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THERE is an increasing trend in most leading companies presenting ‘Value-Added Statements’ or ‘Statement of Wealth Accumulation and Its Distribution’ in their annual published accounts, as the concept of corporate social responsibility gradually takes root.
The raison d’etre of a commercial enterprise, in its true sense, is to generate value as a socio-economic entity. The Value Added Statement (VAS) is relied upon by corporate managers, investors, lenders, policymakers, public authorities and financial analysts etc., for forming decisions.
The VAS gives valuable insight into the company’s policies and strategies, but the Securities and Exchange Commission of Pakistan has not yet made it mandatory for registered companies to include it in their annual financial reports.
According to the SPRING guidebook, ‘value-added’ refers to the wealth created through the organisation’s production processes or provision of services. Value-added measures the difference between sales and the cost of materials and services incurred to generate the sales.
The resulting value-added, or wealth generated, is distributed as wages to employees; accounted for depreciation for reinvestment in machinery and equipment; paid as interest to lenders or as dividends to investors; as profits to the organisation and donations to society.
Reports presented by leading companies of major industries enlisted on the Karachi Stock Exchange were reviewed, and it was found that about 66.67 per cent of the sampled market players included VAS in their annual financial reports. Details are given in the table below.
