IFRS Taxonomy Annual Convention Paul Druckman International Integrated Reporting Council

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1 IFRS Taxonomy Annual Convention 2012 Paul Druckman International Integrated Reporting Council

2 PwC

3 The reporting mismatch An illustration for a typical business: Reporting content strategic issues forecasts / plans Business value strategic growth development plans past performance business as usual The consequence: Issues central to long term business value aren t getting the attention they deserve Capital markets compensate by pricing in risks that may well be adequately managed Investors focus on the short term because they can t get a clear picture of the long term 18/05/2012 PwC 3

4 It is not enough to keep adding more 400 Prudential annual report pages 'Back end' pages 'Front end' pages Source: Investis research PwC 4

5 The world has changed reporting must too The world population is increasingly urban Global population by type of area and by region: Global economic power is shifting Top 10 economies by GDP in 2050 The global middle class is rapidly expanding Population in low- and middle-income countries earning $4,000-$17,000 per capita (purchasing power parity) Growth Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008 Greenhouse gas emissions keep rising GHG emissions by regions Source: Goldman Sachs, BRICs and Beyond, 2007 Environmental degradation jeopardises people s quality of life People living in areas of water stress by level of stress Source: World Bank, Global Economic Prospects, 2007 The world could be running out of some resources Global supply forecasts according to the implied ultimate recoverable resources of conventional oil, date of peak production and the post-peak aggregate decline rate Degradation Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008 Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007 Source WBCSD Vision 2050 PwC 5

6 we cannot solve our problems with the same thinking we used to create them Albert Einstein

7 INTEGRATED REPORTING <IR> PwC

8 Professor Mervyn King often borrows words from Victor Hugo noting Nothing else in the world...is so powerful as an idea whose time has come. The way in which integrated reporting is capturing the imagination of the world suggests that its time has come.

9 The purpose of <IR>...is to elicit communication about an organization s strategy, governance, performance and prospects (as distinct from reporting of results). <IR> requires management to take into account all of the factors, and the interconnections between those factors, that affect the organization s ability (or not) to create and preserve value in the short, medium and long-term.

10 What is <IR>? <IR> is the process that results in concise communication of an organization s strategy, governance, performance and prospects. The process includes integrated thinking, which is the application of the collective mind of those charged with governance (the board of directors or equivalent) and the ability of management to monitor, manage and communicate the full complexity of the value-creation process and how this contributes to success over time. The process of <IR> takes into account the connectivity and interdependencies between the full range of factors that have a material effect on an organization s ability to create and preserve value over time, including (but not limited to): - The resources and relationships on which the organization depends or which it affects. - The external context in which the organization operates; - The opportunities and risks faced by the organization and how its business model deals with them; - Activities, results and performance, past, present and prospective; - Financial and non financial information;

11 How is Integrated Reporting different? Thinking Disconnected Integrated Stewardship Financial capital All forms of capital Focus Past, financial Past and future, connected, strategic Timeframe Short term Short, medium and long term Trust Narrow disclosures Greater transparency Adaptive Rule bound Responsive to individual circumstances Concise Long and complex Concise and material Technology enabled Paper based Technology enabled 11

13 Objectives through

14 Mission and Vision This IIRC s mission is to create the world s first globally accepted Integrated Reporting framework, that elicits from organizations all relevant information about their strategy, governance and prospects in a clear, concise and comparable format; and to promote the adoption of <IR> by regulators and report preparers. Our vision is for <IR> to be accepted globally as the corporate reporting norm, benefiting organizations, investors and society by encouraging behaviours that lead to efficient capital allocation and long term growth and prosperity. Our strategy for achieving the mission and vision is to promote adoption of <IR> by report preparers, regulators and investors.

Draft Framework Outline

Draft Framework Outline 11 July 2012 ABOUT THIS OUTLINE In its 2011 Discussion Paper, Towards Integrated Reporting - Communicating Value in the 21 st Century, 1 the IIRC noted its intention to develop