Integrated Reporting – CA Final FR Study Material is designed strictly as per the latest syllabus and exam pattern.
Integrated Reporting – CA Final FR Study Material
Question 1.
What are the guiding principles for preparation and presentation of Integrated Report?
Answer:
The following Guiding Principles underpin the preparation and presentation of an integrated report, informing the content of the report and how information is presented:
1. Strategic Focus and Future Orientation
An integrated report should provide insight into the organization’s strategy and how it relates to the organization’s ability to create value and to its use of and effects on the capitals in short, medium and long term period. The report should clearly show the linkages between strategy, risks and opportunities, current performance, as well as future outlook and targets.
2. Connectivity of Information
An integrated report shows the connections between the different components:
- Organisation’s business model
- External factors that affect the organisation
- Various resources and relationships on which the organisation and its performance are dependent upon
3. Stakeholder Relationships
An integrated report should provide insight into nature and quality of the organization’s relationships with its key stakeholders including how and to what extent the organization understands, takes into account and responds to their legitimate needs and interests.
4. Materiality
A focus on materiality should assist in avoiding irrelevant and detailed information from cluttering the report. The integrated report is a high-level, concise report that contains only the most material matters and information affecting the organisation and its ability to create value over time. Additional information can be placed in supporting reports.
5. Conciseness
An integrated report should be concise. It implies that the information should be accessible through crisp presentation, the omission of imma-terial information, and a logical easy-to-follow structure.
6. Reliability and Completeness
An integrated report should include all material matters, both positive and negative, in a balanced way and without material error. Integrated reporting requires that consideration is given to both good and bad news and performance. Furthermore, both the increases and reductions in the value of the important capitals should be reflected.
Question 2.
What is Integrated Reporting and what are its salient features?
Answer:
Integrated reporting is a concept that has been created to better articulate the broader range of measures that contribute to long-term value and the role organizations play in society. Integrated Reporting is enhancing the way organizations think, plan and report the story of their business. Central to this is the proposition that value is increasingly shaped by factors additional to financial performance, such as reliance on the environment, social reputation, human capital skills and others.
This value creation concept is the backbone of integrated reporting and is the direction for the future of corporate reporting. In addition to financial capital, integrated reporting examines five additional capitals that should guide an organization’s decision-making and long-term success — its value creation in the broadest sense.
An integrated report is a concise communication about how an organization’s:
- Strategy
- Governance
- Performance And
- Prospects
In the context of its external environment leads to the creation of value over:
- Short
- Medium And
- Longterm
Its a portal by which the organisation communicates a holistic view of:
- Its Current position
- Where it’s going And
- How it intends to get there
The report enables readers to make an assessment of the organisation’s ability to create value in the future, with value creation referring to the value created for both the organisation and for others.
Salient features of Integrated Reporting Framework Principle Based Approach
The International Framework (the Framework) takes a principles-based approach. This Framework identifies information to be included in an integrated report for use in assessing an organization’s ability to create value; it does not set benchmarks for such things as the quality of an organization’s strategy or the level of its performance.
It intent to strike an appropriate balance between flexibility and prescription that recognizes the wide variation in individual circumstances of different organizations while enabling a sufficient degree of comparability across or-ganizations to meet relevant information needs.
Targets the Private Sector or Profit Making Companies
This Framework is written primarily in the context of private sector, for-profit companies of any size but it can also be applied, adapted as necessary, by public sector and not-for-profit organizations.
Identifiable Communication
An integrated report maybe prepared in response to existing compliance requirements, and may be either a standalone report or be included as a distin-guishable, prominent and accessible part of another report or communication. It should include, transitionally on a comply or explain basis, a statement by those charged with governance accepting responsibility for the report.
An integrated report is intended to be more than a summary of information in other communications (e.g., financial statements, a sustainability report, analyst calls, or on a website); rather, it makes explicit the connectivity of information to communicate how value is created over time.
Financial and Non-financial Items
The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time. It, therefore, contains relevant information, both financial and other.
Value Creation
Value created by an organization over time manifests itself in increases, decreases or transformations of the capitals caused by the organization’s business activities and outputs. That value has two interrelated aspects – value created for:
- The organization itself, which enables financial returns to the providers of financial capital
- Others (ie., stakeholders and society at large)