In the present report, an effort has been made to illustrate the role of the International Integrated Reporting Committee. For this purpose, the IIRC website and relevant accounting literature have been referred to. Subsequent to this an understanding is developed in respect of the importance that integrated reporting holds in respect of the comparability of the reports prepared, the usefulness of the report prepared, the quality of the report that has been prepared and the users of the financial report that has been prepared. The various principles of reporting like stakeholder’s relationships, materiality, conciseness, reliability, completeness, consistency and completeness will be compared with the findings of the CPA report (Scott 2015). The purpose that has been mentioned in respect of the financial reporting in the AASB or AASB will be compared with the objectives that have been stated in the international reporting framework and the general purpose financial reporting. In the last segment of the report, a comparison has been drawn with respect to four companies and the compliance of the same with the IR has been analyzed.
With reference to the IIRC website and relevant accounting literature, explain the role of the International Integrated Reporting Committee (IIRC)
The IIRC is one of the many global coalition that is comprised of various regulators, standard setters and the regulators and entities that are engaged in the accounting profession. The main objective and the role that has been bestowed upon the International Integrated Reporting Committee is the creation of a framework that is globally accepted and leads to the enhancement of the process of communication by the companies in respect of creation FO value in a fixed frame of time. The committee is focused on creating development in this respect by the various decagons that are being taken in the internationally accepted integrated reporting framework. The creation of this framework was aimed at ensuring that the companies carrying out their commercial activities are properly communicated with in respect of the way in which they can create value for their shareholders in the fixed period (Arnold and Kyle 2017). For affecting the next level of corporate reporting, the committee engages in proper communication in respect of these matters with the company.
The main intention or the interest of the shareholders is to get information that is capable of molding their economic and non-economic decisions that are taken by them in respect of the matters relating to their engagement with the company. For instance, the stakeholders concerned about the environmental implications of the company’s activates will be interested in getting the information related to the effects the entity has on the environment. A fixed pattern or design of annual report containing a fixed number of disclosures will not be adequate for the shareholders. The reason being the needs and expectations of the shareholders vary significantly depending upon the information that is required by them. The report that has been prepared by the CPA and other accounting literature bring in forefront the fact that the information that is being disclosed in the annual report of the company becomes the primary material for the research that is conducted by the stakeholders in respect of the company (Hoyle et al. 2015).
The direct engagement that is established between the shareholders and the company is the primary source of information for them. The interesting issue here is that the shareholders are in need of more information in respect of the information that has been given out by the management of the company for instance the points that have been considered for determining the prioritization of the information to be provided.
It is often seen that the integrated reports fail to cater to the needs of the shareholders of the company as well as other stakeholders like the ones concerned with the civic and environmental issues presented by the company. One of the main problems that are being faced by the shareholders is the lack of comparability of the integrated report that has been prepared by the entities (Ghani and Muhammad 2016).
Quality of reporting:
Significant variations have been found by the stakeholders of the company in respect of the quality that is being maintained by the companies in preparing the integrated reporting. As per the views of the shareholders there are some key points that should be mentioned in the report like the presence of significant and relevant case studies, failure to set targets that are going to be achieved in the future by the company and failure to establish the relevance of the stated matters (Hemmer and Labro 2016). The stakeholders of the company concerned with the environmental impact of its activities expressed concern in respect of the non-disclosure of important information in the annual reports of the company, like the amount of fossil fuel that has been used by the company and the various other smaller issues presented and faced by the company as highlights.
The most important aspect of the financial reports prepared by the entities is their ability to be useful in respect of the decision making process of the stakeholders. The shareholders of the company have presented mixed opinion about the usefulness of the reports that are being prepared by the entity (Weygandt et al. 2015). The integrated reporting was supposed to address the issues that are faced on a regular basis by the shareholders in respect of the decision making process and it must have to prove useful at the time of the decision making process of the entity.
The primary users of the integrated reports that are being presented by the company are the stakeholders of the company. The stakeholders of the company comprise of many participants like the shareholders of the company, the government and the various regulatory bodies that are operating within the country (Beams et al. 2017).
The report that has been prepared and presented by the CPA focusses on one of the significant aspects of the integrated accounting that is stakeholder relationships.
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Guiding principles |
Findings from CPA report |
Integrated reporting |
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Stakeholder relationships |
Stating stakeholder relationships |
Performance Business |
The findings of the CPA report suggest that the stakeholders of the company demand to be provided with such information that is material in nature or the ones that can influence their economic decisions (Libby 2017). Some of the examples of such information include carbine gas emission, social impact etc.
The CPA report states that the information must be relevant as well as concise to facilitate the understanding. As per the report the conciseness of the financial statements that have been prepared by the entity is important because loads of information distracts the shareholders of the company from important information (Campbell et al. 2017).
The reliability of the information must be increased by adhering to all the laws and regulations applicable on the company. For the purpose of increasing the reliability of the information that has been provided the company must ensure that the information that has been provided is free from misstatement.
The information that has been disclosed must be consistent and should be comparable with all the other entities. For making the information consistent and comparable the company must adopt the same method for the same item consistently over a period of time (Warren et al. 2015).
The definition and objective of the International Framework with the definition and objective of general purpose financial reporting as contained in the AASB or AASB conceptual framework
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Definition and objective of the International Framework |
Definition and objective of General purpose financial reporting as contained in the AASB or AASB conceptual framework |
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Definition- this is a report that helps in the provision of material information in respect of the entity’s strategy, performance and governance. |
Definition- the objectives and the concepts that are being used for general purpose financial reporting are being explained by conceptual framework. |
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Objectives- the establishment of the guiding principles and certain elements of the financial statements. |
Objective- Help the preparers in development of the accounting principles in case no standard is being made applicable to specific transaction. |
Identification of the users of an integrated report and identification of the users of general purpose financial reporting
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Identification of the users of an integrated report |
Identification of the users of general purpose financial reporting |
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The identification of the users will enable the entity to provide such information as is relevant for them |
The primary users of this reporting are the long-term investor and the lenders of the company. |
Integrated report concept of materiality and the AASB conceptual framework concept of materiality
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Integrated report concept of materiality |
AASB conceptual framework concept of materiality |
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It requires proper disclosure in respect of the matters that can affect the ability of the business in its creation of value for its customers. |
If the omission of any information can affect the decision of the stakeholders then it will be considered material. |
Integrated report concepts of reliability, completeness, consistency and comparability and the AASB conceptual framework concepts of reliability, completeness, consistency and comparability
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Integrated concepts on reliability, completeness, consistency and comparability |
AASB conceptual framework concepts of reliability, completeness, consistency and comparability |
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Reliability and completeness- Completeness- all the material information must be present in the report. |
Reliability- the information must be free from material error for being considered reliable. Completeness- There should be no information that is not disclosed to the stakeholders. |
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Consistency and comparability-. Consistency-). The policy once adopted must be followed continuously Comparability- the information varies from business to business as the way of creating value I unique. |
Consistency-. The same method must be used for same items for a period. Comparability-. It should be one of the goal of the entity. It must ensure to make the data comparable. |
Comparing and contrasting the integrated reports of four companies that appears in the examples database of the integrated reporting website with respect to any four of the IR Guiding Principles
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Integrated reports of four companies |
IR Guiding Principles |
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HULAMIN LTD: The company focuses on resolving the issues with the shareholders of the company in the most effective and the efficient way possible. . CEMEX All the changes in the entity are being informed to the shareholders of the company to build better relationships. MT GROUP: The group informs the details fo the operations of the company as the investors have invested their money in the entity. . DSM: The company is focusing on building cordial relationship with the stakeholders of the company. . |
Stakeholder relationships: The integrated reporting encompasses customer stakeholder relationship too. . |
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HULAMIN LTD: The company uses the materiality factor to disclose both the qualitative and quantitative information to the stakeholders of the company. There are several changes made by the company in the content of the information that is disclosed by the company for the enhancement of the information and making the figures comparable. . CEMEX: For ensuring that the financial statements of the company is not at misstated or contains all the relevant information, it discloses all the relevant information in respect of the financial statements. . MT GROUP: For providing the users with an overall view of the performance and the position of the company, it ensures that the company is disclosing all the relevant information properly and objectively. . DSM The company focuses on providing the shareholders of the company with the material factors of the company and for that, the disclosures relating to them are being made in the financial statement of the company. |
Materiality: The term materiality means the significance the information holds in respect of the decision making process of the stakeholders of the company. |
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HULAMIN LTD: The company believes in the adoption of an approach that is consistent in nature and capable of meeting the needs of all the stakeholders of the company. For ensuring the comparability of the information, the company compares the data with the comparative statements that have been recorded for the same period. CEMEX: The company is trying to provide the shareholders of the company with such information that is consistent and comparable in nature. MT GROUP: The users of the financial statements of the company must understand that the concepts of consistency and comparability are very subjective and the company ensures that adequate information is being provided to the users for the purpose of comparison. DSM. Proper focus is being given by the company for providing the information to its users that are consistent in nature and the information is comparable with the other corporate entities for the specific period. |
Consistency and comparability: Consistency means that the information provided by the companies is comparable within the companies that are operating in the same industry. |
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HULAMIN LTD . The company is determined to provide the users with such information that is free from any distortion or material misstatement. The responsibility of the overlooking the internal control systems was given to the directors of the company. relatively better reliance are being given by the controls that are being present in the company’s framework but the same fail to provide absolute assurance in respect of the matters that have been stated out in the financial statements. The company undertakes to maintain accountability in respect of many elements of the financial statements like the accountability of the assets that have been recorded by the entity. In addition to this the detection of the material misstatement and errors by the entity. CEMEX Providing the users with useful, reliable and complete information is the focus of the company. MT GROUP’ The group has ensured that proper emphasis is being given in respect of providing reliable and complete information to the users. DSM The company focusses on delivery of complete and reliable information to the users of the entity. |
Reliability and completeness This refers to the process of communicating both the good news and the bad news to the shareholders relating to the entity. |
From the above discussion it is established that the relevance of the IR guiding principles in the process of understanding the various activities that are being performed by the company for the purpose of conducting the business of the entity. Stakeholder relationships, materiality, reliability and completeness, consistency and comparability are the four principles that have been chosen as the four guiding principles (Maynard 2017). By the discussion of the various aspects of the four companies i.e. Hula in Ltd, CEMEX, MT group and DSM the four principles have been explained in detail. For relating to the principles of the IR guidelines, the integrated reports prepared by these four companies have been considered.
The process of gathering of the information is one of the factors that had been noted for explaining the similarities and the differences. The process of integrated reporting framework stresses the importance of getting the requisite information. For attracting the stakeholders of the company and for maintaining healthy relationship with them it is essential for the company to disclose all the relevant information that might help them in the decision making process. Every stakeholder of the company has the right to be acquainted with any change that has occurred within the entity. If the company engages in the withholding of the information related to the misstatement or fraud, being committed by the it can lead to distortion of the information that is being provided to the stakeholders and in turn negatively affect the image of the company (Wen 2017). The company also give due attention towards communicating well with its stakeholders and maintain good relationships with them at the same time.
Conclusion
The conclusion that can be drawn from the above discussion is that the integrated accounts help the stakeholders of the company to get the requisite information. The mainstream business practices are being aligned by the companies with process of value creation for the shareholders by making use of the integrated reporting. The comparison that is being drawn between the various companies in the report has highlighted the fact the entities must ensure that all the requisite information are being disclosed to the shareholders of the company for the purpose of aiding them to indulge in the process of decision making. For the long-term existence and the sustenance of the business, it is crucial the proper communication is being established with the shareholders of the company and proper relationship is being maintained with them.
References
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Arnold, G. and Kyle, S., 2017. Intermediate Financial Accounting Volume 2. Lyryx.
Beams, F.A., Brozovsky, J.A. and Shoulders, C.D., 2017. Advanced accounting. Pearson.
Campbell, J.L., Khan, U. and Pierce, S., 2017. The effect of mandatory disclosure on market inefficiencies: Evidence from Statement of Financial Accounting Standard Number 161.
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Ghani, E.K. and Muhammad, K., 2016. The Effect of Freemind on Students’ Performance in an Advanced Financial Accounting Course. International Journal of Academic Research in Business and Social Sciences, 6(7), pp.262-275.
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Oldroyd, D., Tyson, T.N. and Fleischman, R.K., 2015. American ideology, socialism and financial accounting theory: A counter view. Critical Perspectives on Accounting, 27, pp.209-218.
Romer, C.D. and Romer, D.H., 2015. New evidence on the impact of financial crises in advanced countries (No. w21021). National Bureau of Economic Research.
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