Mr. Li Yong
Vice Minister of the Ministry of Finance, P. R. China
President of CICPA
Member of IIRC
On April 16, 2013, the International Integrated Reporting Council (hereafter referred to as IIRC) released the Consultation Draft of International Integrated Reporting Framework for global comments. This is a remarkable achievement of IIRC and global accounting experts in promoting the innovation and reform of traditional financial reporting model. Hereby, on behalf of Chinese accountancy profession and CICPA, I would like to extend our appreciations for the forward-looking spirits of IIRC and global accountancy profession, and congratulations on this important achievement.
Integrated reports are a new form of corporate reports, which aim to integrate financial and non-financial information, and provide more comprehensive, relevant and precise decision making information for stakeholders. Based on current corporate reports, such as financial reports, management commentary, social responsibility reports, corporate governance and remuneration reports, the integrated reports are designed to incorporate the important information reflected in those reports, including information on corporate strategy, governance structure, financial performance, social responsibility and prospects, and reflect those aspects of information in one corporate report in a clear, concise and understandable way.
The creation of integrated reports conforms to the demands of reforming current corporate reporting model for global economic sustainability. While the concept of sustainability increasingly obtaining global attention and acceptance, current economic model has to be reformed deeply. The corporate reports, which are the guidance of allocating social resources, play a fundamental role in the transformation of global economic mode. In order to develop a new economic sustainability model, it is an important step to set up a new form of corporate reporting model, which will supplement information in financial reports and meet demands of stakeholders for all-round information, so as to reflect the link between corporate social responsibility, governance, and long-term potentiality, and reasonably guide the allocation of resources. Therefore, IIRC proposes the concept of integrated reporting, and has been committed to promoting the concept and developing an integrated reporting framework.
IIRC’s principle-based integrated reporting framework stipulates the basic concepts, guiding principles and main contents of preparing corporate integrated reports with a view of setting up a global single principle of preparing the reports. According to the Consultation Draft, the corporate integrated reports should include seven sections, namely, organization overview and external environment, risk and opportunities, strategy and resource allocation, governance, performance, future outlook, and business model. In this framework, corporate integrated reports can reflect the interrelation and interdependence among various aspects of corporates’ information, and the corporates’ ability to create and maintain value in short, medium and long term. It can also reflect the corporates’ reliance on and use of different resources, and their ability to access resources as well as their influence on those resources.
Compared to traditional corporate reporting model, the integrated reporting model does not overemphasize performance in short term any more, but reflects concepts of sustainability. Traditional corporate reports attached relatively more importance to historical financial information, while the integrated reports not only reflect historical financial information, but also focus on the corporates’ prospects and future uncertainties, which can demonstrate their ability to create and continue to create value in the future. Besides information in short term, integrated reports also provide information on corporates’ potentiality in medium and long term, and make clear the relations between sustainability and economic value. Therefore, integrated reports can help corporates to transform their business model, and urge them to get rid of shortsighted effects caused by paying too much attention to performance in short term. The integrated reports can also help corporates to integrate sustainability concepts into their management thinking and business processes gradually and choose a sustainable way, which will in turn promote the sustainable development of global economy.
Integrated reports can reflect the relevance among various aspects of information, and show the whole picture of corporates’ businesses. In the traditional corporate report model, the reports are independent from each other, some important information has not been effectively integrated, which results in a low level relevance among information. Integrated reports replace this “silo mentality” with “integrated thinking”, link closely various core points in corporate reports (financial information, management commentary, governance and remuneration information), and interpret them in a single, clear, consistent and comparable way based on corporates’ business model and strategy. In this way, information on human resource, technologies, society and nature as well as the relations among them will be provided to stakeholders for systemic consideration in decision making.
For a long time, China has attached great importance to economic development in a sustainable way, and has seen the concept of constructing a conservation-oriented and environment-friendly society as an important point of accelerating transformation of the economic development mode. China has always emphasized on improving economic development quality, economic stability and sustainability. In term of corporate reporting model, Chinese government has always attached importance to promoting the reform of corporate reports through urging corporates to publish social responsibility reports, which has already made positive progress. There are more and more listed companies and SOEs under State-owned Assets Supervision and Administration Commission publishing social responsibility reports, increasing from 10 in 2006 to 1,001 in 2011. Judging by the social responsibility reports published in 2011, most of them had a complete structure, and disclosed their management and performance information in economic, environmental and social aspects with explanations of their sustainable prospects.
Chinese accountancy profession and CICPA have actively supported and participated in the development of international integrated reporting framework, and have been trying to take our efforts in promoting corporate report reform and the achievements to global counterparts for interactions. I firmly believe that with China’s active participation, the concepts of integrated reporting framework and its good practice will provide useful reference to us and promote further reform of Chinese corporate reports.
