Listed companies in limbo over results

…as PAAB says it's still consulting



The Public Accounts and Auditor’s Board (PAAB) says it is still consulting on how best listed companies will publish their 2018 audited results following the adoption by the Reserve Bank of Zimbabwe’s of Real Time Gross Settlements (RTGS) dollars as the country’s currency.

In his Monetary Policy Statement delivered last month, RBZ governor John Mangudya introduced the interbank foreign exchange market where the RTGS dollars, made up of RTGS balances, bond notes and coins and mobile money, are traded against the US dollar and other denominated currencies at market-determined exchange rates.

The consultations by the PAAB comes as companies have delayed publishing their audited financial results for the year ended October 31, 2018 as they seek guidance from the PAAB.

Admire Ndurunduru, the CEO of PAAB, says there is a need to come up with a robust guidance that provides a practical solution to the fundamental requirements of the economy. “We are in communication with various sector regulators and updating them on the work we are doing,” Ndurunduru said.

Speaking to Business Times, the Securities Exchange Commission CEO, Tafadzwa Chinamo, said there was confusion as to which currency to use. “We don’t really know the currency which will be used. It is best that we just wait and see how they will do it when they announce their results,” Chinamo said. This comes as sentiment is slowly drifting towards an October 2018 conversion, when the central bank separated the nostro FCA and RTGS FCA. However only PAAB as the supreme adjudicators of IFRS standards, can set the official dates on the functional currency to be used.

Gloria Zvaravanhu, the CEO of the Institute of Chartered Accountants said her organisation had embarked on workshop crusade while waiting for a signal from the PAAB.

“Unfortunately we cannot comment on [the publishing of financial results] because we are waiting for PAAB’s guidance on the issue, because PAAB is the one which issues the report concerning that, but we will be holding workshops on that issue early next week in Harare,”
Zvaravanhu said.

Stanley Kudenga, the Zimre Holdings CEO, said his company’s shareholders want closure to the current predicament. “I think everyone including Zimre shareholders understand the difficulties. All they want is an acceptable closure to this chapter, and going forward we can have financial statements that have clarity for easy reading and interpretation,” Kudenga said.

“Otherwise, emerging from 2018, the fundamental that Zimre shareholders would have is; did we have assets on our balance sheet that are a good hedge for the United States dollar?”

Zimre Holdings is an expansive investment holding company with strong interests in insurance and properties.

Another listed concern, TSL Limited, has delayed its results because of the conundrum.

In a notice, TSL said the audit of the consolidated financial statements for the year ended October 31, 2018, was still in progress pending the issuance of guidance from PAAB on the functional and presentation currency for reporting entities.

It said the guidance would “take into account the pronouncements” made in the RBZ 2019 Monetary Policy Statement and the “subsequent codification of the pronouncements under Statutory Instrument 33 of 2019.

“Given the above, the company has since obtained the necessary regulatory approval to extend the date by which the group’s audited financial results should be published to March 31, 2019. Consequently, the company’s annual general meeting which was scheduled for  March 27, 2019 has been postponed to a later date which will be advised in due course,” TSL said.

The companies are responding to the codification of statutory instrument (SI) 33 of 2019 and the Reserve Bank of Zimbabwe exchange control directive to authorised dealers.

Section 4(1) of SI 33 states that: “For accounting and other purposes, all assets and liabilities that were immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall on and after the effective date be deemed to be valued in RTGS dollars at a rate of one-to-one to the United States dollar.

“After the 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 United States dollar on a willing-seller willing-buyer basis.

“…That every enactment in which an amount is expressed in United States dollars shall, on and after the effective date, be construed as reference to the RTGS dollar, at parity with the United States dollar, that is to say, at a one-to-one rate.”

Financial service group, Old Mutual Limited (OML), says monetary policy reforms are contributing to continued uncertainty in the country, which is home to its subsidiary Old Mutual Zimbabwe.

In the just released 2018 annual results, OML said the change in the functional currency for Zimbabwe reduces its contribution to the group, thereby increasing the solvency ratio. The group’s full year solvency ratio went up 170% largely driven by the remittance of
dividends from Old Mutual plc to Old Mutual Limited and the change in the functional currency in the southern African country.

According to OML, for the purposes of 2018 reporting, an RTGS US dollar exchange rate of 3.3 to 1 (RTGS rate) has been estimated. The inputs considered in this estimate include the recent announcement to increase the fuel price for those settling in RTGS, global relative
fuel prices and the official inflation rate. Another observable input taken into consideration was the premium at which the Old Mutual and PPC shares trade on the Zimbabwe stock exchange versus The Johannesburg Stock Exchange.

“On 20 February 2019, the Reserve Bank of Zimbabwe announced that the RTGS would be recognised as an official currency and that an inter-bank foreign exchange market would be established to formalise trading in RTGS balances with other currencies. In line with industry consensus on this matter we have applied a reporting change to the functional currency for our businesses in Zimbabwe from 1 October 2018. This change has reduced both reported profits and net asset value in 2018.”