Answers:
Introduction
Integrated Reporting is a crucial aspect in the process of accounting. Integrated reporting is a process of communication that shows how strategies, governance, performance and prospectus of an organization contributes to the creating of wealth and value in long, medium and short term. Apart from this, integrated reporting helps the organizations in the process of effective decagons making. There are some major benefits of integrated reporting. On the other hand, this process has some major shortcomings. Integrated reporting helps the organizations in developing effective strategies.
Background Information on Integrated Reporting
As per the above discussion, it can be understood that integrated reporting helps to show the process of creating values and wealth of the business organization with the help of various strategies. There is a basic framework for integrated reporting in the business organizations. the integrated reporting framework have some basic objectives. The main objective of this framework is to set up Guiding Principles and Content Elements in order to control the total process of integrated report. The process of integrated reporting is applicable for all the companies irrespective of size of the company and type of the industry. One of the major purposes of this framework is to identify all the relevant and necessary information that must be included in the integrated reports to assess the ability of the organizations for value creation and wealth. As the main purpose of integrated reporting is to evaluate the company’s process of creating value, it contains both relevant financial and other information (integratedreporting.org, 2017).
Hence, it can be said that integrated reporting can benefit all the stakeholders of a business organization. Various stakeholders include employees, customers, business partners, suppliers, shareholders, government and many others. Integrated reporting is a principle-based approach that assists in maintaining an appropriate balance between flexibility and prescription. However, it can be seen that integrated reporting does not prescribe any kind of specific key performance indicators and methods of measurement. The International Integrated Reporting Framework is a key factor for the acceleration of the adoption of integrated reporting in the companies of all over the world. Integrated reporting applies various kinds of concepts and principles in order to bring greater efficiency and cohesion in the financial reporting process. Due to the international reception of integrated reporting, it helps to increase the information qquality that is provided to financial capital providors. The framework was released after the major consultation by the businesspersons and investors all over the world (integratedreporting.org, 2017).
Benefits and Shortcomings of Integrated Reporting
According to the above discussion, it can be said that integrated reporting system has a major importance in the process of financial reporting. It can be seen that integrated reporting has some major benefits along with some major shortcomings. Both the advantages and shortcomings are discussed below:
Advantages
The major advantages of integrated reporting are mentioned below:
One of the major and important advantages of integrated reporting is that it helps to establish a better and effective understanding about creation of value and wealth by the business organizations. This is very much helpful for the organizational people (integratedreporting.org, 2017).
As per the framework of integrated reporting, description of major risks and opportunities needs to mention in the financial statement of the business organizations. This is a major benefit of integrated reporting. This disclosure allows the investors to predict the long, medium and short-term impact of the organization (García-Sánchez, Rodríguez-Ariza & Frías-Aceituno, 2013).
The disclosure of the process of creating value in the organization helps to win the trust of the customers and investors. On the other hand, it helps to intact the goodwill and reputation of the company (Brown & Dillard, 2014).
Shortcomings
The major shortcomings of integrated reporting are discussed below:
The major shortcoming of integrated reporting is the transition of a traditional annual report to broader report that states the value creation story of the companies. Business organizations often find this process difficult as the stating of value creation is a complex process for the organizations (Crowther, 2016).
There is not any particular method for the creation of integrated reporting. As per the framework of integrated reporting, every business organizations should develop the integrated report based on their individual business model. This is a major disadvantage of integrated reporting as it left much organization unsure about the structure of their integrated reports (Junior, Best & Cotter, 2014).
Recommendation
As per the above discussion, it can be understood that integrated reporting help the business organizations to inform the process of creating value. On the other hand, it has been seen that any organization irrespective of size and type of the industry can implement the process of integrated reporting. The main responsibility of Australian Securities and Investment Commissions, commonly known as ASIC, is to protect the Australian consumers, investors and creditor by implementing various regulations and policies (asic.gov.au, 2017). Hence, based on the findings of above two parts, it can be said that ASIC should employ integrated reporting for every company in Australia. The main reason is that this process will bring clarity and transparency in every stage of business. Apart from this, integrated reporting will help the organizations to handle the customer complaints in a quick manner. In the point of view of the investors, integrated reporting will make them able to know about the potential risks and opportunities of the companies in the near future. Thus, it is clear that all the parties related to the businesses will be benefitted from this decision.
Conclusion
The main aim of the report is to analyze and evaluate the various aspects of integrated reporting. The above discussion shows that integrated reporting is an important aspect in all kinds of businesses as it shows the company’s value creation process. Some major advantages of integrated reporting are disclosure of value creation process, risks and opportunities of an organization. However, the absence of any specific model makes integrated reporting difficult for most of the companies to follow. It is suggested that the ASIC should introduce integrated reporting in every kinds if business in Australia.
References
Brown, J., & Dillard, J. (2014). Integrated reporting: On the need for broadening out and opening up. Accounting, Auditing & Accountability Journal, 27(7), 1120-1156.
Crowther, D. (2016). A social critique of corporate reporting: Semiotics and web-based integrated reporting. Routledge.
Financial reports | ASIC - Australian Securities and Investments Commission. (2017). Asic.gov.au. Retrieved 31 March 2017, from https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-reports/financial-reports/
García-Sánchez, I. M., Rodríguez-Ariza, L., & Frías-Aceituno, J. V. (2013). The cultural system and integrated reporting. International Business Review, 22(5), 828-838.
International <IR> Framework | Integrated Reporting. (2017). Integratedreporting.org. Retrieved 31 March 2017, from https://integratedreporting.org/resource/international-ir-framework/
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance: a historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), 1-11.
Realizing the benefits: The impact of Integrated Reporting. (2017). integratedreporting.org. Retrieved 31 March 2017, from https://integratedreporting.org/wp-content/uploads/2014/09/IIRC.Black_.Sun_.Research.IR_.Impact.Single.pages.18.9.14.pdf
THE INTERNATIONAL <IR> FRAMEWORK. (2017). integratedreporting.org. Retrieved 31 March 2017, from https://integratedreporting.org/wp-content/uploads/2013/12/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf
