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Integrated reporting 'offers opportunities'
Accountancy News |
Nations looking to develop and introduce integrated reporting (IR) can learn a great deal from developments in South Africa, it has been claimed.
The Association of Chartered Certified Accountants (ACCA) has urged countries to look at this nation, where IR became mandatory two years ago.
ACCA explained that IR is a fast-developing concept in corporate reporting, which enables businesses to present environmental, social or ethical information in a way that is explicitly related to the financial, strategic, and governance information within an annual report.
With IR having become compulsory for South African firms in 2010-11, ACCA has analysed ten companies' reports from before and after the changeover.
The reports show there is significantly more social, environmental and ethical information reported in the 2010-11 reports than those before IR became mandatory.
Previously such information tended to be restricted to specific sections, such as the sustainability report, rather than being part and parcel of the whole paper.
ACCA said one of the most important changes seen in the reports is "a shift towards more stakeholder orientated reporting".
"There is also a discourse of care for stakeholders emerging in the integrated reports, and a greater level of attention is given to stakeholder engagement than in earlier reports," the organisation stated.
Rachel Jackson, head of sustainability at ACCA, said there is a difference between then and now, demonstrating that IR does make a difference.
"It appears that the organisations examined have had a growing realisation that non-financial issues have financial implications for their firms," she stated.
"There has been a change in how sustainability issues are now linked to materiality and risk."
Ms Jackson said it is clear that the emergence of IR presents new opportunities but also new challenges for the corporate reporting agenda.
It also poses challenges for the International Integrated Reporting Council (IIRC) which will need to take these into account, she said.
"The 'stakeholder engagement' approach could present a challenge to the IIRC, whose recent documentation suggests it does not favour such an approach," Ms Jackson stated.
"Instead, the IIRC’s focus has been on the production of integrated reporting for decision-making purposes, and for shareholders. The IIRC itself has made clear its emphasis is on shareholder, not stakeholder, accountability."
Posted by Jon Aspinell
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