The IIRC released the Consultation Draft on 16 April 2013.  The 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 Framework introduces the concept of the Integrated Report which it says is primarily focused on financial capital providers.  It describes the Integrated Report 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 Framework develops the requirement for an integrated report through guiding principles (these underpin the preparation of an integrated report and are: strategic focus and future orientation, the connectivity of information, stakeholder responsiveness, materiality and conciseness, reliability and completeness, and consistency and comparability) and content elements (the categories of information required to be included in an integrated report).  The Framework notes that the Integrated Report is not intended to replace financial reporting (rather it will seek to build on it by broadening the key concepts disclosed and embedding integrated thinking into the organisation).

The FRC comment that the Consultation Draft provides little clarity as to the Framework’s principal objective which “detracts from the usefulness and clarity of the Framework as a whole”.  Crucially the FRC highlight that the Framework does not explain who the Integrated Report is for highlighting that “the IIRC needs to be very clear on who the users of the Integrated Report are”.  Although the Framework notes that it is intended primarily for ‘providers of financial capital’, the FRC also see that such a report could also meet the needs of a wider group of stakeholders and would like to see this intended user more clearly brought out in the Framework.     

The FRC also comment that the Consultation Draft fails to clarify what the purpose of the Integrated Report is.  They highlight that the Framework provides a confusion as to whether the Integrated Report is “a new additional form of corporate reporting or whether it builds on/is aligned with existing reporting practices”.  They comment that if the Integrated Report is an additional form of corporate reporting then there should be more clarity in the Framework as to the interaction of the Integrated Report with other traditional forms of corporate Reporting.  Insight is provided by the FRC that an Integrated report may not be required in the UK as an investor-focussed corporate communication, not least as a similar level (although not identical) of information has to be provided by UK Company law in the narrative report.     

A number of other concerns are expressed by the FRC in their detailed responses to the Consultation Draft such as the description and application of the concept of value in the Framework and some of the language used in the Framework being overly complex, reducing understandability.  The FRC are also concerned that “the IIRC has adopted a different approach to materiality to that used in IFRSs” and recommend that the Framework use a consistent definition to that defined by the IASB for use in International Financial Reporting Standards (IFRSs), especially if the Integrated Report is to be used as an investor-focussed corporate communication.  

The FRC comments are echoed by other bodies such as the Association of Chartered Certified Accountants (ACCA).  The ACCA agree with many of the comments expressed by the FRC most notably regarding the need for further clarity on the "relationship of the integrated report and other forms of reporting" and the further work that the IIRC needs to do to address perceived "gaps in the framework".  The ACCA would also like the IIRC to provide "case studies of best practice" to help with application.

The FRC would like the IIRC to consider the responses to the pilot studies being carried out as well as the responses to the Consultation Draft before finalising their Framework.

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FRC comment letter (link to FRC website)

Our previous story on the Consultation Draft