Current Issues in Corporate Reporting - Term Paper Example

Integrated Corporate Reporting Introduction There has been need to produce a standardized method of corporate reporting by the business community. Previous reporting did not bring about financial development, sustainability and improved performance that had been desired by the business world (ACCA (GREAT BRITAIN), 2009). Despite the fact that most companies need to give proper detail of their business in audited financial reports and other separate reports on sustainability, such efforts had failed to provide a detailed account of the performance of the companies (Everingham & Kana, 2008). It is because of this that had necessitated the need to come up with an integrated report, through the international integrated reporting committee in 2011. The core mandate of integrated reporting therefore is to gather information about an organizations strategy, its governance, future prospects and performance in a manner that reflects the structure it operates in terms of the commercial, environmental and social context. It is meant to be an organizations most important reporting tool (ACCA (GREAT BRITAIN), 2010). Its aim is to create a formula for accounting for sustainability, bringing together governance, social, environmental and finance in a cohesive way. In order to achieve its mandate and to be welcomed internationally as the standard reporting method, the international integrated reporting committee had a representation from different parts of the corporate world (Eccles & Krzus, 2010).These includes the civil society, the investment sectors, accounting, the academic front, standard setting sectors, the regulatory sector as well as the security sector. It also has task forces that deal with content development, governance, engagement and communication as well as a working group and a steering committee. This report therefore broadly discusses the need for integrated reporting and the challenges that were met when constituting such reporting methods during the 2011 international integrated reporting committee meeting. Need for new approach to corporate reporting Corporates need to achieve financial development, sustainability and improved performance while reporting on their corporate performance. Against the background of this, previous reporting did not manage to yield such objectives (Bennett, Burritt& Schaltegger, 2006). In fact, it exposed some businesses to their bare minimum since companies were revealing most of their financial details while yet they did not achieve improved performance that they expected. This therefore necessitated the need for a new framework for corporate reporting that would boost their performance through better methods of reporting (Brockett & Rezaee, 2013). Existing corporate reports are often long and disconnected. Furthermore, they are based on various strands, such as governance, financial performance, operations and strategy, which ought to be interdependent. Integrated reporting therefore bridges this gap by integrating the disconnected strands to present one broad set of information (Robert et al, 2008). The need therefore is to present a framework that will incorporate all these fragmented information into one sourceinformation through the new approach in corporate writing, thus creating convenience by putting all these information in one set of data. Emphasis has been made over the past on short term reporting on financial performance. This did not help the future growth of the company since it ties the business to achieving these short term goals, instead of strategizing for future growth. Integrated reporting addresses this issue by focusing on long term financial performance to gauge the growth of the business. The new approach emphasizes the need for long term planning thus the reports are based of long term performance unlike past reporting (Sutton, 2004). Environmental and social factors are directly linked to the performance of a business. For instance, an environmental factor such as global warmingmayhave an adverse impact on resources such as fuel, which is critical to the day to day running of business since it may affect the cost of production in a number of ways (Crowther, 2012). Social factors on the other hand may include the changes in lifestyles of individuals which may affect the demand of certain goods. Such factors, which were previously not covered in earlier reporting, are now incorporated in the new framework for reporting since they greatly impact on the overall performance of any given business. Investors have been wary about the return to their investment due to lack of proper framework to guide the decision making process. The new approach aims at addressing this by providing support knowledge to long term investors by illustrating to them therepercussions for longer term decision making. In the past, there had been no clear guidelines for undertaking the decision making process and as such poor decisions could not be clearly accounted for. There has been the need to report about the day to day governance and running of businesses by the management. This has been necessitated by stakeholders who would like to get in depth knowledge of how the business they invested in is run and how this affects it out put or performance (Dipiazza & Eccles, 2002). Very few details have been reveled in past reporting about the day to day running of organizations by managers and this makes it difficult to fault find in the event there is a problem or luck luster performance. Past reporting was stringent and rigid. It was based on specific but limited avenues of reporting. However, the new approach to reporting embraces more avenues of reporting and this would include discovering innovation in corporations reporting processes, both within the organization and outside as well as how they include all aspects of their operation activities. Problems faced in producing new corporate reporting The process of creating an integrated reporting system has been faced with a number of setbacks. This has been brought about by a number of challenges. They include the following: There existed different rules and regulations governing the various jurisdictions in the international society. For a report to be standardized there is need for such report or rules in reporting to be applied across the board (Jones, 2012). This has been a challenge because the international communities have different rules that govern them and as such some reporting guidelines may not be acceptable in different jurisdictions. This greatly affects the process of creating an integrated report since the committee has to compromise or look for alternative ideas or methods that can be accepted across the board and one that is all inclusive. It may also mean that some jurisdictions may have to be guided by a different guideline on corporate reporting and this could slow down the process of formulating integrated reporting (Rezaee, 2006). Directors of different jurisdictions have been accused of being inconsistent in their fiduciary duties. The role of directors in the integrated committee was to act on behalf of the different stakeholders. Their duties may include offering advice to the committee on behalf of the jurisdiction they represent. However, such directors have been accused of being inconsistent in their duties and this has greatly affected the credibility of the process. Such accusations if not addressed could have slowed down the process of formulating a new framework for corporate reporting. Since the idea of creating an integrated framework for corporate reporting was relatively new, it goes without saying that it would require more time to gain knowledge and experience to ensure the success of the framework in the long term. Some aspects in the reporting have to be tried out and tested in order to know their viability. The more knowledge is gathered regarding the framework, the more successful it would be. In essence, experience is the best teacher and as such the framework has to be tried and tested to be more successful. The various elements such as environmental law and finance have set up guidelines that governing them. Such legislation and regulations may need revision to keep them up to date with the proposed framework (Villiers, 2006). This revision requires more time and resources to implement as well as consultation, political will and good leadership skills, which at the time was not forthcoming. The new framework for reporting would encompass more subjects and have a strategic focus. As such, concerns on fiduciary roles and business confidentiality would need to be tackled in order to avoid future conflicts (Pounder, 2009). Measures needed to be put in place to help deal with such a situation in the event that it occurs. Since the integrated reporting involves integrating different segments of reporting into one, organizations will be face with the challenge of setting up systems or improving on the available structures for netting and amassing information. Such structures may be costly to these organizations and may also take more time to set up. This will therefore slow down the advancement of formulating and implementing the integrated reporting. There is also the challenge of confidentiality among the different business community. Organizations are faced with the problems of disclosing confidential information which may hurt the performance of their business or reveal too much information to the benefit of their competitors. The level of confidentiality needed to be addressed by providing a framework that would guide what information needs to be reported on that would not jeopardize the performance and growth such affected companies. Such companies will also need to learn how to balance what information they need to give out and what they should not without losing out on the benefit of integrated reporting. There had been complains about the directors’ responsibility if the reports were to place more emphasis of the future. Guidelines had not been put in place to deal with responsibility of directors in the long term since the new corporate reporting placed emphasis in the future. There was therefore the need to address this issue before the guidelines formulated could be acted upon by all the corporate stakeholders in the international community. Analysis of the different sectors of reporting such as environmental issues, financial performance and social factors is still evolving. The necessary tools needed to analyze these factors in an aggregated manner were yet to be established. The international integration committee therefore had the challenge to provide the necessary tools which will reveal relevant information to be reported while addressing such diverse topics. The methods of compensation and enticement arrangements to the supply chain that were available at the time emphasized on the short time. Integrated reporting on the other hand focuses on long term success on investment returns. There is the need therefore to place necessary steps by the regulatory and non-regulatory players to readjust this focus. Conclusion Good corporate reporting helps the international business community to forge a path to ensure success in their businesses and benefits their partners and stake holders. The need for creating a better framework for corporate reporting should be encouraged for the benefit of their organizations. The integrated reporting should therefore be aimed at consolidating the previous corporate reports into one report rather than creating a new one in addition to the older reports (Nurdin, 2009). The main beneficiaries of the report are the stakeholders who most often need results than unnecessary paper work. This means they may need more relevant and useful insights. To achieve this, the framework will have to address the determination of value on what to report about more so in respect to the investors and stakeholders (Freeman, 2010). Without this, the good will of integrated reporting would be subdued by organizations which reveal too much hence resulting to cluttering. In summary, the success of integrated reporting depends on how the social, environmental and governance pillars have been included into organizations, in order for them to take a sustainable path in the future or long term. According to Higson (2003), it should incorporate thinking at different levels, which needs to happen so that the systems of integration, such as management, governance, strategy and processes can sustain effective reporting. Bibliography BROCKETT, A., & REZAEE, Z. (2013).Corporate sustainability integrating performance and reporting. Hoboken, N.J., REZAEE, Z. (2006). Corporate governance post Sarbanes-Oxley. Hoboken, NJ [u.a.], Wiley CROWTHER, D. (2012). A social critique of corporate reporting: semiotics and web-based I ntegrated reporting. Farnham, Surrey, Gower Pub ECCLES, R. G., & KRZUS, M. P. 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