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TRUE VALUE METRICS
ACCOUNTING for CHANGE IN STATE
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The foundation of TVM accounting is based on the core structure of conventional financial accounting where there are balance sheet accounts and profit and loss account accounts. TVM incorporates not only the economic (financial) dimension of the socio-enviro-economic system, but also the social dimension and the natural capital dimension.
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SETTING UP FOR
MEASURING PROGRESS AND PERFORMANCE
ORGANIZING THE ELEMENTS OF THE SOCIO-ENVIRO-ECONOMIC SYSTEM
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GO TOP
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We must think in terms of the complete Socio-Enviro-Economic system where there is a People piece, and People Built System piece, and a Nature piece ... now, Socio (Social Capital), Enviro (Natural Capital) and Economic (Economic Capital which includes Financial Capital).
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The first step is to separate FINANCIAL CAPITAL from the other parts of PEOPLE BUILT SYSTEMS.
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We can improve the representation by adding the Sun which is the ultimate source of all energy for planet earth.
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And then reorder to put FINANCIAL CAPITAL at the top to reflect the way metrics about financial capital are at the center of conventional accounting, financial reporting and economic analysis.
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ELEMENTS OF THE SOCIO-ENVIO-ECONOMIC SYSTEM
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Elements of the System by Segment (I)
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Elements of the System by Segment (II)
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THE ECONOMY / ECONOMIC CAPITAL
These graphics are from circa 2003. There has been some evolution of the framing since then, and the prevailing thinking about segmentation (2018) is as follows:
- Financial Capital;
- Tangible Financial Capital
- Intangible Financial Capital
- Physical Capital;
- Buildings
- Infrastructure
- Machinery and Equipment
- Vehicles
- Working Capital
- Intangible Capital
- Knowledge Capital
- Institutional Capital
- Enabling Environment
- Cultural Capital
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ECONOMIC CAPITAL / FINANCIAL
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FINANCIAL CAPITAL
Financial Capital is part of Economic Capital. Conventional financial accounting and reporting is the basis for reporting:
(1) business profit;
(2) capital market valuations; and,
(3) GDP growth.
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ECONOMIC CAPITAL / INTANGIBLE CAPITAL
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Institutional Capital
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Knowledge Capital
Knowledge Capital ... What we know enables productivity and performance. ... Some of this is shared universally and is available for free use, and some is owned by Individuals and Business entities and may be used for their private gain at the expense of society as a whole.
Knowledge Capital ... Knowledge Capital is expanding rapidly … faster than at any previous time in history. ... Important parts of Knowledge Capital have been created with Government funds, often for military and security purposes.
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