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Integrated Reporting - Summary Notes - Bhavik Chokshi

The International Integrated Reporting Council (IIRC) was established in 2010 to develop a globally accepted framework for integrated reporting. Integrated reporting aims to provide both financial and non-financial information, including data on six forms of capital (financial, manufactured, intellectual, human, social, and natural) to explain how an organization creates long-term value. The IIRC framework takes a principles-based approach and encourages organizations to identify material issues. Indian regulators now encourage top 500 companies to voluntarily provide integrated reports alongside traditional financial reports.

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340 views2 pages

Integrated Reporting - Summary Notes - Bhavik Chokshi

The International Integrated Reporting Council (IIRC) was established in 2010 to develop a globally accepted framework for integrated reporting. Integrated reporting aims to provide both financial and non-financial information, including data on six forms of capital (financial, manufactured, intellectual, human, social, and natural) to explain how an organization creates long-term value. The IIRC framework takes a principles-based approach and encourages organizations to identify material issues. Indian regulators now encourage top 500 companies to voluntarily provide integrated reports alongside traditional financial reports.

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Vinayak
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Integrated Reporting Bhavik Chokshi

CHAPTER 21: INTEGRATED REPORTING

I. INTERNATIONAL INTEGRATED REPORTING COUNCIL (IIRC)


In 2010, IIRC was set up which aims to create the globally accepted integrated reporting framework. It is the
body which has prescribed Integrated Reporting (IR) Format. IIRC is a global coalition of: Regulators, Investors,
Companies and Standard setters

II. INTEGRATED REPORTING


Integrated Reporting will integrate both financial and non- financial information. It is based on showing value
creation on an overall basis for 6 measures of capital. Integrated Reporting suggests detailed disclosures for six
capitals (Financial, Manufacturing, Intellectual, Human, Social, Natural) that should guide an organization’s
decision-making and long-term success.

The primary purpose of an integrated report is to explain to providers of financial capital how an organization
creates value over time.

III. SALIENT FEATURES OF INTEGRATED REPORTING FRAMEWORK


 Principle Based Approach:; Lays down broad principles, it does not set standard format for reporting
 Targets the Private Sector or Profit Making Companies: But it can also be applied, adapted as
necessary, by public sector and not-for-profit organizations
 Identifiable Communication: May be either a standalone report or be included as in annual report
 Financial and Non-financial Items: Reporting for six forms of capital
 Value Creation: Value created by an organization over time is reflected in the changes of the capitals
caused by the organization’s business activities and outputs.

IV. THE CAPITALS


The capitals are stocks of value that are increased, decreased or transformed through the activities and outputs
of the organization. The Framework has categorise the capital into 6 main forms.
 Financial Capital: The pool of funds available to an organization for use in the production of goods or
the provision of services eg: debt, equity
 Manufactured Capital: Manufactured physical objects that are available to an organization for use in
the production of goods or the provision of services eg: Building, plant
 Intellectual Capital: Organizational, knowledge-based intangibles eg: Patents, Copytights
 Human Capital: People’s competencies, capabilities and experience, and their motivations to innovate
 Social and Relationship Capital: The institutions and the relationships within and between
communities, groups of stakeholders and other networks.
 Natural Capital All renewable and non-renewable environmental resources and processes that provide
goods or services that support the organization eg: Air, water

V. GUIDING PRINCIPLES FOR PREPARATION AND PRESENTATION OF INTEGRATED REPORT

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Integrated Reporting Bhavik Chokshi

One of the distinguishing features of Integrated Reporting is that in contrast to compliance based reporting, there
can be no model report. Every report must be built around the unique business model of the preparer. Few
Guiding Principles are:
1. Strategic focus and future orientation
2. Connectivity of information
3. Stakeholder relationships
4. Materiality
5. Conciseness
6. Reliability and completeness
7. Consistency and comparability

VI. CONTENTS OF INTEGRATED REPORTING


 Organisational Overview and External Environment
Explain what does the organisation do and what are the circumstances under which it operates
 Governance
Explain how the organisation’s leadership structure supports its ability to create value
 Business Model
Explain the Inputs, processes and Outputs generated
 Risks and Opportunities
Explain the specific risks and opportunities that affect the organisation’s ability to create value and how
is the organisation dealing with them (Risk management policy)
 Strategy and Resource Allocation
Explain where the organisation wants to go and how does it intend to get there
 Performance
Explain to what extent has the organisation achieved its strategic objectives for the period and what are
its outcomes in terms of effects on the capitals
 Outlook
Outline the challenges and uncertainties is the organisation likely to encounter in pursuing its strategy,
and what are the potential implications for its business model and future performance
 Basis of Preparation and Presentation
Explain how the organization determines what matters to include in the integrated report and how such
matters are quantified or evaluated

VII. VI. SEBI Regulations


SEBI vide its circular dated February 6, 2017 has advised top 500 companies [to whom Business Responsibility
Report (‘BRR’) have been mandated under SEBI Regulations to adopt Integrated Reporting on a voluntary
basis from the financial year 2017-18.
The listed entities are advised to adhere provide Integrated Report in the annual report separately or by
incorporating in Management Discussion & Analysis or even by preparing a separate report and giving reference
of the same in the Annual Report.

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