Champions of integrated reporting say we need it because we’re now living in a different world and the way companies present information has failed to keep up with the changes. The balance sheet, they say, does not tell the full story of globalisation, innovation and intellectual property, environmental issues and the organisation’s ability to recruit and keep the best and brightest.
But with the growth of integrated reporting appearing almost inevitable, the challenge for accountants and rule-makers is to ensure it does not create a compliance burden – particularly for small and medium-sized businesses.
The International Integrated Reporting Council (IIRC) has put up a model for integrated reporting. That model “brings together material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates,” said the IIRC in a discussion paper last year. It expects to have a global framework for integrated reporting in place by the end of 2013.
There is an expectation that some Australian companies will adopt this framework in 2014, though it will not be a statutory requirement. A few jurisdictions are moving faster; South Africa, for example, has made it mandatory.
Changing nature of reports
Andrew Conway, chief executive officer of the IPA, says the rise of integrated reporting reflects changes in what users want from annual reports.
“The users of the annual report have sharpened their focus on areas beyond the financial statement into areas of more general value creation,” he says. “Those issues are becoming front of mind for users of the reports.
“The challenge is that, when you look at the way traditional information is presented in annual reports, there’s a general acceptance that annual reports have become cumbersome. More is not always better in terms of content. It’s really an issue of relevance and also the way it’s presented.”
Three Australian companies – NAB, Stockland and bankmecu – are now piloting integrated reporting. Their findings and tweaks to the system will shape integrated reporting when it is introduced in Australia.
