The Public Accountants and Auditors Board (PAAB) has made a determination on financial reporting and auditing guidelines following the recent Reserve Bank of Zimbabwe’s Monetary Policy last month, which ushered in a number of monetary and currency adjustments.

In its recommendations dated March 21, 2019, the PAAB said “the presentation currency is expected to remain USD as at 31 December 2018, but this remains the sole prerogative of directors.”

The country adopted a multicurrency system in 2009, which was largely underpinned by the United States dollar, and listed firms adopted the US dollar as their book keeping currency.

But there have been significant monetary shifts in the period between then and now.

These include the introduction of export incentives in the form of bond notes in October 2016 through Statutory Instrument 133 which amended section 44 of Reserve Bank of Zimbabwe Act (the bond notes eventually became a surrogate currency); separation of RTGS (real time gross settlement) bank accounts and US dollar Nostro accounts last year, and very recently the announcement of the Monetary Policy Statement which saw the floating foreign currency trading through the introduction of an inter-bank foreign exchange market.

The Monetary Policy also created the RTGS dollar (a combination of the bond notes and electronic bank balances) as the functional currency in Zimbabwe.

The PAAB, which functions in terms of the Public Accountants and Auditors Act Chapter 27:12, is the accounting and auditing standards setter as well as the independent regulator for the accountancy profession in Zimbabwe.

Added the PAAB:

“Preparers of financial statements are expected to assess the impact of the entity’s inability to comply with requirements of IAS21 Effects of Changes in Foreign Exchange Rates, covering the financial statements as a whole including the statement of financial position and the statement of comprehensive income. The assessed impacts can be considered as significant or not significant and that may affect the fair presentation of financial statements.

“Preparers are expected to comply with disclosure requirement s of IAS10:21. Events after the reporting period relating to non-adjusting events including the monetary policy statement of February 20, 2019, Exchange Control Directive RU28 (which introduced interbank market) as well as SI33 of 2019 (which converted assets and liabilities from USD to RTGS$ at 1:1).

“Preparers are also encouraged to disclose separately and in columnar form, the elements of the statement of financial position analysed into 3 categories, that is, Monetary Assets and Liabilities (Nostro FCA USD),Monetary Assets and Liabilities (RTGS$) and Non-Monetary Assets and Liabilities (whose underlying values or amounts are denominated in USD). The total amount for each line item should be reconciled to the amounts presented in the primary Statement of Financial Position.”

The Zimbabwean Government, via Statutory Instrument 33 of 2019, has announced that for accounting purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in US dollars (other assets and liabilities referred to in section 44C(2) of the principal Act) shall on and after the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.

And that after that effective date, “any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act, exchange the RTGS dollar for the US dollar on a willing seller willing-buyer basis.”

But local IFRS expert Anesu Daka has said insofar as Zimbabwe still maintains the multicurrency system, a company can chose a different reporting currency if they can explain their reasons.

“There is a local currency, namely RTGS dollar. Hence, a Zimbabwe dollar (ZW$). It also provides a formal platform for market observable exchange rate between the ZW$ and other currencies through the inter-bank exchange market,” he said.

“This now mirrors the reality that the US$ was and is no longer the dominant (functional/booking-keeping currency) in Zimbabwe.

“Thus, the ZW$ will now be used as the book-keeping or functional currency, however, an entity can choose to present the actual financial statements using a different presentation currency to its functional currency as long as the reason is disclosed.”