Accounting groups are warning that inadequate advice on how to define and disclose details of a company's business model is hampering efforts to move to integrated reporting.
A paper from the Chartered Institute of Management Accountants (CIMA), the International Federation of Accountants (IFAC) and PwC describes current reporting on business models as 'inconsistent, incomparable, and incomplete' because of a lack of consistent guidance.
The paper, which reviews the key issues, was prepared at the request of the International Integrated Reporting Council (IIRC) and is published in advance of IIRC's International Integrated Reporting Framework due to be released for comment on 16 April 2013.
Charles Tilley, CIMA chief executive, said: 'Corporate reports have become more complex yet provide less insight to investors on how value is created or destroyed.
'High quality business model reporting is critical to helping investors better understand performance in terms of the impact external factors have on an organisation, and how organisations create value that is sustainable over time.'
PwC research found that 77% of the FTSE 350 mention business models in their accounts, but only 40% provide insightful detail about those models. Only 8% integrate business model reporting with strategy and business risks.
The paper argues there is a need for a clear, universally applicable, international definition of a business model. As well as discussing what that definition should be, the paper looks at common areas and proposed content, to ensure a consistent application across industries and sectors.
Ian Ball, IFAC principal advisor and chair of the IIRC working group, said: 'Being able to communicate effectively on an organisation's capitals, business activities, products and services, and the outcomes they generate is essential if a company is to communicate how it creates value over time. .
'The concept of the business model is also critical to understanding other areas of integrated reporting, such as the concepts of materiality and capitals.'
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