I agree that IFRS compliance can add rigidity. Thus it is not a FORCED option or alternative. However, for the Value generation module hat I am planning on preparing, a basic mapping of accounts needs to occur, so that the module can properly estimate generated economic value. However, you are right and the Economic Value Generation module (to be made yet) could use an alternate form where the accounts needed are specified one by one without IFRS, to maintain desired flexibility.
The link to shareholders has to do with the fact that you can then, without further calculations, create a financial report to shareholders, with all these calculations, on a per-share-basis. Then you can aggregate all the data to create tailored shareholder reports with correct information, without having to process the data on an excel.
Having this module could enable the most powerful of all reports in any business: For those who desire to do so, an economic value added leaderboard, where employees can sense the direction of the company, and feel ownership of the business, where a reduction in generated economic value or Delta EVA from one period to the next, makes them keenly aware of the status of the business. A bonus scheme based on this has shown amazing results in performance for companies. This can greatly improve morale, or affect it accordingly so that action is taken. The way you do this is that for every monetary unit of economic value added generated or lost form one period to the next, you can drill down to find out which item was the major contributor to this. This then is the issue that is tackled by the organization, and eveyrbody is in the same page when it comes to business performance: All petty issues are set aside with the goal of shoring up the company. After further study, I have concluded that EVA or similar measures are the desired focus, because if you focus on sales targets, you will do great there, but might oversee cost control And then, even if you oversee cost control and sales properly, you might still oversee capital management such as loan repayments, dividends, all important components of a business. Thus, a business which is aligned with controlling its sales, costs, expenses, debt cost, equity cost will perform much better. It will also attract investment money. If you incentivize on this, the results are clear.
I personally heard from Mr. Stern the success case of Mr. Goizueta when they implemented this in Coca Cola Femsa circa 1997, where the stock market value skyrocketed. As you know, market value of the stock depends on the free cash flows to the firm once all the obligations above are complied with. Caveat emptor: Clearly, Something happened at KOF since 2013 that the stock dropped in price. Aside form this case I also heard and saw many cases with data, for smaller businesses, thow were the ones who benefitted the most from such management practice. One that comes to mind is the Tata group. I have seen other small to medium businesses here operate under those principles and they have excelled. The “revolutionary idea” behind EVA: Keep proper finances and accounting, and never forget ALL your employees, i.e. stay humble and treat everyone humanely.
I am including a link to a great book by Mr. Stern on how they have implemented EVA in several businesses, and how they have succeeded. It is a short but fun and enlightening read.
The EVA Challenge: Implementing Value-Added Change in an Organization
by Joel M. Stern et al.
As an addition, I use EVA as a tool to help “win” the soccer game as per Mr. Fred Kofman’s advice. I had the privilege of meeting with him a couple of times, and he changed my mind completely.
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I believe that ERPNext aims to resolve the problem of “losing teams” such as Rushabh has put forth in his blog posts. Thus, our job is to provide the tools to help companies (teams) win. If they win, ERPNext and the community wins.