Chapter 18

Question 1

What is the objective of financial reporting?

Answer 1

Provide information that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity

Question 2

What is integrated reporting?

Answer 2

Process of producing integrated report

Question 3

What is primary purpose of IR?

Answer 3

Explain to providers of financial capital how an entity creates value over time

Question 4

What is integrated thinking?

Answer 4

Active consideration by an organisation of the relationship between its various operating and functional units and the capital that organisation uses or affects

Question 5

Who did the IIRC merge with and why?

Answer 5

SASB to form value reporting foundation

Question 6

What did VRF provide?

Answer 6

Comprehensive resource for businesses to understand and report long term value creation

Question 7

Why was the International Integrated reporting council formed?

Answer 7

To establish integrated reporting as the norm within mainstream business practice

Question 8

In August 2022 who did the VRF consolidate with?

Answer 8

IFRS Foundation

Question 9

What is the IFRS responsible for?

Answer 9

Work of IASB.
It aims to develop uniform global requirements for sustainability disclosures

Question 10

What is the objective of the IIRC?

Answer 10

Develop an internationally accepted integrated reporting framework

Question 11

What is the objective of the IR framework?

Answer 11

Establish guiding principle and content elements that govern overall content of integrated report
Explain fundamental concepts that underpin integrated report

Question 12

What are the three fundamental principles of integrated reporting?

Answer 12

Value creation for organisation and others
Value creation process
The capitals

Question 13

What are the objectives of integrated reporting?

Answer 13

Improve quality of information available
Provide a more cohesive and efficient approach to corporate reporting
Enhance accountability and stewardship
Support decision making

Question 14

What are the six capitals included in the IR framework?

Answer 14

Financial
Manufactured
Intellectual
Human
Social and Relationship
Natural Capital

Question 15

What is financial capital?

Answer 15

Pool of funds that is available to organisation for use in production, obtained through financing

Question 16

What is manufactured capital?

Answer 16

Physical objects that are available for use in production.
e.g. buildings, equipment

Question 17

What is intellectual capital?

Answer 17

Organisational, knowledge-based intangibles.
e.g. patents, copyrights, software

Question 18

What is human capital?

Answer 18

People’s competencies, capabilities and experience, and their motivation to innovate

Question 19

What is social and relationship capital?

Answer 19

Institutions and relationships within and between communities, groups of stakeholders and other networks, and ability to share information to enhance individual and collective well being

Question 20

What is natural capital?

Answer 20

All renewable and non-renewable resources and processes that provide goods or services

Question 21

What are the limitations of financial reporting?

Answer 21

Potential for bias
Reluctance to disclose information for fear of losing competitive advantage
May provide too much information

Question 22

What are the benefits of IR framework?

Answer 22

Provides guidance for preparers
Increases user familiarity
Being principles based enables application of framework by entities operating in any framework

Question 23

What are the benefits of integrated reporting?

Answer 23

Increase in level of forward looking information
Increases understanding of users
Improved stakeholder reputation
Improved efficiencies

Question 24

What are the limitations of IR framework?

Answer 24

Requires experienced staff
Difficult to compare across different entities and sectors
Being principles based leads to increased subjectivity and bias