True Value Accounting, updated 2016

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Confidence (Limit) Accounting + Resource Information = True Yield (True Value).

As the acronym suggests, Clarity has developed a methodology for True Value Accounting (TVA). Current financial accounting practices value a company with a single point value in their financial accounts. Companies that do report on social and environmental issues for demonstrating Corporate Social Responsibility (CSR) do so separately from financial reporting, referred to as ‘triple bottom line’ accounting.

As part of Clarity Show Case designs, an innovation in financial accounting called ‘Confidence Accounting’ adds range values to company financial accounts. In a changing world, confidence ranges enable the company’s  ‘commodity value’, for example, to be valued under a range of scenarios such as energy price, demographic developments and resource access and depletion.

In parallel, producing range value information is standard practice for resource accountants and statistical agencies. The further significance of the Confidence Accounting framework is that it readily incorporates resource accounting modifiers such as company skill sets, environmental context and social context as part of the range. ‘Triple bottom line’ accounting becomes a single bottom line, for decision makers to compare company value and risk* in a common currency – money!

Above: For this hypothetical company, range values are populated with resource accounting modifers. This voluntary accounting practice is for overall company valuation, while disruption of its day to day financial accounting is minimal. Source: modus vivendi, 2014.

In effect, resource accounting for carbon emissions (GHG) to mitigate climate change is already a mainstream requirement to measure national commitments to United Nations Framework Convention on Climate Change (UNFCCC) Agreements. There are increasing efforts to standardise methodologies for measuring GHG emissions. In the meantime, voluntary Confience Accounting already facilitates differing GHG emission calculators per unit $ output to refect in the range value of financial accounts. Other issues will follow as awareness of their impact on economies grows.

September 2014 MMG/SNJ

Updated March 2016 SNJ