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Integrated reporting needs clarity, says 100 Group chair

Clarity needed about what businesses need to do differently in order to adopt integrated reporting, 100 Group chair tells Financial Director Conference

CLARITY is needed about what businesses must do differently to adopt integrated reporting, the chairman of the influential 100 Group of FDs has said.

Speaking at the annual Financial Director Conference in central London yesterday, Robin Freestone, CFO of Financial Times-owners Pearson Group and chair of the lobby group of FTSE 100 FDs, suggested annual reports already include much of the information required under integrated reporting.

Launched in December last year, integrated reporting aims to create more concise reporting that better communicates to investors how the business creates value over time, by taking into account a host of non-financial factors.

However, businesses are hesitant about adopting integrated reporting with FDs waiting to see how the project develops before making decisions about changing their reporting models.

According to Freestone, it “was not very clear” how integrated reporting differs from many FTSE annual reports, while the 100 Group is undertaking research about what companies will “need to in detail”.

“Ultimately, do we have do anything different?” Freestone said. Nevertheless, he agreed with the framework’s aims and that annual reports need to be more concise.

“If annual reports continue to grow at the rate by which they have [Pearson’s] report willl end up being 1,000 pages long,” he said.

According to FRC chief executive Stephen Haddrill, businesses cam achieve the aims of integrated reporting by following the UK reporting watchdog’s guidance on strategic reports. The FRC recently published its advice on creating the strategic reports, following their introduction to annual accounts from October 2013.

The best practice guide, developed in line with the EU Directive on Non-Financial Reporting and the International Integrated Reporting Framework, is the first of a series of steps from the FRC to help shareholders better assess value through improved reporting.

In addition to a “fair, balanced and understandable” view of company’s strategy, objectives and business model, the report should also include information about the “internal and external environment” the company works in and its business performance.

Within these categories, it highlighted environmental, employee, social and human rights factors, as well as non-financial key performance indicators (KPIs) and board gender diversity details as important elements. Where a company does not include environmental and social issues on the grounds of immateriality, it will be expected to explain what has been excluded and why.

“Our view is that if you follow our guidance on the strategic report you will meet the goals [of integrated reporting],” Haddrill said at the conference.

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