17 July 2013

ACCA: Long-term value creation focus in integrated reporting framework is a positive step

In its response to the IIRC's consultation on the way ahead for integrated reporting, ACCA says that the IIRC framework is on the right path but some areas need to be fleshed out. Investors will benefit from the move towards integrated reporting.

In its response to the IIRC consultation on the integrated reporting framework, 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 integrated reporting 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 integrated reporting 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 integrated reporting."

ACCA said the IIRC framework has evolved quickly from the initial concept and has benefited 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 integrated reporting. 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.

Balancing act

ACCA, which itself took part in the IIRC’s integrated repoting 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 integrated reporting framework for it to be effective.  

Richard Martin said: "ACCA has had the benefit of first-hand experience of integrated reporting in practice, so we have a good view of the challenges that the IIRC and prospective preparers face. 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.

"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."

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