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Accounting Assignment Question
Accounting Assignment Solution
The application of the concept of the capital to integrated reporting
Link: Integrated Reporting
There is a growing concern among companies that the traditional corporate reporting adopted by them is inadequate to meet the information requirement of its stakeholders. In order to enhance the information available to stakeholders for decision making, companies have begun to report both financial and non-financial information. The suggested solution for the company is to offer clarity in interlinking financial and non-financial information reported so that it allows for a continuous assessment of the company’s performance during the current time period and the future (Cheng et al. 2014).
The base of this integrated reporting framework is the concept that companies have to incorporate all the resources they utilize as inputs to their business operations (PWC 2013). Six resources are identified for this purpose known as capitals which include financial, manufactures, intellectual, human, social and natural. This model is expected to assist companies and their investors to make a proper decision and assist them to communicate with transparency on how they generate value.
The usage of capitals in integrated reporting is based on three fundamental concepts. Firstly, it suggests companies focus on their methods adopted to generate value over a period of time – short-term, medium-term and long-term. Secondly, the companies are asked to incorporate an outline of their business model reflecting the entire value chain of their operations. Thirdly, it underlines the relationship that exists between companies and their resources that lead to effective and successful operations.
The major objectives for including capitals concept in integrated reporting are its role as a benchmark to ensure that the companies consider all the types of resources used by them and to ensure value generated as it depends on the increase and decline in the capital used (EY 2013).
Reflection: This has offered me an in-depth understanding of the types of resources used by companies and the necessity for incorporating capitals in integrated reporting……………