6.2 Fundamental Concepts of Integrated Reporting Flashcards
Which statement about value creation is false?
A. Value creation is one of the three fundamental concepts of integrated reporting.
B. Because externalities of value creation do not affect the organization, they should not be included in the integrated report.
C. Value created for others that is considered material should be included in the integrated report.
D. Value is created both for the organization as well as for its external environment.
B. Because externalities of value creation do not affect the organization, they should not be included in the integrated report.
Value is created for the organization and for others. Externalities, which are effects on the capitals not owned by the organization, may occur when value is created. However, externalities influence nonfinancial value created by the organization and should therefore be included in the integrated report.
Which of the following is included in the integrated report?
A. Social and relationship capital but not negative externalities.
B. Only financial, manufactured, and intellectual capital.
C. Material value created for others and externalities.
D. Value created for the company but not for the external environment.
C. Material value created for others and externalities.
The forms of value created (for the company and for others) are closely related. For example, sale of a product results in revenue for the company and some form of value for the customer, depending on the nature of what was sold. The sale affects not only financial capital but also social and relationship capital. Externalities, whether positive or negative, also should be addressed. They are effects on the capitals not owned by the company. Accordingly, if the value created is material, it should be included in the integrated report, regardless of whether it has been created for the company itself or for others.
Which statement about the capitals is false?
A. The capitals can decrease, increase, or be transformed due to the regular course of business.
B. Value can be created in any of the six capitals and is not necessarily measured in financial capital.
C. An integrated report does not have to be structured along the six capitals.
D. Every organization should address the six capitals in its integrated report.
D. Every organization should address the six capitals in its integrated report.
Not all capitals are equally important for every organization. Some may be irrelevant to a given company. Moreover, the names of capitals are not standardized, and the integrated report need not be structured based on the capitals.
According to the <IR> Framework, value creation depends on sources known as capitals. Which of the following is a true statement about the capitals?</IR>
A. Every company should address the six capitals in its integrated report.
B. The capitals are affected by the regular course of business.
C. Value is necessarily measured in financial capital.
D. Value creation occurs only when the total of the capitals increases.
B. The capitals are affected by the regular course of business.
The value of the capitals may change in form, increase, or decrease as a result of the activities and outputs of the company in the regular course of business. For example, one capital may need to decrease for another to increase. Furthermore, value may be created over different capitals and is not necessarily measured in financial terms. Also, value creation is viewed not only as an increase in the total of the capitals but also as preservation of their aggregate value.
In an integrated report, what is the difference between outputs of business activities and outcomes?
A. Outputs are results in the form of physical products, by-products, and waste. Outcomes are the intangible results.
B. Outputs are results in the form of products and services. Outcomes are these results measured in financial capital terms.
C. Outputs are results in the form of all products created. Outcomes are unwanted externalities such as by-products and waste.
D. Outputs are results in the form of products, services, by-products, and waste. Outcomes are the effects of outputs on capitals.
D. Outputs are results in the form of products, services, by-products, and waste. Outcomes are the effects of outputs on capitals.
Outputs are the results of business activities in the form of products, services, by-products, and waste. Outcomes are the effects of outputs on the six capitals. These outcomes relate directly to the external environment and are not necessarily controlled by the company.
According to the <IR> Framework, manufactured capital is a source of value creation for a company. Manufactured capital</IR>
A. Consists of the environmental resources used.
B. Is obtained through financing.
C. Need not be owned.
D. Must be presented in an integrated report.
C. Need not be owned.
Manufactured capital is every tangible object possessed by (available to) a company, whether or not owned. Examples are roads and ports.
An economic condition may affect a company’s ability to create value. It is an example of which influencing factor?
A. Governance.
B. External environment.
C. Strategy and resource allocation.
D. Performance.
B. External environment.
The ever-changing external environment in which a company operates includes political conditions, economic conditions, technological change, societal issues, and environmental challenges.
The fundamental concepts of integrated reporting, as defined by the IIRC, are
A. The six capitals, the value-creation process, and materiality
B. Value creation, the value-creation process, and the six capitals.
C. The six capitals, the value-creation process, and the business model.
D. External environment, the business model, and materiality.
B. Value creation, the value-creation process, and the six capitals.`
