Accounting Theory: Traditional vs. Integrated Reporting Analysis

This report provides an in-depth analysis of integrated reporting within the context of accounting theory, specifically focusing on its application to Takeda Pharmaceuticals. The report begins by examining the capacity of traditional corporate reporting to address current social and environmental challenges, highlighting the importance of corporate social responsibility and its impact on stakeholders. It then delves into integrated reporting, comparing it to traditional methods, outlining its advantages and disadvantages, and defining its key differences from non-financial reporting. The analysis includes discussions on environmental, social, and governance (ESG) factors, materiality, measurement, and disclosure techniques. The report also assesses the relevance of integrated reporting to various stakeholders and concludes by summarizing the key findings, emphasizing the benefits of integrated reporting in improving business strategies, facilitating operational frameworks, and enhancing communication and decision-making processes within the organization. The report also acknowledges the limitations of traditional corporate reporting, such as lack of conceptual framework and less sustainability.

Accounting Theory
Research

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Capacity of traditional corporate reporting assisting or meet the current social and
environmental challenges.......................................................................................................1
2. Analysing integrated reporting as well as its limitations over traditional corporate reporting
................................................................................................................................................2
3. Defining the way integrated reporting differs from non-financial reporting.....................3
4. Analysing the advantages or disadvantages of integrated reporting..................................5
5. Relevance of integrated reporting to stakeholders ............................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
In the present era, corporate social responsibility is highly significant which in turn helps
in enhancing the brand image of an organisation. On the basis of financial report provided by
various companies, stakeholders who belong to the internal as well as external environment of
firm uses such information and make valuable decisions. In the present assessment, chief
executive of Takeda Pharmaceuticals has proposed to make report over usefulness of traditional
or integrated report for company as well as stakeholders. However, there will be discussion
based on the advantages or disadvantages of such reports as well as their fruitfulness in meeting
the environmental sustainability. It will also shed light on the disclosure of financial statements,
ESG, CSR as well as global reporting initiative along with their impact or efficiency on
controlling the sustainability.
1. Capacity of traditional corporate reporting assisting or meet the current social and
environmental challenges
In consideration with preparing the financial reports for organisation, managers or
accounting professionals must include information such as carbon disclosure projects and
greenhouse gas protocols. Thus, these are the part of such financial analysis which indicate
corporate social responsibilities of organisation (Adams, 2015). The reports facilitated by Takeda
Pharmaceuticals Co. Limited for the assessment year 2016 describe firm's social and
environmental responsibilities towards the patients, business as well as goodwill in the market.
However, this firm is based on manufacturing drugs to give cure to society suffering from any
disease. Thus, CSR reports are the main responsibility of an organisation which describe entity's
impact over society. In includes various terms such as sustainability, corporate citizenship,
sustainable development, financial statements, CSR, environmental as well as social reporting.
However, in context with preparation of such reports, there is the need to make fruitful analysis
of such reports as well as considering their loopholes which are needed to be resolved.
Environmental, social and governance (ESG): Takeda pharmaceuticals Co. Ltd. has
engaged with proper initiative of work performance of organisation in context with protecting
environment as well as producing less damage to it (Flower, 2015). On the basis of
environmental point of view, organisation has been engaged in Paris Agreement as well as
Sustainable development goals (SDGs). However, organisation has developed an action plan as
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Fiscal 2020 in context of reducing environmental impact of medium and long term planning
which includes CO2 emissions, NOx and Sox emissions, Greenhouse gas protocols, waste
disposal as well as fresh water.
Integrated reporting: It will be analysed as per the disclosure of organisational financial
reports which help in measuring the organisational capacity to meet long term debts.
Environmental impacts will be understood by the professionals as it helps in improving
organisational performance (Flower, 2015). It includes financial, manufacturing, social, natural,
human, intellectual relationship as well as material risks. However, Takeda has established the
integrated reporting, incorporating non-financial reporting in context with society, human rights,
environment, etc.
Materiality: It indicates the responsibility of organisation in disclosing information
relevant to material used in financial statement. Thus, it can be said that complete information
which helps in preparation of financial statements is denoted as material. However, it will be
used or analysed by stakeholders as well as investors to make their valuable decisions with
regard to investments or improvement in operational activities (Cai, and et.al., 2014). However,
it includes details such as significant social, economic as well as environmental impact which
provokes stakeholder’s decisions.
Measurement and disclosure: Techniques used in context of solving the global
environmental issues, there is regular inspection or measurement of such tasks performed by
Takeda Pharmaceuticals Ltd. The internal as well as external audit enhances quality,
comparability and creditability of such strategies as well as produces accurate information in
relevance with accounting stability (Caparrós and et.al., 2017).
Corporate performance: Takeda Pharmaceutical has involved the Global Health
Innovative Technology Fund, which operates as to provide founding or financial support to six
Japanese Pharmaceutical entities (Adams, 2015). They also have collaboration with United
Nations Global Compact which gives them Strength in CSR activities as well as ensures the
authenticated informations are used in such documents.
2. Analysing integrated reporting as well as its limitations over traditional corporate reporting
Integrated reporting helps organisation in analysing the financial position as well as it
ensures that all resources are utilised which create value. However, it enhances or improves the
quality in deciding policies or making fruitful strategies. In context of traditional methods of
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preparing reports, the integrated reporting will be profitable as well prompt in providing
information to stakeholders (Freeman and et.al., 2014). Thus, such investors or professionals of
Takeda pharmaceuticals will be able to make accurate decisions in accordance with planning
investments along with improving the internal performance of this entity. However, this
reporting will help professionals in making effective communication for sharing the information
as per designing strategies, governance as well as performance of firm. The limitations of
traditional corporate reporting as per integrated system are:
 Information which is generated from various departments of organisation is highly based
on various costs or expenses incurred by them.
 The compilation of report depends on information generated by various departments such
as purchase, production method, sales as well as promotional process of such units.
 Implementation of integrated reporting as financial technique will help in understanding
the basic ability related with technical knowledge.
 It ensures that complete data or information is used in the preparation of such financial
statements that belong to current economic level, social and environmental crisis,
inflation gap, climate change recession, etc.
 Traditional reporting consists of lack of conceptual or regulatory framework which will
be difficult for stakeholders to make comparison between two periods of reports.
 In traditional aspect, there is less sustainability as it will be hard for the organisation in
making fruitful comparison and then stakeholders may not be able to reach at an
appropriate decision.
 This reporting failed at giving information related with adequate financial position of
organisation as well as would not be able to disclose firm's ability to meet short and long
term expenses.
 For the environmental safety and security, this reporting will not show accurate data
related with Carbon disclosure, NOx and Sox emissions, etc.
3. Defining the way integrated reporting differs from non-financial reporting
Integrated reporting and framework is different from the other techniques. In accordance
with several changes such as:
Stewardship: Here, the stewardship of organisation is on financial capital while in
integrated reporting, this relates with other equity such as human, natural, social and intellectual
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as well as production capital. Thus, uses of such information are based on value chain techniques
which is positive in context of acquiring the authenticated information as well as making proper
execution of corporate social responsibility.
Technological variations: The traditional concept of report still goes for paper work such
as preparing or recording the transaction in registers as well as their regular entry. In accordance
with the integrated reporting, there is implication of use of modern technology such as recording
transactions on the devices as well as on their auditing (Flower, 2015). It has brought drastic
changes in the concept of recording all transactions such as there has been implementation of
cloud data storage which helps professionals at Takeda Pharmaceutical to record transactions
anywhere as well as they can be able to make audit over such stored data.
Focus: The sustainable value creation will be done by the help of current corporate
reporting. Thus, such reports are being prepared in consideration with improvements in analysis
made by an organisation with the help of comparison over both current and previous years
(Caparrós and et.al., 2017). Thus, such examination of accounts facilitate the actual costs of the
operational activities held in premises. It helps in making proper comparison of such accounts
and organisational growth in context with previous records. Integrated method consists of global
reporting initiative which helps in providing the guidelines for environmental sustainability.
Thinking: Non-financial or traditional methods or preparing reports are mainly
considered with storage of stock, funds and the expenses of organisation but such reporting is
connected with the contrary, support and reflects integrated thinking of an entity (Bublitz,
Philipich and Blatz, 2015). It helps managers or accounting professionals to build up the
favourable communication contact on which fruitful decision in favour with organisation can be
made or implemented. Thus, such reporting helps the professionals in analysing fruitful concept
of making cost control, sustainability as well as positive environmental actions.
Time frame: Duration required in the preparation of integrated report is quite short or
prompt as compared to traditional or non-financial methods of preparing such reports. Thus,
preparation of traditional reports will be very much time consuming as well as includes various
errors. In such facilitated documents there will be existence of unauthenticated informations
which will mislead stakeholders in making an effective decision. There will be a threat of having
the unauthenticated data. (Freeman and et.al., 2014). Thus, integrated reporting will be made
with the use of software and devices to calculate such transaction so it will be fruitful in
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gathering the favourable information related with financial position and turnover generated by an
organisation.
Adaptive: Traditional methods of preparing reports consist of claim and hindering as well
as they depend over proper judgement on any loopholes. Thus, integrated reporting were
constituted over universal principle which in turn facilitate professionals as well as stakeholder
to understand the importance of disclosure of such documents as well as enerate the
consciousness regarding environmental issues. Hence, integrated reporting is the wider concept
as it has various reporting tools such as GRI, CSR as well as CO2 emission ratings which in turn
helps organisation or stakeholders to have valuable information.
Trust: Integrated reporting depends on the current increasing trend of Voluntary
disclosure, sustainability reporting as well as IIRC claims. Here, organisation has to disclose all
such information and brings the transparency in their reporting in context with gaining trust of
stakeholders (Bublitz, Philipich and Blatz, 2015). With the help of such reports, business may
earn faith in minds of stakeholders. For instance, Takeda Pharmaceuticals need to present
information such as CO2 emission and other environmental factors to the stakeholders which
describe environmental sustainability. However, traditional approaches would not bring such
crystal clearance in such reports.
G4: Integrated reporting has several features such as CSR and various environmental
sustainability presentation (G4 Sustainability Reporting Guideline, 2017). However, global
reporting initiative as well as G4 consists of effective guidelines in controlling issues such as
wastage, recycling of such materials, etc. It guides organisation in making fruitful allocation of
the resources.
4. Analysing the advantages or disadvantages of integrated reporting
Integrated reporting has some benefits or demerits in context of organisational operations.
However, here are some merits and demerits of this reporting technique on the basis of agency,
legitimacy as well as stakeholder theories:
Advantages:
Improves the business strategies: Integrated reporting is based on analysis of current
year's information and on previous year's data. Thus, it will be profitable for the managers or
accountant in Takeda Pharmaceutical to design the budgets as well designing strategies for
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operational activities in organisation (Bernardi and Stark, 2016). It will be beneficial in changing
policies or rules set by professionals on the basis of frequent changes or requirements in business
activities.
Facilitate the operational framework: Authenticated or specific information helps the
organisational professionals in making strategies or designing framework to make proper control
over costs or expenses incurred. There will be mentioned information in relevance with cost of
operations as well as earnings over such activities (The benefits and downsides of Integrated
Reporting, 2017). In context with environmental issues, there has been decision made in respect
with developing such techniques where the organisation can make reduction in wastes or
promote recycling of such material or resources.
Helps in creating profitable valuation for stakeholders: Investors or shareholders of an
organisation seek profit or turnover earned by organisation. On the basis of such revenue
generated by business, they make investments such as purchasing the shares as well as
debentures and have profitable earnings and gains for entity on disclosure of such financial
statements.
Beneficial in connecting units: Information of such reports must be regulated in the
entire operating department in organisation. It brings connectivity in business as it will be
effective in resolving the problems or obstacles faced by any unit (The benefits and downsides of
Integrated Reporting, 2017). It builds up the unity in the industry as all the departments are
connected to each other and during the peak work load they can divide such pressure. It helps in
smooth functioning of business.
Improvements in business performance: Integrated reporting contains valid or specific
data that is gathered from the authenticated sources (Baboukardos and Rimmel, 2016). This will
be fruitful for the organisation in making improvements in operational activities such as
motivating workers to improve performance, changing pricing techniques, controlling expenses,
implementation of environmental safety rules, etc.
Disadvantage:
following are the demerits of Integrated reporting:
 Reports consist of new accounting standards which will be complex to understand by
accountants in organisation.
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 There will be lack of experience or tested standards and so, it cannot be said that such
data is relevant or adequate.
 It brings down the clarity of information.
 There will be possibility of substitute information.
 These reports do not contain any guidance or procedure so an accountant would not be
able to understand the procedure of preparing it.
5. Relevance of integrated reporting to stakeholders
Theories in relation to integrated reporting include legitimacy, stakeholders and
voluntary. This in turn helps the organisation in making fruitful efforts for retaining stakeholders
of organisation. There can be use of various techniques to bring enhancement in operational
activity of capital or corporate market.
Legitimacy theory: This theory describes the actual position of firm as compared with its
desirable targets. It helps in making fruitful organisational behaviour which established the
corporate legitimacy (Bublitz, Philipich and Blatz, 2015). Such methods help stakeholders in
analysing the performance of such entity that assists in making investment decisions.
Stakeholder engagement theory: In this context, organisation makes efforts in retaining
maximum number of stakeholders in favour with gaining profitable investment which helps in
bringing up the strength to enhance capital structure (Garanina, and et.al., 2017).
Voluntary theory: This theory helps professionals in preparing accounting disclosure on
the basis of costs or full Disclosure of such accounts which help an organisation in improving
performance as well as bringing innovative ideas to gain higher profitability (Cai and et.al.,
2014). Thus, it helps business in improving the environmental performance as well as controlling
greenhouse gas emissions.
CONCLUSION
From the above report, it can be concluded that Takeda Pharmaceuticals Co. Ltd. can
analyse various accounting theories and financial tools with the help of integrated reporting. It
includes various tools such as CSR and GRI reports which help the managers in making fruitful
efforts in controlling environmental issues. Thus, here some suggestions were generated to
compress or lower down the wastage or recycling such resources. Further, it can be said that this
firm has been engaged with some environmental health and safety contracts such as Paris
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agreements and sustainable development goals (SDG). Hence, this business has adopted the
integrated reporting system over traditional corporate reporting which helps in providing specific
information to stakeholders.
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