ACCA Strategic Professional · Advanced Performance Management · Sustainability

Karolina Engineering reports that it has invested heavily in staff training this year, raising employee skills and loyalty, but that the training cost reduced short-term profit. Under the International Integrated Reporting Framework, how should the company describe this in its value creation discussion?

The company should present the training as converting financial capital into human capital, showing the trade-off between short-term profit and longer-term value. The Framework recognises six capitals and expects the report to explain their interdependencies and how the organisation's activities increase, decrease or transform them.

1. AAs a transformation of financial capital into human capital, showing interdependence between the capitalsCorrect
2. BAs an irrelevant item because human capital is not one of the capitals
3. CAs an expense only, to be disclosed in the financial statements and not in the integrated report
4. DAs an increase in manufactured capital because training supports production