State the drawbacks of adopting shareholder value added (SVA) approach.

Drawbacks of Adopting SVA A limitation in the use of SVA as a performance measure is that, by nature, it is an aggregate measure. In order to analyse the underlying causes of any changes in calculated value between years, it is necessary to fully comprehend the value drivers and activities specific to a given firm. There may be certain enterprises which are subject to any degree of price regulation then it may not be possible for management to adjust output prices to achieve a commercial return in response to upward movements in input prices. Such a situation may result in SVA being reduced even though there may have been no decrease in overall efficiency. Similarly, a reduction in direct Government funding would result in a decrease in SVA. Combined with the use of traditional accounting measures, a thorough knowledge of the value drivers of the business will assist in determining the underlying causes of fluctuations in the value added measure. Again, the use of SVA is not a substitute for detailed analysis of business drivers; rather it is an additional measurement tool with an economic foundation.