Integrated Reporting supports better business management, but there is room for improvement, finds ACCA survey

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Mumbai, April 24, 2017: The adoption of Integrated Reporting can be challenging, but it generates tangible organisational, reputational and commercials benefits, according to a report published by the Association of Chartered Certified Accountants (ACCA). Titled Insights into Integrated Reporting, it draws together a review of 41 corporate reports from across the world to understand how Integrated Reporting is enabling a range of companies to articulate more clearly and fully what truly drives them forward.

In February this year, market regulator SEBI asked top 500 listed companies to voluntarily adopt integrated reporting framework from FY 2017 to improve disclosure standards and help shareholders make an informed decision. Such reporting will indicate a concise communication about how an organisation’s strategy, governance, performance and prospects create value over time.

The ACCA report Insights into Integrated Reporting, highlights how traditional financial reporting no longer meets the needs of businesses seeking to develop and maintain resilient and responsible operations, not just in the immediate future, but also in the medium and long term. Mere financial reporting is mostly backward looking, focusing heavily on financial capital. On the contrary, Integrated Reporting, takes a holistic view of the success of an organisation, based on metrics such as the expertise of people, their intellectual property developed through research and development, and their interaction with the environment and the societies in which they operate. ACCA’s report aims for a corporate set-up where integrated thinking and reporting are embedded in mainstream business practice.

Yen-Pei Chen, Subject Manager, Corporate Reporting at ACCA said, “The aim of integrated reporting – through integrated thinking – is to create a more stable and sustainable global economy, by encouraging companies to think about how they do business in a more holistic and forward-looking way. In today’s volatile business environment, this vision is as pertinent as ever.”

She adds, “ACCA’s research has found passionate support for the aims of integrated reporting among business leaders, but it has also pinpointed specific barriers to better reporting. I hope that our findings will drive action from standard-setters, regulators, professional bodies and researchers to help remove these barriers, and give businesses the confidence to embark on their integrated reporting journey.”

Mohammed Sajid Khan, Head of International Development, ACCA, says “While regulations require companies to exercise transparency, a more fundamental reason for integrated reporting lies in accountability. Implementation of Integrated reporting in India will lead companies to account for the impact it has on the stakeholders and avoid critical business risks, including high financing costs. A transparent approach, will not only improve reputation, but also bind stakeholders such as employees to the company’s objectives.”

Adopters of Integrated Reporting identify many benefits, including a more integrated thinking and management process, greater clarity on business issues and performance, improved corporate reputation and stakeholder relationships, more efficient reporting, employee engagement and improved gross margins. While integrated reporting can serve as an approach to sound business management, they need to be of high quality if providers of financial capital and other stakeholders are to derive value from them.

The report also elucidates several areas where reporting can be improved. These include:

  • Value creation: There exists a widespread challenge in identifying and articulating what the organisation’s stakeholders perceive as ‘value’
  • Connectivity: Companies identified the breaking down on silos within the organisation to establish connectivity as a significant problem. Integrated reporting requires changing existing data collection processes
  • Defining performance measures: In current reporting practices, thinking and practice is still immature in articulating the value organisations derive from non-financial capitals
  • Materiality: Companies found it challenging to reconcile the idea of different stakeholders. Improving the materiality determination process could help drive improvements in conciseness, completeness and reliability
  • Conciseness: Nearly half of the integrated reports reviewed ran over 150 pages. Companies found it difficult to reconcile conciseness and meaningful communication with stakeholders
  • Reliability and completeness: Only 51% of the reports reviews achieved a balance of good and bad news in equal measure. Companies need to know what ‘good reporting’ looks like before that can implement internal control processes and consider external assurance on their integrated report

For more information, see Insights into Integrated Reporting.

About Insights into Integrated Reporting

The Insights into Integrated Reporting report published by ACCA (the Association of Chartered Certified Accountants) draws together a review of 41 corporate reports produced by member organisations in the IIRC’s (the International Integrated Reporting Council) <IR> Business Network – performed in 2016 in collaboration with the IIRC – with interviews with 9 integrated reporters around the world.

About ACCA

ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. It offers business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA supports its 188,000 members and 480,000 students in 178 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 100 offices and centres and more than 7,110 Approved Employers worldwide, who provide high standards of employee learning and development. Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. It believes that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. ACCA’s core values are aligned to the needs of employers in all sectors and it ensures that through its range of qualifications, it prepares accountants for business. ACCA seeks to open up the profession to people of all backgrounds and remove artificial barriers, innovating its qualifications and delivery to meet the diverse needs of trainee professionals and their employers. More information is here: www.accaglobal.com