The paper 'About Value Creation ' is a great example of a Finance and Accounting Assignment. IIRC paragraph 1.2 defines integrated reporting as a process that results in communication, most visibly a periodic “ integrated report about value creation over time. It is a concise communication about how an organization’ s strategy, governance, performance, and prospects lead to the creation of value over the short, medium, and long term. In this regard, an integrated report is more than the traditional reporting that mainly deals with financial matters or a sustainability report which is mainly concerned with environmental matters.
The following types of information will need to be captured from now on in order to sufficiently meet the needs of integrated reporting; Information about the capitals the organization uses and effects and the critical interdependences which include trade-offs between them Information about the capacity of the organization’ s governance structure in assessing resilience against short term disruptions and respond to stakeholders' legitimate needs interests and expectations in a bid to secure long-term returns. Information regarding how the organization tailors its business model and strategy in responding to the opportunities and risks it faces including major changes in its external context Information on other organizational value drivers, activities, results (financial and others), and outcomes in terms of the capitals- past, future, and present. The above information can be summarized as capitals, governance, including opportunities and risks, strategy and resource allocation, business model, performance, and future outlook. The IR process is intended to be applied continuously to all relevant reports and communications, in addition to the preparation of an integrated report.
The integrated report may include links to other reports and communications e. g.
financial statements and sustainability reports. The IIRC aims to complement material developed by established reporting standard setters and others and does not intend to develop duplicate content (Para 1.18- 1.20). I agree with how paragraphs 1.18-120 characterize the interaction with other reports and communications. It should be noted that integrated reports are aimed at providers of financial capital and as such does not aim at doing away with other statements but rather it seeks to provide information that is useful to capital providers. This information could be financial in nature and hence the reason why integrated reports may borrow from the traditional financial reports.
Similarly, the capital providers’ funds in a bid to create value may be used in sustainability activities and also incorporate social responsibility activities. As such it may borrow from such reports. However, as stated above, integrated reports do not seek to duplicate the works of the above traditional reports. Neither is it a combination of such reports. As such, though the integrated reports are distinct from other reports, they may borrow heavily from them including having links to such reports and communication such as financial and sustainability reports.
However, the reports must recognize that value does not only arise from the information contained in such reports but it is also created from factors that are external to the organization. In this regard, I do agree with the provisions of paragraph 1.18- 1.20. The < IR> Framework describes six categories of capital (Para 2.17). An organization is to use these categories as a benchmark when preparing an integrated report (Para 2.19-2.21) and should disclose the reason if it considers any of the capitals as not material (Para 4.5).
Such a ‘ capitals framework’ means that centrally to popular beliefs, organizations do not only rely on financial capital to create value. Organizations depend on a variety of forms of capital for their success. These may include financial, intellectual, manufactured, human, social and relationship, and natural capital. The framework implies that the above capitals store value in one form or the other and become a valuable input to the organization’ s business model. Such capitals are increased, decreased, or transformed through the activities and outputs of the organization since they are enhanced consumed, modified, destroyed, or affected by the activities and outputs.
I agree with such classification of capital since for an organization to succeed, it must combine a number of the capitals mentioned above. For instance, a service organization needs to make a profit in a bid to improve its financial capital. However, it will be hard for the organization’ s financial capital to increase through increased profitability if its quality of human capital is not improved. This justifies justification of capital into various categories in that to create value; the organization needs more components of the capitals framework than just finance. Given this information differentiation, outline initiatives currently being undertaken at a global level by regulators, international bodies, accounting profession and academics to achieve integrated reporting;
Theiirc.og, 2015, Integrated reporting, Retrieved on 5th January 2015, from;