Question

What are some of the benefits and costs of integrated reporting?

It is argued that Integrated Reporting may bring two key benefits for preparers. These are: a better cost of capital and an improved decision-making process.

Required: Explain why. (Note a comprehensive answer is required.)

Answer 1

Integrated report is a communication made by the organizations about how an organizations strategy, governance, performance and prospects lead to creation of value over the short, medium and long terms.

Integrated reports are different from conventional reporting as these reports also concentrates on human resources, environmental factors, social reputation and others which is not the case in conventional reports.

Benefits of Integrated Reporting:

More of Long term invstor oriented: Reports made as communications will be used by stake holders of the organization for knowing the financial status, performance and various other aspects of the organization. As integrated reports are prepared on the basis of external factors on the company, these will give more better view of organizations financial position. These reports will give a view on the sustainability and long term performance of the organization.

Cons of Integrated reporting:

Preparation of Integrated reports is complex as this involves valuation based on external factors like Human capital skill, Social reputation, environmental factors and others. Also there is lac of clarity on the factors ythat needs to be considered while designing these reports. Also there is lack of standardization in these reports which is also affecting organizations in adopting these reports.

International Integrated reporting council (IIRC) establised in 2010 is working on adoption of these integrated reports by various businesses and investors.