Foundations in Accounting – A Critical Analysis Report

This report presents a critical analysis of John Flower's paper, "The International Integrated Reporting Council: A Story of Failure." The report examines Flower's viewpoints on integrated reporting, focusing on sustainability, the disparity between theory and practice within the International Integrated Reporting Council's principles, and the overall effectiveness of integrated reporting. It discusses the council's role in supporting integrated reporting for investors and stakeholders, the importance of sustainability, and the alignment of integrated reporting with corporate success. The analysis evaluates Flower's claims, acknowledging both the strengths and weaknesses of integrated reporting, while also considering its potential for improvement. The report concludes that while Flower's assessment highlights areas for development, integrated reporting is not necessarily a complete failure but rather a process with considerable scope for enhancement, particularly in addressing sustainability and aligning with the needs of stakeholders.

Running head: FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
Foundations in Accounting – A Critical Analysis
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1FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
Executive Summary
This paper aims to present a critical analysis of the paper by John Flower named The
International Integrated Reporting Council: A story of failure. John Flower being a expert has
very clearly jotted down the drawbacks of Integrated Reporting and has thus provided a scope
for the improvement of Integrated Reporting as a process. John Flower has thrown light on
aspects such as sustainability, disparity between practice and theory of the principles set by
International Integrated Reporting Council. John Flower has been partially correct with his
viewpoints, but Integrated Reporting following the proper rectifications and
recommendations can go a long way. Therefore it is not a story of failure provided there is
ample scope of improvement.

2FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
Table of Contents
Part 1..........................................................................................................................................3
Introduction............................................................................................................................3
Discussion..............................................................................................................................3
Conclusion..............................................................................................................................8
Part 2..........................................................................................................................................9
Video Transcription...............................................................................................................9
References................................................................................................................................11

3FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
Part 1
Introduction
Integrated reporting is a process that gathers material information from the financial
statements of the organization and other aspects of business like the strategy or plan adopted
by the organization, the performance of the organization and its scope to prosper in order to
get a clear picture of the social, environmental and commercial context inside which it works.
In short it aims to provide a clear idea about how an organization creates and maintains value
in business (Jensen & Berg, 2012).
The International Integrated Reporting Council is an establishment or council which
was created in order to support investors and other stakeholders of business taking up
integrated reporting as a method of accounting. It was launched by the Prince of Wales along
with other international partners. It acts as a coalition of all stakeholder involved in the entire
process of business like the regulators or investors. The International Integrated Reporting
Council results in a clear image of the utilization and effect of the business resources on
which the prosperity of the business depends. It creates a bridge between the organization’s
success and the goodwill it makes for its stakeholders (Aceituno, Rodriguez‐Ariza, & Garcia‐
Sanchez, 2013).
In this study a critical analysis of John Flower’s report, The International Integrated
Reporting Council: A story of failure has been presented. It aims to provide a view about the
prediction of John Flower whether his views can be supported or not de (Villiers, Rinaldi &
Unerman, 2014).

4FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
Discussion
John Flower’s purpose in analyzing integrated reporting is limited to the extent till
which it clearly considers sustainability (Flower, 2015). But the purpose of integrated
reporting is not limited in doing this. Rather, it is more about being a witness to the early
stages of revelation of various ways of thinking about corporate success(Frias‐Aceituno,
Rodríguez‐Ariza & Garcia‐Sánchez, 2014). Research that is concerned with disclosure of the
corporate data in the society should be changed as given, as the disclosure patterns when
changed are controlled or governed by a concern with the main purpose of profit
maximization. John Flower’s paper suggests that the potential capacity of integrated reporting
to result in change is dependent on the extent till which it leads to a source of disparity
important enough to change the perspective of the managers in order to maximize profit. It is
apparent from John Flower’s report that he is a supporter of the concept of idealism and
magnifies the intentions that are worthy and thus concludes that integrated reporting as a
process would have a long tenure. It sincerely attempt to inspire accountants to introspect and
reflect or think longer, dig deep into what value means and other related worthy aspects
(Abeysekera, 2013).
John Flower aims to offer a brief analysis of the International Integrated Reporting
Council and lastly comes down to the cynical conclusion that gradually with time integrated
reporting will run out of its sole objectives. Flower’s analysis is influenced by explicit
judgments that integrated reporting has strongly been diluted with time. Flower in fact is of
the opinion that the stronghold principles and system developed by the council has gradually
faded from 2009 to 2014. John Flower very successfully has been able to identify some
serious disparities between the objectives of the Integrated Reporting and its implementation
or practice in real life (Cheng et al., 2014). In spite of the well knitted structure and a clarified
framework it is impossible to deny the fact that the process does become less influential when

5FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
implemented. John Flower has very clearly mentioned in his paper that the use of integrated
reporting is limited to its theoretical scope. According to Flower the practical use of
integrated reporting has become much more diluted and with error. On the other hand it is
also not possible to deny the sincere effort by the International Integrated Reporting Council
to gather and establish a generally and globally accepted principle of reporting and
accounting. Integrated reporting is the most popular and widely accepted form of process for
corporate social reporting and has been assumed to have a long survival period. It is not at all
agreeable to argue against the virtues of International Integrated Reporting Council as it has
founded principles which are clear, consistent and comparable. John Flower also comments
on the capability of the process to fulfill or meet up to its social and environmental objectives
(Frías-Aceituno, Rodríguez-Ariz & García-Sánchez, 2013). John Flower in his paper very
accurately focuses on the incompatibility or the sense of mismatch of traditional reporting
practices, sustainability and capitalism. Here arises a universal and all time controversial
issue which discusses that capitalism is superior to sustainability. The five sources of
integrated reporting that reduces sustainability are divided into five sources of corporate
value. The sole purpose of Integrated Reporting is that it is essentially an accounting practice
that is used for managing and governing novel risks that stand upright in front of
corporations. Thus Integrated Reporting can be referred to as a sustainable source of
accounting system that grows on the brawns of accounting such as detailed, verifiable,
relevant data which is highly helpful for the decision makers of the organization. Integrated
Reporting has the ability to create a clear view and detailed information of the consequences
that are of financial nature of consuming capitals and produce a different tool to reassess
organizational practices (Rensburg & Botha, 2014). Flower however is of the opinion that
financial stability and sustainable discourses are compulsory and vital for capitalism to
succeed. John Flower in turn concludes that professional practice of Integrated Reporting is

6FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
not at par with the concept of capitalism (Stent & Dowler, 2015). John Flower’s viewpoint
that the principles and policies of Integrated Reporting does not clearly match or is
incompatible with its professional or practical practice is not completely true because
Integrated Reporting is created with an intention to make in line the reported information
with the needs of the investors, give error free non financial information, enhance the trust in
the relationship with key stakeholders, result in better decisions regarding resource allocation,
decreasing costs, improve management of risk and reputational risk and also reduction in the
cost of capital (Crowther, 2016).
The Integrated Report shares a lot of features with the traditional practices of
accounting like it includes a well informed and detailed Balance Sheet and also prepares a
specific plan or mapping of strategy for the organization. It does not follow the sustainable
accounting practices done to instill sustainability into the everyday practices of the firm.
John Flower in his analysis of the paper of Integrated Reporting has stated that the primary
objective of Integrated Reporting is diverse and out of the scope of integration and is
recognized with the incompatible nature of these objectives and the problem to accommodate
them all in a single report. John Flower also pointed out a clear by pass from the desire to
install sustainability into the Integrated Report (Eccles & Kiron, 2012). Achieving
International Integrated Reporting Council’s objectives has been assumed to somewhat arise
on the account of new information. Integrated Reporting on the other hand deduces
sustainability as if leading to profit that is if sustainability leads to value creation then the
sustainability of the investors and other key stakeholders of business are protected through
better risk management policies. Thus it can be concluded that Integrated Reporting leads to
the much acclaimed trickledown theory where in the revenue earned by large corporations

7FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
trickle down the hierarchy chain and a part of such revenue is earned by the employees and
the stakeholders at the end of the chain. Integrated Reporting is based on the common
assumption of citizens with democratic power in hand and capable and agreeing to check
rewards as a token of appreciation and disciplinary punishments to large self centered firms
using dividing practices. There is some level of significance in the attempt to prepare an
annual report of corporate indecencies, but it is also important to judge whether the Integrated
Report is enough to point out the acts of indecency.
Integrated Reporting uphold a neo-liberal programmatic and put in the elements that
are required for the effective establishment of sustainability that are in line with the primary
capitalism principles. This probably does not intend to mean that Integrated Reporting and
thinking or research will not lead to any positive environmental and social changes. However,
the detailed content of an Integrated Report builds the particular areas of common reference
between the sustainability and the corporate practices that are local in nature (Sierra‐García,
Zorio‐Grima & García‐Benau, 2015). Here John Flower argues that the structure or the way
in which Integrated Reporting is constructed is not perfect because the entire flow of the
process focuses more on the sustainability rather and throws no light on the substantial and
equal distribution of power. It is not possible to get as to how these uncontrolled integrated
reports can lead to ability of system sustainability reforms. Therefore it can be easily
understood how Integrated Reporting has the capability to silence the vital components of the
sustainability (Thomson, 2015). If Integrated Reporting is a sincere effort to better the
capability of corporations in order to enable them to make much further sustainable decisions
then it has to accept and fulfill the challenges to be dealt with utmost priority posed by the
unsustainable society (Busco et al., 2013). An integrated report should have to consider the
features of what would contain a reasonable corporation working in a sensible world. An
Integrated Report should be held responsible for all the unreasonable outcomes of their

8FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
intentions and actions. An Integrated Report should be prepared in such a way that it informs
others how a particular firm is participating in the process of sustainable transformation by
throwing light upon the inter as well as intra relationships and results of their actions on
economic and social systems. John Flower in his paper clearly mentions that the International
Integrated Reporting Council should develop a clear and in depth understanding of the
sustainability programmatic. Integrated Reporting also appears to be a process with well
directed intentions that leads to initiate a desire to do something productive and therefore it
does utilize its potential ( Bartocci & Picciaia, 2013). However, as it can be understood it is
too deeply rooted in the flow of business for reasonability rather than the sustainability or
reasonability for business. John Flower’s analysis further adds to a gradually increasing
structure of evidence that leads to International Integrated Reporting Council have been more
of a concept than a practice (Brown & Dillard, 2014).
Conclusion
Thus it can be concluded from the study that according to the framework, the
International Integrated Reporting Council has not put any focus on sustainability accounting.
It assumes this conclusion on two considerations: that the International Integrated Reporting
Council’s meaning of value is value that is concerned with investors’ and not value for world
and that the International Integrated Reporting Council keeps no burdens on organizations to
register harm done on bodies that are outside the boundary of the firm where the impact on
the firm is probably nil (Serafeim, 2015). The paper also comes down to the view that the
International Integrated Reporting Council’s recommendations will most probably have very
little effect on practice related with corporate reporting, because of their lack of force(García-
Sánchez, Rodríguez-Ariza & Frías-Aceituno, 2013). The paper also forwards the
International Integrated Reporting Council’s major drawback of not putting any sustainable
accounting to the constitution of the governing council of the Integrated Reporting. Another

9FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
drawback is that the policies and principles of International Integrated Reporting Council are
dominated by the profession of accountancy and the multinational enterprises which have
huge effect on business. Lastly it can be concluded that, the International Integrated
Reporting Council is a victim of regulatory capture.
Part 2
Video Transcription
The entire study is about the critical analysis of a paper written by John Flower on
International Integrated Reporting Council. The name of the paper is The International
Integrated Reporting Council: A story of failure. Here in this paper John Flower discusses the
drawbacks of Integrated Reporting. His paper is of the view that the potential capacity of
integrated reporting that leads to change is utterly dependent to that extent till which it leads
to a source of disparity or leads to a difference important enough to change the way the
managers think in order to lead the firm to a goal of profit maximization. It is clearly
apparent from John Flower’s report that he stands strong as a supporter of the concept of
idealism and magnifies the intentions that are worthy and thus concludes that integrated
reporting as a process would have a long tenure. John Flower as an analyst aims to offer a
brief analysis of the International Integrated Reporting Council and lastly comes down to the
negative conclusion that gradually with time integrated reporting will run out of its sole
objectives. Flower’s analysis reflects explicit judgments that the integrated reporting has
strongly been diluted with time. He strongly suggests that there is a major disparity in the
objectives of Integrated Reporting as penned down and as practiced. Flower in fact is of the
opinion that the stronghold principles and system developed by the council has gradually
faded from 2009 to 2014 that is it has gradually loosened its grip from the date of its
foundation till the present time (Stubbs & Higgins, 2014). But John Flower’s viewpoint that

10FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
the principles and policies of Integrated Reporting does not clearly match or is incompatible
with its professional or practical practice is not completely true because Integrated Reporting
is created with an intention to make in line the reported information with the needs of the
investors, give error free non financial information, enhance the trust in the relationship with
key stakeholders, result in better decisions regarding resource allocation, decreasing costs,
improve management of risk and reputational risk and also reduction in the cost of capital.
The International Integrated Reporting Council is of critical acclaim and has put up a
laudable effort in compiling a collection of generally accepted principles which are clear,
concise and to the point and has made the entire process of accounting easy and has in turn
helped the decision makers in taking proper decisions. But John Flower correctly points out
another drawback in the reporting that Integrated Reporting provides no focus on the
sustainability which is a major issue in the path of implementation of Integrated Reporting.
John Flower in his paper clearly mentions that the International Integrated Reporting Council
should develop a clear and in depth understanding of the sustainability programmatic,
therefore keeping these points in mind it should be concluded that Integrated Reporting is not
a story of failure and with proper rectifications and recommendations, Integrated Reporting
as an accounting management process can really be effective and useful.

11FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
References
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Brown, J., & Dillard, J. (2014). Integrated reporting: On the need for broadening out and
opening up. Accounting, Auditing & Accountability Journal, 27(7), 1120-1156.
Busco, C., Frigo, M. L., Quattrone, P., & Riccaboni, A. (2013). Redefining corporate
accountability through integrated reporting: What happens when values and value
creation meet?. Strategic Finance, 95(2), 33-42.
Cheng, M., Green, W., Conradie, P., Konishi, N., & Romi, A. (2014). The international
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Crowther, D. (2016). A social critique of corporate reporting: Semiotics and web-based
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reporting is the future of corporate reporting. MIT Sloan Management Review, 53(3),
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12FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
Flower, J. (2015). The international integrated reporting council: a story of failure. Critical
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13FOUNDATIONS IN ACCOUNTING – A CRITICAL ANALYSIS
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