day 27 nonfinancial reporting 2009 v3

day 27 nonfinancial reporting 2009 v3 -...

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Nonfinancial Performance  Measurement and Reporting Dr. James Gong
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Agenda Why nonfinancial reporting? Nonfinancial reporting model Jenkins committee report Balanced scorecard Value reporting FASB 2001 SEC 2006 Evaluation of nonfinancial reporting
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Why nonfinancial reporting? Inventors are keen to understand a  company’s strategy and the key “drivers of  value” Annual reports provide limited information on  these matters Strategy of value creation, capabilities to  implement the strategy, and management  performance toward strategic goals, cannot  be measured purely by financial numbers
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0.00 1.00 2. 00 3.00 4.00 5.00 6.00 7.00 8.00 D e c - 9 5 M a r 6 J u n S p 7 8 0 1 2 Month Market-To-Book S&P 500 Average Market-To-Book Ratio: 1995- 2002
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Interpretation  Market-to-book ratio of Standard & Poor’s  500 is greater than four.   This means that traditional accounting  measures represent about 25% of the  value of these companies.
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Nonfinancial Measurement  and Reporting Models Jenkins Committee model Kaplan and Norton’s balanced  scorecard PwC’s value reporting
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Jekins Committee Model (1994)
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The Balanced Scorecard  (BSC) What are the four perspectives on value  creation? How are these four perspectives linked?
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The Balanced Scorecard Financial perspective How do we look to our stakeholders? Customer Perspective How do we look to our customers? Organization Learning Are we able to sustain innovation? Business Processes What processes are the value drivers? Vision and Strategy
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The Balanced Scorecard Cause and effect links beyond matching  of cost to revenue Relationship between shareholder value  and the non-financial measures  Dynamics: leads, lags, feedback loops Link desired outcomes with strategy  and mission
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Financial Perspective Objective Increase shareholder value Examples of measures Cost reduction                 Revenue growth This perspective evaluates the profitability of the strategy. Assume the company’s key strategic initiatives are cost reduction  relative to competitors and growth. The financial perspective focuses on how much of operating  income and return on capital employed results from reducing  costs and selling more units.
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Customer Perspective Objectives Increase market share Increase customer satisfaction Examples of measures Market share in communication networks segment                 Customer satisfaction survey  This perspective identifies the targeted market segments  and measures the company’s success in these segments.
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Internal Business                Process Perspective Objectives Improve manufacturing capability
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day 27 nonfinancial reporting 2009 v3 -...

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