Performance Results in Value Added Reporting

Performance Results in Value Added Reporting

Performance Results in Value Added Reporting

Performance Results in Value Added Reporting

Synopsis

Shows the ways in which value added reporting is used abroad and how it can, and should, be used in the United States for its predictive ability and other advantages.

Excerpt

Value added reporting calls for the measurement and disclosure of net or gross value added, a measure of the increase in wealth generated by the productive use of a firm's resources before its eventual allocation among the production team of the shareholders, bondholders, labor, and the government. Although its use by the foreign multinational firms is on the increase, this innovative form of reporting is encountering some resistance in the U.S. contest. in 1991, an American Accounting Association special committee looking into the topic of measurement in general suggested the expansion of accounting disclosure to include a value added report. One factor arguing for this form of innovative reporting is its general usefulness to investors, users of information, and policy makers. the purpose of this book is to show the usefulness of value added data in various economic and financial contracts. Various empirical studies presented show in fact that (a) value added can be measured under any of the known price changes models; (b) a value added-based model has a better association with stock returns than an accounting profit-based model, and the valuation model relating accounting return to market return is more complete when relating the total return of the market to the total wealth generated, as measured by the net value added; (c) market return is better explained by value added than either earnings or cash flows; (d) value added-based productivity is useful in understanding the role of accounting variables in the prediction of firm valuation; (e) the . . .

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