Assessing the compliance of annual reports with the principles of the international integrated reporting framework: A study on the Interest-Free Banking Sector

Interest-free banks are the most important institutions in the Islamic finance industry that provide and allow these funds to be used in accordance with the fundamental resources and fundamental principles of Islam. When we consider that interest-free banking assets have been on the rise over the years, the extent to which these banks meet the expectations and demands of their stakeholders becomes very important. Businesses present their operating results to stakeholders through corporate reports. Financial reporting consists of a balance sheet showing the assets, liabilities and equity on a specific date (statement of financial position), an income statement showing operating results (statement of comprehensive income), a cash flow statement showing cash inflows and outflows (statement of cash flow), and a financial statement including only financial information such as the statement of changes in equity. As a result of the rising globalization phenomenon, financial bottlenecks, and increasing social, environmental and economic risks, financial reporting was insufficient to meet the stakeholders' information needs, and the corporate reporting approach has evolved into sustainability reporting. To meet the information needs of a large stakeholder group; sustainability reporting, which shows the impact of business activities on environmental, social, governance and economic factors and how it is affected by them, has become an important element in the reporting approach. Financial reporting approaches corporate reporting from the point of view of financial information, while sustainability reporting covers sustainability issues. Integrated reporting, on the other hand, is a holistic corporate reporting element that combines financial and non-financial information under one report to provide information on how value is created, how value is preserved or eroded in the short, middle and long term. Integrated Reporting is named as the one report, but contains financial reporting and sustainability reporting information. The aim of the study: a review of interest-free banking and integrated reporting to determine the current state of interest-free banking in the global interest-free banking sector. Accordingly, the priority was to establish the theoretical framework of interest-free banking and the current state of interest-free banking. we addressed the theoretical framework of integrated reporting, integrated reporting frameworks, and the assurance and reliability of the integrated report. we also analyzed the current state of integrated reporting. In the research section of the study, we tried to determine the integrated reporting status of interest-free banks in the interest-free banking sector by examining the 2020 annual reports. As a result of the content analysis made on the annual report of 76 interest-free banks included in the research universe; it has been concluded that the average integrated report score of interest-free banks is around 0.55 (%55) percent, and the integrated report score of 43 interest-free banks is 0.50 (%50) above, representing %57 of 76 interest-free banks.