The ValueReporting Revolution: Moving Beyond the Earnings Game

Do financial reports convey the actual value of companies? According to a 1997-98 survey by PricewaterhouseCoopers (PwC), only 19 percent of investors and 27 percent of analysts found financial reports useful in that way. But a new page might be turning on financial disclosures. Robert Eccles and his PwC-affiliated co-authors examine how performance-measurement concepts like the balanced scorecard are changing the corporate-reporting landscape. Coined ValueReporting by PWC, this concept calls for more complete company disclosure of the elements that truly determine value, such as corporate strategy, intangible assets, external environment, and risk. Using Cisco, Yahoo, Shell, and others as examples, the authors demonstrate the foibles of focusing on short-term earnings and show how managers, investors, and analysts can benefit from a new reporting model.