4) Integrated Reporting & Key Principles Flashcards
asset efficiency ratios?
- inventory turnover
- average collection period
- settlement period
- operating cycle
- asset turnover
cash ratios?
- cash conversion
- free cash flow
market perception ratios?
- price earnings
- earnings yield
- dividend yield
- dividend cover
which requirements must an integrated report meet?
- fundamental concepts
(value creation and capitals) - guiding principles
- content requirements
what factors should an IR look at?
- strategy
- governance
- risk mgmt
- financial performance
- future prospects
long term vision of the IIRC?
embedding integrated thinking in mainstream business practices facilitated by IR
what is the primary purpose of an IR?
to explain to providers of fin capital how an org creates, preserves, erodes value over time
role of six capitals in value creation?
all six need to play a role otherwise no value can be created
what does integrated thinking help with?
integrated decision making
what is integrated thinking?
when the org considers relationship between its operating and functional units, and the capitals it uses
what does integrated thinking incorporate into decision making?
- governance and remuneration
- financial statements
- mgmt commentary on these elements
- sustainability reporting
what are the fundamental concepts of the IR?
- value creation
- six capitals
what is value creation?
the processes that result in inc/dec or transformations of capitals caused by the org’s business activites and outputs
what are capitals?
stocks of value on which orgs use as inputs and outputs to their business model and which are used in org activities
what are the six capitals?
financial
manufactured
natural
social and relationships
intellectual
human
why is the governance function necessary?
needed for the company to function properly and deliver value; ensure risks are identified and managed
what do guiding principles show us?
- how to implement IR
- what to focus on
- how it should look
what are the 7 guiding principles?
1) strategic focus and future orientation
2) connectivity of info
3) stakeholder relationships
4) materiality
5) conciseness
6) reliability & completeness
7) consistency and comparability
what is connectivity of info?
show holistic picture of interrelatedness between factors that impact value creationn
what is stakeholders relationships?
provide insight into nature/quality of org relationships; how org responds to their needs/interests
what is materiality?
provide insight on matters which substantively impact ability to create value
what is reliability and completeness?
includes all material matters, both + - in a balanced way, no errors
what is consistency and comparability?
present info on a consistent basis and in a way that allows for comparison with other orgs to the extent that it is material
content elements uses?
must be included and should be related back to the org’s ability to create value. helps see us how value is created using capitals.
what are the content elements?
- organizational overview + ext environment
- governance
- business model
- risk and opportunities
- strategy and resource allocation
- performance
- outlook
what does performance indicate?
to what extent the org has achieved its objectives for the period and what effect this had on capitals
what does outlook speak about?
challenges/uncertanties the org is likely to face when pursuing strategy and potential implications for business model and future performance)
what is basis of presentation?
how org determines which matters to include in IR and how such matters are quantified/evaluated
how is performance measured?
not prescribed by framework; company will set its own performance indicators and using judement given the specific circumstances
disadvantages of IR?
subjectivity and if they focus on wrong stuff, value will decline
concerns with IR?
- not assured – not signed off on
- diverts focus away from sus reporting as IR is required by King/JSE
- may not actually result in integrated thinking and may not be useful for non-corps
