Preparers of financial reports are increasingly expected to integrate non-financial information into statements, but how will this affect FDs? asks Rachael Singh.

If the financial crisis has taught us anything, it is that the way business works must change. An evolution is descending upon the community, in the way credit is provided, in the standards of financial reporting, in how auditors work, and in the way businesses communicate with their stakeholders. One term that was heard of before the crisis, but is now uttered more often and louder, is integrated reporting.

 

 

Corporate communication must adapt to the changing needs of stakeholder demands, which will encompass all the information needed to draw a line in the sand for its current status, while presenting how it intends to move forward, and to where. Integrated reporting (IR) is a holistic view of a company’s performance, risks and opportunities in relation to six categories of capitals: financial, manufactured, human, intellectual, natural and social.

To help companies understand the metrics and methodology needed to pull together such diverse datasets, a formal framework is expected to be released at the end of the year by the International Integrated Reporting Council (IIRC) – a collection of representatives from the largest companies, institutes and firms with former director of the Financial Reporting Council, Paul Druckman, as its CEO. “For finance directors, it is important to look at the macro picture”, he says.

 

Just 20% of the capital of a business is tangible, which is why IR is the next logical step in corporate reporting, according to Sallie Pilot, director of research and strategy at reporting advisers Black Sun

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