<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The income approach is the subject of debates conducted by academics and practitioners as one of the most controversial approaches in valuation practice. It is also somewhat differently understood by the three historically shaped valuation schools (US, British and German). This article compares the main assumptions underpinning the income approach’s investment method between the three schools in order to: 1) determine why the assumptions change and in what direction; 2) assess the advantages and disadvantages of explicit cash flows; and 3) evaluate the advisability of incorporating explicit cash flows into Polish valuation methodology. A thesis is formulated that, in Poland, the investment method should use implicit cash flows for estimating the market value of properties. There is a need to include explicit cash flow in university programs, but their use should be limited to valuations undertaken to determine the investment value of a property or the market value of portfolio properties, as well as valuations carried out for the purposes of financial reporting as required by EU legislation (MSSF 13 and MSR 40).</p><p>The article was prepared based on the review and analysis of the relevant literature.</p></abstract>

The income approach is the subject of debates conducted by academics and practitioners as one of the most controversial approaches in valuation practice. It is also somewhat differently understood by the three historically shaped valuation schools (US, British and German). This article compares the main assumptions underpinning the income approach’s investment method between the three schools in order to: 1) determine why the assumptions change and in what direction; 2) assess the advantages and disadvantages of explicit cash flows; and 3) evaluate the advisability of incorporating explicit cash flows into Polish valuation methodology. A thesis is formulated that, in Poland, the investment method should use implicit cash flows for estimating the market value of properties. There is a need to include explicit cash flow in university programs, but their use should be limited to valuations undertaken to determine the investment value of a property or the market value of portfolio properties, as well as valuations carried out for the purposes of financial reporting as required by EU legislation (MSSF 13 and MSR 40).The article was prepared based on the review and analysis of the relevant literature.

Valuation Schools and the Evolution of the Income Approach. An Evaluation of Change Trends

Real Estate Management and Valuation

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

The income approach is the subject of debates conducted by academics and practitioners as one of the most controversial approaches in valuation practice. It is...

Valuation Schools and the Evolution of the Income Approach. An Evaluation of Change Trends

Published Online: Jul 12, 2019

Page range: 66 - 76

DOI: https://doi.org/10.2478/remav-2019-0016

Keywords
real property valuation, valuation standards, income approach

© 2019 Ewa Kucharska-Stasiak, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Valuation Schools and the Evolution of the Income Approach. An Evaluation of Change Trends

Published Online: Jul 12, 2019

Page range: 66 - 76

DOI: https://doi.org/10.2478/remav-2019-0016

Keywordsreal property valuation, valuation standards, income approach

© 2019 Ewa Kucharska-Stasiak, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
real property valuation, valuation standards, income approach