International Integrated Reporting Council †MyAssignmenthelp.com

Question: Discuss about the International Integrated Reporting Council. Answer: Introduction: The report is prepared to demonstrate critical evaluation of usefulness of integrated reporting. Integrated reporting intends to promote corporate strategy by combining the reporting of non-financial and financial measures. Evaluation of integrated reporting usefulness to organization has been done by researching and evaluating journal articles relating to integrated reporting. The article that would form the basis of present report is stakeholder perspective from South Africa.It is the first country requiring integrated reporting on wider scale (Adams 2015).An integrated report is a platform of accurate communication about performance, strategy, performance and governance of organization that leads to creation of medium, short and long-term value. Integrate reporting has been made a requirement for all listed companies by Johannesburg securities exchange. It is predicted by analyst that there exist strong correlation between ability of business and its resilience to create value in short, long and medium term. In the initial phase with the introduction of integrated reporting, it was intended to communicate non-financial and financial information to range of stakeholders, but now it is more focused on investors of organization. Several ranges of benefits are provided by integrated reporting to providers of investment decisions or capita allocation and shareholders. The purpose of launching framework of integrated reporting is to reflect genuine challenges faced by organizations and making reporting by corporate more grounded and therefore they are considered useful to investors. Providers of financial capital are provided information about how value over time is created by organization (Barboz et al. 2013). With regard to adoption if global integrated reporting, South Africa has been one of leading countries. Call for creation of integrated reporting in South Africa evolved from inseparability of sustainability, strategy, performance and governance. A greater context of performance indicators should be provided by integrated reporting and such reporting standard should be capable of clarifying how relevant financial information fits into long term strategy of business and ultimately providing range of benefits of stakeholders. The continued development of South Africa is driven by stakeholder approach of King Reports. The introduction of new reporting standard has led to researcher focusing on well companies in nation is focusing on presenting their financial information in an integrated manner (Crowther 2016). However, companies witnessed various obstacles in releasing their integrated reporting despite of making good job in creating accessibility to such reporting. Such obstacles comp rised of few published example, limited guidance and eruption in uncertainty from potentially on conflicting guidance. Several researches in South Africa have gained little information whether such reporting standard have gained an understanding of financial information to stakeholders and how they are communicated to them. The role of early adopter of integrated reporting that is played by South Africa also comes with several challenges and it also depicts the perception of general public of financial reporting in country (Brown and Dillard 2014). It was inferred from some of research that investors do not rely much on using integrated reporting to make their investment decisions. A number of relevant an informed questions had been raised in the special edition of Auditing, Accounting and Accountability journal. A research agenda was laid out from perspective of accounting. It also involved comments on growing academic interest in academic research on integrated reporting and gaining of considerable prominence in since the IIRC (International Integrated reporting council) has been formed in 2010 (Zhou et al. 2017). From the current literature on integrated reporting, a number of themes can be identified. While integrating the political nature of standard setting, the emergence of integrated reporting was highlighted as fragile and complex relationship between the parties to the manifestation of its framework. It has been argued by authors that still prevails uncertainty in positioning of integrated reporting in the corporate reporting (de Villiers et al. 2014). South Africa has led the field in total number of integrated reporting that is being registered in database of GRI. It was because of requirement of all listed companies on their stock exchange to produce integrated report and because of mandating of King III. In recent years, some of the close runner of South Africa in publishing integrated report includes Brazil, Australia and Netherland (Dumay et al. 2016). The information based on database of GRI depicts some of sectors that are leading in experimenting with integrated reporting are energy utilities, financial services, mining and energy. Some other sectors would have perceived to double by the volume of financial services integrated report. Higher volume of financial services publishing self declared integrated reports are based in Australia, South Africa and Brazil and low number are based on USA and UK (Flower 2015). Results are more distributed in terms of utilities and energy. Companies in different countries have expressed their intention of publishing integrated reports because of number of reasons and they are listed below: Integration of financial report and corporate sustainability report in one single document that depicts cohesion between financial, operational and social actions. Integrated reporting intends to improve information quality that is available to financial capital providers enabling them to make a productive and efficient capital allocation. It seeks to promote understanding interdependencies between broad base of capitals such as manufactured, financial, social, human, and natural and relationship along with enhancing their stewardship and accountability. It assist organizations in building practice of financial, environmental, social, governance and sustainability reporting and making them well equipped with managing their brand, operations and stakeholders reputation and dealing with management of such risks that would lead to comprising of long-term sustainability of organization (Fras-Aceituno et al. 2013). Promoting an efficient and consistent approach to corporate reporting and providing platform for communicating full range of factors by which the organization ability to create value over time is affected. Meeting needs of stakeholders, avoiding of internal silos, strategic and natural fit and providing stakeholders with full information of reporting. Companies have been producing integrated report as it combines financial performance with information and data on social, environment and governance performance. Integrated reporting depicts information on non-financial key performance indicators (Garca?Snchez et al. 2017). Combing financial and non-financial performance along with sustainability measures undertaken by different companies. Perspective of integrated reporting: The concept of integrated reporting arrived due to recognition of importance of non-financial information to investors. Focus of integrated reporting for the last few years have been relied on importance of value creation through six capitals. Another capital that is intrinsic to creation of value is human, intellectual, natural and social relationship. Objective of such report is to provide performance information of companies to investors in an integrated way and providing more detailed information that are of particular interest (Stubbs and Higgins 2014). It can also provide analytic tool for exploring relationship between nonfinancial and financial using data from other sources and data provided by company along with comparing the performance of company with that of their competitors. There is a growing awareness among organizations of different countries as indicated by working group of international auditing and assurance board as they are seeking to broaden their base to provi de stakeholders with wide range of information (Haller and van Staden 2014). It has been ascertained by overview of feedback of IIRC companies internal system for handling integrated report is far less mature as against financial information. It has been claimed by some authors that integrated reporting represents a striking and new feature of corporate reporting concerning future relevance and value of such reporting. Advocating of integrated reporting is done in positive for re configuring and advancing legitimacy of corporate reporting by making use of interrelationship in their formulation. However, there are some critical issue facing such reporting standard in practice is its use by investors and sustainable demand. This has been consistent with claim that such reporting is designed for financial capital providers driven by prevailing market demand. Long-term orientation are adopted by companies in decision making process by practicing integrated reporting as it helps in attr acting long-term base of shareholders (Moolman et al. 2016). The platform was supported as it encompassed sustainability with attracting business value investors through long-term orientation. Nonetheless, serious concerns have been raised by conducting number of studies about presumed positioning of integrated reporting as a vehicle for conveying information and materiality to stakeholders. Moreover, it has been claimed that primary focus of IR is on creating investors value as against to creating value for society has led to abandoning sustainability accountability. Such reporting does not have any material interest to investors as the firms practicing such reporting process are not required to report about harms that are inflicted in entities. Due to lack of prescription in the framework of IR, agendas of reporting might get dominated by powerful entities. In order to facilitate a more meaningful sustainability reporting, there is a need for engaging vigorous sustainability techn iques. IR has the possibility of becoming legitimate practice by organizations due to its refection on capturing of business in spite of stakeholder and issues reconciliation (Macias and Farfan 2017). It is believed by supporters of IR that initiative has ability of changing norms and culture of reporting process. Investors and companies would be influenced in a way that repercussion of negative and positive externalities would be considered by them in association with operating decisions and corporate investment (Roth 2014). Quality of information and equity capital cost: The cost of equity capital is directly and indirectly influenced by financial information. A voluntary disclosure theory to non-financial information has been extended by researcher with increasing trend of supplementing non-financial with financial information. Negative relations have been documented between cost of equity capital and disclosures of corporate social responsibility and behaviors of investors to some extent are influenced by performance yield and disclosure of non-financial information. Capital allocation decisions of investors are changed based on informations that are contained in an integrated report. Organizations aligning their report within the framework of integrated reporting have been found to be associated with lower equity cost of capital. Organizations producing high quality of integrated report have the benefits of reduced equity capital cost. Investors are benefitted incrementally due to the platform of integrated reporting compared to current reporting framework (Stent and Dowler 2015). However, integrated reporting does not affect capital market as it intends to improve the environment of information of reporting companies. Sustainability reporting and integrated reporting: There exist strong relation between sustainability reporting and integrated reporting and GRI is considered as key driver in the process. One of the important aspects of performance of company is sustainability reporting and it forms a crucial part of integrated reporting. The core of integrated reporting is qualitative and quantitative non-financial information and importance of such information is provided by sustainability reporting. However, there are other views that do not link sustainability with integrated reporting as it is perceived that former is for stakeholders and latter is only for shareholders and investors. Implications of sustainability into integrated reporting would vary country by country resulting from factors such as difference in filing process and variations in regulations of respective countries. Trade off exist between value creation and sustainability performance of organization. In relation to this, economic performance of business and its impact on socie ty for sustaining its value in future should be the core part of integrated reporting. Users of reports are required to understand the terms as they are discursive and speculative in nature. In the context of emergence of integrated reporting, both sustainability and financial reporting have been subjected to misunderstanding (Owen 2013). It was believed that development of integrated reporting would replace sustainability reporting. However, measures of six capitals involved in integrated reporting present one of considerable challenge. For increasing level of familiarity associated with IR, it should be established more firmly with the financial and non financial users along with equity investors remit. It is required to clearly signaled to users of such report about corporate reporting uniqueness reflecting relevance of needs of capital, value creation, strategy and risks. Market benefits of IR are required to be established through lower risk premium and lower equity cost of capital. Greater incentives for companies to adopt IR would come by clearly establishing value relevance benefits. Buy side fund managers should be engaged at greater level for stimulating demand of long-term metrics of value creation by sell side analysts (Soyka 2013). Increased use and demand of IR would be facilitated a gradual shift towards an approach that is more rounded for making investment decisions. Respective views of equity analysts and fund managers have revealed that there were several benefits of integrated reporting. There were notable views on lack of familiarity with IR irrespective of various benefits. Several issues were faced by capital market participants regarding seeking information via such reporting standard. IR intends to explain to providers of financial capital and its relevance to equity market users was observed as clear divergence as it was short-term orientation that stemmed from behavior and culture of capital market (Trbucq and Magnaghi 2017). They viewed IR as remote as it focuses on short-term. Secondly, adopters of IR had lack of critical mass despite the support of institution in its constitutional phase. Challenges exist from buy side perspective in culture of market and it calls for increased need for external and internal disclosures. Another key challenge is faced in terms of lack of sufficiently disclosure and use of such reporting both with ext ernal clients and within organization. Fundamental challenge faced by IR comes from short-term and long-term orientation, incentives structure and culture of capital market (Melloni 2015). For IR becoming market driven and sustainable, it is essential that these challenges are met. Conclusion: Companies have been embracing integrated report in the past few years. The approach of integrated reporting comprising of non-financial and financial information brings to organization not only financial capital inside and outside organization but also natural and social capital. Integrated reporting phenomenon is making its mark for brining internal change within organization as well as a tool of external communication. In light of this, it is required by business practitioners and academics to continue working in tandem for analyzing they impact of this new approach of reporting on strategies of organization. There is requirement of explaining six capitals of IR in better way in an attempt to remove jargon that is associated with integrated reporting approach. Barriers to use and engagement with integrated reporting would disappear if users are able to understand capital. The challenge of culture of market needs to be overcome for realizing the potential of integrated reporting. Ac ross different sectors all around the world, integrated reporting is regarded as subject of much experimentation. Embedding together both financial and non financial informations depicts a more sophisticated interlayering of information to its users. References list: Adams, C.A., 2015. The international integrated reporting council: a call to action. Critical Perspectives on Accounting, 27, pp.23-28. Barboza, P., Vaillant, L., Mawudeku, A., Nelson, N.P., Hartley, D.M., Madoff, L.C., Linge, J.P., Collier, N., Brownstein, J.S., Yangarber, R. and Astagneau, P., 2013. Evaluation of epidemic intelligence systems integrated in the early alerting and reporting project for the detection of A/H5N1 influenza events. PLoS One, 8(3), p.e57252. Brown, J. and Dillard, J., 2014. Integrated reporting: On the need for broadening out and opening up. Accounting, Auditing Accountability Journal, 27(7), pp.1120-1156. Crowther, D., 2016. A social critique of corporate reporting: Semiotics and web-based integrated reporting. Routledge. de Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing Accountability Journal, 27(7), pp.1042-1067. Dumay, J., Bernardi, C., Guthrie, J. and Demartini, P., 2016, September. Integrated reporting: a structured literature review. In Accounting Forum (Vol. 40, No. 3, pp. 166-185). Elsevier. Flower, J., 2015. The international integrated reporting council: a story of failure. Critical Perspectives on Accounting, 27, pp.1-17. Fras-Aceituno, J.V., Rodrguez-Ariza, L. and Garca-Snchez, I.M., 2013. Is integrated reporting determined by a country's legal system? An exploratory study. Journal of cleaner production, 44, pp.45-55. Garca?Snchez, I.M. and Noguera?Gmez, L., 2017. Integrated Reporting and Stakeholder Engagement: The Effect on Information Asymmetry. Corporate Social Responsibility and Environmental Management. Haller, A. and van Staden, C., 2014. The value added statementan appropriate instrument for Integrated Reporting.Accounting, Auditing Accountability Journal,27(7), pp.1190-1216. Higgins, C., Stubbs, W. and Love, T., 2014. Walking the talk (s): Organisational narratives of integrated reporting.Accounting, Auditing Accountability Journal,27(7), pp.1090-1119. Macias, H.A. and Farfan-Lievano, A., 2017. Integrated reporting as a strategy for firm growth: Multiple case study in Colombia. Meditari Accountancy Research, (just-accepted), pp.00-00. Melloni, G., 2015. Intellectual capital disclosure in integrated reporting: an impression management analysis.Journal of Intellectual Capital,16(3), pp.661-680. Moolman, J., Oberholzer, M. and Steyn, M., 2016. The effect of integrated reporting on integrated thinking between risk, opportunity and strategy and the disclosure of risks and opportunities. Southern African Business Review, 20(1), pp.600-627. Owen, G., 2013. Integrated reporting: A review of developments and their implications for the accounting curriculum. Accounting Education, 22(4), pp.340-356. Roth, H.P., 2014. Is integrated reporting in the future?. The CPA Journal, 84(3), p.62. Soyka, P.A., 2013. The International Integrated Reporting Council (IIRC) integrated reporting framework: toward better sustainability reporting and (way) beyond. Environmental Quality Management, 23(2), pp.1-14. Stent, W. and Dowler, T., 2015. Early assessments of the gap between integrated reporting and current corporate reporting. Meditari Accountancy Research, 23(1), pp.92-117. Stubbs, W. and Higgins, C., 2014. Integrated reporting and internal mechanisms of change. Accounting, Auditing Accountability Journal, 27(7), pp.1068-1089. Trbucq, S. and Magnaghi, E., 2017. Using the EFQM excellence model for integrated reporting: A qualitative exploration and evaluation. Research in International Business and Finance, 42, pp.522-531. Van Staden, C. and Wild, S., 2013. Integrated reporting: An initial analysis of early reporters. In Massey University Accounting Research Seminar, Auckland Zhou, S., Simnett, R. and Green, W., 2017. Does integrated reporting matter to the capital market?. Abacus, 53(1), pp.94-132