1. The background to and meaning of integrated reporting?
2. Arguments for and against focusing on integrated reporting; What are the costs and benefits of doing so?
3. Assuming integrated reporting is chosen as a viable option – How should this new area be marketed to clients? What exactly are the types of services that might be offered; What are the type of skills and training the staff employed in it would require?
4. Should the accounting practice consider embedding integrated reporting policies more firmly in its own business?
Integrated reporting encourages a consistent and well-organized approach to corporate reporting which aspires to develop the quality of the information obtainable to providers of financial capital so that they can perform more proficient and creative distribution of capital. The integrated reporting is based on the long-term vision in which integrated thinking is entrenched in the conventional trade practice (De Villiers, Rinaldi and Unerman 2014). Integrated reporting is implemented in both the public and private divisions assisted by integrated corporate reporting norms.
The main objective of integrated reporting is to give detailed providers of monetary capital on how an organisation develops worth over time. An integrated report is beneficial to the stakeholders who are involved in an organisation with the capability to produce value over time. These include employees, customers, suppliers, trade partners, local communities, legislators, regulators and policy makers. The international integrated reporting framework considers the principle-based approach. The basic intention is to create a balance amid the elasticity and direction, which identifies the wide differences in individual state of affairs of diverse organisations (Flower 2015). This enables a adequate level of comparability across the organisations in order to assemble the pertinent information needs. It does not sets down the definite key performance pointers, measurement procedures and the revelation of individual matters. It only includes a small figure of requirements, which needs to be applied prior to an integrated report being in conformity with the structure.
An integrated report can be prepared in respect to the present conformity obligation, which may be either separate report or may be incorporated in the form of discernible prominent report. It must be included transitionally to explain the basis of the report by those charged with supremacy by accommodating the accountability of statement.
The major objective of integrated report is providing an close look into the capital and relations used and by the organisation. They are collectively referred in the form of capital under this framework. The concept of integrated reporting aims to explanation on how an organisation interacts within the external environment (Crowther 2016). It also considers the capitals which is used to produce value over the short, medium and long-term.
Capitals are represented in the form of stock of values which increases, decreases or transforms through the help of actions and outputs of the organisation. It is generally categorized under this frame in the form monetary, manufactured, intellectual human, communal and natural capital. It is noteworthy to denote that organisation developing an integrated report is not under the obligation to adopt such classification or to configure their reporting concerning lines of the capitals. The capability of an organisation to develop value for itself enables them to generate monetary returns to the providers of the fiscal capital. This is correlated with the value that the companies develop for its stakeholder’s ranges upon the performance, communications and relationships (Adams 2015). When these are important to the company’s ability, it helps in creating value for its self, which is included in the incorporated report. The purpose of integrated reporting structure is to set up the directing principles and fundamentals of content, which rules the overall content of an integrated report. Integrated reporting identifies the information which is to be included in the integrated report with the objective of using it to assess the organisation’s ability to create value.
According to the management perspective implementation of integrated reporting is based on the adoption of integrated thinking. Implementing integrated reporting will enable corporations to gain from the superior information and data accessibility with superior decision support system providing an additional holistic vision of the corporation. These insights help in looking ahead with resonance tactical decision making. Risk management can be made superior by making prominence interdependencies under the value procedure (Haller 2016.). An increased level of lucidity can lead to improved appraisal of opportunities and risk thereby, this may enable the management to find easily align tactical objectives.
Businesses generally report transformed forms of admiration with better interior understanding of the worth procedure along with the employee recognition by the organisation. By revealing value drivers and assessing the value chain, individuals are better able contribute in each functions which is not only highlighted but also appreciated. Internal reporting provides holistic presentation of the organisation by linking the capitals and this in turn provides explanation to the value drivers for stakeholders (Frias et al. 2014). The status of integrated reporting acts a pioneer in combining the increased transparency, which helps in improving the public image of the business with improved stakeholders trust along with investors trust.
Arguments against implementing integrated reporting consist of the internal confrontation by the individual departments and individual employees. These resistances mainly include struggle to changes arising out of execution. Another downward side that is identified is higher cost and resources requirement at each stage of business generally due to the short of practice and an enlargement of guidelines. This is generally applicable during the first year of functioning and depends upon how the procedure looks like and whether or not integrated reporting is used to make more efficient reporting (Eccles and Krzus 2014). Therefore, greater resource competence and reformation of the procedure is one of the major advantage once the integrated reporting is effectively implemented. In order to avoid complications, managers must need to sustain the thought of integrated reporting with its successive modifications and sufficient management skills to administer the alteration process. In addition to this, a better level of lucidity leads to potentially fresh risk for the organisation because of the revelation of negative and equivalent accountabilities (Stubbs and Higgins 2014).
An integrated report can help in optimising the reporting such as it helps in enabling numerous subdivisions to work together on an interdisciplinary level by sharing data and creating synergies. Integrated reporting can help in broadening the perceptions and gaining facts of the overall business for diverse departments. One of the positive results of the implementation procedure is reinforcing the internal dialogue further than the boundaries of department (Deegan 2013). Implementing the integrated reporting framework helps in enhancing the efficiency resources with fiscal, sustainability and governance reports are combined by taking into the consideration the manufacturing and allocation costs. Operational decision-making procedure are accelerated because of enhanced reliability in individual reports upon the value chain of the corporation. The integrated report helps in facilitating external communication by providing dependable tool application to large number of stakeholders by disclosing the relevant information to the financial community.
The integrated report helps in satisfying the needs of the investors for a holistic depiction of the business by enabling them with assessment that is more inclusive. On the other hand, by establishing the integrated reporting it can lead to comprehensive modification and a prolonged period of execution. It may include numerous years from the early decision of implementation to publish the initial report (DeFond and Zhang 2014). An incredible harmonization attempt is required when there is insufficient knowledge in the interdepartmental collaboration. Usually, the requirement for resources is regarded as high with each department can vigorously figure the procedure and make changes to the report according to the distinct requirements. To provide gradual process of implementation of the integrated reporting it is probable to illustrate and construct on current reporting structure with procedures which are then modified and extended comprehensively.
An integrated report can help in optimising the reporting by enabling multiple subdivisions to work together on the level of interdisciplinary by creating information and creating synergies. Internally with the adoption and progressive improvement of existing structures and procedure along with the familiarity in sustainability reporting, promote the expansion procedure (Di Pietra, McLeay and Ronen 2014). In addition to this, publication of the progress report after three of four times in a year along with expert IT support assists in simplifying the access to the relevant data by encouraging report development. The main benefit of using development report is that it acts in the form of response from the internal and external stakeholders that can be easily included in the reports.
Establishing open communication amid the subdivisions, interactions and better collaboration helps in establishing operational conformity measures. On the level of management recognising the support of the board and other departments along with open culture helps in creating superiority in simplicity. It is noteworthy to denote that external identification with the help of reward helps in creating a positive stakeholder feedback, which ultimately acts in the form of motivating factor for the organisation (Ahmed 2016). In addition to this, using the structure and the support of expert consultant’s external service providers are considered as helpful. Several respondents have agreed that they would embark on the journey again if the organisation has to implement the concept of integrated reporting unless the company obtains the long-term benefit of implementing. Integrated reporting helps in outweighing the management through efforts and cost, which is related to the integrated reporting by making changes in the management reporting procedure.
The benefit of integrated reporting from the viewpoint of investors consists of the clear connection between the sustainability along with long term performance. Along with this, the concept of integrated reporting helps in attaining increased comprehension concerning the future outlook of the business organisation. It is noteworthy to denote that the integrated reporting also helps in pooling significant information for long-term risk, which consists of making modification in the climate that can create a significant impact on the business model (Falzon 2016). Therefore, it can be understood that concept of integrated reporting can help in providing greater insights concerning the way a corporate value can be treated. On contrast to this, there is also several downside of integrated reporting framework as laid down by several different researchers before the work. This consists of the complication and lack of lucidity along with general lack of conviction of integrated reporting leading to achievement of goals. It also consist of the inadequacy of the consensus in relation to the appearance of the integrated reporting. Insufficient acknowledgement of standard can be considered as one of the associated problems (Gaffikin 2016). It is noteworthy to denote that the framework of integrated reporting tends to rise beyond the downward side of the integrated reporting even though there is prevailing gap in the structure that needs to alleviated.
The integrated reporting structure can help in reducing the entire cost of reporting for different corporation by providing single mode of standard reporting. However, there are several challenges concerning the quantification and presentation of reports on different capitals such as manufactured capitals, natural capitals and social capitals. There also prevails the challenges concerning the cost of reporting simultaneously when the benefits are generally intangible and else diverse (Henderson et al. 2015). It can be understood that the concept of integrated reporting enables the clients and investors to invest in firms since the system of reporting helps in understanding both the sustainability report and financial report of the organisation. It can concluded that the implementing and preparing the concept of integrated reporting is considered as expensive for mid tier Australian accounting organisation. Despite this, it can be concluded that the mid-term Australian firms may invest in preparing and implementing integrated reporting within the firms since it offers more benefits and profit to the firms.
The implementation of integrated reporting cannot be successful without involving the stakeholders such as the clients, investors, employees, and the industry. The company must ensure that the stakeholders are accustomed to the new reporting format of the company as a company cannot function without their stakeholders. In order to make the stakeholders believe in the adopted integrated reporting the company can communicate with the key shareholders and explain the change that are to be brought (Horngren et al. 2013). The benefits of the integrated reporting should be highlighted and how the financial reporting would affect the decision of stakeholders based on the financial reporting should be discussed with the stakeholders to take them in confidence. The stakeholders should be informed about the value that the implementation of integrated reporting would create. The stakeholders should be made aware of the fact that the integrated reporting would bring a transparency in the financial report and thus helps in developing the trust between stakeholders and the company (Hyman 2014). The different business sectors especially public sectors and refinery sectors have been benefited by adopting the integrated reporting as they were able to develop trust among them regarding the transparency of the information provided.
The types of services offered by the integrated reporting to its clients are elaborated as following:
While preparing the integrated report, it is necessary to develop certain skills and concepts for an individual in practice. Likely to an accountant and an auditor, the similar line of work will be followed by individual at the time of preparation of the integrated reporting framework at the ending of the reporting period (Messier 2016). In this context, it is important to have skilled and trained employees who can understand the clear concept of adaptability while incorporate necessary information in the framework of the integrated reporting. Needless to say, the practicing disclosure of the accounting is evolving and dynamic in nature. Thus, communication is one of the essential skills for employees in this context. It is obvious fact that comprehensive value creation is the ultimate aim of the integrated reporting. Thus, communication skill will help to identify the interdependency between all elements external and internal (Rensburg and Botha 2014). As a result employee will help to assess the materially effectiveness on the perspective of the organisation to create value over time. Handling time effectively is another skill for employees to conduct the integrated report. An adequate training needs to be provided to employees for the development of the time management skills. Additionally, the fact of ingeniousness needs to be followed for maintaining the reporting integrity and comprehensiveness. For all these reason, necessary skills and training of employees needs to be developed while preparing the integrated reporting.
There are several elements are incorporated while developing the sustainable value creation of the business. All the operational and functional units of an organisation, along with the capital that it applies to create value needs to be considered for the preparation of the integrated report. Therefore, a sense of comprehensiveness or integrated the integrated thinking needs to be approached while evaluating the process of integrated reporting framework for an organisation (Porter, Simon and Hatherly 2014). In the general perspectives, the organisation develops the integrated report at the end of the period. These periodic integrated reporting, however, needs to facilitate the comprehensive value across all section of the organisation. Thus, integrated communication process in regards of following governance, policies, strategies, activities and performance of the reporting entity needs to be assessed. In this way, an integrated reporting framework help in to make combine internal and external elements into the business and such aspects have been conveyed to all stakeholders of the company. Evidence suggests in the recent times that the level of effectiveness is being increased and demands are high for integrating report maintaining more accessibility and transparency Sierra et al. 2015. As stated by Tucker and Schaltegger (2016) that the integrated reporting is helpful for extending the acceptance of the corporate reporting in the financial field.
However, evidence reflects that integrating reporting benefits are perceived by most of the public sector firms. Interestingly, the approach of integrated reporting is being enabled flexibility in terms of maintaining values of all stakeholders for short to long period of time. It has been positively noted that many of organisations for the purpose of effective decision-making process (Wang et al. 2013) are adopting integrated thinking approach. Thus, it can be said that many of the reporting entities for making the effective decision-making have emphasized the efforts of integrated reporting. This increases the comprehensive value towards the stakeholders of the company.
Conclusion:
To conclude with it is noteworthy to denote that the mid-tier Australian accouting firms must make the use of integrated reporting and implement the concept within the reporting and operational functions so that they can regulate their organisational business environment. From the above stated study it can be understood that integrated reporting plays vital role in stakeholder reporting. However, it involves expense and cost in preparation of integrated report but it enables organisation with long-term benefits. It can be concluded that the mid-term Australian organisation should invest in preparing and implementing integrated reporting within the firms since it offers additional benefits and income to the firms.
Though the integrated reporting approach enhances the interdependency between internal and external elements of the reporting entity, the holistic view of strategy, performance, governance and prospects needs to be translated more effectively for increasing the value optimization towards the shareholders. Therefore, it can be stated that the mid-tier Australian accounting firm should acknowledge the importance of integrated reporting framework for increasing the value proposition across all the stakeholders of the company. This recommended approach will also earn more potentiality of the clients in front of the stakeholders. In other words, the integrating report increases the comprehensive values to all investors of the company.
Reference list:
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Ahmed, R., 2016. Progress In Management Accounting Research And Zimmerman’s Conjectures (2001): WHERE ARE WE NOW?. Asia-Pacific Management Accounting Journal, 10(1).
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Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
DeFond, M. and Zhang, J., 2014. A review of archival auditing research. Journal of Accounting and Economics, 58(2), pp.275-326.
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