Quite new to the scenario, the term Integrated reporting brings many doubts compared to corporate reporting. Traditionally, corporate reporting was mainly an annual report with financial figures presented to the public by listed companies. This resulted in various reports for various needs like review, performance, profit etc. there was more and more evidence showing the focus on financial figures only drives for short term financial success but long term benefit may be ignored by the managers. Communication between the company and its stakeholders is not sufficient. And the reports were created by employees at different times.
Here comes the Integrated reporting (IR)
‘Integrated report is a concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term’, says International Integrated Reporting Council (IIRC). IR is meant for short, medium and long term communication covering both financial and non-financial information.
No longer satisfied by the companies’ investors and stakeholders, the corporate reporting become complex after the 2008 financial crisis Thus with the vision to align capital allocation and corporate behavior to wider goals of financial stability and sustainable development through the cycle of integrated reporting and thinking, International Integrated Reporting Council (IIRC) was set up in 2010.
The integrated report aims to cover a broader set of capital to create value. These capitals can be:-
- Financial Capital (Historically reported)
- Manufactured Capital
- Intellectual Capital
- Human Capital
- Social & Relationship Capital
- Natural capital
Integrated reporting becomes beneficial to corporates in many ways,
Strong decision-making: Integrated reporting and connections enable the investors to examine the impact of various factors in the business at a time and make a better decision for further developments. The transparency in the works results in a great reputation.
Enhanced Accountability: The report on each type of capital will help to record and monitor every factor related, thereby developing a system of measurement.
Better Communication- Detailed information and systematic regular reports will lead to a higher level of trust and engagement, thereby improving the relationship.
ACCA Course covers Integrated Reporting which as a concept becomes at the Professional Level.
Get a complete knowledge of the ACCA papers from our previous blog, “ACCA: Move ahead and Stay ahead”