What is integrated financial reporting

Integrated financial reporting refers to the process of combining various aspects of a company's financial information, performance, and non-financial data into a cohesive and comprehensive report. The purpose of integrated financial reporting is to provide stakeholders with a holistic view of a company's financial health, strategy, operations, and its broader impact on the economy, society, and the environment.

The key features of integrated financial reporting often include:

  1. Financial Statements: Traditional financial statements like the balance sheet, income statement, and cash flow statement are included to present the company's financial performance, position, and cash flows.

  2. Non-Financial Information: Integrated reporting goes beyond financial data and incorporates non-financial information, such as environmental, social, and governance (ESG) metrics. This data helps stakeholders assess the company's impact on sustainability, social responsibility, and ethical practices.

  3. Business Model: Integrated reports typically describe the company's business model, outlining how it creates value over the short, medium, and long term. This section helps investors understand the sources of a company's revenue and how it sustains profitability.

  4. Strategy and Risk Management: Integrated reports may highlight the company's strategic objectives and how it manages risks that could impact its ability to achieve those objectives.

  5. Future Outlook: Companies may provide their vision for the future and outline their growth strategies, investment plans, and anticipated challenges.

  6. Stakeholder Engagement: Integrated reporting emphasizes the company's interaction and engagement with various stakeholders, such as customers, employees, suppliers, communities, and investors.

  7. Materiality: The report focuses on information that is material to the company's performance and its stakeholders' decision-making processes.

  8. Clear Communication: The report aims to present information in a clear, concise, and understandable manner, enabling stakeholders to make informed decisions about the company.

The International Integrated Reporting Council (IIRC) has been a prominent advocate for integrated reporting. Their framework provides guidance on how companies can prepare integrated reports that effectively communicate the relationship between financial and non-financial performance, leading to a more comprehensive understanding of a company's value and sustainability efforts. Integrated reporting is a part of the broader movement towards sustainable and responsible business practices, reflecting the growing awareness of the importance of environmental, social, and governance issues in business decision-making.