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Winning Professional Accountant

Suresh Gooneratne

Diesel & Motor Engineering PLC

20 October, 2012

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Integrated Reporting

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Why Integrated Reporting? Australia 212 all out

Sri Lanka 180 for 6 in 42 overs

Who is likely to win the match?

• What is the state of the pitch?• Is the ball turning a lot?• Who is at the crease?• What is the current partnership?• How many overs have their weaker bowlers got to bowl?

In other words, one would want to assess the

“State of Play”

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Why Integrated Reporting?

1) Need to know the “State of Play”

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Courtesy of IIRC

The percentage of market value represented by physical and financial assets versus intangible factors, some of which are explained within financial statements, but many of which are not.

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Why Integrated Reporting?

1) Need to know the “State of Play”

2) Corporate Valuations

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The world has changed – Reporting must too

Source – WBCSD Vision 2050

The world population is increasingly urbanGlobal population by type of area and by region: 1950-2050

Global economic power is shiftingTop 10 economies by GDP in 2050

The global middle class is rapidly expandingPopulation in low- and middle-income countries earning $4,000-$17,000 per capita (purchasing power parity)

Greenhouse gas emissions keep risingGHG emissions by regions

Environmental degradation jeopardises people’s quality of lifePeople living in areas of water stress by level of stress

The world could be running out of some resourcesGlobal supply forecasts according to the implied ultimate recoverable resources of conventional oil, date of peak production and the post-peak aggregate decline rate

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Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008

Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007

Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008 Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007

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Why Integrated Reporting?

1) Need to know the “State of Play”

2) Corporate Valuations

3) The World has changed

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The IIRC

• The International Integrated Reporting Council (IIRC)

• Is there a universally recognized guideline published on Integrated Reporting?Not yet. The International Integrated Reporting Framework is due for publication towards end 2013.

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What is Integrated Reporting?• A process that brings together material information about

an organization’s strategy, governance, performance and

prospects in a way that reflects the commercial, social and

environmental context within which it operates.” (IIRC)

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What is an Integrated Report?• “A single report that provides a clear and concise

representation of how an organization demonstrates

stewardship and how it creates and sustains value.” (IIRC)

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Fundamental Concepts

A. Capitals

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Resources and relationships or “capitals”• Financial capital: The pool of funds available to the

organization.

• Manufactured capital: Manufactured physical objects, as distinct from natural physical objects.

• Human capital: People’s skills and experience, and their motivations to innovate.

• Intellectual capital: Intangibles that provide competitive advantage.

• Natural capital: Includes water, land, minerals, and forests; and biodiversity and eco-system health.

• Social capital: The institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being. Includes an organization’s social license to operate.

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Fundamental ConceptsA. CapitalsB. The Business ModelsC. Creating and Preserving Value

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Key WordsA. Non- Financial CapitalsB. Business ModelC. Creating or Preserving Value C. Strategic FocusD. Future OrientationE. Connectivity of InformationF. Stakeholder Inclusiveness

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Integrated Reporting – Future Needs• A Framework/ Guideline

• Develop Measurement Mechanisms.

• Overcome problems that may be faced in providing the context

for Non- financial information in conglomerates.

• Performance Management to recognize multiple capital

formation.

• Pay for performance to include multiple capital formation.

• Risk Management reports to be more inclusive

• Development and or refinement of existing Assurance Services

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Thank you