CC BY
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UDK 657
Apolovenkova N. G.
Student of International Accounting and Audit Faculty
Federal state educational Budgetary institution of higher education "Financial University under the Government of the Russian Federation "
Russia, Moscow
INTEGRATED REPORTING AS A MODERN MODEL OF PUBLIC
REPORTING
Annotation. This article is devoted to a new method of presenting information about the state of the company - integrated reporting. The purpose of this article is to study the nature of integrated reporting, the analysis of its implementation in Russia and the identification of existing problems in the formation of integrated reporting. The results of this article are the systematization of information on the nature of integrated reporting and the prospects for its development and existing problems in Russia. This study can later be used as a basis for improving the methodology for the formation of integrated reporting.
Key words: integrated reporting, integrated thinking, value creation, International Council on Integrated Reporting (ISME), Russian Regional Integrated Reporting Network (RRS).
Globalization and the development of innovative technologies dictate new requirements to accounting methodologists. For their implementation, it is important to form an objective and reliable financial reporting, its qualitative analysis, the formation of a system of reliable data for the formation of decisions by the management of the organization. In this scenario, the format and content of the financial statements, which are also subject to changes, are adjusted and clarified, take on special importance.
The modern structure of corporate reporting was formed as a result of changing approaches to its compilation, the impact of globalization processes, the formation and development of new economic theories, the creation of a community of institutional investors, the impact of crisis processes in the global economy (2008-2009, 2014-2016, etc.).
The key factor that led to the transformation of approaches to corporate reporting was the global crisis of 2008-2009. He made it possible to identify the shortcomings of the economic model of developed countries, which finally took shape by the early 2000s. Its main features are the orientation of economic entities to profit at the expense of the growth of business value, a short-term positive financial result instead of a qualitative implementation of the company's development strategy in the long term.
To a large extent, liberalization of economic activity with a voluntary type of obligations of economic agents was also characteristic of the model under consideration. Its result was a low level of social responsibility of firms,
households, society, the state.
In addition to all the global crisis of 2008-2009. allowed to identify weaknesses in financial reporting under IFRS. Despite the positive role played by the adoption of international financial reporting standards in more than 100 countries around the world, which made it possible to improve the comparability of financial information demanded by global capital markets, financial reporting did not allow to diagnose the inability of the existing economic model to withstand crisis events, external shocks and challenges. The increased complexity of reporting, the congestion of information disclosed, made the financial statements cumbersome, made it difficult to perceive significant information. Analysis of the accounts of those years showed that the aggregated annual report of a significant number of organizations included more than three hundred pages. This fact finally confirmed the relevance of the reporting system and the transition to integrated reports.
Historically, the first reports of the integrated type began to appear in 20052006. Already in 2007, within the framework of the International Corporate Register contest for the best annual report, a special nomination for the best integrated report was created. At the end of 2007, the Accounting for Sustainability organization, created under the auspices of the Prince of Wales, compiled a report form for the Connected Reporting Framework. An improved form of the report Connected Reporting, which was called "How to guide", appeared in 2009.
In 2010, the International Council on Integrated Reporting (ISME) was organized, and all previous studies were organized to develop and use a uniform approach to integrated reporting systems around the world. The initiators of the creation of the global structure were:
• Global Reporting Initiative (GRI) Initiative;
• International Federation of Accountants (IFAC);
• Project "Accounting for sustainability" (A4S);
• International Organization for Standards (ISO).
Since 2013, the IASB has joined the international initiative. He developed the concept "International Standard for Integrated Reporting: 1.0", which includes five sections:
1. Overview of the organization;
2. Fundamental provisions;
3. Basic principles of functioning;
4. Structural elements;
5. Glossary and applications, comments on the presentation.
International standards on integrated reports are of the nature of
recommendations and affect all types of enterprises: commercial and non-profit structures, public and private organizations. It seems reasonable to analyze each of the sections of Standard 1.0 in detail.
Overview of the organization. The documents approved by the IDIS contain an accurate definition of the integrated report: a set of brief information about the
strategy and current activities of the company; its prospects; interaction with the external environment; value creation.
The purpose of the integrated report is to provide reliable information to owners, investors, creditors that the company is stably generating value over a long period of time. A set of important tasks is formed from the set goal:
• the formation of an innovative approach to reporting that will reveal a wide range of financial and non-financial factors;
• Creation of an array of information regarding the distribution and use of the corporation's capital, including the creation of value in the short and long term;
• increasing the responsibility of the management of organizations in the use of different types of capital: own, borrowed, invested;
• gradual formation of an integrated approach to the achievement of the organization's goals, which compares financial and non-financial results.
When an integrated report deals with the creation of value, it is taken into account for all stakeholders - owners, management, staff, partners, consumers, suppliers, society, the state.
Particular attention in the standard requirements to the integrated report is given to the content of the reporting: it should disclose all the essential information that relates to the functioning of the organization. If legal restrictions, the threat of unfavorable actions on the part of competitors do not allow to reflect the necessary data in the integrated reporting, then in the appendix to it the reason of exclusion is indicated. If information is not available for objective reasons, then measures for correcting the situation are described.
The main criterion for the preparation of integrated reports is the existence of interconnection and interdependence between the financial and non-financial factors included in the report. In addition, special attention is paid to the company's ability to create value for all stakeholders. In this issue, special importance is taken by such criteria as:
• the ratio between the capital used in the functioning of the organization (own, borrowed, reserve, invested);
• the ability of the existing organizational structure and management structure to adequately respond to external and internal shocks, and take into account the interests of owners, management, staff, partners, consumers, suppliers, society, the state;
• the order and peculiarities of the organization's formation of its business model in accordance with the identified opportunities and risks; certain strengths and weaknesses;
• the organization's activities to create its value for all stakeholders.
Fundamental positions. International Standard 1.0 underscores the fact that
the value is formed not only at the expense of the internal resources of the organization: the external environment also participates in its creation. Due to it, new investors become participants of the authorized capital; from it come borrowed resources from financial and credit organizations; it receives the result of the organization's activities - goods, works, services.
In this scenario, the integrated report should reflect information about the external environment, in particular:
• about risks and threats, which are fraught with the actions of competitors, changes in regulations, deterioration of the geopolitical situation, etc .;
• about natural, financial, labor, information resources, as well as business connections, and other opportunities that increase the effectiveness of the organization.
It is believed that the organization creates value precisely in the process of transformation of various types of capital in the course of economic activity. As a result, there are two important tasks in the activity of any organization:
1) Return of invested capital in any of its manifestations in the form of added value;
2) Satisfaction of interests of owners, management, personnel, partners, consumers, suppliers, society, the state.
Any organization creates value (value) by performing a wide range of activities, participating in a significant number of relationships and interactions. For example, within the framework of interaction with suppliers, the organization converts financial capital into a production one, and in the course of relations with consumers it not only transforms production capital into a financial one, but also changes its value at the expense of added value.
At the same time, there are changes in the non-financial performance of the organization: the level of customer satisfaction, the willingness of suppliers to enter into transactions with the company, partner support of management initiatives of the organization, reputation and goodwill of the company, conditions for social licenses, compliance with legal requirements and norms.
The integrated report reflects the process of value formation (cost) (Figure 1), as well as those factors that affect it. The creation of value for itself is subject to detailed disclosure in the integrated report, for others - only in case of its materiality.
A wide range of people are interested in creating value, for each of which it will have its own expression. For owners it will be reflected in the growth of business capitalization; for creditors - in obtaining current income, capable of paying off financial liabilities; for the staff - in the growth of profits, which can turn into an increase to the salary or premium, etc.
It should be noted that in order to optimize accounting and analysis in the integrated report, it is recommended to consider not only various forms of financial capital (own, borrowed, reserve, invested), but also production, natural, labor (human), intellectual, social-reputational. Under capital in the standard is meant a stock of value that is able to grow, contract, transform in the course of the company's activities. For example, employee training provides an increase in
human capital, and the receipt of profits provides an increase in financial capital.
It seems advisable to consider each of the varieties of capital in order to understand what exactly should be reflected in the integrated reporting.
1) Financial capital is a set of financial resources that are the basis of production. Their source can be borrowed financing (loans of financial and credit organizations and other economic agents), own resources (retained earnings, owner funds, depreciation charges, etc.), state support (subsidies, grants, subsidies, etc.). They can also be created within the framework of economic and investment activities of the organization.
2) The productive capital consists of an extensive set of fixed and working capital used for the production of goods and services. It includes objects that belong to the company on the basis of ownership or are part of the property of other economic entities, but are used in the main activity of the enterprise.
3) Intellectual capital consists of a set of intangible assets that can be conditionally divided into two groups:
• organizational means (methods, algorithms, knowledge, experience, procedures, norms, protocols);
• intellectual property (software, brand, licenses, patents, special rights,
etc.).
4) Human capital includes skills, experience, qualifications of employees, their managerial abilities and motivation to implement innovations. Human capital often includes approaches to risk management, decision making, development of strategy and tactics of the organization, a set of ethical values and corporate culture.
5) Social reputational capital most often consists of special institutions, norms and patterns of behavior on the basis of which relations are built between communities of stakeholders and other agents from the external environment. It also includes the values accepted by all, participation in achieving collective and individual well-being, readiness for cooperation and development. Social and reputation capital is the company's goodwill, its reputation in the market, social licenses for its stable functioning.
6) Natural capital includes minerals resources of the biosphere, land that directly participate in the creation of products or mediate this process as infrastructure elements. In the structure of natural capital, a separate line is the observance of environmental norms and rules for the use of natural resources.
The standard for the preparation of integrated reporting does not require mandatory separation of capital into the above categories: the organization has the right to choose the classification option. The proposed list is of a recommendatory nature. Thus, individual industrial enterprises engaged in the processing of semifinished products do not have natural capital, and the available land is referred to production assets. Other companies include in the category "intellectual capital" not only intangible assets, but also the qualification of employees and business reputation.
At the same time, the rules for compiling integrated reporting require
mandatory disclosure of information on the rights to the capital used by the organization: whether it is owned by the organization or whether it is used by the right of economic management and operational management. In this case, the subject of economic activity has the right to choose any form of information display - value (as in accounting reporting), quantitative, etc. It is not excluded that information is displayed in text form provided that it is not possible to disclose it in another form. Such criteria provide considerable freedom in the preparation of an integrated report.
Basic principles of functioning. When compiling an integrated report, International Standard 1.0 proposes to focus on six key principles that will avoid mistakes and miscalculations.
1. Reliance on the organization's strategy and development prospects.
The integrated report should include the analysis and evaluation of the company's strategic plan: does it consider the effective use of capital and whether it provides value creation in the long-term and short-term. To the full, this principle is able to prove itself in commercial organizations that have a quantitative measurement of performance.
2. Interrelation of information.
Report information should form a holistic view of the functioning of the company, and therefore all factors used must be interrelated and interdependent. It is about the connection of information about the past and the future; about strategy and tactics of business functioning; financial and non-financial indicators.
3. Feedback from stakeholders and their response.
The report should reflect information on the qualitative characteristics of the company's relations with owners, creditors, investors, staff, the public, the state. The document determines the extent to which the organization takes into account the interests and needs of all stakeholders. In this principle, the main specific feature of the functioning of a large corporation is reflected: qualitative interactions with the subjects of the external and internal environment.
4. Conciseness and significance of information for management accounting
Despite the complex nature, an integrated report should only contain
information on issues that are of significant importance to stakeholders: its ability to generate value in the short and long term, regulate financial and non-financial risks, and seek and use opportunities and strengths. The most significant factors in the functioning of the organization are those that help it generate value. As a result, integrated reporting reflects the degree and nature of the company's strategy, organization of management, performance, etc. Before you include an indicator in a report, it is important to assess its role in creating the value of the company for all stakeholders.
5. Reliability, objectivity and completeness of information.
The integrated report should include information on strategic plans, management activities, financial and non-financial performance of the company. In a balanced integrated report, there is no bias regarding the choice or presentation of information. The absence of errors implies in it that the following
conditions are met:
• application of processes and control systems to reduce inaccuracies to the lowest possible level;
• if there are estimates in the data, it is clearly specified, and the nature and limitations of the evaluation process is explained.
The information included in the integrated report is, by its nature, the most important information for carrying out economic activities. Accordingly, if the factor is important for doing business, the cost of obtaining important information about it should not be a barrier to proper assessment and management of this factor.
When you include information about material facts related to competitive advantage, the organization is considering how to describe the essence of the factor without disclosing certain data that can significantly damage its competitive advantage. Accordingly, the organization analyzes what advantage the competitor can actually derive from the data of the integrated report, and correlates it with the needs in achieving the main objective of the integrated report
6. Stability and comparability of information.
The information provided in the integrated reporting is collected from two sources:
• information that remains unchanged for a long period of time;
• data that changes over a short period of time, but at the same time they are comparable with the information of organizations in the same branch of the economy.
If the integrated report compiled on the basis of the results of the month, quarter, year turned out to be inaccurate, containing mistakes and miscalculations, then the course and the order of its compilation can be changed in the subsequent period.
In this regard, it is possible that the integrated reporting in different companies will differ from each other: each business entity adapts it to its own specifics and needs. In addition, the process of creating value in each of the organizations vary considerably. But even in this case, a high level of comparability of information in dynamics or with indicators of other organizations of the industry should be observed.
Structural elements. Any organization is a complex object with a complex structure, which includes:
• functions, goals and objectives of the organization;
• features of the external environment of its activities;
• managment structure;
• aggregate business model;
• risks and opportunities for operation;
• Strategic development plan;
• the concept of resource use;
• the order of activities;
• prospects for development, expansion, coverage of new regions, etc.
The easiest way to compile an integrated report is to answer all the above questions in a meaningful way.
For the first and second of the elements listed above, the organization must:
• provide brief information about what it does;
• bring the characteristics of the external environment;
• reveal principles and values;
• describe the main activities;
• evaluate the characteristics of the competitive environment;
• Calculate the number of employees and the amount of regular income, etc.
On the third element, it is important to determine the business and personal
qualities of the company's management; to assess their skills; the desire for innovation and motivation for their implementation in the functioning of the organization; applied risk management techniques; system of encouraging employees and forming effective mechanisms of motivation; application of international theoretical and practical developments on corporate governance issues, etc.
On the fourth element, consideration of the business model, which is built on the basis of a qualitative transformation of resources into finished products, their subsequent implementation, which ensures the fulfillment of tasks and the achievement of the organization's goals in a tactical and strategic context, is important. In this regard, the integrated report describes the business model, which includes key resources, commercial activities, products, results.
The fifth element assesses the risks and opportunities that affect the process of generating the company's value for a wide range of stakeholders. Therefore, the description of the sources of risks is provided, the probability of their manifestation, their scope and results of action, the management system used in the company is determined.
The sixth and seventh elements deal with a wide range of information related to the company's future development, including:
• the organization has sound strategic and operational goals;
• a strategic plan detailing its main points;
• plans for the distribution and use of different types of resources in production activities;
• indicators for assessing the quality of implementation of strategic and tactical plans.
On the eighth element, the company must clearly understand the outcome of its operation and whether it has reached its strategic goals. Therefore, each goal should have a quantitative indicator indicator, which will determine the nature of its achievement. If it is not possible to express it quantitatively, a text expression is used. In this case, the nature of the assessment by comparison with other values will be relative. In general, the main role is played by those indicators that can be expressed quantitatively.
Often, in such cases, an analysis of the deviations is required, taking into account the reasons for this state of affairs; identification of links between current
and strategic indicators; demonstration of the relationship between financial and non-financial capital; comparison of information on the company's activities with the average values for the industry or the data of competitors. It is also advisable to conduct a retrospective analysis.
The last element deals with risks, uncertainties, problems in meeting the goals of the strategic plan. Based on a sound and transparent analysis, the company discloses its expectations regarding the external environment; how this will affect the organization and how the organization is now prepared in order to respond to these difficulties in the future.
The final section of International Standard 1.0 provides the application with additional information:
• the scope of reporting;
• a brief description of the essential standards and methods;
• a form for presenting material information;
• the order and structure of information about the various types of capital of the company;
• Timing of tactical and strategic plans and indicators.
The standard specifies that all aggregated and disaggregated indicators should be commented on in the final part of the integrated report.
Standard 1.0 determines the optimal deadline for the preparation of reporting documents: once a year. During this period, a significant amount of significant information can be accumulated, which can be analyzed from the position of influence on the formation of value over a long period of time.
Summing up, we can summarize: integrated reporting is an indicator of the company's openness and transparency. Its ability to analyze not only the financial, but also the non-financial component of the activity, makes it possible to estimate the generated value for all stakeholders. The use of integrated reports will allow Russian companies to enter foreign capital markets, capture the attention of new strategic and institutional investors, strengthen the position in the global market segments, optimize interaction with owners, creditors, consumers, partners, personnel, the public, and government structures.
References:
1. GRI. Forging a path to integrated reporting. 2016.
2. International Integrated Reporting Council ('IIRC').
3. KPMG. Currents of change: The KPMG Survey of corporate responsibility reporting 2015.
4. KPMG. Integrated Reporting Performance! insight through Better Business Reporting. Issue 1. 2011.
5. KPMG. Room for improvement: The KPMG survey of business reporting: Second edition. 2016.
6. PWC. Searching for buried treasure: A review of 2015 strategic reporting practices in the FTSE 350. 2015.
7. SAICA. Integrated Thinking. 2015.
