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Date: 2019-07-17 Page is: DBtxt001.php list0300-State-TVM-1

Definitions for TrueValueMetrics
State ... in the TVM framework



The balance sheet. In corporate accountancy there is an integration between the balance sheet, the operating statement and the cash flow. They are all prepared from the same set of data in the accounting system ... each of these reports shows a part of the whole. The results reported are coherent. Changes in the balance sheet are explained by the performance reported in the operating statement. The cash flow statement reconciles with the operating statement and the balance sheet.

State is a balance sheet. The TVM framework is a similar coherent structure. This framework makes it possible to deduce information that is not otherwise easily obtained by having a focus on the balance sheet and how it changes over time.

Easy data. It is relatively easy to collect balance sheet data, it is much more difficult to get all the data to report reliably about activities. Statistics are a very poor basis for decision making in many, if not most, operational situations.

Balance sheet change. Balance sheet change or change in 'state' is a very good measure of progress in TVM just as change in a business balance sheet is a good measure of profit and the results attributable to investors. The integration or coherence of balance sheet and operating statement, it is possible to use the changes between two balance sheets to deduce the result of economic activities without actually having all the details of the activities. This technique used to be referred to as 'incomplete records' in accountancy when used to prepare financial reports where operating data were missing or inadequate.

Economic activity. Economic activities are required to sustain society ... produce food, water, housing, clothes, health, education and entertainment. These economic activities are the origin of value adding ... or value destruction ... for society. Progress is measured by reference to the change in 'state' ... that is in the TVM balance sheets. Detailed data about economic activities is used to explain why some aspects of the balance sheet have changed ... but it might be quite obvious without much need for detailed data.

Activity reporting Activity reporting is similar to the reporting of the corporate Profit and Loss Account or Operating Statement. An Activity Report may show some of the characteristics of economic activities in the community that have had an impact on socio-economic changes. An Activity Report helps to explain the changes that have taken place in the balance sheet of the community. Thus, for example, an increase in stock levels of grain might be explained by an unusually good harvest ... and explain why there was a good harvest.

Time series. TVM also uses time series of key items to gain an understanding of what is happening in the community. Market prices are a leading indicator of market conditions and other broader issues in the community. High food prices and low livestock prices is a reliable indicator of emerging famine conditions.

The text being discussed is available at


TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative.
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