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Australia’s top companies moving towards integrated reporting, KPMG survey shows

Integrated reporting on the rise for Australia

A quarter of the country’s biggest 200 companies are now using the principles of ‘integrated reporting’ in their annual reports, with a focus on how they create longer term value rather than short-term earnings, a KPMG study published today shows.

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The fourth edition of ASX 200 Corporate Reporting in Australia reveals a significant rise in companies moving away from just detailing past financial performance in their 2017 annual reports, to describing how their boards and management are working to create sustainable value for investors and other stakeholders.

The report also shows that over 75 percent of the ASX200 have ‘cut the clutter’ in their financial reports – removing immaterial information and restructuring reports to make them clearer to users. This is up from 58 percent a year ago.

Nick Ridehalgh, KPMG Lead Partner, Better Business Reporting said: "In 2017, we have seen steady progress in companies adopting the principles of integrated reporting – 25 percent, up from about 14 percent a year ago. 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. The G100 group of leading CFOs and ACSI understand the market and business opportunity, and are strongly in favour of companies adopting integrated reporting.

‘Encouragingly, more companies are providing evidence of improved internal strategic alignment, and better engagement with customers, employees and other stakeholders arising from integrated reporting. Globally, there has been substantial progress with 1,600 companies now adopting integrated reporting – Australia still has a long way to go, but the signs are definitely more positive now.

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."


Details from the report:

  • Over 50 percent of organisations have moved on from purely talking about financial position and performance, and are now also including narrative disclosure on non-financial performance. But mostly this is without specifically connecting it to strategy or strategic objectives - the leading reporters provide this connectivity and are also showing performance against targets or budgets and using measurable KPIs.
  • 78 percent include a high-level discussion of strategy, giving an idea of where the organisation is heading in the short and/or medium term. This year 12 percent of organisations disclosed specific objectives which underpin their high level strategies to give the reader insight into how they intend to deploy their strategy.
  • 70 percent of organisations are now identifying their material business risks as well as explaining how they are being managed or mitigated, including 3 percent who are connecting the risks to their strategic objectives, key value drivers and future outlook throughout their report.

Nick Ridehalgh said: “While it is encouraging to see more Australian organisations moving towards adoption of the principles of integrated reporting, we are still behind many other major capital markets. In this report there are perspectives from leaders of companies and investment institutions on the benefits they have experienced in applying integrated reporting both within their organisations and with their key investors and other stakeholders. They see integrated reporting as driving clarity and alignment across the organisation of what is important to create and preserve longer term value – it is driving better business practices.”

For further information

Ian Welch
T: 0400 818 891
E: iwelch@kpmg.com.au

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