The Integrated Reporting Movement. Eccles Robert G.

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СКАЧАТЬ href="#n79" type="note">79 Indeed, many companies were more comfortable reporting on board charters and terms of reference rather than actual activities undertaken by the board over the year. Only 16 % of those surveyed by PwC described the activities of the board.80 “Some companies have battled with what to include in their report about governance. The information that is most relevant is that which reflects how governance affects the value creation ability of the business,” said Roberts.81

Disclosure of Forward-Looking Information

      Although an area that had improved since the first reports, companies were loath to disclose too much forward-looking information. This was especially true when it came to environmental, social, and governance (ESG) factors. While Deloitte found that companies disclosing KPIs generally included historical trends and future targets – an increase from 75 % inclusion to 80 % inclusion from Period 1 to Period 2 for fiscal 2011 – future performance projections still suffered from a lack of completeness. Only one-third of those surveyed by Deloitte set measurable nonfinancial targets linked to strategy and stakeholder concerns.82 Similarly, PwC found that only 13 % of companies surveyed provided effective communication on future outlook. Only 10 % provided future targets for KPIs. While 90 % discussed future market trends, only 61 % of companies linked them to strategic choices, and expected market rates and growth were, more often than not, not quantified. Nor was there much explanation of which factors would impact those trends in the future. However, 68 % of companies did identify the time frame in which future viability had been considered.83

      Reasons cited for the lack of disclosure were fear of regulatory reprisal and creating expectations that could be used against management in the future, as well as the simple fact that corporate reporting has traditionally been focused on past performance. In its 2011 assessment, KPMG suggested substantial cultural change was necessary to achieve a truly forward-looking perspective corroborated by a consideration of past performance against strategy and strategic perspectives, and that companies could guard against liability by wording their future performance goals and expectations carefully.84 “This was a scary area for companies first stepping out on their integrated reporting journey,” said Roberts. “But over the years disclosure has improved, with companies realizing that it was not about giving a profit projection; rather, the focus lay in transparency regarding the significant relationships and factors with the power to affect the future value creation ability. Companies have been quite inventive, using ratios, waterfall graphs, commodity reviews, and other clever ways to show true relationships.”85

Characteristics of the Report

      Company report preparers overwhelmingly felt that it was impossible to provide the amount of detail stakeholders would want in a single integrated report if that report were to remain clear and organized. Journalists like Ann Crotty feared that the reporting structure had succumbed to a gradual “densification” in which a checklist approach led to documents of 400 pages. However, analysis by the accounting firms showed that companies were slowly learning how to balance transparency with accessibility of reporting documents.86 Although all the accounting firms conceded that overall reports were still “too long,” there was evidence that companies were trying to shorten their reports. While 35 % of companies initially surveyed by E&Y in 2011 believed that an integrated report would be less than 50 pages and 44 % were neutral, most respondents envisaged the next integrated report as being between 50 and 80 pages.87

      In the following two years, the goal shifted to producing an integrated report between 80 and 120 pages. Graham Terry, Senior Executive at The South African Institute of Chartered Accountants (SAICA), noted that, in the application of integrated reporting, some principles would necessarily conflict with each other. Further, little guidance existed for what should or should not be included in the report.88 Left to their own devices, some report preparers found that the most effective way to incorporate all of King III's requirements without producing information overload in the integrated report was to refer to other, more detailed documents with explicit links to the full IFRS financial statements and other detailed information like the sustainability report – a strategy Deloitte observed worked well when those links were clearly highlighted.89 E&Y noted that companies that appeared to have started from scratch in determining what and how to report often produced shorter and more effective reports.90

      Although nearly all companies agreed that other reports were necessary, responses varied on exactly where and how information was being distributed. One hundred percent of the top 100 JSE-listed companies disagreed that integrated reporting was merely cross-referencing between annual reports and sustainability reports. This did not mean that other reports would disappear. During the first cycle of mandatory integrated reporting, 36 % of companies reported a belief that a separate integrated report would be published alongside a sustainability report and the annual report on financial statements, 43 % disagreed, and 21 % expressed no strong belief that an integrated report should be published separately alongside the financial statements.91 Mohamed Adam, a member of the King Committee, and Jo-Anne Yawitch, CEO of National Business Initiative,92 noted that companies tended to get distracted by form (one report vs. multiple reports) when they should be focusing on the substance of the report itself.93

      All accounting firms noted an increase in the use of graphics, charts, and images in conveying overviews of information. Heat maps for materiality were especially useful, and E&Y noted the increased use of waterfall charts94 that explained the factors influencing movement in key measures such as profit over time.95

Internet Use

      Although most companies initially made little use of the Internet in their integrated reporting efforts, all members of the Big Four firms and many South African thought leaders noted ways in which a more effective use of the Internet could ease the growing pains of integrated reporting. When it came to improving the treatment of materiality, Nigel Payne, a professional Non-Executive Director, suggested that those preparing an integrated report “need to be aware about the five or six things that are cooking at the moment” and put the details of these issues on the website. That is, thoughtful use of the company's integrated reporting site and the potential incorporation of Extensible Business Reporting Language (XBRL)96 could assuage concerns about report length and content; by posting longer, more detailed documents on their website that need only be referenced in a concise integrated report, the company did not sacrifice completeness of information for clarity.

      E&Y found in 2013 that many companies had improved in their use of navigation aids, icons, and other forms of cross-referencing to connect information across the report and that they had put detailed sustainability, corporate governance, and risk disclosure information on their website. While companies offered a few “quick reading”97 options, some had begun to use XBRL98 to tag information relevant to different stakeholders.

Auditing and Assurance on Nonfinancial Information

      While companies surveyed had not sought uniform “reasonable”99 assurance on nonfinancial information by an independent auditor, many agreed that it was desirable, and an increasing number of companies were seeking independent assurance on particular KPIs. E&Y noted that although more ESG indicators had received some form of external assurance, how those СКАЧАТЬ