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(PDF) Integrated Reporting: The Future of Corporate Reporting

Added on - 20 Sep 2021

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Running Head: Integrated Reporting
Integrated Reporting: A future of Corporate Reporting
Integrated Reporting1
Integrated Reporting: A future of Corporate Reporting
Corporate reporting is the practice undertaken by the company to communicate with its
stakeholders to meet their information needs. The stakeholders of the company hold certain
interest in direct or indirect ways and hence they require various information regarding
company’s business activities and its overall performance in order to undertake sound and
informed decision making in the matters in which they are associated with the company.
Corporate reports which are commonly known as annual reports primarily contain the
information regarding the economic activities and financial performance during a particular
year. However, in the rapidly changing globalised world, the business of the corporate
entities are getting complex. On account of this, the information needs of the stakeholders are
also continuously growing (Bhasin, 2017). For investors the current framework of corporate
accounting does not meet their information requirements completely. Information about only
financial performance does not help the investors and other stakeholders to assess the overall
performance of the reporting entity. Thus, provision mere financial information does not
serve the core purpose of corporate reporting. Information regarding managerial quality,
company’s brand reputation, governance practices, risk and opportunities available to
company, company’s initiatives towards social and environmental protection are yet to be
incorporated in the corporate reports to make them more relevant to the stakeholders of the
company. In the modern era, it is generally believed that that the companies take socially and
environmentally responsive actions have more potential to create more shareholders’ value.
In response to the developing economic reality the corporate accounting must be kept at pace
so that the information needs of the interested parties could be met by providing both the type
of information: financial and non-financial one considering short term as well long term
purpose. Integrated reporting is the new and modified approach of corporate accounting.
Integrated Reporting2
Integrated reports are those reports that cover financial highlights of the business and along
with the financial information it also covers the information regarding the company’s
performance towards its social and environmental practices and various regulatory
compliances (Schaltegger & Wagner, 2006).
At present there do not exist any framework of integrated reporting that is accepted at the
universal level. However, many researchers and regulatory bodies have realised the need of
making the provisions of reporting of financial and non-financial information by the
corporate bodies as the mandatory provisions. Corporate reporting just like any other
business activity must be kept on traction with the evolving economic reality and must
address the needs of the wider base of stakeholders(Young, Cohen & Bens, 2018).
Technology is significantly and certainly changing the way corporate reporting is undertaken.
Changes in technology have extended the scope of possibility of accessing the corporate
information by the stakeholders and hence the information needs of stakeholders are growing
rapidly(Lipunga, 2015). On the premise of rapidly growing information needs the content of
the corporate reports must be extended so as to satisfy the shareholders and other
stakeholders (Schaltegger & Wagner, 2006).
Unfortunately, the existing framework of traditional corporate reporting is losing its
relevance in the eyes of the stakeholders of the companies because of growing business
complexities and scope. Many experts have discovered that mere dissemination of financial
information does not serve the basic purpose of corporate reporting and hence the scope of
corporate reports must be expanded to include all those matters that are generally considered
as material for the user’s decision making (Bhasin, 2016). Also, it has been argued by various
researchers that the current financial reporting does not provide information on timely basis
and also financial reports are overloaded with the information which are not even relevant for
the users in their decision making. On the other side, non-financial reporting is current at its
Integrated Reporting3
initial stage of its development and hence it is facing numerous challenges to make its mark
(Erol & Demirel, 2016).
It is firmly believed that high-quality of reporting of business information lies at the heart of
strong and sustainable organisation, markets and the economies at times. Looking at the
importance of quality reporting the landscape of corporate reporting is rapidly changing.
However, the broadening the scope of business performance and reporting is still a debatable
and complex issue to be completely resolved (Thomson, 2015). Currently, many
organisations are voluntarily indulged the preparation of integrated reports as they are well
aware of the benefits of adopting the principles of corporate reporting. Integrated reporting is
currently observed to deliver a great impact on the corporate reporting community. In a short
time-frame IR has considerably changed the landscape of corporate reporting (Churet &
Eccles, 2014). With each passing year the number of companies that are complying with the
IR framework on a voluntary basis is increasing and it can be estimated that integrated
reporting shall become the universal practice at-least for the listed entities in the next coming
5-10 years. The integrated reports will replace the traditional corporate reports in the near
future (Owen, 2013).
Integrated reports take together the financial as well as non-financial measures related to an
entity on a common piece of report ((Juma, Tumwebaze & Orabia, 2017). Typically, an
integrated report aims at achieving simplicity and clearly stating about its financial as well as
sustainability practices towards the compliance of environmental, social and governance
standards(Association of Chartered Certified Accountants, 2017). This report shows clearly
the connection between the financial and non-financial performance metrics. The traditional
metrics for the measurement and valuation of economic performance is no longer providing
the complete picture of corporate performance(Busco, Frigo & Riccaboni, 2013). Recently in
2017, the International Federation of Accountants has published a paper that states that
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