Integrated reporting Essay Example
I agree with how the characterization of information and communication is described in the paragraph. This is because the concepts of integrated reporting are for the purposes of promoting transparency within the organization based on its method of reporting. The reporting method within an organization plays an important role in determining the image of the organization. However, the matter of concern is the development of duplicate content which is not intended by the IIRC. This should not be applied in the key performance indicators. This is because the key performance indicators should produce the same results regardless of the method of analysis used. Including links to other reports is also an important aspect of reporting and communication. This can be achieved through the use of the integrated reporting concepts. This will provide easy access to the report and hence promoting transparency which is also a major objective of integrated reporting (Integrated Reporting. 2013). The interaction with the other reporting is thus useful and it has positive outcome on the reporting.
The interaction with other reporting is also important for the purposes of determining how accurate the financial information is (Petcharat, 2010). This therefore simplifies the process for the users who intends to use the reports of the company. On the other hand, it is also important to note that the interaction will play an important role in terms of giving the true image of the company in terms of it records. The interaction will ensure that the sustainability reports as well as the financial reports are available to the users. The interaction is also important in terms of eliminating errors during the reporting process. All the incorrect information will also be eliminated through the use of the concepts for the purposes of reporting. The users will also be placed in a better position in terms of decision making with regard to the operations of the company. Since the concepts are aimed at giving the correct view about an organization, most of the organizations will have to improve their performance. This is thus an advantage to the company.
The capital framework means using the various types of capital during the reporting process to determine the position of the company. This is achieved by classifying some of the capitals as outputs to the business while others are classified as inputs. The position of the company can thus be determined by gauging how the different capitals impact the business. The success of the business is determined by the performance of the output capitals. A business is considered profitable when the financial capital is increased. This therefore plays an important role in terms of determining the financial position of the company. The disclosure of the capital is also an important factor that can be used to improve the performance of the company. This is because it gives the company information regarding all the capitals and hence the easy determination of its position (Wilis, 2007). Using the capitals as benchmarks is thus useful to a businesses organization as it has positive impacts.
The use of capitals as benchmarks for organization plays an important role in terms of value creation. This is because the business has to analyze all the capital that it utilizes and how they impact on the performance of the business. Although it may not b possible to classify all the stock of value within the business, the use of capitals is still relevant to an organization. The use of capitals also plays an important role in terms of determining the availability, quality and affordability of the capitals. This is an important aspect that determines the operations of the company. The use of capitals also determines the actions that an organization should take for the purposes of improving its performance. Training of the personnel is an example as this has to be done if the analysis indicates that the poor performance of the organization is due to lack of training and skills of the employees. The use of capitals as outlined in the integrated reporting framework is thus beneficial to an organization (WICI, 2008).
At the global level, various initiatives are being undertaken. Signing of the memorandum of understanding with international bodies is an initiative that is being undertaken for the purposes of ensuring the success of the integrated reporting. Pilot projects are also being established for the purposes of testing the concepts of integrated reporting. The use of pilot projects for the integrated reporting is for the purposes of determining if the concept will be successful. On the other hand, the pilot projects are for the purposes of establishing the strengths and weaknesses of the integrated reporting for the purposes of making improvements. The accounting bodies are also implementing the concepts of integrated reporting. Most of the regulators are also encouraging the organizations to adopt the concepts of integrated reporting for the purpose of benefiting the organizations. Some of the regulators have also made the adoption of the integrated reporting compulsory. The initiatives being undertaken are for the purposes of ensuring that the reporting methods are changed in favor of the integrated reporting (Krzus, 2010).
The regulators also encourage the organizations to provide reports concerning their capitals. This is one of the important concepts of integrated reporting that organizations have to adopt. The concepts of integrated reporting are also being incorporated on the corporate responsibility policies. This is considering that most of the international and local organizations adopt the corporate responsibility policies. This therefore means that all the organizations that have adopted the corporate social responsibility have to adopt the integrated reporting principles (Mammat, 2009). This is thus considered a method that will force the organizations too change their reporting methods in favor of the corporate reporting. The international bodies and regulators are also giving special considerations to the organizations that adopt the integrated reporting. This is meant to encourage other organizations to adopt the use of the integrated reporting. Efforts are thus being made to ensure that organizations are adopting the integrated reporting through the changes in policies.
The positive accounting theory considers politics as one of the factors that affects the regulation of business. The concepts of integrating reporting on the other hand are aimed at increasing transparency during reporting. This means that the organizations have to ensure that their actual profits being made are accessible. The political aspects may play a role in terms of formulating policies of taxation depending on the profits being made by an organization (Milne, 2002). This will also see an increase in restrictions and taxation on business organizations and hence its disadvantage to organization. The political perspective is thus a factor that may lead to the failure of the implementation of the integrated reporting. This concern may cause resistance among organizations leading to the failure of its implementation. The hypothesis of bonus plan is also a concept of positive accounting. According to this hypothesis, the achievement of bonus is important to the employees as well as the business organization. This usually forces the companies to report what is not actual. Focus is usually placed on the value as well as the profits.
Reporting the actual scenario as is required by the integrated reporting will therefore have a negative impact on the bonus hypothesis. The organization may end up exposing its weaknesses in terms of the profit and hence changing the public outlook of the company. This is thus a factor that may lead to the failure of the implementation of the integrated reporting. Debt financing is also an important principle of positive accounting principle. This is because most organizations always prefer to remain with liquidity in the company (Tarca, 2010). This always leads to the organizations giving a false report with regards to its finances. The report is usually used for the purposes of financing the debts. However, the exposure of actual information will be required through the use of integrated reporting. Giving the correct information will mean that the company may be forced to loose much liquidity. The debt financing factor will therefore lead to resistance and hence the failure of integrated reporting among most of the organizations. The exposure of the financial details of an organization is therefore a factor that contributes to the resistance to the concept of integrated reporting.
Petcharat, N, 2010, Can organizations meet their environment and social reporting obligations even in a financial crisis? Towards an effective sustainability management accounting system, In 2010 Global Business Conference Proceedings (pp. 79-96), Innovation Institute.
Wilis, A, 2007, “Transforming Corporate Reporting” in 2007 Summit on the Future of the Corporation: Paper Series on Corporate Design, Retrieved on September 17, 2013 from <http://www.corporation2020.org/pdfs/SummitPaperSeries.pdf>
Mammat, J, 2009, “Integrated Sustainability Reporting and Assurance” Conference paper, CIS Corporate Governance Conference.
Krzus, M, 2010, One Report: Integrated Reporting for a Sustainable Strategy, Wiley, New Jersey, and USA.
WICI, 2008, A Global Framework for Measuring and Reporting on intellectual Assets and Capital, Retrieved on September 17, 2013 from <http://www.worldici.com/index.php,>.
Integrated Reporting. 2013, Integrated Reporting. Retrieved on September 17, 2013 from <https://www.globalreporting.org/information/current-priorities/integrated-reporting/Pages/default.aspx>.
Milne, M, 2002, Positive accounting theory, political costs and social disclosure analyses: a critical look, Critical perspectives on accounting, 13(3), 369-395.
Tarca, A, 2010, Accounting theory, John Wiley and Sons.
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