Introduction to Integrated Reporting
Discuss various advantages and disadvantages of an integrated report ending with recommendations at the conclusion.
Integrated reporting is an activity centered on the integrated thinking that results in a periodic reporting on the value creation of a firm as time goes. It also focuses on the communication used in the value creation of an organization. Before discussing the main core of the paper it is important to get some aspect very clearly to get all the concepts. It is also defined as a precise way of communication about how an establishment’s plan on how the work is done imminence. It focuses much in the activities taking place in respect to the internal and external environment, authority, presentation and projections. Integrated reporting also aims to addressing the problems associated with an organization or a firm and gives a clear direction towards improving the value. (ACCA and NBA 2013)
- What is the impact of using an integrated reports within an organization and its governance?
- Are the claims and views of Flower (2015) and Adams (2015) regarding the usefulness of integrated reports true?
Integrated reporting is reinforced by the international integrated reports council which is a coalition built of the watchdogs, investors, corporations, standard setters, the certified accounting professionals and the non-government organization who share the view of better communication in improving the integrated reporting. International integrated reporting council have resulted to evolution of cooperate accounting reports. Integrated reporting aims to create on reporting developments to provide an extended practice of reporting the value created by a firm, by taking in concern of non-financial possessions such as mortal, social and knowledgeable resources as a monetary investment. Integrated reporting ensures that all the aspects of the business are followed to the latter. It does not major with the finance only but other aspects are also incorporated to improve the value of the firm over the short, medium or a long-term strategy. (AUASB 2013)
Studies have shown that integrated reporting has a tremendous positive impact on the companies that get involved in the periodic reporting of the same. Some of the benefits of the that the companies have gathered include good reputation, a more advanced decision-making process, breaking down of the internal silos. The benefits stated above are, but a few since the paper’s purpose is to discuss the impacts of the benefits and various limitations of integrated reporting.
Better communication has been enhanced by integrated reporting since the in a business firm various parties constitute driving forward of the activities happening in a business. Having good cooperation in a company concerning the agreed standards of production and goals set better communication is enhanced. For instance, a firm will set specific measures to achieve a goal, bearing in mind that the whole organization constitutes of the internal and external factors towards production communication must be an essential value to check upon to reach the goal set. If the transmission in the firm is vertical, it means that the boss must be in a position to communicate effectively to meet the stipulated goal in the integrated report. Integrated reporting focusses more on the improvement of the activities a firm has been performing. With this understanding, all the stakeholders must improve the communication matters to make a step forward and eliminate stagnation of the business. As seen above integrated reporting has created an excellent platform for improvement in communication thus good results. (Eccles 2009),
Benefits of Integrated Reporting
Enhancement of the way an organization thinks, plans and reporting the story behind a business. Integrated reporting has enabled critical thinking of the organization through the change of the strategies to be used in converting of the short-term approach to the long-term plan of a business. For instance, in the business world there exists many goals set to reach a specific purpose. The potential to achieve the goal whether small or a huge goal changes the way of thinking. Similarly, the results of a modest goal do not depend on much bothering of the parties involved since the expected output is not very much demanding. When the expectations of a business are very high and stipulated to be long-term seriousness, and much effort becomes the input of taking that task. Integrated reporting is believed to make the firms from the short term level to the long-term overtime thus improved thinking of the firm and the employees involved in the firm. (KPMG 2011)
Offering an opportunity to communicate a clear, concise and integrated story that explains how value is created over time. Integrate reporting is a venture that coherently allows for value creation. Knowing how it should run many organizations can deliver precise information on what they are producing and steps the business is taking to improve the value of the products to earn more profits at a future date. Literary taking a goal about the what a person knows best, and he/ she is determined to partake that goal is a result of an excellent understanding of the content or tasks to handle at any point. Integrated reporting exposes the organization to seriousness when it comes to working on the various activities out. Thus each stakeholder of the company is fluent in the duties expected to flow from him/her. With this regard integrated reporting has resulted in giving an opportunity to improved communication in a concise and clear manner by all stakeholders. (KPMG 2011)
Management of critical opportunities and building of risks have made the investor and all the stakeholders of the firm to create confidence when working towards a long-term goal. Integrated reporting has enabled coming up with reports that have allowed them to perceive many opportunities concerning to improve the value creation of the firm. Having that in mind the management can complement them and have a way forward to implementing the opportunities gathered since value creation is required (Yates 2017). This benefit of integrated reporting has brought up huge investments and of which are long term. It is evident that integrated reporting has impacted the presentation of the opportunities out there for grabs by the investors.
Limitations of Integrated Reporting
Integrated reporting has enabled the producing firms to think holistically according to the strategies set by them. In all the firms the financial statements are mandatory in setting out what is expected of a firm or the progress of the same (International Integrated Reporting Council 2013). For instance, in the business world, the anticipated results of production all depends on the total cost of the inputs. This determines the production era. With integrated reporting and taking much concern in the value creation, a firm must think smartly to create a more enabling environment to produce. This approach has enabled the stakeholders involved in the business to believe in a more advanced manner to reach the stipulated long term, medium or short-term goal.
Another benefit of integrated reporting is recognition of creating value to improve the business. It is evident that whenever some amount is added to the existing business, the output and the results of the company changes drastically (AUASB 2013). Since integrated reporting involves the creation of value over time, in-depth understanding of the content towards value creation gets to the stakeholders of the business. Having this knowledge is all the contribution of having practiced integrated reporting in their prospective industry. It is evident that increasing of value have been made clear to business owners thus a benefit towards the stakeholders from the integrated reporting. (KPMG 2011)
Sustainability is as a result of aiming higher from the previous step. Integrated reporting aids in approval of many suppliers, customers, stakeholders and the society. Having potentiahuge returns, a business must be extra serious when performing the tasks ahead. Allows forming of strong bonds with the severe customers, suppliers, stakeholders and the society by creating trust and credibility towards them. Integrated reporting has enabled the creation of trust and confidence in the process of invention of value. (KPMG 2011)
Combined reporting has benefitted the businesses in maximizing the potential to transfer sales, land by providing a better business valuation. The business owner has an incentive to address the integrated reporting to have skills on how to make the business better (Adams 2015). Having the company as long term, short term or medium it takes the aid of integrated reporting to maximize the business potential. It is evident that integrated reporting has enabled the business to be on a better base of valuation which yields good fruits over time.
It has also enabled security financing at a reasonable cost compared to other reporting methods. Among many lenders in the current world will want to know how financial capital has been deployed in the past and coming years. Integrated reporting has enabled recognition of future intentions based on a complete strategy and a well-rounded business plan. Those are the various benefits impacted by the combined reporting. (PWC 2013)
Having the concern with all the aspects pertaining a business creates potential to alter the market and how companies operate. Mounding a shift in a perspective of meeting a short-term monetary goal of developing a long-term strategy that will not only commit to the social and environmental issues but also to sustainable business and society (ACCA and NBA 2013). It is essential to get a hitch on who is using the integrated reporting before getting to the benefits associated with the venture. Combined reporting has gained popularity since the establishment of the international integrated reporting council in the year 2010. In countries like Brazil, it is performed on a mandatory basis which includes South Africa, and Brazil and research offer evidence towards integrated reporting in other countries including the United Kingdom, Holland, Australia, Spain, Japan, Singapore and United States of America. (Ecclesia 2011)
Despite the fact that the underlined advantage integrated reporting bears some flaws in respect to its performance towards the accounting techniques. The experts criticize integrated reporting framework of the international integrated reporting council. Regarding the fact that it has abandoned sustainability accounting focusing on value for investor required instead of the amount of the society. The flaw of integrated accounting chips in due to the focus on the firm itself and leaving the community alone. This reporting platform has no clear standards of reporting. (AUASB 2013)
Integrated reporting does not have a great concern about the accountability, human rights, and political characteristics thus lowering its effectiveness. According to Rodrigues (2015), the content of the threes papers is as addressed below. When flower (2015) is compared with the initial intent of 2011 many limitations are drawn from the same. The limitations majors on the management accounting performs fabulous great shareholders and divers transformative ability. Integrated reporting exposes limitations due to a comparison of flower (2015) 0n addressing sustainability. (flowers 2015)
Another limitation is that integrated reporting was supposed to be the excellent solution for the framework. However, IIRC did not meet the stipulated objectives it has laid before concerning the settlement. The most serious failure is an abandonment of sustainability in the accounting sector in its framework. According to flower (2015), integrated reporting does not focus on the environment surrounding the investment, but instead, it concentrates on the value addition of the investors.
The business case is in a wide range of integrated reporting. Signifies a limitation since it focuses on value creation to increase profits. It does not talk more about the pollution that is done by a firm upon production. A production firm has consequences to the surrounding environment. Having majored in the profit maximization side, it leaves much about the climate exposing a flaw in its framework (KPMG 2011).
Another point of critique is whether integrated reporting can be considered as a parameter for measuring the sustainability measuring practice. Combined reporting is an accounting practice intended to man the novel risks and run corporations. The combined report is capable of running the risks internally and has no access to the environmental dangers and not advising on them. Though having the guts to give a future strategy for improving results, there would lack coherent strategic objective (KPMG 2011).
Conclusion
Based on the above discussion it is evident that Integrated reporting surpasses the traditional approach of handling silos since It enables a good relationship between the involved parties in a business. Moreover, integrated reporting is able to connect the internal and the external information towards making a common goal. Organization should therefore adopt the use of an integrated reports in order to improve organizational governance but should properly come up with proper solution to encounter the limitations of using the system
References
ACCA and NBA (2013), “Capitals: Background Paper for .” Copyright by the International Integrated Reporting Council. Pp. 3. < https://www.theiirc.org/wp-content/uploads/2013/03/IR-Background-Paper-Capitals.pdf>
Adams, C.A. (2015). The International Integrated Reporting Council: A call to action. Critical Perspectives on Accounting, Vol. 27 No. 1, pp. 23-28.)
AUASB (2013). “AUASB Submission on Consultation Draft of the International Framework.” Last accessed on 17 September 2013.<https://www.auasb.gov.au/admin/file/content102/c3/Jul13_AUASB_Submission_IIRC_CD_Integrated_Reporting_Framework_%2815-07-13%29.pdf>
Business Council of Australia (2013), “Submission to the International Integrated Reporting Council regarding the Consultation Draft of the International Integrated Reporting Framework.” Pp. 4-7. <www.bca.com.au/Content/99521.aspx>
CLP Holding Ltd (2013),” IIRC_ Consultation Response.” Pp. 2-8< https://www.clpgroup.com/ourcompany/corporategovernance/consultation/Documents/2013/IIRC-Consultation-Response.pdf>
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Eccles, R.G. (2011), “Integrated Reporting for a Sustainable Strategy.” Luxembourg Green Business Summit.< https://ns360712.ovh.net/~greenwor/images/stories/users/robert_eccles.pdf>
Flower, J. (2015). The International Integrated Reporting Council: A story of Failure. Critical Perspectives on Accounting, Vol. 27 No. 1, pp. 1-17.
Global Reporting Initiative, “Integrated Reporting.” Last accessed 17 September 2013.<https://www.globalreporting.org/information/current-priorities/integrated-reporting/Pages/default.aspx>
Institute of Chartered Accountants Australia (2013). “ICCA Submission_ IIRC IR Consultation_ July 2013”. Pp. 3-8.
International Integrated Reporting Council (2013). “Consultation Draft of the International Framework.” < https://www.theiirc.org/wp-content/uploads/Consultation-Draft/Consultation-Draft-of-the-InternationalIRFramework.pdf>
International Integrated Reporting Council. “The need for IR & the current corporate reporting framework.” Last accessed 17 September 2013:< https://www.theiirc.org/about/aboutwhy-do-we-need-the-iirc/>
KPMG 2011. “Integrated Reporting: Performance insight through better business reporting.” Issue<https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/road-to-integrated-reporting.pdf>
PWC 2013. “IIRC Consultation Draft of the International Framework.”< https://www.pwc.com/en_US/us/cfodirect/assets/pdf/comment-letter/iirc-consultation-draft-july-2013-pwc-response.pdf>
Yates, A. 2017. Corporate Reporting. A significant shift towards adoption of the principles of integrated reporting. KPMG.
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