Integrated reporting framework draft welcomed by KPMG

The IIRC's new Draft Integrated Reporting Framework 2013 aims to help organisations better report business value

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KPMG has welcomed the release of the International Integrated Reporting Council’s (IIRC) Draft Integrated Reporting Framework 2013, claiming it represents a significant step towards reporting business value.

The highly anticipated framework was released on 16 April and is being perceived as a new chapter in corporate reporting. It outlines the fundamental concepts of integrated reporting, guiding principles and elements such as organisational review, opportunities and risks, strategy, performance and future outlook.

According to the IIRC, the framework will help companies in the process of integrated reporting to communicate a full range of factors materially affecting the ability of an organisation to create value over time, drawing together other reporting strands. It is also designed to inform how financial capital is allocated to support short, medium and long term value as well as enhance accountability and stewardship.

While some questions have been raised around how much is too much information, KPMG International deputy chairman, Alan Buckle, applauded the work of the IIRC and urged regulators, investors and governments to get behind the change in business reporting in order to ensure future financial stability.

However KPMG called on the IIRC to better address the many different interpretations of integrated reporting used in the market today. It also hoped the final version of the framework will tackle any risks in misinterpretation to ensure reports stay focused, and help readers understand how a business’ earnings potential has been developed and protected.

While the integrated report was useful, KPMG also expected companies to find integrated reporting most interesting as a means to improve their existing narrative reporting.

“Integrated reporting provides an opportunity to re-align corporate reporting with investor decision-making,” KPMG Australia’s Better Business Reporting Group leaders, Michael Bray, said. “It is an opportunity to shift the reporting focus from short-term financial performance to long-term value creation.”

The World Business Council for Sustainable Development is also urging CFOs, investor relations and board members to understand what integrated reporting is and look to improve the linkage between strategic intent and performance. It claims the framework is set to challenge the status quo of value creation and transparency in reporting.

“Financial capital is disproportionate in the way in which a company is value,” its president and deputy chair of the IIRC, Peter Bakker, said. “Social and environmental impacts are not recognised to the extent they need to be in investment and capital allocation decisions. This is short sighted.”