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VALUE REPORTING

VALUE REPORTING . -AN INSIGHT. WHAT IS VALUE REPORTING. The Value-Reporting model is about broadening corporate reporting to have companies identify and meet analysts’ and investors’ needs for relevant information about value drivers, intangible assets and estimated future cash flows

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VALUE REPORTING

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  1. VALUE REPORTING -AN INSIGHT

  2. WHAT IS VALUE REPORTING • The Value-Reporting model is about broadening corporate reporting to have companies identify and meet analysts’ and investors’ needs for relevant information about value drivers, intangible assets and estimated future cash flows • The Value Reporting Revolution clearly explains why corporations must move toward greater transparency

  3. TYPES OF VALUE REPORTING

  4. BRAND VALUATION

  5. Evidence of brand value • Recognition of value of intangible assets • Continuous increase in the gap between companies’ book values and their stock market valuations • Sharp increases in premiums above the stock market value that were paid in mergers • Management attention has increased to these assets • Brand is a special tangible because of the economic impact • It influences the choice of customers,employees,investors • Brand plays a major role to contribute to shareholder value • Eg:Mc donald’s brand accounts for more than 70 percent of shareholder value • Brand owning companies can earn huge returns on their capital and grow faster.

  6. Brand valuation models • Research –based brand equity valuations • Purely financially driven approaches • The most widely used is the brand –earnings- multiple model • Eg: if we see infosys brand valuation calculation,follows; • Determine brand profits by eliminating the non-brand prfits from the total profits • Restate the historical profits at present day values • Provide for the remuneration of capital to be used for purposes other than promotion of the brand • Adjust for taxes • Determine the brand- strength or brand-earnings multiple • The valuation based on factors on a scale of 1-100 internally.

  7. Infosys brand value-year 2011 (In Crores)

  8. ECONOMIC VALUE ADDED

  9. Economic Value Added • EVA is the difference between after tax operating profit and cost of capital invested by both debt holder and equity holder. • EVA=NOPAT-(Cost of Capital*Capital) where NOPAT is Net Operating Profit after tax Capital is capital invested by both debt holder and equity holder Cost of Capital = Weighted Average of after tax cost of equity and debt

  10. NOPAT = EBIT*(1-Tax Rate) • WACC = Debt/ (Debt+Equity)*(1-tax rate)*rdebt + Equity/(Debt+Equity)*requity where rdebt and requity are the specific return expected by debt and equity holders and these are calculated by CAPM. requity = rf+ b(rm-rf)

  11. List of EVA Disclosure Companies in Indian Corporate Sector • TCS • INFOSYSTCH • HINDUNILVR • LT • TATASTEEL • SATYAMCOMP • HEROHONDA • DRREDDY • OFSS • CROMPGREAV • PIRHEALTH • CADILAHC • GODREJCP • LAXMIMACH • PIDILITIND • MOSERBAER • J&KBANK • ISPATIND • ROLTA • FINPIPE • UNICHEMLAB • SASKEN • ORCHIDCHEM • THOMASCOOK • NUCLEUS • NAVNETPUBL • EMAMILTD • SUNDRMFAST • JBCHEPHARM • VESUVIUS • ICSA • TATAMETALI • SHASUNCHEM

  12. Medium of Disclosure Used for EVA Reporting

  13. Areas of EVA-Application in Indian Companies

  14. Extent of EVA Disclosure by Indian Companies

  15. INTELLECTUAL CAPITAL

  16. WHAT IS INTELLECTUAL CAPITAL • Intellectual capital is the difference in value between tangible assets (physical and financial) and market value. This contrasts with physical and financial forms of capital; all three make up the value of an enterprise. • Measuring the real value and the total performance of intellectual capital's components is essential for any corporate head who knows how high the stakes have become for corporate survival in the Knowledge Economy and Information Age. So, the main point is how an organization can affect the firm's stock price using the leverage of intellectual assets.

  17. Classification of Intellectual Capital

  18. HUMAN RESOURCE ACCOUNTING ASSUMPTIONS OBJECTIVES To provide the feedback to the managers on the performance. To compute the return on the total assets employed. (Men & Machinery) To enable planning of Manpower. • The people are valuable organizational resources • Value of the people is influenced by the Management Style • Investors are aware about how is the employee being treated in the organisation.

  19. WEALTH CREATION

  20. Wealth is a total amount of economically relevant assets including physical, financial, human, IP asset ( R & D, technical knowhow, trade secret, etc.), and that benefits to society. • To create is to make something new, better, beneficial. • Wealth creation is more than mere possessing wealth • Making money and creation of wealth should go hand in hand

  21. Will shareholders commit same mistake????? • Theory of demand and supply –decisions based on price of a share • Role of shareholders, consumers, government • Role of institutional investors • Should value reporting be mandatory? • Conclusion ------- Highly subjective…… • No concept of belongingness

  22. Long term perspective • Increasing the ability to earn • Insure future income • Banks, M&A, debenture holders, public deposits • Case analysis – Sahara’s issue of OFCD – a lesson – on brand value – is that every thing?

  23. TEAM MEMBERS • PRABHASH AGARWAL • SHIVANS GUPTA • SRIDHAR HARI BABU PURAM • SHARADA SHINDE • SIDDHANT GOYAL

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