‘Time to recognise value of integrated reporting’

The development of integrated reporting is set to become one of the most valuable assets for the business world.

Why? Because it will give a much clearer picture of an organisation’s activities and performance. It will also facilitate the move towards business sustainability.

As we all know, the purpose of corporate reporting is to assist in the effective functioning of the market economy by enabling shareholders, investors and other stakeholders to assess the overall performance of a business and establish its present and future value.

In addition, the dynamic of the corporate reporting system, in part, determines the ability of regulators, auditors and other parties to provide the necessary checks and balances over the business ecosystem that is needed to ensure its health and sustainability.

The reporting model must move with the times if it is to remain relevant. The business world is developing at breakneck speed and greater demands are being placed on it by regulators and shifts in public opinion.

CIMA has played an active part in the development of corporate reporting over a number of years through our involvement with the Report Leadership initiative, the Operating and Financial Review in the UK, the International Accounting Standards Board’s Management Commentary guidance, the UK Financial Reporting Council’s Cut the Clutter project, the Tomorrow’s Corporate Reporting project and the latest proposals from the UK government’s Department for Business Innovation and Skills.

With such strong credentials, it is logical that CIMA has taken a place on a pilot programme initiated by the recently formed International Integrated Reporting Council (IIRC), a cross-section of leaders from the corporate, regulatory, academic and standard-setting sectors.

The programme offers a select group of companies the opportunity to road- test the principles and practicalities of integrated reporting.

The findings will then be used to support a reporting framework that is relevant to the needs of business today. But what is integrated reporting exactly and why is it so relevant to management accountants?

According to the IIRC, integrated reporting demonstrates the linkages between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates.

This should then help businesses to take more sustainable decisions and enable investors and other stakeholders to understand how an organisation is really performing.

CIMA has long advocated that corporate reports should contain the top slice of information regularly reported to boards in order to provide an understanding of the interdependencies and consequences of business activity.

In short, good reporting should provide a platform for the directors to explain how they have managed the business, with a view to sustainable success.

This focus is also central to the principles of integrated reporting – just as it is fundamental to the work of the management accountants.

The idea of a pilot programme, existing outside current regulatory challenges and charged with developing an “ideal” integrated report, is one that we believe will produce meaningful results.

At the end of the pilot programme, the IIRC should be in a position to say:

• This is what an ideal integrated report should look like.
• These are the implementation issues that preparers will encounter.
• Here are some tested solutions.
• These are the regulatory changes needed to create a globally integrated reporting structure.
• Here is the supporting evidence from a two- year study.

CIMA is delighted to be given the opportunity to contribute some innovative thinking to this project. This is what chartered management accountants are really good at and I am confident that the IIRC’s project will further enhance our members’ role as champions of business sustainability and guardians of public trust.