Chapter 18 Integrated reporting IMAS 1 Objective of

Chapter 18 Integrated reporting IMAS 1

Objective of financial reporting v. Provide information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity (efficient allocation of resources) v. Directors should show they are managing financial capital and non financial capital IMAS 2

<IR> v. Integrated report demonstrates the linkages between an organisation’s § Strategy § Governance § Financial perf § social. , environmental and economic context in which the entity operates *** These linkages (connections)aid organisations: § to take more sustainable decisions § Enables stakeholders to understand how an organisation is really performing IMAS 3

<IR> v<IR> - looks at how value is created and preserved in an organisation in the short, medium and long term **Wide range of factors determine the value of an organisation (financial and non-financial factors) – Integrated thinking v. Primary purpose – to explain to providers of financial capital how an entity creates value IMAS 4

Integrated thinking v. Active consideration by an organisation of: § Relationship between various operating functional units and § Capitals that the organisation uses or affects IMAS 5

Integrated Reporting Organisational perspective v. Opportunity to articulate their strategy (giving the market an understanding of their strategy) Investor perspective v. Investors need to understand how strategy is being pursued to create value over time IMAS 6

IIRC Mission – create the globally accepted international framework that elicits from the organisation material information about their v. Strategy v. Governance v. Performance and, v. Prospects In a clear, concise and comparable format IMAS 7

Objective of IIRC v. Establish guiding principles and content elements that govern the overall content of an integrated reporting v. Explain the fundamental concepts that underpin integrated reports IMAS 8

Purpose of integrated reporting v. Explain to providers of financial capital how an entity creates value over time Objectives if IR: v. Improve quality of information to providers of financial capital v. Provide more cohesive and efficient approach to corporate reporting v. Enhance accountability and stewardship for the broad base of capitals v. Support integrated thinking, decision making and actions that focus on value creation over time IMAS 9

Fundamental concepts for IR v. Value creation for the organisation and for others v. The value creation process v. The capitals IMAS 10

Benefits and limitations of Integrated reporting Benefits Limitations Increase in the level of forward-looking information Potential for bias as reports are not required to be audited Disclosure of new previously undisclosed information Reluctance to disclose information for fear of losing competitive advantages Improve stakeholder reputation due to increased transparency May provide too much information for users to digest Improved efficiency within the org IMAS 11

Benefits and limitations of Integrated reporting framework Benefits Limitations Provide guidance for preparers as to contents of the IR Principle based rather than rule based leads to increased subjectivity Being principle based enables the application of the framework by entities operating in any industry Difficult to compare across different entities and sectors Increase user familiarity with the terminology and structure used within the IR Requires experience staff to apply concepts properly IMAS 12