Integrated Reporting key to creation of long term value


KUCHING: KPMG has welcomed the recent publication of the International Integrated Reporting Council’s (IIRC) Draft Integrated Reporting Framework as an important step towards better business reporting that could ultimately address the gap between reporting content and business value.

According to a press statement, with the current state of adoption around the globe on ‘Integrated Reporting’, the IIRC’s Draft Integrated Reporting Framework provided a platform for companies to effectively handle its capital by focusing its reporting on its business story and value creation.

Alan Buckle, deputy chairman of KPMG International, said, “We applaud the work of the IIRC and urge regulators, investors and governments to actively drive for change for better business reporting which can help ensure future financial stability.”

In addition, Mohamed Raslan Abdul Rahman, managing partner of KPMG in Malaysia welcomed the Draft Integrated Reporting Framework as an important step in the evolution of corporate reporting. He said, “Interest in and adoption of Integrated Reporting is growing rapidly and should be seen as an effective way to communicate a company’s performance in the implementation of a sustainable strategy.”

Companies would be most interested in Integrated Reporting as a means to improve its existing narrative reporting to make it more meaningful and compatible, the statement noted.

“The concept of building narrative reporting around an organisation’s business model, and the resulting focus on how the business had been developed, would be particularly attractive to management teams looking to move their investor dialogue beyond short-term earnings,” Raslan commented.

He also outlined that the importance of Integrated Reporting for Malaysia was that it allowed organisations in various sectors such as oil and gas and the financial sectors an opportunity to realign corporate reporting with investor decision-making.

As such, KPMG recommended that companies in Malaysia tap on the consultation period for the draft framework as a platform to express their views on how Integrated Reporting should be developed.

“Although a combined effort of market and regulatory forces is required to take this forward, board of directors play a crucial role in spreading the adoption of Integrated Reporting as it provides a good opportunity to shift the reporting focus from short term financial performance to long term value creation,” he remarked.

Meanwhile, with regards to the immediate relevance of the Draft Integrated Reporting Framework, Raslan said, “The test of success would be whether Integrated Reporting was able to provide investors with the information needed to make better judgments on businesses’ ability to generate returns over the long term.”

Additionally, he called on the IIRC to address the many different interpretations of Integrated Reporting in the marketplace. He also hoped that the final version of the framework would address any risk of misinterpretation to ensure reports stayed focused on helping readers understand how the earnings potential of the business had been developed and protected.