The Role of Integrated Reporting in Corporate Reporting

This article discusses the role of integrated reporting in corporate reporting, including its benefits for private and public companies. It also explores how integrated reporting influences the business model and strategic control of organizations. The article emphasizes the importance of considering the six capitals of integrated reporting for effective decision-making by strategic management accountants.

Running head: ADVANCE MANAGEMENT ACCOUNTING
Advance Management Accounting
Name of the Student
Name of the University
Author’s Note

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Introduction
Integrated Reporting, commonly known as IR, plays a crucial role in the promotion of a
more consistent as well as effective approach of corporate reporting; it also aims in improving
the quality of available information to the users so that the organizational capital can be allocated
in the more efficient and productive manner (integratedreporting.org, 2019). The primary
objective behind the introduction of IR is to inform the financial capital providers of the
companies that how the companies are creating value and all the stakeholders of a company such
as suppliers, employees, customers, communities and other can become majorly beneficial from
the IR. At the same time, it needs to be mentioned that integrated reports provide the users with
both the financial and non-financial information of the companies with the aim to assist them in
the process of various decision-making (integratedreporting.org, 2019).
Discussion
IR improves the manner the business organizations think, plan and report the details of
their businesses. In today’s business world, many of the companies use IR in order to clearly and
concisely communicate an integrated story of their process of value creation. For this reason,
organizations irrespective of private and public are using IR for building understanding as well
as trust in their businesses.
IR is considered as an effective way to assist a private company in better understanding
and managing how they create value so that they can report on their value creation process. The
adoption of IR assists a private company in building a better as well as more material
understanding about the aspects that ascertain the company’s ability of value creation over long,
medium and short-term (integratedreporting.org, 2019). In this process, IR helps in improving

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the private firms’ business planning and development by taking into account a wholly corrected,
holistic view on the capitals as well as resources necessary for their business models. Thus, IR
provides the opportunity to the private companies in understanding six different capitals so that
they can effectively manage them for long-term value creation; these capitals are financial
capital, manufactured capital, intellectual capital, human capital, natural capital and social and
relationship capital (integratedreporting.org, 2019). Moreover, better understanding of these
capitals helps the private companies in implementing better communication channels with the
key stakeholders. The IR framework provides the private companies with three guiding
principles that are strategic focus, future orientation and conciseness in reporting. Overall, IR
improves the corporate reporting of the private companies (integratedreporting.org, 2019).
Like private companies, the companies under the public sectors become majorly
beneficial from the implementation of IR. It is the responsibility of many public sector
companies to provide service delivery as well as governance excellence in an environmentally,
socially, financially and economically way (home.kpmg, 2019). IR provides major assistance to
the public sector companies in equilibrium reporting of the conflicting aspects. IR can provide
the public sector organizations with an agenda so that they can focus their reporting on their
major objectives. After that, the public sector organizations get major assistance from IR in
explaining their strategies, governance and operating model so that they key stakeholders can
assess their performance based on these key strategies (home.kpmg, 2019). It means IR assists
these companies in effective stakeholder engagement that can assists these companies in
showing how they have maintained the balance of the often conflicting needs of different
stakeholders. Moreover, the public sector organizations can get the opportunity from IR in
aligning their reporting with the organizational risks and opportunities along with management

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accountabilities (home.kpmg, 2019). Thus, on the basis of the above discussion, it can be said
that both the private and public sector organizations can use IR for increasing their
organizational effectiveness.
It needs to be mentioned that IR has eight elements and Business Model is one of them.
IR has positive impact on the strategy and control of the organizational business model as the
implementation of IR helps the companies in understanding their business model. An integrated
report assists in describing the business model through four aspects; they are Inputs, Business
activities, Outputs and Outcomes (Adams, 2015). IR positively influences the organizational
strategies by showing how the major inputs are material for understanding the strength and
flexibility of the business mode. After that, IR assists the organizations in developing the
business strategies by describing the key business activities. In this way, the companies can
ascertain how they are different from their competitors. After that, companies become able in
identifying the internal outcomes, external outcomes, positive outcomes and negative outcomes
with the implementation of IR and this aspects assist in the implementation of control in the
business model (Cheng et al., 2014).
Value creation is considered as another crucial aspect in IR. The financial capital
providers have interest in the organizations’ value that they create. At the same time, they also
have interest in the organizations’ value creation for others. The ability of the firms in creating
value for itself is connected with the value creation for others (Eccles & Serafeim, 2015).
Companies create value through a wide range of activities like relationships and interactions. In
this situation, an integrated report plays a crucial part as helps in including the interactions,
activities and relationships that are material to the ability of the organizations in the value
creation. IR helps the companies by providing the value creation process which includes the

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aspects of business model that are inputs, business activities, outputs and outcomes. In the value
creation process, IR helps in considering the components of external environment that are
economic conditions, technological changes, community issues and environmental hurdles. It
needs to be mentioned that the providers of the financial capital wants to obtain information
about the value creation process of the companies and the implementation of IR assists in
providing the necessary information on this aspect (Simnett & Huggins, 2015).
At the same time, integrated reporting plays a crucial role in the strategic control of the
companies. IR involves in identifying the short, medium and long-term strategic objectives of the
business organizations. After that, it describes the connection between allocation of
organizational resources and organizational strategies. This aspect helps in answering the
question that how strategy and resource allocation is related with the business model of the
companies (Owen, 2013). This process is majorly helpful in establishing strategic control. In
addition, business organizations can identify the risks and opportunities of the businesses by
assessing whether the external environmental factors have impact on the business strategies. In
the presence of this information, companies can bring control over their business strategies.
The presence of six capitals can be seen in IR; they are Financial capital, Manufacturing
capital, Intellectual capital, Human capital and Social and Relationship capital; and it is believed
that all of these six capitals have impact on the aspect of strategic management accounting of the
companies (Stubbs & Higgins, 2014). The journey of IR commences from the core of the
business organizations that is the business model. The foundations of the businesses are
resources, activities, outputs and outcomes. The value creation process begins in the presence of
strategy development, action planning, risk management and governance. The necessitate of
establish the connection across the value creation drivers puts the strategic management

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accountants at the front position of the value creation process. No one has better knowledge
about the businesses than the strategic management accountants as they have a unique as well as
holistic perspective of the strengths and weaknesses of the businesses (De Villiers, Rinaldi &
Unerman, 2014). For this reason, they are at the heart of the drive to IR within the organizations.
It needs to be mentioned that IR integrates both the financial and non-financial
information of the businesses for providing the comprehensive picture of the organizational
value creation. For this reason, it will be necessary for the strategic management accountants to
take into consideration all the six capitals of IR to report about the value creation process of the
business (Churet & Eccles, 2014). Hence, they will be needed to play a more energetic role in
strategic discussion with the companies’ strategic partners. When the majority portion of the
company’s market value is related to intangible assets, it is needed for the strategic management
accountants to understand how the other resources such as human capital, intellectual capital and
others are affecting the business operations with the aim to make effective business decisions. It
indicates that the six capitals of IR have impact on the decision-making process of the strategic
management accountants (Dumay et al., 2016).
Conclusion
To infer, IR has major relevance in the corporate reporting of the contemporary world. As
per the above discussion, the adoption of IR provides both the private as well as public
companies with major advantages in creating value and thus, they can adopt IR for their
corporate reporting. It can also be seen that IR has major positive influence on the business
model of the companies that includes both strategic initiatives and strategic control. The above
discussion also sheds light on the fact that the strategic management accountants can become

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majorly beneficial by considering the six capitals of IR due to the positive impact on the
profession.

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