CIMA F2 Syllabus D. Integrated reporting - <IR> overview - Notes ^{1 / 2}

Overview of the <IR> Framework

The 'integrated reporting' concept

Integrated reporting (stylised as "< IR >") is the basis for a fundamental change in how to manage and report to stakeholders.

Integrated Thinking

is the active consideration of the relationships between how an organisation operates and the capitals it uses

There are three fundamental concepts underpinning <IR>:

1. The Capitals

   These are the resources and the relationships used by the organisation

   They are financial, manufactured, intellectual, human, social and relationship, and natural capital. 

   However, an integrated report may not cover all capitals – the focus is on capitals that are relevant to the entity

2. Value creation

   An organisation’s activities influences its ability to continue to draw on capitals continuously

3. The value creation process

   At the heart of the value creation process is an entity’s business model

   This creates outputs (products, services, by-products, waste) and outcomes (internal and external consequences for the capitals).

Objectives and fundamental concepts of integrated reporting

• To improve the quality of information available to providers of financial capital

• To communicate everything affecting how an organisation creates value

• Look after the broad base of capitals and show how they depend on each other

• Make decisions that focus on creating value in the short, medium and long term

Integrated Report

• Combines financial and non-financial information

• Is NOT mandatory

• Is primarily aimed at providers of financial capital and others interested in the organization’s ability to create value

• Is principles based - entities may be flexible when considering the disclosures they make which are suitable for their circumstances.

• Is relevant for private and public sector entities

Steps to determine materiality for creating and presenting an Integrated Report

1. Identifying relevant matters based on their ability to affect value-creation

2. Evaluating the importance of relevant matters as per their effect on value-creation

3. Prioritising matters based on their relative importance

4. Determining the information to disclose about material matters