Integrated Reporting Case Study

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Integrated Reporting

Background to the Case

The manner in which business is conducted today, how businesses create value and the context in which they operate is rapidly changing. A 2011 report by Deloitte illustrates this, expressing a concern that assets reported in financial statements “reflect a steadily diminishing component of shareholder value. From 1975 when physical and financial assets represented 83% of market value, to 2009 when they represented a mere 19%, there has clearly been a change in business models which is not reflected in traditional financial statements” (Deloitte, 2012, p.6). As business value creation evolves, with non-financial and intangible assets becoming key drivers of corporate performance, the traditional reporting mechanisms become increasingly redundant (CIMA et al., 2011). Furthermore, global demands, increased social media technology and a rapidly evolving business environment have provided increased pressure on the traditional corporate reporting framework to ensure that organisations maintain a position of accountability to an increasingly demanding and diverse range of stakeholders (Deloitte, 2011).

As society enters a new technological age, an age of exponential population growth, increasing consumption, actual and prospective resource scarcity and climate change concerns, the accounting profession is being forced to rethink its underlying core reporting premises and foundation (CIMA et al., 2011; Deloitte, 2011; IIRC 2013). The business information needs of today are future orientated, demanding broad and market-driven risk-based information that ensures an organisation’s relevance and resilience within the market. Such business information needs fall well outside traditional reporting frameworks, leading to new thought leadership around accounting practice, with the formation of the International Integrated Reporting Council (IIRC). The IIRC is currently developing a global business reporting framework that aims to provide an integrated and holistic picture of an organisation (IIRC, 2013). This is currently discussed in the Consultation Draft of the International Framework available @ It aims to do this by “bring[ing] together material information about an organisation’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates” (IIRC, 2011, p. 8). Integrated Reporting (IR) aims to enhance understandability of corporate reporting by providing a concise and connected representation of how an organisation demonstrates stewardship and how it creates and sustains value in the short, medium and long term.

IR has in a short period of time attracted a significant following of supporters through the IIRC’s Pilot Programme encompassing over 85 businesses comprising large multinational organisations including The Coca-Cola Company, Microsoft Corporation and pharmaceutical giant Novo Nordisk, accounting service providers and international professional bodies across diverse geographic locations. Further endorsement has come from the recent signing of Memorandums of Understanding with leading international bodies including the International Federation of Accountants (IFAC), the Global Reporting Initiative (GRI) and the World Business Council for Sustainable Development.

Despite such broad and influential support from large and powerful international bodies concerns have recently been expressed about the level of integration achieved within IR pilot project organisations, suggesting that the skills and capabilities required of accountants in order to be effective service providers in this arena, go well beyond those currently associated with financial and sustainability reporting. Paul Druckman, CEO of the IIRC, recently commented during a visit to Australia, “[W]ell over a 1000 are thinking they are doing integrated reports. Very few of them are integrated reports … This had resulted in bigger “combined” sustainability and financial reports rather than smaller, better targeted ones as envisaged…. [B]usinesses need[ed] to work out first what was really important to their business strategy rather than what regulations told them to do” (as quoted in Drummond, 2012). Allyson Park, Vice-President of Corporate External Affairs at Coca-Cola confirms such concerns explaining that “challenges in developing IR include the costs of collecting and assuring non-financial data in the same timeframe as financial data; quantifying human, social and intellectual capitals; understanding potential Securities and Exchange Commission requirements; and working towards full implementation of IR. We embed content from our Sustainability Report into our Annual Report, and vice versa. However, we do not feel that this is IR. Like many companies we currently produce a combined report” (IIRC, 2012a, p.15). It appears that this new proposed way of reporting, which is so different to what has been done traditionally, is proving difficult for business and the profession alike.

Hint: You will find it extremely useful to review the Consultation Draft of the International Framework, see above.


  1. Describe and differentiate from current reporting practice the types of information that will need to be captured from now on in order to sufficiently meet the needs of integrated reporting. (2 Marks).
  2. The process is intended to be applied continuously to all relevant reports and communications, in addition to the preparation of an integrated report. The integrated report may include links to other reports and communications, e.g. financial statements and sustainability reports. The IIRC aims to complement material developed by established reporting standard setters and others, and does not intend to develop duplicate content (para 1.18-1.20). Do you agree with how the paragraphs 1.18-1.20 characterise the interaction with other reports and communications? Justify your answer. (3 Marks).
  3. The Framework describes six categories of capital (para 2.17). An organisation is to use these categories as a benchmark when preparing an integrated report (para 2.19-2.21), and should disclose the reason if it considers any of the capitals as not material (para 4.5). Outline what such a ‘capitals framework’ means. Do you agree with this approach to the use of ‘capitals’? Provide justification and evidence in your explanation. (4 Marks).
  4. Given this information differentiation, outline initiatives’ currently being undertaken at a global level (i.e. by regulators’, international bodies, accounting profession, academics etc.) to achieve this. (3 Marks).
  5. Taking a positive accounting theoretical perspective outline three reasons why Integrated Reporting may not be achievable. (3 Marks).