Discuss about the Management Accounting for Corporate Integrated Reporting.
The process Corporate Integrated Reporting is a step that is taken into force by the companies so that they can make their reporting formats more appropriate. There are many disclosures in the companies like the environmental and social disclosures that are made mandatory for the institutions just as the financial statements. These reports are needed to be prepared individually which make it a time-consuming method. Hence, in order to decrease the time utilized and making the process of data collection and recording much easier, the process of corporate integrated reporting is taken into force. This type of reports also helps the concerned public to understand the position of the firm in a much better and elaborated manner thus keeping them informed about the company’s progress (Francis et. al, 2013). Corporate Integrated Reporting is generally caller as CIR and has helped a lot of institutions to carry out their work in a smooth manner.
The main objectives that are achieved by the use of CIR are as follow:
Providing the public with quality financial statements:
The main objective of the firm to shift the accounting system was to provide the users with the most appropriate and quality information. The users of such documents are the government, stakeholders, creditors, investors, financiers, etc. They are all in a sense a small owner of the company as they have all invested in the shares and thus they also have the sole right to verify and know the financial position of the company and also other information’s which may affect the company’s reputation and name (Slaper & Hall, 2011). Briefly, it can be explained as, the better the financial statements of the firm the better will be its power to opt for a loan or seek for investors (Caradonna, 2014). The main function of the Integrated Reporting includes the proper utilization of the sum of all the activities and information related to the firm.
The system of CIR induces the management to provide the customers of the company with reports that provide them with all the information. It is not possible for the firm to answer and clear the doubt of each individual shareholder. Therefore, there should be made such a financial statement that may clear the doubts of the stakeholders and thus clarifies any misconceptions present in their minds (Freeman & Alexander, 2013). These types of purpose shall be easily concurred using CIR. For example – if a company need a bank to provide a loan, then it needs the s to show all the necessary documents to the bankers so that they and look at the report and then ascertain that the company is worthy of a loan or not. Therefore, the financial statements should be easy to understand and free of any misstatements because if the financer will find any problem in the accounts, then he may deny providing the firm with the loan (Glover & Lin, 2013). All these functions are made easy by the use of CIR, as the data made using this function is clear and very accurate.
The CIR system of accounting makes it easier for a user to compare the data of the firm with the previous year’s data that helps them in making decisions. The comparison can be of the same company in the different years or the comparison may be made between two companies that pervade in the same field. Thus, it will not be good for a company if it will not provide the users a proper financial statement, as they will not be able to understand the economy of the business (Bonson & Bednarova, 2015).
If there is a situation arising for the firm to merge or collaborate with other firms, a proper set of the financial data is needed. If the firm have maintained the financial data according to the CIR then it will be easy for the stakeholders and the owners as all the required data will be contained in a small account will the stakeholders can assess and then take any decisions regarding to the merging or acquisition (Walker & Salt, 2012).
The normal account of the firm does not allow it to go through the non-financial aspects of the firm that affects its business. In CIR system of accounting, it will become very helpful for the firm as it also contains the data about firms non-financial like the human index and the corporate social rankings that may change the financial value of the firm (Benabou & Tirole, 2010).
The use of CIR will also make it easy for the firm to find and loophole vulnerability present in the system very easily. The main risks that should be identified are the IT risks, labor turnover risks, etc which needs to be detected and rectified as soon as possible. These risks can only be identified if they are clearly mentioned in the financial statements of the firm. In addition, the firm should focus on finding the key factors that help them to improve the firm’s operational systems (Douma & Hein, 2013). They should find the ways and production methods or the product itself, which yields them a high rate of return, and thus make their business profitable. The firm after the assessment should drop the ideas of producing goods with low returns and shift its focus to the high yielding products. For example – if a company have 10 different products being manufactures and four products collectively are giving the 70% of the profits, then it should shift the concerns from the six products to those four products (Bauer & Hann, 2010).
The CIR system of data reporting includes all the necessary information that is needed by a user to assess the performance of the firm. The format of CIR has all the necessary information of the firm to the user thus making it easier for him to decide whether he needs to invest in the firm or not (Albuquerque et. al, 2013). This will help the company to gain the trust of the individuals and then persuade them to invest in their business by the new and improved revenue generations.
The firm’s stability helps it to opt for loans and other credit facilities. It is made easier for them to ask for loans from the bank finances, public offer, debentures, and other short-term borrowings. This also leads to the stable share prices of the firm.
Conclusion
The company should try to hear some experts who are able to make proper CIR framework channels. The sole purpose of the CIR reporting is to make a financial stamen that includes all the information relating to the company. It should be checked that the data is not published in a haphazard form as this may lead to a downfall in the company’s reputation. CIR should always be created with the standalone statements as they help the firm to gain the trust of their shareholders and helps them to preserve data carefully. Therefore, it will be the best conclusion to say that Corporate Integrated Reporting (CIR) is the future of the financial reporting systems and thus every firm should use it, as it will be affecting the society as a whole.
References
Albuquerque, R, Durnev, A. and Koskinen, Y. (2013) Corporate social responsibility and firm risk: theory and empirical evidence. Boston University.
Bauer, R. and Hann, D. (2010). Corporate environmental management and credit risk. Maastricht University.
Benabou, R and Tirole, R. (2010) Individual and Corporate Social responsibility. Ecnomica. [online]. 11, pp. 1-19. Available from: https://doi.org/10.1111/j.1468-0335.2009.00843.x [Accessed 23 April 2018]
Bonson, E. and Bednarova, M. (2015) CSR reporting practices of European companies. Spanish Accounting Review. [online]. 18 (2), p. 182-193. Available from: doi: https://dx.doi.org/10.1016/j.rcsar.2014.06.002 [Accessed 23 April 2018]
Caradonna, J. L. (2014). Sustainability: A History. Oxford University Press
Douma, S. And Hein, S. (2013). Economic Approaches to Organizations. London
Francis, R. N., Harrast, S., Mattingly, J. and Olsen, L. (2013) The relation between accounting conservatism and corporate social performance: An empirical investigation. Business and Society Review. [online]. 118 (2), p. 193 – 222. Available from: doi: 10.1111/basr.12008 [Accessed 23 April 2018]
Freeman, E. and Alexander, M. (2013). Stakeholder management and CSR: questions and answers. Oxford Press
Glover, J. and Lin, H. (2013) Accounting conservatism and incentives: Intertemporal considerations [online]. Available from: from https://wpweb2.tepper.cmu.edu/facultyAdmin/upload/wpaper_416061082434241_GL_7-25-2013.pdf [Accessed 24 March 2018]
Slaper, T. F. and Hall, T. J. (2011) The Triple Bottom Line: What Is It and How Does It Work? Indiana Business Review.[online]. 86(1), pp. 6-10. Available from: https://www.ibrc.indiana.edu/ibr/2011/spring/article2.html [Accessed 23 April 2018]
Thomas, S.A. (2016) The Nature of Sustainability. Chapbook Press. Grand Rapids, Michigan
Walker, B. and Salt,S. (2012) Resilience Practice: Building Capacity to Absorb Disturbance and Maintain Function. Island Press.
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