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TVM a better system. TVM is a better system than the prevailing money profit accounting system. It starts with the very effective concepts of double entry accountancy and builds on this to incorporate the essential metrics needed for value accountancy for society as well as money profit accountancy for the implementing enterprise.
Corporate financial reporting is very efficient ... making it possible for a huge organization like, for example, General Electric, to report in three pages the activities and results of perhaps 300,000 people. This is done using a Balance Sheet, a Profit and Loss Account and a Statement of Cash Flow. The principles of accounting make financial reports informative without being long.
The lost integrity of accountancy.Though the basic principles of double entry accountancy are very powerful, the principles of accountancy have, over the past forty years been systematically diluted by lawmakers, regulators and rule making bodies at the behest of special interests so that modern financial reports have less reliability now for representing what is true and fair than in the past. This, more than any other single factor, explains the abysmal state of financial reporting in modern corporate organizations.
Recognition that financial metrics and economic statistics were inadequate and insufficient is not new. Dr. Stone working at Cambridge in the 1950s brought accounting ideas and economics together to develop a system of National Accounts that remains today as the UN System of National Accounts. (UNSNA).
Critics of the World Banks 'World Development Report' which had a focus on metrics like national GDP and other macro economic financial statistics resulted in the development by a team at the United Nations Development Programme (UNDP) of a broader indicator of socio-economic progress called the Human Development Indicator (HDX). This expanded thinking about international socio-economic development performance from simply Gross National Product (GNP) growth to a very much broader indicator that many elements that determine quality of life
My own work with engineering metrics and control engineering ... and later with cost accounting and corporate profit improvement ... and then in the area of national development planning and emergency aid coordination showed me that metrics were very useful. My experience also showed me that wrong metrics and wrong incentives have rapid and deeply perverse consequences.
Logical framework. Accountancy is a strong logical framework for the metrics of corporate performance based on money profits. Adding the value dimension to this logical framework results in a very powerful system for “double bottom line” reporting and analysis.
When the accountancy framework with value is applied to the community as the reporting entity, then a whole new paradigm of socio-economic progress analysis becomes possible. When this framework is combined with 21st Century data acquisition techniques and data processing, all sorts of possibilities are within reach!
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