Long-term Value Creation Focus in Integrated Reporting Framework is a Positive Step, Says ACCA
Plans for an integrated reporting framework are a step in the right direction but need to be developed further, says ACCA (the Association of Chartered Certified Accountants) in its response to the International Integrated Reporting Council's (IIRC) consultation about the way ahead for IR.
ACCA says its own research, "Understanding Investors: Directions for Corporate Reporting," has shown that many stakeholders would welcome integrated reporting, seeing in it a number of benefits such as a focus on the long term, including a better understanding of long-term risks to the business model and wider insights into how corporate value is created, with the added benefit of influencing the way that companies approach their strategic planning and their operational management practices.
Richard Martin, ACCA head of corporate reporting, said, "The plans for IR are right in principle and there is a significant opportunity for the quality of corporate reporting to be improved by giving to investors and others a more complete view of the entity and its prospects over a longer time-frame than is usually covered in traditional corporate reporting."
"However, there remain gaps in the framework that need to be fleshed out. The framework still needs to be fully field-tested, and it would help prospective preparers greatly if IIRC were able to provide case studies of best practice across a range of different organisations. These would also help promote adoption and aid compliance in an area where there is much enthusiasm but little awareness."
"A grey area still exists with regard to the relationship between the integrated report and other forms of reporting, such as statutory narrative reports and sustainability reports. Duplication must be avoided and the IR needs to find a suitable accommodation with those other reporting requirements. IIRC should work with other regulators and standard setters to iron out any problems in this area that could emerge as barriers to adopting IR."
ACCA said the IIRC framework has evolved quickly from the initial concept and has benefitted from contributions from many stakeholder groups. In its submission,
ACCA welcomed the progress of the project and noted that there appears to be broad support in many countries for the concept of IR. However, ACCA said the outline framework needs to be padded out. The global accountancy body has set out in its submission a number of general and technical points that it says must be effectively addressed.
ACCA, which itself took part in the IIRC's IR pilot programme and incorporated the concepts of integrated reporting in the production of its own integrated report for the first time last year, says that IIRC has to get the balance right within the IR framework for it to be effective.
"One specific element of the draft framework that needs to be addressed is the extent to which preparers should aim to keep their reports to a certain size. While the focus on keeping reports concise is important, it shouldn't override the need for the report to be sufficiently informative to reflect the complexity of the affairs of many reporting organisations and the range of information needs of stakeholders, including providers of financial capital," says Martin.
Martin adds that the framework also needs to contain more informed guidance and good examples to strike the right balance between transparency in reporting on the one hand and commercial sensitivity and exposure to risks in respect of forward-looking information on the other.