Integrated Reporting: The future of corporate reporting

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Financial reports, sustainability reports, annual reports – these are some amongst the wide variety of corporate reports being published by an entity for the benefit of its stakeholders.

Actually, talking about regulatory requirements and other voluntary filings, there are hundreds of types of reports that are issued by different types of entities.  Those reports are issued and submitted mandatorily in compliance with certain requirements or voluntarily.  Given the wide variety of corporate reports, each has its own guidelines in preparation, formats and contents which are embodied in a framework or sets of standards.  We’ll focus our discussion on the Integrated Reports.

What is Integrated Report and what is Integrated Reporting?

When we say integrated reports, what comes first in your mind?

Financial Reports and Sustainability Reports

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You are most probably aware of Financial Statements which are, in the Philippines, prepared in accordance withPhilippine Financial Reporting Standards (PFRS) (for large and publicly accountable entities) , PFRS for Small and Medium-sized Entities (SMEs) (for small and medium-sized entities) or either PFRS or PFRS for SMEs (for micro-entities).  Even financial reports can be prepared using forward-looking information, instead of historical information, which may be a projected financial statements or a forecasted financial statements.  It can also be made just for management purposes, often called management reports.  All of these focuses on the financial aspect of the business.

Sustainability reports on the other hand has wider coverage than financial reports as they cover (apart from the financial) the economic, environmental and social objectives of a company.  These sustainability report are often prepared in accordance with the Global Reporting Initiatives’ Sustainability Reporting Guidelines (now G4).

Now, what about annual report, what is the basis for preparation?  Well, certain companies, especially those which are listed and publicly accountable are required by certain governing bodies in certain jurisdiction to prepare and submit annual reports.  But aside from the mandatory contents in what other basis are these prepared?  I think this is where Integrated Reports come in.

Integrated Reports

The King III Code on Governance defines an integrated report as “a holistic and integrated representation of the company’s performance in terms of both its “finance” and its “sustainability”.

And says it should be:

  • An annual report
  • Statutory financial information and sustainability information should be integrated
  • Should have sufficient information to record how the organisation has affected the economic life of the community – positively and negatively
  • Should contain forward-looking information – on how the board feels it can enhance the positive aspects and negate the negative aspects
  • Integrated reporting requires more than just an add on of sustainability information – sustainability reporting should be integrated with other aspects of the business process and managed throughout the year. Sustainability should be embedded in the organisation.
  • Integrated reporting should focus on substance over form.
  • The board’s audit committee must establish a formal process of assurance on sustainability reporting. It should recommend to the board the need to engage an external assurance provider to provide assurance over material elements of the sustainability part of the integrated report. It should oversee sustainability issues in the integrated report, ensure the sustainability information is reliable, and that no conflicts or differences arise when compared to the financial results.

Integrated Reporting <IR>

Integrated Reporting is  a process that results in communication by an organization, most visibly a periodic integrated report, about value creation over time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term. An integrated report should be prepared in accordance with the International Integrated Reporting Framework.

While the communications that result from Integrated Reporting will be of benefit to a range of stakeholders, they are principally aimed at providers of financial capital allocation decisions.

Integrated Reporting aims to catalyse a more cohesive and efficient approach to corporate reporting that draws together other reporting strands and communicates the full range of factors that materially affect the ability of an organization to create value over time. Its objective is to inform resource allocation by providers of financial capital that supports long term, as well as short and medium term, value creation. It promotes integrated thinking, decision-making and actions that focus on the creation of value in the long term, as well as short and medium term. Integrated Reporting enhances accountability and stewardship with respect to the broad base of capitals (financial, manufactured, human, intellectual, natural, and social and relationship) and promote understanding of the interdependencies between them.

Integrated Reporting builds on developments in financial and other reporting to catalyse an evolution in corporate reporting.  An integrated report communicates the factors most important to the creation of value over time.  Organizations will provide additional detailed disclosures, such as financial statements and sustainability reports, for compliance purposes and to satisfy particular information needs, including those of stakeholders other than providers of financial capital. These other disclosures may be linked to or referenced in the organization’s integrated report.

How Integrated Reporting Will Shape the Future of Business

The business and investor benefits of Integrated Reporting are compelling. The empirical evidence from the IIRC Pilot Programme shows that Integrated Reporting enables the articulation of strategy and how the business is creating value over time.

Integrated Reporting and the Global Economy:

  • Information is the lifeblood of capital markets.  Integrated Reporting enables a better communication of the material factors that create value over the short, medium and long term.
  • Integrated Reporting is a critical element in contributing towards financial stability and sustainable economic development. It supports investor decision-making and the efficient allocation of capital.

Integrated Reporting In Practice:

  • Over 100 global businesses and 50 institutional investors are directly involved in the IIRC’s work. This includes some of the world’s most iconic brands, such as Coca-Cola, Clorox, Microsoft, Hyundai, Tata, Unilever, Marks and Spencer, SAP and National Australia Bank.
  • Integrated Reporting results in the concise communication of value.
  • Integrated Reporting promotes integrated thinking and the breakdown of silos within the business.

Guidelines In the Preparation of Integrated Reports

We now have at least an idea of what is Integrated Reports but what do we need to consider when preparing Integrated Reports?  Are there any present guidelines, frameworks or standards need to be complied with?

The International Integrated Reporting Council (IIRC) is currently developing the International Integrated Reporting Framework and is currently updating the consultation draft.

After a successful three months of engagement, the IIRC consultation period has closed, and work has started to analyse the submissions. Since launching the Consultation Draft of the International <IR> Framework at events in 10 of the world’s largest capital markets on 16 April, extensive consultation has taken place with organizations across the world. From South Korea to Sweden, Italy to Indonesia, and the Netherlands to New Zealand people have been evaluating and commenting on the Consultation Draft.

The IIRC received 359 submissions, many of which represented a group of organizations. Submissions came from every region of the world: Africa, Central, South and North America, Asia, the Middle East, Eastern and Western Europe, and Oceania.

Submissions came from a variety of sectors including providers of financial capital, analysts, assurance providers, NGOs, consultants, accountants, academics, policy makers, regulators, report preparers and users, as well as labour representatives.

All comments received are considered a matter of public record.  Following are the list of submissions:

Assurance Opportunity in Integrated Reporting

The development of a framework for Integrated Reporting will be expected to open an opportunity both for accounting and non-accounting profession to provide assurance services in when the said framework has already achieved a stage of finality.

As a matter of fact, in the accounting profession, top accounting services firms have supported the development of this framework and submitted comments in the consultation draft.  It is expected that when this project achieved a stage of finality, it will be given wide publicity.

While preparing Integrated Reports adds value to corporate reporting, it is not expected that the public may be open to strictly adopt Integrated Reporting in their corporate reporting due to some cost-benefit or practicability considerations due to some systems and resources limitations.  Unless and until Integrated Reporting is made mandatory by regulatory authorities, wide acceptance is not expected except for those with sufficient understanding of its value and those who have sufficient resources.

Note: Part of this article were sourced from IIRC website.


Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact support@philcpa.org for more information and if you want to avail professional services. Find us on Facebook!



Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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