Financial reporting Challenges in Zimbabwe in 2009

Impact of dollarising the Zimbabwean Economy on financial reporting - accountants being hounded by yesteryear.

As accountants in international markets are grappling with the effects of the global recession with its attended challenges such as impairment of financial instruments, risk management and various IFRS revisions, accountants in Zimbabwe have been dealing with a different type of nightmare; the after effects of the yesteryear hyperinflation and impact of dollarisation on financial reporting.

The Government of Zimbabwe adopted a multi currency system at the beginning of 2009 with the United States Dollar, Rand and Pound being used as the preferred currencies by the transacting public and business.

The adoption of other currencies other than the local currency, which had virtually become useless by end of 2008, has brought much welcomed stability in business, with budgets and planning now making sense in boardrooms in the country. However, the changeover has resulted in serious accounting implications which have a bearing on the opening trial balances of businesses as at 1 January 2009. The question on accountants have had to deal with is how do you translate a Zimbabwean Dollar balance sheet into USD? What exchange rate is used? This challenge has been even more complicated for institutions with year ends after 31 Dec 2008 say 30 March 2009 resulting in cases in additional financial reporting costs.

To this end, accountants in Zimbabwe are still being hounded by IAS 21 as the functional and presentation currency of businesses has changed overnight from Zimbabwean dollars to US dollars or Rands.

The challenges of opening balances have implied that probably companies need to consult IFRS technical partners to ‘perform agreed upon procedures’ in order to come up with an opening balance sheet that reflects a ‘true and fair’ view. For institutions with significant Zimbabwean dollar balances as at 31 December 2008, this has meant that these may have been impaired and institutions need to consider the requirements of IAS 36: Impairment of Assets and IAS 39: Financial instruments, Recognition & measurement.

Dony Mazingaizo, ACCA, Dip IFRS, Dip Banking, BCompt (Hons) UNISA, BAcc (Hons) UZ, CTA has a keen interest in IFRS.