TechTalk Blog -- Why the Capital Markets Needs Integrated Reporting -- Non-Financial Reporting

By David Colgren posted 03-27-2017 12:57 PM

  

Interesting article… Largest democratic country in the world (India) is pushing the largest capital markets country in the world (USA) to have public companies disclose not only financial information but non-financial information to better serve both investors and the public. Including both financial and non-financial information is known as "integrated reporting" by public companies.  

Currently the US Securities & Exchange Commission isn’t even allowing voluntary filing of non-financial data to be included with financial reports by public companies. US GAAP does not include non-financial accounting metrics.

Key question in the United States: will the capital markets stay relevant to meeting both the needs of investors and the public if this non-financial information is not disclosed and/or the accounting standard bodies don’t recognize non-financial data from an accounting perspective?

Premise: How can the capital markets on a global scale deal with climate change and distribution of natural resources to a population expanding to 10 billion people by 2050 to name a few of the critical global issues facing humanity? Today the global population is at 7.5 billion. NASA has stated that we will need the resources of three earth's to sustain the population. 

Does a public company have to serve the public interest? Does it have a "perceived" license to operate in the public interest? Can capitalism generate a profit and serve the public interest at the same time supporting innovation, creation of value and new jobs?

I believe public companies can … and will … but without including the disclosure of non-financial information its future relevance is in jeopardy.  How can we drive investment if we don’t have the information we need to create innovation and jobs of the future with relevant data?  Freedom is having choice based on reliable data.

The IMA is an active member of the International Integrated Reporting Council (IIRC) that supports the concept of integrated reporting and we will see how this moves forward.

Wikipedia defines Integrated reporting as:

"The process that results in communication, most visibly a periodic “integrated report”, about value creation over time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term."[1]

It means the integrated representation of a company’s performance in terms of both financial and other value relevant information. Integrated Reporting provides greater context for performance data, clarifies how value relevant information fits into operations or a business, and may help make company decision making more long-term. While the communications that result from IR will be of benefit to a range of stakeholders, they are principally aimed at providers of financial capital allocation decisions.

IR helps to complete financial and sustainability reports. A framework has been published, but some questions remain in order to know how to apply it."


Stock exchanges are starting to mandate that public companies disclose non-financial information critical to creating a sustaining society moving forward.

This article from the world’s largest democracy documents why integrated reporting is so critical to a thriving capital markets…

It is also my hope that disclosed information issued by companies is done so using data tagging like XBRL so this information can be machine-readable and consumable by a global audience driving investment decisions. Why not make this data searchable and usable in a more effective manner.

By the way -- India requires disclosure of certain non-financial information and its required to be tagged in XBRL -- which includes sustainability information.

Managing accountants can play a role in helping companies to create, disclose and consume non-financial data using XBRL.

Stay tuned…   



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