a service provided

by Marshall & Stevens to assist companies with optimizing and enhancing asset management and fixed asset records.

Benefits: Supports management’s statements of establishing and maintaining adequate internal

control over financial reporting

Accurate property tax reporting

Provides accurate fixed asset data

Identifies non-existent assets, optimizes return-on-asset ratios

Reduces the need for property management workforce

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Capital Asset Review and Evaluation Services Methodology Assesses the property records and the asset life cycle

Develops the appropriate plan after assessment

Performs a complete physical inventory capturing all pertinent asset data

Reconciles, cleanses, and records assets

Delivers a validated, supportable, updated and enhanced asset information with a go forward asset management plan

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Marshall & Stevens’ Capital Asset Review and Evaluation Services

Optimized Fixed Asset Records Optimal Unit of Reporting: only track what is required from regulatory

agencies, including local property taxation, insurance, or environmental control management.

Optimal Unit of Property Management: use Best Practices to define most efficient unit of property for managing asset life cycles.

Address Special Information Needs: construction in progress, leased property, environmental assets, non-insurable assets, retired assets, and adjusted property

Asset Information System: include asset type, description, manufacturer, serial number, year, original cost, account, project number, and as appropriate location and bar codes, job number, partial retirement, transfer, and adjustment information

Classification by Reporting Class

Identification of Intangibles

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Internal Control of Fixed Assets

Valuation Issues for PP&E Insurable Values – Cost of Reproduction

Property tax values – Fair Market Value

Surplus equipment available for transfer or sale

• Orderly Liquidation

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Internal Control of Fixed Assets (cont.)

Insurable Values

• Need to know how much insurance to carry

• Proof of loss

• Determination of FV for Insurance is based on current Cost of Replacement New Less Depreciation (“CRNLD”)

• Can inspect major items and apply cost indexes to remaining items

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Internal Control of Fixed Assets (cont.)

Surplus and Idle Equipment

• Many companies have assets no longer in use• Space• Insurance• Taxes

• If properly identified, can develop sales amounts that could be realized

• Alternatively, take impairment charge

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The Public Company Accounting Oversight Board (PCAOB) has established that internal controls of PP&E must be considered by management and reviewed by the auditor.

Factors an auditor must consider to determine if an account is significant:

Size and composition of the account

Susceptibility of loss due to errors or fraud

Accounting and reporting complexities associated with the account

Exposure to losses represented by the account

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Accounting for PP&E - Property, Plant & Equipment

Case Example

5 Casinos in 4 cities

Inventory and asset clean management for SOX 404(b) and stewardship.

Property Tax savings were significant.

Marshall & Stevens identified the value of the slots and separated the cost between software (non-taxable) and hardware (taxable).

Several hundred slots were identified as missing, or present but not on the books.

Renovations were reviewed and booked to reduce tax exposures.

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Why choose Marshall & Stevens?

We are a recognized leader in the valuation field and our experience is unsurpassed.

The independence of our valuations benefits you for the property tax appeal process.

We view this opportunity as a basis for a long-term relationship.

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Contact Information

Marshall & StevensCorporate Headquarters

355 South Grand Avenue, Suite 1750Los Angeles, California 90071

Please contact a sales representative in you area by clicking on the “contact us” link.

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