Economic value added reporting in India

Abstract

EVA is superior to accounting profits as a measure of value creation because it recognizes the cost of capital. EVA could bring back the lost focus on Economic Surplus from the current emphasis on accounting profit. EVA and Market value added (MVA) are two different approaches based on different variables, but both are used to evaluate the shareholders value created by the company. There is no accounting standard in India which makes disclosure of EVA mandatory to all listed companies. Some companies have already made EVA a part of their annual report. The present study covers 125 Public Ltd., companies annual report for a period of five years from 1995-1996 to 1999-2000. This paper examines the various disclosure practices related to EVA as followed by Indian public Ltd companies in its annual report.