Value Creation Reporting: Answering the Question ‘Value to Whom’ according to the International Integrated Reporting Framework

Abstract

Value Creation Reporting: Answering the Question ‘Value to Whom’ according to the International Integrated Reporting Framework The principal function of integrated reporting is the reporting of value and this phenomenon seems the most philosophical part of the International <IR> Framework. This paper discusses what the value concept refers to in the Framework: Value to investors, value to society or value to present and future generations? In this sense, we try to answer this question by highlighting the dynamics of capital formations according to interrelations between capitals and demonstrating the value creation process in the short, medium, and longer term. We show that (1) „profit” is the result of short term value creation, which indicates the „value to value chain stakeholders”, (2) „expected fair value of equity” represents the „value to investors” and (3) „longer term value” represents the „value to society” according to the International <IR> Framework. Additionally, we touch on the inadequacies of the current Framework and suggest future research opportunities within the scope of value creation reporting. To our knowledge, this study is the first to provide a detailed framework on the dynamics of capitals usage and it attempts to show the intersection of accounting and finance in terms of value creation reporting.

Balancing quantitative and qualitative value-creation reporting

“…Identifying multiple stakeholders and their contributions to an organisation is not an easy task. Value-creation literature commonly focuses on investors as the primary stakeholders (Adams 2017; Barnabe et al 2019;Freudenreich et al 2019;Glassman et al 2017;Gokten & Gokten 2017;Sheveleva 2018;Śledzik 2013), and to a lesser extent on other stakeholders, such as employees, the board of directors, suppliers, customers, and society or communities at large. Determining the quantitative (objective) value an organisation creates for each group seems the prevalent method of defining value for each group.…”

“…Similarly, the value created for employees, in the form of human capital, is often reflected in company reports and literature with quantitative measures, such as the number of hours worked, financial benefits received, rewards schemes, and education provided (Gokten & Gokten 2017;Śledzik 2013;Sunder 2017;Titko & Shina 2017). The qualitative value an organisation creates for employees, such as quality leadership, low employee turnover, staff morale, employeedriven innovation, institutional knowledge, fair staff policies, productivity, skills level and capabilities are recognised in the human-capital literature only.…”

“…http://www.sajems.org Open Access organisation, building trust and relationships, a clearer articulation of strategy, and enhancement of their governance role (Adams 2017;IIRC 2014). Value for society or communities is often equated with Corporate Social Responsibility (CSR) expenditure or shared value (Gokten & Gokten 2017;Sheveleva 2018;Sofian 2018) to the exclusion of qualitative aspects, such as social licencing, legitimacy to operate, and cultural relationships and beliefs (Freudenreich et al 2019;Gokten & Gokten 2017).…”

“…From the extant literature mentioned above, it is clear that value creation is not only a quantitative or economic concept, but should also include qualitative or non-financial aspects (Freudenreich et al 2019;IIRC 2017;Lev & Sunder 1979;Gokten & Gokten 2017;Sofian 2018;Sheveleva 2018). The international focus on financial value, sometimes to the exclusion of qualitative or non-financial value, warrants investigation.…”

Do Boards Determine Integrated Reporting in Nigerian Listed Oil and Gas Firms?

“…Integrated reporting refers to the system of reporting that combines both financial and non-financial information in the report. Integrated reporting develops the integrated thinking underlying the interdependencies between financial and non-financial information thus, improving the quality of information and identifying the material issues that affect the business, which will lead to a better allocation of resources to enhance value creation over time (Gokten & Gokten, 2017;Hurghis, 2017). Integrated thinking considers the connectivity and interdependencies among a range of factors that affect the ability of the firm to create value over time.…”