Evolution and Benefits of Integrated Reporting

This document discusses the evolution of integrated reporting, its benefits in overcoming the shortcomings of traditional financial reporting, current challenges and problems, and whether Australian listed companies prepare integrated reports. It also explores the question of whether integrated reporting should be made mandatory globally.

Running head: ADVANCED CORPORATE REPORTING
Advanced Corporate Reporting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ADVANCED CORPORATE REPORTING
Table of Contents
Question 1:.................................................................................................................................2
Introduction:...........................................................................................................................2
Discussion:.............................................................................................................................2
Evolution of integrated reporting:......................................................................................2
Ways through which integrated reporting overcome the shortcomings of the traditional
financial reporting:.............................................................................................................3
Current challenges and problems for integrated reporting:................................................4
Discussion of whether Australian listed companies prepare integrated reporting:............5
Discussion of whether integrated reporting should be made mandatory globally:............6
Conclusion:........................................................................................................................7
Question 2:.................................................................................................................................7
Requirement (i):.....................................................................................................................7
Requirement (ii):....................................................................................................................8
Requirement (iii):.................................................................................................................10
References:...............................................................................................................................12

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Question 1:
Introduction:
Integrated reporting has gained popularity since its inception in 2010 of the
International Integrated Reporting Committee (IIRC) (De Villiers, Rinaldi and Unerman
2014). Even though IIRC has been the dominant body in setting global integrated reporting
policies, integrated reporting has emerged before the establishment of the stated body (Cheng
et al. 2014). The current section would focus on the evolution of integrated reporting along
with highlighting its key benefits to overcome the deficiencies of the traditional reporting
system. The section would emphasise on the existing issues and challenges of integrated
reporting as well. In addition, discussion would be made regarding whether the listed
organisations follow in Australia along with recommending whether integrated reporting
should be made mandatory for all global business organisations.
Discussion:
Evolution of integrated reporting:
Integrated reporting takes into account all material information of governance,
strategy, prospects and performance of an organisation in a manner that sheds light on the
environmental, social and commercial context within its operating areas
(Integratedreporting.org 2019). It results in clear and concise depiction of the value creation
picture, which is valuable and pertinent to all stakeholders. After the global financial crisis of
2007, many regulatory bodies, policy makers and leading financial institutions were working
on their endeavours for enhancing their mechanisms of corporate reporting. In 2009, “King
III Code of Governance Principles” has been released in South Africa, in which it has been
recommended that the organisations should prepare as well as publish integrated reports

3ADVANCED CORPORATE REPORTING
(Churet and Eccles 2014). Therefore, South Africa became the first nation where
organisations listed in Johannesburg Stock Exchange have to follow the reporting
requirements of integrated reporting. As a result, in May 2010, “Integrated Reporting
Committee” has been found in South Africa for formulating guidelines on sound integrated
reporting practices.
In August 2010, the “Global Reporting Initiative (GRI)” and “Accounting for
Sustainability Report (AAS)” declared the establishment of the “International Integrated
Reporting Committee (IIRC)” for creating an integrated reporting framework for the global
organisations. This framework would assist the organisations on communication of
information deemed to be useful for the investors as well as other stakeholders for analysing
the long-term prospects of the organisation clearly, concisely and comparably (Eccles and
Krzus 2014).
Ways through which integrated reporting overcome the shortcomings of the traditional
financial reporting:
There are a number of ways through which integrated reporting could cover the
loopholes inherent in traditional financial reporting, which are discussed as follows:
With the help of integrated reporting, assurance could be provided through which
corporate organisations briefly represents about the material information. This clearly
implies the performance of an organisation in non-financial aspects that influence the
quality of the developed strategy and its implementation (Flower 2015).
Integrated reporting provides better insight of the relationship between financial and
non-financial performance. This is crucial, as the organisations need to communicate
their non-financial performance strategically.

4ADVANCED CORPORATE REPORTING
Integrated reporting leads to better transparency and increased access to external and
internal information sources for short-term as well as long-term improvements (Frias‐
Aceituno, Rodríguez‐Ariza and Garcia‐Sánchez 2014). In addition, it formulates
enhanced control systems and internal measurement in order to generate reliable non-
financial information timely.
There is more streamlined and automated information towards the review process as
well as fact inclusions in the report.
The integration of reports aids in undertaking business performance comparison for
standardisation.
The stakeholders would have an insight of the business affairs with the help of which
an improved relationship with the economy could be formed effectively (Idowu et al.
2016).
Current challenges and problems for integrated reporting:
Although integrated reporting provides an effective picture of financial and non-
financial data of an organisation, it is deemed to be voluntary and non-binding. Hence, they
are providing an incomplete picture of their activities frequently (Pérez 2015). This clearly
signifies the fact that the externally realised mechanisms of assurance are not involved
adequately in investigating integrated disclosures. Another challenge is to incorporate the
type of contents within the integrated reports. The non-financial report recipients have to be
identified as well.
There is a serious concern confronting the sustainability approach of IIRC. According
to Serafeim (2015), the focus of this framework is mainly on the investors, as it does not take
into consideration the requirements of the other stakeholders, natural environment and
society. The researcher argued further that integrated reporting has been an ideologically-
closed approach owing to its inability of strengthening critical reflection on usual business

5ADVANCED CORPORATE REPORTING
practices. Despite the fact that environmental disclosures might assist in advancing corporate
image when there is no corresponding involvement, socially accountable behaviours and their
accounting are unnecessarily concomitant. This issue has the potential of restricting the
adoption of integrated reporting (Simnett and Huggins 2015). Moreover, the framework of
integrated reporting emphasises on the supply side that include the integrated reporting
preparers, while ignoring the demand side constituting of the perspectives of the users on the
framework. Moreover, IIRC has developed six-capital model in integrated reporting
framework, which is not followed by the Australian investors. This is because of the
considerable gap between the information that the reporting organisations supply and
information sought by the financial markets (Stent and Dowler 2015). Therefore, it is
necessary to simplify and comprehend the integrated reports to a wider stakeholder audience.
Discussion of whether Australian listed companies prepare integrated reporting:
Since integrated reporting has been issued in 2010, nations have carried on adopting
the framework. It has become mandatory in South Africa and Brazil. However, the other
countries like Australia, UK, Japan, Netherlands, Spain, USA and Singapore have started to
adopt the same. In Australia, there are clear guidelines for governing and disclosing financial
data. Therefore, the Australian listed organisations are not mandated to report publically non-
financial data like figures related to environmental and social performance (Stubbs and
Higgins 2014). However, integrated reporting has started to gain popularity in Australia,
which could be found from the signing of an investor statement by a significant group of
global investors like VicSuper and Cbus by focusing on integrated reporting value and
significance in capital allocation decisions in 2017.
In accordance with “ASX 200 Corporate Reporting” in Australia, there is increase in
demand for enhanced information, which is answered by the organisations. For instance, 48%
of the ASX listed organisations have adopted integrated reporting in 2018, which have been

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25% in 2017 (KPMG Newsroom 2018). Moreover, there have been more organisations
reporting specific objectives underpinning the high-level strategy for providing information
to the users about the ways of deploying the same. In 2017, the figure has been 12%, which
has jumped to 43% in 2018. The other notable improvements are in the number of ASX
organisations disclosing narratives on non-financial performance along with statement of
corporate governance. 70% of the ASX organisations have disclosed non-financial
performance narratives in 2018 compared to 50% in 2017 and increase could be observed in
terms of corporate governance statement disclosures from 37% in 2017 to 53% in 2018
(KPMG Newsroom 2018). These organisations are not only enhancing disclosures for
addressing current business issues, they are aiming to be innovative in the ways through
which information to different business stakeholders.
Discussion of whether integrated reporting should be made mandatory globally:
The good organisations would view integrated reporting in the form of an opportunity
for communicating and implementing sustainable strategy that would aid in creation of value
for the shareholders in the long-run along with contribution to sustainable society (Uyar
2016). However, in order to achieve this globally, integrated reporting has to be mandatory
rather than voluntary. It needs to be made to a group of standards. For instance, capital
markets could not be accessed, if companies are not mandated to implement the same. Hence,
if integrated reporting is not made mandatory, poor-performing organisations would not opt
for the same resulting in incomplete information set in order to undertake decisions.
For ensuring the adoption of integrated reporting, legislation is a crucial aspect. The
global nations need to pass regulations for mandatory integrated reporting in order to fulfil
the needs of the stakeholders (Vaz, Fernandez‐Feijoo and Ruiz 2016). Moreover, it is
expected that the leading global organisations would start adopting integrated reporting,
which would be driven by the business community in the form of best practice reporting that

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would assist the investors in their decision-making process. Hence, integrated reporting has to
be mandated from the global perspective.
Conclusion:
By considering all the above-discussed aspects, it has been analysed that integrated
reporting provides better insight of the relationship between financial and non-financial
performance and improved transparency. Despite the fact that environmental disclosures
might assist in advancing corporate image when there is no corresponding involvement,
socially accountable behaviours and their accounting are unnecessarily concomitant. This
issue has the potential of restricting the adoption of integrated reporting. However, more
Australian companies have started the adoption of integrated reporting for enhancing the
corporate disclosures to different groups of stakeholders. Therefore, it could be inferred that
integrated reporting should be made mandatory from the global perspective, which could be
possible through legislation and steps taken by the leading global organisations in adopting
the same.
Question 2:
Requirement (i):
In the Books of Eureka Limited
Computation of Current Tax
Particulars Amount Amount
Accounting profit before tax
$1,384,00
0
Add: Expenses not allowed for deduction under tax
Depreciation expense - Plant $224,00

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0
Warranty expenses $84,000
Insurance expense $84,000
Long service leave expense
$140,00
0 $532,000
Less: Expenses allowed for deduction under tax
Depreciation expense - Plant
$280,00
0
Warranty expenses paid $28,000
Insurance expense paid
$112,00
0
Long service leave expense paid $84,000 $504,000
Taxable profit
$1,412,00
0
Tax rate 30%
Tax liability $423,600
Requirement (ii):
In the Books of Eureka Limited
Taxation Worksheet as at 30 June 2019
Item Carrying
amount
Tax
Base
Deductible
Temporary
Difference
Taxable
Temporary
Difference
Tax
Expense
Revaluation
Surplus
Tax
Payable
Assets

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Cash $
76,000
$
76,000
$
-
Inventory $
270,000
$
270,00
0
$
-
Receivables (net) $
210,000
$
210,00
0
$
-
Prepaid insurance $
28,000
$
-
$
28,000
$
8,400
$
8,400
Plant $
896,000
$
840,00
0
$
56,000
$
16,800
$
16,800
Land $
1,260,000
$
840,00
0
$
420,000
$ 126,000 $
126,000
Liabilities
Payables $
224,000
$
224,00
0
$
-
Provision for
warranty expenses
$
56,000
$
-
$
56,000
$
(16,800)
$
(16,800)
Loan payable $
560,000
$
560,00
0
$
-

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Provision for long
service leave
$
56,000
$
-
$
56,000
$
(16,800)
$
(16,800)
Total $
112,000
$
504,000
$
(8,400)
$ 126,000 $
117,600
Deferred tax assets $
33,600
Deferred tax
liabilities
$
151,200
Less: Opening
balance
$
-
$
-
Net balance as on
30 June, 2019
$
33,600
$
151,200
According to “Paragraph 15 of AASB 112”, it is necessary to recognise deferred tax
liability for all taxable temporary differences. On the other hand, “Paragraph 24 of AASB
112” clearly states that deferred tax assets have to be realised for all temporary differences to
the degree that it is likely that there would be availability of taxable profit in opposition to
which deductible temporary difference could be used (Aasb.gov.au 2019). In the above table,
taxation worksheet is prepared by conforming to all the necessary principles mentioned in
AASB 112. The deductible temporary difference is calculated by deducting tax base of the
liabilities from their carrying amounts. On the other hand, taxable temporary difference is
calculated by deducting tax base of the assets from their carrying amounts. Based on the two
amounts, tax expense of 30% and revaluation surplus of 30% are computed. Therefore, the
entire worksheet is prepared in accordance with the guidelines mentioned in AASB 112 in

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order to compute deferred tax assets, deferred tax liabilities, tax expense, revaluation surplus
and tax payable in an appropriate manner.
Requirement (iii):
In the Books of Eureka Limited
Journal Entries
For the period ended 30 June 2019
Date Particulars
Debit
Amount
Credit
Amount
30-Jun-
19 Current Tax Expense Account..................................................Dr $423,600
To Provision for Income Tax Account $423,600
(Current tax expense recorded for the year)
30-Jun-
19 Deferred Tax Assets Account...................................................Dr $33,600
Revaluation Surplus Account...................................................Dr $126,000
To Deferred Tax Liabilities Account $151,200
To Deferred Tax Expense Account $8,400
(Deferred tax for the year recorded)

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References:
Aasb.gov.au., 2019. [online] Available at:
https://www.aasb.gov.au/admin/file/content105/c9/AASB112_08-15.pdf [Accessed 8 May
2019].
Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international
integrated reporting framework: key issues and future research opportunities. Journal of
International Financial Management & Accounting, 25(1), pp.90-119.
Churet, C. and Eccles, R.G., 2014. Integrated reporting, quality of management, and financial
performance. Journal of Applied Corporate Finance, 26(1), pp.56-64.
De Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and
an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7),
pp.1042-1067.
Eccles, R.G. and Krzus, M.P., 2014. The integrated reporting movement: Meaning,
momentum, motives, and materiality. John Wiley & Sons.
Flower, J., 2015. The international integrated reporting council: a story of failure. Critical
Perspectives on Accounting, 27, pp.1-17.
Frias‐Aceituno, J.V., Rodríguez‐Ariza, L. and Garcia‐Sánchez, I.M., 2014. Explanatory
factors of integrated sustainability and financial reporting. Business strategy and the
environment, 23(1), pp.56-72.
Idowu, S.O., Dragu, I.M., Tiron-Tudor, A. and Farcas, T.V., 2016. From CSR and
sustainability to integrated reporting. International Journal of Social Entrepreneurship and
Innovation, 4(2), pp.134-151.

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Integratedreporting.org., 2019. [online] Available at: https://integratedreporting.org/
[Accessed 8 May 2019].
KPMG Newsroom., 2018. ASX 200: Integrated Reporting gains traction in Australia -
KPMG Newsroom. [online] Available at: http://newsroom.kpmg.com.au/asx-200-integrated-
reporting-gains-traction-in-australia/ [Accessed 8 May 2019].
Pérez, A., 2015. Corporate reputation and CSR reporting to stakeholders: Gaps in the
literature and future lines of research. Corporate Communications: An International
Journal, 20(1), pp.11-29.
Serafeim, G., 2015. Integrated reporting and investor clientele. Journal of Applied Corporate
Finance, 27(2), pp.34-51.
Simnett, R. and Huggins, A.L., 2015. Integrated reporting and assurance: where can research
add value?. Sustainability Accounting, Management and Policy Journal, 6(1), pp.29-53.
Stent, W. and Dowler, T., 2015. Early assessments of the gap between integrated reporting
and current corporate reporting. Meditari Accountancy Research, 23(1), pp.92-117.
Stubbs, W. and Higgins, C., 2014. Integrated reporting and internal mechanisms of
change. Accounting, Auditing & Accountability Journal, 27(7), pp.1068-1089.
Uyar, A., 2016. Evolution of corporate reporting and emerging trends. Journal of Corporate
Accounting & Finance, 27(4), pp.27-30.
Vaz, N., Fernandez‐Feijoo, B. and Ruiz, S., 2016. Integrated reporting: an international
overview. Business Ethics: A European Review, 25(4), pp.577-591.