Integrated reporting – a “one-size-fits-all” solution!?

The aim of this chapter is to provide a discussion of the business case of Enel, which is an International Integrated Reporting Council (IIRC) pilot program company currently evolving its corporate disclosure towards Integrated Reporting (IR). The relevance of pilot company business cases has been recognized by the IIRC, which defined their experience as “invaluable”. On the one hand, Enel did modify its corporate reporting system coherently with the IIRC guiding principles by including considerable non-financial information in its annual report, reducing the length of its sustainability report and improving its materiality determination process and business model analysis. On the other hand, it will be interesting to see how the company applies other aspects of the IIRC framework, such as the six-capital structure and the way in which reporting boundaries are defined. The analysis done in this chapter may be of interest to companies, standard setters and scholars wishing to enhance their knowledge on how companies are currently evolving their corporate disclosure systems towards IR.

This chapter explores how companies can elaborate a report that is capable of satisfying stakeholders’ “hunger” for information by integrating financial, environmental, social, and economic information together. The Integrated Report (IR) proposed by the International Integrated Reporting Council is based on more than just a method of reporting or a fashion fad. It presents a new way of looking at business operations that is no longer solely aimed at maximizing profits, which is a real, cultural change. The IR aims to communicate the financial and non-financial information that characterizes the sustainable value creation of an organization in a connected, clear and concise way. This chapter aims to demonstrate how the IR concept is stimulating the academic, institutional, and corporate world ten years after the birth of the IIRC. The research design provides information gathered from a time-series investigation over an eight-year period (2011–2018) straddling the <IR> Framework and the Directive 2014/95/EU to verify how IR as a corporate tool has spread through the countries of the EU. The investigation has taken into consideration all IR released from the companies present in the IIRC Examples database during the period considered. Samples are limited to only companies with legal head offices in the countries of the European Union.

In the current business environment, financial reporting has become insufficient in terms of information, which is caused by the increasing information needs of stakeholders. In this context, an integrated reporting modality has emerged thanks to the International Integrated Reporting Council (IIRC), where the information presented is both financial and nonfinancial information, such reporting being called “Integrated Reporting”. Thus, starting from this consideration, the main objective of the paper aims at the main aspects that lead to the presentation of the benefits of implementing integrated reporting in organizations, through the ability to understand, in a more complete way, the "real" performance of a sustainable organization. The essential elements contained in an integrated reporting concern the capital, the business model and the process of creating and maintaining value, this reporting must be integrated in the strategy and vision of the organization, allowing through the transparency of these integrated reports the observation of all aspects led to the results obtained by the organization, as well as providing information on the role of the organization in society and the context in which it operates, the image of the organization being complete. The purpose of this paper is to highlight the importance and role assigned to integrated reporting in measuring the performance of a sustainable organization, by making it easier to understand the cause and effect of the link between financial performance and sustainability by stakeholders.

In 2013, the International Integrated Reporting Council (IIRC) issued the Integrated Reporting (IR) Framework to improve corporate reporting. The purpose of IR is to integrate financial and non-financial information to explain how the organisation creates value and improves firm performance over time. Since the introduction of IR, a company weighs the benefits over the costs of changing to IR. Recent trends in IR have heightened the need to examine the actual contents of IR. The objective of this study was to find the relationship between preparing a high-quality IR and corporate reputation. Corporate reputation is one of the main objectives for the preparation of IR, and preparing a high-quality IR can positively impact corporate reputation. Data was collected from a sample of 120 companies from the IIRC websites for three years (360 firm-year observations) to examine the quality of following the 2013 Framework. An index was developed, and the corporate reputation score was collected from the RepTrak websites. The finding showed that companies preparing high-quality IR reports had a significant positive relationship with corporate reputation. Preparing a high-quality IR sends a signal to users of annual reports as a connotation of the company (good product or services, ethical management reporting), which will help build trust towards the company and improve its reputation. This study contributes by providing empirical evidence for a company, which is uncertain about the benefits of IR. The IR disclosure score can be used as a reference by IIRC and policymakers to prepare the IR. Keywords: integrated reporting, disclosure quality, corporate reputation

In conducting analytical procedures, auditors may use both financial information and nonfinancial information such as general economic conditions, technological changes in the client's industry, and new products from competitors. While there has been extensive research on the impact of financial information (e.g., Biggs and Wild 1985), there has been little consideration of how auditors use nonfinancial information. Further, little is known about how these forms of evidence are integrated. The purpose of this study is to examine the relative consideration of financial and nonfinancial trends in two analytical review tasks: establishing the level of audit scope and generating hypotheses. As noted by Koonce (1993), prior studies have examined analytical review phases separately and, thus, have contributed to our understanding in a piecemeal fashion. Seventy-eight auditors participated in an experiment with the independent variables reflecting financial trend (stable or decline) and nonfinancial trend (stable or decline). Increased risk and auditor training associated with financial information suggest that greater focus will be placed on financial rather than nonfinancial information. The results suggest that auditors place heavier reliance on financial trends than nonfinancial trends in establishing the overall level of audit scope. Further, auditors apparently utilize nonfinancial information as corroborating evidence. The results also reveal that a greater number of hypotheses are generated when financial or nonfinancial trends signal a decline than when they signal a stable environment, and the greatest number of hypotheses are generated when both financial and nonfinancial information indicate a decline. The findings also indicate that a greater number of hypotheses are generated as a result of financial information than nonfinancial information. Further, results reveal that a large and essentially equal number of hypotheses were generated when either financial or nonfinancial trends indicate a decline, suggesting that auditors consider nonfinancial information in the hypothesis-generation stage of the analytical review process. Thus, if we look at the audit-scope phase in isolation it appears that auditors may not sufficiently consider nonfinancial information. However, in the hypothesis-generation stage, both financial and nonfinancial trends affected the quantity of hypotheses generated. Thus, it is important for researchers to look at multiple stages of the analytical review process concurrently.

Using financial and non-financial data from casino gaming firms listed in the United States from 1999–2017, we explore two research questions: (1) Is financial information value relevant to financial markets in the casino gaming industry? (2) Does non-financial information have incremental explanatory power over financial information? In general, we find that accounting numbers can explain a firm’s market value and stock returns in the casino gaming industry, except for accounting accruals, which may behave differently compared to other industries. We also find that non-financial information, such as the number of table games, number of slot machines, and their relative proportion, have significant value relevance in explaining market valuation. Our findings contribute to a better understanding of the value relevance of financial and non-financial information in the casino gaming industry. We also provide analysis of firms characterized by these non-financial attributes. Keywords: hospitality, casino, gaming, value relevance, table games, slot machines JEL Code: L83, M19, M41

Purpose The purpose of the present study is to investigate the demand side of non-financial reporting, especially integrated reporting. We investigate (1) what type of content the users of online integrated reports access most frequently and (2) whether users search for non-financial content and content that integrated reports must contain to comply with the requirements of the International Integrated Reporting Framework (IIRF). Design/methodology/approach We perform big data analysis on the log files associated with user access to five online integrated reports over a period of 12 months to investigate what type of information users access most frequently when they visit online integrated reports. Content analysis enabled us to match the usage data (page impressions) to certain topics within the integrated reports. Our analysis, which is based on data reflecting over one million webpage views, indicates which types of integrated-report content attract the users’ attention and which do not. Findings Our results confirm that integrated reports in general, and specific components in particular, are of significant value to users. In contrast to what other studies suggest, we find no evidence that users seek financial information to a much greater extent than non-financial information. Specifically, our results show that usage between financial and non-financial information is quite evenly distributed and differs depending on the metric under consideration; considering usage by topic impressions financial information is used more frequently, scaling topic impressions by report pages addressing a specific topic, non-financial information displays higher usage. With respect to specific topics, our analysis shows that the topics that attracted most interest from our sample of users are performance, financial statements, company profile and value creation. Furthermore, our findings confirm the importance of integrated reporting from a user perspective. Practical implications The results of our study are of practical value to both standard setters and (potential) preparers for two main reasons: first, they provide user-centric evidence about the importance of non-financial information and empirically confirm that integrated reporting has become widely accepted among users; second, they provide evidence about the topics that are of specific interest for users and therefore should also be considered by preparers and standard setters more carefully. Originality/value The present study enriches the literature on financial and sustainability reporting with informative insights into which of the topics that integrated reports contain attract most interest from users. Moreover, our results are based on actual data on the usage of such reports that reflect real user-journeys, rather than on artificial data, created for research purposes.

Waste is Our Business, Inc.: The Importance of Non-Financial Information in the Audit Planning Process

Social and environmental aspects, considered valuable factors in decision making process, play an important role within the nowadays complex business environment. Recent accounting literature reveals that the need for disclosing non-financial information is widely debated based on the fact that considerable decisions cannot be supported only by referring to past financial performances. This paper, organized as an empirical study, aims to provide an overall image upon social and environmental disclosures inside the integrated reports of the companies which have taken part for three consecutive years in the International Integrated Reporting Council (IIRC) Pilot Programme Business Network.The research is conducted among the integrated reports issued by companies belonging to various industries, coming from France, Germany and United Kingdom. The results achieved show that companies fail to present a complete picture regarding their social and environmental performances and implicitly fail to achieve the intended purpose of the IIRC in promoting the accounting for sustainability. An overall result shows that companies coming from Germany disclose the least social and environmental aspects within integrated reports as compared to British and French organizations.

Introduction. In modern conditions, the study of the essence and prevention of economic crimes is becoming more and more relevant, since the damage from their consequences increases significantly every year. The growing volume of damage is associated both with the general trend of increasing crimes and with the growth of their detection, which becomes possible if the essence of the crime, its execution and motives are understood. Manipulation in financial statements, as one of the types of economic crimes, is the most difficult method of fraud to detect. In this regard, many researchers offer a different set of tools for detecting manipulations, however, since the methods of committing fraud are constantly being improved, detection methods require timely modernization. Objectives. Determination of a sufficient set of analytical procedures in order to identify signs of manipulation in the financial statements of a construction organization based on public information. Methods. In the course of the study, methods of logical and statistical analysis were used. Results. An assessment of the financial and non-financial information of the construction holding activity was carried out, important components of the analysis of the financial and economic activities of the organization were identified, a set of analytical procedures used to identify signs of manipulation in financial statements was proposed. Conclusions. Conclusions are drawn about the importance of a comprehensive study of not only financial information, but also non-financial information, the use of a benchmarking procedure and the calculation of analytical indicators that can indicate problem areas in financial statements, on the basis of which a set of analytical procedures is proposed, including five stages: data collection for analytical procedures , testing financial statements by analyzing financial information based on a decision tree, analyzing non-financial and financial information, and comparing the results of the analysis of financial and non-financial information.

In recent years, ESG investment has been attracting a lot of attention both practice and academia. In the midst of these ESG investment trends, corporate non-financial information has become more important, and integrated reports that include both financial and non-financial information have been attracting attention. However, unlike financial statements, there are no standard forms in integrated reports. The content and amount of them vary, and the ingenuity of each company can be seen. In addition, while financial information can be shown as numerical values and graphs, non-financial information tends to be qualitative information. Since it is difficult to read and compare multiple integrated reports consisting of tens to hundreds of pages, the need to read more important non-financial information efficiently and objectively is increasing. Therefore, in this study, we analyze these integrated reports quantitatively by using natural language processing techniques to tell the differences between "good" and "not good" integrated reports. Here, as "good" integrated reports, we use a list of excellent integrated reports and significant improved integrated reports from the GPIF website. For the good integrated reports, we found that (1) they describe more sustainable words that create long-term value, (2) describe more about their services and customers, and (3) are proactive in sustainability and corporate governance.

This chapter provides a comprehensive discussion of materiality and assurance in the context of Integrated Reporting (IR). On the one hand, materiality has gained much importance following the introduction of IR, since one of the main objectives of this innovative form of reporting is to reach conciseness. On the other hand, assurance may play a crucial role in conferring reliability to the materiality determination process proposed by the International Integrated Reporting Council (IIRC) and to the whole process of IR. This chapter provides a discussion of the state of the art of materiality and assurance in the context of non-financial information and, more specifically, IR. It also points out some of the main challenges the IIRC materiality determination process will have to face in order for companies to implement it correctly. Finally, drawing on the peculiarities of IR, the chapter points out some issues that will have to be discussed regarding assurance and its effectiveness. Some insights for future development of the debate are also proposed.

The financial reporting plays a significant role in sustainable development, as it contributes greatly to providing the information required to assess sustainable development performance. In order to achieve the sustainable development, accurate information should be provided to stakeholders on the energy consumed and the impact of energy consumption on the environment. Information on sustainable energy performance needs providing both of financial and non-financial information. However, the traditional financial reporting system is unable to provide information that helps measure and promote sustainable energy performance, as the current accounting system provides financial information only. It is therefore important to adopt an appropriate reporting framework to support the evaluation of sustainable energy performance. This paper proposes an approach to the measure the sustainable energy performance based on the integrated reporting framework. A unique feature of the approach is the selection of corporate energy performance indicators that cover both financial and non-financial information. This paper therefore sets out indicators for assessing sustainable energy performance based on the Integrated Reporting Framework. Furthermore, the application of the indicators proposed in this paper helps regulators and economic policy makers to develop sustainable development strategies at national level. Moreover, the adoption of the proposed indicators can provide accurate information on the real and future of sustainable energy in the country.

Corporate reporting in recent times faces a series of challenges as companies are expected to reassess their strategy for information disclosure. Within a global economic environment that is continuously evolving, there is a strong need for an internationally coordinated action as the financial and non-financial information disclosed by a company influences its strategic decisions. The topic of the current paper outlines the issue of integrated reporting as the interconnection between financial, social and environmental information. We intend to investigate the influence of financial performance on social and environmental disclosure and measure the integration level of corporations that claim to publish integrated reports. The main stages of the research involve the determination of financial ratios and disclosure index levels for environmental and social information. For the purpose of establishing the disclosure index we consider the referential of GRI G3 international standards, while compliance with the standard would be the prerequisite for integrated reports, by contributing to an increase in non-financial disclosure, in addition to the mandatory financial one. Our sample comprises 16 Asian-Pacific companies that participate in the pilot program initiated by the International Integrated Reporting Committee according to which organizations are encouraged to integrate their non-financial information - social and environmental disclosure - within annual reports, along with financial data. The research methodology assumes computation of a disclosure index for social and environmental information, and determination of financial ratios for establishing the influence of financial performance on socio-environmental disclosure and the actual level of integration in specific integrated reports. Our findings suggest the financial ratios can be directly, indirectly, and non- correlated with non-financial information, while the integration process is attained at high, medium, or low levels, according to the aggregation of financial, social, and environmental information.

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