Zimbabwe’s listed companies will start presenting their financial statements using the hyperinflationary economies standard (IAS) following approval by the Public Accountants and Auditors Board (PAAB).
BY FIDELITY MHLANGA
According to a circular by the accountants’ apex board, usage of the new reporting model covers financial periods ended on or after July 1, 2019.
“The PAAB can advise that there is broad market consensus within the accounting and auditing professions that the factors and characteristics to apply the Financial Reporting in Hyperinflationary Economies Standard (IAS 29), in Zimbabwe have been met,” PAAB said.
Section 44(2)(a) of the Public Accountants and Auditors Act empowers PAAB to make regulations prescribing auditing standards, accounting standards and accountancy reporting standards for use in Zimbabwe, including the application of internationally-recognised auditing, accounting and reporting standards.
PAAB, via its circular, recommended that preparers of financial statements exercise professional judgment in considering the presentation of historical financial information as supplementary information alongside the primary International Financial Reporting Standard (IFRS) financial statements which would be inflation-adjusted in terms of the requirements of IAS 29.
Where historical financial information is presented alongside IFRS financial statements adjusted for IAS 29, it must be made clear which represents the primary financial statements.
The accounting profession is in a dilemma as to which inflation rate to apply in their reporting after Treasury suspended publication of annualised inflation figures which stood at 176% by end of June.
Simbisa Brands Limited announced in the full-year results ended June 2019 that, it foresees difficulties in complying with the IAS 29 accounting standard in the absence of year-on-year inflation data following the rebasing decision by Treasury.
Institute of Chartered Accountants of Zimbabwe chief executive Gloria Zvaravanhu said the institute will run familiarisation workshops this week and provide further guidelines for use by companies.
“We are going to be running workshops on it in Bulawayo and Harare this week. We are working on it (the issue of which inflation rate to use) and will share at the workshops and issue an implementation guideline,” said Zvaravanhu.
The IAS 29 lists factors that indicate an economy is in a hyperinflationary cycle. One of the indicators of hyperinflation arises when cumulative inflation over a three-year period approaches, or is in excess of 100%.
This is not the first time Zimbabwe has adopted hyperinflation reporting standard. In 2008 it resorted to the same before abandoning it after the adoption of the multi-currency system.
Reeling from inflationary pressures, Argentina adopted IAS 29 after the country was deemed hyperinflationary.