South Africa: Integrated Reporting Could Be The Key That Enables Capital Markets To Focus On Long Term Value

Last Updated: 5 June 2013
Article by Mark Hoffman

But reports produced under the Framework need to stay focused on meeting investor needs

KPMG has welcomed the release of the International Integrated Reporting Council's (IIRC) Consultation Draft of the International Integrated Reporting Framework.

Key points: 

The International Integrated Reporting Framework is an important step on the journey towards better business reporting that could ultimately address the gap between reporting content and business value. According to KPMG, Integrated Reporting provides an opportunity for companies to make their case for capital more effectively by focussing their reporting on their business story and value creation.

"We applaud the work of the IIRC and urge regulators, investors and governments to actively drive for change for better business reporting which can help ensure future financial stability. We need to grasp the opportunity for reform," said Alan Buckle, Deputy Chairman of KPMG International.

Whilst welcoming the Consultation Draft as an important step in the evolution of corporate reporting, KPMG also called on the IIRC to address the many different interpretations of Integrated Reporting currently being promoted. KPMG anticipates that the final version of the Framework will address any risk of misinterpretation to ensure reports stay focussed on helping readers understand how the earnings potential of the business has been developed and protected. The test of success would be whether Integrated Reporting is able to provide investors with the information needed to take better judgements on businesses' ability to generate returns over the long term.

According to David Matthews, leader of KPMG's Integrated Reporting team "Integrated Reporting provides an opportunity to re-align corporate reporting with investor decision-making.  It is an opportunity to shift the reporting focus from short term financial performance to long term value creation".

From a South African perspective Mark Hoffman, Director for Accounting Advisory Services at KPMG in South Africa, says "Integrated reporting is well on its way in South Africa. The Integrated Reporting Consultation Draft will further advance, enhance and refine the thinking of companies in their approach to adopting integrated reporting as an integral business process."

KPMG believes the concept of implementing integrated reporting around your business model and strategies; with a focus on how the business had been developed, will be particularly attractive to management teams looking to move their investor dialogue beyond short-term earnings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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