Chapter 18 Flashcards
What is the objective of financial reporting?
Provide information that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity
What is integrated reporting?
Process of producing integrated report
What is primary purpose of IR?
Explain to providers of financial capital how an entity creates value over time
What is integrated thinking?
Active consideration by an organisation of the relationship between its various operating and functional units and the capital that organisation uses or affects
Who did the IIRC merge with and why?
SASB to form value reporting foundation
What did VRF provide?
Comprehensive resource for businesses to understand and report long term value creation
Why was the International Integrated reporting council formed?
To establish integrated reporting as the norm within mainstream business practice
In August 2022 who did the VRF consolidate with?
IFRS Foundation
What is the IFRS responsible for?
Work of IASB.
It aims to develop uniform global requirements for sustainability disclosures
What is the objective of the IIRC?
Develop an internationally accepted integrated reporting framework
What is the objective of the IR framework?
Establish guiding principle and content elements that govern overall content of integrated report
Explain fundamental concepts that underpin integrated report
What are the three fundamental principles of integrated reporting?
Value creation for organisation and others
Value creation process
The capitals
What are the objectives of integrated reporting?
Improve quality of information available
Provide a more cohesive and efficient approach to corporate reporting
Enhance accountability and stewardship
Support decision making
What are the six capitals included in the IR framework?
Financial
Manufactured
Intellectual
Human
Social and Relationship
Natural Capital
What is financial capital?
Pool of funds that is available to organisation for use in production, obtained through financing
What is manufactured capital?
Physical objects that are available for use in production.
e.g. buildings, equipment
What is intellectual capital?
Organisational, knowledge-based intangibles.
e.g. patents, copyrights, software
What is human capital?
People’s competencies, capabilities and experience, and their motivation to innovate
What is social and relationship capital?
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
What is natural capital?
All renewable and non-renewable resources and processes that provide goods or services
What are the limitations of financial reporting?
Potential for bias
Reluctance to disclose information for fear of losing competitive advantage
May provide too much information
What are the benefits of IR framework?
Provides guidance for preparers
Increases user familiarity
Being principles based enables application of framework by entities operating in any framework
What are the benefits of integrated reporting?
Increase in level of forward looking information
Increases understanding of users
Improved stakeholder reputation
Improved efficiencies
What are the limitations of IR framework?
Requires experienced staff
Difficult to compare across different entities and sectors
Being principles based leads to increased subjectivity and bias
