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A brief history of the Australian discounted cash flow practice standard

A brief history of the Australian discounted cash flow practice standard The increasing complexity of investment properties has necessitated the application of more advanced valuation and analysis techniques. Following the property cycle of the 1980s/1990s, and the recommendations of several reporters, the DCF method has been promoted in Australia for certain income‐producing properties. The Australian Property Institute disseminated an information paper in 1993 that discussed DCF and suggested a performance approach to its application. Following this, a practice standard was produced in 1996 that was highly prescriptive but which contained a number of confusing passages. With the benefit of hindsight, its publication was premature and it was withdrawn from circulation. A rewrite was commissioned and an exposure draft was circulated in early 1999. It has been prepared as a performance standard in which the valuer is called on to follow a method while disclosing the specifics. However, a number of considerations remain to be finalised, for example, the application of the term cash flow to net operating income, income after finance and income after finance and tax. The preparation of standards is an evolutionary process and the present coverage of the DCF practice standard reflects the market in which it applies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

A brief history of the Australian discounted cash flow practice standard

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References (46)

Publisher
Emerald Publishing
Copyright
Copyright © 2000 MCB UP Ltd. All rights reserved.
ISSN
1463-578X
DOI
10.1108/14635780010324349
Publisher site
See Article on Publisher Site

Abstract

The increasing complexity of investment properties has necessitated the application of more advanced valuation and analysis techniques. Following the property cycle of the 1980s/1990s, and the recommendations of several reporters, the DCF method has been promoted in Australia for certain income‐producing properties. The Australian Property Institute disseminated an information paper in 1993 that discussed DCF and suggested a performance approach to its application. Following this, a practice standard was produced in 1996 that was highly prescriptive but which contained a number of confusing passages. With the benefit of hindsight, its publication was premature and it was withdrawn from circulation. A rewrite was commissioned and an exposure draft was circulated in early 1999. It has been prepared as a performance standard in which the valuer is called on to follow a method while disclosing the specifics. However, a number of considerations remain to be finalised, for example, the application of the term cash flow to net operating income, income after finance and income after finance and tax. The preparation of standards is an evolutionary process and the present coverage of the DCF practice standard reflects the market in which it applies.

Journal

Journal of Property Investment & Finance – Emerald Publishing

Published: Apr 1, 2000

Keywords: Investment property; Valuation; Standards

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