MIA-ACCA Integrated Reporting Survey

40 Pages·2016·0.6 MB·English

®
MIA-ACCA
Integrated Reporting Survey
Contents
Executive Summary 4
Introduction 6
Survey findings 7
• Profile of respondents
• Knowledge of <IR>
• Awareness of <IR> benefits
• Perceived challenges of <IR>
• Primary recipients and preparers of <IR>
• Need for assurance of <IR>
• Implementation and impact
Support, promotion and training 22
Conclusion 24
Appendix – survey questionnaire 25
Contact us 37
22 MMIIAA--AACCCCAA IINNTTEEGGRRAATTEEDD RREEPPOORRTTIINNGG SSUURRVVEEYY
MIA-ACCA INTEGRATED REPORTING SURVEY 3
Executive Summary
Integrated Reporting (<IR>) is gathering
momentum around the world, but uptake
in Malaysia is in its early stages. This survey,
conducted among a wide range of stakeholders
in the corporate reporting value-chain including
both preparers of corporate reports and users
of those reports, finds that knowledge of <IR>
is still relatively low in Malaysia. Over half
(51.0%) of all 330 survey respondents say they
have no or little knowledge of <IR>, while only
13.0% have good or in-depth knowledge.
Encouragingly, <IR> has piqued interests and there is a strong When asked about the potential benefits that <IR>
appetite for learning more about this new corporate reporting could bring, survey participants see scope for improved
regime: among participants with no or little knowledge transparency and governance reporting, improved
of <IR>, 96.9% of corporate report preparers and 92.9% communications with external stakeholders, and the
of non-reporters1 say they plan to know more about it. promotion of integrated thinking through breaking silos
within organisations. Few, however, acknowledge benefits
Among preparers of corporate reports with some (more
such as the potential to increase share price, despite evidence
than a little) knowledge of <IR>, 27.7% indicated that
showing this to be one positive result of <IR> adoption.
their company would consider adopting <IR> and only
12.0% rule it out. Just under a third (31.3%) say <IR> has
PERCEIVED CHALLENGES IN <IR> ADOPTION
already been discussed at the board level – an important
Both preparers of corporate reports and non-reporters
step for increasing senior executive understanding of the
anticipate <IR> benefits to be outweighed by costs and
potential benefits of <IR> and initiating adoption plans.
the effort involved. Many survey participants foresee a
Levels of active advocacy by non-reporters are relatively range of challenges in <IR> adoption. They are particularly
low at the moment. Among auditors and users of financial concerned about the cost of <IR> preparation (identified as
statements who have reasonable knowledge of <IR>, only a ‘top three’ challenge by 47.0% of respondents), the lack of
32.5% see themselves as active advocates of <IR> presently. guidance on how to prepare an integrated report (a top three
challenge for 46.1%), and the lack of necessary connectivity
POTENTIAL BENEFITS FROM <IR> ADOPTION and integration processes within organisations (40.9%).
Most survey respondents envisage scope for improving
However, there are support and various readily available
the current state of corporate reporting in Malaysia. Over
resources to help organisations tackle the perceived
two-thirds (68.2%) of all auditors and users of financial
challenges involved in <IR> adoption. For example,
statements do not think current corporate reporting enables
the International Integrated Reporting Council (IIRC)
them to gain enough information on a company’s value and
promotes a range of resources on its own website,
value-creating potential. Of this group, a majority (58.4%)
including case studies from early <IR> adopters, research
think <IR> would help to improve corporate reporting.
materials and guidance developed by third parties.
1 Where relevant in this report, the comparison is made between the responses of corporate report preparers and those of non-reporters which include auditors,
consultants, investors and other users of financial statements. For simplicity, the latter group is referred to as “non-reporters” or “auditors and users of financial
statements”.
4 MIA-ACCA INTEGRATED REPORTING SURVEY
Executive Summary
PRIMARY RECIPIENTS AND PREPARERS Over half (54.1%) of all respondents are convinced that the
Most survey participants identify current and potential widespread use of <IR> by companies in Malaysia would
investors as the primary recipients of integrated reports make it a more attractive place to do business, 34.4% of
(identified by 73.0% and 69.7% respectively). Analysts and respondents are uncertain and only 11.5% disagree.
regulators are also seen as primary recipients by many,
We also asked survey participants whether use of <IR>
while some respondents think <IR> would also be of
would make Malaysian businesses themselves more
interest to the general public, customers and suppliers.
attractive to investors. Respondents are even more
Survey participants typically place primary responsibility for positive in their assessments, with 61.8% believing
preparing an integrated report with top management: 59.4% Malaysian businesses would have more investor
identify the CFO, 50.0% the CEO and 41.2% the Board of appeal. Just under a third (30.6%) are unsure.
Directors as having the main responsibility. 66.4% of the
respondents also believe that there should be a requirement SUPPORT NEEDED
for those charged with governance to include a statement A regular theme of this survey is the need for support
acknowledging their responsibilities over the <IR>. A not for businesses – to increase knowledge of <IR> and help
insignificant proportion of respondents (14.9%) surprisingly them tackle implementation challenges. Technical and
allocate responsibility to the auditors as well, even though preparation advice is the priority form of support that
preparing financial statements and corporate reporting is participants would like to see provided by government
clearly the responsibility of management and boards. and industry associations. When asked what support
professional accounting bodies could provide, research
NEED FOR ASSURANCE OF <IR> on the benefits and costs of <IR> tops the list, followed
Almost half (49.2%) of all survey respondents think by the conducting of training seminars and workshops,
stakeholders will require an integrated report to be and the provision of technical advice and consultancy.
audited in order for them to rely on it, while only 9.9%
Finally, 62.1% of all survey respondents believe that an
do not expect stakeholders to require audit activity.
internationally-recognised training syllabus for <IR> would
The rest of the respondents were unsure about this.
be valuable to them when considering how to obtain skills
When we asked the respondents on their perceived level and knowledge in this area. The finding once again confirms
of assurance needed in the various content elements on the demand for authoritative training and information
an <IR> report, many survey participants believe some on <IR> so that members of the reporting, auditing and
level of ‘reasonable assurance’ is likely to be required for financial statement user communities can fully understand
information about a company’s performance (selected the potential benefits of <IR> adoption, implement it
by 63.3% of respondents), governance (60.9%) and the effectively and make best use of the information it presents.
basis of preparation (57.7%). When asked about the need
for assurance of the entire integrated report taken as a NEXT STEPS
whole, prepared in accordance with the International <IR> As this survey has confirmed, professional accountancy
Framework, the percentage of respondents seeing value bodies such as the Malaysian Institute of Accountants (MIA)
in such assurance rises to 82.2%. Conducting assurance and the Association of Chartered Certified Accountants
by reference to the International <IR> Framework should (ACCA) have important roles to play in conducting
ensure some comparability of approach and give investors research, initiating training seminars and promoting
greater reassurance that an integrated report’s contents technical and practical guidance materials. There is clear
are reliable when forming views on an organisation’s value- interest in <IR> in Malaysia and strong demand to know
creating potential over the short, medium and long term. more about how its adoption could boost corporate
performance and attract more international investment.
STIMULATING TAKE-UP
Filling this knowledge gap should be seen as a vital activity
Take-up of <IR> has been low so far in Malaysia. This may
– a necessary first step in order to raise awareness of <IR>
explain why a higher proportion of respondents opt for a
and its benefits, build momentum for <IR> adoption within
regulatory approach to implementing <IR> in Malaysia,
Malaysian companies, and ensure advisers and auditors
with 38.7% choosing ‘apply or explain’ approach and 26.9%
have the necessary expertise to support clients in fulfilling
choosing a mandatory requirement. In comparison, 32.3%
their corporate reporting ambitions. All these are in line
of respondents would prefer a market-driven approach,
with the strategic plan of the Integrated Reporting Steering
which is consistent with what the IIRC has promulgated.
Committee (IRSC), which was established within the MIA.
A market-driven approach is more likely to succeed if
businesses and investors believe Malaysia and individual
Malaysian companies will benefit from <IR> adoption.
MIA-ACCA INTEGRATED REPORTING SURVEY 5
Introduction
The MIA and ACCA Malaysia jointly conducted a survey of corporate
report preparers and users of those reports, seeking to gain insights into
their current thinking on the benefits and challenges associated with <IR>.
This survey is part of ACCA’s contribution to the IRSC, The survey ran from 13 August to 14 September 2015 and
which was established in Malaysia under the auspices was sent to all MIA members, ACCA members in Malaysia
of the MIA in December 2014 with the objectives of and attendees of <IR> roundtables held by the MIA. It
performing research and shaping thinking on <IR>, attracted 330 respondents, with a good representation
promoting the adoption of <IR> in Malaysia, providing from both corporate reporters and users of financial
support to organisations adopting <IR>, engaging statements. Survey participants include senior business
businesses in shaping the continued development of leaders such as chief executives, chief financial officers and
<IR>, and giving recognition to <IR> adopters. board members (from both PLCs and unlisted businesses),
auditors, academics, regulators and consultants.
In 2015, the IRSC undertook a number of activities to
promote <IR>, including participation in the International The survey questions were based (with some modifications)
Integrated Reporting Council’s (IIRC) <IR> Business on an earlier survey conducted by the Institute of Singapore
Network, conducting an investors’ roundtable and an Chartered Accountants and the National University of
engagement session and focus group dialogues with Singapore. Their findings are available in the report,
selected public listed companies (PLCs), and publishing ISCA-NUS Integrated Reporting Survey 2014 (thereafter
articles on <IR> in the MIA’s magazine, Accountants Today. referred to in this report as ‘the ISCA-NUS survey’).
Comparisons between the findings of the two surveys
This survey of corporate report preparers and users represents
are highlighted in this report where appropriate.
another important element of the IRSC’s recent work. The
survey identifies the levels of knowledge of <IR> among
businesses and their readiness to adopt it, the <IR> adoption
challenges that businesses perceive, and the support they
require in order to implement <IR> successfully within
their organisations. The survey also addresses a number of
other issues, such as the level of support for <IR> among
investors and other users of corporate reports, any factors
holding back <IR> adoption (such as lack of knowledge),
and what assurance users of reports think <IR> should have.
Participants were also asked about the topics they would like
to see covered during a future <IR> conference in Malaysia.
6 MIA-ACCA INTEGRATED REPORTING SURVEY
Survey findings
PROFILE OF RESPONDENTS Corporate report preparers participating in the survey
Our survey generated a total of 330 valid responses. operate in many different sectors, particularly manufacturing
The vast majority of survey respondents (84.6%) are MIA (18.2%), construction and real estate (15.5%) and financial
members, while 44.2% are members of ACCA. However, services (8.8%). The majority (68.0%) of their companies are
some of the respondents hold multiple memberships with listed on the stock exchange, while 32.0% are unlisted.
other professional bodies as well, such as the Malaysian
All sizes of listed companies are included: 28.1% of the
Institute of Certified Public Accountants (MICPA), the
corporate report preparers in our sample work in companies
CPA Australia, the Chartered Institute of Management
with a market capitalisation of less than RM100 million,
Accountants (CIMA) and the Institute of Chartered
while 18.5% are in companies with a market capitalisation
Accountants in England & Wales (ICAEW), among others.
of more than RM1 billion. 21.5% of the corporate report
Survey respondents are relatively evenly split between preparers work for a government-linked company.
corporate report preparers and non-reporters. Corporate
In the ISCA-NUS survey, a majority (53.3%) of survey
report preparers (54.8% of all respondents) include individuals
respondents worked in unlisted companies, while 24.4%
in the finance function such as chief financial officers and
worked in companies with a market capitalisation of
accountants, as well as CEOs, board committee members,
less than S$300 million and 12.6% worked in companies
corporate communication specialists and sustainability
with a market capitalisation of more than S$1 billion.
practitioners. The non-reporters (45.2% of all participants)
9.6% worked in companies with a market capitalisation
include a strong representation of auditors and investors, as
of between S$300 million and S$1 billion.
well as consultants, regulators and ‘others’ such as academics
and lecturers. The ISCA-NUS survey included a slightly
higher proportion of corporate report preparers (63.2%), with

non-reporters accounting for 36.8% of total respondents.
COMPOSITION OF RESPONDENTS
Corporate Report Preparers I (Audit Committee, Independent Directors, Board Member) 44 13.3%
Corporate Report Preparers II (CEO) 9 2.7%
Corporate Report Preparers III (Finance function including CFO, Financial Controller, Accountant) 125 37.9%
Corporate Report Preparers IV (Others e.g. Corporate Communication, Sustainability Practitioner) 3 0.9%
Auditors 78 23.6%
Consultants 28 8.5%
Investors (e.g. Shareholders, Analysts) 16 4.9%
Regulators 6 1.8%
Other (please state) 21 6.4%
TOTAL 330 100.0%
Status of respondents by market capitalisation
Less than
28.1%
RM100 million
RM100 million to less
11.8%
than RM300 million
RM300 million to less
9.6%
than RM1 billion
More than
18.5%
RM1 billion
Non-listed company 32.0%
0 5% 10% 15% 20% 25% 30% 35%
MIA-ACCA INTEGRATED REPORTING SURVEY 7
Survey findings
KNOWLEDGE OF <IR> We found no evidence of greater understanding of
Current levels of <IR> knowledge in Malaysia, as revealed <IR> among corporate report preparers from listed
in our survey, are low. We asked survey participants to companies. Only 6.6% of listed company preparers have
rank their level of knowledge of <IR> on a scale from good or in-depth knowledge of <IR>, two percentage
one (no knowledge) to five (in-depth knowledge). Just points less than the 8.8% of preparers overall.
over half (51.0%) place themselves in the lowest two
The low levels of knowledge we have found is
categories, indicating that they have below average level
understandable given that <IR> is a relatively young
of knowledge of <IR>. Only 13.0% rank themselves in the
initiative globally, and take-up by companies in Malaysia
top two knowledge categories, categorising themselves as
has so far been limited. Our recent engagement with
having higher than average level of knowledge in <IR>.
PLCs revealed that, as of 31 December 2015, less than
In the ISCA-NUS survey in Singapore, an even 10 were actively pursuing the adoption of <IR>.
greater percentage (66.7%) of respondents identified
Although our survey finds generally low levels of <IR>
themselves as having below average knowledge of
knowledge, survey participants are clearly keen to learn more.
<IR>. However, a similar proportion (12.5%) ranked
Among participants who rank themselves as having lower
themselves as having above average <IR> knowledge.
than average level of knowledge in <IR>, 96.9% of corporate
In Malaysia, corporate report preparers are more likely to report preparers and 92.9% of non-reporters say they plan
say they have little or no knowledge (54.1% doing so) than to know more about <IR>. Some survey participants provide
auditors and users of financial statements (47.0%). At the additional comments, confirming that they would welcome
other end of the knowledge scale, non-reporters are twice training, articles (for example, in the MIA’s Accountants Today
as likely as corporate report preparers to claim higher magazine) and the dissemination of research findings to help
knowledge: 18.1% of auditors and users say they have good them gain the additional knowledge of <IR> that they seek.
or in-depth knowledge, compared to just 8.8% of preparers.
Level of knowledge of <IR> Interested to learn more about <IR>
40% 100
96.9%
92.9% Yes
No
35% 36.0% 80
30% 60
28.2%
25% 40
22.8%
20% 20
7.1%
3.1%
15% 0
Corporate Report Non-Reporters
Preparers
10% 10.9%
5%
2.1%
0
1 2 3 4 5
Response total
1 = No knowledge, 5 = In-depth knowledge
8 MIA-ACCA INTEGRATED REPORTING SURVEY
Survey findings
Board discussion
DISCUSSED AT BOARD? CONSIDER ADOPTING?
Country Malaysia Singapore Country Malaysia Singapore
Level 3 to level
Yes 31.3% 15.6% Yes 53.8% 71.4%
5 knowledge
level [where 1 = No – 28.6%
No knowledge; Maybe 46.2% –
5 = In-depth
No 68.7% 84.4% Yes 15.8% 44.7%
knowledge]
No 19.3% 55.3%
Maybe 64.9% –
Among preparers with some knowledge of <IR> (ranking Some survey respondents, although appreciating that <IR>
themselves at levels three to five), a little over a quarter could enhance corporate governance, express concern
(27.7%) indicate that their company would consider that it could potentially ‘add to the burdens of doing
adopting <IR>, while another 60.2% are unsure. Only business’ in difficult economic times. It is important to note
12.1% rule it out – and in none of these companies that adoption of <IR> is entirely on a voluntary basis for
has <IR> been discussed at the board level. now, a decision that has to be driven by the benefits to the
company’s own internal management and performance,
Only 31.3% of corporate report preparers with some
and benefits that are expected to accrue to users of the
knowledge of <IR> say that <IR> has been discussed
reports. We consider such potential benefits later in this
at the board level. None of this group rules out the
report. It is also worth highlighting here that <IR> does not
possibility of adopting <IR>. A majority (53.8%) say their
necessarily require incremental information to be disclosed by
company would consider it, while 46.2% are unsure. Not
companies, but instead provides a framework for presenting
surprisingly, among the 68.7% who report that <IR> has
within the report, financial and other information relevant
not been discussed at the board level, respondents are
to value creation in an integrated and coherent way.
much less likely to say their company would consider
adopting it – just 15.8% doing so while 64.9% say maybe.
User advocacy
In the ISCA-NUS survey, only 15.6% of corporate report Among auditors and users of financial statements with at
preparers with some knowledge of <IR> said that <IR> least some knowledge of <IR> (in the top three knowledge
had been discussed at the board level. Of this group, rankings), only a third (32.5%) describe themselves as
71.4% said their board would consider adopting <IR>, but active advocates of <IR>. This reinforces the need for more
28.6% said they would not. (Note that survey respondents knowledge sharing and communication of the impact <IR>
in Singapore were not given the option of a ‘maybe’ can have on application of ‘integrated thinking’ in the
response.) Of the 84.4% of respondents in the Singapore companies, and on the greater insight users of financial
survey who said that <IR> had not been discussed at statements can gain into how companies create value.
board level, 44.7% said they would consider adopting it.
Non-reporters, alongside corporate report preparers,
These findings suggest that encouraging greater awareness need reassurance that <IR> genuinely provides useful
and discussion of <IR> at the board level is important for information and improves the transparency of corporate
encouraging its wider adoption in future. Once boards reporting. As one survey participant comments, there is no
consider the potential benefits of <IR>, they appear point in the initiative if it is ‘only done for compliance’.
open-minded to considering its introduction in their
organisation. Boardroom backing for <IR> becomes
particularly important once organisations begin adopting
new initiatives such as <IR>, as our previous engagement
with business leaders has confirmed. Buy-in from board
members is vital for making sure that new initiatives
become properly embedded in management practices.
MIA-ACCA INTEGRATED REPORTING SURVEY 9
Survey findings
<IR> and sustainability reporting
Sustainability reporting is sufficient without <IR> 3.0% Other 0.6%
They are perfect substitutes 4.6%
<IR> makes sustainability
reporting redundant 2.1%
They are not perfect substitute
but overlapped 12.4%
Sustainability reporting
I have no idea 36.4% is a subset of <IR> 40.9%
In practice, there is often confusion over whether there is <IR> aims to present the providers of financial capital with
any difference between <IR> and sustainability reports. a more holistic, integrated view of corporate performance.
We posed the question to the survey participants. Over The IIRC’s International <IR> Framework provides a
a third (36.4%) of the respondents confesses that they model for representing all the resources and relationships
have no idea. The largest percentage (40.9%) think that that organisations use to create value. It identifies six
sustainability reporting is a subset of <IR>. In fact, <IR> and ‘capitals’: financial, manufactured, human, social and
sustainability reporting are not perfect substitutes but the relationship, intellectual and natural. ESG content, to the
two approaches overlap. Only 12.4% of the respondents extent relevant to the value-creation capability of the
in Malaysia demonstrate the correct understanding. In the organisation, would be presented as part of these capitals.
ISCA-NUS survey, 26.7% of their respondents got it right.
The IIRC’s International <IR> Framework defines an
In the evolution of corporate reporting, sustainability integrated report as follows: ‘An integrated report is a
reports represent an earlier appreciation of the importance concise communication about how an organisation’s
of additional (not purely financial) information to investors strategy, governance, performance and prospects, in the
and other stakeholders. Sustainability reports traditionally context of its external environment, lead to the creation
cover environmental, social and governance (ESG) topics, of value over the short, medium and long term.’ The
and typically aim to provide readers with insights into issues concept of sustainability therefore underpins <IR>.
such as a company’s greenhouse gases emissions and
The Corporate Reporting Dialogue (CRD) brings together
involvement with society. However, as set out in the Bursa
the key global corporate reporting standard setters and
Malaysia’s Main Market and ACE Market Listing Requirements
framework providers with an aim to promote greater
released in October 2015, sustainability reporting in
coherence, consistency and comparability between
Malaysia encompasses material economic, environmental
corporate reporting frameworks, standards and related
and social risks and opportunities of an organisation.
requirements. The CRD website contains a helpful Landscape
Another characteristic of sustainability reports is that they
Map comparing the purpose of the International <IR>
are often standalone documents, not necessarily explicitly
Framework to that of other reporting initiatives (including
relating to the financial performance of the organisation.
sustainability reporting under the Global Reporting Initiative,
GRI). The map indicates how the scope and content of
those initiatives relate to the IIRC’s Framework (see http://
corporatereportingdialogue.com/landscape-map/).
10 MIA-ACCA INTEGRATED REPORTING SURVEY