The International Integrated Reporting Committee (IIRC) was formed in August 2010 with the objective of creating a globally accepted framework for integrated reporting to respond to the need for a concise, clear, comprehensive and comparable integrated reporting framework structured around an organization’s strategic objectives and its governance and business model as well as integrating both material financial and non-financial information.

One of the driving forces for integrated reporting is the belief that current financial reporting does not provide the most relevant information for decision-making. There is little substantive disclosure about strategy, innovation, people, customer loyalty and the business risks related to environmental, public policy and regulatory issues, which many believe are major drivers of value. Furthermore, disclosure requirements currently exist for a lot of information that many believe is not relevant for decision-making and, probably more importantly, obscures information that is relevant for decision-making.

The objectives for an integrated reporting framework are as follows:

  • to support the information needs of long-term investors by showing the broader and longer-term consequences of decision-making;
  • to reflect the interconnections between environmental, social, governance and financial factors in decisions that affect long-term performance and condition, making clear the link between sustainability and economic value;
  • to provide the necessary framework for environmental and social factors to be taken into account systematically in reporting and decision-making;
  • to rebalance performance metrics away from an undue emphasis on short-term financial performance; and
  • to bring reporting closer to the information used by management to run the business on a day-to-day basis.

One of the goals of the IIRC is to present proposals for a framework at the time of the G20 meeting in November 2011.

The IIRC is currently focused on making its case for integrated reporting and drafting a framework. However, it is widely acknowledged that technology will play a key role in the success of integrated reporting and, in particular, the dissemination of information in an integrated report. It is believed that XBRL will be one of the key technology tools for disseminating the information in an integrated report.

By its nature, and in order to reflect the interconnections between environmental, social, governance and financial factors in decisions that affect long-term performance and condition, an integrated report will contain key narrative information in addition to data. One of the important questions will be whether XBRL can be an effective dissemination tool for this narrative information, as it currently is for data. Said another way, can XBRL be effectively used for the dissemination of narrative information, or will it take that information out of context?

by Bob Laux