Integrated Reporting - Assignment Example

Integrated Reporting Name Course Tutor Unit Code Date Reporting Questions 1. Describe and differentiate from current reporting practice the types of information that will need to be captured from now on in order to sufficiently meet the needs of integrated reporting. In a bid to help users as well as prepares comprehend the divergence of integrated reporting from traditional corporate reporting, the IIRC has put forward eight differences between current and integrated reporting. The first difference is based on the feature of trust and resilience. Whereas current reporting offers room for narrow disclosures, integrated reporting advocates for greater transparency. This will be enabled through the disclosure of the nature along with the quality of an organization’s association with stakeholders. Integrated reporting will also require disclosure of how main stakeholder’s legitimate desires, interests and prospect will be understood, considered and addressed. The second difference is based on the concept of stewardship. As integrated reporting advocates for greater disclosure, it comes without say that stewardship and the duty of a reporting entity to care for or sensibly make use of the capitals its actions plus outputs impinge on. Therefore, an organization has to reveal all forms of its capital while current reporting restricts this to revelation of financial sources. Thirdly, while current reporting is embedded on isolated thinking, integrated reporting brings into play extra integrated thinking as it ensures the likelihood for a fuller regular inclusion of stakeholder’s legitimate desires, interests and prospect. On the feature of focus current reporting concentrates on past and financial reporting. Although integrated reporting is based on stakeholder responsiveness, it does not imply that an integrated report must endeavour to fulfil all information wishes of all stakeholders. To a certain extent, integrated reporting should concentrated on past as well as future reporting in a connected and strategic manner achieved via focusing on matters that are that are vital to short, medium and long term value creation. This point covers the fourth as well as the fifth differences that are based on the attributes of focus and time frame of reporting in that order. The sixth difference is based on the adaptive feature of reporting. Whereas current reporting is rule bound, integrated reporting is based on the responsiveness to individual circumstances. This responsiveness is self-manifest through decisions, activities as well as performance and continual communication with stakeholders. On the feature of conciseness, current reporting appears to be a long and complex process, but integrated reporting introduces materiality and conciseness in reporting. An integrated report is bound to offer concise information that is material to evaluating an organization’s aptitude to create value in the short, medium and long term. This would reduce redundant information. Finally, current reporting is paper based but integrated reporting allows for use of technology in reporting. Technology will come in handy when cutting down the time frame of reporting. Integrated reporting encourages use of technology to boost connectivity of information. 2. The process is intended to be applied continuously to all relevant reports and communications, in addition to the preparation of an integrated report. The integrated report may include links to other reports and communications, e.g. financial statements and sustainability reports. The IIRC aims to complement material developed by established reporting standard setters and others, and does not intend to develop duplicate content (para 1.18-1.20). Do you agree with how the paragraphs 1.18-1.20 characterise the interaction with other reports and communications? Justify your answer. Yes. Integrated reporting is wished-for so as to advance sharing of information between organizations and financial/capital markets. An integrated report makes available both financial and non-financial information of an organization’s performance, strategy as well as governance in its business along with social perspective in a manner that underpins the interdependence of information. This will also overcome the current problem of lack of integration of essential information. In addition, integrated reporting implies that organizations do not regard this well-built hard work as merely an addition, other than how they hold up the organization’s value creation stratagem. The intention of Integrated Reporting and of preparing an integrated report must be to offer a point of access for information on each and every one vital substance that may have an effect on the performance of an organisation. The report ought to be an entity’s main means of communiqué of its value creation model plus upcoming prospects as regards its use of along with the effect on the capitals. Integrated Reporting comes in to meet the demand from market participants for enhanced reporting, particularly for a wide-ranging but concise, integrated report which includes the information that actually matters and presents a broader view that portrays the key value drivers of the organisation. This includes comprehension of the broader task that an organisation undertakes in the social order and offers a unified and tactical view of the organisation. Also, organizations need not essentially prepare a separate report to realize the integrated reporting objectives. They may well in addition build on by now existing reports, such as the annual report or the executive annotations. Furthermore, Integrated Reporting amounts to a new-fangled process and novel form of corporate reporting. For this reason, integrated reports possibly will entail reporting substance not formerly reported or recognized. Also litheness in Integrated Reporting is significant to encourage innovativeness. Numerous interactions flanked by a reporting entity and its providers of financial capital are subject to legal entitlements that is why companies will have to deem the interaction between these compliance necessities and how to build up an integrated report. It has been monitored that the function of current corporate reports as a contact tool has been in an inferior position over time with an greater than ever focal point on conformity and, so, an integrated report ought to develop into a principal contact manuscript, telling the value creation narrative, as opposed to being compliance-focused. 3. The Framework describes six categories of capital (para 2.17). An organisation is to use these categories as a benchmark when preparing an integrated report (para 2.19-2.21), and should disclose the reason if it considers any of the capitals as not material (para 4.5). Outline what such a ‘capitals framework’ means. Do you agree with this approach to the use of ‘capitals’? Provide justification and evidence in your explanation. Each and every one organization relies on an assortment of forms of capital for its success. The proposed capitals framework consist of financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital along with natural capital. These capitals act as stores of value that interactively become inputs to an organization’s business model. The capitals are increased, decreased or altered in the course of the activities and outcomes of the organization since they are improved, utilized, customized, damaged or otherwise impacted by those actions and outputs. A case in point is where an organization’s financial capital is boosted when it earns a profit, and the value of its human capital is enhanced when employees gain superior skills. The stock of capitals taken as a whole is not fixed in the fullness of time. There is an invariable flow between and within the capitals as they are increased, decreased or transformed. For instance, when an organization perks up its human capital by way of employee training, the associated training expenses trim down its financial capital. The end result is that financial capital has been malformed into human capital. This makes obvious the incessant relations and alteration between the capitals, even though with anecdotal rates and outcomes. A lot of actions cause increases, decreases or transformations that are extremely intricate and engage a broader blend of capitals or their components. Even if organizations endeavor to produce value, in general, this possibly will entail the reduction or damage of value stored in some capitals predisposing to a net decrease to the overall stock of capitals. In many cases, whether the net effect is an increase or decrease will depend on the perspective chosen. In this capitals framework the term value creation includes occurrences when the overall stock of capitals is decreased; when value is diminished or destroyed. Yes, I agree with this approach to the use of ‘capitals’. In order to develop a corporate reporting structure that is fit for the coming times, there is need for an approach that is efficient and collaborative, one that sees the system as a whole and recognises and builds on the potency of each part of the current system. Among other considerations, the system should support shareholder and investor decision making by allowing them to compare the expectations and performance of organizations, evaluate their long term survival and value-creating aptitude as they focus the financial structure as a sum total on long term value creation. Current reporting follows the international financial reporting standards that lay emphasis on discreet assets. Other forms of information are provided as appendixes. However, in the present day, financial, social, human capital, information technology and natural capital are essentially mutually dependent and build value. Not one organization in developing its value can opt to neglect these capital aspects. It is becoming clearer that the success or failure of organisations relies on their capability to create and sustain value devoid of draining the capital assets on which that worth depends. 4. Given this information differentiation, outline initiatives’ currently being undertaken at a global level (i.e. by regulators’, international bodies, accounting profession, academics etc.) to achieve this. Following a growing momentum for the need to adopt integrated reporting, various international reporting and professional bodies as well as academicians have come up with an array of initiatives to realize this as indicated in the table below; Date Body Initiative 2 August 2010 – 19 October 2010 UK, Department of Business, Innovation and Skills To find out ways to perk up the quality of company reporting and thus facilitate stronger and more effectual stakeholder engagement 22 November 2010 – 28 January 2011 European Commission, Directorate General for Internal Market and Services To gather stakeholder’s views on ways to get better the disclosure by organizations of non-financial information 25 January 2011 – 25 April 2011 South Africa, Integrated Reporting Committee (IRC) Developed a discussion paper on the framework for integrated reporting and the integrated report in a bid to provide a practical direction on the integrated report Late May 2011 – 31 July 2011 International Integrated Reporting Committee (IIRC) and the Global Reporting Initiative (GRI) Developed a discussion paper on an integrated reporting framework for public consultation October 2010 – December 2012 Global Reporting Initiative (GRI) Development of new version (G4) of GRI guidelines. The aim is to harmonise Environmental, Social and Governance (ESG) and sustainability practices globally. Source: Tomorrow’s Corporate Reporting, PWC, 2011. 5. Taking a positive accounting theoretical perspective outline three reasons why Integrated Reporting may not be achievable. There has been awesome support for integrated reporting, however many questions, issues and worries have emerged threatening the whole process. There are issues whether the projected investor centre of attention is suitable. There is also a great deal of question whether one short report is able to meet up diverse needs, and whether an integrated report ought to be the main report. In addition integrated reporting is still quite immature. The radical changes seen in the most recent developments confirm that the idea is sprouting in haste. Integrated reporting is quite fresh and several metrics to be followed are not as established as, for instance, financial data. If non-financial information requires to be reviewed together with financial data then integrated reporting possibly will end in less sustainability matters being addressed. Reports have a divergence as regards the quality and observance to standards. Maybe additional time is required to completely prepare everything before reports are joined together. Integration is broad; it is not merely adding the present sustainability report on to the annual report. In that regard, reporters are completely against it for the reason that it will mean that the spirit of sustainability gets plummeted in prejudice of information with solid numbers which may well not be existent at the moment. The key challenge here is with the present apparatus of measuring the actual financial brunt of social as well as environmental concerns. Another huddle is defining the return on investment on sustainability endeavours and the need to determine what needs to be dealt with. Existing apparatus for achieving this have not caught up with our heart’s enthusiasm for the transformation. References CIMA, PwC & Tomorrow’s Company, 2011, Tomorrow’s Corporate Reporting: A critical system at risk, Accessed on 8 September 2013 Read More