IFAC welcomes the International Integrated Reporting Council’s (IIRC’s) revision of the <IR> Framework, which should be an important step in its continued development. In its response to the IIRC, IFAC is broadly supportive of the proposed revisions to the <IR> Framework, including strengthening the statement of responsibility for an integrated report, emphasizing the importance of the role of those charged with governance, clarifying terms within the business model, and addressing the need for more balanced reporting of positive and negative outcomes.
The Consultation Draft also asked for feedback on more strategic questions in ‘charting a path forward’. IFAC believes non-financial and financial information needs to be connected through a framework that captures relevant aspects of value creation and sustainable development. The <IR> Framework is the starting point for such a conceptual framework given it is the only comprehensive reporting framework. However the Consultation Draft does not explicitly address the fundamental issue of how the <IR> Framework needs to further evolve to be considered an all-encompassing connected conceptual framework for reporting.
IFAC believes this should be the priority focus for the IIRC and its strategic partners.
For the <IR> Framework to be more widely recognized as a connected umbrella conceptual framework for reporting, it must:
- Provide the foundation for understanding and reporting on multi-faceted value drivers based on financial and non-financial information – and demonstrating the connections between them.
- Provide the principles and key concepts around “how to report” with respect to scope, content and presentation. This is the foundation for “what to report” provided by other standards.
- Support the convergence and comparability of reporting through incorporation of significant initiatives and standards that are the building blocks to converging and aligning metrics, including those related to sustainability/ESG.
- Enable assurance, which is critical to confidence in all corporate reporting and most effective when applied against metrics and narrative disclosures that are supported by clear best practices or reporting standards.
Achieving this will require a pragmatic approach. With that in mind, IFAC believes:
- In order to promote long-term relevance of the <IR> Framework and continued expansion of its use, it is vital that integrated reporting be positioned as an immediate solution to current market demands for consistent, reliable information that enables rigorous measurement and reporting of factors material to value creation and sustainable development.
- The primary users of an integrated report must remain the providers of financial capital, which will help ensure (a) concise and focused reporting on value creation, (b) the alignment of the <IR> Framework with the IASB’s Management Commentary Practice Statement, and (c) the assurance of integrated reporting.
- The <IR> Framework must incorporate corporate impacts on society and the environment that are not expected to impact financial performance in the short term but are relevant to a broader corporate purpose, reputation and license to operate, with a view that these broader impacts can ultimately have material financial impacts.
- The <IR> Framework may need to be re-branded as a Framework for Understanding and Reporting on Value Creation to position it more clearly as being about integrated thinking and reporting and may also help to deal with the challenge that in many countries, the adoption of integrated reporting is through existing regulatory requirements for management reporting.
Read IFAC’s full response to the consultation here: Download Full Response