To better improve the corporate reporting with the integration of financial and non-financial information, Integrated Reporting is developed by The International Integrated Reporting Council (IIRC). This research is encouraged by the emersion of integrated reporting (IR) to respond the stakeholder’s demand as it becomes a debated corporate reporting trend in the world. Integrated reporting as a new corporate reporting trend in the world presents an organization’s business model and value creation process, highlight the use and dependence types of resources, enable stakeholders to evaluate a firm’s ability to create value over the short, medium, and long term more effectively, and assist users to assess firm long-term viability, therefore they can more effectively allocate scarce resources.
In order to ensure the integrated report quality and to achieve transparency and comparability of the published integrated reports amongst different companies, seven Guiding Principles are introduced in the IR Framework. It underlies the preparation and presentation of integrated report, inform the content and how it should be reported. The integrated report also consists of eight content elements that link to each other. These content elements also depend on the individual circumstances of companies. Researchers have examined integrated reports especially for the information content. The aims of this research is to assess the integrated report quality on European firms. The international (IR) framework and previous studies are used to improve a scoring scheme using content analysis. This research used 5 scoring area for quality assessment, namely conciseness, readability and clarity of document, accessibility, reliability, and content element area.
This research aims to investigate the integrated reporting (IR) quality on European firms and whether there is an improvement on (IR) quality from 2016 to 2017. This research have analyzed 126 integrated reports from 63 European firms in 2016 and 2017 derived from IIRC official database. This is the first study examining the integrated reporting quality specifically on European firms. Researchers observed that the highest increase of content element is business model disclosure. This finding suggested that the European firms pay more attention to improve their value creation disclosure then describe them in the business model as a core element of the integrated report. They also presented their business input, process, output, and outcome more clearly and comprehensively in 2017 compared to 2016. Although the efforts to improve the content of integrated report requires substantial resources, for instance, to adapt internal processes, cost, IT systems, etc, this significant increase means that the firms perceived that the relevant costs (both explicit and implicit) sustained by (IR)implementation was adequately covered by its benefits. According to these research findings for this 5 areas, hence researchers conclude that there is an partial increase of integrated reporting quality of European firms from 2016 to 2017. This increased is occurred in 2 aspects, namely readability and clarity of documents and content element area as a whole. Therefore, the hypotheses 2 states that the integrated reporting quality of European firms improves from 2016 to 2017 is partially accepted.
The first results shows that European firms published a moderate quality of integrated report. Hence, hypothesis 1 stated that integrated reports published by European firms on average show a low quality is not accepted. The second results suggested that there is a partially significant increase of integrated report quality on European firms on 2016 to 2017, particularly for readability and clarity of document and content element area. Hence, hypothesis 2 stated that the integrated reporting quality of European firms improves from 2016 to 2017 is partially accepted. This research contributes particularly to the more comprehensive scoring scheme for 5 areas, especially for content element, compared to the previous study. It also gives the insight for the (IR)adopter, IIRC, and government as well regarding with the integrated reporting implementation.
Author: Prof. Dian Agustia, S.E., M.Si., Ak., CMA., CA
Details of the research can be viewed here:
Agustia, D., Sriani, D., Wicaksono, H., & Gani, L. (2020). Integrated Reporting Quality Assessment. Journal of Security & Sustainability Issues, 10(1). doi.org/10.9770/jssi.2020.10.1(4)
