Advance Management Accounting: Integrated Reporting Framework Essay

This essay examines the relevance of the Integrated Reporting (IR) Framework in the contemporary corporate world. It begins by introducing the IR framework, highlighting its importance in addressing sustainability issues and providing a comprehensive view of a company's value creation. The essay then analyzes the application of the IR framework, focusing on a case study of Wesfarmers Ltd, an Australian retail company. The analysis includes an examination of Wesfarmers' sustainability reports and the six capitals approach: financial, manufactured, intellectual, human, social and relationship, and natural. The essay demonstrates how Wesfarmers uses the IR framework to communicate its strategies, governance, and future prospects to stakeholders. It concludes by emphasizing the benefits of the IR framework in maintaining sustainability and reporting on the value created by the business. The essay references key academic sources to support its arguments and provides a detailed overview of the framework's practical application.

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

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Introduction to Integrated Reporting Framework
In the modern era, the significance of financial reporting framework has enhanced
significantly which is mainly due to the growth of different industries, sustainability issues and
also due to the various scandals which has taken place in the global economy. There was a call to
a better approach in the reporting framework so that an efficient and sustainable approach can be
adopted which effectively showed how the activities of the business created value for the
community at large (Stubbs and Higgins 2014). Integrated reporting framework was developed
which ensured that the reports which were prepared by the management of the company had
various aspects of sustainability and value creation covered in the same (De Villiers, Rinaldi and
Unerman 2014). The practice of integrated reporting did not only focus integrating the
approaches of the business towards economic and various social activities but also appropriately
demonstrated how value was being created from the operation. In addition to this, the reporting
framework also become a concise way for making communication regarding various factors
which are associated with strategies, governance and other future prospects of the company.
Discussion
Analysis of Reporting of Wesfarmers Ltd
The assessment considers a company which has adopted integrated reporting framework
and also discuss which aspects are being reported by the management of the company. The
company which is selected for this purpose is Wesfarmers ltd which is one of the listed
companies which is in Australia. The company which is considered is engaged in retail business
and provides customers products and in fact the company is recognised as one of the giants in the
retail business operating in Australia. The company follows the integrated reporting framework

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so that the management can shows the stakeholders that the business is looking after theirs needs
effectively (Cheng et al. 2014).
The reason due to which integrated reporting framework has become so important is
mainly because the businesses has realized that the needs of the stakeholders can affect the
business operations and profitability. Another major benefit of implementing integrated reporting
framework is that the same can assist in internal decision-making process and help the business
to maintain long term sustainability in the business. One of the major approaches which is
followed in the integrated reporting process is the six capitals approach. This approach has
contributed greatly to maintaining sustainability in a business and also in strategic management
of the business.
In the case of Wesfarmers ltd, the integrated reporting process is closely followed is
evident from the sustainability reports of the business and also the annual report which is
formulated by the management of the company. The sustainability report for the year 2018
shows that the management has put in significant efforts to fulfil the needs of the stakeholders of
the business and the community at large. Wesfarmers supports the Sustainable Development
Goals (SDGs) which are set by the united nations. The company has adopted some of its own
goals for the purpose of meeting the sustainability requirements and for the purpose of creating
value for the organization. Some of the major goals covers certain major issues such poverty,
gender equality, hunger issues, health and hygiene and climate changes. The sustainability report
also shows that the management of the company has been able to reduce injuries to employees,
protect and conserve the environment and provide support to the community.

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Figure 1: (Eight major Goals of Wesfarmers)
Source: (Wesfarmers Sustainability Report 2019)
Figure 2: (Progress of Wesfarmers in Different aspects)
Source: (Wesfarmers Sustainability Report 2019)
The above figure shows the major areas which are considered by the management of
Wesfarmers for the purpose of creation of value and also for maintaining sustainability of the
business. The above chart represents the performance for the year 2018 and covers the aspect of
sustainability accordingly (Brown and Dillard 2014) . In an overall estimate the company has

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contributed around $ 86.6 million towards the needs of the community at large which includes
salaries and wages paid to employees.
Six Capital Approach
The six capitals approach which is followed closely in integrated reporting framework
allows the management to identify the areas where focus is required and helps in creating value
for the business. The different types of capitals which are considered in this approach are listed
below in details:
 Financial Capital: The financial capital depicts the money or funds which is used by
businesses for meeting the obligations of the business on day to day basis and also
financing different activities of the business. The financial capital is invested in a
business so that the management can generated revenues from the activities which are
conducted by the business (Eccles and Serafeim 2015). In the case of Wesfarmers ltd, the
management of the company generally depends on equity and debt sources for
accumulating capital and in addition to this also has retained earnings for financing the
activities of the business. Manufactured Capital: The manufactured capital represents the purchased or
manufactured products of the business. In the case of Wesfarmers, the company generally
retails products to the final consumers and therefor most of the products which is on offer
is purchased or developed by the business. The products which are offered includes food
items, clothes, accessories, appliances and other kind of products. The business is able to
create value by offering different varieties and brands of products under the same roof.

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 Intellectual Capital: These types of capital also forms an integral part of the business and
refers to the innovations and developments which are brought about by the management
of the company. Such capital are used by the business for the purpose of developing a
competitive advantage in the market and appropriately face competition (Beattie and
Smith 2013.). The management of Wesfarmers are always involved in innovation as the
level of competition in the market is significantly high. The company has successfully
implemented the use of drones for surveillance of CSBP’s ammonium nitrate facility.
Therefore, it can be said that the management of the company has taken significant steps
to ensure that environment is safe and a level of sustainability is maintained. Human Capita: The employees and staff who are working the organization forms part of
human capital of the business. This type of capital closely analyses relationship which is
established between the employees of the business and the management. The employees
are considered to be the life force of an organization and therefore it is essential that the
management needs to maintain such capital for the purpose of ensuring that proper
revenue is generated by the business (Fonseca, McAllister and Fitzpatrick 2014). In the
case of Wesfarmers, the sustainability report of 2018 shows that the management
considers the needs of the employees perfectly. There have not been any issues regarding
pay or malpractice. The company also carries out it responsibility towards the community
by employing more candidates and meeting the employment requirement to the company. Social and Relationship Capital: This capital expresses the relationship which is
established by the business with the external stakeholders and community at large. Social
and Relationship capital includes effectiveness of supply chain management, community
acceptance, government relations and relationship with competitors. In the case of

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Wesfarmers ltd, the management if the company has effective relationship with all its
suppliers, employees and customers at large. The company puts special emphasis on the
satisfaction level of the customers. The customers are the main revenue generating unit of
the business and therefore the opinion of the customers are considered to be important by
the management of the company. Natural Capital: The nature capital comprises of natural resources which is used by the
management for the purpose of ensuring that the management is able to maintain its
operations. In the case of Wesfarmers ltd, the business is in the retail business therefore
the company does not require to use nature capital for the purpose of creating value for
the customers as they are already selling manufactured products in retail business.
Conclusion
The above discussion shows the use of six capitals by businesses for the purpose of creating
value for the business and then the same van be reported to the customers through integrated
reporting approach. In addition to this, all the major decisions which are taken by the
management are based on such reports which are formulated. In the case of Wesfarmers ltd, the
company uses integrated reporting approach in order to maintain and demonstrate to the
stakeholders of the company that the business is acting in the best interest of the stakeholders.
Therefore, the benefits which are associated with integrated reporting framework is quite evident
as the same helps in maintaining sustainability and reports effectively on the actual values which
are created by the business over time.

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Reference
Beattie, V. and Smith, S.J., 2013. Value creation and business models: refocusing the intellectual
capital debate. The British Accounting Review, 45(4), pp.243-254.
Brown, J. and Dillard, J., 2014. Integrated reporting: On the need for broadening out and opening
up. Accounting, Auditing & Accountability Journal, 27(7), pp.1120-1156.
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.
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 Serafeim, G., 2015. Corporate and integrated reporting. Corporate
Stewardship: Achieving Sustainable Effectiveness, p.156.
Fonseca, A., McAllister, M.L. and Fitzpatrick, P., 2014. Sustainability reporting among mining
corporations: a constructive critique of the GRI approach. Journal of cleaner production, 84,
pp.70-83.
Stubbs, W. and Higgins, C., 2014. Integrated reporting and internal mechanisms of
change. Accounting, Auditing & Accountability Journal, 27(7), pp.1068-1089.
Wesfarmers Sustainability Report (2019). 2018 released . [online] Wesfarmers.com.au.
Available at: https://www.wesfarmers.com.au/util/news-media/article/2018/09/16/2018-
wesfarmers-sustainability-report-released [Accessed 9 Feb. 2019].