6.4 Adoption of Integrated Reporting Flashcards
Which of the following is not a challenge for an organization that adopts integrated reporting (IR)?
A. Materiality definitions.
B. The unwillingness of stakeholders to accept the new reporting form.
C. Support from senior management.
D. Data quality of nonfinancial information.
B. The unwillingness of stakeholders to accept the new reporting form.
An integrated report typically is beneficial for stakeholders. It should improve stakeholder relations by providing a holistic view of the entity that connects nonfinancial and financial information with its value-creating potential. Thus, stakeholder acceptance is not perceived as a challenge.
The challenges of adopting integrated reporting (IR) include
A. Defining materiality when using a multi-capital approach.
B. The resulting linkage of financial and nonfinancial information.
C. More employee engagement.
D. Forcing departments to work together.
A. Defining materiality when using a multi-capital approach.
IR uses a six-capital approach to value creation. Consequently, IR must filter the increased information available through a properly defined level of materiality. For example, a definition of materiality may be based on what providers of financial capital need to know.
The business case for adoption of integrated reporting (IR) most likely includes
A. Universally accepted standards for value creation.
B. Linkage of financial and nonfinancial information.
C. Use of a single-capital approach.
D. Less emphasis on the importance of the tone at the top.
B. Linkage of financial and nonfinancial information.
An integrated report is intended to provide a holistic view of an entity. It connects financial and nonfinancial information with the long-term value-creation potential of the entity.
What benefits are attributable to integrated reporting (IR)?
A. Better stakeholder relations, lower reputational risk, and better decision making.
B. Better stakeholder relations, more providers of financial capital, and better decision making.
C. Better stakeholder relations, more providers of financial capital, and higher assurance for the integrated report.
D. Lower reputational risk, better decision making, and higher assurance for the integrated report.
A. Better stakeholder relations, lower reputational risk, and better decision making.
Better relations with employees and suppliers and more committed customers, reduced risk to reputation, and better decision making and resource allocation are benefits of IR.
Which of the following is a potential advantage of integrated reporting (IR)?
A. Reduction of costs by establishing new control systems.
B. Better control systems for financial information.
C. Less emphasis on the materiality of nonfinancial information.
D. Providing assurances on nonfinancial information.
D. Providing assurances on nonfinancial information.
Providing assurance on nonfinancial information, the amount of which is unlimited, is difficult. However, validating the integrated presentation of financial and nonfinancial information is important. Assurance on IR enhances the quality of the reports and their comparability among organizations. A similar benefit results from an auditor’s opinion on financial information.
