What if stakeholders could receive a single annual report that explains clearly how a company or organization creates value over the short, medium and long term? Such a globally accepted report would go far beyond existing financial statements prescribed by the FASB or IASB, and would expand its focus from short-term financial results to long-term changes in value. It would outline an organization's strategy, governance, performance and prospects, all framed within the context of its external environment. And its principles would apply to corporate, not-for-profit, and governmental entities alike.
The idea of developing an integrated report has moved from concept to reality in just five years. Begun in 2009 at a meeting convened by Prince Charles of Wales, this effort has led to the creation of the International Integrated Reporting Council (IIRC) and the December 2013 publication of the first framework for Integrated Reporting, dubbed "
For a number of reasons, financial executives can play a critical role in the development and issuance of integrated reports. Most importantly, integrated reports include financial statements and other financial information. Furthermore, financial executives will need to help plan and vet new disclosures about strategic planning and corporate social responsibility that could be included in integrated reports.
The explicit objective of the IIRC is to establish a new norm for corporate reporting, and the IIRC has been working quickly toward this objective with active participation from the leaders of the FASB, IASB, the AICPA, the largest CPA firms, and many professional organizations of accountants in the U.S. and around the world. If the
This article describes the key elements of the new
Background and Benefits of Integrated Reporting
Integrated reporting is built on the concept of "integrated thinking," defined by the IIRC as "the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects. Integrated thinking leads to integrated decision-making and actions that consider the creation of value over the short, medium and long term."
As such, integrated thinking and
Accounting researchers have long argued that increased transparency in financial reporting should increase share prices while making it easier for companies to raise capital. In theory, companies' voluntary reporting of
The IIRC was established in 2009 to oversee the creation and implementation of an integrated reporting "framework within which more long-term decisions can be made, unlocking financial capital for investments as well as providing a more holistic picture of how value is created over time." The IIRC believes this will allow investors to assess the impact of the "organization's strategy, governance, performance and prospects" more effectively. The IIRC also believes integrated reporting will benefit the reporting organizations themselves by improving their communications with stakeholders and enhancing their internal processes.
The organizational structure of the IIRC consists of a Board that takes responsibility for approving the