Value added statement

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Value added statement
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Value added statement represents the social character of production, something which was not included in very traditional profit and loss accounting. The added value is created during production process as the consequence of mixing the effort and co-operatation of teams in the company[1]. Value added concept was firstly used in 1790 in North American Census of Production. The value added statement (VAS) is one of the basic and most important statements for stakeholders. Probably the main purpose of its creation was to show stakeholders information about the company in more understadable way for them[2].Value added statement was called also a new form of enterprise accounting and is placed in the context of progressive accounting [3]. The reasons why companies are publishing Value Added Statamets are[4]:

  1. Communicating employees information about the company' situation,
  2. Being evaluated better by annual financial statement awards (having more points),
  3. Showing social responsibility of the company,
  4. Facilitating negotiations about wages,
  5. Meeting employees expectations.

Example of Value Added Statement

Example of Value added statement is presented below. It is a difference between value of produced goods (at selling price) versus purchases. Below example values are shown in $[5]:

  • Goods Produced at Selling Price value is 1.000.000
  • Purchases of External Goods and Services value is 200,000
  • Total Value Added by Production value is 800.000

Sources of Value Added would be wages, taxes, interest, depreciaton, profit etc. as below:

  • Wages and Salaries with value 400.000,
  • Taxes with value 100.000,
  • Interest with value 20.000,
  • Depreciation with value 180.000,
  • Profit with value 100.000,
  • Total Value Added with value 800.000.

Expanded Value Added Statement

Expanded Value Added Statement (EVAS) is alternative framework in evaluating economic, environmental and social value added. It has roots several contexts of accounting[6]:

  • Mainstream accounting which is traditional accounting (Income Statement, Balance Sheet) and progressive accounting (Value Added Statement),
  • Critical accounting which is not neutral and shaped by society,
  • Sustainabiity which meets needs of the present
  • Social accounting which is more about behavioural aspect, includes supplemental social accounting and integrated social accounting.

Footnotes

  1. Burchell S., Clubb C., Hopwood A.G. (1985), p.388
  2. Staden C. J. (2000), p.2
  3. Mook I. L. (2007), p.20
  4. Staden C. J. (2000), p.3
  5. Mook I. L. (2007), p.20
  6. Mook I. L. (2007), p.14

References

Author: Bartłomiej Zegarliński