The problem of informative usefulness of residual income. RIBV radar concept
The problem of informative usefulness of residual income. RIBV radar concept

Summary/Abstract: RIBV is one of the possible variants of residual income calculation based on unadjusted book values. The usefulness of residual income should always be evaluated separately from the point of view of its motivational function and informational function. From the first perspective, RIBV is weak goal-congruent (in a decisional sense), although more goal-congruent than traditional accounting metrics. Problems implied by weak goalcongruence of RIBV can be solved by utilization of a tool allowing for reduction in managerial myopia (e.g. a bonus bank). However, such tools do not resolve the problem of the low informative usefulness of RIBV, that was confirmed by the empirical research presented in the article. The problem manifests itself in the fact that RIBV can signal value creation (destruction) when it is not created (destroyed), it can also exhibit value created (destroyed) sums that are not true. Thus, periodic performance measurement, evaluation and a compensation system that is to be based on RIBV must include not only a tool resolving problems resulting from the low motivational usefulness of the residual income version, but also a tool resolving problems resulting from the low informational usefulness of RIBV . Multidimensional evaluation of RIBV performance, utilizing RIBV radar presented in the article, can serve as such a tool.

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