Экономические науки/ 7. Учет и аудит

Postgraduate student Kolisnyk V.Y.,

Simon Kuznets Kharkiv National University of Economics, Ukraine

Integrated reporting in Ukraine: problems and advantages of implementation

Ukraine's transition to sustainable economic development and its integration into European and world community require the introduction of modern practices of cooperation between the state and business, and business and society that would strengthen the mutual responsibility of participants of public life, to create conditions for further sustainable development.

In managerial decisions making enterprise managers should take into consideration important information that describes all aspects of the economic entity. Reporting, which allows to combine both financial and non-financial performance and provide full information on the activities of the entity is integrated reporting (IR), preparation of which has become a common practice for foreign companies, while the order of submission of such reports by domestic enterprises requires explanations and clarifications.

The integrated reporting implies the process, the result of which is an integrated report as a means of informing on how strategy, governance, performance and prospects of the organization lead to the creation of value in the short, medium and long term [13].

In contrast to the existing reporting systems, integrated reporting provides the key stakeholders of companies with essential information about the strategy of the organization, management and resolution of commercial, social and environmental issues. By effectively combining these often disparate areas, the company will be able not only to provide information on past performance, but also to demonstrate the formation of long-term value of the company in the future.

The problems of organization and methods of integrated enterprise reporting into various times were considered in the works such foreign and Ukrainian economists as K. Busko, M. Frigo, A. Kvattro, A. Rikkabon, A. Hrytsenko, T. Davydyuk, R. Kostyrko, P. Kutsyk, N. Lohanova, I. Makarenko, B. Petrushevskaya, M. Prodanchuk, T. Slozko, and others. Not reducing the importance of scientific developments of leading domestic scientists, the economists note that improving the organization and methods of integrated reporting has not yet found sufficient attention in their works. This logically implies deepening and expanding research aimed at improving the organization and methodology of integrated statements.

The main feature of integrated reporting is that it focuses on the factors of production, which company consumes and creates: financial, manufacturing, human, intellectual, natural and social [2]. The information provided in integrated reports, has more value to users than a standard financial reporting.

In December 2013 there was adopted the international standard for integrated reporting, its main objective is to establish guiding principles and elements that define the general content of the integrated report and explain fundamental concepts that underlie them. In accordance with international standards on integrated reporting the integrated report should include eight elements [2]: a review of the organization and the environment; management; business model; risks and opportunities; strategy and resource allocation; results of operations; the prospects for the future; basic principles of preparation and presentation.

At the moment, we do not assume that integrated reporting completely replaces the existing format of the financial statements, which has been and remains one of the most important resources of information on financial and economic activities of the organization. This IR will eventually become condensed consolidated source of information on the company for all its stakeholders and other formats and it’ll replace the non-financial reporting.

The transition to integrated reporting will require companies’ considerable transformations, efforts and costs within the following processes:

¾ rethinking of their activities - the formation of integrated thinking, without which it is impossible to prepare high-quality (i.e, useful from the point of view of stakeholders) report;

¾ organization of internal collaboration and increasing employee motivation as part of the reporting process;

¾ revision of a number of corporate documents and processes;

¾ development of methodology for the preparation of the IR;

¾ ensuring the functioning of the system of information gathering;

¾ improving risk management systems related to the publication of the forward-looking statements.

In order to prepare an integrated reporting at a decent level, you need to provide opportunities for maximum interaction between different divisions of the company. Thus, we can determine are the following advantages of drawing up integrated reporting (Table 1).

In the process of implementation in practice of integrated reporting a key element is the establishment of clear and precise procedures for the formation of such statements. In our opinion, the procedure of reporting should regulate the process of formation of a working group from the moment of its formation to the procedure approval of integrated reporting. At each stage of the procedure of forming the integrated report the following elements should be clearly defined: the necessary data; responsible persons; deadlines.

However, the company may face such difficulties in the process of drawing up integrated reporting as:

¾ time and costs for the preparation of the integrated reporting ;

¾ the lack of interest of senior management in the integrated reporting;

¾ ambiguous understanding of the content of the integrated reporting;

¾ inadequate assessment of the time required for preparation of the integrated reporting;

¾ the low efficiency of interaction in the team;

¾ a lack of understanding of the importance of the integrated reporting and the requirements regarding the quality of the work performed;

¾ lack of common goals among the various departments in the preparation of the integrated reporting.

Table 1

Advantages of preparation of integrated reporting

Advantage	Description
Increasing the quality of corporate governance	Organizations that have implemented ISO, use the integrated report as a central tool of connection strategy used both inside the company and outside it in order to maintain time and resources
Compound financial and non-financial key performance indicators	Companies using IR, demonstrate an integrated approach in their reports, linking non-financial and financial key performance indicators in order to present a coherent strategy
A greater degree of transparency; increasing the reliability of the information reported	Genuine loyalty to the principles of transparency represents a new approach that requires changes in the internal thinking. IR helps organizations to maintain a greater degree of transparency and receive answers to the questions that arise at the level of the company, about what information is appropriate to disclose
Providing the best environmental, social and public information to interested parties	The adoption of IR allows organizations to take appropriate decisions in connection with requests for information. Changes in internal processes help companies to answer the questions of stakeholders with greater confidence in the information and the best balance between quality and quantity

At present, the integrated structure of the report is not uniform. There are no guidelines and legal framework for the preparation of an integrated report. Analyzing the economic situation at this stage, it should be assumed that in the near future there will be developed general requirements for the preparation of an integrated report to the world community and instructional materials in Ukraine.

Another important problem that arises in the preparation of an integrated report - shortage of staff with expertise in this area. The transition to this type of reporting in Ukrainian organization is just beginning, and in this regard, "ready" professionals who are able to start work in the new programs with the new regulatory framework is still the task of our universities.

The first attempts at drawing up an integrated report by Ukrainian companies are evidence of their desire to meet international requirements, to become able to be a worthy competitors not only in domestic market but also in the world community.

At this stage, the implementation of integrated reporting will lead to the following (Fig. 1).

Fig. 1. Possible effects from the introduction of integrated reporting in Ukraine

As a result, integrated reporting is the most efficient way to study the needs of companies in the capital since such reporting eliminates the gap between leadership and investors concerning their assessment of the success of the business and performance of management efforts.

References

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