The ValueReporting Revolution
Book

The ValueReporting Revolution

Moving Beyond the Earnings Game

Robert G. Eccles, Robert H. Herz, E. Mary Keegan and David M. H. Phillips
Wiley, 2001

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Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

The words “compelling” and “accounting” are seldom used in tandem, but there is no other way to describe this call to arms written by a former Harvard Business School professor and three accountants from PricewaterhouseCoopers. The book, which is framed as a manifesto for change in the world of corporate reporting, is written in un-accountant-like language bordering on the subversive. Its main message: Traditional corporate reporting practices are inadequate because they don’t capture the market information and the non-financial measures that drive value. Investors rely too heavily on short-term financial results, which contributes to unprecedented volatility in global equity markets. The authors’ remedy? Disclosure of more and better information. This new model is presented in such detail that executives could use it as a blueprint in building new corporate reporting regimens. But you needn’t be a corporate leader to appreciate the far-reaching implications of this book, which getAbstract recommends to all professionals as a – yes – compelling analysis of the current practice and evolving future of corporate reporting and its standards, pivotal benchmarks in the global economy.

Summary

You Say You Want a Revolution?

The discrepancy between the rapid advances in almost every global industry and the increasingly inadequate practices of corporate reporting is not the trivial concern of a few accountants. Its real repercussions are seen daily in the world’s equity markets.

Because markets are not receiving the information they need to accurately value companies, investors are left to make decisions based on the information they do have: rumors, fickle market sentiment and earnings estimates or surprises.

The result is volatility. Consider the NASDAQ’s roller-coaster ride on April 4, 2000. At 1:18 p.m., the Nasdaq Composite Index was down 575 points, or 14%. An hour later, the index jumped 452 points and was down only 2% for the day. A simple fact is at the root of these wild swings: The market is having a hard time valuing companies in the New Economy. Traditional measures explain less and less of a stock’s real value. Increased volatility and value concentration make the accuracy of stock prices open to question, and The Earnings Game has made markets dysfunctional.

The time has come for a revolution in corporate reporting. Corporate executives...

About the Authors

Robert G. Eccles is President of Advisory Capital Partners and a Senior Fellow of PricewaterhouseCoopers.Robert H. Herz is a Partner at PricewaterhouseCoopers based in the United States. E. Mary Keegan and David M. H. Phillips are Partners at PricewaterhouseCoopers based in the United Kingdom. “

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