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4 Reasons CFOs Should Care about Integrated Reporting

Bob Laux, CPA, Senior Director of Financial Accounting and Reporting, Microsoft CorporationOn Nov. 15, the AICPA organized a roundtable discussion for the International Integrated Reporting Committee at SAP’s headquarters in Palo Alto, Calif. I attended the meeting along with representatives from major investors, companies and other stakeholders. It allowed us the opportunity to discuss the business case for integrated reporting, and the challenges surrounding the acceptance of this critical reporting framework. Among those challenges is communicating the benefits of integrated reporting to businesses and their stakeholders, especially CFOs.

Why should you care about integrated reporting?

Because it’s about:

1. Communicating vs. Complying
A lot of financial executives have complained about the state of financial reporting. It seems like a compliance exercise versus a mechanism for communicating business performance. We need to get out of the compliance mindset and embrace tools that tell the organization’s financial story in the best—and most transparent―way. Integrated reporting provides a holistic method for explaining how the organization is doing, and how the management team thinks it will do in the future.

2. Reporting the Intangibles
As page four of the IIRC’s latest discussion paper explains, it’s not just about physical or financial assets any more: “The need for a broader information set is clearly demonstrated by the small percentage of market value now explained by physical and financial assets―down to only 19% in 2009 from 83% in 1975.” The value drivers of a company are increasingly intangible, not just tangible assets, such as intellectual and human capital. Intangibles even include how employees and the public perceive the organization, and how well it operates in relation to environmental, social and governance issues. The transformation from a manufacturing economy to an information economy has not been matched by similar changes in financial reporting. Integrated reporting provides a coordinated view that helps organizations rooted in the information age report on their real sources of value and accomplishments beyond financial results.

3. Breaking Down Silos
Because it provides feedback on how organizations are functioning on multiple levels, integrated reporting helps organizations break down silos and promotes information sharing, which helps the organization run better.

4. Increasing Transparency
Integrated reporting is an idea evolved by financial experts to improve transparency and help organizations communicate more information about performance to investors. Using integrated reporting, CFOs have a chance to take a leadership role in telling the company story in a more effective way, making an even bigger impact on their organizations.

Even if your organization hasn’t implemented integrated reporting, you can demonstrate your leadership capabilities surrounding this critical issue by reading IIRC’s latest framework discussion paper and submitting comments by the Dec. 14 deadline.

If you’re not using integrated reporting, how is your organization communicating performance?

Bob Laux, CPA, Senior Director of Financial Accounting and Reporting, Microsoft Corporation. Bob is responsible for Microsoft’s financial accounting, including interacting with and responding to accounting standard setters on numerous issues.  Prior to joining Microsoft in 2000, Bob was an Industry Fellow at the Financial Accounting Standards Board.

 

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