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Why CPAs Should Learn about Integrated Reporting

Shutterstock_217047778Integrated reporting <IR> is receiving a growing amount of coverage worldwide lately, from both academics and from the accounting profession, and this trend shows no sign of slowing down. Books, research articles, presentations and other publications that highlight the potential opportunities of integrated reporting are becoming commonplace. The International Integrated Reporting Council has developed a plethora of resources including case studies and reports that provide a solid introduction to this topic. But a fundamental question remains unanswered. In terms of day-to-day implementation and data that can be acted upon, what exactly is an integrated report, and what does it mean for the CPA profession?

What is it?

An integrated report focuses on the financial performance of an organization, but also includes operational and qualitative information not typically contained in a 10-K. Proposed and supported by the International Integrated Reporting Council, the <IR> framework includes information about financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital. In essence, integrated reporting attempts to convey a more comprehensive view of the organization than simply reporting financial performance. Underpinning this idea is the reality that, while financial results are analyzed by shareholders and other end users, the strategic management of the six capitals and operational data, including qualitative data, drive those financial results.

What it means for CPAs

CPAs traditionally have occupied the role of financial reporting experts, and play an important part in communicating the performance of the organization to internal and external users. Expanding beyond this traditional role and scope of work is a topic widely discussed at accounting conferences and among accounting professionals. Integrated reporting provides an opportunity for CPAs to assume a more leadership-focused role within organizations and the decision making process. As the individuals who most thoroughly understand the information being reported, it is logical that CPAs seize this opportunity to improve the relevance of information distributed to end users.

How to find out more

While integrated reporting is an emerging field, there is an abundance of information available for CPAs wishing to learn more about <IR>. The IIRC webpage referenced above is a terrific resource for research on this topic. Additionally, organizations around the world, including the AICPA and CIMA, have dedicated efforts designed to explore this emerging area. Additionally, and perhaps the best way to embrace the idea of integrated reporting, is to be proactive in both the search for information and the application of this information to a company or industry. In an increasingly stakeholder-oriented business environment- that includes growing numbers of groups such as environmental and governance agencies interested in the performance of an organization, as well as investors that adopt longer-term, sustainable strategies- CPAs who embrace the opportunities of <IR> will be well positioned for success.

Sean Stein Smith, DBA, CPA, M.S., M.B.A., CMA, CGMA, Assistant Professor, Rutgers School of Business – Camden. Sean serves on the AICPA National CPA Financial Literacy Commission. He is a member of the NJCPA Content Advisory Board, Student Programs & Scholarship Committee, Young CPAs Council, Nonprofit Interest Group, and Accounting & Auditing Standards Interest Group. He can be reached at drseansteinsmith@gmail.com.

Employees around a table image courtesy of Shutterstock


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