International Financial Reporting Standards (IFRS) are either adopted by the countries as prescribed by the standards committee or through the path of convergence as done by countries like China, US and India to integrate with the global reporting base. In the first paper, “Convergence to IND AS 16: Changes and Implications”, the authors, Poonam Dugar and Vibha Tripathi, make an attempt to present an insight into the new and converged IND AS 16 – Property, Plant and Equipment (PPE) and its implications drawn after revising the framework of AS 6 – Depreciation and AS 10 – Fixed Assets. The authors observe that there will be significant changes in the accounting and disclosure of the components of a PPE in the process of recognition, depreciation and derecognizing of the assets individually and separately, leading to major changes in the value of PPE in the financial statements.

Corporate valuations are arrived at by various participants in the capital market from the fundamental information provided in the financial statements and other relevant announcements from the company in a range of forms. The statement of assets in the balance sheet is sliced up to further understand the utilization and efficiency of assets to project future earnings. In the second paper, “Non-Core Assets and Disclosure Requirements”, the authors, Reshma K Tiwari, Debabrata Das and Jasojit Debnath, make an attempt to explain the non-core assets presented in the balance sheet and propose a conceptual framework for their disclosure in financial statements. The authors observe that the firms need to stick to full disclosure as desired by users of financial statement. To increase the simplicity, precision and clarity of the information on assets for better governance and full disclosure, it is vital that each asset class needs to be classified into ‘core’ and ‘non-core’, at least in the notes to accounts of the firm’s annual report.

In the third paper, “Economic Value-Added as an Emerging Tool of Performance Measurement: Evidence from Indian Companies”, the authors, Poornima B G, Parab Narayan and Y V Reddy, make an attempt to explain the relationship of traditional performance measures, i.e., various ratios with Economic Value-Added (EVA). The authors find that the mean values of EVA Capital Employed (EVACE), Earnings Per Share (EPS), Return on Invested Capital (ROIC) and Return on Net Worth (RONW) differ significantly. Further, they observe a weak correlation between EVACE and EPS, and a strong correlation of EVACE with ROIC and RONW. A significant impact of ROIC on EVACE is also observed.

In the last paper, “An Empirical Study on Economic Value-Added and Market Value-Added of Selected Indian FMCG Companies”, the authors, E Madhavi and M S V Prasad, make an attempt to resolve whether the modern measures like Economic Value-Added (EVA) and Market Value-Added (MVA) or the traditional performance measures better explain value creation by firms. The authors find that the empirical findings of the study support the argument that EVA is a better indicator than traditional measures like EPS in explaining the market value in the financial markets.

-- Vunyale Narender
Consulting Editor