Page 505 - SBR Integrated Workbook STUDENT S18-J19

Answers

Example 6

Integrated reporting

Benefits

Employees

According to IAS 38 Intangible Assets, an entity usually has insufficient control
over the expected future economic benefits arising from a team of skilled staff
and from training to meet the definition of an intangible asset. No asset is
therefore recognised in traditional financial statements in relation to employee
expertise, meaning that the users are not fully aware of its value.

An integrated report conceptualises value in terms of a range of capitals,
including human capital (i.e. employees). Therefore Lario could make
extensive disclosures about its staff. Employees are likely to be one of Lario’s
greatest assets and disclosure of this within the integrated report would help
users to assess the company’s chances of long-term success. KPIs, such as
expenditure on staff training, would enable users to assess and compare
Lario’s commitment to its staff over time.

Risks

Opportunities and risk are rarely addressed in traditional financial reports but
are key determinants of future success. In contrast, discussions of
opportunities and risk are very prominent within integrated reports. An
integrated report will provide the users with greater information about the risks
that Lario faces, particularly from its competitors, as well as how these have
been addressed.

Perception

An integrated report may increase investor confidence in the long-term
success of Lario’s business model. Greater transparency and disclosure may
lead to better relationships between Lario and its providers of financial capital.
The process of producing an integrated report may help the management of
Lario better understand how value is created and destroyed within its business
processes, leading to positive changes in strategy, management and resource
allocation.

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