Update and Current Perspectives on Integrated Business Reporting

The International Integrated Reporting Council (IIRC) has published the responses to its Discussion Paper, Towards Integrated Reporting – Communicating Value in the 21st Century. More than 215 responses submitted to the IIRC are available online, alphabetically, through the drop-down menu under the green Discussion Paper tab. The IIRC plans to publish a summary of comments by the end of March 2012.

So far, 61 companies have agreed to participate in the Pilot Program to test a new integrated reporting framework as it is developed. There are still opportunities to participate in the Program, especially for companies in North America, South America and Asia. The IIRC is also establishing an Investor Network, which will help shape integrated reporting to meet investors' needs.

Nick Ridehalgh, a senior director with KPMG, says integrated reporting is a chance for CFOs to drive change management by showing they understand the short-term, medium-term and long-term goals of the business and communicate better with the capital markets. Watch the video “Why adopt integrated reporting?” at The Australian Financial Review online.

In addition, PwC in the UK recorded a live webcast called “Business reporting in this economic environment: What to action now and consider for the year ahead” to help identify what makes good reporting. The live webcast aims to share insights on issues for management and the board, to explain what investors want to see in the annual report, and to look ahead at what is likely to change.

With market confidence shaken, there has been a positive response from investors and regulators to those companies that provide some additional, pertinent disclosures to help reassure the markets. This means demonstrating that the critical business issues, such as securing funding for borrowings, acquisitions or capital projects, are being effectively managed. It means inspiring confidence in the business model and its resilience in this economic environment. And, it means building trust in the appropriate governance of the business. The webcast looks at some of the important issues that the board and audit committees are focusing on as they sign off on annual reports.

PCAOB Concept Release on Auditor Independence and Audit Firm Rotation

On August 16, 2011, the US Public Company Accounting Oversight Board (PCAOB) issued a concept release to solicit public comment on ways that auditor independence, objectivity and professional skepticism could be enhanced.


One possible approach on which the Board is seeking comment is mandatory audit firm rotation, which is explored in detail in PCAOB Release No. 2011-006. However, the Board seeks advice and comment on other approaches as well. Comments should be submitted no later than December 14, 2011. The Board will also convene a public roundtable meeting in March 2012, at which interested persons will present their views. Additional details about the roundtable will be announced at a later date.

Integrated Reporting: Performance insight through Better Business Reporting

KPMG has issued the first edition of the publication Integrated Reporting: Performance insight through Better Business Reporting. It focuses on the challenge of providing better corporate reporting. Many who read this may not be familiar with the topic but, with the publication by the International Integrated Reporting Committee (IIRC) of its Discussion Paper, it is likely to receive more attention in the future. In the past, KPMG has looked at this as “Better Business Reporting” which captures the essence of the subject.

The first edition provides some background on Integrated Reporting with a series of short articles by some of the firms’ specialists. After a brief summary that explains what Integrated Reporting is, Michael Bray sets out the case as to why senior executives and non-executives ought to be interested.

Canadian Public Accountability Board (CPAB) Report 2011

Since its incorporation in 2003, the Canadian Public Accountability Board (CPAB) has issued seven annual public reports. The first five reports summarized inspection findings. Two years ago, CPAB changed its approach to focus on the root causes of audit deficiencies and to highlight the key recommendations that, if implemented, would have the greatest impact on improving audit quality. In the past year, CPAB has enhanced its risk assessment capabilities and now uses a more robust risk analysis process to identify high risk firms and audit engagements, improving the effectiveness of its inspections. CPAB has also increased the frequency of its inspections of firms that audit fewer than 100 reporting issuers.

According to CPAB, audit quality in Canada continues to be sound. Nonetheless, the 2010 inspections showed no significant improvement in audit quality from the previous year. The report identifies the major areas that would enhance audit quality. These include engagement supervision and review, application of professional skepticism, improving substantive analytical procedures, providing sufficient audit evidence, improving communication with audit committees, preparing significant issues and completion memos, and enhancing consultation on 25 complex, non-routine transactions.

(Read the CPAB Report on the 2010 Inspections of the Quality of Audits Conducted by Public Accounting Firms, issued in April 2011.

About the National Investor Relations Institute (NIRI)

Founded in 1969, the National Investor Relations Institute (NIRI) is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts and other financial community constituents. The largest professional investor relations association in the world, NIRI’s more than 3,500 members represent 2,000 publicly held companies and $5.4 trillion in stock market capitalization. Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation. (See IR Weekly and the President's Blog for the latest news and developments in investor relations.)

Integrating the Business Reporting Supply Chain

High-quality business reporting lies at the heart of strong capital markets and sustainable economic growth. All those involved in the business reporting supply chain play a critical role in making business reports more relevant, understandable and reliable. This will enable the various stakeholders who use those reports to make informed decisions with respect to an organization’s social, environmental, and economic performance.

Recent interviews with key business leaders from around the globe capture recommendations on governance, financial reporting, financial auditing, and broader business reporting from prominent preparers, directors, auditors, standard setters, regulators and investors. This report analyzes what, according to interviewees, the various participants in the business reporting supply chain should do to further improve governance and the usefulness of business reports, as well as the preparation and audit of those reports. Unless otherwise stated, the recommendations in this report apply to all organizations and businesses. (For more information, read the March 2011 IFAC report Integrating the Business Reporting Supply Chain.)

Professor Mervyn King explains Integrated Reporting

South Africa is the first country to issue specific guidelines defining the content of an integrated report for listed companies. Integrated Reporting is now a stock exchange listing requirement for South African companies and will replace the old form of annual report which focused primarily on financial information and the short-term horizon. In a series of YouTube videos uploaded by the South African Institute of Chartered Accountants (SAICA), Professor Mervyn King explains Integrated Reporting, at the launch of South Africa's new Framework for Integrated Reporting and the Integrated Report Discussion Paper. The SAICA is the foremost accountancy body in South Africa and one of the leading Institutes in the world. It serves the interests not only of the Chartered Accountancy profession, but also of society in general through its key objective of upholding professional standards and integrity.

NYSE issues report on core governance principles

The New York Stock Exchange's Commission on Corporate Governance has released a report that identified core governance principles it believed could be widely accepted and supported by issuers, investors, directors and other market participants. The Commission, formed in response to the financial crisis of 2008 and 2009, considered numerous issues, including the proper role and scope of a director's authority, management's responsibility for governance and the relationship between a shareholder's trading activities, voting decisions and governance.

Business Redefined: Global Trends that are Changing the World of Business

In 2010 Ernst & Young published a report called Business redefined: a look at the global trends that are changing the world of business. It provides an in-depth look at the six most influential trends that will redefine business success, highlighting the key questions that business leaders should be asking themselves right now. The way that business leaders plan for — and respond to — these trends over the next decade will help determine who the market leading companies of tomorrow will be. The report highlights six key trends: 1. the rise of emerging markets; 2. increasing focus on resource efficiency and climate change; 3. the transformed financial landscape; 4. increased role of government in the private sector; 5. the next evolution of technology; 6. fostering a global workforce in dynamic times.

US – SEC chairman hits back at international accounting convergence myths

The head of the US markets watchdog has sought to put to rest myths and rumours about the US commitment to International Financial Reporting Standards (IFRS). Mary Schapiro, chairman of the US Securities and Exchange Commission (SEC), told an audience of accountants at the US CFA Institute’s annual conference, she was committed to international standards, but was equally committed to protecting US investors from possible side effects. (Read the article “Schapiro hits back at international accounting convergence myths” at Accountancy Age online.)

Corporate Governance: Best practice reporting, January 2010

PricewaterhouseCoopers (PwC) has published Corporate Governance: Best practice reporting, January 2010. This publication is a repository of good practice examples of corporate governance reporting, featuring extracts from the annual reports of FTSE 350 companies. The quality and clarity of reporting are crucial for all businesses, regardless of their size, sector, business success and financial stability. Getting the balance and tone of what is disclosed right, given the fragility of the market, is not going to be easy. It is important for boards to think about the unintended consequences of what is said and how it is said.

Canada - World Economic Forum 2010

Canada's Prime Minister Stephen Harper is in Zurich, Switzerland attending the World Economic Forum in the ski resort town of Davos. Harper, who is president of the G8 this year, is accompanied by International Trade Minister Peter Van Loan and by Finance Minister Jim Flaherty. Harper's stay begins with a roundtable discussion with business leaders from around the world, where he is expected to argue that the world's banks must adhere to Canadian-style banking regulations to avoid another catastrophic economic crash. On Thursday, January 28, 2010, Harper will deliver a keynote address to the World Economic Forum, where he is expected to outline his desire to turn Canada's presidency of the G8 into an opportunity to improve the health of women and children in some of the world's poorest nations. The annual meeting in Davos has become a favorite stop for key players in the global economy and attracts more than 2,500 CEOs, heads of state, celebrities and representatives from leading non-governmental organizations. (For more information, read the National Post article Harper to G8: 'Less promises, more results'.)

US - Strategic Plan for Fiscal Years 2010–2015

The US Securities and Exchange Commission (SEC) has released its Draft Strategic Plan for Fiscal Years 2010–2015, which includes a continued commitment “to promote the establishment of high-quality accounting standards by independent standard setters” and support for “a single set of high-quality global accounting standards.” The draft Strategic Plan is a statement of the SEC’s mission, vision, values, strategic goals, planned initiatives and performance metrics.

COSO publishes thought paper on ERM

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has released a paper on Strengthening Enterprise Risk Management for Strategic Advantage. The paper follows the release in October 2009 of a paper on Effective Enterprise Risk Oversight: The Role of The Board of Directors. (Read COSO’s press release.)

SEC's Schapiro says focus on investor needs will restore confidence

Mary Schapiro, chairman of the US Securities and Exchange Commission (SEC), said that while there were many causes of the global financial crisis, much of it boils down to risk. Investors, financial institutions, credit rating agencies, regulators and other market participants either did not know or did not understand the risks of many products. Schapiro said it is time for the markets to return to an era where everyone "can compete based on real services and results." She said to get to that point, the industry needs to focus on investor needs. (Read the online articles  "SEC head Mary Schapiro: Blame us for financial crisis too" and "SEC to begin scrutinizing risks related to retirement products".)

Canada - Advisory Committee on Canadian Securities Regulator

The Honourable Jim Flaherty, Canada's Minister of Finance, has announced the appointment of the members of the Advisory Committee of Participating Provinces and Territories to the Canadian Securities Transition Office, which is leading Canada's efforts to establish a Canadian securities regulator. The Advisory Committee will provide advice on the transition to a Canadian securities regulator. As part of its work plan, the Transition Office is consulting with provinces and territories, securities experts and legal advisors.(Read the Press Release.)

US - XBRL National Conference

This summer kicked off the biggest implementation of XBRL in the United States with the requirement from the Securities and Exchange Commission (SEC) for public companies to submit XBRL-tagged financial statements. A conference will be held in New York on November 17-18, 2009 to help companies better understand the impact this technology standard will have on business in terms of greater accuracy, transparency and simply a better connection with shareholders. The conference will feature sessions by the SEC, public companies and auditors, on how the US GAAP implementation is going and even more importantly, about what’s ahead for financial executives and investors with initiatives like corporate actions and proxy reporting. (Get more information and register for the first XBRL US National Conference: Financial Reporting – Advancing Transparency and Transforming the Dialogue!)

G-20 calls for single set of global accounting standards by June 2011

In an agreement reached to make dozens of changes to the regulation of financial markets, systems and institutions, the leaders of the G-20 called on “international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process and complete their convergence project by June 2011.” The joint statement also said the International Accounting Standards Board's institutional framework should further enhance the involvement of various stakeholders. (Read the article "G-20: Achieve Single Set of Global Accounting Standards by June 2011" at JournalofAccountancy.com.)

CICA/RBC Business Monitor Webinar

Established in 2007, the quarterly Canadian Institute of Chartered Accountants (CICA) / RBC Business Monitor draws on the strategic thinking and business insight of CAs in leadership positions in industry to provide a view of business trends and economic confidence across our nation. The most recent CICA/RBC Business Monitor survey conducted in Q2 2009 found that optimism regarding the economy has improved, though it is still down from historical highs. The survey also found that corporate profits and revenue are still estimated to decline over the next 12 months, although less than indicated by the previous survey. (Register for the free CICA/RBC Business Monitor webinar on September 29th, 2009. )

US - Center for Audit Quality offers guide on IFRS

The Center for Audit Quality (CAQ), which is affiliated with the American Institute of Certified Public Accountants (AICPA), has developed a Guide to International Financial Reporting Standards (IFRS). The CAQ developed the Guide to IFRS in recognition of the timeline in the US Securities and Exchange Commision (SEC) proposed IFRS roadmap and the critical decisions that must be made regarding the use of global accounting standards in the US. The Guide will provide investors, policymakers and other capital market stakeholders with a timely, accessible and objective introduction to the debate over a single set of high-quality global accounting standards.