Accounting In Context - Assignment Example

Integrated Reporting Student’s Name Institutional Affiliation Question 1 The business world has with time evolved owing to technological changes and other factors such as population growth, climatic changes, scarcity in factors of production and increase in consumption among households just to mention a few. This evolution has rendered the traditional corporate reporting framework redundant and need has arose for it to be improved to suit the current economic situation (Soyka 2013). The traditional reporting method is shallow and does not provide a proper insight of the activities of an organization and the information captured in it is shallow much to the dismay of the organizations diverse stakeholders (Adams 2013). The traditional method is also technologically outdated, and its role of providing accountability to organizations operations is under threat. The information that will be captured henceforth is more detailed and takes into consideration the future of the organization, and it will also be a market driven (Loska 2013). In short, the information in the integrated reporting will capture and give a picture of an organization taking into account all aspects of the organization. Information captured in the integrated reporting includes the governance of the organization. The integrated reporting will provide detailed information of how an organization is governed, that is its leadership (Kass 2012). It will give the leadership structure and how leadership is executed. The information in the integrated also captures the strategy of an organization. This information explains how an organization plans for its future were clearly explaining how continued availability of resources will help the organization to achieve its long term strategy (Busco et al. 2013). The traditional reporting method is rather vague about this. Finally, the information in the integrated reporting will give insight on the performance of the organization in all aspects of growth and profitability. It does this in a manner that captures the business, social and the physical factors of the environment in which the business operates. The traditional reporting method falls short of this (Soyka 2013). Question 2 I agree with how these paragraphs characterize the interaction with other reports and communications. To make the IR process relevant and purposeful, it should be done on a continued basis to all reports and communications made in an organization. Integrated reporting may capture information that is available in other reports and communications and reports. The aim as to this is to compliment the work of other established reporting standards and not to duplicate it as many may think. The integrated report in most cases captures and projects information that is not in other reports and communications or information that is not sufficiently detailed in other reports and communications (Busco et al. 2013). An integrated report has combined emphasis on strategy an organization employs and how it moves towards achieving that strategy. An integrated report is future oriented unlike most reports and communications which in most cases capture the present or past scenario of an organization. An integrated report captures the present and past scenario and projects it into the future to give an overview of what the future occurrence maybe for an organization. An integrated report also gives a connectivity of information, the capital structure of the organization, the business structure and ability of an organization to utilize its resources to it to meet goals in the short and long term (Soyka 2013). It also aims at improving the understandability of corporate reporting by providing an insight of how an organization manages its operations to meet its objectives. In most cases, reports and communications fall short of this which is needed much by investors and stakeholders in deciding certain factors about the organization. The information in integrated reporting is important, and that's why it's done continuously to all relevant reports and communications. Integrated report compliments as opposed to duplication of content in reports and communications (Adams 2013). Question 3 Capital is grouped in six different categories, and organizations use these categories as a point of reference during the preparation of an integrated report. Capital framework means a skeletal structure that shows what capital is available to an organization and what it is composed of. These six categories of capital are financial, manufactured, intellectual, human, social and relationship capital category (Soyka 2013). I agree with the approach of capital as a benchmark when preparing an integrated report. Capital in an organization is the main determinant or rather it helps projects a picture of how an organization is likely to perform (Kass 2012).The capital structure of the organization can clearly tell what the future of the organization is likely to be. Strong capital structures with a strong combination of all the six categories indicate strong position for the organization and a strong possibility for growth. The value of an organization is stored in its capital and it either decreases or increases depending on the inputs an organization put in capital structure (Busco et al. 2013). An organization that is making profits continually has a strong financial capital structure. Human capital likewise is improved through training and constant equipment of employees with current and modern working skills. Not all capital categories are material when preparing an integrated report. For example, intellectual capital and relationships with external stakeholders may be unnecessary in an integrated report. This is because the information may be somehow confidential to an organization or including it in the integrated report may make the report irrelevant or fall short of its purpose (Kass 2013). An organization like coca cola Company which has embraced integrated reporting may not find it necessary to include the social relationship and intellectual capital category in its integrated report. It being a multi-national company, and the investors and other stakeholders are interested more in the financial and manufacturing capital and maybe human capital. This is because these are the capital categories that are likely to project a picture of what they are likely looking for in terms of investment and growth of their capital invested in this company (Loska 2012). Question 4 This latest development in integrated reporting has led to different initiatives being undertaken to suit the new style of integrated reporting. Stakeholders in the accounting profession have seen the need to embrace integrated reporting. These initiatives are being carried out at a global level (Kass 2012). Academicians are restructuring the accounting education structure to suit the current integrated reporting need. The current accounting curriculum fall shorts of knowledge and techniques that can fully equip a candidate to prepare a comprehensive, integrated report as per the IR requirements. The accounting profession is also migrating from the traditional reporting method which is becoming redundant with time and cannot fully capture the rising and continually changing factors affecting the business world such as climatic changes and population growth. ACCA In particular has restructured its curriculum to incorporate the Integrated Reporting content (Soyka 2013). Leading international accounting bodies have signed a memorandum of understanding to endorse the IIRC Program to embrace integrated reporting standards (Busco et al. 2013). Business organizations on the other hand are trying to incorporate integrated reporting and as thus majority has already exposed their accounting stuff to this new accounting technique. They have taken their stuff through training programs that have equipped them with skills on how to prepare an integrated report and what to capture in it to make it relevant. Regulators such as IIRC have introduced pilot programs to evaluate the effectiveness of integrated reporting and its applicability, and this has attracted many multinational companies such as Coca cola just to mention (Adams 2013). Question 5 Integrated reporting is a major development in the accounting profession, but there are major setbacks towards it being achieved. One of the reasons why integrated reporting may not be a reality is the lack of skills and knowledge on how to prepare integrated reports (Soyka 2013). The pilot program initiated by IIRC indicates that the integrated reports prepared by some organizations fall short of the expectations of an integrated report. Organizations have not fully equipped their accounting personnel with the skills of preparing an integrated report, or the accounting personnel don't know quite what it entails producing a comprehensive, integrated report (Adams 2013). The other reason integrated reporting may not be achieved is the high cost involved in the preparation of one. The costs involved include the cost of data collection, the costs of quantifying different types of capital such as human and social capitals among other costs (Loska 2013). This high cost has made it difficult for organizations to produce a separate integrated report and have opted to produce a combined report. Organizations have resulted to stick to the traditional method of reporting due to the cost of migrating to the integrated Reporting method (Kass 2013). Finally, many organizations are reluctant to embrace the integrated reporting since many do not understand what it is all about or rather they do not see the need for it. This is the case especially in small organizations that are comfortable in using the traditional technique of reporting since it suits their needs (Busco et al. 2013). References Adams, C. A. (2013). Understanding integrated reporting: The concise guide to integrated thinking and the future of corporate reporting. London: Do Sustainability. Busco, C., Frigo, M. L., Riccaboni, A., & Quattrone, P. (2013). Integrated Reporting: Concepts and Cases that Redefine Corporate Accountability. (When values meet value.) Cham: Imprint: Springer Kass, A. (2012). Towards Mainstreaming Integrated Reporting - Theoretical Landscape and Practical Insights. München: GRIN Verlag GmbH. Loska, T. (2013). Integrated reporting. S.l.: Grin Verlag. Soyka, P. A. (2013). The International Integrated Reporting Council (IIRC) Integrated Reporting Framework: Toward Better Sustainability Reporting and (Way) Beyond. Environmental Quality Management, 23(2), 1-14. Read More