Which of the following is a disadvantage of SVA?

• A. It is inexpensive to implement
• B. Ignores brands and other stuff that don't appear on balance sheet
• C. It yields precise non-financial outcomes
• D. It requires no data

Answer: (D)

The key idea here is that SVA often quantifies value using data that sits on the financial statements and related metrics, which means it can miss important intangible assets. Brands, customer loyalty, reputation, and other non-physical assets aren’t typically captured on the balance sheet, yet they can have a big impact on long-term value. Because SVA can overlook these elements, its results may misrepresent the true value of strategic options, particularly those aimed at building or protecting intangible assets.

That makes ignoring brands and other things that don’t appear on the balance sheet a genuine drawback of SVA. The other statements aren’t drawbacks: SVA isn’t inherently inexpensive to implement; it usually requires collecting meaningful data and modelling value drivers. It doesn’t routinely yield precise non-financial outcomes, since its emphasis is on financial/value measures rather than exact non-financial metrics. And SVA does rely on data, so the notion that it requires no data isn’t accurate.