Value Added Statements; Risk Assessment and Corporate Financial Management

Value Added Statements; Risk Assessment’s Role in Corporate Financial Management

This paper will show the benefits of value added statements and argue for their inclusion in U.S. financial reports. The role of risk assessment in financial management will also be discussed.

Gary Meek and Sidney Gray (1988) argued that value added statements (VAS) would show profits in a format that would be easily understood and usable by all stakeholders rather than just the shareholders. The VAS shows how value created by a company is used to pay those stakeholders which created the wealth or value added (Meek and Gray, 1988). Meek and Gray (1988) identified four areas that would benefit from VAS reporting: measuring wealth created by the company, emphasizing stakeholder interdependence, conditioning employee expectations of pay and prospects, and establishing productivity incentive programs.

Meek and Gray (1988) wrote that reporting the creation of wealth would interest various stakeholders and show the business’s role in generating income for society. Measuring and reporting wealth through VAS would raise the general public’s awareness of a company’s activities , benefiting the company and the public. Meek and Gray (1998) noted that income numbers receive the most attention, but are not the most effective way to show a company’s performance. The VAS emphasizes the interdependence of the stakeholders by showing how sources of income are paid to employees, governments, providers of capital, and the business. Meek and Gray (1998) wrote that the VAS may make the groups more cohesive. Others argue that the VAS would only highlight the amount each shareholder received and create competition among them (Meek and Gray, 1998). Meek and Gray (1998) wrote that VAS would benefit employees by conditioning their expectations for pay and by forming a basis for productivity incentive programs. The VAS would clearly show employees how much they received in wages and...