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Beyond the income statement
The valuation methodologies applied under the traditional corporate reporting model are no longer valid because of the gradual decline in the importance of accounting results and the possible existence of significant value without accounting profits.
The scenario, characterized by security and market volatility and significant security concentration – major corporations account for 60 to 80% of stock market capitalisation on international markets while other companies compete for a very small portion - leads us to set ourselves a new aim: To optimise shareholder value within a constantly changing environment .
The ValueReporting proposal is based on a philosophy of total transparency. It calls for radical changes in attitudes and conducts and represents a challenge to current regulatory frameworks.
Objectives of ValueReporting ™
To provide shareholders and stakeholders with information on:
- Financial and non-financial value indicators.
- Tangible and intangible assets.
- Integrated risk and value management and reporting to facilitate more adequate decision taking.
- Voluntary transparency, beyond legal reporting requirements.
- How to go beyond the income statement and escape from the “results game”.
Benefits of greater reporting transparency
- Enhanced creditability of managers.
- More long-term investment.
- Improved follow-up by analysts.
- More capital at less cost.
- Higher share prices.
- In short, a better managed company.
- More relevant information when taking investment decision.
- A return more consistent with the risks assumed.
For the analysts:
- More and better information for analysis.
- The opportunity to improve credibility.
In order to attain these objectives, the following tasks should be completed:
- Companies: report regularly and voluntarily on all relevant value aspects.
- The Boards of Directors: ensuring that management teams observe that practice.
- Investors and other stakeholders: ask companies for the information they need.
- Investment analysts: again conduct research and prepare reports that are really objective and independent.
- Audit firms: lead the change to non-financial indicators and their standardization in order to maintain market relevance.
- Regulatory bodies: support this approach led by the market to define and set standards.