Accounting: the expanded

The Expanded Value Added Model

Along the line of earlier researchers (for example Abt & Associates Inc., 1974; Belkaoui, 1984; Estes, 1976; Linowes, 1972), Mook developed several social accounting statements that integrate financial and social information (Quarter, Mook, & Richmond, 2003). One model in particular will be applied in this chapter: the Expanded Value Added Statement, or EVAS. The EVAS is based on a traditional accounting statement called the Value Added Statement, but it is modified to include social and environmental items.

Value added is a measure of wealth that an organization creates by adding value to raw materials, products and services using labour and capital. It is not a new concept; rather it has been used since the turn of the twentieth century in the calculation of the Gross National Product. The Value Added Statement also is not new; it was proposed in 1954 by Suojanen and has been used in the United Kingdom since the 1970s. It is also used in other European countries and South Africa. In contrast to profit, which is the wealth created for only one group—the owners or shareholders—value added represents the wealth created for a larger group of stakeholders (Riahi-Belkaoui, 1999). Thus, the Value Added Statement focuses on the wider implications of an organization’s activities beyond its profits or losses. It emphasizes that the organization also employs people, contributes to societal costs through taxes, rewards investors and creditors for risking their funds, and contributes to the community.
Figures 5.1 and 5.2 depict the difference between profit and value added. Figure

5.1 presents a simple graphic illustration of an income statement that equates wealth with profit—or revenues less expenses. The expenses may include payments for such items as external goods and services, wages and benefits to employees, interest on loans, taxes,

and depreciation²⁰ Revenues received (which is also the market value of the organization’s outputs) are shown on the left-hand side of Figure 5.1, while the expenses and profit that correspond to those revenues are shown on the right.