* In reliance on section 299A(3) of the Corporations Act, more specific growth opportunities including, but not limited to,
specific potential partner universities in the US market and specific new products to be added to the product range such as
new diplomas and associate degrees in both UPD and SAE, have not been disclosed as their disclosure would likely result in
unreasonable prejudice against Navitas because disclosure of these would give Navitas’ competitors a commercial advantage
which would jeopardise Navitas’ growth plans and prospects.
Navitas Limited Annual Report 2013, page 32
Foreword 1 Background 2 Observations and recommendations 3 The corporate
reporting suite 4 RG 247 4.1 4.2 4.3 4.4 4.5 5 Integrated Reporting 6 Methodology 7 How can KPMG assist you? Appendix 1 Examples
Operating and Financial Reviews: April 2014 43 © 2014 KPMG, an Australian partnership. All rights reserved.
5 Integrated Reporting
As part of our review of the ASX51-100 annual reports KPMG considered the extent to which companies are already applying certain aspects of the <IR> Framework in the preparation of their most recent OFRs, recognising that the Framework was only released in December 201320, as well as where opportunities for further improvements exist.
The International <IR> Framework
The most notable development over the last year was the release of the International <IR> Framework (the <IR> Framework) by the IIRC in December 2013, following much consultation and update over a three year period. This principles-based framework establishes Fundamental Concepts, Guiding Principles and Content Elements to be considered in
preparing an integrated report.
The integrated report is primarily aimed at providers of financial capital, in particular long term debt and equity investors. The underlying rationale is that more effective communication of how value is created and will be enhanced and/or protected over the short, medium and long term, will allow for more informed capital allocation decisions and increased access to capital for the company.
Integrated Reporting:
• does not require the creation of a new or separate report, but offers an opportunity for organisations to enhance and integrate aspects of their current reporting suite, through clearer linkages across all reporting components and better alignment to the business model and corporate strategy.
• recognises that value is not created by organisations in isolation, but through interaction with the external environment and through dependencies on various forms of capital. It aims to communicate how the organisation’s business model draws on those capitals as inputs, and converts them to outputs for the entity as well as outcomes for society more generally. <IR> is essentially reporting which maps the value creation process.
• drives connectivity throughout the report by linking the business model and business strategy to performance targets, risks to achieving the strategy, actual results and future outlook. It rebalances disclosures away from past history, and towards management’s plans and addresses mega-trends and game-changers that if they were to occur could have a fundamental impact, positive or negative, on long term value.
Integrated Reporting and RG 247
Even if organisations are not ready to fully commit to integrated reporting, RG 247 disclosures can be enhanced by using the <IR> Framework, especially with respect to a clear explanation of the organisation’s business model, its business strategies, and its prospects.
The Guiding Principles and Content Elements of the <IR> Framework have much in common with RG 247, however there are some significant differences:
• The key difference lies in the Fundamental Concepts underlying the <IR> Framework. RG 247 does not have fundamental concepts, and is rather guidance on best practice supported by a number of worked examples.
• The <IR> Framework represents a significant extension to the current intent of RG 247, which is focused mainly on the drivers of financial performance (hence is mostly backward looking), and mainly addresses financial and manufactured capital.
• The <IR> Framework also contains a number of ‘must haves’ if a report is to be able to assert compliance with the Framework notwithstanding that it is principles-based. • RG 247 is specifically designed for the OFR included in a directors’ report under the
Corporations Act.
• The <IR> Framework makes it very clear that the Framework is not requiring the creation of a new report. It can equally be applied within an existing report. Accordingly, the Framework can be applied to an OFR. Equally, it could be applied in an annual review, a sustainability report, or even a prospectus in support of a capital raising.
Set out below is an analysis of the relationship between the <IR> Framework and the guidance contained in RG 247. Following this is a similar analysis in relation to the Guiding Principles and Content elements of the Framework.
Fundamental Concepts
The Fundamental Concepts of the <IR> Framework are:
• Value creation for the organisation and for others. Providers of financial capital (investors)
are interested in the value an organisation creates for itself. They are also interested in the value an organisation creates for others when it affects the ability of the organisation to create value for itself, or relates to a stated objective of the organisation (e.g. an explicit social purpose) that affects their assessments. Accordingly, the ability of an organisation to create value for itself is linked to the value it creates for others.
– 1
20 Until December 2013, the IIRC’s pilot companies had been working with a prototype of the Framework under the guidance of the IIRC. South African companies had been working under the former South African <IR> Framework, which has made a significant contribution to the International <IR> Framework.
Foreword 1 Background 2 Observations and recommendations 3 The corporate
reporting suite 4 RG 247 4.1 4.2 4.3 4.4 4.5 5 Integrated Reporting 6 Methodology 7 How can KPMG assist you? Appendix 1 Examples
Operating and Financial Reviews: April 2014 44 © 2014 KPMG, an Australian partnership. All rights reserved.
• The capitals. The six capitals comprise financial,
manufactured, intellectual, human, social and relationship, and natural capitals, although this categorisation is not required to be adopted in preparing an integrated report. The capitals are stocks of value that are increased, decreased or transformed through the activities and outputs of the organisation, and there is a constant flow between and within them as they are increased, decreased or transformed.
For example, when an organisation improves its human capital through training, the related training costs reduce its financial capital in the short term, but are designed to improve it in the medium to longer term, a point not captured in today’s financial and sustainability reporting.
• The value creation process, or business model. Value
created by an organisation over time manifests itself in increases, decreases or transformations of the capitals caused by the organisation’s business activities and outputs (i.e. its business model).
An integrated report aims to provide insights about:
• the external environment that affects an organisation (the external environment) the resources and relationships used and effected by the organisation (the capitals) • how the organisation interacts with the external
environment and the capitals to create value over the short, medium and long term (the business model).
The value creation process set out in an integrated report is captured in the following diagram: