Challenges of, and techniques for, materiality determination of non-financial information used by integrated report preparers

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
A.M.I. Lakshan ◽  
Mary Low ◽  
Charl de Villiers
Keyword(s):  
Decision Making ◽  
Value Creation ◽  
Financial Information ◽  
Institutional Isomorphism ◽  
Research Approach ◽  
Sufficient Information ◽  
Integrated Reporting ◽  
Content Type ◽  
Material Information

Purpose The international integrated reporting framework encourages organisations to disclose material information that affects their ability to create value. This paper aims to investigate the challenges and techniques preparers of integrated reports use to determine the materiality of non-financial information. Design/methodology/approach This paper uses an exploratory interpretive thematic analysis and an archival research approach. Qualitative semi-structured interviews were conducted with 55 integrated reporting (IR) preparers in 12 publicly listed companies, supported by the perusal of the companies’ integrated annual reports over a three-year period. Findings IR preparers find materiality determination for non-financial information challenging. This study found that preparers convert challenges into opportunities by using materiality disclosures as image-enhancing marketing tools, which causes concerns regarding weak accountability and a deviation from the International Integrated Reporting Council’s objective of improving information quality. This study found that IR preparers use various techniques in conjunction to determine materiality levels, as well as whether to disclose non-financial information in their integrated reports. The institutional isomorphism lens used in the study highlighted the issues IR preparers faced in their determined efforts of IR materiality levels under mimetic and normative isomorphism pressures. Research limitations/implications The challenges and techniques identified can contribute to the development of a framework for materiality level determination for non-financial information. Practical implications Regulators who are concerned with ensuring sufficient information to improve investor decision-making will be interested in the techniques IR preparers use to determine materiality levels for non-financial information, to improve their regulations and frameworks. Originality/value This study contributes to the literature regarding challenges with materiality level determination in integrated reports and techniques used by IR preparers. The application of an institutional isomorphism lens led to greater insight and understanding of IR preparers’ challenges and techniques in materiality determination. This paper makes a number of significant contributions to the IR literature. First, it identifies the usefulness of material information for decision-making and the influence stakeholders have on the materiality determination of non-financial information, which have not been mentioned in the prior literature. Second, the literature is silent on how organisations relate materiality to value creation for the purposes of determining the materiality content of an integrated report; this research provides empirical evidence of the use of value creation criteria in materiality determination. Third, the study highlights that materiality is a combination of efforts that involves everyone in an organisation. Further, the strategy should be linked to IR and preparers have indicated that integrated thinking is required for materiality determination.

It is not always bad news

2018 ◽  
Vol 31 (5) ◽  
pp. 1319-1348 ◽  
Author(s):  
Mary-Anne McNally ◽  
Warren Maroun
Keyword(s):  
Impression Management ◽  
Financial Reporting ◽  
Value Creation ◽  
Sustainability Reporting ◽  
Management Control ◽  
Financial Information ◽  
Accounting System ◽  
Integrated Reporting ◽  
Content Type ◽  
Corporate Reporting

Purpose The purpose of this paper is to challenge the notion that non-financial reporting is mainly about impression management or is only a superficial response to the hegemonic challenges posed by the sustainability movement. It focuses on the most recent development in sustainability reporting (integrated reporting) as an example of how accounting for financial and non-financial information has the potential to expand the scope of accounting systems, promote meaningful changes to reporting processes and provide a broader perspective on value creation. Design/methodology/approach The research focuses on an African eco-tourism company which has its head office in South Africa. A case study method is used to highlight differences in the presentation of an integrated business model according to the case entity’s integrated reports and how individual preparers interpret the requirement to prepare those reports. Data are collected using detailed interviews with all staff members involved in the preparation process. These are complemented by a review of the minutes of the company’s sustainability workshops and integrated reports. Findings A decision by the case organisation to prepare an integrated report gives rise to different forms of resistance which limits the change potential of the integrated reporting initiative. Resistance does not, however, preclude reform. Even when individual preparers are critical of the changes to the corporate reporting environment, accounting for financial and non-financial information expands the scope of the conventional accounting system which facilitates broader management control and promotes a more integrated conception of “value”. Research limitations/implications Integrated reporting should not be dismissed as only an exercise in corporate reporting and disclosure; it has a transformative potential which, given time, can enable new ways of managing business processes and articulating value creation. Originality/value This study answers the calls for primary evidence on how the requirement or recommendation to prepare an integrated report is being interpreted and applied by individual preparers. The findings add to the limited body of interpretive research on the change potential of new reporting frameworks. In doing so, the research provides theoretical support for developing arguments which challenge the conventional position that integrated reporting is little more than an exercise in impression management.

Environmental event materiality and decision making

2012 ◽  
Vol 27 (3) ◽  
pp. 284-298 ◽  
Author(s):  
Jeffrey Faux
Keyword(s):  
Decision Making ◽  
Research Approach ◽  
Policy Makers ◽  
Content Type ◽  
Environmental Event ◽  
User Groups ◽  
Environmental Events ◽  
A Company ◽  
Action Decision

PurposeThe purpose of this paper is to investigate environmental event materiality and user decision making, providing an empirical basis for reporting entities disclosures regarding material environmental events that further users' ability to make decisions.Design/methodology/approachA vignette describing an environmental event facing a company was provided to participants who were asked whether the event was deemed to be material and, second, whether the event would initiate an action or no action decision. The use of an experimental approach reveals results regarding the decision‐making process of users rather than relying on respondents stating preferences.FindingsResults indicate that user groups consider the environmental event to be material at a threshold of 6 percent. The determination of the event as material results in a “no action” decision that suggests isolated events of this size may not result in “action” decisions. The study has implications for policy makers and entities disclosing environmental events.Research limitations/implicationsThe experimental research approach adopted is primarily limited by the specific contextual nature of the event.Originality/valueEntity reporting of environmental events is receiving unprecedented levels of interest and this paper contributes to the materiality research and practice in this area.

The dynamics of financial information and non-financial environmental, social and governance information in the strategic decision-making process

2019 ◽  
Vol 12 (3) ◽  
pp. 314-329 ◽  
Author(s):  
Martin Esch ◽  
Mike Schulze ◽  
Andreas Wald
Keyword(s):  
Decision Making ◽  
Financial Information ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Decision Making Process ◽  
Senior Executives ◽  
Integrated Reporting ◽  
Content Type ◽  
Different Types ◽  
Types Of Information

Purpose The purpose of this paper is to link the fields of research on strategic decision (SD) making and integrated reporting (IR) and advances knowledge of the concept of integrated thinking by describing how financial information and non-financial environmental, social and governance (ESG) information are used in different phases of the strategic decision-making process (SDMP). Design/methodology/approach In total, 15 senior executives from twelve different industries were asked about the importance of different types of information within SDMPs. The data were analyzed by means of content analysis. Findings The authors derive a four-phase model and explicate the utilization of financial information and non-financial ESG information within each phase. The findings show that both types of information affect SDMPs, but the importance of each type differs among the phases. Practical implications This study offers practitioners a yardstick against which to compare how they use different types of information throughout the SDMP. Originality/value This paper provides a conceptual model of integrated thinking in SD making by connecting two separate fields of research. This connection will permit deeper study of the field of information and its implications for SD making. The present investigation shows that IR can promote integrated thinking in companies, as the broader range of information at hand allows companies to form a holistic picture of internal management questions and incorporate information that has not been previously prepared or associated with existing information.

The hidden power of language

2020 ◽  
Vol 11 (1) ◽  
pp. 187-206
Author(s):  
Philipp Hummel ◽  
Jacob Hörisch
Keyword(s):  
Decision Making ◽  
Value Creation ◽  
Cost Reduction ◽  
Social Consequences ◽  
Decision Makers ◽  
Social Aspects ◽  
Social Aspect ◽  
Content Type ◽  
Current Accounting ◽  
Cost Reductions

Purpose Stakeholder theory research identifies changes in language as one possible mechanism to overcome the deficiencies of current accounting practices with regard to social aspects. This study aims to examine the effects of the terms used for specific accounts on company internal decision-making, drawing on the example of “value creation accounting”. Design/methodology/approach The study uses a survey based-experiment to analyze the effects of terms used for specific accounts on decision-making, with a focus on social aspects (in particular expenditures for staff) in cost reduction and expenditure decisions. Findings The findings indicate that wordings, which more closely relate to value creation than to costs, decrease cost reductions and increase the priority ascribed to the social aspect of reducing staff costs in times of financial shortage. The effects of terms used on cost reductions are stronger among female decision makers. Practical implications The analysis suggests that conventional accounting language best suits organizations that aim at incentivizing decision makers to primarily cut costs. By contrast, if an organization follows an approach that puts importance on social aspects in times of financial shortage and on not doing too sharp cost reductions, value creation-oriented language is the more effective approach. Social implications The study suggests that the specific terminology used for accounts should be chosen more carefully and with awareness for the possible effects on cost reduction decisions as well as on social consequences. Originality/value This study contributes to a better understanding of the relevance of language in accounting. It suggests that the terms used for accounts should be chosen purposefully because of their far-reaching potential consequences for stakeholders as well as for the organization.

Managing material value creation matters in integrated reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Natasja Steenkamp ◽  
Roslyn Roberts
Keyword(s):  
South African ◽  
Value Creation ◽  
Design Methodology ◽  
Qualitative Approach ◽  
The Body ◽  
Structured Interviews ◽  
Integrated Reporting ◽  
Process Information ◽  
Content Type ◽  
Body Of Knowledge

Purpose This paper aims to explore how advanced integrated report preparers internalise and operationalise material value creation information to manage the generation of such information for the integrated report. Design/methodology/approach The paper adopts a qualitative approach using in-depth semi-structured interviews to examine how information about material value creation matters in six South African organisations are managed. Findings The findings will be useful to integrated reporting adopters as to how they might implement appropriate processes and systems to determine, communicate, collect and process information about matters that substantively affect their value creation. Originality/value The paper contributes to the body of knowledge by providing insight on how material value creation matters are determined, communicated internally and information about such matters generated.

Barriers to implementing digitalization in the Indian construction industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Avirag Bajpai ◽  
Subhas C. Misra
Keyword(s):  
Decision Making ◽  
Construction Industry ◽  
Research Paper ◽  
Fuzzy Decision Making ◽  
Top Management ◽  
Research Approach ◽  
Extensive Literature ◽  
Total Quality ◽  
Fuzzy Dematel ◽  
Content Type

PurposeThis research paper aims to analyze the critical barriers to implementing digitalization in the Indian construction industry as Indian construction companies are lagging in the implementation of digital technologies in the work environment.Design/methodology/approachIn this research paper, a qualitative research approach is adopted, and multiple detailed interviews are conducted with industry and academic experts. Further, multi-criteria decision-making (MCDM) techniques are used to finalize the prioritization among various alternatives. The fuzzy-decision-making trial and evaluation laboratory (Fuzzy-DEMATEL) and interpretive structural modeling (ISM) techniques are employed to find the exact relationship among the identified alternatives.FindingsThis study identifies 14 critical barriers from an extensive literature review and multiple interviews with industry professionals, and further driving and critical barriers are identified.Research limitations/implicationsIn this research paper, an exploratory study with a limited number of respondents from a large Indian construction company is carried out. Further, a detailed longitudinal analysis can be done to assess the subjectivity of the participants with more advanced statistical tools. However, this research discusses several points pertaining to the implementation of digitalization in the construction industry. The research further identifies the critical barriers to digitalization in the Indian construction industry.Practical implicationsThe finding of the study has two-pronged implications. First, it provides a road-map to the construction industry by highlighting the engagement of top management as the key focus area for successful digitalization. Second, the finding also shows similarity of the digitalization process to the adoption of process improvement techniques like lean and total quality management (TQM), wherein the top management plays a crucial role in ushering in the implementation of a disruptive change.Originality/valueThe research is unique in two ways. First, this is one of the very few attempts to understand digitalization in the Indian context. Second, the research also demonstrates that the combination of fuzzy DEMATEL and ISM techniques can be successfully employed in the emerging field of construction digitalization research.

Improving integrated reporting

2019 ◽  
Vol 20 (1) ◽  
pp. 60-82 ◽  
Author(s):  
Rada Massingham ◽  
Peter Rex Massingham ◽  
John Dumay
Keyword(s):  
Value Creation ◽  
Balanced Scorecard ◽  
Intangible Assets ◽  
Organisational Learning ◽  
Performance Measurement System ◽  
Intangible Asset ◽  
Strategy Execution ◽  
Integrated Reporting ◽  
Content Type ◽  
Future Value

Purpose The purpose of this paper is to present a new learning and growth perspective for the balanced scorecard (BSC) that includes more specific measures of integrated thinking and value creation to help improve integrated reporting (<IR>). Practical, relevant definitions of these historically vague concepts may improve intangible asset disclosures (IAD) and increase uptake of the<IR> framework. Design/methodology/approach The paper is conceptual. The authors use organisational learning to theorise about the learning and growth perspective of the BSC, within the context of the practice of IAD. Findings Several criticisms of IAD, the<IR>framework and the BSC have acted as barriers to implementing the<IR>framework. The improved version of the BSC’s learning and growth perspective, presented in this paper, addresses those criticisms by redefining the concept of integrated thinking (learning) and more fully connecting that learning to future value creation (growth). The model is designed to be used in tandem with the<IR>framework to operationalise integrated thinking. A new BSC strategy map illustrates how this revised learning and growth perspective interacts with the other three BSC perspectives to create long-term shareholder value through the management and growth of knowledge within an organisation. Research limitations/implications Organisational learning is an important source of competitive advantage in the modern knowledge economy. Here, the authors encourage further debate on how to report and disclose information on intangible assets, driven by a new conceptual strategy for organisational learning that fully supports the BSC’s capacity to help integrated thinking and future value creation for the<IR>framework. Practical implications From its roots as a performance measurement system, the BSC has become a widely used strategy execution tool. The<IR>framework has struggled to gain traction, but still has value in exploring intangible assets and its disclosure from a systems thinking perspective. The model is designed to bring an explicit understanding of how to improve integrated thinking for the<IR>framework facilitating better measurement, management and reporting of human and structural capital. By doing so, the new model enables a firm to use the BSC to engage with<IR>more effectively, which should also be useful for practitioners given the widespread use of the BSC. Originality/value The analysis of the BSC’s learning and growth perspective reveals two dichotomies – one between resources and growth, and another between systems and capability. The revised perspective resolves these dichotomies with clear, forward-focused measures of learning and intangible asset growth, and multiple vertical and horizontal connections between the perspective’s four constructs. The authors demonstrate practical paths to value creation through a range of strategic impacts.

A value creation perspective on international business in Latin America: directions for differentiation between emerging market multinationals

2020 ◽  
Vol 28 (2) ◽  
pp. 157-175 ◽  
Author(s):  
Michel Hermans ◽  
Armando Borda Reyes
Keyword(s):  
Decision Making ◽  
Latin America ◽  
International Business ◽  
Latin American ◽  
Value Creation ◽  
Emerging Market ◽  
Institutional Characteristics ◽  
Content Type ◽  
A Value ◽  
Internationalization Strategies

Purpose This study aims to draw researchers’ attention to the need to differentiate within the emerging market multinational companies (EMNCs) category. This study focuses on international business in Latin America to argue that the region’s specific institutional characteristics have consequences for within-firm decision-making regarding internationalization strategies. Additionally, the study suggests that to develop a more specific understanding of international business in emerging markets, it is important to consider how decision-makers define value and how they can capture such value. Design/methodology/approach The approach used in this study draws on the bathtub analogy used in micro-foundations research in international business. It proposes a multilevel analysis in which micro-level variation in within-firm decision-making is considered, while accounting for the conditioning effects of macro-level contextual factors. Findings The study identifies characteristics of the Latin American institutional context that are relevant to international business strategies and that potentially differ from other emerging market contexts. These include the pendular shifts to and from pro-market economic reform, fragmented government intervention in business, underdeveloped capital markets, low competition among firms and polarized labor markets. The study explains how these characteristics shape the definition of value and firm strategies to capture value in international markets, and provides examples from firms in different industries. Originality/value This study applies a value creation and capture perspective to international business in Latin America, allowing for the simultaneous consideration of macrolevel institutional characteristics and microlevel variation in decision-making regarding internationalization strategies. This perspective not only helps to distinguish Latin American EMNCs from companies from other emerging market contexts, but also explains the considerable variation in the internationalization strategies of firms within the region.

scholarly journals Integrated approach for risk management in servitization decision-making process

2020 ◽  
Vol 26 (7) ◽  
pp. 1949-1977 ◽  
Author(s):  
Sarra Dahmani ◽  
Xavier Boucher ◽  
Didier Gourc ◽  
Sophie Peillon ◽  
François Marmier
Keyword(s):  
Decision Making ◽  
Decision Process ◽  
Positive Impact ◽  
Practical Implication ◽  
Risk Identification ◽  
Decision Makers ◽  
Decision Making Process ◽  
Research Approach ◽  
Content Type ◽  
Action Research Approach

PurposeThe paper proposes an innovative systemic method helping decision-makers to control servitization transition process, through decision process risk diagnosis.Design/methodology/approachThe proposed method is based on the modeling of decision processes and risk identification and analysis. This method was based on an action-research approach, in close relationship with two companies (SMEs). The paper develops the feasibility experiment at Automelec company.FindingsThe method was successfully implemented and delivered concrete diagnosis results.Research limitations/implicationsThe generalization of the applicability of the method needs to be tested on several different cases.Practical implicationsThe first practical implication is related to the efficiency of the method to help decision-makers in a servitization context to limit uncertainty and get a global view of the weaknesses of their decision-making process, it raises their awareness about servitization transition for their companies. Furthermore, the method also helps to explain the strategy of a servitization transition. It enhances the level of maturity of the decision process of the company, and can be used as a training/learning tool for managers.Social implicationsThe results brought by the research contribute to give the decision-making boards for organization living a servitization transition and especially SMEs a better control over the servitization decision process and related risks, which will increase the economic stability of the company and its vision over long, medium and short horizons. This will bring positive impact on the overall economic and social environment and networks of the servitized SME, and enhance the confidence of coworkers, subcontractors and clients.Originality/valueThe first originality of the paper is related to the new way of considering risk, not only as an analysis criterion but as the central driver in steering a strategic transition for the company, such as servitization. The second originality of the study is about assessing risk occurrence over a decision-making process through decision reliability and decision confidence.

scholarly journals Internet of Things adoption for reconfiguring decision-making processes in asset management

2019 ◽  
Vol 25 (3) ◽  
pp. 495-511 ◽  
Author(s):  
Paul Brous ◽  
Marijn Janssen ◽  
Paulien Herder
Keyword(s):  
Decision Making ◽  
Internet Of Things ◽  
Asset Management ◽  
Business Processes ◽  
Research Approach ◽  
Data Provenance ◽  
Civil Infrastructure ◽  
Content Type ◽  
Management Domain ◽  
Decision Making Processes

Purpose Managers are increasingly looking to adopt the Internet of Things (IoT) to include the vast amount of big data generated in their decision-making processes. The use of IoT might yield many benefits for organizations engaged in civil infrastructure management, but these benefits might be difficult to realize as organizations are not equipped to handle and interpret this data. The purpose of this paper is to understand how IoT adoption affects decision-making processes. Design/methodology/approach In this paper the changes in the business processes for managing civil infrastructure assets brought about by IoT adoption are analyzed by investigating two case studies within the water management domain. Propositions for effective IoT adoption in decision-making processes are derived. Findings The results show that decision processes in civil infrastructure asset management have been transformed to deal with the real-time nature of the data. The authors found the need to make organizational and business process changes, development of new capabilities, data provenance and governance and the need for standardization. IoT can have a transformative effect on business processes. Research limitations/implications Because of the chosen research approach, the research results may lack generalizability. Therefore, researchers are encouraged to test the propositions further. Practical implications The paper shows that data provenance is necessary to be able to understand the value and the quality of the data often generated by various organizations. Managers need to adapt new capabilities to be able to interpret the data. Originality/value This paper fulfills an identified need to understand how IoT adoption affects decision-making processes in asset management in order to be able to achieve expected benefits and mitigate risk.

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