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The Economic Consequences Of Non Financial Information Reporting

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Question:

Disccuss about the Economic Consequences of Non Financial Information Reporting.
 
 

Answer:

Introduction

Non-financial reporting involves the report by accumulating and revealing data on non-financial features of a company’s performance, together with ecological, societal, worker and virtuous matters, and defining measurements, indicators and sustainability goals based on the company’s approach.      

Non-Financial Data is playing an important role in decision making. The impression clasps aimed at in-house judgment making within companies as well as aimed at the verdict making of shareholders. Nowadays Administration and patrons both want trustworthy data for their judgement making and henceforth, records management, reporting and revelation of non-financial information is gaining push, with numerous companies today. Disparate results of reporting on pecuniary information, effects of non-financial reporting are still relatively new, and no generally accepted principles are yet accessible.

Nature of Non-Financial Information.

Non-Financial information means sustainability, corporate social responsibility, environmental social and governance, social performance, green banking disclosures,

Let us discuss about these elements of non-financial information:-

Sustainability means the capability to create and maintain well-defined process or approach indeterminately. There are three types of sustainability which are commercial sustainability, societal sustainability and ecological sustainability. Commercial sustainability means to maintain the definite level of economic assembly indeterminately. Societal sustainability means to maintain the social well-being at definite level for indeterminate period. Ecological sustainability means to preserve the proportions of renewable resources as well as non-renewable resources depletion indeterminately.

Corporate social responsibility means projects and programs or activities such as eradicating hunger, poverty and malnutrition, promoting healthcare, promoting education, gender equality, ensuring environmental sustainability, ecological balance, animal welfare, measures for benefit of armed forces veterans, training to promote recognised sports, Paralympic sports and Olympics sports.

Corporate social responsibility also includes projects and program also activities which are mentioned above undertaken by the board of directors of a company(Board) in pursuance of recommendations of the CSR committee of the board as per declared CSR policy of the company subject to the condition that such policy will cover the above mentioned subjects.

 


By integration CSR activities with with their organisational operations business achieve the balance of social, ecological and monetary.

  • Reporting Manner of Non-financial information

How these non-financial information is reported is a big question. First of all management should be aware of what kind of information is worth to report. They should know the features of information which needs to be reported. Before discussing how to report non-financial information let us know discuss the attributes of non-financial information first:

Features of non-financial information business reporting:-

  1. The information which has been presented should be unaffectedly explanatory.
  2. The information should include proactive elements which will increase the understanding.
  3. The information should appropriate and well-timed and substantial.
  4. The information should define company’s plans and related threats and prospects.
  5. The information should also explain panel’s part in evaluating the plans and controlling of threats and prospects.
  6. The information should be easily available and correctly united by means of additional data that assists stakeholders to get the entire depiction of the corporation.
  7. The information should be unprejudiced in its application where it is used and confirmation grounded where it is not functional.

Reporting of non-financial information has become very important in today’s corporate world. It is beneficial for the company as well as it is beneficial for the investor’s clients and public at large to know the position of the entity.

To present non-financial information most of the organisations report on generally four matters. These matters can be discussed as follows:-

  1. Monetarist
  2. Ecological
  3. Societal
  4. Societal (exclusive of Workers)

Most of the organisations recorded top on monetary aspect, which stayed mostly due towards the reporting of elementary pecuniary presentation.

The ultimate essential zones of conservational data is emanations’ seepage and discarded includes co2 emanations’. This information is often required by the regulatory authorities to know the environmental impact of the business activity of the organisation.

Social information(exclusive of worker) includes quantum of activities which involves social well-being of the people like, organisation efforts in rural development, development of education system, providing essential help to the armed forces. Organisation have report on these matters to regulatory authorities.

Report on social matters includes satisfaction of employees, work culture, benefits to employees, training to employees for enhancing their skill and knowledge (Arsuay, 2017).

 

Consequences of non-financial information reporting

Non-financial info has additional elongated tenure emphasis than financial information. Monetary info normally emphasis on yearly besides diminutive tenure performance of accounting pointers.

Financial information do not presents quality of work, client’s happiness, goodwill, effectiveness and human topics.

For extended tenure and sustainability in a competitive environment and to accomplish business desired aim bearing in mind the non-financial data in judgement creation is decisive.

Administration be able to use the non-financial data aimed at upcoming accounting and inconsistency scrutiny. The non-financial data also helps to know the inside performance and amount the wage earner and client contentment.

There will be the straight effect on the probable monetary aims which can be clarified below:-

When workers of an entity are happy with the employers and the work culture where they are working they will work efficiently and will give their services, they will try to finish the work before deadline, and in the result clients will be happy with company and they will rely more on the company and will provide more work to the organisation (Business.org , 2017).

Advantages of non-financial reporting at glance

  1. Interest, Preserve and conserve gratified staff.
  2. Helps in management of risk.
  3. Helps to save resources.
  4. Aids in decreasing operating costs.
  5. Improves effectiveness and efficiency.
  6. Increase customer, shareholder and investors trust.
  7. Improves the goodwill of the company.
  8. It makes the organisation capable to do things differently in compare to their competitors.
  9. It helps the organisation grab new business opportunities.
  10. Improves associations with clients and investors.
  11. Enhance brand image of the organisation.
  12. Helps in building a good clientele.
  13. Helps in knowing internal environment of the organisation.

Apart from so many advantages there are many disadvantages too of non-financial information.

Let us discuss those limitations in details. First disadvantage include budget and period.

Time is very crucial nowadays, administrations spends a lot of time in identifying the important non-financial information.

Another disadvantage is non-financial information does not have in unit of measurement like some information can be measured in fractions, some in amount and some in idiosyncratic means (Globaltfi, 2017)

Other disadvantage may include missing of correct link, means company spent time in finding out level of client happiness rather than client trustworthiness.

Another disadvantage will include the numerical dependability. This can be explained with the example suppose the market survey has been done for client satisfaction some will be interested in the survey other may not, hence not providing the correct statistics.

Non-financial reporting has become very essential part of the companies nowadays as it has become very important for the investors clients and stakeholders to know the performance of companies in these areas because they are included matters in for company’s image which have accountability to the stakeholders. It can initiate sustainability development and add towards the growth of superior commercial exercise (Henry, 2017).

 

Disclosure of non-financial matters should be made in order to know business position.

Disclosure of financial data is not sufficient meant for knowing the company’s performance. From financial statements, financial information are easily available. Financial information generally includes liquidity of a firm, monetary arrangement, performance, success of the company. By including only financial matters we will not be able to know the synchronicity of organisation with the society, environment, its industrial growth, workers happiness, well-being plus security at work. Pecuniary information does not provide us with investment the company has made on its employees their skill knowledge and competency, also they do not highlight the matters that can provide us with the information such as corporation’s flaws, its market share, client happiness, different products, quality regulator costs, division growth etc.

On the other hand revelations of non-financial information helps in development aimed at innovative kinds of exploration called to be additional monetary exploration. Hence entity performance is no more acclimatised by financial information only. But by the composite of incorporeal means formed through the preceding doings of the entity.

There are numerous transnational guidelines have been introduced for non-financial information disclosures, some of them are as follows:-

  1. OECD guidelines for multinational entities.
  2. Global reporting initiative.
  3. ISO26000
  4. ILO core conventions.
  5. European commission instruction (Business .org , 2017).       
 

Economic consequences of the Information (capital market and debt market)

Share bazaars are obsessed by stakeholder soppiness, which on the other hand is obsessed by the several non-financial occasions like macro-economic issues, societal and green fluctuations in all over the world. Very important distress in the capital market all over the world was the European debt crunch and this is associated with non-financial reporting. Therefore issue regarding this issues are seen as the most significant issue that are affecting the markets

The financial and non-financial information which are being disclosed in the certified audited financial statements of the company reveals the entire picture of the company. Investors are being highly interested in knowing this information as they will get to know position of the company they are investing in. On the other hand not only investors or clients are affected by these information, markets are also affected by these information reporting. Share prices in stock gets regulated by the overall position of the company. Debt market is also affected by the revelations of these information (Fraga)

Corporate revelation is important for working of effective capital market. Organisation gives info via controlled pecuniary report which includes financial statements, footnotes management discussion, non-financial information and other guiding conclusions.

Debt market means a market where debt instrument are operated. Debt instrument will be the asset in the hands of holder of debt instrument, where holder gets the fixed payment along with the interest payments. Corporate bonds are the example of debt market. Information provided in the certified financial statement highly effect the debt market as holder of the debt instrument will get to know the paying back capability of the borrower as well as from financial statements one get to know debt market situation of the company (Business intelligence providers, 2017).

On the other hand Capital market are those market where long extended term debt or equity supported securities are operated. Capital market distributes the household saving of stakeholder and use it in a protracted term fruitful use such as companies and government making long term savings. Disclosures of financial and non-financial information in certified financial statement also show the capital structure of the company and forewarned the investors regarding the capital structure of the company (Edelwiss, 2017).

Conclusion:

From this report we get to know about the nature of non-financial information which includes sustainability, corporate social responsibility, environmental information etc. non-financial information plays an important role in decision making by the shareholders and investors or the users of financial information in regard to the company. There are also many advantages of reporting of non-financial information which we have discussed earlier like, it helps in management of risk, have to save resources, helps in building a good clientele, helps in knowing the internal environment in the company etc. Apart from the advantages there are many limitation too in reporting of non-financial information like time and cost in identifying the relevant non-financial information. But if one is aware of the attributes of the significant information to be revealed it will be advantageous. Disclosure of non-financial information have become essential nowadays it not only win the trust of clients workers and investors but also helps the organisation to improves its brand image and win the new and greater work opportunities. Financial information only shows the financial aspects of the company its liquidity, profitability etc. But disclosure of non-financial information also shows the business and customers associations, internal working environment, its effort regarding environment friendly activities, its social connections in public interest etc. Hence non-financial information disclosure is necessary along with financial information disclosure as it will help to know the entire position of the company.

 

References.

Business intelligence providers. (2017).Importance of non financial information. [online] Available at: https://www.slideshare.net/bquteam/the-importance-of-non-financial-information-in-decision-making [Accessed  9th April. 2017].

Buiness.org. (2017).Non financial reporting. [online] Available at:  https://business.un.org/en/documents/8842[Accessed  9th April. 2017].

Henriques, A (2017).Reporting on non financial information. [online] Available at: https://www.henriques.info/downloads/Reporting%20of%20Non-Financial%20Information%20FINAL.pdf [Accessed  9th April. 2017].

Global Reporting. (2017).Non fiancial reproting. [online] Available at:https://www.ey.com/Publication/vwLUAssets/Non-financial_reporting/$FILE/Climate%20change_Non%20financial%20reporting.pdf [Accessed  9th April. 2017].

Arsuay , A. (2017).Effect of nonfiancial information. [online] Available at: https://iremjournal.com/article/download/5000129380/5000118588 [Accessed  9th April. 2017].

GLobaltfi. (2017).Disclosures of non financial information. [online] Available at:https://www.accaglobal.com/in/en/technical-activities/technical-resources-search/2011/january/ec-disclosure-non-financial.html [Accessed  9th April. 2017].

 

Harper coloins canada. (2017).Corporate social responsibility. [online] Available at: https://www.harpercollins.ca/about-us/corporate-social-responsibility [Accessed  9th April. 2017].

 

Fraga .  J(2017).Corporate social responsibility. [online] Available at: https://www.jfraga.com/csrreports.htm [Accessed  9th April. 2017].

 

Edelweiss. (2017).Debt capital market. [online] Available at:https://www.edelweissfin.com/FinancialServices/CapitalMarkets/InvestmentBanking/DebtCapitalMarkets.aspx [Accessed  9th April. 2017].

Henry, K (2017).Impact on non financial reporting. [online] Available at:https://www.environmentalleader.com/2015/08/impact-of-the-eu-directive-on-non-financial-reporting/ [Accessed  9th April. 2017].

Simmons and simmons. (2017).Non financial reporting. [online] Available at: https://www.elexica.com/en/legal-topics/corporate-governance-and-compliance/040117-disclose-non-financial-board-diversity-info [Accessed  9th April. 2017].

Source Intelligence. (2017).Non disclosure financial requirements. [online] Available at: https://www.sourceintelligence.com/additional-non-financial-disclosure-requirements-companies-effect-year/ [Accessed  9th April. 2017].

Business and human rights. (2017).Company non financial reporting. [online] Available at:https://business-humanrights.org/en/eu-requirements-on-companies-non-financial-reporting-2014 [Accessed  9th April. 2017].

Capital market. (2017).Debt capital market. [online] Available at:https://www.edelweissfin.com/FinancialServices/CapitalMarkets/InvestmentBanking/DebtCapitalMarkets.aspx [Accessed  9th April. 2017].

CSR . (2017).Sustainablity. [online] Available at:   https://www.csreurope.org/mantra [Accessed  9th April. 2017].

Banking and finance. (2017).Non financial reporting [online] Available at:https://ec.europa.eu/finance/company-reporting/non-financial_reporting/index_en.htm [Accessed  9th April. 2017].

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