Integrated Reporting Flashcards
Definition of Integrated Reporting as per IIRC (International Integrated Reporting Council):
A process founded on integrated thinking that results in periodic integrated report by an organisation about value creation over time and related communications regarding aspects of value creation.
Value creation:
The process that results in increases, decreases or transformations of the capitals caused by organisation’s business activities and outputs. (IIRC)
Value creation is influenced by:
- Influenced by external environment
- Created through relationships with stakeholders
- Dependant on various resources
Definition of integrated report:
A concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term.
IIRC Mission:
To establish integrated reporting and thinking within mainstream business practice as the norm in public and private sectors.
IIRC Vision:
To align capital allocation and corporate behaviour to wider goals of financial stability and sustainable development through the cycle of integrated reporting and thinking
Purpose of International <IR> Framework:</IR>
To establish guiding principles and content elements for preparation of an integrated report, and to explain the concepts that underpin them. (IIRC 2013)
IIRC Framework is principles based and is based on 3 fundamental concepts:
1.) Value creation = value is created when there are increases,decreases or transformations of an entity’s capitals caused by its business activities and outputs.
2.) The capitals = are stocks of value that are increased, decreased or transformed through activities and outputs of organisation.
3.) Value creation process = Value creation process is process by which an entity uses its capital as inputs and converts them to outputs.
6 capitals according to Framework:
1.) Financial capital = pool of funds
2.) Manufactured capital = manufactured physical objects
3.) Intellectual capital = organisational, knowledge-based intangibles i
4.) Human capital = people’s competencies, capabilities and experience, and their motivations to innovate
5.) Social and relationship capital = institutions and relationships within and between communities.
6.) Natural capital = all renewable and non-renewable environmental resources and processes that provide goods or services that support past, current/future prosperity of organisation.
7 guiding principles that <IR> Framework requires an organisation's reporting to display in order to be seen as meaningful:</IR>
1.) Strategic focus and future orientation
2.) Connectivity of information
3.) Stakeholder relationships
4.) Materiality
5.) Conciseness
6.) Reliability and completeness
7.) Consistency and comparability
10 Benefits of International <IR> Framework:</IR>
1.) Connecting departments
2.) Improved internal processes leading to a better understanding of the business
3.)Increased focus and awareness by senior management on long-term sustainability of business
4.)Better articulation of strategy and business model
5.) Improved performance
6.) Improved relationship with stakeholders
7.) Consistency in approach between companies
8.) Principles-based approach allows the report to be tailored to specific entities
9.) Provides guidance for preparers of an integrated report
10.) Quality assurance for users of an integrated report
7 Limitations of International <IR> Framework:</IR>
1.) Time and cost of preparing an integrated report
2.) Management may be reluctant to disclose forward-looking information
3.) Can be challenging to articulate what an entity’s capital are and to determine appropriate measures of these capitals
4.) Challenges in determining what is material
5.) Needs to be adapted for not-for-profit and public sector organisations
6.) Non-mandatory guidance so there is a risk of low uptake of entities adopting integrated reporting
7.) Lack of prescribed format reduces comparability between entities
