The Corporate Report method The first column may be used to formulate a value-added statement as recommended in the Corporate Report.. We shall assume that 45 per cent of the profits are distributed as dividends and that tax is £25,000. The materials figure in this statement represents the amount spent in the period, (£250) adjusted for the change in stocks (£100). This is something of an approximation, for the value of stocks is a mixture of bought in materials (or non-value-added items) and labour costs or 'value added by the firm' items). By effectively increasing the total value added by the value added put into stock, the resulting measure includes productive effort during the period which has not resulted in sales - a violation of the matching principle. The cost of sales method This method attempts to correct for the approximation of the previous technique by separating stock costs into materials and value aded items. The materials figure is now: Table Example Ltd, Manufacturing and trading account. Table Value-added statement as in the Corporate Report. The value-added figure is accordingly revised to: 700-205=£495 The decrease of £55 is represented by value-added costs (in this case labour) that have been put into stock. The statement would now read: Table Value added-the cost of sales method.