With most listed companies getting adverse opinions on their 2018 financial results, the Zimbabwe Stock Exchange (ZSE) says it will not bring the issue before a special Listings Committee meeting.
All things being equal, the special Listings Committee would then decide if the reported firm(s) should continue trading on the local bourse.
But the ‘adverse opinions’ are largely a result of monetary and exchange policy pronouncements over the past few months.
Zimbabwe 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.
And just this February, the RBZ’s Monetary Policy announced the creation of the interbank foreign exchange market and the introduction of the RTGS dollar (a combination of the bond notes and electronic bank balances) as the functional currency in Zimbabwe.
In view of the earlier changes, on March 20, 2019 the ZSE announced a blanket extension to 30 April 2019 for publication of 31 December 2018 financial results by listed companies.
“Following the expiry of the extension and publication of audited financial statements by Issuers, the ZSE observed that most, if not all, of the published results carried adverse opinions on the basis of non-compliance with the requirements of International Accounting Standard (IAS) 21.
“Stakeholders are advised that, in terms of clause 3.26 in Section 3 in the ZSE’s Listings Requirements, such opinions mandate the Listings Committee to convene a special meeting to consider the effects of such opinions and the continued listing of the affected issuer,” said ZSE chief executive Justin Bgoni.
“It is also the obligation of the ZSE to notify the Securities and Exchange Commission of Zimbabwe (SECZ) of this development in terms of Rule 49 (2) of Statutory Instrument 100 of 2010.
“Having observed the pervasiveness of the challenge across all reporting entities, the ZSE made a decision to waive the requirement for the special Listings Committee meeting(s) regarding the audit opinions issued on basis of non-compliance with IAS 21.
“However, the ZSE will still proceed to notify the SECZ and provide it with the requisite supporting documentation with regards to all modified opinions,” said Bgoni.
“The ZSE’s resolution was informed by the understanding that it was not the Listed Companies’ volition not to comply with the financial reporting standards but rather a matter of complying with the obtaining laws of the country as prescribed by Statutory Instrument 33 of 2019.
“Going forward, issuers are expected to fully comply with International Accounting Standards as guided by the listing requirements unless the country’s statutes direct otherwise.”
The bourse said it will continue to engage the Public Accountants and Auditors Board on any new developments regarding financial reporting by issuers.
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.”