Global accounting groups urge long-term value creation amid coronavirus

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Three worldwide accounting groups have banded together to issue a report offering guidance on how CFOs and finance teams can steer their organizations toward long-term value creation during the COVID-19 pandemic.

The report, issued last week by the International Federation of Accountants, the International Integrated Reporting Council and the Association of International Certified Professional Accountants (the unified voice of the American Institute of CPAs and the Chartered Institute of Management Accountants), offers insights for CFOs, finance teams and other business leaders about how they can go beyond looking purely at the financials to understand the entire value creation process.

The report advises readers on how to identify some of the main opportunities and risks related to an organization’s strategy and business model. It explains how CFOs, finance teams and organizations can develop more of an integrated view of performance and value, combining the balance sheet, business and society perspectives. It also suggests how they can incorporate some of the priorities for value creation into their decision-making and reporting processes..

“COVID-19 is the greatest threat to value creation we’ve seen in generations,” said IFAC CEO Kevin Dancey in a statement. “As a result, many companies are juggling a handful of pressing priorities, including protecting cash flows, ensuring long-term value creation, and delivering positive societal impacts. The CFO and finance function can partner with management to overcome the challenges associated with understanding and driving long-term value creation.”

The report aims to help CFOs and finance teams consider all the relevant information around performance, opportunities, risks and trade-offs and make them available to internal decision-makers, investors and other capital providers. Accountants are in a good position to lead a value creation agenda. Taking on this value creation mindset also helps reinforce the role of the CFO and finance team as effective business partners within an organization.

“With an estimated 80 percent of enterprise value now made up of non-financial assets such as brand recognition, human capital and customer satisfaction, organizations that understand how to create and deliver value will be better positioned to achieve sustainable success,” said Barry Melancon, CEO of the Association of International Certified Professional Accountants, in a statement. “Accounting and finance professionals are uniquely positioned to bring together the insights and data needed by management teams to inform a value creation agenda, which is particularly important during this time of uncertainty.”

The goal is to move the usual corporate mindset from shareholder value creation to more of a longer-term stakeholder value creation perspective. The authors see the benefits of a value creation agenda as going beyond the traditional markers of success, enabling business leaders to identify some of the opportunities and risks related to the organization's strategy and business model. Companies can communicate to a variety of external stakeholders, not just shareholders alone, about the company's impact on society.

“Business leaders are under growing pressure to marry profit with purpose,” said IIRC CEO Charles Tilley in a statement. “A value creation agenda delivers exactly this. Building on the International Integrated Reporting Framework, this new report will guide CFOs to better understand, measure, and report on value creation and impact. The result is comprehensive measurement based on a company’s value drivers that can be used to steer long-term sustainable development.”

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Coronavirus IFAC AICPA IIRC Barry Melancon