Integrated Reporting Framework Released by the IIRC
by Terri Eyden on
By Jason Bramwell, Staff Writer
The International Integrated Reporting Council (IIRC) issued a final framework for integrated reporting in an effort to promote a more cohesive and efficient approach to corporate business reporting as well as to improve the quality of information available to stakeholders.
The IIRC – a global coalition of regulators, investors, accountants, standard setters, and nongovernmental organizations – noted that integrated reporting "benefits all stakeholders interested in an organization's ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators, and policymakers."
The release of the integrated reporting framework, which was adopted by the IIRC on December 8, follows a three-month global consultation period led by the IIRC earlier this year, which prompted more than 350 responses. The IIRC provides advice on the IIRC's mission, role, and governance practices through thought leadership, intellectual contributions, and strategic insight.
"The framework brings technical rigor and cohesion to a process that has grown organically and through market pressure over the last three years," IIRC CEO Paul Druckman said in a written statement. "Today, we have fired the starting gun on a period of global adoption that will begin in early 2014 by showcasing practical examples of reporting innovation, including how businesses are demonstrating value creation using the 'capitals' model and principles, such as the connectivity of information."
According to the IIRC, the integrated reporting framework does not include requirements on specific key performance indicators, measurement methods, or the disclosure of individual matters, but it does include requirements that should be applied before an integrated report is considered in accordance with the framework.
"An integrated report may be prepared in response to existing compliance requirements, and may be either a standalone report or be included as a distinguishable, prominent, and accessible part of another report or communication," the IIRC noted. "It should include – transitionally on a comply or explain basis – a statement by those charged with governance accepting responsibility for the report."
The IIRC defined the following seven guiding principles of integrated reporting:
1. Strategic focus and future orientation. An integrated report should provide information into the organization's strategy and how it relates to the company's ability to create value in the short, medium, and long term as well as to its use of and effects on the capitals.
2. Connectivity of information. A holistic picture should be shown of the combination, interrelatedness, and dependencies between the factors that affect the organization's ability to create value over time.
3. Stakeholder relationships. Insight should be provided into the 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. Information should be disclosed that substantively affects the organization's ability to create value over the short, medium, and long term.
5. Conciseness. The report should be concise.
6. Reliability and completeness. All positive and negative matters should be included in a balanced way and without error.
7. Consistency and comparability. Information should be presented (a) on a consistent basis over time, and (b) in a way that it can be compared with other organizations to the extent it is material to the organization's own ability to create value over time.
American Institute of CPAs (AICPA) President and CEO Barry Melancon, CPA, CGMA, who serves on the IIRC, said in a written statement December 9, "The AICPA commends the IIRC for developing an integrated reporting framework through extensive international collaboration and the participation of key stakeholders, who approach the issue with different perspectives. The framework will provide companies the foundation for enhanced business reporting and benefit investors by serving as a complement to financial reporting."
The framework is currently being piloted by more than 100 businesses and more than thirty-five investor organizations in more than twenty-five countries around the world, sixteen of which are members of the G20, the group of nations focused on strengthening the global economy.
The pilot program will run until September 2014, allowing participants time to test the framework to ensure that integrated reporting "is relevant to the mainstream business and investor communities and can be incorporated as part of existing reporting requirements," Druckman said.