Advanced Financial Accounting: Evaluating Integrated Reporting Functions and Guiding Principles

This study evaluates the functions of International Integrated Reporting Council and explains integrated reporting functioning with reference to relevant accounting literature and CPA report outcome. It also contrasts and compares CPA report outcome underpinning following principles and explains similarities and dissimilarities between general purpose financial reporting and conceptual framework of AASB/IASB.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................3
Answer to requirement 1:................................................................................................................3
Evaluating the functions of IIRC with reference to the websites and significant literature:...........3
Answer to requirement 2:................................................................................................................3
Explaining integrated reporting functioning with reference to relevant accounting literature and
CPA report outcome:.......................................................................................................................3
Answer to requirement 3:................................................................................................................4
Contrasting and comparing CRO report outcome underpinning following principles:..................4
Answer to requirement 4:................................................................................................................4
Explanation of similarities and dissimilarities between the following:...........................................4
Answer to requirement 5:................................................................................................................5
Comparing integrated reporting of companies:...............................................................................5
Answer to requirement 6:................................................................................................................5
Factors attributing to similarities and differences that has been identified:....................................5
Conclusion:......................................................................................................................................5
References and Bibliography:..........................................................................................................6

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Introduction:
In this particular study, the importance of International Integrated reporting council has
been explained by reviewing the associated literature and referring to the website. Functioning of
integrated reporting has been explained by referring to the findings generated from CPA report in
terms of materiality, stakeholder relationship, materiality, consistency and comparability and
reliability and completeness. Furthermore, the similarities and differences between conceptual
framework of IASB/AASB and general purpose financial reporting (GPFR) has been explained
in terms of objective and definition, users identification and concepts of materiality, consistency,
comparability and reliability. The integrated reports of four companies have been evaluated with
respect to the guiding principles. In addition to this, the differences and similarities of such
integrated reporting have been demonstrated based on the analysis performed in the above
section.
Discussion:
Answer to requirement 1:
Evaluating the functions of IIRC with reference to the websites and significant literature:
International Integrated reporting council is the alliance of investors, regulators,
accounting profession, industry setters, non government organization, and academics and
accounting profession for enhancing value creation communication and thereby contributing to
corporate reporting evolution. It was stated by IIRC that creation of new reporting model by the
development of an internationally accepted international reporting is the main objective. This

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will assist in creation of value over time so that organization is capable to providing concise
communication to its stakeholders.
The main objective of integrated reporting is to promote an efficient and cohesive
approach to corporate reporting through stewardship and accountability and focusing on value
creation over short, medium and long term by supporting integrated thinking. Such reporting
framework is viewed to provide potential benefits to all stakeholders that help in sharpening
ability of organization to create value over time. IIRC intend to make improvement in
information quality to the financial capital providers so that it helps in productive and efficient
allocation of capital (Aasb.gov.au 2018). Therefore, it can be said that the primary purpose of
such reporting framework is to provide benefits to all the interested stakeholders such as
customers, employees, business partners, suppliers, legislators, local communities, policy makers
and regulators.
Answer to requirement 2:
Explaining integrated reporting functioning with reference to relevant accounting
literature and CPA report outcome:
a. Providing stakeholders with relevant information
The information that is sought by stakeholder should be relevant to the work they are
doing and their information requirement are varied and extensive. For instance, the interest of
environment stakeholder lies in the significant environmental issues (Hoyle et al. 2015).

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However, a single and static annual report might not be sufficient in addressing their requirement
of information.
b. Engagement of stakeholders
Such reports helps stakeholder in directly engaging with companies and conduct research on
company by cross checking the relevant matters. For identification of risky areas, reports are
used by stakeholders for accessing to background information. The usefulness of integrated
reporting is that it provides platform for stakeholders to gain access to retrieving relevant
information about organization.
c. Reporting comparability
It has been ascertained from CPA report findings that the information requirement of
environmental and civic stakeholders are not met using the integrated reporting. Comparability
across reporting companies is quite challenging and compared to integrated reports,
sustainability reporting’s more useful for stakeholders. Comparability of report is the main
argument that the stakeholders have raised about reports comparability (Macve 2015). However,
for financial stakeholders, comparability is less of an issue.
d. Reporting quality
The main aim of integrated reporting is to improve the information quality that is
available to providers of financial capital so there is productive and efficient allocation of capital.
Issues are raised by environmental stakeholders about the fact that there is no inclusion of right
indicators such as lacking specificity, amount that is lend to the fossil fuel projects and headline
information depicting that there is smaller amount of information available on specific issues. It

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has been found by the financial stakeholders that there are significant variations in integrated
reporting quality (Larson et al. 2017). Concerns have been raised about using a lot of case
studies, not focusing on material issues, absence of narratives and targets that are considered
important for business.
e. Reporting usefulness
The usefulness of integrated reporting comes with a mixed view as held by stakeholders.
It has been widely acknowledged that current approaches to reporting of company come with
shortcomings of limiting the usefulness to the external audiences. It is suggested by the
stakeholders that improvement could be made in report by integration of more numbers so that it
provides more information on the material environmental, social and governance issues
(Beckman et al. 2017).
f. Users of reporting
The main users of integrated reporting are stakeholders of organization such as
shareholders, suppliers, legislators and employees.
Answer to requirement 3:
Contrasting and comparing CPA report outcome underpinning following principles:
a. Relationship with stakeholders
This particular guiding principle is based on providing insight into the quality and nature
of relationship of organization with their key stakeholders. It is ascertained from the CPA report

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findings that the elements of performance content forms the basis of gathering the information
about stakeholder relationship. Management of organization is required to have an ongoing
communication with stakeholders and thereby contributing to make an improvement in
stakeholder relationship.
b. Materiality
It deals with effective disclosure of information through which the ability of organization
is substantively affected for value creation over long term, short and medium term. Businesses
are required to make disclosure of issues related to environmental matters for environmental
stakeholders. Moreover, additional disclosure should be made regarding the impact of climatic
change and emission of carbon dioxide. The application of materiality concepts according to
integrated reporting leads to value creation (Camilleri and Camilleri 2017).
c. Conciseness
The concept of conciseness is to provide sufficient understanding of the governance and
strategy prospects of organization and the availability of less information would not burden the
stakeholders. Conciseness is the guiding principle that is largely praised by company as depicted
from CPA report outcome. It was difficult for investors to access to the potential information
because of availability of detailed information. Presentation of report in concise format has been
a challenging task for organization that requires solving complex business issues. It has been
found from analysis that integrated reporting fails to provide concise information to the
stakeholders (Nilsson and Stockenstrand 2016). However, the importance of value creation is
understood by users along with the performance of organization at the same time.

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d. Completeness and reliability
Guiding principles of reliability and completeness include all the negative and positive
material matters in a balanced manner and without any error. The principle of completeness and
reliability is encouraging as depicted by findings from review. However, there could be
improvement in completeness and reliability by determining the process of materiality. The
conciseness principle can be improved by identification of relevant matters and implementation
of process of robust materiality. It would help in improving overall completeness and reliability.
Nevertheless, it is difficult for users of report to judge absence of material errors and
completeness. In order to improve the credibility of report in eyes of stakeholders and investors,
it is considered crucial to achieve reliability and completeness. The integrated report should have
established sound process of internal control and the information used by management for
running the business should be included in the report (Martin and Roychowdhury 2015). In
addition to this, the positive as well as negative aspects of performance should be disclosed.
Reliability of information presented in the report can be increased by improving the process of
material determination.
e. Comparability and consistency
Comparability guiding principles assist in enabling comparisons with other organization
and ensuring consistency over time. Such comparison is done to the extent that is material to the
ability of organization for creating value. From the evaluation of CPA report, it was analyzed
that the stakeholders place great importance on the integrated reporting usefulness. It is reviewed
from finings of CPA report that reviewers were unable to access comparable and consistent
information. In addition to this, 68% of report made use of factual and neutral language and it

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avoided using promotional and marketing tools. The integrated report presented by organization
has not produced any comparable information along with some of information being
inconsistent. For instance, some comparatives of prior years were provided while it was missing
for recent years when the comparison was made for different time periods. At present, integrated
reporters are more concerned with reporting of consistent measures and internal consistency over
time rather than they are with reporting information (Jalil et al. 2015). Comparing the
information between companies is difficult because there may be different process behind
accessing the data.
Comparability principle is equally important for financial as well as environmental
stakeholders. Comparative information is of great significance to investors and it is quite a
challenging task for organization to provide with the meaningful information over a long time
frame.
Answer to requirement 4:
Explanation of similarities and dissimilarities between the following:
a.
General purpose financial reporting Conceptual framework of AASB/IASB
General purpose financial reporting is the
framework that is used by organization for
presentation of financial statements that helps
in discerning the financial performance and
All the reporting Australian entities preparing
general purpose financial statements apply the
framework of AASB. The framework of IASB for
the presentation and preparation of financial
statements depicts that the reporting entity is an

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condition of reporting entity. Such framework
helps in identification of users so that
consistent and broad types of information are
provided. It depicts that the financial report
presented according to such framework would
help in meeting the common information
requirement of users.
organization from whether users are able to source
financial information by relying on the financial
statement.
The objective of international framework
concerning general purpose financial reporting is to
provide potential, lenders, investors and other
creditors with the financial information that is
useful in making decisions about entity resources.
It provides direction to the users of reporting entity
providing resources but does not have the ability of
compelling entity to provide them with the
information’s for investment decision.
The objective of conceptual framework of IASB or
AASB is to address the areas such as measurement
concepts, derecognition, disclosure and
presentation and financial performance.
Furthermore, the objective of such framework is to
make considerable improvement in conceptual
framework by making revision in year 2016
conceptual framework. The financial statements of
reporting entities will not be immediately impacted
by proposed changed in reporting framework.
Existing standard of conceptual framework will not
be changed on immediate basis resulting from
IASB framework.
b.
Users of general purpose financial reporting Users of Integrated reporting

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The Primary users of general purpose financial
reporting includes lenders, potential investors and
other creditors. In addition to this, there are other
users of such general purpose financial reporting
and this includes government, employees and
general public.
Integrated reporting is required by several users
such as stakeholders and they are comprised of
financial as well as environmental stakeholders.
In addition to this, some other users are the long
term investors who seek investment in any
particular organization.
Other stakeholders who find integrated reporting to
be of great usefulness are suppliers, government,
local communities and other standard setters.
c.
Materiality concept as per Integrated report Materiality concept as per IASB CF
As per the reporting framework of Integrated
report, the matters that are responsible for
substantively impacting the ability of organization
to create value for over short, medium and long
term should be adequately disclosed.
Materiality is the factor that affects the relevance of
information presented in the financial statements. It
is not regarded as primary qualitative
characteristics because it is a cutoff point. The
nature of information presented is relevantly judged
by the information presented.
Four steps are set out in the framework for decision
making concerning materiality. It involves
identification of information based on value
creation, evaluation of relevant matter importance,
determination of disclosure of information about
material matters and prioritizing of the matters
Information is considered material as per the
conceptual framework if the decision could be
influenced by misstatement and omission of the
figures presented in the financial statement. It is
such aspect that is entity specific depending upon
nature and magnitude of information (Hunton et

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(Larson et al. 2015) al. 2015).
d.
Concepts of completeness, reliability and
consistency as per Integrated report
Concepts of completeness, reliability and
consistency as per conceptual framework of IASB
Completeness- All the information presented in the
financial statements of reporting entity should be
recognized as free from material errors so that a
complete picture of the financial resources and
claims of organization is presented.
Completeness- Completeness is one of the
fundamental qualitative characteristics of
conceptual reporting framework. The information
presented in the financial report should be complete
so that total picture of claims and economic
resources are presented.
Reliability-All the material matters whether it is
negative or positive should be incorporated in the
integrated reporting and presentation of such
information should be in a balanced manner and
free from any material errors.
The freedom from materiality of errors and the
balance is impacts the reliability of information. On
other hand, reliability of information is enhanced
by the stringent reporting system and robust
internal control. This is also facilitated through the
engagement of stakeholders.
Reliability- The concept of reliability as per the
conceptual framework is identified as qualitative
characteristic of useful financial information.
Uncertainty measurement is the main concern that
makes the availability of financial information les
useful. It has been clarified by the IASB framework
that the financial information becomes less relevant
due to uncertainty measurement. Reliability aspects
are quite similar to qualitative characteristics such
as faithful representation.
Consistency- At present, the main concern of
integrated reporters is the internal consistency and
Consistency- Consistency is about using same
methods for treating the same items either for a

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employment of consistency measures so that it
facilitates in comparing information between the
reporting entities. It is essential for business to
recognizes the importance of consistency so that
they the comparison between the reporting period
is enhanced.
single periods across entities or from period to
period within a reporting entity. Satisfaction of
some fundamental qualitative characteristics helps
in attaining some degree of comparability.
Answer to requirement 5:
Comparing integrated reporting of companies:
Comparing the integrated report of chosen
companies
Guiding principles of Integrated Reporting
CEMEX
All the material information relevant to
stakeholders is disclosed in an adequate way. It is
ensured by organization that there is no omission of
any figures from the financial statement.
HULAMIN LTD
The concept of materiality is applicable from both
qualitative and quantitative characteristics
perspectives. In addition to this, the materiality is
enhanced by facilitating the comparison of the
information between reporting periods
Materiality
The materiality concepts are applicable from the
perspective of creating value to organization.

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(Richardson 2017).
DSM
The material information is dealt in an appropriate
manner by putting a proper emphasis so that the
financial statement is free from any such material
errors.
MTN Group
All the material matters are adequately highlighted
by organization so that their true financial position
is reflected.
CEMEX
All the information presented in the report of
company is consistent and comparable so that the
financial performance can be analyzed.
HULAMIN LTD
It is believed by company that there should be
consistent approach for accounting the balance and
treating the stakeholders.
DSM
The qualitative characteristics of financial reporting
have been put with great emphasis so that the
performance of DSM can be easily compared with
reporting entities.
MTN Group
Comparability and consistency
These qualitative characteristics intend to facilitate
comparison and consistent presentation of
information between the reporting entities.

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It is required by user to understand these qualitative
characteristics so that there is consistent
presentation of information.
CEMEX
The company is focused to provide with complete
and relevant information so that the completeness
of financial reporting is enhanced.
HULAMIN LTD
Providing relevant and useful information is of
great importance to stakeholders and this is done by
strengthening internal control system.
DSM
Providing stakeholders with relevant and complete
information is the main objective of the financial
reporting at DSM.
MTN Group
The financial report intends to provide complete
and reliable information to stakeholders.
Completeness and reliability
CEMEX
Maintaining strong relationship with the
stakeholders is the main objective of financial
report at CEMEX.
Relationship with stakeholders

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HULAMIN LTD
The relationship with stakeholders is improved by
formulation of strategies and resolving of any
disputes by using mechanism of dispute resolution.
DSM
Stakeholders are informed about relevant
information by building cordial relationship with
them.
MTN Group
The operation of the company is informed by
company through properly build mechanisms.
Answer to requirement 6:
Factors attributing to similarities and differences that have been identified:
From the analysis presented above, it can be inferred that the financial reporting of all the
chosen organization incorporates the guiding principles of Integrated Reporting. The differences
and similarities between the guiding principles of different companies are evaluated in context of
materiality, completeness, stakeholder relationship and comparability and consistency (Cockrell
2015).

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Conclusion:
From the analysis of the Integrated as well of conceptual reporting framework, it can be
concluded that the integrated reporting’s lacks in proving relevant information to stakeholders in
several fronts. The financial reporting of companies should be improved by making proper
recommendations to the framework that would enhance the financial information presentation.
Activities of decision making are further enhanced by maintaining string relationship with
stakeholders.

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