Zimbabwe 2009 Mid term Budget offers little reprive for Employees & Companies

The mid term budget presented by The Finance Minister on 16 July 2009 offered little reprive to employees with no downward revisions to the high PAYE. Further, the loan benefit was revised resulting in only US1000 loan amount being nontaxable. One would have expected amounts north of US5000 to ensure employees are cushioned from the high PAYE for those employers with a capacity to offer loans.

The targeted concessions for business were not enough although some reductions in import duty for some specific goods were offered. The government needs to do more to reduce duty while balancing inflows to the fiscus. This will ensure that the cost of production is competitive inorder to ensure companies compete favourably with other cheap imports such as in the clothing industry and meat industry. You need more concessions in the manufacturing sector if we are going to stimulate production and ensure a balance between inflows and outflows of money in the multi currency enviroment. This will ultimately positively impact on tax inflows into the fiscus.

One would not want a relapse of yester year where a farmer getting diesel at a subsidised price from NOCZIM found it easier to sell the diesel than farm.

It seems the budget was driven by representations from the various economic players implying that in future other sectors also need to be heard so that there is a holistic representation of the economic sectors in the budget leaving less room for arbitrage opportunities by fly by night investors.

Otherwise there is a lot of thought in the budget and some worthy revisions such as scrapping of the banking levy for the banking sector to have some relief. Hopefully the banking sector will respond by reducing charges and offering credit! inorder to stimulate production but understandably this will take time as balance sheets of banks need to be enhanced and probably a revision of the credit offering as what was done in South Africa through the National Credit Act. Banks are also cautious in line with the ongoing recession and lessions from the subprime crisis. Improvements in risk management systems of banks is also key in this regard.

Dony Mazingaizo, ACCA has an interest in financial management and IFRS

Challenges for raising credit in the face of less meaningful 2008 audited financials - The case of Zimbabwean Companies

While the obvious challenge exists for Zimbabwean firms trying to raise working capital and access credit lines in offshore markets using 2008 financial statements which are not meaningful in terms of the numbers, i think all hope is not lost.

Previously, companies in Zimbabwe may have viewed company valuations, due dilligence exercises and revaluation of assets as an academic and expensive exercise or one merely to meet regulatory prudential benchmarks. Now there is need to perform asset valuations and benefit from the strength of balance sheets that are more comperable to other companies in the region. To this end, coming up with audited half year accounts with revalued assets helps companies to approach prospective financiers and investors with more realistic numbers.

Companies also need to benefit from correct asset classifications and use i.e. investment category (IAS 40) or owner occupied (IAS 16) as this has a significant impact on reported earnings and capital e.g. for land and buildings.

These are times for quick wins and companies that report financials that reflect a true and fair view, underlying performance and investment potential are bound to win the hearts of any discerning offshore investor.

In addition one would expect real production to take place with capacity utilisation around 60-80% being acceptable by end of year. The government also needs to play ball in ensuring policy consistency, political stability, restructuring of the high and punitive tax regime and review of investment incentives such as tax holidays across the various economic sectors.

Dony Mazingaizo, BAcc Hons, ACCA, Dip IFRS, Dip Banking, BCompt Hons (UNISA), has special interest in IFRS and Financial Management

When a merger marriage goes wrong!

Who ever thought that the marriage between Kingdom Holdings and Meikles Africa could go wrong. It was not expected!!

There could be a number of reasons which include cultural shocks, leadership clashes and corporate governance challenges. A number of lessons can be leant from this and one glaring lesson is that, synegistic benefits in a merger go beyond the numbers!!

Wither to IFRS?

The globalization of business and finance has led more than 12,000 companies in more than 100 countries to adopt IFRS. In 2005, the European Union (EU) began requiring companies incorporated in its member states whose securities are listed on an EU-regulated stock exchange to prepare their consolidated financial statements in accordance with IFRS1. Australia, New Zealand and Israel have essentially adopted IFRS as their national standards. Canada, which previously planned convergence with U.S. Generally Accepted Accounting Principles (GAAP), now plans to require IFRS for publicly accountable entities in 2011. The Accounting Standards Board of Japan (ASBJ) and the International Accounting Standards Board (IASB) plan convergence by 2011. On November 11, 2008, Mexico announced it would adopt IFRS for all listed entities starting in 2012. (www.ifrs.com)

The recent subprime crises has challenged standard setting bodes to raise the the bar and purse convergence efforts more vigorously than before. It is becoming a glaring relality that IFRS is no longer an option even in the US but a business case and opportunity that needs to be explored. Other accounting authorities have mentioned that given the complexity and rapid developments in IFRS, there is need for companies to invest in Global Centres of Excellence especially those with cross boarder listings in order to offer timely business IFRS solutions that have a significant impact on strategy and operations. For example, implementing the revised IFRS 3, Business Combinations and IFRS 1, First Time adoption of Accounting Standards has implications on reported earning and IT platforms with a lot of integration required and process reingineering.

The filing of statutory returns to tax authorities, regulators such as SEC and Central Banks is also needs to be considered. These are indeed excting times giving an opportunity for global IFRS experts to offer business solutions to business.

Going forward, change will be the only constant as there are definately going to be a lot of changes and refinements especially to far value standards such as IAS 39, IAS 32 and also those standards that deal with consolidations and SPVs e.g. SIC 12, Considation of Special Purpose Entites

Dony Mazingazo, ACCA has special interest in IFRS and financial management

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.

Financial Management in Africa

Africa entreprises have a long way in improving financial management capacity and leverage on the immense resources that are available on the continent. Significant strides have been made in the education sector in subsaharan africa but a lot needs to be done in improving financial systems, capacity building and thus strengthening accountability concerns especially in SMEs and public entreprises.

I have a great feeling that young people can do more in harnessing the opportunities of the global economy and thus assist in the improvements of financial management systems in their own jurisdictions and beyond borders.

A lot of potential remains uptapped and many organisations are utilising inadequdate financial management infrastructure. I have a passion for financial management and accountability and i believe more can be done to deliver in this critical area.