Integrated Reporting (IR)
Guiding principles for preparing and presenting IR
Contents elements of an IR
Types of capital
Usefulness / Advantages / Importance / Argument for IR
Issues concerning IR
Guiding principles for preparing and presenting IR
Can be used as a basis of preparing IR
1. Strategic focus and future orientation
Insights of organisation’s strategy and how it relates to the organization’s ability
to create value in the short, medium and long term and to its use of and effects
on the capitals.
2. Connectivity of information
An integrated report should show a holistic picture of the combination, inter-
relatedness and dependencies between the factors that affect the organization’s
ability to create value over time.
3. Stakeholder relationships
IR should provide insight into the nature and quality of the organization’s
relationships with its key stakeholders, including how and to what extent the
Integrated Reporting (IR) 1
organization understands, takes into account and responds to their legitimate
needs and interests.
4. Materiality
An integrated report should disclose information about matters that substantively
affect the organization’s ability to create value over the short, medium and long
term.
5. Conciseness
An integrated report includes sufficient context to understand the organization’s
strategy, governance, performance and prospects without being burdened with
less relevant information.
6. Realibility and completeness
An integrated report should include all material matters, both positive and
negative, in a balanced way and without material error.
7. Consistency and comparability
Consistent Information are disclosed over time and enabling comparisons with
other organisations to be made.
Since IR is voluntary report, consistency information of reporting including the
information disclosed would facilitate comparison over a period of time.
Contents elements of an IR
Organisational overview and external environment
Reporting of company’s operation and financial performance in the context of the
external environment (industry + macro)
Governance
Refer to the monitoring and controls within the company which should be
compliance with the CG code
Business model
Strategies uses by the company to sell its goods or services that give it the
competitive advantages
Integrated Reporting (IR) 2
Risk and opportunities
Specific risk and opportunities that effect the organisation’s ability to create value
over the short, medium and long term, and how is the organisation dealing with
them.
Strategy and resource allocation
Financial and Human resources that have been assigned to execute the respective
strategies (Not just talk, Plans are made for the resources)
Performance
The company’s performance in using the 6 types of capital
Outlook (Future)
Risk and uncertainties that confronting the organisation in pursuing the strategy,
and the potential implications for its business model and future performance
Basis of preparation and presentation
How does the organisation determine what matters to include in the IR and How are
such matters quantified or evaluated
Types of capital
Focus reporting on what the capitals used and the outcomes (positive and
negative) and the value creation over short, medium and long term.
Integrated Reporting (IR) 3
Stakeholders’
Capital Report about what
focus
Existing and
Pool of funds used in the production of goods and
potential
provision of services. (Greater fund > Greater
1. Financial investors,
opportunities in product development, market penetration
lender, other
and acquisition of business.)
trade payables
Existing and PPE and material goods used in the production process
potential rather than output itself. The efficiency of this capital being
2. Manufactured
investor, NGO, used. The implication of this capital to the social and
lender environment. *State of art (Modern) facilities
The value of the company, employees’ knowledge and
Existing and
3. Intellectual business training. (Cannot be see) Proprietary
potential
capital information (intangibles) that provide company with
investor, lender
competitive advantages. (Can be see)
People’s health, knowledge, skills and motivation that are
needed for productive work (can be enhanced through
Potential
4. Human education and training). (Cannot be see) Company’s
employees and
capital recruitment policy such as gender, age race equality.
trade union
Employees’ welfare (remuneration, working environment,
perquisite, share option and etc)
5. Social & Community, Maintaining its relationship with communities that help
Integrated Reporting (IR) 4
Relationship general public maintain and develop other capitals. Report on what have
capital and whoever been done by the company to the community.
involve
NGO,
Regulatory Consumption of natural resources use by the company in
bodies, the production of goods and provision of services that
6. Natural
Communities, support the past, current and future prosperity of the
capital
General public organisation. Environmental footprints generated from the
and future company’s operation (positive and negative)
generation.
Usefulness / Advantages / Importance / Argument for IR
For Company
1. To support Integrated Thinking
Decision making and actions will focus on value creation over time (short, medium
and long).
Integrated Thinking is the company acknowledging its responsibilities towards other
stakeholder (not only shareholder), therefore will embrace their interest in the
decision making.
2. Transparency
Because IR is voluntary, this will help in removing information asymmetry that exist
between the company and shareholders.
3. Accountability
Based on what has been disclosed, stakeholders can hold the company
accountable (if the Co’s activities is against their interest)
4. Lower the reputational risk
By voluntarily report on the company’s performance in the 6 areas,it made the
company seen to be an ethical companies and therefore will help boost its
reputation (can be benefit to shareholders as share price can appreciate)
5. Ease in raising finance with a lower cost of capital
Extensive voluntary disclosure which can build transparency and trust will help
improve its access to capital at a lower cost of capital (low risk to bank)
For Stakeholders
Integrated Reporting (IR) 5
Potential and existing shareholders
To improve the quality of information available to enable a more efficient and productive
allocation of capital.
Stakeholders (including company and shareholders)
To provide a more cohesive and efficient approach to corporate reporting that draws on
different reporting strands (capitals used and their respective performance) and
communicates the full range of factors that materially affect the ability of an organisation
to create value over time.
Issues concerning IR
Director’s duties
Director did not owe other stakeholders duties, the publication of IR may give other
stakeholders wrong impression that director has duties on them and therefore
accountable.
Commercial confidentiality
As IR includes many sensitive commercial information, Co may lose its competitive
advantages if other competitor did not publish IR.
Capacity building
As the old reporting is purely focus on historical financial information, but IR will
have to include many additional information which currently do not available,
therefore the capacity of gathering and combining information will be costly and time
consuming.
Integrated Reporting (IR) 6
