IIRC publishes 'Consultation Draft' on integrated reporting

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15 Apr, 2013

The International Integrated Reporting Council (IIRC) has released the Consultation Draft of its proposed International Integrated Reporting (<IR>) Framework. The draft Framework seeks to create the foundations for a new reporting model to enable organisations to provide concise communications of how they create value over time.

The draft Framework reflects input received by the IIRC in response to earlier consultation through a Discussion Paper (and feedback on a Prototype Framework), the findings to date from the IIRC’s Pilot Programme, and the results of other outreach activities.

The information below covers the following topics:

The ‘integrated reporting’ concept

Integrated Reporting (stylised by the IIRC as ‘<IR>’) is considered a process that results in communications by an organisation about value creation over time.

The most visible expression of <IR> is an integrated report, which the draft Framework proposes to define as:

… a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term.

The draft Framework outlines three fundamental concepts as underpinning <IR>:

  • Capitals – stores of value that an organisation depends on for its success as inputs to its business model, and which are increased, decreased or transformed through its activities and outputs.  These broaden the current focus on financial and manufactured capital to include intellectual, human, social and relationship capital (all linked to human activity), and natural capital, which provides the environment for the other capitals.  Not all of these capitals would be relevant to all organisations and organisations may define additional capitals, or consider some items to be across capitals (see our earlier story for more information)
  • Business model – how an entity creates value, through a chosen system of inputs (resources), business activities, outputs (products and services) and outcomes (internal and external consequences both positive and negative).  See our earlier story for more information
  • Value creation – the concept of ‘value’  for <IR> purposes is broader than traditional meaning of value focused on financial performance, and includes other forms of value that are created through the increase, decrease or transformation of capitals, each of which may ultimately affect financial returns.  Accordingly, value is broad in its conceptual basis, encompasses different time horizons for different stakeholders, and requires a focus on all relevant capitals.

<IR> is focused primarily on financial capital providers “in order to support their financial capital allocation assessments”, but also seeks to benefit other stakeholders including employees, customers, suppliers, business partners, local communities, legislators, regulators and policymakers.

It does this through encouraging the use of ‘integrated thinking’ whereby an organisation actively considers relationships between its operations and the ‘capitals’ it uses and affects, with the objective of achieving integrated decision making that considers wider impacts and benefits over the short, medium and long term time frames.  For example, in addition to traditional measures of performance such as revenue, profit or loss or cash flows from operations, integrated thinking might consider the impacts of an entity's operations on employees, supplier and customer relationships, the local community and the environment, considering the trade-offs between each, and the impacts on the long term performance of the entity.  To this end, the draft Framework also promotes the alignment of external and internal reporting, particularly at the top level of an organisation, as being “nearly always appropriate, even for the most complex of organizations” (consistent with the requirements of IFRS 8 Operating Segments, but on a broader scale).

The draft Framework is intended primarily for the for-profit companies in the private sector, but the Consultation Draft indicates that it “can also be applied, adapted as necessary, by public sector and not-for-profit organizations”.

Building blocks for an integrated report

The draft Framework develops the requirements for an integrated report through:

  • Guiding principles – these underpin the preparation of an integrated report.  These are: strategic focus and future orientation, the connectivity of information, stakeholder responsiveness, materiality and conciseness, reliability and completeness, and consistency and comparability
  • Content elements – the categories of information required to be included in an integrated report under the draft Framework, presented as a series of questions rather than a prescriptive list of disclosures.
Requirements for an integrated report


  • An integrated report is prepared in accordance with the Framework
  • An integrated report applies all principles-based requirements in the Framework unless, and to the extent, the unavailability of reliable data, specific legal prohibitions or competitive harm results in an inability to disclose information that is material (in this case, additional information is provided)
  • An integrated report is a stand-alone and concise communication, linked to other reports and communications for those stakeholders who want additional information


  • Organisational overview and external environment – What does the organisation do and what are the circumstances under which it operates?
  • Governance – How does an organisation’s governance structure support its ability to create value in the short, medium and long term?
  • Opportunities and risk – What are the specific opportunities and risks that affect the organisation’s ability to create value over the short, medium and long term, and how is the organisation dealing with them?
  • Strategy and resource allocation – Where does the organisation want to go and how does it intend to get there?
  • Business model – What is the organisation’s business model and to what extent is it resilient?
  • Performance – To what extent has the organisation achieved its strategic objectives and what are its outcomes in terms of effects on the capitals?
  • Future outlook – What challenges and uncertainties is the organisation likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?


  • The organisation’s materiality determination process
  • The governance body with oversight responsibilities for <IR>
  • The reporting boundary and how it was determined
  • The nature and magnitude of the material trade-offs that influence value creation over time
  • The reason why the organisation considers any of the capitals to be immaterial given its particular circumstances, if this is the case

Interaction with financial reporting

The draft Framework does not seek to replace financial reporting, but seeks to build on it by broadening the key concepts disclosed and embedding integrated thinking into the organisation.

The <IR> process is designed to be applied continuously in developing reports and communications, including a stand-alone integrated report prepared annually in line with the statutory financial reporting cycle.  Financial statements, and sustainability reports, are acknowledged in the draft Framework as additional reports that may be required “for compliance purposes or to satisfy the particular information needs of a range of stakeholders”.  The draft Framework additionally notes that technological advances “enable innovative approaches to reporting” and that web-based media and XBRL may be useful for <IR> in bringing connectivity of information between a concise integrated report and detailed and other information.

The draft Framework notes:

Although <IR> builds on developments in financial and other reporting, an integrated report differs from other reports and communications in a number of ways.  In particular, it has a combined emphasis on: conciseness, strategic focus and future orientation, the connectivity of information, the capitals, the business model, the ability to create value in the short, medium and long term, and providers of financial capital as the primary audience.

In addition, the draft Framework provides guidance on the reporting boundary used for integrated reporting, explicitly linking it to the boundary used for financial reporting purposes (i.e., financial information about subsidiaries, joint arrangements and associates).  The draft Framework requires information provided in an integrated report to be prepared on the same basis, or reconciled to, information in an entity’s financial statements.

However, an integrated report would also include information beyond the financial reporting entity to identify opportunities, risks and outcomes that may have a material effect on the ability of the financial reporting entity to create value over time.  This may include ‘related parties’ (such as defined in IAS 24 Related Party Disclosures), but may also extend to other parties which introduce opportunities, risks and outcomes (e.g., the labour practices of key suppliers may impact an entity’s ability to create value).  In some respects, this is conceptually similar to, but significantly broader than, the requirements in IFRS 12 Disclosure of Interests in Other Entities in relation to unconsolidated structured entities.

Background papers

In order to assist in understanding the key principles and background to the concepts in the Consultation Draft, the IIRC has also published ‘background’ papers on the capitals, materiality and the business model concept (links to our earlier stories on these papers), which were prepared by Technical Collaboration Groups formed by the IIRC.  These papers, which were used to develop the draft Framework, explore the key concepts in the draft Framework in more detail, summarise constituent feedback and the outcomes of the Pilot Programme, and include additional analysis and examples to assist in the understanding of <IR>.

The background papers are available on the IIRC website. Further background papers are expected later in the year on the concepts of connectivity, value and assurance.

Comment period and the way forward

The Consultation Draft is available on IIRC’s website at www.theiirc.org/consultationdraft2013. In addition to English, approved translations will progressively be made available in the following languages: Arabic, Chinese, French, Italian, Japanese, Portuguese, Russian and Spanish.

The Consultation Draft is open for comment for a three-month period, with comments due by 15 July 2013.  The IIRC hopes to receive comment in a prescribed format through their website, but will accept alternative responses.

The IIRC hopes to publish a first version of its finalised Framework by the end of 2013.  The adoption of <IR> will depend upon legal, regulatory and other developments, although individual organisations may choose to voluntary adopt the Framework.

Click for IIRC press release (link to IIRC website).

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