The Influence Of Financial Market Developments On Accounting Essay.

Explaining integrated reporting functioning with reference to relevant accounting literature and CPA report outcome

Discuss about the Financial Market Developments Influence Accounting.

In this particular study, the importance of International Integrated reporting council has been explained by reviewing the associated literature and referring to the website. Functioning of integrated reporting has been explained by referring to the findings generated from CPA report in terms of materiality, stakeholder relationship, materiality, consistency and comparability and reliability and completeness. Furthermore, the similarities and differences between conceptual framework of IASB/AASB and general purpose financial reporting (GPFR) has been explained in terms of objective and definition, users identification and concepts of materiality, consistency, comparability and reliability. The integrated reports of four companies have been evaluated with respect to the guiding principles. In addition to this, the differences and similarities of such integrated reporting have been demonstrated based on the analysis performed in the above section.

International Integrated reporting council is the alliance of investors, regulators, accounting profession, industry setters, non government organization, and academics and accounting profession for enhancing value creation communication and thereby contributing to corporate reporting evolution. It was stated by IIRC that creation of new reporting model by the development of an internationally accepted international reporting is the main objective. This will assist in creation of value over time so that organization is capable to providing concise communication to its stakeholders.

The main objective of integrated reporting is to promote an efficient and cohesive approach to corporate reporting through stewardship and accountability and focusing on value creation over short, medium and long term by supporting integrated thinking. Such reporting framework is viewed to provide potential benefits to all stakeholders that help in sharpening ability of organization to create value over time. IIRC intend to make improvement in information quality to the financial capital providers so that it helps in productive and efficient allocation of capital (Aasb.gov.au 2018). Therefore, it can be said that the primary purpose of such reporting framework is to provide benefits to all the interested stakeholders such as customers, employees, business partners, suppliers, legislators, local communities, policy makers and regulators.

The information that is sought by stakeholder should be relevant to the work they are doing and their information requirement are varied and extensive. For instance, the interest of environment stakeholder lies in the significant environmental issues (Hoyle et al. 2015). However, a single and static annual report might not be sufficient in addressing their requirement of information.

Contrasting and comparing CPA report outcome underpinning following principles

Such reports helps stakeholder in directly engaging with companies and conduct research on company by cross checking the relevant matters. For identification of risky areas, reports are used by stakeholders for accessing to background information. The usefulness of integrated reporting is that it provides platform for stakeholders to gain access to retrieving relevant information about organization.

It has been ascertained from CPA report findings that the information requirement of environmental and civic stakeholders are not met using the integrated reporting. Comparability across reporting companies is quite challenging and compared to integrated reports, sustainability reporting’s more useful for stakeholders. Comparability of report is the main argument that the stakeholders have raised about reports comparability (Macve 2015). However, for financial stakeholders, comparability is less of an issue.

The main aim of integrated reporting is to improve the information quality that is available to providers of financial capital so there is productive and efficient allocation of capital. Issues are raised by environmental stakeholders about the fact that there is no inclusion of right indicators such as lacking specificity, amount that is lend to the fossil fuel projects and headline information depicting that there is smaller amount of information available on specific issues. It has been found by the financial stakeholders that there are significant variations in integrated reporting quality (Larson et al. 2017). Concerns have been raised about using a lot of case studies, not focusing on material issues, absence of narratives and targets that are considered important for business.

The usefulness of integrated reporting comes with a mixed view as held by stakeholders. It has been widely acknowledged that current approaches to reporting of company come with shortcomings of limiting the usefulness to the external audiences. It is suggested by the stakeholders that improvement could be made in report by integration of more numbers so that it provides more information on the material environmental, social and governance issues (Beckman et al. 2017).

This particular guiding principle is based on providing insight into the quality and nature of relationship of organization with their key stakeholders. It is ascertained from the CPA report findings that the elements of performance content forms the basis of gathering the information about stakeholder relationship. Management of organization is required to have an ongoing communication with stakeholders and thereby contributing to make an improvement in stakeholder relationship.

It deals with effective disclosure of information through which the ability of organization is substantively affected for value creation over long term, short and medium term. Businesses are required to make disclosure of issues related to environmental matters for environmental stakeholders. Moreover, additional disclosure should be made regarding the impact of climatic change and emission of carbon dioxide. The application of materiality concepts according to integrated reporting leads to value creation (Camilleri and Camilleri 2017).

The concept of conciseness is to provide sufficient understanding of the governance and strategy prospects of organization and the availability of less information would not burden the stakeholders. Conciseness is the guiding principle that is largely praised by company as depicted from CPA report outcome. It was difficult for investors to access to the potential information because of availability of detailed information. Presentation of report in concise format has been a challenging task for organization that requires solving complex business issues. It has been found from analysis that integrated reporting fails to provide concise information to the stakeholders (Nilsson and Stockenstrand 2016). However, the importance of value creation is understood by users along with the performance of organization at the same time.

Guiding principles of reliability and completeness include all the negative and positive material matters in a balanced manner and without any error. The principle of completeness and reliability is encouraging as depicted by findings from review. However, there could be improvement in completeness and reliability by determining the process of materiality. The conciseness principle can be improved by identification of relevant matters and implementation of process of robust materiality. It would help in improving overall completeness and reliability. Nevertheless, it is difficult for users of report to judge absence of material errors and completeness. In order to improve the credibility of report in eyes of stakeholders and investors, it is considered crucial to achieve reliability and completeness. The integrated report should have established sound process of internal control and the information used by management for running the business should be included in the report (Martin and Roychowdhury 2015). In addition to this, the positive as well as negative aspects of performance should be disclosed. Reliability of information presented in the report can be increased by improving the process of material determination.

Comparability guiding principles assist in enabling comparisons with other organization and ensuring consistency over time. Such comparison is done to the extent that is material to the ability of organization for creating value.  From the evaluation of CPA report, it was analyzed that the stakeholders place great importance on the integrated reporting usefulness. It is reviewed from finings of CPA report that reviewers were unable to access comparable and consistent information. In addition to this, 68% of report made use of factual and neutral language and it avoided using promotional and marketing tools. The integrated report presented by organization has not produced any comparable information along with some of information being inconsistent. For instance, some comparatives of prior years were provided while it was missing for recent years when the comparison was made for different time periods. At present, integrated reporters are more concerned with reporting of consistent measures and internal consistency over time rather than they are with reporting information (Jalil et al. 2015).  Comparing the information between companies is difficult because there may be different process behind accessing the data.

Comparability principle is equally important for financial as well as environmental stakeholders. Comparative information is of great significance to investors and it is quite a challenging task for organization to provide with the meaningful information over a long time frame.

From the analysis presented above, it can be inferred that the financial reporting of all the chosen organization incorporates the guiding principles of Integrated Reporting.  The differences and similarities between the guiding principles of different companies are evaluated in context of materiality, completeness, stakeholder relationship and comparability and consistency (Cockrell 2015).

Conclusion:

From the analysis of the Integrated as well of conceptual reporting framework, it can be concluded that the integrated reporting’s lacks in proving relevant information to stakeholders in several fronts. The financial reporting of companies should be improved by making proper recommendations to the framework that would enhance the financial information presentation. Activities of decision making are further enhanced by maintaining string relationship with stakeholders.

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