Financial Instruments to Create Value Added of the Entities Engaged in

Foreign Economic Activity: Analytical Accounting Perspective

SOFIIA KAFKA

Department of Accounting and Taxation,

Ivano-Frankivsk National Technical University of Oil and Gas,

15 Karpatska Str., 76019, Ivano-Frankivsk,

UKRAINE

TETYANA ORIEKHOVA

International Economic Relations Department,

Vasyl’ Stus Donetsk National University,

21, 600th Anniversary Str., 21000, Vinnytsia,

UKRAINE

NINA POYDA-NOSYK

Accounting and Auditing Department,

Ferenc Rakoczi II Transcarpathian Hungarian College of Higher Education,

6, Kossuth square, 90202, Beregove, Transcarpathia,

UKRAINE

NATALYA MALYUGA

Department of Accounting, Taxation and Audit,

Polissia National University,

7, Boulevard Stary, 10008, Zhytomyr,

UKRAINE

SVITLANA RASSADNYKOVA

Department of Economics and International Economic Relations,

International Humanitarian University,

33, Fontanskaya Road, 65000, Odesa,

UKRAINE

OLENA VOLKOVA

Department of Finance, Accounting and Taxation,

Kherson National Technical University,

24, Berislavske highway, 73008, Kherson,

UKRAINE

Abstract: - The aim of the article was to justify the financial instruments to create value added of the entities

engaged in foreign economic activity. The key method used to identify the correlations between the studied

processes and phenomena was the correlation and regression analysis. Graphics simulation and the logical

structure analysis were also applied to schematize the sequence of implementing the author’s suggestions to

improve the accounting and analysis of value added as a financial result of an entity engaged in foreign

economic activity. The specific features of the value added of the entities engaged in foreign economic activity

as an economic category are described. The ways to manage and optimize the value added of entities engaged

in foreign economic activity were suggested. The author’s hypothesis is grounded that the results of the created

value added are determined by the priority of key impact factors (financial instruments) with a concurrent

limitation of increasing costs for other factors. Based on the practical results and theoretical generalizations, the

recommendations for structuring accounting, control and analysis of value added of entities engaged in foreign

economic activity and taking into account the factors that affect it. The resource redistribution procedure for

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DOI: 10.37394/23207.2022.19.140

Sofiia Kafka, Tetyana Oriekhova,

Nina Poyda-Nosyk, Natalya Malyuga,

Svitlana Rassadnykova, Olena Volkova

E-ISSN: 2224-2899

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financial instruments that affect the amount of value added while controlling costs, which is presented on the

example of a particular company, constitute the practical significance of this article. Prospects for further

research in this area are to develop cost control mechanisms for value-added components in terms of types of

activities. This will allow for a more effective cost minimization of entities engaged in foreign economic

activity and increase value added through optimizing the value added chain.

Key-Words: - Value added; Impact factors; Financial results; Performance; Export; Import; Foreign economic

activity; Accounting; Analysis.

Received: October 23, 2021. Revised: August 3, 2022. Accepted: August 25, 2022. Published: September 8, 2022.

1 Introduction

1.1 Topicality

One of the key indicators of the country’s economic

development in the context of globalization,

transnationalization and internationalization are

intensification of foreign economic activity and

promotion of international economic relations.

Integration into the world economy allows for the

latest areas of economic modernization, attracting

foreign investment and advanced technologies,

adding to the competitiveness of companies and

providing access to world markets. Competition in

the markets increase because of globalization

processes, thus determining the need for the

dynamic development and improvement of not only

production and technological, but also

organizational, economic and management systems

of companies, in particular, the analytical

accounting system. This is the reason why the

existing domestic entities engaged in foreign

economic activity (hereinafter referred to as the

entities engaged in FEA) are forced to adapt their

own analytical accounting to new conditions in

order to have the opportunities for their viability,

proper operation and development. In this context,

one of the priority scientific and practical problems

of these companies in a competitive environment is

the creation of value added by the entities engaged

in FEA in the key value added chains (marketing,

logistics, sales) is.

1.2 Overlooked Issues

Modern theory, methodology and practice of

management considers processes and effective

approaches to their analysis, accounting, planning,

organization, control of company performance as an

important element of an effective management

system. They are constantly measured, as well as

financial and non-financial conditions of their

formation are assessed, thus increasing the

flexibility, competitiveness and viability of the

system which is managed in the market conditions.

In this context, the creation of value added and

enhancement of its growth, which is relatively

uncommon in the scientific literature and practice,

but an important economic category, remain

significant issues of scientific and practical plan for

accounting and analysis of company performance.

The issues of identifying the specific features of

value added as a category that describes the

activities of the entities engaged in FEA, which are

important for understanding the process of

achieving the financial results of the company, are

poorly studied in scientific publications. Moreover,

the issues of identifying the factors that determine

the growth of value added of these entities, as well

as financial instruments, resource base causing that

growth have not yet been insufficiently investigated.

Poor exploration of these issues determined the

subject matter, topicality, aim and structure of this

article.

1.3 Aim

The aim of the article was to justify the key

financial instruments to create value added of the

entities engaged in FEA, and to provide scientific

and practical solutions for accounting and analysis

of these instruments.

1.4 Objectives

The aim of the research involved a number of the

following objectives:

1) identification of key factors — financial

instruments that have the most significant direct

impact on the value added of entities engaged in

FEA;

2) grounding of the author’s hypothesis that the

results of the created value added are determined by

the priority of key impact factors (financial

instruments) with a concurrent limitation of

increasing costs for other factors.

3) making generalized recommendations on the

procedure of accounting, control and analysis of

financial results and, in particular, the added value

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of entities engaged in FEA, and the factors that

affect it, on the basis of practical results obtained.

2 Literature Review

The need to obtain the most complete and

operational information about the company’s

activities determines the need for continuous

improvement of corporate analytical accounting

systems of entities engaged in FEA. As author [1]

noted, this is important for making timely and

effective management decisions in the current

dynamic environment of operation and development

of these entities. In this regard, these economic

entities should implement specific measures to

make their system of accounting, control and

analysis more efficient, using the successful

experience of other countries, in particular author

[2], as well as scientific and practical achievements,

such as those provided by author [3].

The science and practice provide no single point

of view on defining the concept of added value. It is

also reasonable to summarize the existing

achievements and note that in defining this

economic category thematic dictionaries and

scientific publications place an emphasis on

“increment of value” [4; 5; 6], “the amount by

which the value of the goods increases” [7; 8], “real

contribution of the company to the value of the

product” [9], etc. In the interpretation of value

added the vast majority of scholars use the concept

of “difference” between the value of the goods

produced or sold and the value of goods and

services used in production/activities.

In recent studies [10], value added is also defined

as the market value of products produced by the

company deducting external costs incurred (the

value of raw materials, services purchased from

suppliers). In general, the author of this article

considers this definition to be the most important for

revealing the subject matter, achieving the aim and

fulfilling the research objectives.

So, the concept of value added is described as a

value which was added to the product throughout

the chain from producer to final consumer. The

practical meaning of this indicator is to measure the

value created by the company at a certain stage of

the production process [11]. When calculating it, the

researchers [10; 12] focus on the amount of newly

created (added) value added in the production

process to the cost of raw materials (supplies)

offered to end users. Value added includes wages,

depreciation and profit, but does not include taxes.

It is used in many countries as a basis for

calculating and paying value added tax, VAT [13].

VAT is inherently a tool for withdrawing part of

value added to the state budget.

The created value added is the main source of

enhancing competitiveness of any company, in the

field of foreign economic activity in particular. The

following model can describe its balanced creation

[14]:

VA(→max) = NI(→max) - ME(→min) (1)

where VA – value added;

NI – net income: the amounts that the company

retains upon payment of all taxes. When making the

calculation for an entity engaged in FEA, you need

to sum up all the company’s revenues for the

reporting period, except for the amounts that will be

required to pay value added tax; excise duty;

customs duty;

ME – material expenses and related costs.

According to this model, maximizing the

company’s net income and (or) minimizing its

material expenses provide the increase of value

added. So, the components of net income and types

of material expenses of the company are the sources

of value added of entities engaged in FEA. In this

regard, the financial instruments that form this

indicator and affect its value are those that

contribute to an increase in the amount of net

income and minimization of material expenses.

Under the current conditions of the development

of economic entities, some researchers, in particular

[1; 15; 16], consider that such instruments are the

promotion of effective activities in marketing,

logistics and sales value chains. In these chains the

value added is created not through direct changes in

the volume of material resources and (or) increased

sales, but indirectly — through actions that promote

operating efficiency, intensification of operations

and process optimization. This will ultimately

promote fulfilling the potential to increase income

and reduce costs resulting from effective marketing

activities.

Improving the system of accounting and analysis

of financial results of an entity engaged in FEA is

characterized in scientific literature by the ways to

meet the needs of presentation and interpretation of

information used in management [17; 18] for the

following purposes: planning and control of the

company activity; decision-making in the company;

optimizing resource consumption and saving assets.

Reviewing the financial instruments creating

value added of the entities operating in a particular

field of foreign economic activity (FEA), one

should refer to the interpretation of the term

“foreign economic activity” (in the literature). The

research scientist [3; 19] defines foreign economic

activity as a system of economic relations

established in the course of exchanging resources of

all kinds between states and their economic entities.

These relations include all aspects of economic life:

production, trade, finance, investment, accounting,

analysis and control. The Law of Ukraine “On

Foreign Economic Activity” considers FEA as the

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activity of economic entities of Ukraine and foreign

economic entities, which is based on particular

relations between them, which is carried out both in

Ukraine and abroad [20].

The entities engaged in FEA maintain

accounting and operational records of foreign

economic transactions, as well as statistical

reporting, which they send to the State Statistics

bodies of Ukraine. The entities engaged in FEA use

a chart of accounts in force in Ukraine and

instructions thereto for the accounting of foreign

economic transactions, as well as the relevant

changes and amendments that reflect the specific

features of the type of foreign economic activity.

These entities independently determine the

procedure for analytical accounting of FEA,

introduce appropriate subsidiary accounts, reflect

this activity and its results in their annual financial

statements.

The need to find ways to ensure effective

accounting and analysis of value added of entities

engaged in FEA is determined by the importance of

quality accounting and analysis for effective

decision-making by the management of the entities

engaged in FEA, especially in the current dynamic

changes occurring in the internal and external

environment of companies. This issue is even more

urgent in view of the need to ensure the improved

readability of accounting and analytical information

for a wide range of stakeholders (owners, investors,

including foreign investment, state control

authorities, etc.). Nevertheless, this situation

determines the need to adapt accounting and

analytical methodology and practice of the entities

engaged in FEA to the operation in a global

information environment of the investment,

financial and capital markets.

3 Methods

3.1 Research Design

The article provides for studying the impact of

particular financial instruments suggested by the

author to increase the competitiveness of the entity

engaged in FEA on the creation of value added of

this entity. This study is to justify the dependence of

certain financial instruments considered in this

paper as legal documents which have a financial

components (contracts, agreements, etc.), which

reflect certain contractual relationships or which

grant certain rights.

The article involved correlation and regression

analysis [21; 22] to determine the correlation ratio

between the resulting feature (value added of the

entity engaged in FEA) and factor features

(financial instruments) through multiple correlation

tools with the Pairwise Comparison Matrix and

regression model (for which the coefficients are

determined for the factors by programmable

method).

The correlation of the resulting feature (Y) with the

factor features (Х1, Х2 ... Хn) is described through

the linear multifactor regression equation, which is

calculated using the formula:







iii xaa

(2)

The resulting feature (Y) will be the value added of

entities engaged in FEA (in UAH thousand). The

author identifies the following groups of financial

instruments, that are important under the current

conditions for the creation and change of value

added of entities engaged in FEA, as factor values:

Х1 – the instruments related to marketing

activities of the entity engaged in FEA (contracted

resources related to advertising and promotion of

products on foreign markets, advertising and

promotion of imported products on the domestic

market, implementation of PR activities,

exhibitions, market research and improvement

activities and improvement of the company’s

competitive positions (related both to the import and

export of products));

Х2 – the instruments related to the sales

operations of the subject engaged in FEA

(contracted resources related to commissions to

intermediaries, agents’ expenses, payment for

consulting and information services related to the

import and export of products, customs broker

services, payment of banking fees for currency

control, currency transfer, currency purchase before

the goods are accepted for accounting);

Х3 – the instruments related to the logistics of

the entity engaged in FEA (contracted resources

related to the (both import and export) freight

delivery, warehousing, insurance);

Х4 – the instruments related to investment

activities intended to develop FEA of the entity

under analysis (equity and financial resources of the

owners);

Х5 – the instruments related to the servicing of

debts resulted from FEA of the entity under analysis

(borrowed capital, loans, external state support,

etc.).

So, the model looks as follows:

Y= a0 + a1Х1 + a2Х2 + a3Х3 + a4Х4+ a5Х5 (3)

where a0-a7 – coefficients for variables calculated

through the regression model by applying the

Regression software solution of the Data Analysis

package in MS Excel.

The model calculation and determination of the

factors that primarily affect the change in the value

added of the entity engaged in FEA is tested in the

article on the example of Odeskabel PJSC [23] —

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the largest manufacturer of cable and wire products

in Ukraine, which is actively engaged in FEA in two

areas:

- exporting a significant part (about 30%) of its

own products abroad;

- actively importing industrial equipment, raw

materials and supplies for the organization of stable

production.

Based on the information of management

accounts and financial accounting of the company,

the data on financial instruments related to the

proposed analytical model (2) and value added for

2016-2021 were distinguished and summarized.

These data were the basis for the study conducted in

the following experiment stages:

1) identification of key factors (Х) — financial

instruments that have the most significant direct

impact on the result (У) for the analysed period;

2) building a regression model (2), which served

as the basis for forecasting the value added of the

company for the next three years in view of the

author’s hypothesis about the priority of key impact

factors (financial instruments Х) on value added

while limiting the increase in costs for others

factors;

3) forecasting options comparison:

- maintaining current trends of changes for all

factors;

- maintaining current trends of changes only for

key factors and limiting (controlling increase of)

costs for other factors (which have less impact on

the result);

- drawing management conclusions and

providing recommendations based on the

comparison results;

4) providing generalized recommendations

regarding the procedure of accounting, control and

analysis of financial results and, in particular, the

added value of entities engaged in FE, as well as the

factors that affect it relying on the practical results

obtained. It is proposed to build a model for

managing the value added of the entity engaged in

FEA of the ith e-commerce company as one of the

ways to structure the research results of the study.

The author proposes the following model:

𝑍𝑉𝐴𝐹𝐸𝐴𝑖= 𝑓(Х1, Х2, Х3, Х4, … Х𝑛)і →

max(𝑝1, 𝑝2, 𝑝3, 𝑝4, … 𝑝𝑛)𝑖 (4)

where 𝑍𝑉𝐴𝐹𝐸𝐴𝑖– the target function of effective

management of the value added (VA) of the ith

entity engaged in FEA;

Х1…𝑛– n- factors – financial instruments that

have a significant direct impact on the result;

𝑝1…𝑛– n- development priorities of the entity

engaged in FEA, which contribute to an increase in

the value added of this entity.

3.2 Research Methods and Tools

The key method used in the research to identify the

correlation between the studied processes and

phenomena is the correlation and regression

analysis [21; 24]. This method allows studying the

correlation — a relationship that is manifested in a

large number of observations in the form of a

dependence between the mean of the resulting

feature and factor features. This article considers the

correlation between the mean of the resulting factor

y with several factor features x, that is, the multiple

correlation is determined.

The study of correlations is reduced to fulfilling

the following objectives: 1) identify where there are

(there are no) correlations between the studied

features; 2) measure the correlation rate between

two (or more) features through special coefficients

(correlation analysis); 3) determine the regression

equation — a mathematical model where the mean

of the resulting feature is considered as a function of

one or more variable factor features (regression

analysis). The correlation and regression analysis

involves a comprehensive study of correlations

(fulfilling all three objectives). The Data Analysis

package in MS Excel is the tool that allows making

this substantiation using software solutions involved

in the study.

The linear correlation coefficient calculated in the

paper relies on the assumption that the deviation of

the factor feature from the mean ( ) are random

and must be randomly combined with different

deviations ( ), provided complete

independence of the features x and у. It is assumed

that there is a correlation between x and у in case of

a significant prevalence of coincidences or

differences of the deviations [21; 24].

… (5)

(6)

The linear correlation coefficient can take values

from -1 to +1, where the sign is determined in the

course of the solution. This coefficient is both a

measure of the correlation rate, and an indicator that

describes the extent of approximation of the

correlation between x and у to the linear one.

Therefore, in some cases the proximity of r to 0 may

mean no correlation between x and у, while in

others it indicate that the correlation is not linear

[21; 24].

Selection of the regression equation is a

mathematical description of the change of mutually

correlated quantities based on the empirical (actual)

data. The regression equation should determine the

mean of the resulting feature in case of a particular

value of the factor feature x, provided that other

xx

yy 

xxx







yyy







  

  

  





2222 yynxxn

yxxyn

r)()(

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factors affecting y and not related to x are not taken

into account. The least-squares method was used in

the article to calculate the regression equation

parameters (а0-а7 coefficients) through the software

solutions of the Data Analysis package in MS Excel.

This method is to calculate the following theoretical

values of the resulting feature, which would provide

a minimum sum of squared deviations from

empirical values [21; 24].

(7)

The study also involves graphics simulation and

logical structure analysis to schematize the sequence

of implementing the author’s suggestions to

improve the accounting and analysis of value added

as a financial result of an entity engaged in foreign

economic activity.

The calculation of the model (2) proposed in the

article and determination of the factors that

primarily affect the change in the value added of the

entity engaged in FEA was tested on the example of

Odeskabel PJSC using the company’s data of

management accounts and financial accounting.

4 Results

4.1 Identification of Key Factors - Financial

Instruments that have the Most Significant

Direct Impact on the Value Added

Table 1 presents the results of analysis and

forecasting the dependence of the value added of

Odeskabel PJSC on the impact of factors —

financial instruments — through correlation and

regression analysis (which was carried out through

Data Analysis software solutions package in MS

Excel).

Table 1. The results of analysis and forecasting of the dependence of the value added of Odeskabel PJSC on

the factors — financial instruments — through correlation and regression analysis

Year

Y (value added of the entity

engaged in FEA), UAH

thousand

Х1 – the

instruments

related to the

marketing

activities of

the entity

engaged in

FEA, UAH

thousand

Х2 –

instruments

related to

the sales

activity of

the entity

engaged in

FEA, UAH

thousand

Х3 –

instruments

related to

the logistics

activity of

the entity

engaged in

FEA, UAH

thousand

Х4 –

instruments

related to

the

investment

activity

intended to

develop

FEA, UAH

thousand

Х5 –

instruments

related to

servicing the

debt resulted

from FEA,

UAH

thousand

2016

30,351.20

4,500.50

6,541.20

8,230.00

7,015.00

351.00

2017

32,280.50

3,220.00

7,650.00

7,228.00

7,122.00

350.00

2018

31,617.70

4,515.22

7,280.00

7,450.00

8,135.00

360.00

2019

34,597.60

4,984.20

9,489.90

8,070.00

8,926.00

480.00

2020

42,485.70

7,594.50

10,920.40

8,200.00

8,831.00

910.00

2021

38,127.70

6,188.40

10,719.20

8,700.00

9,064.00

1,254.00

Total

115,211.00

18,767.10

31,129.50

24,970.00

26,821.00

2,644.00

Average

annual

value

38,403.67

6,255.70

10,376.50

8,323.33

8,940.33

881.33

Average

annual

growth rate

1.05

1.11

1.01

1.05

1.33

Forecast

Ymod — forecast

according to the

plan of

intensification

of marketing

and sales tools

Yavr —

forecast

for

average

annual

growth

rates

Forecast for

average

annual growth

rates

Forecast

for average

annual

growth

rates

Average

annual value

Average

annual

value

Average

annual value

2022

42,862.81

40,130.94

6,881.69

11,913.35

8,323.33

8,940.33

881.33

2023

47,135.86

42,239.43

7,652.65

13,240.54

8,323.33

8,940.33

881.33

2024

51,885.83

44,458.69

8,509.98

14,715.58

8,323.33

8,940.33

881.33

Average

annual

growth rate

1.10

1.05

1.11

1.00

 min)

yyS

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(forecast)

Source: calculated by the author

Line 2 presents data on the value added of the entity

engaged in FEA under research for 2016-2021.

Lines 3-7 provide aggregated data on financial

instruments that affect the creation of value added

(according to Model (2)). The average annual values

and the average annual growth rate are determined

for these values. The impact rate of the instruments

— factors (Х1-Х5) on the value added — the result

(Y) is determined through the Correlation function

of the Data Analysis package in MS Excel. Table 2

shows the results of determining the correlation rate

— the Pairwise Comparison Matrix.

Table 2. The Pairwise Comparison Matrix for the correlation rate between the value added of Odeskabel PJSC

and the factors — financial instruments — for 2016-2021

0.91087

0.938282

0.824055

0.520382

0.697155

0.593848

0.743187

0.742292

0.874556

0.548191

0.809038

0.778939

0.86243

0.756664

0.719345

Source: calculated by the author through the Correlation function of the Data Analysis package in MS Excel

The results in Table 2 were the basis for identifying

the factors that have the greatest direct impact on

the resulting feature — the value added rate:

Х1 — the instruments related to the marketing

activities of the entity engaged in FEA — 0.91

correlation rate;

Х2 — instruments related to the sales activity of

the entity engaged in FEA — 0.93 correlation rate.

4.2 Building a Regression Model and a

Subsequent Analysis of Options for

Implementing the Model Of Changes in the

Value Added of Odeskabel PJSC under the

Impact of Financial Instruments

The coefficients — parameters of the regression

model were determined using the Regression

function of the Data Analysis package in MS Excel:

a0 =37297.88; a1=1.832918; a2=2.154892; a3=-

2.07143; a4=-1.75965; a5=0.286469;

and the following regression model was built on

their basis and on the basis of (2):

Y= 37297.88 + 1.832918*Х1 + 2.154892*Х2 -

2.07143*Х3-1.75965*Х4+ .286469*Х5, (8)

This model was the basis for:

– forecasting the company’s value added for

the next three years in view of the author’s

hypothesis about the priority of the key impact

factors (financial instruments X) on the value added,

while limiting the increase of costs for other factors.

The forecasting results are presented in Line 2 of

Table 1 in the block “Ymod — forecast according to

the plan of intensification of marketing and sales

tools”.

– forecasting the company’s value added for

the next three years, while maintaining current

trends for all factors. The forecasting results are

presented in Line 2 of Table 1 in the block “Yavr —

forecast for average annual growth rates”

The forecast options for the next three years

were the basis for the calculation of the average

annual growth rate of value added. Relying on the

analysis of the forecast data, we made the following

statements:

– given that the changes in the current trends

maintain in the key factors only, which include:

Х1 – the instruments related to the marketing

activities of the entity engaged in FEA —

0.91 correlation rate;

Х2 – the instruments related to the sales activity

of the entity engaged in FEA — 0.93 correlation

rate;

– while in case of limiting (controlling an

increase in) costs for other factors (which have less

impact on the result), namely:

Х3 – instruments related to the logistics activity

of the entity engaged in FEA – 0.52 correlation rate;

Х4 – instruments related to the investment

activity intended to develop FEA – 0.74 correlation

rate;

Х5 – instruments related to servicing the debt

resulted from FEA – 0.81 correlation rate;

a significantly higher — 10% — average annual

growth rate of value added is achieved, instead of a

5% annual increase for the case of maintaining

current trends of changes in financial instruments.

Therefore, a twofold increase in the dynamics of

the indicator is achieved through the

implementation of the analytical and management

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solution suggested in the article. Figure 1 presents

generalized results of the implementation of this

solution, as well as its comparison with the option

that involves maintaining current trends in the

indicators.

Fig. 1: Options for implementing the model of changes in the value added of Odeskabel PJSC under the impact

of factors — financial instruments

Source: compiled by the author

4.3 Making Generalized Recommendations

for the Procedure of Accounting, Control

and Analysis of Value Added of Entities

Engaged in FEA and the Impact Factors

The main feature of the calculation of the value

added of an entity engaged in FEA through the

proposed model is that financial instruments that

have a certain impact on the value added are the

object of evaluation. So, distinguishing the values of

financial instruments and reporting with the

inclusion of those values in the analytical

accounting database are important areas of

improving the system of accounting and analysis of

entities engaged in FEA.

In this sense, it is more important to assess the

effectiveness of individual segments, activities,

rather than to determine the financial result of the

entity engaged in FEA as a whole. Provided limited

financial resources, the former which will allow:

- identifying the most profitable segments and

activities, while giving up unprofitable segments

(activities);

- finding the most rational resource consumption

structure to provide maximum (or planned) added

value.

Information on financial instruments to create

value added can be used for the preparation of

interim and annual management accounts and

financial statements, as well as for the marginal

analysis.

Therefore, the inclusion of the metrics of

financial instruments to create value added of the

entity engaged in FEA in the accounting and

reporting system will ensure more effective costs

management through the use of value added and

factors that determine its increase resulting from the

proposed model. This way of management can

significantly improve the company’s performance

through the following opportunities:

– enhancing the potential of the accounting,

reporting, analysis and control system, as well as

rationing the elements and items of costs incurred in

order to obtain particular financial results;

– identifying cause-effect relationships, the

company’s resource management levers;

– making well-founded operational and

investment decisions;

– determining the real financial result at the

level of value added both for particular areas of

activity (FEA) and for the company in general.

So, the optimal scale of activities that will yield

the expected positive financial result in the form of

increased value added (Figure 2) will be promoted

by improving the system of accounting and analysis

of entities engaged in FEA through distinguishing

the values of financial instruments and reporting

with the inclusion of those values in the analytical

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accounting.

Fig. 2: The chart of formation and distribution of financial results of the entity engaged in FEA

Source: compiled by the author

This approach provides the rational use of

available production resources and fulfilling the

potential for the development of the entity engaged

in FEA. The model presented in this research is

proposed for this purpose, where the financial

instruments — the factors that have an impact on

the company’s value added — are the main

variables.

In view of the results of the study, based on

Model (3) suggested in the research, the author

intends to provide maximization of the target

function of effective management of value added of

the entity engaged in FEA 𝑍𝑉𝐴𝐹𝐸𝐴𝑖=

𝑓(Х1, Х2, Х3, Х4, … Х𝑛)і →

max(𝑝1, 𝑝2, 𝑝3, 𝑝4, … 𝑝𝑛)𝑖 through the following

development priorities of the entity engaged in FEA

(𝑝1…𝑛), which will promote the increase of added

value of this entity:

𝑝1 – improving the company’s performance

through a set of management decisions to improve

business processes that yield a synergistic effect of

optimizing the company’s functions;

𝑝2 – creation of added value through the

development of marketing and sales activities of the

entity and their conversion into profit to be used for

payment of dividends, repayment of debts and

liabilities, implementing development projects, for

incentives, technical and technological re-equipment

and modernization, etc. (see Figure 2);

𝑝3 – improvement of the system of management

accounts and analysis of the entity engaged in FEA

by distinguishing the values of financial instruments

that have an impact on value added, as well as

reporting with the inclusion of these values in the

analytical accounting database;

𝑝4 – creating an information and analytical

database for effective management decisions based

on the model suggested in this research, which

provide efficient resource distribution to support

financial instruments that have a significant effect

on value added with a simultaneous control of the

costs for other instruments.

Therefore, creation of more effective (optimized)

operating conditions for this entity provides for the

improvement of the analytical accounting system

and the system of support for management decisions

in terms of value added of the entity engaged in

FEA. The improvement dynamics can be monitored

through the extent of the company’s development

priorities, which will be reflected in the added value

and consequently — the amount of profit.

5 Discussions

Value added is a category that describes the

company’s financial performance. Each commercial

company generates income and expenses of a

certain structure that can have a different impact on

value added, as [25; 26; 27] stated. In this context,

the common point between this study and the

research by [2; 28] is that substantiation of the

management decisions of entities engaged in FEA,

and especially management of the company’s costs

and revenues as a separate area of management, is

closely related to accounting and analysis.

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The International Federation Of Accountants

(IFAC) developed the International Good Practice

Guidance entitled Evaluating and Improving

Governance in Organizations [29]. This Guidance

indicates the areas of activity where the company

should use the accounting and analysis tools should

be used: establishing strategic activities; ensuring

the achievement of the company’s goals; ensuring

risk management in the company; verifying the

resource efficiency. According to the author,

accounting and analysis of value added becomes an

element of cost and revenue management system

rather than a self-sufficient system in this context. In

the accounting and analysis system, the information

which is important for the company’s management

is generated based on contrasting the dynamics and

amount of costs and revenues. Therefore, the results

of this research completely meet the IFAC

recommendations and represent scientific and

practical significance. This aspect is also in line

with the results obtained by [30; 31], thus providing

additional opportunities for improving the analytical

accounting system to support management decisions

on value added of the entity engaged in FEA.

Moreover, in contrast to the works mentioned, this

article focuses not only on management accounts,

but also covers the aspects analytical accounting of

economic entities in view of their interdependence.

The latter allows both to create better conditions for

the operation and development of the entity, and to

improve its performance.

As noted in this article, one of the main results of

an effective system of accounting and analysis of

financial results of entities engaged in FEA is

obtaining analytical information required to

substantiate and make management decisions in the

company. These decisions relate primarily to

improving performance in the long run (strategic

perspective), which is in line with the findings of

authors [32]. From this perspective, this system can

become a flexible tool to enhance the development

of entities engaged in FEA, which will provide a

combined effect of the latest approaches and tools

of management accounts together with strategic

management [33].

It should also be emphasized that a certain

freedom to choose the solutions and requirements

for accounting and analysis of financial results

according to international standards [29] does in no

way imply the use of accounting policy as a tool for

creating the company’s positive image by

presenting only positive results of its performance.

It shall not contradict the main accounting principle

— true and fair view [34; 35], which is a separate

problem for discussion. Consequently, the

possibility of implementing specific actions to

improve management and organization of

accounting and control of financial results is

determined in this article to be the main guideline

for improving the accounting and analysis of value

added of entities engaged in FEA in view of the

current conditions and trends in accounting and

analytical practice is. Solving current problems of

the operation detected through the analysis can be

one of the areas of improving efficiency.

The practical value of the article lies in the fact

that its methodological base and the results of its

approbation make it possible to improve the

implementation of the involvement of specific

financial instruments to make the most of the

potential for increasing the added value because of

the specifics of the subjects of foreign exchange.

The practical significance of this article is the

procedure for redistribution of resources by

financial instruments that affect the value added

while controlling costs presented on the example of

a particular company.

At the same time, this work has certain

limitations, primarily regarding its practical use,

which consists of the need to constantly control the

factor of subjective interpretation and determine the

structure of the formation of added value by the

persons who define it. To some extent, the results of

this work contribute to the minimization of such an

interpretation, but not to the full size, especially

concerning the number of losses in the course of

activity that is acceptable for a particular company.

This actualizes the need to reveal the issues of cost

control, which determines the direction of further

research based on the article's findings.

Developing cost control mechanisms for value-

added components in terms of types and activities

are the prospects for further research in this area.

This will allow for a more effective minimization of

the costs incurred by entities engaged in FEA and

increased added value by optimizing the value-

added chain.

6 Conclusion

The important issues of support that the analytical

accounting provide for the management process in

the field of foreign economic activity at the

company level are considered in the article. The

special contribution of this article to solving the

problems of science and practice is as follows.

Firstly, the impact of particular financial

instruments suggested by the author to enhance the

competitiveness of the entity engaged in FEA on the

creation of value added of this entity is explored.

What is in this work is also important, that the key

factors — financial instruments that have the most

significant direct impact on the value added of these

entities — are identified. The conclusion that

follows from the analysis of the obtained data on the

example of Odeskabel PJSC is that a significantly

higher average annual growth rate of value added is

achieved in case of maintaining the current trends of

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changes only for key factors, represented by tools

related to marketing and sales of the entity engaged

in FEA, with simultaneous limitation (control of

increase in) costs for other factors (which have less

impact on the result).

The necessary conditions for effective

accounting and analytical practice of recording

value added in the reporting of FEA entities are

determined, which primarily include the form and

presentation, detailing and adaptation of accounting

records to the needs and capabilities of enterprises

operating in a particular field (FEA), as well as the

extent to which the company is free to choose the

most rational and convenient way of accounting and

recording costs for certain activities, elements,

items.

The appropriateness of using the capabilities of

analytical accounting systems based on international

accounting and reporting standards is determined on

the above ground. The need to implement a set of

measures and involve tools to enhance the increase

in the value added of the entity engaged in FEA was

identified. Special consideration is given to the need

to find theoretically substantiated ways to provide

the management of companies to the possible extent

with objective, complete and timely information on

the amount and dynamics of value added, which is

required to make well-founded and effective

management decisions. This improvement will

enhance the capacity for converting the available

limited resources of domestic companies into

financial results (added value) as an economic

value.

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