How Do We Communicate Value?

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Table of Contents

Introduction
Statement of facts
Argument
Conclusion
Works cited

Introduction

Integrated representation of a company’s reporting is the presentation of a company’s financial as well as non-financial data that can be used in evaluating the company’s performance. This is done through an explanation of how sustainability is promoted in a particular company’s operations and this may be used in the strategic decision making in that company or other external stakeholders. The debate on the adoption of integrated reporting has increased in momentum over the last few years as different stakeholders raise different views on its adoption. The reporting on companies has in recent times changed as it has been identified that there is more to a successful company than just their financial growth (NZICA 21).

While summarizing the article “How do we communicate value?”, I have identified that investors and other stakeholders in the market are concerned about the non-financial value of companies in regard to issues such as labor laws, carbon disclosures and more in their evaluation of a company’s sustainability in the market. This has been identified to give a more comprehensive idea of the particular company’s sustainability and other qualitative characteristics. This because financial performance has been identified to fluctuate in an environment where there are so many non-financial market forces (Matthews 6). The particular formulation and adoption of integrated reporting revolves around the realization that in the last few years the quantity of information that accountants as well as financial analysts have to generate and present to stakeholders in a particular company has increased exponentially (Tilley 65). The need to reduce and refine this data while still maintaining its relevance and detail has forced regulators to formulate and adopt integrated reporting. Most of the regulators adopting integrated reporting in their particular markets are doing so with a long-term perspective of their local markets as well as regional economies (Verschoor 15).

Statement of facts

I have identified that the use of integrated reporting does not mean that it will automatically spur growth and sustainability since the communication and application of the information reported will be crucial in ensuring the sustainability of companies and stock markets (Hutton 10). The use of integrated reports has been identified to be helpful in identifying the particular aspects of a company’s intangible value, which are often not included in other financial accounts. This allows stakeholders to deduce information on a company’s efficiency and performance in non-monetary terms as well as its sustainability for future investment in regard to the returns on investment. It also reduces the amount of data that accountants and financial analysts have to report as compared to the use of annual reports and sustainability reports, which served an almost similar purpose (Verschoor 14).

I have also identified that the integrated reporting eases the communication of non-financial information on companies. This is because it is designed to efficiently incorporate financial and non-financial data into the communication aspect of reporting in a way that balances their emphasis on both types of data unlike previous reports, which mainly concentrated on financial data and laid very little emphasis on non-financial data (Tilley 65). The need to adopt integrated reporting is also advised by the need to identify and evaluate the long-term performance of a company. Integrated reporting gives stakeholders’ in-depth information, which they can apply to come up with a more concrete evaluation of a company’s long-term performance to identify its success or lack of it and choose whether to invest more or not (California CPA 1). The fact that few of the world’s stock exchanges give sufficient information on the reporting of non-financial data means that most firms and companies do not know how they will apply it in the market (Verschoor 13).

I noted that the adoption of integrated reporting puts firms in a compromised situation especially if they do not have cultural structures that are less rigid since they will have to evaluate and change a lot of their structures. After the success of changing their structures, the firm has to communicate and educate their clients on the particular reasons behind the adoption of integrated reporting and this may not resonate well especially with conservative companies. However, the adoption of integrated reporting especially in stock markets all over the world will increase the activity of investors as they will be in a position to better evaluate information on their investments. It has also been identified that it will revolutionize the stock markets as the valuing of most companies will change with the adoption of a mode of reporting that will increase the emphasis on their non-financial value (Osborn 23). While regulatory demands in the world may be varied and most of them may seem to be constantly changing, the adoption of integrated reporting gives accountants as well as financial analyst the chance to comfortably conform to those particular regulatory demands, despite their location in the world. Finally, I have identified that integrated reporting has a greater institutional mandate as compared to sustainability reporting in regard to the particular application in the formulation and implementation of strategies in organizations.

Argument

While most accounting organizations may be willing to adopt integrated reporting, it may not be practical in most of the world’s securities markets as most of them have particular mechanisms and frameworks that are identified to be quite rigid (Verschoor 13). This may, on the other hand, suggest that there is a need to evaluate and change the current structures that are evident in most securities markets. For instance, it is identified that the move to compel all companies that are listed in the Johannesburg stock exchange to adopt integrated reporting by 2011 may have been ahead of its time as most companies as well as the particular stock exchange structure did not know how to go about it as well as how to apply it (Oberholzer 48). This requires the application of legitimacy theories as some laws do not deem it mandatory. The fact that there are still a lot of undefined parameters revolving around integrated reporting means that there may be still time before stock markets can start adopting it full. However, the fact that it is still a voluntary option in the country means that the firm can start acquainting itself with it before it becomes mandatory so as to increase their efficiency in the future.

The adoption of integrated reporting may be incorporated in part into the already existing structures. This serves the same purpose as the use of annual reports together with social reports in as much as value reporting is concerned (Osborn 22). It also does not generate a lot of new useless data as the use of sustainability as well as annual reports, which most accountants are often not in a position to effectively communicate to their own clients as well as to other interested parties in the market (Brooks 8). It has been identified that the use of integrated reporting will ensure that accountants and financial analysts spend more time evaluating and understanding non-financial data so as to be able to effectively communicate it to stakeholders who can then use it to evaluate the particular position of the company (Drury 93).

While a lot of effort goes into preparing and presenting annual reports as well as sustainability reports, which serve an almost similar purpose as the integrated reports, not much emphasis is placed on the performance, strategies as well as commitment to sustainability of the particular companies on the part of the various stakeholders who are reported to (Osborn 22). The use of integrated reports generates interests especially on the sustainability as well as the particular growth strategies adopted in the company and this gives the various stakeholders with interests in the company a more integrated and comprehensive view of the true value of the company now and in the future (Oberholzer 48). The firm’s customers would greatly appreciate a less bulky mode of reporting that gives them even more insight into their interests as well as makes it easy for them to make organizational decisions based on accounting information. It has been identified that the world has been struggling to solve the 21^st century challenges with the 20^th and the 19^th century reporting and decision making (Brooks 7).

Conclusion

Through identifying that integrated reporting is becoming slowly integrated in financial reporting requirements in financial markets all over the world, the firm should know that the adoption of integrated reporting is inevitable (Tilley 65). It is, therefore, important for a firm that has a wide array of clients to adopt the mode of financial reporting starting now. This should give the firm time to adapt to the integrated reporting before it is made mandatory all over the world or even demanded by its clients. It will also give the firm a chance to grow with this mode of reporting as it is being refined and defined to be more efficient and this may work to ensure the efficiency of the firm in applying it in serving its clients (Oberholzer 48). The firm will also be in a position to effectively communicate all the financial data before other firms can fully conjure out the new communication structures that are needed with the adoption of integrated reporting.

The fact that the current regulatory guidelines do not specifically make it mandatory to apply integrated reporting means that the firm can adopt it voluntarily and be in a position to test it and see how it fairs with their clients. This should give the firm a competitive edge in the market since the use of integrated reporting is not only important in the sustainability of organization, but also that of entire economies. The clients will benefit since the long-term success of the use of integrated reporting lies in its use and its incorporation into organizations’ cultures. This may be the reason some parts of the world are now making it mandatory for companies to use integrated reporting. Therefore, I recommend that the firm adopt integrated reporting in serving clients accounting needs.

Works cited

Brooks, Camille. Corporate Reporting. London: Aspen Publishers. 2011. Print.

California CPA. Push for Integrated Reporting: Comment on New Draft Guidance. Los Angeles: California CPA. 2011. Print.

Drury, Colin. Management and Cost Accounting. Upper Saddle River: Cengage Learning EMEA. 2007. Print.

Hutton, Amy. Beyond Financial Reporting. New York: Morgan Stanley Publication 2004. Print.

Matthews, David. Integrated Reporting. New York: Governance Publishing & Information Services Ltd. 2011 print.

NZICA. How do we communicate value? Wellington: NZICA publishing. 2011. Print.

Oberholzer, Andre. Integrated reporting: Why should you care? New York: Communication World. 2011. Print.

Osborn, Jeremy. Project manager, The Prince’s Accounting for Sustainability Project (A4S) and the International Integrated Reporting Committee (IIRC). London: Seven Publishing Group Ltd. 2011. Print.

Tilley, Charles. Integrated reporting must complement a company’s strategic goals. London: Seven Publishing Group Ltd. 2011. Print.

Verschoor, Curtis. Should Sustainability Reporting Be Global thought leaders on the Integrated? London: Institute of Management Accountants. 2011. Print.

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