Last September 2013, we brought to you our thoughts on the integrated reporting in our article “Integrated Reporting: The future of corporate reporting“. We have discussed what is integrated report and integrated reporting and how it will shape the future of business.
We also mentioned that the International Integrated Reporting Council (IIRC) was developing the International Integrated Reporting <IR> Framework and was updating 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. This article will discuss:
- The Release of the International Integrated Reporting <IR> Framework
Introduction of the <IR> Framework by the IIRC
- What it means to the Accounting Profession?
The Release of the International Integrated Reporting <IR> Framework
On December 9, 2013, finally, the IIRC released the final International <IR> Framework, together with the Basis for Conclusions and Summary of Significant Issues.
You can download the Framework, Basis for Conclusions and Summary of Issues using these links:
- The International Integrated Reporting Framework
- Integrated Reporting – Basis for Conclusion
- Integrated Reporting – Summary of Significant Issues
As discussed in our previous article, 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. 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.
Introduction of the <IR> Framework by the IIRC
In it’s website, www.theiirc.org, the International <IR> Framework was introduced. Following were posted in the IIRC website:
The release of the International Integrated Reporting (<IR>) Framework on Monday 9 December 2013, marks an important milestone in the market-led evolution of corporate reporting. It follows a three-month global consultation led by the International Integrated Reporting Council (IIRC) earlier this year, which elicited over 350 responses from every region in the world, the overwhelming majority of which expressed support for <IR>.
<IR> applies principles and concepts that are focused on bringing greater cohesion and efficiency to the reporting process, and adopting “integrated thinking” as a way of breaking down internal silos and reducing duplication. It improves the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. Its focus on value creation, and the ‘capitals’ used by the business to create value over time, contributes towards a more financially stable global economy and is a force for sustainability.
The Framework will be used to accelerate the adoption of <IR> across the world, where it is currently being trialled in over 25 countries, 16 of which are members of the G20, the group of nations focused on strengthening the global economy.
Commenting on the release of the Framework, IIRC Chairman Professor Mervyn King SC, said, “We have been taken aback by the degree to which mainstream businesses and investors have been willing to participate in creating this Framework and embarking on their own <IR> journey. Last month PepsiCo became the latest global company to sign up to the IIRC’s 100-plus strong business network, which includes HSBC, Unilever, Deutsche Bank, China Light & Power, Hyundai Engineering and Construction, National Australia Bank and Tata Steel.
“I am delighted that the day has come when businesses worldwide can use the Framework as a tool for the better articulation of their strategy, and to engage investors on a more long-term journey to attract investment that will be crucial to achieving sustained, and sustainable, prosperity.”
IIRC Chief Executive Officer, Paul Druckman, said, “The Framework brings technical rigour and cohesion to a process that has grown organically and through market pressure over the last three years. Today we have fired the starting gun on a period of global adoption that will begin in early 2014 by showcasing practical examples of reporting innovation, including how businesses are demonstrating value creation using the ‘capitals’ model and principles such as the connectivity of information.
“We could not have reached this milestone without the dedicated support of our innovators, our Pilot Programme participants who have contributed so much to the development of the Framework. Together they have ensured that <IR> is relevant to the mainstream business and investor communities, and can be incorporated as part of existing reporting requirements.
“We will use the Framework, together with examples and evidence of the business and investor case, to reach out to a wider pool of businesses who are seeking to adopt <IR> for the first time. It is the right time to participate in the journey towards a better, more cohesive reporting landscape that makes sense both to businesses and to the decisions of providers of financial capital, in this interconnected, complex and resource-constrained world.”
What it Means to the Accounting Profession?
Integrated reporting is not a sole role of the accounting professionals. Integrated reports are prepared by, technically,by ALL of the relevant departments within the organization as it doesn’t only tackle the financial aspects but as well as the 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. To the extent that accounting is used in the preparation of the integrated reports, we think that accountants play an important, significant and vital role in this area.
As integrated reporting covers wider scope than financial reporting, as it covers both financial, sustainability and annual reports, accountants should work hand on hand with various people within the organization, including but not limited to the human resources, CSR, sales people, purchasing people, marketing people, investor relations and other operations people to gather all required information to comply with the <IR> Framework.
It is also advisable that organizations who are planning to adopt the <IR> Framework in corporate reporting to establish a dedicated department or group of people to plan, implement and monitor the data gathering process and review. Processes should be revisited to ensure that required information are captured by companies’ information systems. Controls should also be in place to ensure that the information gathered are not materially misstated.
Management should also provide training to the people assigned the integrated reporting role and ensure that all relevant department in the organization are aware of the overall objective of the integrated reporting of the Company.
On the side of the practitioners, Integrated Reporting gives way to another assurance service which we can offer to the clients. Reports, when assured, will have more integrity and will be most likely be relied upon by the decision makers. As discussed stakeholders are primarily those providers of financial capital allocation decisions. As integrated reports are, technically, new concept due to the newly introduced framework, assurance providers should be knowledgeable of all the aspects need to consider in the preparation of integrated reports, including but not limited to the processes and controls employed by the management.
For assurance training on the preparation of integrated reports or assurance services on integrated reports in the Philippines, contact using the contact form in the “About” section of this website.
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