Choosing between indexation-based valuation and direct market comparable evidence for industrial plant isn't a matter of preference — it depends entirely on what evidence actually exists for the specific asset category being valued.
When market comparable is the right approach
Standardised, widely-traded equipment — generators, forklifts, standard HVAC plant, common material handling equipment — typically has an active secondary market with observable transaction and asking prices. Where this evidence exists, market comparable is the more direct and defensible approach: it reflects actual market behaviour rather than a cost-derived proxy.
When PPI/indexation is the right approach
Specialised, custom-built, or facility-integrated equipment — production lines configured for a specific process, bespoke processing equipment, purpose-built industrial infrastructure — rarely trades on a secondary market. There's simply no comparable evidence to draw from. Indexation, trending the original acquisition cost forward using an appropriate cost index, becomes the practical alternative.
The hybrid reality
Most industrial portfolios contain both asset types, meaning a single valuation assignment often applies both methods across different line items within the same asset register — a mistake we see is applying one method uniformly across an entire asset schedule regardless of whether comparable evidence exists for specific items.
Cross-checking between methods
Where possible, even indexed valuations benefit from a market sense-check: does the indexed value fall within a plausible range compared to what similar (even if not identical) equipment has transacted for? This cross-check catches indexation errors — outdated base costs, inappropriate index selection, or missed obsolescence factors — before they reach a final report.
Documentation standard
Whichever method is applied to a given asset, the valuation register should record which method was used and why, on an item-by-item or category basis. This transparency matters enormously at audit or dispute stage — a reviewer needs to see the methodology decision was deliberate, not default.