This website uses cookies to ensure you have the best experience. Learn more

The Value Added Statement Essay

1535 words - 7 pages


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 ...view middle of the document...

622) this link “assist the inte- professional exchanges of data and expertise”

This paper therefore evaluates the usefulness of VA statement to shareholder and a wider stakeholder community and why it has not become mandatory. It also includes the preparation of a value added statement of Hythe plc for the year 20X6, with 20X5 from the financial information in its corporate report.

Preparation of Value Added Statement (VAS)

The Value Added statement of Hythe Plc. was prepared from the financial information obtained from the company’s account. The total wealth created by the company during the two comparative periods is computed as Sales less payment to suppliers of materials and services. This translated to £1.85million and £1.83million in the year 20X6 and 20X5 respectively. In 20x6, 44%, 22%, 26% and 8% of the wealth created were distributed to employee, government, provided of capital and retained respectively. While distribution in 20X5 was 43%, 21% and 24% to employees, government, provided of capital and 12 % reinvestment to maintain and develop operation. These measures provide useful information on the wealth created and available for the company team which can be used for predictive and planning purposes.

The value added ratios computation reveals that wealth created per employee was £46.23 and £43.67 in 20X6 and 20X5 respectively while the sales per employee ratios were £128 and £110 in the year 20X6 and 20X5 respectively. These ratios could provide a useful comparative and predictive tool to Hythe Plc in order to determine its performance in relation to other competitors and comparative period.

Meanwhile, the Value added statement has been prepared using the Gross VAS as against the Net VAS model. The Gross VAS requires that the depreciation amount be part of the distribution while it is included in VAS statement for the other model.. The Gross VA model was adopted because it is more objective than Net VAT as depreciation measurement is prone to subjective judgments and it lead to a closer link to national income (Morley,1979, p.626).

The detailed statement is highlighted below:

Hythe plc.
Value Added Statement for the year ended 31 December 20X6

20X6 % 20X5 %
£000s £000s

Sales 5,124 4,604

Paid to Suppliers for Material & Services
Materials consumed 2,934 2,482
Fuel consumed 290 242
Hire of plant and machinery 41 38
Auditors' remuneration 10 8.00
Total 3,275 2,770

TOTAL WEALTH CREATED 1,849 100% 1,834 100%

Wages 607 598
Salaries 203 198
810 44% 796 43%
Corporation tax provision 402 22% 393 21%

Providers of capital:
14% debentures 168 151
6% preference shares 24 24
Dividend 288 256
480 26% 431 24%

Reinvested to maintain and develop operations:
Depreciation 155 144
Retained Earning 2 70
157 8% 214 12%



Find Another Essay On The Value Added Statement

Accounting - Income Statements, Balance Sheets

1011 words - 4 pages the balance sheet and deducted from the owners' equity. The same principle is applied in the event that the income statement resulted to profit. The amount is recorded in the balance sheet and added onto the owners' equity account.In recording transactions using the accounting principle, two accounts are always affected to remain in balance. This is often called double-entry system. For example: the company realized a revenue during the month of

Solving the Foreclosure Crisis Essay

1877 words - 8 pages buy the assets. Thirdly, the Fair Value Accounting has impacted on irrational investment behaviour because the movement of price in the market in a short time make the panic market. If the government have healthy market environment, the Fair Value Accounting is become value added to financial institution. Therefore, the current financial crisis is not caused by the Fair Value Accounting, it just shows transparency in the financial statement.

True and Fair from the Accountants' Perspective

1754 words - 8 pages determined via the requirements set out within the fair value hierarchy and guidelines set out by IFRS 13. The hierarchy is the central component of statement no.157 Generally Accepted Accounting Principles (GAAP). The hierarchy is comprised of three levels; level one, two and three respectively, where the order of preference must be adhered to by management when estimating the fair value of an asset or a liability (Miller & Bahnson 2007, p.30). The

Fundamentals of Financial Statement

841 words - 3 pages . According to the University of Phoenix (2006), "the balance sheet is sometimes called the statement of financial position because it summarizes the entity's resources (assets), obligations (liabilities), and owners' claims (owners' equity)". Kitchen and office equipment were purchased along with supplies. With theses three transactions she also increased her property. Purchasing the supplies increased her debt but still added value to the operation

Analytically Reviewing Kraft’s Position

1599 words - 6 pages encourage input and ensure a collaborative development of the vision statement. Communicate with employees to understand the current culture. At times an organization may have to realign management and leadership and, as Jim Collins points out, get the right people on the bus. Conclusion I discussed and reviewed Krafts’ mission statement, vision statement, and company stated values and added possible suggestions of alignment and recommend

Corporate Finance

976 words - 4 pages stakeholders, as a value added rather than profit, which is created for one group of stakeholders. It can improve the profit and loss account through rearrangement and a different focus. The Profit and Loss Statement does not provide any information showing the extent of the value or the wealth created by the company for a particular period. Contribution to the company by other stakeholders cannot be assessed through the Profit and Loss

Measuring Merit: Pay for Performance

1079 words - 4 pages issue of their evaluation (2004). According to Koppich (2004), Systems of peer review, that have been used for a decade or more in a dozen or more districts have shown considerable potential. Coupling a well-cultivated peer review system with value-added test scores could create a sound structure for teachers’ compensation. Making speculations about student achievement simply by analyzing test scores from one academic year to the next can be

The purpose of this assignment is to analyse source code and look for vulnerabilities. The vulnerabilities identified will be exploited with a

1475 words - 6 pages 3.1 Exploit XSS Vulnerabilities The standard javascript code to test for XSS vulnerabilities is : . The script is entered on the register page in the email address input. The script must be entered in the email input when the user registers. The attack is amended with the SQL injection added at the end. The standard javascript attack works but the SQL injection at the end add a value in the field. ' or '1'='1' -- '. The script allows the

Ten Practical Implications of Porter’s Work

1818 words - 8 pages profits are growing and thus sustaining the company’s long term strategy. d. Magretta (2012) reminds us that GM couldn’t succeed in spite of being the world’s largest car company while a much smaller BMW remains profitable. 3. Competitive advantage is not about beating rivals; it’s about creating unique value for customers. If you have a competitive advantage, it will show up on your P&L. a. Practical examples of this statement are: • Warren

Financial Statements

1142 words - 5 pages This week's team assignment was drawn out for the learning team to discover the net income, total assets, explain the amounts of monies used for properties and equipment, as well as stock options used. In addition, the assignment asked that it be detailed in which components led to these answers and which financial statement was the most valuable in the team's review. We will detail these questions and provide additional information so that the

"Four Basic Financial Statements". Provide an explanation of the four basic financial statements used in business

913 words - 4 pages necessary to compute the Retained Earnings Statement is Net Income, which is derived from the Income Statement. Previous retained earnings will be added to the net income and dividends subtracted from the total, which will reflect current retained earnings. If dividends exceed the sub-total of previous retained earnings and net income, it will reflect a net loss for the company. While if the sub-total of previous retained earnings and net income exceeds

Similar Essays

Achieving The Value Added Organization Essay

3724 words - 15 pages Project Title : Achieving the Value-Added OrganizationTable of Contents1. Abstract2. Introduction3. Methodology / Procedure4. Definition4.1 What is Value-Added?4.2 How is it measured?5. Why is Value-Added important to Organization6. Characteristics of an Value-Added Organization7. Techniques for a value-added organization8. Crafting a Strategy to Create and Capture Value (focus on human resource issues)Overview ?6.1 It Begins with Leadership

The Role, Purpose, Use And Impact Of Value Added Tax

1641 words - 7 pages -registered VAT companies do not have the benefit of reclaiming input tax, they are allowed to claim the full value of their VAT charge as an expense in their profit and loss account. Some companies are partially VAT-exempt. This is where a taxable person makes both VAT-rated and VAT-exempt supplies. Some of their input tax can be recovered using the following formula:(Total Taxable Supplies divided by Total supplies) multiplied by Non-attributable

Vision And Mission Essay

1504 words - 6 pages opportunity for the organization. The vision in the case varies from what is listed on the company’s website, so obviously they are updating their vision statement regularly so it is current. The vision statement is focused; it notes a desire to continuously improve relationships, balance stakeholder interests through employee empowerment, and focusing on value-added activities as the vision for the future. The vision is also understandable which is

Smells Alike Essay

976 words - 4 pages added analysis (EVA), Shareholders value analysis (SVA) and Extensible Business Reporting Language (XBRL)? In view of the foregoing, this paper discusses analysis of financial statements and limitations inherent in traditional financial reporting. It also considers whether modern and contemporary measures of performance address these limitations. Analysis based on financial statements Financial statement analysis is fundamental to the