Zim currency crisis impacts reporting period

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ZIMBABWE’S economic crisis has significantly affected listed firms’ financial reporting standards due to currency distortions in the market.
In October last year, Reserve Bank of Zimbabwe governor John Mangudya instructed financial institutions to separate existing bank accounts into two categories, namely Nostro FCAs and RTGS FCAs, implicitly acknowledging the difference in value between the United States dollar and bond notes.
Subsequently, official inflation spiked from 5,4 percent in September to a post dollarisation high of 42,1 percent in December after the deterioration of the parallel market rates for bond notes and balances in the RTGS FCAs against major currencies.
This created an accounting dilemma among local businesses as to which currency should be considered as “functional” for reporting purposes.
Last week, Zimbabwe Stock Exchange-listed TSL Limited (TSL) published its “preliminary” unaudited results with a view to revisit them once “further guidance is issued”.
The agro-industrial concern, which has a trading year that runs from November 1 to October 31, is the first company to report results covering the period of concern.
“The (evaluation) process is still underway through the relevant structures including professional accountancy organisations and engagements with stakeholders among others,” the company said in a note accompanying its financial results for the period under review.
“The audit of the consolidated financial statements for the year ended October 31, 2018, is in progress pending the issuance of guidance on the functional and presentation currency for reporting entities.
“This guidance is expected to be received through the relevant structures including the accounting and auditing profession in the country in the month of February 2019,” TSL said.
“Given the above, the Zimbabwe Stock Exchange has extended the date by which the group’s audited results should be published to 28 February 2019,” it added.
The company’s preliminary results show that it achieved a profit after tax of $12,9 million, representing an increase of 168 percent from a profit of $4,8 million it recorded in the previous comparable period.
This came after the company’s revenue increased by 19 percent to $52,1 million.
However, the devaluation of local bank balances since October would have had an impact on the absolute value of the company’s profits.