Definitions for TrueValueMetrics
In corporate accountancy, the reporting is done based on a system that captures data about ALL business transactions in the organization. The data are organized and the results are reported according to established rules. In theory ... and according to the foundation accountancy principles ... the reporting is simply an aggregation of data to reflect a true and fair view of the financial situation and the performance of the enterprise. Neutral data then produces reporting that is free of bias ... free of judgment.
The TVM principle is that TVM data are neutral and TVM reporting is free of bias. It is the analysis that gives an indication of the conclusions ... and not a system that seeks data to support, or disprove a particular hypothesis.
Data must be independent and neutral in order for any of the analysis and conclusions to be credible. The value of TVM is enhanced by having the data and analysis independent and neutral. In fact, independence in collecting and processing the data is essential for credibility.
A critical strength of accountancy is that it produces data that are neutral,. The use of these data may prove a point or support an opinion ... but the data are neutral. This is a fundamental of good professional accounting and is key to the system being of value. Old fashioned corporate accountancy had rules and conduct, both professional and internal to ensure that data are neutral and correct. New TVM must do the same.
It is essential that data are credible. This may best be achieved by some level of independence in data collection, as well as independent checks. It is possible for those with an interest in the outcome to be a part of the process of data accumulation, but they must never be the sole source of data. The data may be contributed by anyone ... and data may be validated by anyone. The data may be used by anyone who is working to improve community progress. While anyone may contribute to the TVM dataflows, there are internal checks to ensure that the data and analysis remain objective and independent.
In good accountancy data are neutral ... they merely are a reflection of something that has reality. Data may have economic characteristics, or represent any other piece of reality. Taken together, these data make a picture. But the data have to be neutral, and reflect as much as possible what is reality. This is in stark contrast to the aggressive use of financial engineering to create the appearance of value merely by re-presenting the reality. It may fool some of the time ... but not everyone all of the time. Old fashioned accountancy based on certain key principles helped to keep financial reports reliable and understandable ... but legislation and rules have sometimes worked to make wrong accounting legal and allowable. These situations have usual had the support of powerful interests ... but this does not make the accounting right ... just legal!
Scientists face the problem of measurement that changes what is being measured ... this and more apply in the area of socio-economic measurement. If people can they will manipulate the data so that they look good ... this is human nature ... but it makes a nonsense of the data and any subsequent analysis. Good corporate accountancy addresses this problem seriously with independent accounting teams and systems that cannot be manipulated by the operating staff. Good corporate accountancy goes further with systems of internal check to ensure the data remain untainted ... and on top of this there are both internal and external audit functions. TVM facilitates multiple independent flows of data that enables a range of cross checks and validation.