Page 19 - CIMA SCS Workbook February 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

Moving down page 14 in the preseen, Vita’s Integrated Report certainly explains how the
company aims to create value. Also, on page 15 of the preseen there is a detailed explanation of
how the company interacts with its key stakeholders. Only four stakeholders are referred to in
Vita’s Integrated Report (shareholders, employees, customers, suppliers) whereas the quote
above refers to more stakeholder groups, but Vita’s key stakeholders are all covered so this
doesn’t seem to be a major weakness.

3 “There are three fundamental concepts underpinning integrated reporting:
1 Value creation for the organisation and for others
2 The capitals
The capitals are the resources and the relationships used and affected by the
organisation, which are identified in the <IR> Framework as financial, manufactured,
intellectual, human, social and relationship, and natural capital.

3 The value creation process
At the core of the value creation process is an entity’s business model, which draws on various
capitals and inputs, and by using the entity’s business activities, creates outputs (products,
services, by-products, waste) and outcomes (internal and external consequences for the
capitals).”

In the middle part of Vita’s Integrated Report on page 14 in the pre-seen, the capitals are clearly
shown, and they are categorised under some of the headings used in the <IR> Framework.
Perhaps Vita could have expanded the list of capitals, by addressing manufactured and natural
capitals too (these two headings are currently not covered). However, bear in mind that Vita is a
company that doesn’t make its own products but simply channels the goods from manufacturers
to retailers and consumers. Therefore, the directors might have concluded that Vita’s interactions
with manufactured and natural capitals are relatively minor, and therefore not sufficiently
important to include in the Integrated Report. This is acceptable according to the terms of the
<IR> Framework.

After identifying the key capitals, Vita’s Integrated Report then goes on to clearly show the “Value
adding activities” and the “Key Outputs” and “Key Outcomes” that are required by the <IR>
Framework. The arrows on the diagram on page 14 in the preseen also help to give a sense of
how the business model “draws on … (the) capitals and, by using the entity’s business activities,
creates outputs … and outcomes”.

In conclusion, these three fundamental concepts are covered very effectively by Vita’s Integrated
Report.

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