Insolvency and Bankruptcy Board of India

31st December, 2018

Subject: Syllabus of Valuation Examination for Asset Class- Plant and Machinery with
effect from 1st April 2019

In pursuance of the rule 5 (3) of the Companies (Registered Valuers and Valuation) Rules,
2017, the Insolvency and Bankruptcy Board of India, being the Authority, hereby publishes the
syllabus, format and frequency of the ‘Valuation Examination’ to be conducted from 1st April,
2019 for the asset class: Plant and Machinery as under:

I. Syllabus
Sl. No. Coverage Weight (%)
1. Principles of Economics
• Microeconomics
- Consumption: Indifference Curve, Consumer’s Surplus, 4
Elasticity
- Price Mechanism: Determinants of Price Mechanism,
Individual and Market Demand Schedules, Law of Demand &
its Conditions, Exceptions and Limitations of Law of Demand,
Individual and Market Supply Schedules, Conditions and
Limitations, Highest, Lowest and Equilibrium Price,
Importance of Time Element
- Pricing of Products under different market conditions: Perfect
and Imperfect Competition, Monopoly
- Factors of Production and their pricing: Land, Labour, Capital,
Entrepreneur and other factors
- Theory of Rent
- Capital and Interest: Types of Capital, Gross Interest, Net
Interest
- Organisation and Profit: Functions of Entrepreneur, Meaning
of Profit and Theories of Profit
• Macroeconomics 4
- Functions & Role of Money
- Inflation: Types of Inflation, Causes, Effects, Inflationary Gap,
Control of Inflation, Monetary, Fiscal and Direct Measures
- Deflation: Causes, Effects, Deflationary Gap, Measures to
Control Deflation, Deficit Financing
- Savings and Investment: Savings and Types of Savings,
Determinants of Savings, Investment, Types of Investment,
Determinants of Investment, Relationship between Savings and
Investment
- Components of Economy: Primary Sector, Secondary Sector,
Tertiary Sector, Informal Sector in Urban Economy, Parasitic
Components in Urban Economy
- Concepts of GDP and GNP, Capital Formation

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 • Parallel Economy 2
- Definition of Parallel Economy, Causes and Effects of Parallel
Economy on use of Land and its Valuation
- Its impact on Real Estate Market
- Construction Industry and Parallel Economy
2. Book Keeping and Accountancy
- Meaning and objects of Book Keeping, Double Entry Book 3
Keeping
- Books of Prime Entry and Subsidiary Books: Cash Book, Bank
Book, Journal, Ledger, Purchase and Sale Books, Debit and
Credit Note Register, Writing of Books, Posting and Closing of
Accounts
- Trading Account, Profit and Loss Account, Income and
Expenditure Account
- Preliminary Analysis of Financial Statements
- Cost, Costing and Elements of Cost, Fixed Expenses, Variable
Expenses, Break-Even Point
3. Law-General
- Indian Legal System: Salient Features of the Indian 10
Constitution, Fundamental Rights, Directive Principles of the
State Policy
- Government: Executive, Legislature and Judiciary
- Laws of Contract: Formation of a Contract, Parties, Void,
Voidable and Unenforceable Contract, Contingent Contract,
Misrepresentation and Fraud and effect thereof, Termination of
a Contract, Remedies for Breach, Performance of Contract,
Indemnity and Guarantee, Law of Agency
- Tort: General Principles of Tort, Tort affecting Valuation
- Law of Arbitration and Conciliation: Salient Features
- Auction: Authority of Auctioneer, Duties of Vendor, Purchaser
and Public, Misdescription and Misrepresentation,
Advertisements, Particulars and Catalogues, Statements on the
Rostrum, Conduct of Sale, Reservation of Price and Right to
Bid, Bidding Agreements. Memorandum of the Sale. The
Deposit, Rights of Auctioneer against Vendor and Purchaser
- Laws of Evidence: Burden of Proof, Presumptions, Conclusive
Proof
- Salient Features of the Insolvency and Bankruptcy Code, 2016 2
concerning Valuation
- Salient Features of the Companies (Registered Valuers and
Valuation) Rules, 2017
- Salient Features of the Securitization and Reconstruction of the
Financial Assets and Enforcement of Security Interest Act,
2002 (SARFAESI Act, 2002) concerning Valuation
- Section 5 (n) of the Banking Regulation Act, 1949 on “Secured
Loan or Advance”
- The Companies Act 2013: Section 192(2), 230 (1), 230 (2), 230
(3), 231, 232, 247 and 281(1)

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4. Introduction to Statistics
- Data Classification and Processing, Graphical Representation 2
of Data, Frequency Distributions
- Measures of Central Tendency, Dispersion and Skewness
- Elementary Theory of Probability and Probability
Distributions, Sampling and Sampling Distributions,
Estimation
- Simple Test of Significance, Regression and Correlation,
Multiple Correlation Coefficient
- Time Series
- Index Numbers
5. Environmental Issues in Valuation
- Environment and Valuation - Differences between the Market 4
Price and the Negative Value Consequent on Environmental
Impact
- Environmental Issues of Air Pollution, Water Pollution,
Environmental Factors and their effects, Measures to Restore
the Damage, Cost to Cure
- Outlines of Environmental Legislations: The Indian Forest Act,
1927, The Water (Prevention and Control of Pollution) Act,
1974, The Air (Prevention and Control of Pollution) Act,1981,
The Environment (Protection) Act,1986
- Laws related to Industrial Health and Safety
6. Professional Ethics and Standards
- Model Code of Conduct as notified by Ministry of Corporate 2
Affairs under the Companies (Registered Valuers and
Valuation) Rules, 2017
- Ethical considerations under terms of engagements
7. Valuation of Plant and Machinery
- Role, Functions and Responsibilities of a Plant and Machinery
Valuer 6
- Cost, Price, Value and Valuation.
- Types of Market, Demand and Supply Curve, Buyer’s and
Seller’s Bell Curve for Overall Sales performance
- Annuities, Capitalisation, Rate of Capitalisation, Years
Purchase, Sinking Fund, Redemption of Capital, Reversionary
Value
- Construction and use of Valuation Tables
• Definitions of the various terms
- Plant and Machinery, Furniture, Fixtures and Fittings – judicial
interpretation of these terms
- Market value, Highest and Best Use Value
• Meaning of the terms
- Basis of Valuation, Value in Use, Value in Exchange, Value to
the Buyer, Value to the Seller, Value to the Occupier, Value in
Existing Use In-Situ, Value in Existing Use in Ex-Situ, Value
in Alternative Use in In-Situ, Value in Alternative Use in Ex-
Situ, Liquidation Value In-Situ/Ex--Situ, Orderly Liquidation
Value, Forced Sale Value

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 - Investment Property, Marketable Non-Investment Property,
Non-Marketable Non-Investment Property with their
characteristics and approaches to Value
- Factors having direct bearing on Value (Valuation Maxims)
like Physical, Legal, Social, Economic, Utility, Marketability,
Transferability, Scarcity, Present Worth of Future Benefits and
Intangible Rights
• Identification and Physical Verification of Plant,
Machinery and Equipment (PME) 4
- Inventory (Listing of Machinery) and data to be collected while
taking inventory
- Importance of Technical Specifications of Plant and Machinery
in Valuation exercise
- Assessment of Condition of Plant, Machinery and Equipment
based on Visual Inspection
- Comparing Inventory with Plant and Machinery Records
maintained by the Company
- Ascertaining Discrepancy
- Identification of Productive, Non-Productive, Surplus and Off-
Balance Sheet Assets
- Age, Effective Age, Total Economic Life, Economic Balance
Life, Physical Life and their importance in Valuation
- Factors affecting Life, both in terms of years or hours of use,
depending on type of assets and maintenance
- Definition and distinction of the terms - Historical Cost,
Acquisition Cost, Book Cost, Written Down Value and Net
Book Value
- Items in the nature of buildings to be treated as Plant and
Machinery- like Chimneys to the Boiler, Brick, Concrete or
RCC Foundation for Plant and Machinery, Water and
Sewerage Installations, Effluent Treatment Plant etc.
- Depreciation under The Income Tax Act, 1961 as well as The
Companies Act, 2013 3
- Useful Lives to compute depreciation as per Schedule II of The
Companies Act, 2013
- Factors to be considered for Componentization of Asset
- Installed Capacity of the Plant, Actual Production, Raw
Material Availability, Level of Technology used such as
Current or Obsolete, Issues if any regards to these
- Part, Fraction and Whole Valuation
- Relationship of Earnings and Assets
- Difference Between Business Specific Economic Viability and
Economic Obsolescence
- Efficiency of Plant Layout, Imbalances in different production
sections and their relevance in valuation
Three Approaches to Value: Cost, Market and Income
• Cost approach
- Reproduction Cost New, Replacement Cost New, Depreciated 6
Reproduction Cost/Depreciated Replacement Cost (DRC),
Difference and similarity in DRC and Market Value

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 - Difference between Reproduction Cost New and Replacement
Cost New
- Methods of Computation of Reproduction Cost New
- Market Inquiry of Current Cost of Brand-New Machine with
Identical Specifications from same manufacturer i.e. Replica
Indexation and its limitations, Cost to Capacity Method and its
limitation
- Methods of Computation of Replacement Cost New when
Identical Machine/Plant is not available i.e. Machine/Plant of
like Kind and Type, and factors to be taken into consideration.
- Direct and Indirect Costs for Estimation of Reproduction New
/Replacement Cost New
- Meaning of the term Depreciation for Wear and Tear, Factors
influencing Depreciation-its measurements and application by
Valuers of Plant and Machinery
- Concept of Salvage Value and Scrap Value along with the basis
of the same
- Methods of Depreciation – Observed Deterioration, Straight
Line, Diminishing Balance (WDV)
- Difference between Accounting and Technical Depreciation.
- Factors to be taken into consideration for selection of
Depreciation Method
- Obsolescence- Technological, Functional and Economic
- Depreciated Replacement Cost (DRC) subject to Potential
Profitability
- Limitations of Cost Approach
• Market Approach- Sales comparison method
- Data Collection 2
- Elements of Comparability and application of appropriate
Weightages to Identified Comparable to Estimate Value of
Subject Plant and Machinery Asset being valued. Instances
when Sales Comparison Method is not feasible and limitations
of Sales Comparison Method
• Income Approach
- The concept of Income Approach 2
- Gross Income-Outgoings, Net Income and Year’s Purchase
- Actual Income Vs Potential Income
- Terminal Income
- Remunerative and Accumulative Rates of Interest and various
methods of determining the same
- Capitalization of Earnings Method
- Discounted Future Earnings Method (DCF Technique)
- Pitfalls of DCF Technique
• Process of Valuation
- Check List for Valuation of Plant and Machinery, documents 3
to be studied prior to Plant Visit/Inspection, ABC analysis
- The items to be treated as Plant and Machinery
- The items to be treated as Land and Buildings
- Physical Verification (Survey and Inspection)
- Data Collection and Valuation Analysis under Replacement
Cost New Method (Cost Approach)
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• Broad categories of machines to be encountered by plant
and machinery valuers in actual practice 2
- Valuation of a machine for which current cost of identical
brand-new machine is available
- Valuation of a machine for which current cost of identical
brand-new machine is not available
- Valuation of a machine which is no longer manufactured
- The reasons for the differences in the prices of the machines
with same technical specifications and features by different
manufacturers
- The factors to be considered while adopting Cost Approach
- Data Collection and Valuation Analysis under- Cost, Market
and Income Approaches
• Leasing of plant and machinery
- Definition of Lease 2
- Leasing, Hiring and Renting
- Obligations of Supplier of Asset, User of Asset, Hire Purchase
Company/Lessor in cases of Loan, Supplier’s Credit, Hire
Purchase and Leasing
- Leasing as an instance of Bailment, Nature of the Bailment
Agreement, Features of Bailment, Contracts Law on Bailment.
- Leasing Rules
- Types of Leases and their characteristics
- Steps in the structuring of a Lease Contract
- Leasing from point of view of Lessor/Lessee
- Limitations of Leasing
- The structure of a Lease Agreement
- Treatment of Leased Assets in Company Accounts –
Accounting Practice for Leased Plant and Machinery as per
Indian Accounting Standards
- Assessment of Lease related risk
- Risk and Return trade-off
- Valuation of leased plant and machinery
• Valuation of plant and machinery for following purposes 6
- Mergers and Acquisitions (including Purchase Price
Allocation)
- Financial Statements
- Impairment
- Auction
- Insurance
- Leasing
- Disposal.
- Capital Raising
- Corporatization and Privatization
- Stamp Duty
- Any other purpose not referred above
- Study of Valuation Standards as per the provisions of the
Companies Act, 2013
- Study of Indian Accounting Standards (Ind AS 16) as
applicable to Valuation
- Valuer as an Expert witness in Court
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 - Valuers’ Functions & Responsibilities, Error of Judgement and
Professional Negligence
Case laws
- Fixture - Holland Vs. Hodgson (1872) L.R.7 C.P.328 at 335 1
(Australia)
- Plant and Machinery in nature of Land and Buildings – Duncan
Industries Ltd. Vs. State of U.P. and Other AIR 2000 SC 355
- Obsolescence – Westinghouse Elect. Corporation 93 NC App.
710, 379 S.E.2D 37(1989) (U.S.A)
- Just because a Plant and Machinery are fixed in the Earth for
better functioning it does not automatically become an
Immovable Property - Sirpur Paper Mills Pvt. Ltd. Vs. The
Collector of the Central Excise, Hyderabad AIR (1998) 1 SCC
400: (1998 AIR SCW 366: AIR 1998 SC 1489)
- Plant and Machinery in nature of Land and Buildings - Official
Liquidator Vs. Sri Krishna Deo and Ors. (AIR 1959 All 247)
- Valuation of specialized Plant and Machinery by Cost
Approach is subject to Potential Profitability - Symex Holdings
Ltd. Vs. Commissioner of State Revenue, Supreme Court of
Victoria, Australia-(2007) VSC 159
8. Law - Plant and Machinery
- Sale of Goods and Agreements to Sell, Seller’s Obligations as 3
to delivery Time, Title, Description, Fitness, Quality and
Quantity; Exclusion of Obligations, Sales by Sample, Passing
of Property in Goods, Transfer of Title by Non-owner,
Remedies for Breach of Contract, Rights of Unpaid Seller
against Goods
- Licensing of Industries and regulation of industrial activities
under various laws; viz. Industrial Licensing Laws etc
- Salient features of various acts such as the Factory Act, 1948,
the Electricity Act, 2003, Labour laws with regards to
regulatory measures for industrial undertakings
9. Principles of Insurance and Loss Assessment
- Principles and legal concepts in relation to Insurance of Plant
& Machinery, The Contract of Insurance, Insurable Interests 4
and Liability to Insure, Duties of the Insurer and the Insured
- The types of Fire Policies -Reinstatement Value and Indemnity
Policies and policies for other perils, Terms and Conditions,
Perils, Beneficial And Restrictive Clauses
- Value at Risk, Sum Insured and Condition of Average, Over
and Under Insurance, Inflation Provisions, other contents,
Depreciation, Obsolescence and Betterment
- Preparation of Claim for Damages due to Insured Perils
- Obligations and Rights of Insurer and Insured
10. Machine Tools, Factory, Utility Equipment and Electrical 6
Installations
- Machine Tools - For Milling, Turning, Cutting, Drilling and
Threading, Grinding, Shaping, Casting, Plastic deforming,
Powder forming, Sheet metal, Welding, Fabrication
- Factory Equipment - material handling and fire protection

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 - Utility Equipment – for energy generation, energy consuming
devices, for energy utilisation
- Electrical Installations
11. Industrial Processes
- Factory Planning and layout: Types of Plant Layout, 6
Production Techniques, Automation, Mass Production, Batch
and One-Off Production
- Principles of Industrial Processes: Material flow, process
sequences, automation and process control
- Industrial Processes: The Normal Processes, Methods of
Manufacture, Plant and Machinery utilised, Flow Diagrams
and Inventory Compilation for the following specific
industries: Textiles, Dairy, Vegetable Oil, Iron, Steel & Non-
Ferrous Metal Production, Chemical and Pharmaceutical,
Plastic and Rubber, Paper and Paper Products, Printing,
Binding and Publishing, Food and Drink
- The nature and function of trade specific machinery in the
above industries
12. Report writing
- Reports-Quality, Structure, Style 3
- Report writing for various purposes like Sale/Purchase,
Mergers & Acquisitions, Insurance, Liquidation and any other
purposes for which a valuer is normally called upon for advice
in general practice
- Contents of the report: The Instructions (including basis of
valuation) received from the clients showing scope of work,
Date as on which valuation is made, Date of Report, Date of
Inspection, Purpose of Valuation, Location of Assets,
Valuation Definition considered, Approach/Method of
Valuation, Procedure Adopted, Summary of Valuation,
Assumptions and Limiting Conditions including Caveats,
Schedule of Plant and Machinery with Make, Model,
Description, Year, Condition, Values
13. Case Study
On valuation of plant and machinery mentioned under Part-7 above. 8
This section will have a case study to test the ability to apply valuation
techniques. There will be a comprehension narrating a transaction
based on which questions will be asked.
Total 100
Note: Wherever any law, an Act of Parliament or any Rule is referred to in the syllabus, the
same shall be taken as in force as on 31st December, 2018. This means that any amendment in
such laws, Acts or Rules effected after 31st December, 2018 shall be ignored.

II. Format of Examination

The format of examination is as under:
a. The examination is conducted online (computer-based in a proctored environment) with
objective multiple-choice questions;
b. The duration of the examination is 2 hours;
c. A candidate is required to answer all questions;

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 d. A wrong answer attracts a negative mark of 25% of the marks assigned for the question;
e. A candidate needs to secure 60% of marks for passing;
f. A successful candidate is awarded a certificate by the Authority;
g. A candidate is issued a temporary mark sheet on submission of answer paper; and
h. No workbook or study material is allowed or provided.
i. A candidate may use a calculator which does not have memory.
j. No mobile phone is allowed.

III. Frequency of Examination

The frequency of Examination is as under:
a. The Examination is available from a number of Examination Centres across the
country.
b. The examination is available on every working day.
c. A candidate may choose the time, the date and the Examination Centre of his choice for
taking the Examination. For this purpose, he needs to enrol and register
at https://valuationregistration.bsebti.com. .
d. A candidate needs to pay an Examination fee of Rs.1500 (One thousand five hundred
rupees only) online on every enrolment.

Further details of the Examination, if any, will be provided subsequently.

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