Reporting to Stakeholders is one of the most important role of a Strategic Business Leader & Integrated Reporting is the need for every stakeholder. It is one of the frequently tested area in ACCA SBL Exam.
Historically Financial statements were the main pillars of corporate reporting, particularly for governance and compliance purposes However there were various arguments that suggests that they do not provide meaningful information regarding whole business value to the stakeholders. They need more broader and forward-looking focus without companies own forecasts and projections.
In 2013, the International Integrated Reporting Council (IIRC) released a framework for integrated reporting primarily to help user get the detailed and insightful information about the company that goes beyond just the financial information.
The framework establishes principles and concepts that govern the overall content of an integrated report. The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time. An integrated report benefits all stakeholders interested in a company’s ability to create value, including employees, customers, suppliers, local communities, legislators and regulators.
IR conveys:
- A concise communication of an organization’s strategy, governance and performance
- Demonstrates the links between its financial performance and its wider social, environmental and economic context
- How organizations create value over the short, medium and long term
- Helps business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing
The integrated report aims to cover 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 has been very beneficial to Corporates. Below are some of the ways they support the users getting the right information.
Enhanced systems and Accountability. The need to report on each type of capital would create and enhance a system of internal measurement which would record and monitor each type for the purposes of reporting.
Strong decision-making. The connections made through <IR> enable investors to better evaluate the combined impact of the diverse factors, or ‘capitals’, affecting the business hence better decision making.
Better Reputation. The greater transparency and disclosure of <IR> should result in better reputation which in turn should result in a lower cost of, and easier access to, sources of finance.
More Harmonization. <IR> provides a platform for standard-setters and decision-makers to develop and harmonize business reporting.
Better Communication and Relationships. Such a level of detailed Information and communication will lead to a higher level of trust from, and engagement with, a wide range of stakeholders hence improving relationships.
ACCA Course holistically covers the overall reporting framework including Integrated Reporting which as a concept becomes very relevant in various ACCA Exams particularly ACCA SBL and SBR Exam. ACCA has also issued a technical Article on Integrated Reporting Meaning and concept. Here is the link for the ACCA technical Article on Integrated Reporting.
Fintram Global– The Silver Learning Partners for ACCA. We have also covered the Concept of Integrated Reporting in specific sessions and have also practiced various concept & comprehensive questions for the ease of their students. You can reach out to us at www.fintram.com for full course or question practice pool on ACCA SBL Exam.