This article outlines how the ACCA Qualification embraces the underlying principles of integrated reporting (IR). IR is a different way of presenting information about the business to its stakeholders and, as such, is a new and exciting development in financial reporting
Integrated reporting, as a concept, has been developed by the International Integrated Reporting Council (IIRC), a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. Together, this coalition shares and promotes the view that communication about businesses' value creation should be the next step in the evolution of corporate reporting.
The International Reporting Council (IIRC) has its headquarters at ACCA and issued a draft framework for the practice of financial reporting in April 2013, which has formed the basis for ACCA to develop more IR content within its syllabuses, particularly at the Professional level. This will take place with effect from December 2014.
Since its relaunch in December 2007, the ACCA Qualification is structured in such a way and contains material that resonates strongly with IR principles and aligns closely to the core content elements of the 2013 IR framework, particularly at the Professional level.
Table 1 below gives an overview of the links between the key ACCA Professional level exam papers and the core content elements of the draft IIRC Framework:
Table 1: Direct or explicit linkages between the ACCA Professional level papers and IIRC content elements
|IIRC Content elements||Professional papers|
|Organisational overview||P1, P3|
|Opportunities and risks||P1, P3, P4, P7|
|Strategy and resource allocation||P3, P4, P5|
|Business model||P3, P5|
|Performance||P2, P5, P7|
To coincide with the publication of the draft IIRC Framework, some companies have started to apply principles of integrated reporting in their external reporting models, including ACCA (see 'Related links').
The ACCA Qualification will, in future, further highlight these developments by making more explicit the elements of integrated reporting in its curriculum. This will apply particularly at the final Professional membership level. The next part of the article explains how this will be achieved.
From December 2014 the following changes to the Professional level exams will take place:
Paper P1, Governance, Risk and Ethics
It is in Paper P1 that students will learn in some depth about the content elements and guiding principles of integrated reporting. Paper P1 will have syllabus outcomes added so that the subject area entitled 'Social and environmental issues in the context of business and ethical behaviour' will be re-named 'Integrated reporting and sustainability issues in the context of business'. The syllabus will now specifically contain references and reflect such themes in integrated reporting as the importance of innovation within a framework of risk awareness and scepticism. The syllabus also contains a reference to 'setting the tone from the top' and the wider governance responsibilities of directors to set responsible and appropriate strategies, taking into account overall performance and organisational impacts of, and on, the environment and wider stakeholder groups.
The major area of change is in Section E7 where, for the first time, the Paper P1 syllabus will contain references to the six capitals. It will also examine the typical content elements and guiding principles of an integrated report and the usefulness of this information to stakeholders.
Paper P2, Corporate Reporting
Additionally, integrated reporting is being added as a current issue to the Paper P2, Corporate Reporting syllabus. Students will need to understand the components and their interactions to be able to determine the value added by such a report and any problems associated with the report and its preparation. The content elements of integrated reporting are covered in A3, Social responsibility and integrated reporting. Integrated reporting as a method of reporting will also be included in Section H and the performance aspects of IR are covered in Section G, Appraisal of financial performance and position of entities.
Paper P3, Business Analysis
The Paper P3 syllabus has significant sections relating to the key elements of integrated reporting, namely organisational overview and external environment, opportunities and risks, strategy and resource allocation, business model and future outlook. All of these elements are well covered in the first three sections of the syllabus that deal with strategic position and outlook, with strategic choices (which link to the resources and model operated by the business) and the sustainable implementation of strategy.
Section A2 has been renamed 'Environmental issues affecting the strategic position of, and future outlook for, an organisation’. In addition, a new outcome will be added to A6 of the syllabus, 'Explain the role of integrated reporting in communicating strategy and strategic performance’, which potentially examines principles and elements of integrated reporting relating to communicating strategy to stakeholders.
Paper P4, Advanced Financial Management
The Paper P4 syllabus has not been added to substantially or significantly amended, in the light of the IIRC Framework publication. However, a significant proportion of the syllabus already relates closely to key elements of the integrated report – namely, opportunities and risk and strategy and resource allocation, both of which are key themes running throughout this syllabus.
The first two sections deal with issues that are arguably related to two of the integrated reporting principles.
Section A covers the role and responsibility of the organisation towards its stakeholders. This section contains outcomes relating to conflicting stakeholder interests, an amended outcome on the ethical and integrated reporting issues in financial management, and the impact of environmental issues on organisational objectives and on governance.
Section C on advanced investment appraisal is mainly about the efficient allocation of economic resources and making the most effective use of funds where capital is rationed and Section H closely addresses the risk element of the IIRC framework.
Sections D and E relate to the business model and key inputs and how they relate to the capitals from which they are derived (being mainly financial in this particular syllabus).
Paper P5, Advanced Performance Management
The Paper P5 syllabus is already firmly structured around specific elements of the IIRC Framework, mainly the performance element, but also contains some outcomes related to other elements, situated earlier on in the syllabus. Sections A and B cover strategic aspects of performance relating to opportunities and risks and to strategy and resource allocation. The main sections of the syllabus are Sections C, D and E which directly cover performance issues such as measurement systems and design, and evaluation, including corporate failure prediction.
A new outcome on integrated reporting as a reporting model is being introduced in Section F of the syllabus under current developments and emerging issues: ‘Explore the role of the management accountant in providing key performance information for integrated reporting to stakeholders’. Once an accepted format for the integrated report becomes established, it is likely that specific references to integrated reporting within this syllabus will move into Section C, Performance measurement systems and design.
Paper P6, Advanced Taxation
Paper P6 is an option paper for those students or members who wish to become specialists in taxation and, as such, this paper does not directly address integrated reporting principles. Indirectly, however, the Paper P6 syllabus does relate to strategy and certain financial aspects of strategy, particularly divisionalised or multinational companies and the impact of relevant taxes on the various situations they face and the actions an organisation may take.
Paper P7, Advanced Audit and Assurance
Consideration of the assurance aspects of such reports will be clearly added to Paper P7, Advanced Audit and Assurance and this may increase as the adopted reporting model for integrated reporting becomes clearer. The key section in which integrated reporting would be referred to is Section E, Other assignments, particularly in relation to prospective financial information, and in Section G, Current issues and developments under social, environmental and integrated reporting and under Current issues.
Integrated reporting is gaining support around the world as a practical and useful reporting framework to enhance the quality and relevance of corporate reporting. The next stage in this process is for professional accounting programmes to support the wider adoption of these principles by developing their curricula accordingly. To lead this initiative, ACCA is planning to incorporate learning outcomes relating to the suggested outcomes of an integrated report.
More explicit coverage of the IR and terminology around content elements and/or guiding principles will now be incorporated within the ACCA syllabuses at the Professional level. In particular, Papers P1 and P2 now contain content around what the benefits to stakeholders are of preparing IR and how this relates to the agency concept and how it is defined. Paper P2 additionally may need to assess examples of how a typical integrated report might be prepared.
Papers P3, P4 and P5 contain several significant sections that already address integrated reporting principles and which will now be more prominently highlighted. Paper P7 will also address audit and assurance issues relating to an IR report, but specific content relating to audit may emerge and develop further, once an accepted format of such a report emerges more clearly, through adoption and practice.
Gareth Owen, ACCA qualifications development manager