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Integrated corporate reporting 'the way forward'
Accountancy News |
28/12/2011
A new approach to corporate reporting is required in a changing global landscape, it has been claimed.
The Chartered Institute of Management Accountants (CIMA) said that at present, reporting mechanisms and outcomes "do not seem to satisfy most users".
Last month, the International Integrated Reporting Council published a discussion paper entitled 'Towards Integrated Reporting: Communicating Value in the 21st Century', considering the issue in some depth.
The paper presented the rationale for integrated reporting within business and offered initial proposals for the development of a global, integrated reporting framework.
CIMA broadly supports the proposals, which it believes can help restore focus to corporate reporting and ensure it fulfils its primary objective.
Nick Topazio, CIMA's head of corporate reporting, commented that the annual report and accounts have become compliance documents.
"They have lost their way as communications documents," he stated.
"There is currently much mistrust of commercial organisations, and in many circles the term 'corporate behaviour' has become synonymous with greed, self-interest and detachment from the real world."
However, Mr Topazio said there are many companies that have successfully adopted business strategies that are focussed on long-term sustainable profitability.
In his view, the corporate reporting system must be allowed to develop to allow effective communication of their stories.
"To be able to meaningfully comment on the economic, social and environmental influences and impacts of an entity's operations requires integrated thinking and planning within the organisation," he added.
Mr Topazio said the business strategy must recognise not just the importance of short-term profits, but also the need for the organisation to succeed over the medium and long-term.
Only once integrated decision-making exists within an organisation will it be in a position to produce integrated, as opposed to combined, reporting, the expert claimed.
He noted that CIMA supports the work of the International Integrated Reporting Council and also the principle of integrated reporting, which it sees as "a natural extension" to its work in driving narrative reporting forward.
"We have long advocated the integration of strategy, opportunities, risk and performance with a clear explanation of how the organisation makes money - the business model," Mr Topazio stated.
"If there are material issues that may affect long-term business success then they should be discussed openly and completely in the narrative report in an integrated manner."
Posted by Stephen Wilkinson
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