How integrated reporting <IR> tells the value story
What is integrated reporting? A way to give stakeholders a concise view of how an organisation creates sustainable value.
- Integrated reporting provides a framework to reconsider not only the organisation’s flagship annual report, but also its broader reporting strategy.
- An integrated report is a clear, concise communication of how an organisation uses its resources and key relationships to implement strategy and create value.
- The Framework, released in 2013, was developed in response to poor business practices that led to the global financial crisis (GFC).
Integrated reporting <IR> will be the reporting norm in most jurisdictions by 2022 if the International Integrated Reporting Council (IIRC) achieves its goals. As the demand for clearer communication grows, integrated reporting can help organisations meet their reporting obligations and tell their value story to investors and other stakeholders in a more compelling way.
An integrated report is a concise communication about how an organisation uses its scarce resources and key relationships through its governance and business model to implement strategy and create value over the short, medium and longer term. It can be a standalone report or included as part of another communication.
The <IR > Framework, released in 2013, was developed in response to poor business practices that led to the global financial crisis (GFC). Early <IR> adopters locally included NAB, Stockland, Bank Australia and New Zealand Post.
Five years on, we are seeing more listed companies and organisations applying <IR> principles to provide more balanced and transparent disclosures, including ANZ, AGL, Qantas, Lendlease, Sanford, Australia Post, Cbus, VicSuper, Watercare and CA ANZ. But while momentum for integrated reporting is growing, Australia and New Zealand still lag the UK, EU (especially France), Japan, South Africa and Brazil. India, Singapore, Malaysia and China are also moving towards <IR> adoption quickly.
The US has a growing number of good <IR> reporters, including Southwest Airlines and GE. The new IIRC integrated reporting hub, based in New York, is expected to drive further take-up during 2019.
The benefits of integrated reporting
At a time when those who prepare financial reports face an ever-increasing reporting burden, integrated reporting provides a framework to reconsider not only the organisation’s flagship annual report, but also its broader reporting strategy. Additional information that is important but not critical to the organisation’s value story can be linked from the flagship report to another report or, more likely, online disclosures.
The key benefit for stakeholders is greater clarity about the information the board and management believe is most relevant to a better understanding of an organisation’s performance in using scarce resources to deliver on strategic priorities in the current period, while setting itself up for future success – its value story.
Both Stanford University’s Professor Mary Barth and Professor Roger Simnett (UNSW) have found that organisations applying <IR> principles can achieve increased access to capital at a reduced cost. In addition, Barth’s research shows the integrated thinking that underlies <IR> – making business decisions in the context of their likely impact on all key resources and relationships (and not just the financials) – can actually achieve real cash-flow improvements over time.
It’s important that accountants, especially those preparing annual reports and other communications, or involved in auditing data, get up to speed on the principles of integrated reporting and how to apply them as they prepare, present and assure their 2019 reporting suite.
principles can achieve increased access to capital at a reduced cost.”