Financial Accounting Theory
Assessment overview
Integrated reporting is an innovative approach to corporate reporting which is gradually gaining international recognition. The International Integrated Reporting Committee (IIRC), which is the peak body driving the integrated reporting agenda internationally, explains that integrated reporting is about "communicating the full range of factors that materially affect the ability of an organization to create value over time" (IIRC, 2013a, p.8). This requires either preparing one comprehensive report or drawing links to standalone financial and sustainability reports, demonstrating how the firm interacts with the external environment and the key resources a firm depends on and is affected by to create value over the short-, medium- and long-term (IIRC, 2013a). According to the IIRC "an integrated report is a concise communication about how an organization's strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value in the short, medium and long term." (International Integrated Reporting Council, 2013b, p.1)
Assessment details
Assume that you are working for a consulting firm that specialises in implementing integrated reporting in large listed companies. You are required to write a report to the Chief Executive Officer of a large ASX listed company in Australia explaining how a move from traditional corporate reporting to integrating reporting can benefit the company and its stakeholders. Your report should specifically address the following:
1. Limitations of traditional corporate reporting. [note traditional corporate reporting includes the perpetration of separate financial reports, sustainability and other reports].
2. What is integrated reporting and how integrated reporting can rectify the limitations of traditional corporate reporting.
3. How does integrated reporting differ from other forms of non-financial reporting (e.g. sustainability reporting, environmental reporting, intellectual capital reporting). [Note: In particular, demonstrate the conceptual differences between integrated reporting and other forms of reporting such as sustainability reporting]
4. Advantages and disadvantages (or costs and benefits) associated with integrated reporting, and theoretically informed arguments as to how the company may benefit, in the balance, by adopting integrated reporting. (Note: refer to theories in accounting that explain why companies may adopt integrated reporting and based on those theories predict how the company might benefit by adopting integrated reporting).
5. How relevant is integrated reporting to various stakeholder groups of the chosen company (e.g., retail investors, institutional investors, lenders, environmental lobby groups, customers etc.)