Presentation by Vincent Tophoff, Senior Technical Manager, IFAC, for the Institute of Internal Auditors International Conference, in Vancouver, Canada, July, 5-8 2015.

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Integrated reporting
Leading Practices & International Developments
Vincent H. Tophoff
International Federation of Accountants (IFAC)

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• Global organization of the accountancy profession
• Supports professional accountants (incl. internal auditors) in
following areas:
– Governance & ethics
– Risk management & internal control (RM/IC)
– Sustainability & corporate responsibility
– Financial & performance management
– Business reporting including integrated reporting
• All areas of critical importance to internal auditors, and to
integrated thinking & integrated reporting!
International Federation of Accountants

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Today’s Agenda

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• Integrated Reporting (<IR>)
& Integrated Thinking
• <IR> Framework & Global
Adoption
• <IR> Implementation
• Internal Auditor & <IR>
• <IR> Capacity Building: IIRC,
IIA, IFAC & Others
• Key Take Aways
• Q&A
Today’s Agenda

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<IR> & Integrated Thinking

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• Global coalition of regulators, investors, companies, standard
setters, the accounting profession & NGOs
• Solving current financial, environmental & social sustainability
issues through better linking investment decisions, corporate
behavior & reporting
• Promoting communication about value creation as the next step
in the evolution of corporate reporting
(“Both IFAC & the IIA are Council members of the IIRC”)
International Integrated Reporting Council (IIRC)

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• To communicate a clear, concise, integrated story that explains
how all of your resources are creating value
• <IR> is helping you to think holistically about your strategy &
plans, make informed decisions & manage key risks to build
stakeholder confidence & improve future performance
• An integrated report is a concise communication about how your
strategy, governance, performance & prospects, in the context
of its external environment, lead to the creation of value in the
short, medium & long term
(“does not need to be a stand-alone, additional paper report”)
Integrated Reporting (<IR>)

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Positioning of <IR>

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• Internal benefit: helps organizations create value
– Evidenced by the research of the organizations participating in the
IIRC’s Pilot Programme & captured in Realizing the Benefits, The
Impact of Integrated Reporting
• External benefit: tell the value creation story in a succinct way &
better engagement with investors & other stakeholders
• Integrated thinking is the foundation
Why Integrated Reporting (<IR>) ?
(“and arguably the main value driver!”)

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Integrated Thinking => <IR>
integrated planning & decision making?
(integrated risk management?)
integrated execution?
integrated monitoring
& review?

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• In what environment are you working & what is changing?
• Who are your stakeholders & what do they want?
• How do you create or destroy value for your various stakeholders?
• What are your overall strategy & objectives?
• How are they affected by risk?
• What business model did you chose? How does it work?
• What is your organization’s performance in outputs & outcomes?
• How does that affect your stakeholders now & in the future?
Integrated Thinking?

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<IR> Framework & Global Adoption

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The International <IR> Framework

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<IR> Framework: Value Creating Process

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• Strategic focus & future orientation (“ability to create value”)
• Connectivity of information (“integrated thinking”)
• Stakeholder relationships (“their needs & interests”)
• Materiality (“substantially affect”)
• Conciseness (“…”)
• Reliability & completeness (“as well as staying concise…”)
• Consistency & comparability
<IR> Framework: Guiding Principles

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• Organizational overview & external environment
• Governance
• Business model
• Risks & opportunities (“separate content element?”)
• Strategy & resource allocation
• Performance
• Outlook
• Basis of preparation & presentation, taking account of general
reporting guidance
<IR> Framework: Content Elements

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• Basis of preparation & presentation, taking account of general
reporting guidance
• Organizational overview & external environment
• Risks & opportunities
• Strategy & resource allocation
• Governance
• Business model
• Performance
• Outlook
<IR> Framework: Content Elements (Reshuffled by me!)

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• Between content elements
• Between capitals (“<IR> goes beyond siloed reporting by
considering all capitals“)
• Between past, present & future
• Between financial & non-financial information
• Between quantitative & qualitative information
• Between integrated report & other business reports
Connectivity Through Integrated Thinking

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• Applicability to various types of organizations (Written primarily in the
context of private sector?)
• Intended audience (Providers of financial capital?)
• Capitals (Overemphasis on financial capital?)
• Materiality (IIRC project with IFAC)
• Order of the content elements (Follow the business flow?)
• Risks & opportunities (Currently still very disconnected)
• Assurance (IAASB currently developing an information paper)
Outstanding <IR> Issues

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• <IR> Framework has been out since December 2013
• Global momentum led by countries like Brazil, Japan,
Malaysia, Singapore, South Africa
• See also <IR> Global Momentum Map:
<IR> Framework: Global Adaptation

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<IR> Implementation

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• <IR> is a journey; it will take more than one reporting cycle
– (“Don’t try to do it all at once”)
• <IR> should not be seen as just additional reporting
– (“Embed integrated thinking in the organization”)
• Don’t think of the Framework as a list of requirements
– (“Tell your own, unique, value creation story”)
• You are probably doing some/a lot of this already
– (“Build on what you’ve got”)
<IR> Implementation

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• Reporting suite: contents, medium & format, timing, budget,
approval process, connectivity
• Materiality
• Stakeholder mapping & consultation
• Assurance approach
• Gap analysis:
– information needed for <IR> vs. information currently reported
– is information in the gap currently collected? reliable? complete?
– if not … (“see <IR> Capacity Building”)
Initial <IR> Decisions to Be Made

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Internal Auditor & <IR>

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• Has a “seat at the table” from which (s)he can influence the
adoption of <IR> (“and integrated thinking & action!”)
• Is familiar with process implementation in the organization
• Offers insight on potential risks to the organization
• Can affect consistency of communication of metrics across
business units
• Provides assurance to increase the credibility of metrics in the
integrated report
Internal Auditor Is Well-Suited to Support <IR>

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• You might consider attending the following session as well:
• In that session, you will:
– Get a high-level overview of what Integrated Reporting (IR) is.
– Discuss the potential benefits of converting to IR & potential drawbacks of
sticking with the current set up.
– Consider barriers to entry into the world of IR
– Define the roles & responsibilities internal audit can play in IR’s
implementation.
Internal Auditor Is Well-Suited to Support <IR>
Tuesday July 7 from 12:45 – 1:45 p.m.
What Internal Auditors Need to Know
About Integrated Reporting
Mariska Edwards, CIA

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• Council member of the IIRC
• Forming an <IR> task force in 2015 to help identify & assess
the opportunities for the profession
• <IR> capacity building through the provision of resources
IIA Supports Internal Auditor to Support <IR>

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<IR> Capacity Building: IIRC, IIA, IFAC & Others

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IIRC <IR> Resources (www.theiirc.org)

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• <IR> Business Network & other <IR> networks including the
new Integrated Reporting (<IR>) Accountancy Body Network
• Integrated Reporting Examples Database
 Examples of emerging practice (about 100 examples)
 Recognized integrated reports (So far, not very many…)
 Good integrated reporting examples (Incl. useful key observations)
• <IR> Case Studies
• Corporate Reporting Dialogue
 Reporting Landscape Map
Additional IIRC <IR> Resources

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IRC of South Africa

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IRC of South Africa: Preparing an integrated report; a starter's
guide

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IIA Resources (www.theiia.org)

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IIA Resources: <IR> & the Emerging Role of Internal Audit

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IIA Resources: Enhanced integrated reporting: internal
audit value proposition

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IFAC (www.ifac.org)

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IFAC: Integrating Governance for Sustainable Success

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IFAC: Principles for Effective Business Reporting Processes

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IFAC: From Bolt-on to Built-in
Managing Risk as an Integral Part of Managing an Organization

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IFAC: www.ifac.org/global-knowledge-gateway

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IFAC Member Bodies

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Accounting & Consulting Firms

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Assurance on <IR>

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Key Take Aways

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• <IR> is link in Integrated Governance chain
• <IR> Framework governs overall content of an integrated report &
explains fundamental concepts
• <IR> implementation = a journey with numerous outstanding issues
• Internal auditors (“WE!”) support <IR> in various ways in the
organizations they work for
• IIRC, IIA, IFAC & other parties support internal auditors in <IR>
• Now it is up to us, internal auditors!
• And if <IR> still does not resonate…
Key Take Aways

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…There are many alternative ways of reporting!

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Q&A