INTEGRATED REPORTING

The discussion paper on IRF being prepared by the IIRC working group
is expected to be released for public discussions by May
The country is still coming to grips with the convergence and
carve-outs of IFRS, and that too in a language of XBRL. But the world
has already started chanting the need for what is called as Integrated
Reporting Facility (IRF) with a holistic view.
IFAC, the global federation of accountants is partnering an important
paper which will now come out in May 2011 for public discussion. Is
India a part of this evolution ? Will it affect us ? IRF is evolving
as continuum of the global pressures on sustainable development and
the pledge of G 20 to promote sustainable business practices.
Sustainability has three important dimensions for all organisations:
social, environmental, and economic performance. In the investor
community these issues are generally grouped as ESG (environmental,
social and governance) disclosures.
There is no global standard for general purpose CSR/sustainability
reporting. The sustainability reporting guidelines issued by the
Global Reporting Initiative are widely acknowledged as representing
best practice . However, GRI framework is not always seen as working
well for the financial community and separate sustainability reports
are often seen as detached from the business.
Prince of Wales initiative on Accounting for Sustainability A4S
developed the connected reporting framework (CRF). The CRF is a
reporting model which presents key sustainability information
alongside more conventional financial information to give a more
rounded and balanced picture of the organisation's overall
performance. The talk on IRF got started in the above context.
Addressing the wider as well as longer-term consequences of decisions
and actions, an integrated report makes clear the link between
financial and non-financial value.
Organisational Framework
In December 2009, Accounting for Sustainability (A4S) convened a
high-level meeting of investors, standard setters (including both FASB
and IASB), companies, accounting bodies and UN representatives, where
it was agreed that A4S and the Global Reporting Initiative should work
together. The formation of the International Integrated Reporting
Committee (IIRC) was formally announced in August 2010. The IIRC has
set up three task forces considering content, governance and
engagement and communications. It will develop proposals for an
integrated reporting framework to be taken to the G20 meeting in
November 2011.
Objectives and Principles
The objectives for an integrated reporting framework set out by
Federation of European Accountants(FEE) are to support the information
needs of long-term investors, by showing the broader and longer-term
consequences of decision-making; reflect the interconnections between
environmental, social, governance and financial factors in decisions
that affect long-term performance and condition, making clear the link
between sustainability and economic value; provide the necessary
framework for environmental and social factors to be taken into
account systematically in reporting and decision-making; rebalance
performance metrics away from an undue emphasis on short-term
financial performance; and bring reporting closer to the information
used by management to run the business on a day-to-day basis.
According to FEE Integrated reporting is underpinned by the following
principles:
Strategically important and material – the core is to move away from
compliance-driven metrics to an integrated report focussed on the
relevant strategy of the organisation;
Connectivity and linkage – information is not presented in isolation,
particularly strategic issues around resource usage and emissions
which impact the core of the business (its brand, products and
services) and its long-term sustainability;
Impacts along the value chain – when reporting on resource usage,
emissions and human rights, the whole value chain of a business is
taken into account;
Time horizon – the integrated model incorporates a view of both past
performance and those prospective events which provide insights into
the changing dynamic of the industry and markets in which a business
operates;
Consistent with management information – the information reported
should be a fair reflection of the management information used
internally to run the business on a day to day basis;
Trusted – the information reported should be capable of being verified;
Flexible and able to evolve over time – the integrated reporting
framework developed in a manner which will enable it to evolve over
time as reporting practices change and mature; and
Behavioural change – an overarching principle of the integrated
reporting framework is for it to act as a catalyst for behavioural
change.
The discussion paper on IRF being prepared by the IIRC working group
is expected to be released for public discussions by May . It is
expected to close by July and be submitted to the G 20 grouping in
November for consideration and approval for adoption by the respective
nations.

Hindu Business Line
(The author A N Raman is President, South Asian Federation of Accountants.)