Running head: INTEGRATED REPORTING 1
Arguments for and against Integrated Reporting System
Name
Institution
INTEGRATED REPORTING 2
Arguments for and against Integrated Reporting System
Introduction
There is need for a successful connection between relationships within an organization
and the stakeholders, financials, and the mode of utilization of the natural resources for any
company. Talking about integrated reporting, there is the need for assessing the value beyond
financial terms such as the long overdue development when an organization’s value is in the
form of intangible assets. The aims for integrated reporting includes the incorporation of all
things within the strategy through risk management, starting from the financial reporting to the
incorporation of other capitals and the meeting of the requirements of a certain broad team of
stakeholders. This reporting looks up to making a link of these elements to ensure that it makes
the interdependencies of these elements to be clear. This objective makes it to represent the most
significant transformation to the reporting rulebook for a long period.
Arguments for Integrated Reporting
The fundamental concept that underlies the phrase integrated reporting is the provision of
one report that incorporates a company’s financial and non-financial information such as
environmental, social, governance and intangibles. Integrated reporting is doubtless the most
debated topics in the corporate reporting world. Integrated reporting helps the company to center
its business reporting on strategy and value creation. Integrated Reporting is a complete form of
reporting. It aims to discourse the confines of the present reporting system and develop a long-
term business strategy. It is similar to a one-size for all reporting system. At the point when the
ongoing history of financial, social, environmental and ethical reporting is analyzed, the idea that
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expanding desires for shareholders and stakeholders on transparency and accountability can be
met by an integrated report has incredible significance.
When global integrated reporting framework was introduced in 2013, it was with a
laudable and lofty ambition –to make corporate reporting all-inclusive and reflective of the real
and fair view of the organizations that companies encounter, and thus useful to investors too
(Soyka, 2013). During its publishing, the IIR framework stated that the primary purpose of the
integrated report was to explain to various investors how an organization creates value over time’
(IIRC 2013a: 4). Prepared by the IR framework, an integrated report will advance the quality of
information and the decision-usefulness to the investors and other users of such information
thereby making the integrated reporting a norm in the corporate reporting world. On the other
hand, many proponents are arguing against integrated reporting citing its demerits to the
corporate reporting world. As a result, the following sections will present a detailed argument
for and against integrated reporting in the corporate reporting world.
According to Cozma-Ighian (2015), integrated reporting optimize reporting. For instance,
integrated reporting enables multiple departments to collaborate, share information and create
synergies. The proponents argue that integrated reporting can broaden the understanding and
knowledge of all the departments and the corporation as a whole. Moreover, Dumitru and Jinga
(2015) reinforce the point by insisting that integrated reporting strengthen the internal dialogue
beyond departmental and divisional boundaries of the organization. Implicitly, it promotes a
more cohesive and effective tactic to corporate reporting which draws on various strands and
communicates the full range of determinants that significantly influence the ability of a
corporation to generate value.
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Furthermore, James (2014) argues that integrated reporting enhances resource efficiency
as financial; sustainability and governance reports are merged. This includes production,
warehousing and distribution costs. For example, integration of the sustainability report into the
corporate company’s annual report saves significant time and expenses because a single report
will be printed, designed and distributed to investors and others users of such information.
Besides, operational decision-making processes are accelerated due to the improved consistency
in individual reports on the company’s value chain. In other words, integrated reporting supports
integrated thinking, decision making and actions that center on the creation of value over short-
term, intermediary term, and long-term (IIRC 2013a: 2). Notably, the core concept of the IIR
framework is the capitals models that offer insights about the resources and relationships used
and influenced by the company.
Moreover, the value that the company creates manifests itself over the period through an
increase, decrease and transformation in the capital used and influenced by the company (IIRC
2013a: 10). James (2014) also argues that mixed reports enhance communication through the
provision of a consistent tool that applies to different stakeholders, and through disclosure of
credible information and relationships too with the financial community. Consequently, the
mixed reports meet the investors' needs for a complete corporate picture for more accessible and
comprehensive assessments.
Another reason to support the integrated reporting concept is that the adoption and
enlightened development of the current arrangements and procedures, as well as capability in
sustainability reporting, foster the development progress. Besides, progress reports it distributed
three or four times each year, in addition to proficient IT bolster that streamlines access to
applicable information empowers report improvement. The benefit of utilizing progress reports is
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that the input from the interior and outer stakeholders can be immediately fused into the report.
Open correspondence between offices, communication, and legitimate collaboration encourage
working and assertion techniques (Soyka, 2013).
On the administration level, the acknowledgment and support of the board and different
divisions, alongside an open corporate culture that exceeds expectations in straightforwardness,
advancement, and progress advances the making of an integrated report. Remotely,
acknowledgment through honors and positive partner input are spurring. Furthermore, the
utilization of the Framework and the help of pro specialists and external specialist organizations
is useful (Ioana & Adriana, 2013).
Another support for integrated reporting is the ease of understating and using the
integrated reporting framework. According to various studies, most managers and employees
support the use of integrated reporting model because they understand its use and usefulness in
the organization. According to Soyka (2013), companies welcome recognition and disclosure of
broader issues that enhance value creation and addition in the organization. They believe that
integrated reporting would strengthen the connectivity between various factors that promote
value creation in the organization (Beattie & Smith, 2013, p.249). The factors include brand and
supply chain management processes. Implicitly, the management and other stakeholders of the
companies understand the use and usefulness of the integrated reporting model in the corporate
reporting community. Consequently, they support its implementation and use in their companies.
Furthermore, the use of corporate reporting information promotes the need for the
integrated reporting model. According to Neilsen and Roslender (2015), “the present,
progressively disorderly and huge, format of corporate reporting – and specifically the annual
report – is of progressively restricted use to them as users, beyond any asserting significance to
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them in relation to their prior understanding and information of a company” (p.267). The users of
such information criticize much of the narratives on the financial reports except the financial
statements, which are considered comprehensive and useful. Other information is considered too
backward-looking and that it lacks connectivity and measurability.
As a result, there is a need for a more complete and all-inclusive reporting model that
would need the needs of the investors regarding providing information that is relevant and real-
time to expedite decision-making and understanding of the company. As such, an integrated
reporting model is supported by users of the corporate reporting information for their
understanding of the company the advantages and disadvantages by highlighting the challenges
that such companies encounter in their business operations. This reporting model would provide
more information including the key performance indicators, corporate strategy, and critical risks
(Cozma-Ighian, 2015, p.129).
Furthermore, critical advancement has been made in diverse accounting areas, and these
incorporate HR accounting, brand accounting, environmental reporting, governance, social
accounting and reporting, value added accounting and reporting. Every one of these features
ought to be incorporated into the financial reports and reports to represent an accurate and fair
perspective of the organization. In any case, the current reporting framework does not perceive
these improvements (Beattie & Smith, 2013, p.246). Thus, organizations following the existing
accounting strategies will most likely be unable to represent their HR, corporate social obligation
and their image and value added to the organization. Subsequently, there is have to receive an
across the board framework that can mull over the new and developing issues in the accounting
scene. In that case, integrated reporting is essential to companies in need of having real and
Fairview representation.
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It is also important to note that the introduction of integrated reporting is aimed at
expanding comparability crosswise over organizations and between nations. Possibly, the lone
prime advantage of actualizing the integrated reporting measures would be an intensified
inclination to work correctly with and crosswise over different nations (Cozma-Ighian, 2015,
p.125). For example, since accounting guidelines right now contrast from nation to nation,
international investors are caught up with various deterrents that stretch the procedure and
require an extraordinary forthright work. In the current reporting framework, if the speculators
need to think about organizations, they should accommodate accounting records of the concerned
organizations to build up a bound together picture before settling on any choices. Creditors and
providers confront similar difficulties when looking at and inspecting the creditworthiness of
companies in different nations across the world. Besides, the examination issues do not just face
large companies but also small business enterprises. Verily, numerous small enterprises would
presumably put resources into the global market if there were integrated accounting and
reporting benchmarks to pursue (Ioana & Adriana, 2013).
Besides, globalization has convinced numerous business organizations to extend past
their original nations, yet the blockades to doing as such are often entangled to prevail. Under the
current reporting system, companies that extend internationally are committed to keep and report
two or more arrangements of accounting records to agree to the foreign nation's legal accounting
necessities. Specifically, this can be a difficult undertaking for small industries, which experience
massive costs of global compliance. This additional expense can make a planned global
development cost excessively expensive to be beneficial. An integrated reporting system would
radically diminish costs for these organizations by annihilating the need to duplicate financial
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and non-financial information. They could take into account-enhanced opportunities for
companies of all sizes over many sectors and nations (Neilsen & Roslender, 2015).
Lastly, implementing an integrated reporting system would likewise allow one definitive
focal body to make tenets and policies concerning corporate accounting and reporting.
Conversely, the present existing corporate reporting systems are built up by each different
nation's authoritative. The current system and principles of reporting frequently lead to
disagreement between individual nations and the global supervisory bodies. This includes a great
deal of time, cash and irritation to the procedure. Confusion and perplexity in regards to
reporting principles and quality practices would have a proper open door resolution with a
central authoritative body. This, to some degree, would reduce the costs that companies presently
bring about as they endeavor to translate corporate reporting standards.
Therefore, companies require a unified set of reporting system, which can be utilized
across all the companies and among various nations around the world to report all the financial
and non-financial information of the companies. The present cracked reporting standards system
has numerous. This customary system of reporting has a few inherent restrictions, which have
stimulated numerous exponents accounting, and reporting organizations to support the integrated
reporting system as well as a selection of one-size-for-all financial and non-financial reporting
standards.
Arguments against integrated reporting
Despite the global corporate and institutional support for the integrated reporting,
questions and doubts remain concerning the use and the usefulness of the mixed reports among
the users of the information printed including the providers of capital.
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One of the arguments against the integrated reporting is the resistance from the
accounting and reporting team, and other management levels as well as individuals departments’
because of the changes that result from the implementation process. Naturally, people resist
change because they like maintaining the status quo. Introduction of integrated reporting would
cause many to change their styles of working which they have conformed to and thus demand
more effort from them. Consequently, many oppose the new reporting model regardless of the
much benefits it brings to the organization (Veltri & Silvestri, 2015, p.447)).
Besides, introducing an integrated reporting system would imply revisiting the current
system of reporting. The procedures, processes, and strategies of executing this tasks would fall
on the organization’s accounting and reporting team and the respective departments in charge of
particularly affected areas such as social responsibility, and environmental conservation
department. Consequently, the assignment of shifting would require much effort because of the
tasks and processes involved with the shift. (Thomson, 2015).
Another argument against the introduction and implementation of the integrated reporting
model is the familiarity, understanding, and knowledge of t integrated reporting model. Many
users of the corporate reporting information have profound understanding and familiarity with
the integrated reporting. This reflects the current low desire and needs for the integrated
reporting system in their companies of affiliations (Soyka, 2013).
Also, the rough adjustment period is among the fears of the new integrated reporting
system among the users. As the company would be shifting from the existing reporting system to
the new system, the probability of committing lavish mistakes as well as delays in the
accomplishment of tasks would be very high. Also, it is evident that each country observes
different laws concerning environmental compliance, social development, and welfare, as well as
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involvement policies for corporations (James, 2014). Consequently, the disparity in legal
compliance could obscure parallelism and concordance of mixed reports between countries in the
world.
Furthermore, integrated reporting is claimed to have an adverse effect on small
businesses which contribute to the significant part of the economy in the world. The small and
medium-sized enterprises may find the changeover cost to be substantial. Consequently, the
majority of the SMEs are against the introduction of the integrated reporting system. These
companies will find the cost of training workers on the use of an integrated reporting system as
well as set up the cost to be heavy, but large companies will consider such expenses exorbitant.
Often, new policies influence small business enterprises more than they do on large corporations
(Veltri & Silvestri, 2015, p.453).
Conclusion
Despite the few difficulties of the one-size-for-all corporate reporting, it is purposed to
give great information for the speculators, investors and other relevant partners including the
public in general. For this situation, quality information would mean providing pertinent,
dependable, reliable consistent from one fiscal period onto the next and total honesty of all
material information that supplements the data in the financial and non-financial statements and
reports, which the old system cannot provide.
In conclusion, globalization is affecting the world's economies in endless ways, and
accounting and reporting standards frame only one part of the numerous systems. Regardless of
whether an integrated reporting system is introduced or not, the globally situated companies,
both vast and small, should deal with the advantages and demerits of globalization in regards to
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their corporate reporting practices. This, in this manner, calls for strategic thinking, planning, and
management to deal with the unverifiable future patterns in the corporate reporting field. As the
world turns into a smaller town, and companies go global, there must be adequate underlying
tactics and strategies to guarantee a smooth change from the current troublesome reporting
system to the newly integrated reporting system-the "one-size-fits-all."
References
Beattie, V., & Smith, S.J. (2013) “Value creation and business models: refocusing the intellectual
capital debate,” British Accounting Review, 45(4): 243-254.
Cozma-Ighian D.S., (2015). Integrated reporting - the future of financial reporting, Internal
Auditing & Risk Management 2(38):125-133.
Dumitru M., & Jinga G., (2015). Integrated reporting practice for sustainable business: a case
study. Audit Financier XIII 7(127):117-125.
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Ioana D., & Adriana T.T., (2013). New corporate reporting trends. Analysis of the evolution of
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James M.L., (2014). The benefits of sustainability and integrated reporting: an investigation of
accounting majors’ perceptions. Journal of Legal, Ethical and Regulatory Issues
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Neilsen, C., & Roslender, R. (2015) “Enhancing financial reporting: the contribution of business
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framework: toward better sustainability reporting and (way) beyond. Environmental
Quality Management Winter (1):1-14.
Thomson I., (2015). However, does sustainability need capitalism or an integrated report
commentary on the international integrated reporting council: a story of failure. Critical
Perspectives on Accounting 27:18–22.
Veltri S., & Silvestri A., (2015). The Free State University integrated reporting: a critical
consideration. Journal of Intellectual Capital 16(2):443-46
