Should Non-financial Info Be Included in Financial Reports?

This report investigates the inclusion of non-financial information within the conceptual framework for financial reporting. It argues for the importance of incorporating social and environmental data, alongside traditional financial metrics, to provide a more comprehensive view of a company's performance. The report examines why current frameworks often exclude this information, citing the primary focus on shareholder financial interests and standardized reporting formats. It highlights the significant impact non-financial factors have on a company's financial performance and strategic planning, emphasizing elements like political factors and customer perception. The analysis includes case studies of two Fiji firms, examining their annual reports to assess the extent of non-financial information disclosure and comparing the quality of this information. The report concludes that the inclusion of non-financial measures, such as employee turnover and performance, is crucial for a complete understanding of a company's overall health and for informing stakeholders. The report suggests that Fiji firms should incorporate non-financial measures in their annual reports to provide comprehensive insights to users.

Should Non-financial
Information be included
in the Conceptual
Framework for
Financial Reporting?

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The financial reports are very crucial for companies as these help in assessing the actual
financial position of companies (Maroun, 2015). Generally, in theses financial reports such as
balance sheet, income statements etc. consist only financial information by ignoring non
financial information. In the project report, it is mentioned that whether the non financial
financial information should include in financial reports or not. For understand it in better sense
two companies' annual reports are analysed.
MAIN BODY
1. Why the Framework does not include social and environmental information/issue.
The framework for preparation of financial reports includes those business activities
which are related to financial transactions. It is so because there is no provision to include the
non financial information in the financial statements. Though non financial factors effect the
profitability of companies but these are not included in the framework. In the aspect of annual
reports of the entities, only information regarding to financial information is included by
neglecting social and environmental informations. Herein, below reasons are mentioned due to
which social and environmental information is ignored in annual reports:
 Due to purpose of annual reports- This is the main reason for which non financial
informations are ignored from the annual reports. The purpose of annual reports is to
provide information about company's financial position to the internal and external
shareholders. The shareholders do not want to know about social and environmental
factors they only need to get information about financial condition of company. This is
why social and environmental informations are ignored.
 Due to fixed format of annual reports- Another reason for ignorance of non financial
information is that companies follow a particular format to prepare the annual reports
(Adams, Houldin and Slomp, 2017). The most common format includes information such
as company's mission, business segment, company's growth, information of company's
director, success stories etc.

So these are some common reasons by which social and environmental issues are ignored from
the annual reports.
2. Importance of social and environmental information for framework.
The social and environmental information is not included in the annual reports as it is not
required by shareholders. This is wrong because these non financial factors have their significant
impact on the profitability of companies. These are very important for perspective of company
because social and environmental information consists various elements like political, customers
perception etc. that can impact to company's operations. Apart from it, companies make their
plans and policies as per the social, environmental information. Hence, this is important that
these information should be included. Below importance of non financial information is
mentioned:
 Impact on company's performance- The non financial information such as social and
environmental information have their significant impact on the company's financial
performance (Mio and Venturelli, 2013). It is so because companies are depended on the
environment and make their policies accordingly.
 Helpful in preparation of strategies- As well as the social and environmental informations
are beneficial for preparation of the strategies. This is so because companies make their
plans and policies as per the current condition of environment and social factors.
3. Analysis of annual reports of two Fiji firms to evaluate whether it include non financial
information or not.
Formerly Flour Mills of Fiji Limited (annual report 2018)
The company's annual report is given of year 2019 in which detailed information is given about
different types of financial statements as well as many other informations. In their annual report,
both environmental and social information is included. The environmental information is about
increasing the prices of food products due to higher demand of customers. It is an environmental
factor that can influence the profitability of above company. Apart from it, another
environmental factor which is included in annual report is about disaster that caused due to TC
keni in year 2018. Along with this can effect the company's revenue in future.

The social information in annual report is about election in Fiji country that can help in growing
to company. This is so because government will promote to companies by keeping the taxation
policies favourable.
Future Forests (Fiji) Limited (annual report, 2018)
In this company's annual report environmental and social information is included which is
related to promoting the production of long term assets in rural areas. Due to this, there will be
more employment and income generating sources for public. Hence, it is the information related
to social and environmental factor is included in annual report.
4. Comparison of quality of non financial information included in both companies' annual
report.
In both companies' annual reports non financial information is included specially about
environment and social factors. Both companies' disclosed different kind of information which is
compared below:
Basis Formerly Flour Mills of Fiji Limited Future Forests (Fiji) Limited
Information In this company's annual report
social and environment information
is included that is about election in
the country that can impact their
profitability in a positive manner.
Along with, environmental
information is also included related
to the disaster.
In this company's annual report, social
and environmental information is
included which is linked with the
providing job opportunities in rural
areas by starting production of timber
assets.
Nature of
information
This company's non financial
informations are specific because it
consists both social and
environmental information. As well
as these informations are impacting
to company's financial performance.
While this company's non financial
information is useful as it is directed
towards the development of rural areas.

Apart from these non financial informations, they may include some other informations such as
government regulations and taxation (Cohen and Karatzimas, 2015).
Reflection
In my opinion, conceptual framework must provide appropriate guidelines for reporting
of the non-financial measures as well like employee turnover, employee performance etc.
because these are the important measures which helps in knowing the employee interest and their
efficiency in performing the task of the company. I believe that Fiji firm should include the non-
financial measures in its annual reports so that the users can get access to both the information
financial and non-financial.
CONCLUSION
From above mentioned project report, it has been concluded that financial and non
financial information both have their own importance. In the annual reports, non financial
information must be included so that shareholders can aware about impact of these information
on company's information. In the report two company's annual reports are concluded which
contains non financial informations too.

REFERENCES
Books and journals:
Maroun, W., 2015. Culture, profitability, non-financial reporting and a meta-analysis: Comments
and observations. Meditari Accountancy Research. 23(3). pp.322-330.
Adams, R., Houldin, M. and Slomp, S., 2017. Towards a generally accepted framework for
environmental reporting. In Sustainable Measures .(pp. 314-329). Routledge.
Mio, C. and Venturelli, A., 2013. Non‐financial information about sustainable development and
environmental policy in the annual reports of listed companies: Evidence from Italy and
the UK. Corporate Social Responsibility and Environmental Management. 20(6).
pp.340-358.
Cohen, S. and Karatzimas, S., 2015. Tracing the future of reporting in the public sector:
introducing integrated popular reporting. International Journal of Public Sector
Management. 28(6). pp.449-460.