Integrated Reporting (IR) is depicted as presenting corporate information based on entity’s performance, environmental, social and governance parameters. Primarily, organisations depict both financial and non-financial information with the use of integrated reporting. It is essential for the businesses to circulate such an information so that the stakeholders are able to know about sustainable initiatives. In the recent times, IR has undergone significant development in the annual report for ensuring improved brand value and customer loyalty (Macias & Farfan-Lievano, 2017).
The application of IR framework in the contemporary corporate can be noted among the investors and stakeholders. However, the limitation of this framework is often criticised with its application only during short-term approach of reporting. The important initiative to implement IR can be defined with presenting a sustainable value for assisting stakeholder in both medium- and short-term business. In addition to this, corporate reporting will be able to acknowledge the developing economic reality which will be essential for organisational planning in the future. In most cases, the leading corporate entities rely on IR framework for ensuring clear and concise standard of reporting. This nature of reporting is often conducive for recognising the values and present the same towards stakeholder. The important information in the integrated reporting is able to guide the principle for multiple model IR approach. These models of IR have generally focused on the areas of both financial and non-financial reporting purposes. Additionally, the relevance of corporate reporting model is associated with appropriate reporting standards which is followed by the organisation within global reporting (Dumay, 2016).
Therefore, it is to be noted that IR significantly contributes towards comparison of financial reports with global standard of reporting. The various components of IR are established with organisations involved in positively contributing towards external environment. In addition to this, the initiatives such as disclosing governance factor can be directly evident with additional value creation. As per the resource and strategy allocation, the organisations will be able to concentrate on both short-term and long-term goals. The UN has also taken major initiative in using sustainability reporting for ensuring that the companies are able to implement IR. This type of initiative is often led by the negotiators by maintaining a “zero draft” policy. The zero draft policy initiative has led to the development in areas where there is lack of access to health and medical technologies. This is often related with addressing fair pricing and improvement in procurement strategies. The application of such a policy will be conducive for the organisations to ensure that companies are able to include sustainability factor in their financial reporting (Corbella et al., 2018).
The adaptation of such a framework among the private companies can be evident with Novo Nordisk, BASF, United Technologies Corporation (UTC), American Electric Power (AEP) and Phillips Electronics. The aforementioned companies have undertaken such a reporting to integrate various types of financial and sustainability information in their financial report. This has permitted the organisations for recognising different areas of non-financial perspective apart from mentioning the key performance based on financial perspective. However, more recently the publicly listed companies have taken the assistance from dedicated IR officers (IROs) who are responsible for monitoring different types of private meetings with shareholders and investors. These officers have also used themselves in providing the required assistance for conducting conferences. During the implementation of IR framework, it is obligated to understand the investor relations function by both private and public sector companies along with different types of upcoming challenges which they might be facing. The role of the organisations is also seen to consider the various opinion of the investors at the time of preparing research model, financial model and data analysis model (Bonsón & Bednárová, 2015).
In different types of other situations, corporate reporting is able to highlight important information related to the risks of the investor pertaining to climate change. This is particularly evident among companies based in USA which has taken considerable initiatives in disclosure of such information in its financial report. It is to be further identified that a handful number of companies in both private and public sectors have disclosed all the necessary information related to risks of the investor pertaining to climate change (Surty, Yasseen & Padia, 2018).
It needs to be noted that for any business publishing of strategy into business model has a significant impact on investor. The wide number of previous research studies have disclosed that various corporate entities implement IR framework to have a better control and strategy implementation. The nature of such evidence can be found among research conducted on South African companies. The different types of other findings of the research have stated about the insights on improvement led by incorporating IR into financial reporting. The main findings of such a study variable to consider several influences which were relevant with the requirement of integrated reporting (K?l?ç & Kuzey, 2018). Some of these findings from the previous studies has stated about pointing out important information with relevance to decision-making in investment. The very types of criteria’s pertaining to the IR framework has been conducive in measuring overall quality of information along with the application of relevant strategy. In this perspective, the control factor has revealed significant information on identifying the opportunity and risk of IR. The influence of such a framework as per strategy and control have ensured a more efficient operation of the business by identifying the risks and at the same time mitigating such threats (Siew, 2015).
The assertions inferred on the strategy on control particularly with relevance to IR has been able to show how businesses have used such a framework to identify future risk factors. It is also essential for the entities to get notified about this type of risk so that it can act from beforehand. The implementation of such risk mitigation strategies can be notably discerned among private companies like Novo Nordisk, BASF, United Technologies Corporation (UTC), American Electric Power (AEP) and Phillips Electronics (Fernando et al., 2017).
The influencing role played by the six concepts on strategic management accounting can be noted with “natural capital”, “human capital”, “financial capital”, “intellectual capital”, “relationship capital” and “social capital”. The adaptation of natural capital acts as a guiding principle for other capitals. This type of capital is associated with definitive changes for observing requirements related to significant publishing of equity information. Additionally, such concepts have been conducive in studying about the changes in business strategy and knowing about the subjects which may be decided in a distinguished manner from stakeholders’ perspective (Goicoechea, Gómez-Bezares & Ugarte, 2019). The use of human capital is able to discern the significant nature of changes which often involve identifying the remuneration of employees, recognition, internal events and external events. It is to be further understood that the application of financial capital is able to understand the significant scope of changes essential in disclosing any important information on financial parameters such as equity, liability recognition and sales revenue (Ngu & Amran, 2018).
The fundamental understanding of intellectual capital is based on recognising the changes in intellectual property rights. Some of the additional assertions like relationship capital can be noted with the aggregate of decisions taken by organisations in ensuring connectivity in the marketplace both directly and indirectly. Relationship capital is helpful in identifying and evaluating different aspects of requirement for such a capital which is often termed as RCM. The aggregate of relationship capital is depicted to be fluid in nature. However, in instance of unprecedented changes may affect such recognition (Serafeim, 2015). Social capital is designed with the factors which includes the effectiveness on how the social group are able to function in an industry with shared identity, norms, effectiveness, trust, cooperation, understanding and reciprocity. It is to be further understood that in several types of other theories the contribution pertaining to social capital can be discerned with the influencing role of the strategies formulated by Management accountants with mention of performance drivers such as growth for entrepreneurial entities, superior managerial performance, maintaining diverse group and improvement in overall supply chain relations. Henceforth, social capital is often praised for its functional efficiency among notable business entities (Paolucci & Cerioni, 2017).
Conclusion
The essence of IR framework in contemporary corporate can be noted among the investors and stakeholders. However, the limitation of this framework is often criticised with its application only during short-term approach of reporting. The adaptation of such a framework among the private companies can be evident with Novo Nordisk, BASF and Phillips Electronics. The publicly listed companies have taken the assistance from dedicated IR officers (IROs) who are responsible for monitoring different types of private meetings with shareholders and investors. Impact of IR framework on strategy is noted with various corporate entities implement IR framework to have a better control and strategy implementation. The nature of such evidence can be found among research conducted on South African companies. Six capitals having an impact on strategic management accounting can be seen with enhancing operation and financial control.
References
Bonsón, E., & Bednárová, M. (2015). CSR reporting practices of Eurozone companies. Revista de Contabilidad, 18(2), 182-193.
Corbella, S., Florio, C., Sproviero, A. F., & Stacchezzini, R. (2018). Integrated reporting and the performativity of intellectual capital. Journal of Management and Governance, 1-25.
Dumay, J. (2016). A critical reflection on the future of intellectual capital: from reporting to disclosure. Journal of Intellectual capital, 17(1), 168-184.
Fernando, K., Dharmawati, R., Sriani, D., Shauki, E. R., & Diyanty, V. (2017, August). Does Integrated Reporting Approach Enhance the Value Relevance of Accounting Information?: Evidence from Asian Firms. In 6th International Accounting Conference (IAC 2017). Atlantis Press.
Goicoechea, E., Gómez-Bezares, F., & Ugarte, J. V. (2019). Integrated Reporting Assurance: Perceptions of Auditors and Users in Spain. Sustainability, 11(3), 713.
K?l?ç, M., & Kuzey, C. (2018). Determinants of forward-looking disclosures in integrated reporting. Managerial Auditing Journal, 33(1), 115-144.
Macias, H. A., & Farfan-Lievano, A. (2017). Integrated reporting as a strategy for firm growth: multiple case study in Colombia. Meditari Accountancy Research, 25(4), 605-628.
Ngu, S. B., & Amran, A. (2018). Board Diversity and Materiality Disclosure in Sustainability Reporting: A Proposed Conceptual Framework. Management, 5(4), 1-14.
Paolucci, G., & Cerioni, E. (2017). Integrated reporting and Italian companies: An empirical investigation. International Journal of Business and Management, 12(9), 221.
Serafeim, G. (2015). Integrated reporting and investor clientele. Journal of Applied Corporate Finance, 27(2), 34-51.
Siew, R. Y. (2015). A review of corporate sustainability reporting tools (SRTs). Journal of environmental management, 164, 180-195.
Surty, M., Yasseen, Y., & Padia, N. (2018). Trends in integrated reporting: a state-owned company analysis. Southern African Business Review, 22(1).
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