Integrated Reporting Flashcards
(28 cards)
What is integrated reporting:
Reporting with the aim to align capital allocation, corporate behaviour, improve financial stability and promote sustainable development.
Key drivers behind Integrated Reporting:
- Global reporting trends
- New technology
- Transparency, inclusiveness and trust
- Materiality
- Stakeholder engagement - driving reputation management
- Avoiding short-termism
- A new value paradigm
The 6 Capitals of Integrated Reporting:
1) Financial capital
2) Manufactured capital
3) Intellectual capital
4) Human capital
5) Social and relationship capital
6) Nature capital
Barriers to Integrated Thinking:
1) Bureaucratic processes.
2) Siloed, short-term thinking and a desire to protect territory.
3) Internal breakdowns in trust and an unwillingness to collaborate.
4) Inability to convert large sets of data.
5) Decision-making skills no longer fit for purpose
6) Unreliable information, especially involving sustainability related financial information
7) Poor understanding of the relationships between the capitals
8) Inappropriate KPIs for judging both organisation and executive performance and remuneration.
9) Asset managers’ short-term focus and inability to make balanced assessments that unfairly penalise some organisations.
What is integrated reporting:
It’s the umbrella under which the organisation’s entire communications and core messages sit, including a corporate report that embraces full financial and sustainability-related financial performance information, like:
1) Financial statements
2) Business review
3) Earnings call
4) Investor roadshows
5) Governance filings
6) Sustainability report
7) Surveys
8) Press releases
9) Chief executive speeches
Objectives of integrated reporting: (6)
1) Improving the quality of information available to the providers of financial capital
2) Enabling a more efficient and effective allocation of capital
3) Proving a more cohesive a d streamlined approach to corporate reporting
4) Drawing on multiple sources of information to highlight a more complete range of factors that materially affect an organisation’s ability to create value over time.
5) Improving accountability and stewardship for a broad range of capitals and an understanding of the integrated reporting interdependencies
6) Supporting integrated thinking, decisions, and actions focussed on value creation.
Barriers of intregrated reporting: (4)
- Moving away from legacy systems that focus on traditional financial measures
- Overcoming concerns that integrated reporting requires more effort
- Addressing the lack of concensus regarding what integrated reporting involves
- Potential confusion around the relationship of an integrated reporting, while also meeting other reporting requirements.
IFRS Foundation definition of an integrated report:
A concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation, preservation, or erosion of value over the short, medium and long term.
Two statements that must be included in an Integrated Report:
1) Acknowledgement of responsibility to ensure the integrity of the report.
2) Opinion or conclusion about whether, or the extend to which, the integrated report is presented in accordance with the Intrgrated Reporting Framework.
It is also encouraged to disclose the process followed to prepare and present the integrated report.
Content elements of an Integrated Report:
- Organisational overview and external environment
- Governance
- Business model
- Risks and opportunities
- Strategy and resource allocation
- Performance
- Outlook (future challenges and implications)
- Basis of preparation and presentation.
What is sustainability?
Meeting the needs of the present without compromising the future.
This incorporates environmental, social and economic factors.
What to take into account with regards to sustainability, as an organisation:
- Impact on the environment
- Impact on society
- The impact of the environment and society on the organisations performance and prospects.
What is the objective of IFRS S1:
Disclosure of information by all applicable entities, about sustainability-related risks and opportunities that is useful to primary users of general-purpose financial reports in making decisions relating to providing resources to the entity.
Who are Primary Users under IFRS S1:
- Lenders, creditors (trade suppliers), investors, potential investors.
What is materiality:
An item is considered material if omitting, misstating, or obscuring the information could be reasonably expected to influence investor decisions.
To whom does IFRS S1 apply:
Entities subject to a regulatory environment to follow IFRS- sustainability-related financial disclosures.
What is SRRO:
Sustainability-Related Risks and Opportunities
4 areas of disclosure under IFRS S1:
1) Governance processes used to monitor, manage and over SRRO.
2) Company’s strategy for managing SRRO.
3) Risk management processes used to identity, assess, prioritise and monitor SRRO.
4) Metrics used to monitor performance in relation to SRRO.
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Integrated Reporting
What makes up an Integrated Report:
7 guiding principles and
8 content elements
What does IFRS S2 encompass:
Climate-related disclosures, like climate related risks and opportunities
What needs to be disclosed under IFRs S2:
- an entity’s cashflow
- access to finance, or
- cost of capital over the short, medium and long term.
The disclosures should cover the same period, as the length of the reporting period.
