Defining your reporting boundary – Business Daily
PHOTO | SHUTTERSTOCK
Many organisations find it challenging when determining what information to include in their corporate reporting strategy. This challenge is further exacerbated by the recent trends in sustainability reporting and other non-financial reporting because they usually require information beyond the legal reporting entity.
For example, incorporating information on the social and environmental impact of an organisation’s activities can be taxing because these matters extend beyond the reporting entity itself without bright lines on where to draw the boundary.
As a result, organisations might be preparing reports that stakeholders find irrelevant. Organisations should consider these tips when defining their reporting boundary.
The first consideration is the reporting frameworks, laws and regulations organisations apply when preparing their reports.
These could include frameworks such as financial reporting as covered by the conceptual framework in IFRS to non-financial reporting frameworks such as Integrated Reporting, GRI (Global Reporting Initiative) or TCFD (Task Force on Climate-Related Financial Disclosures).
While these regulations contain information required for reporting, they are not prescriptive. Therefore, organisations should ensure they tailor the information to tell their unique story in the context of their operating environment.
Secondly, organisations should understand the users of their corporate reports. It enables organisations to determine what information is sought by each stakeholder. It is efficient when deciding what information to include in an organisation’s report.
This way, corporate reporting takes into consideration the needs of users. Thirdly, organisations should ensure that their reporting covers material issues. Organisations should develop a process for identifying material issues for reporting.
This process should cover both quantitative and qualitative matters. For example, some organisations have applied the AA1000SES principles in determining material issues through stakeholder engagement. It will ensure that organisations define their boundary so that their reporting is relevant to stakeholders.
A well-defined reporting boundary also provides value for money to an organisation from a cost-benefit analysis of reporting.
