Accounting Professions Stand on Integrated Reporting Analysis - Mitsubishi Corporation - Assignment Example

Accounting Profession’s Stand on Integrated Reporting (IR) Analysis Student’s Name Institutional Affiliation A. Accounting Profession's Stance On Integrated Reporting (IR) In lieu of the consultation draft that was issued by the International Integrated Reporting Council (IIRC), the Association of Chartered Certified Accountants made significant comments and contributions that fairly much defines their position on the matter. The adoption of IR is set to result to efficient and productive capital allocation, which will in turn act on financial stability and sustainability as a whole. Extensive researches indicate that IR is focused on improving the overall quality of information that is presented to the financiers of financial capital in order to facilitate them in their allocation process (Eccles & Krzus, 2010). It is also set to foster a much more cohesive and efficient technique in relation to corporate reporting that is directly related to different reporting frameworks. In addition to this, IR is expected to enhance aspects related to accountability and stewardship for the wider base of such capital base as finance; manufactured; intellectual; human; social and relationship as well as natural ones (Jensen & Berg, 2012). Basically, it seeks to support integrated model of thinking, decision-making and actions that should now focus on the creation of value over a shorter and medium period. Hughen, Lulseged and Upton (2014) argues that the capacity owned by an organisation to create value for itself is directly related to the underlying level of value it creates overtime. This is set to happen as a result of a broad spectrum of activities; interactions as well as relationships as shown in the figure below; The ACCA ascertains to the fact that it supports the overall concept related to integrate reporting. The professional’s body indicates that through its numerous researches; it has become evident that most of the stakeholders would fairly embrace the idea of implementing integrated reporting since it has the potential of resulting to numerous benefits that include; a complete focus on long term, perfect comprehension of underlying risks involved that include long term risks to the business model as well as the wider insights into the manner for which the element of corporate value is developed (ACCA, 2013). The International Framework (2013), note that the process of adopting integrated reporting on this full complete coverage basis has an enormous potential for influencing the manner for which entities commit to their strategic planning as well as their overall operational management undertakings. In fact, the body notes that there is a need for the IIRC to commit to addressing the current issue related to a lack of unawareness of integrated reporting and proposes for extensive campaigns of the concept for purposes of widespread acceptance and implementation. It is ascertained that having a non-statutory framework, which can be adopted by different entities and the overall market at large, can assist in raising awareness, promote its adoption and, also foster the aspect of good practice. The underlying experience emanated by the IIRC to establish areas that can be further enhanced to the framework and thus, assist to gather underlying evidence of the advantages of adopting integrated reporting is expected to facilitate the propelling of the market uptake. It should be further noted that the IIRC should now exploit the underlying opportunity to attain progress on this initiative. Sufficient emphasis should be focused on ascertaining that the Integrated Reporting platform is considered to be good; practical and fairly-founded as much as possible. Krzus (2011) notes that for the purpose of developing the framework even further, the IIRC is encouraged to focus more on the credibility of the pilot initiative and the resultant feedback from the investors’ extensive networks. The Australian Financial Reporting Council is of the opinion that IR’s ambition of a market-led adoption can only be achieved when the global market accepts that integrated reporting will result to production of better as opposed to only disclosures and that it will require additional reporting that will result to more benefits as opposed to burdens (Australian Financial Reporting Council, 2013). The body further notes that there is a clear need for effectively distinguishing between IR and sustainability reporting. AFRC ascertains that the entire framework should provide clearer guidance on matters related to the scope and content of reporting on sustainability issues. ASIC has come out to support the implementation of IR in the process of disclosing financial reports to the different stakeholders. However, it is more concerned with inclusion of environmental and sustainability information in annual reports as opposed to engaging the GRI or even the International Reporting Council (IIRC) stipulations on a much specific manner. Integrated Reports Produced By Two Australian Companies and Two Other Companies of Your Choice 1.0 Woolworth Integrated Report The management ascertains that it is ready to adopt the IIRC legislative frameworks and has already adopted the G4 core frameworks that relates to global reporting initiative and, also the international financial reporting standards. The reporting comparability has been provided, which includes the involvement of David Jones financial results as well as the Country Road Group (Woolworth’s Holdings Limited, 2015). Materiality of the report is identified as adhering to Group’s eight strategic objectives, which represents that material opportunities that seeks to foster value creation for stakeholders within the short, medium and long term period. The report provides the business model of the company and notes of its three underlying fundamental operating segments that include; Woolworths South Africa; David Jones and Country Road Group ICountry Road Group (Woolworth’s Holdings Limited, 2015). The business model is made up of the six capitals that includes; the financial; manufactured; intellectual; social relationship and natural capital, which are all used to create value for the firm. The report presents the company’s industry’s trends for which it is ascertained that a substantial range of macro-economic, social; political and technological aspects are the core shaping factors of the current and future landscape for which all retailers conduct their respective operations while consumers make efficient purchasing decisions. It identifies the stakeholders as the being the strong influencing aspect that will help develop the company’s overall value creation (Woolworth’s Holdings Limited, 2015). There is a notable probability that stakeholder’s perception is likely to affect the entity’s reputation and that there is a need for dealing with in a much proactive manner. In addition to this, the company provides financial statements; selected explanatory notes; strategy especially relating to operations and future expansion processess as well as the governance report. In essence, it sufficiently presents information related to the future outlook of the company; the year being 2016 financial period. The Group governance framework sets out the fact that the firm had acquired David Jones while at the same time made sure to attain full ownership of the Country Road Group. Presently, there are three operating company boards that reports directly to the WHL Board that include; Woolworths South Africa; David Jones; and Country Road Group. Subsequently, the report notes that the future outlook and especially in relation South African customer is set to experience notable pressure despite the fact that the upper-income customer is still resilient in most cases (Woolworth’s Holdings Limited, 2015). This pattern is also likely to be experienced in Australia where customer confidence is set to come down significantly. However, strategies have been put in place to ensure that opportunities are pursued even further in order to gain significant share gains within the sub-Saharan Africa and Australasia regions (Woolworth’s Holdings Limited, 2015). 2.0 Wesfarmers Limited Unlike its overall counterpart; Wesfarmers report only mentions but does not provide relevant information related to its existing business model. The company’s operational overview only notes of its capital efficiency focuses that is set to accomplish the overall cost of capital advantage. In fact, it provides at the Group focuses on improving its overall working capital efficiency for all its business operations and curtails improper capital expenditure exercises. It thus fails to distinguish different capital frameworks and how they are adopted for value addition purposes (Wesfarmers Limited, 2015). Of particular interest to note, the company does provide effective strategies that it can use to create value and they include; strengthening the underlying businesses operations by way of operating excellence and thereby satisfying the overall customer needs.; securing growth chances through aspects related to entrepreneurial programs; and also renewing most of its portfolio through value-adding transactions (Wesfarmers Limited, 2015). Just like its counterpart, it also provides an extensive financial overview plan that further includes presentation of the basic financial statements. The report provides the strategies related to future performance outlook where factors that will likely result to favourable operations are identified as; mine expansions, business optimisation, product extension and market reach. Certainly, it also provides for the efficient drivers that are needed for the future positive outlook. Other notable areas provided within the report include; the governance review, the sustainability activities as well as its investor engagement strategies that include; access to up-to-date highly reliable information and notes to the financial position (Wesfarmers Limited, 2015). As opposed to Woolworth, Wesfarmers’ report does not however; present information related to industry overview and how the company is positioned to it in regards to future operations. Non-Australian Companies 1.0 Ocean Group This is a company operating in the South African market and listed there as well. The report notes of the underlying target audience and materiality. Some of the strategic objectives mentioned in the report include; the ability to generate sustained financial returns by way of coming up with efficient market returns; driving activities related to transformation and localisation; optimising the company’s underlying operations as well as developing its trusted relationships. It goes ahead to provide a well-detailed value added statement that reflects the contribution of each item into the company’s overall revenues. The Group’s chairman report indicates the numerous ways for which different geographical regions like South Africa, Namibia and Far East all contribute to the creation of a value added wealth position (Oceana Group, 2015). It identifies the different forms of capital needed for value creation and they include social and relationship; human and intellectual as well as natural capitals, which each of these capitals efficient distinguished. For instance, the report identifies social and relationship capital as being taxes accrued in South Africa and Namibia as well as the US; investments made in regards to corporate social initiatives in both South Africa and Namibia; human and intellectual capital is identifies as salaries and employee benefits; disabling injuries frequency rates while natural capital is identified as being marine biomass and Hake operations in MSC chain (Oceana Group, 2015). The company’s business model provides value propositions whereby customer value proposition is identified as being reliable and affordable in providing responsible harvested and processed products; while employee value propositions is based on learning and earnings while at the same time innovating and growing all stewards of fishing rights (Oceana Group, 2015). It provides detailed information relating to understanding different stakeholder material interests; some of the notable stakeholders identified by the report include; government and regulatory authorities, shareholders and investors as well as different trade unions in South Africa like FAWU; TALFU and UDF (Oceana Group, 2015). The report provides information related to financial statements and their respective accompanying notes as well as operating overview, which provides material information related to revenue generation. The corporate governance overview provides information related to the different board committees and their respective roles and responsibilities. It also presents sufficient information related to future expected performance and how this position will be achieved (Oceana Group, 2015). For instance, it is noted that the company has committed to acquiring significant businesses like Lusitania; Foodcorp and Daybrook as the management team has taken strides to ensure that there could be seamless integration of new companies to its overall people-base and assets (Oceana Group, 2015). 2.0 Mitsubishi Corporation The company ascertains that their effort to publish the 2015 integrated report is focused on attaining sustainable economic value; along with sustainable societal and environmental-based values. Some of the significant disclosures provided by the report include; First, the disclosures pertaining to corporate standards of conduct that seeks to protect against corporate business activities; encourage aspects related to fairness and integrity; respect for human rights and employees; information security and sharing as well as contribution to the society as a whole. The Japanese-based company ascertains that it seeks to review its future strategic direction in relation to how to ensure efficient future financial outlook (Mitsubishi Corporation, 2015). Secondly, the report provides information relating to the sustainability aspect of the company especially in relation to board composition, pay and remuneration packages. Third, it provides sufficient information related to the different operational reviews that include revenues and expenses changes within the underlying operational period. Consequently, it avails enough information in relation to the business model that is focused on subsidiaries and affiliates (Mitsubishi Corporation, 2015). Other notable disclosures made within the integrated report include; financial statements and investors information at the current financial year as well as their worth. The report however; fails to provide any information in relation to overall industry overview that is greatly considered in determining future performances. B. Personal Opinion On Integrated Reporting Yes. In my opinion, integrated reporting provides sufficient information related to stakeholders in regards to an organisation’s immediate strategies, governance structure, performance and prospects in regards to the IR. Aspects related to performance and prospects are fairly expounded by the manner for which companies seeks to create value; which is reflected by the increase and decrease in the different six capital models; the underlying business model information, which greatly depicts information related to the inputs; business-based activities and outputs as well as information provided by an organisation’s ability to conduct an extensive industry overview so that it could determine the possible external factors that might affect the overall performance as a whole (Chartered Institute of Management Accountants, 2014). The governance aspect is also expounded in a more sufficient manner since organisations are called to provide information related to the composition of the boards as well as their respective roles and responsibilities. The strategies section of the IR requires organisations to come up with exact strategies put in place to ensure that they operate into the future (Chartered Institute of Management Accountants, 2014). Some of these strategies are focused on business optimisation and expansion activities. As a result of all this disclosure requirements, Matthews (2012) notes that shareholders are positioned fairly to rely on the reports in order to make sound and reliable decisions on whether to continue investing with the company or pulling out investments altogether. Bibliography ACCA. (2013). The Draft Framework for Integrated Reporting; Comments from ACCA. Retrived on May 201, 2016 from http://integratedreporting.org/wp-content/uploads/2013/08/184_ACCA.pdf Australian Financial Reporting Council. (2013). Consultation Draft of the International Integrated Reporting Framework. Retrived from http://integratedreporting.org/wp-content/uploads/2013/08/158_Australia-Financial-Reporting-Council-Combined.pdf Chartered Institute of Management Accountants (2014). Integrated Reporting in the Public Sector, Retrieved on May 20, 2016 from http://www.cimaglobal.com/Documents/Thought_leadership_docs/reporting/IR-Public-Sector.pdf Eccles, R. G., & Krzus, M. P. (2010). One report: Integrated reporting for a sustainable strategy. John Wiley & Sons. Hughen, L., Lulseged, A., & Upton, D. R. (2014). Improving stakeholder value through sustainability and integrated reporting. The CPA Journal, 84(3), 57. Jensen, J. C., & Berg, N. (2012). Determinants of traditional sustainability reporting versus integrated reporting. An institutionalist approach. Business Strategy and the Environment, 21(5), 299-316. Krzus, M. P. (2011). Integrated reporting: if not now, when?. Zeitschrift fuer Internationale Rechnungslegung, 6, 271-276. Mitsubishi Corporation. (2015) Integrated Report 2015. Retrieved on May 20, 2016 from http://www.mitsubishicorp.com/jp/en/ir/library/ar/pdf/areport/2015/all.pdf Matthews, D. (2012). Introducing Integrated Reporting. Integrated Reporting, (1), 4-5. Oceana Group. (2015). Integrated Report 2015; Creating Shared Value. Retrieved on May 20, 2016 from http://oceana.co.za/sites/default/files/ar/Oceana_IAR_15.pdf The International Framework.(2013). About Integrated Reporting. Retrived from http://integratedreporting.org/wp-content/uploads/2013/12/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf Wesfarmers Limited. (2015). 2015 Annual Integrated Report. Retrieved on May 20, 2016 from http://phx.corporate-ir.net/external.file?t=2&item=o8hHt16027g9XhJTr8+weNRYaV9bFc2rMd0Q/AXw4zsN+kvalgq7WBA7fXxlVjEzQsC594vN+owMGtwtef25z3xQWPOHdkYrfIV2FIPIKXPp2HjoYWXmCI4zwMKferTtrgGvMxPwkSLj97XhViybPg==&cb=635780712883201538 Woolworth’s Holdings Limited. (2015) Integrated Report 2015. Retrieved on May 20, 2015 from http://www.woolworthsholdings.co.za/investor/annual_reports/ar2015/whl_2015_integrated_report.pdf Read More