Ch 2 Flashcards
Objective of Financial Reporting
(IASB Conceptual Framework)
To provide information about the reporting entity that is usfeul to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity
Example areas not covered by financial reporting
How the business is managed
Future prospects
Environmental policy
Attitude towards social responsibility
Difference in Approach: GRI vs IIRC
GLOBAL REPORTING INITIATIVE
guidelines that propose additional disclosures (economic, env, social perf indicators) in addition to standard F/S disclosures
INTERNATIONAL INTEGRATED REPORTING COUNCIL
Framework proposing a fundamental and revolutionary change to how entities are managed and how they report to st/h
How and GRI address historical over-reliance on solely financial disclosures and short-termist obsession
enables org to communicate clearly on how it draws from all resources and relationships to create and preserve value in the s/t, m/t and l/t
GRI
encourage orgs to disclose extra information (econ, env, social) alongside standard F/S - either in separate doc or as part of mgmt commentary within F/S
Overall Aim of GRI
GRI suggests that entities report performance indicators so that users can monitor their performance from economic, environmental, and social perspectives
G4
Latest version of GRI Sustainability Reporting Guidelines, dated May 2013
Contain PRINCIPLES on content, quality, and guidance on setting report boundary; plus DISCLOSURE ITEMS on mgmt of issues and actual performance indicators used
Central focus of MATERIALITY to build public trust and ensure info important for st/h is shared (its omission must otherwise be explained)
Overview of GR Guidelines
SECTIONS 1/2: PURPOSE AND HOW TO USE
Explains two elements of (1) Reporting Principles and Standard Disclosures) and (2) Implementation Manual
Gives step-by-step guide to using Guidelines and preparing a report
SECTION 3: CRITERIA FOR ORG TO PREPARE REPORT IN ACCORDANCE WITH GUIDELINES
Explains option for disclosures: CORE giving background against which org communicates economic, env, social perf; COMPREHENSIVE builds on this to require additional reporting of strategy/analysis, governance, ethics, integrity
SECTION 4: REPORTING PRINCIPLES
The required characteristics of the Report Content and Report Quality
SECTION 5: STANDARD DISCLOSURES
Largest section - goes through the different types of GENERAL and SPECIFIC DISCLOSURES
Then explains how to subcategorize INDICATORS (a specific disclosure)
SECTIONS 6/7: QUICK LINKS AND DEFINITIONS OF KEY WORDS USED
Overview of Specific Standard Disclosures (GRI)
Subdivided into:
(1) DIsclosures on Management Approach: org explains how econ, env, social impacts are managed
(2) Indicators: broken into econ, env, social categories
Description of GRI Indicators
ECONOMIC
flow of capital among different st/h, and primary economic impacts of org throughout society
ENVIRONMENTAL
impacts on inputs (energy, water) and outputs (emissions, waste); biodiversity, transport, and prod/svc-erlated impacts; env compliance and spending
SOCIAL
impact on the social systems the org operates in
Subcategories: Labor Practices and Decent Work, Human Rights, Society, Product Responsibility
Example Economic Disclosures (GRI)
Economic Performance
rev/costs, pension cont, taxes paid, subsidies rcvd
Market Presence
wage competitiveness, proportion of local hire SM
Indirect Economic Impacts
level of investment in infrastructure projects
Procurement Practices
proportion of spend on local suppliers
Example Environmental Disclosures (GRI)
Materials
volume of use, proportion that is recycled
Energy
total fuel consumption, reduction in energy reqs of sold prods/svcs
Water
Biodiversity
significant impacts, e.g. species affected and for how long
Emissions
total greenhouse gas/ozone depleting substances emitted, any deliberate reductions achieved
Effluents and Waste
Products and Services
how env impact is mitigated, proportion of products/packaging reclaimed
Compliance
Transport
Overall
Supplier Environmental Assessment
% of new suppliers screened for environmental criteria
Environmental Grievance Mechanisms
Example Labor Practices and Decent Work Disclosures (GRI)
Employment
turnover, # new staff, benefits provided (e.g. parental leave, life insurance)
Labor/Management Relations
Occupational Health and Safety
Training and Education
average hours of training provided
Diversity and Equal Opportunity
analysis of employees (and governance) by age, gender, ethnicity, etc.
Equal Remuneration for Women and Men
Supplier Assessment for Labor Practices
Labor Practices Grievance Mechanisms
Example Human Rights Disclosures (GRI)
/% of org investments/contracts which underwent human rights screening
Investment
Non-discrimination
Freedom of Association and Collective Bargaining
measures to support rights to both of these (e.g. joining trade union)
Child Labor
Forced or Compulsory Labor
Security Practices
Indigenous Rights
Assessment (of entity operations)
Supplier Human Rights Assessment
Human Rights Grievance Mechanisms
Example Society Disclosures (GRI)
Local Communities
operations with local comm engagement, those with significant actual/potential –ve impacts
Anti-corruption
Public Policy
analysis of donations to political parties (by region, recipient)
Anti-competitive Behaviour
legal actions faced re. anti-competitive behavior / violations of monopoly laws
Compliance
Supplier Assessment for Impacts on Society
Grievance Mechanisms for Impacts on Society
Example Product Responsibility Disclosures (GRI)
Customer Health and Safety
summary of H&S breaches reported by customers, results of any investigations
Product and Service Labelling
Marketing Communications
list of banned/restricted products per region, summary of any govt investigations into non-compliance with advertising regs
Customer Privacy
complaints received (e.g. losses of data, leaks)
Compliance
General Standard Disclosures (GRI)
Discuss General Issues relating to Entity > Specific Information regarding performance
Strategy and Analysis
Org Profile
Identified Material Aspects and Boundaries
Stakeholder Engagement
often ignored or underestimated, important for PR/marketing and to have a pulse on product reception
Report Profile
reporting date, date of last report, use of Core/Comprehensive Disclosures
Governance
Ethics and Integrity
org’s values and norms, plus int/ext mechanisms for reporting and seeking advice on ethical matters
Principles for Defining Content of the GRI Disclosures
STAKEHOLDER INCLUSIVENESS
who are the st/h and how the report responds to their expectations and interest
SUSTAINABILITY CONTEXT
MATERIALITY
threshold where Aspects become sufficiently important for refleting org’s econ/env/social impacts or influencing st/h decisions
COMPLETENESS
NON-DISCLOSURE
identification of omissions with explanations
Possible explanations for omissions (GRI)
Org should recognize that omission of large # of Standard Disclosures may invalidate claim that reporting is “in accordance” with GRI Guidelines
A Standard Disclosure, part of a Std Disc, or an Indicator is not applicable – reason why should be disclosed
Information is subject to confidentiality constraints – these constraints must be disclosed
Existence of Legal Prohibitions – these must be disclosed
Information is currently unavailable – steps being taken to get the information must be shared
