3 December 2013
South African listed companies are global leaders when it comes to integrated reporting, with this new and improved form of corporate reporting rapidly taking hold in many parts of the world from the United Kingdom to Austria to Australia and Brazil.
As the most experienced reporters – our local listed companies and large state-owned companies have been preparing integrated reports for the past three years stemming from King III’s call for integrated reports – their practices reveal emerging trends which are closely observed by the rest of the world.
One such trend is that integrated reports are slimming down. Good news indeed because there is no doubt that an enjoyable read is a concise report offering the most significant information about a company and providing links to where more detailed information can be found. The latest research shows that the average number of pages of the 2012 reports issued by the top 100 companies on the JSE is 161 pages – down from 179 pages in 2011. This is a trend that is likely to continue as companies get more comfortable with placing static and less significant information on their websites, leaving the integrated report to disclose what matters most. The research shows that of the top 100 companies, 66 included their full annual financial statements with the other 34 opting to include abridged statements, summary financial information, or only significant financial information. While the majority of companies in the survey clearly preferred to include their full financial statements, actually the integrated report need contain only the financial information that is essential for the reader to assess the ability of the company to continue to create value in the future.
The research shows that the shortest 2012 report is 35 pages (beating the 45 pages in 2011) and the longest is 450 pages (a narrow win over the 456 pages in 2011). The annual research was commissioned by the Integrated Reporting Committee (IRC) of South Africa and undertaken by the University of Cape Town’s College of Accounting.
An interesting finding is that 52 of the reports are specifically aimed at investors as the readers, while 48 are aimed at the broader base of investors plus other stakeholders (such as employees, customers, suppliers and society). This is noteworthy as the current international preference is to aim the report to providers of financial capital, being investors and creditors. It is also a departure from the 2011 reports where 57 were aimed at the broader base of stakeholders.
One of the issues of concern picked up in the 2011 research was that not all of the reports carried a statement from the company’s board of directors endorsing the report. This is important as a test of the credibility of the report and the information it contains. There is international preference for such a statement and while there has been some criticism about its inclusion, it is a fact that in many jurisdictions directors are responsible for corporate reporting anyway. The 2012 research revealed that 37 reports carried prominent statements with 8 others showing less prominent endorsement by the board. These figures are slightly lower than the 2011 findings.
Another concern is that most companies are not disclosing how they carried out their report materiality process. This is a crucial process as it determines which information and matters are disclosed in the report (the most significant stuff!). Only 24 of the reports had good disclosure in this area.
Note: The International Integrated Reporting Council (IIRC) will issue its international framework for an integrated report in the week starting December 9 2013. The finalisation of the Framework comes after three years of development and global consultation.
Note to editors
About the IRC of South Africa
The IRC was formed in May 2010 under the chairmanship of Professor Mervyn King to develop and promote guidance on good practice in integrated reporting. The current members of the IRC are the: Association for Savings & Investment South Africa (ASISA), Banking Association South Africa (BASA), Business Unity South Africa (BUSA), Chartered Secretaries Southern Africa (CSSA), Financial Services Board (FSB), Institute of Directors in Southern Africa (IoDSA), Institute of Internal Auditors (IIA), Government Employees Pension Fund (GEPF), Johannesburg Stock Exchange Ltd (JSE), Principal Officers Association (POA), The Finance Union (SASBO), Dr Gavin Andersson, Dr Bob Scholes, and The South African Institute of Chartered Accountants (SAICA). SAICA serves as secretariat to the IRC. For more information on the IRC and its Working Group see www.sustainabilitysa.org
Issued by: The Integrated Reporting Committee of South Africa
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