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The Value Added Statement

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Introduction

Value added (VA) report is a statement of an entity wealth created and distributed in a financial year and intended to shift an organization away from the profit and loss account. It is simply an entity’s revenue for a given period less outside purchases or payment for supplier of services and materials. VA is a measures performance through the collective efforts of management, provider of capital and employees. According to Bao & Bao (1998, p252), VA statement shows “how the benefits of the effort of a firm were shared among its stakeholders including stockholders, creditors, management, employees, and government”. Morley (1979, p.620) expresses it as “the wealth creation for the company team, in which employee are seen as responsible participants”.

The corporate report which was published by the Accounting Standards (Steering) Commit-tee(ASSC) in 1975 recommended the publication of VA statement in Europe and since then has received prominent international acceptance. For instance, before the advent of IFRS in Nigeria, it was a mandatory requirement for public companies to provide VA information in their financial statement. In South Africa, greater numbers of companies in the industrial sector of the Johannesburg Stock Exchange (JSE) still voluntarily include VA information in their financial statement (Malgwi, & Purdy, 2009). In 2005, about 77% of companies listed on the JDE produced value added statement or consolidated value added statement (Stainbank, 2009, p. 138). The advent of the Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines has considerably stimulated and encouraged value added information

One significant importance of Value added statement is that it provides a link bet...

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...orley(1979, p.625), a dishonest accountant could manipulate the choice of method to produce a misleading Value added figure.

Also, VA statement as part of financial report may lead to confusion with the earning statement, in particular if a non-accountant see a conflicting trend between earning and value added figure, for example a positive VA and negative earnings(Morley, 1979, p.624). This may have informed standard setter from making the information mandatory as it will conflict with one of the basic principle of financial statement.

More so, over the years the importance of VAS has declined due to shift from industrial democracy (Elliott & Elliott, 2012, p864) and there are alternative, modern and consistent, reliable corporate social responsibility reporting which can be benchmarked against international scheme as well as capable of external verification.
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