The number of ASX 200-listed companies using the principles of integrated reporting in their annual reports has almost doubled over the last year, which is likely to pave the way for more regulatory standards professionals need to meet, according to a big four firm.
The fourth edition of KPMG’s ASX 200 Corporate Reporting in Australia revealed that up to 25 per cent of companies have adopted integrated reporting, up from 14 per cent last year.
The report also shows that over 75 per cent of the ASX 200 have “cut the clutter” in their financial reports – removing immaterial information and restructuring reports to make them clearer to users, up from 58 per cent a year ago.
KPMG audit partner Carolyn Ralph, said integrated reporting and other forms of external reporting were a high priority for the Auditing and Assurance Standards Board.
“As integrated reporting continues to develop, and investors acknowledge the holistic insights provided, a natural appetite for external assurance of such reports will emerge,” said Ms Ralph.
“Auditors can play a critical role in this ecosystem of trust, providing objective assessment of integrated reports.
“This subject is on standard-setters’ agendas – specific auditing standards exist and more will emerge, focused on scoping assurance on the things that consistently matter in company reports.”
KPMG lead partner, better business reporting, Nick Ridehalgh said that while Australia were lagging behind other major capital markets in adopting integrated reporting, the signs were encouraging to see.
“There has been a groundswell of movement on this issue over the past 12 months including the AICD, who are now supporting adoption of the principles of integrated reporting, and Australian investors who, like their international counterparts, recognise the importance of integrated reporting in their capital allocation decisions,” said Mr Ridehalgh.
“Under integrated reporting, companies provide more information on the broader health of the organisation and the challenges and opportunities it faces in the future, rather than focusing on analysing past financial results. This includes more focus on active governance, resource use and exposure, strategic performance, and management of material risk to create and preserve value.
“In traditional reports, the reader is often not given sufficient information to fully assess a company’s ability to execute its strategy in the future, and so whether past earnings are likely to be sustainable in the medium to long term.”
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