“CONTEMPORARY ISSUES IN ACCOUNTING (AFU 08606)”

Faculty of Accounting, Banking and Finance,

Department of Accounting and Finance
Dr. Kaaya, I.D (Ph.D., CPA), [email protected], [email protected], +255 767 428496
Session I, 29th March, 2022
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INTERGRATED REPORTING !
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“STRATEGIC PLANNING AND BUDGETING IN GENDER
PERSPECTIVE”
EQUAL OPPORTUNITIES COMMISSION UGANDA
Dr. Kaaya, I.D (Ph.D., CPA)
Session I, 22nd April, 2021
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BENCHMARKING SESSION!
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 LEARNING OUTCOME!
 At the end of this session you shall be acquitted with the
Understanding and Knowledge of the Origin, Rationale,
Principles and Practices of Integrated Reporting and its
Synonymy with the TFRS 1 – Report to Those Charged with
Governance.
 And discussion on International Sustainability Standards Board
(ISSB). The the ISSB will lead to development of International
Sustainable Reporting Standards (ISSR) which brings
sustainability reporting requirements in addition to financial
reporting (IFRS).
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 REMARKS
 ‘If business models for long-term value creation are evolving,
then the manner in which a company reports on its
performance should be reconsidered as well”........realisation
that traditional reporting is inadequate to deal with a wider
business agenda has helped propel towards Integrated
Reporting” (Delloitte).
¶ ...In the end, integrated reporting , when executed with requisite
rigor , allows both the company and its stakeholders to make better
informed decisions.
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 “ IR emanates from the ‘Integrated Thinking’ – and may
leads to even more ‘Integrated Thinking’ and Decision
Making Process by Corporate Houses.
 Financial Reporting: ‘Financial Information – Mandatory’---
Sustainability Reporting: ‘Non- Financial Information - Mostly
Voluntary’ - Integrated Reporting: ‘Financial and Non- Financial
Information – Mostly Voluntary’.
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 WAIT! ===JUST CURIOSITY!
 A MEANS TO SUSTAINABLE
VALUE CREATION:
INTEGRATED REPORTING!.

To what extent does the existing reporting framework recognise

intangible assets – such as intellectual capital, research and
development, brand value, natural and human capital? To what
extent does your financial reports reflect non-financial
information – past, present and future?.

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 Intergrated Thinking and Reporting
- introduction and explication
 Globalisation and rapid technological changes have caused
fundamental changes in business processes –and what
market participants view as relevant information to aid
decision making –.

 It follows that : To create value over time, the today’s

organizations need to actively manage a wider range of
resources beyond financial and tangible assets.

 Intangibles such as - intellectual capital, research and

development, brand value, natural (heritage) and human
capital have become as important as tangible assets in
many industries.
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 Intergrated Thinking and Reporting
– Introduction and explication
 But intangible assets are not ‘universally assessed’ in current
financial reporting frameworks even though they often
represent a substantial portion of market value.
 As such the ‘reality check’ for business and what should be
conveyed in financial reports is needed, and Integrated
Reporting is probably the right way to go..
 More importantly, the influence of stakeholders on business
value and viability can not be ignored in the current business
environment.
 The Integrated Thinking and Reporting approach has come to
fill the GAP?.....to give the investors what they desire in
reports.

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 Intergrated Thinking and Reporting
– The Origin
 In recognition of this need, the new corporate reporting
initiative – IR is rapidly being adopted.
 The initiative was championed – by the International
Integrated Reporting Council (The IIRC) founded in
England and Wales (2010) – global not for profit
organisation.

 The IIRC is a coalition of regulators, investors, companies,

standard setters, accounting profession and NGOs –
 The main objective of the IIRC remains to ‘Promote
Sustainability Accounting’ – through sustainable value creation
as the next step in the evolution of corporate reporting.
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 INTERGRATED THINKING AND
REPORTING DEFINED
 Integrated Reporting<IR> is a process that brings together
all material information about an organizations' strategy,
governance, performance, and prospects in a way that
reflects the commercial, social and environmental context
within which it operates ( IIRC).
King III Code of Governance Principles, SA(2009) define
ị
<IR> as holistic and integrated representation of the
company’s performance in terms of both finance and its
sustainability.
 Integrated report is single report that combines the financial and
narrative information found in company’s annual report with non
–financial information such as environmental, social and
governance issues – and narrative information found in ‘CSR or
Sustainability report’-
 IR seeks to tell the story of how an organization creates
value.
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 INTERGRATED THINKING AND
REPORTING
 Integrated Reporting<IR> is a process founded on
integrated thinking that results in a periodic integrated
report by an organization about value creation over time
and its related communications.

ⱹ It is the practice of financial reporting and reporting

of environmental, social and governance — or ESG —
issues of the organization.

 It equips organizations to strategically manage their

operations, brand, and reputation to stakeholders and be
better prepared to manage any risk that may
compromise the long-term sustainability of the business.

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 INTERGRATED THINKING AND
REPORTING
 Integrated Thinking – is defined as ‘active consideration of the
relationships and interdependencies between capitals the
organization uses or affects in value creation process’.
¬ It leads to integrated decision-making and actions that consider

the creation of value over the short, medium and long term.
 The Integrated Thinking – refers to the conditions and processes
that are conducive to an inclusive process of decision making,
management and reporting, based on the connectivity and
interdependencies between a range of factors that affect an
organization’s ability to create value over time.
 An integrated report is the output of Integrated Thinking, and the
same can result into better Integrated Thinking - Therefore
Integrated thinking and Integrated Reporting are Two sides of the same
coin.
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 INTERGRATED THINKING AND
REPORTING
The “AIMS” of the Integrated Reporting:
ị To improve quality of information available to providers of
financial capital – for more efficient and productive of allocation
of capital,..i.e. stability and sustainability.
ị Provide more cohesive - unified and efficient approach corporate
reporting – and communicate full range of factors that
materially affects ability of the entity to create value.
ị Enhance accountability and stewardship for the broad base of
capitals (Financial, manufactured, intellectual, human, social and
relationships and natural) and promote understanding of their
interdependencies.
ị Support ‘integrated thinking, decision making and actions’ that
focuses on the creation of value over short, medium and long-
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 INTERGRATED REPORT vs
TRADITIONAL REPORT
 An integrated report is a concise communication about how
an organization’s strategy, governance, performance and
prospects, in the context of its external environment, lead to
the creation of value in the short, medium and long term.

 An integrated report is a holistic and integrated

representation of the organization’s performance in terms
of its finance and its sustainability.

 Integrated reporting, a new development in the reporting

landscape, seeks to concisely communicate a firm's value through
a more holistic picture that integrates financial and non-financial
information.
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 Intergrated Report and Traditional
Report: The GAP
 An ‘intergrated report’ is considered ‘broader’ than traditional
approaches in terms of ‘scope and time horizon’ - it should tell
organization’s ‘unique value creation story’ for each of these
areas and include how:--------
 It creates value and for whom - measures and quantifies the layers
of value and - identifies the value created at each level and how it
may affect future performance.
 An integrated report explains how an organization creates and
sustains value over time. This value is not created by or within
an organization alone, but:
 Influenced by the external environment and conditions.
 Created through relationships with stakeholders - numerous
 Dependent on various resources, beyond financial.
# SOURCE: International <IR> Framework, IIRC (2013, para 2.2).

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 Intergrated Report and Traditional
Report: The GAP

 The primary purpose of an intergrated report’ is to

explain to providers of financial capital how an
organization creates value over time…………..primary
purpose.

 However, it benefits all other key stakeholders interested in an

organization ability to create value over time such as employees,
customers, suppliers, business partners, local communities,
legislators, regulators and policy makers
---------------------------------But the KING is PROVIDERS of
Financial Capital.

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 Confused?

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 Any Questions Please?

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 GOODMORNING!

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INTERGRATED REPORTING (The IIRC) FRAMEWORK !
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 INTERGRATED REPORTING (The IIRC)
FRAMEWORK
 The IR Framework - provides principles – based guidance for
companies and other organizations that wish to prepare an ‘
intergrated report’.
 The framework was issued by the IIRC in December (2013)…and
provides combined emphasis on ‘conciseness’, ‘strategic focus’ and
‘future orientation’, ‘interconnectivity’ of information, capital and
their interdependencies.
 It makes an emphasis on the importance of ‘Intergrated
Thinking’ within the organization.
 The IR Framework ( IIRC) offers general understanding of the
IR, ‘IR value creation process’, ‘Underlying Principles’ and
‘Element Contents’ of an intergrated report.

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 INTERGRATED REPORTING (The IIRC)
FRAMEWORK

 The purpose of the Framework: To establish Guiding Principles

and Content Elements for intergrated report and Fundamental
Concepts that underpin these.

 Applicability of IR Framework : designed for private sector

context and for profit companies’ but can be applied for public
sector and NPOs-.

 Responsibility for Intergrated Reports: Rests to those charged

with governance – should acknowledge responsibility and
conclusion that the reports is presented in accordance with the
framework.
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 FROM: SILO REPORTING - INTEGRATED
REPORTING

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IR (The IIRC) FRAMEWORK: Fundamental
Concepts

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IR (The IIRC) FRAMEWORK: Fundamental
Concepts
 The ‘Capital’ - resources and relationships used and affected
by the organization as identified in the Framework.
 Six (6) Capitals’ with different combinations and
connectivity.
 Financial capital: Pool of funds available to organization for
use in production of goods or provision of services, e.g.
debt or equity.
 Manufactured capital: Manufactured physical objects, for
use in production of goods or provision of services, e.g.
equipments.
 Intellectual capital: Organizational, knowledge-based
intangibles, e.g. patents.
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IR (The IIRC) FRAMEWORK: Fundamental
Concepts
 Human capital: People’s competencies, capabilities &
experience & motivations to innovate.
 Social & relationship capital: Relationships within an
organization, as well as those between organizations and its
external stakeholders,.
 Natural capital: All renewable & non-renewable environmental
resources & processes that provide goods or services that
support past, current or future prosperity of organization, e.g.
Water, land.
 These categories are not necessarily to be adopted in preparing
entity’s integrated report – and report may not cover all – focus
should be on capitals relevant to the entity.

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IR (The IIRC) FRAMEWORK: Fundamental Concepts
– Value Creation Process

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 IR (The IIRC) FRAMEWORK: Fundamental
Concepts – Value Creation Process

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ANY QUESTIONS!

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 IR (The IIRC) FRAMEWORK: Guiding
Principles
 The IR Framework is principles – based, therefore
underlying the preparation of integrated report are the Seven
(7) Guiding principles – should inform the content and how
the information is presented:
❶ ‘Strategic Focus and Future orientation’ – the IR should
provide insight into the organization's strategy and how it
relates with its ability to create value in short, medium and
long-term and to its use of and effects of capitals.

❷ ‘Connectivity of Information’ – IR should show a holistic

picture of the combination interrelatedness and dependencies
between factors that affect entity’s ability to create value over
time – financial and non-financial.

❸ ‘Stakeholders Relationship’ – the report should show nature

and quality of entity’s relationship with its key stakeholders-
including how it understands, and responds their needs and
interests.
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 IR (The IIRC) FRAMEWORK: Guiding
Principles
❹ ‘Materiality’ – the IR should disclose information about matters
that substantially affects the organization's ability to create value
over short, medium and long-term --- but how material is
material? – Para 3.18 of the Framework provides steps of
determining materiality but IFRS PRACTICE 2 : Materiality
Judgment can also be used.
❺ ‘Conciseness’ – IR should be exhaustive, detailed but concise.

❻ ‘Reliability and Completeness’ – the IR should include all

material matters, both positive and negative , in a balanced way

and without material errors.
❼ ‘Consistency and Comparability’ – the information in an

integrated report should be presented (i) on a basis that is

consistent over time, and (ii) in way that enables comparison
with other organization.
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 IR (The IIRC) FRAMEWORK: Guiding
Principles

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 IR (The IIRC) FRAMEWORK: Content
Elements
 An integrated report includes and should depict eight
Content Elements (Para. 4) - fundamentally linked to each
other – responds to each of respective questions –:
 ‘Organizational overview and External Environment’ – What
does the organization do and what are the circumstances under which it
operates – internally and externally?.
 ‘Governance’ – How does the organization’s governance structure
support its ability to create value in the short, medium and long term.?-
leadership and board structure?
 ‘Business model’ - What is the organization’s business model? - system
of transforming inputs, through its business activities, into outputs and
outcomes.
 Risks and opportunities –What are the specific risks and opportunities
that affect the organization’s ability to create value over the short, medium
and long term, and how is the organization dealing with them? – KPIs and
KRIs ( KRFs)!?.
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 IR (The IIRC) FRAMEWORK: Content
Elements
 ‘Strategy and resource allocation’- Where does the
organization want to go and how does it intend to get there? –
Corporate ‘strategic and annual planning’ process?.
 ‘Performance’ – To what extent has the organization achieved
its strategic objectives for the period and what are its outcomes in
terms of effects on the capitals?.- e.g. quantitative indicators, KPPs
and outcomes increase/decrease in capital.
 ‘Outlook’ -What challenges and uncertainties is the organization
likely to encounter in pursuing its strategy, and what are the potential
implications for its business model and future performance?
 ‘Basis of preparation and presentation’–How does
the organization determine what matters to include in the integrated
report and how are such matters quantified or evaluated? – e.g.
materiality determination process, reporting boundaries and significant
methods and framework applied to quantify or measure material matters.

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 IR (The IIRC) FRAMEWORK: Content
Elements

‘General reporting guidance under the
Framework -The following general reporting
matters are relevant to various Content
Elements:
 Disclosure of material matters (See para.4.50–4.53).
 Disclosures about the capitals (See para.4.54–4.55).
 Time frames for short, medium and long term(See para.
4.57–4.59).
 Aggregation and disaggregation (See para.4.60–4.62).

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 Any Questions Please?

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THE INTERNASTIONAL SUSTAINABILITY STANDARDS BOARD
(ISSB) – THE FUTURE OF INTERGRATED REPORTING ! !
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 ISSB -THE FUTURE OF INTERGRATGED REPORTING !!
 As discussed earlier, international investors are increasingly
calling for high quality, transparent, reliable and
comparable reporting on climate and other environmental,
social and governance (ESG) matters – integrated
reporting.
 In response the IFRS Foundation created the
International Sustainability Standards
Board ( ISSB) in Nov 2021.
• To develop—in the public interest—a comprehensive
global baseline of high-quality sustainability
 ISSB disclosure standards to meet investors’ information
needs.
 The ISSB is an independent, private-sector body
that develops and approves IFRS Sustainability
Disclosure Standards (IFRS SDS).

 The ISSB operates under the oversight of the

IFRS Foundation

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 ISSB -THE FUTURE OF INTERGRATGED REPORTING !!
 Under the IFRS Foundation Constitution, the
ISSB has complete responsibility for all
sustainability-related technical matters of the
IFRS Foundation including:

• full discretion in developing and pursuing its

technical agenda, subject to certain
consultation requirements with the Trustees
 The ISSB’s
ROLES
and the public

• the preparation and issuing of SDSs and

exposure drafts, following the due process
stipulated in the Constitution

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 ISSB -THE FUTURE OF INTERGRATGED REPORTING !!
 International Sustainability Standards Board
has proposed two (2) standards (ED):

 IFRS S1 General Requirements for Disclosure of

Sustainability-related Financial Information.
 The proposed objective of IFRS S1 is to require an entity to
disclose information about its significant sustainability-related
risks and opportunities that is useful to the primary users of
GPFRs when they assess enterprise value and decide whether
to provide resources to the entity
 The ISSB -  A reporting entity would disclose material information about
Standards all significant sustainability-related risks and opportunities to
Proposed which it is exposed.
 The assessment of materiality would be made in the context of
the information necessary for users of general purpose
financial reporting to assess enterprise value.

 An entity’s general purpose financial reporting

would be required to include a complete, neutral
and accurate depiction of its sustainability-related
financial information.
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 ISSB -THE FUTURE OF INTERGRATGED REPORTING !!
 the International Sustainability Standards
Board ( ISSB) has proposed two sustainability
standards (ED):
 IFRS S2 Climate-related Disclosures

 The proposed objective of IFRS S2 is to require an entity to

disclose information about its exposure to significant
climate-related risks and opportunities, enabling users of
an entity’s general purpose financial reporting to:
 The ISSB - • assess the effects of significant climate-related risks
Standards and opportunities on the entity’s enterprise value;
Proposed • understand how the entity’s use of resources, and
corresponding inputs, activities, outputs and outcomes
support the entity’s response to and strategy for
managing its significant climate-related risks and
opportunities; and
• evaluate the entity’s ability to adapt its planning,
business model and operations to significant climate-
related risks and opportunities.

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 ANY QUESTIONS!

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Need I Say More,?.
Thank You, Asante Sana, Merci,
Webalenyo, Ashe Oleng!,

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