ACCA Strategic Professional · Strategic Business Reporting (International) · Analysis and interpretation of financial and non-financial information and measurement of performance
Vantage plc's finance director, who is a professional accountant, is asked by the CEO to remove a paragraph from the integrated report disclosing that a key supplier has been found to use child labour. The CEO says it would damage the share price and the matter is 'not a financial statement item'. The paragraph is material to investors' assessment of the business model's sustainability. What is the most appropriate response under IFRS-based reporting principles and professional ethics?
The accountant should refuse to omit the paragraph and escalate to those charged with governance if pressed. The matter is material, and integrated reporting requires balanced disclosure of negative as well as positive matters. Omitting or diluting it would be misleading and breach integrity, even though the report is voluntary.
- ARefuse to omit it, as omitting a material matter would make the report misleading and breach integrity and objectivity; escalate to those charged with governance if the CEO persistsCorrect
- BOmit the paragraph because integrated reporting is voluntary and outside IFRS Accounting Standards
- CReplace the paragraph with a general statement that supply chain risks are monitored, to avoid naming the issue
- DInclude it only in a separate website statement so that the integrated report remains positive
Explanation
Integrated reporting requires material matters to be disclosed in a balanced way, including negative ones. Removing or diluting it would be misleading and breach the fundamental principles of integrity and professional behaviour. The accountant should resist and escalate to the audit committee or board. The voluntary nature of the report does not permit misleading content, and a vague replacement statement is still misleading.
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