ZIMBABWE’S biggest cigarette manufacturing firm, British American Tobacco Zimbabwe (BATZ) Holdings, will not be publishing its third quarter interim financial statements as required by the new listing rules due to demanding International Accounting Standard (IAS) 29 process.
Zimbabwe companies are now required to apply the IAS 29 standard-financial reporting because they are operating under hyperinflation environment.
Although the obvious benefit of reporting quarterly is that of providing more transparency and better investor protection in line with international practices, there is an on-going debate on whether Zimbabwe companies should report more frequently due to costs involved.
Interim and annual reports are important publicly available information for investors and analysts to make investment decisions and recommendations.
In a notice to shareholders, company secretary Pauline Kadembo, said the will now publish a trading update by Friday this week.
“The board of directors of British American Tobacco Zimbabwe (Holdings) Limited notifies shareholders that due to the limited time and processes required in terms of the International Accounting Standard 29 – Financial Reporting in Hyperinflationary Economies, BAT will not be publishing the Abridged Financial Statements, for the 2019 third quarter interim reporting, as anticipated,” Kadembo said.
“The company will instead be publishing a trading update for the third quarter. The board further advises that the trading update will be published on the company’s website and the Zimbabwe Stock Exchange data portal by 13 December 2019.”
Last month, BAT said they would not be able to publish third-quarter interim financial statements by November 15 as required by the bourse saying the financial statements would be published on the company’s website and the Zimbabwe Stock Exchange data portal by December 15.
In October, the Public Accountants and Auditors Board directed that all Zimbabwean entities with reporting periods ending on or after July 1 2019 are required to apply hyperinflationary accounting.
In terms of the requirements of IAS29 Financial Reporting in Hyperinflationary Economies, all entities reporting in a hyperinflationary environment are encouraged to apply the same indices to produce inflation-adjusted financial statements.
IAS 29 considers several indicators of the existence of hyperinflation. These include when the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency, where amounts of local currency held are immediately invested to maintain purchasing power and the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency and prices may be quoted in that currency.
It is applicable when sales and purchases on credit take place at prices that compensate for expected loss of purchasing power during the credit period even if the period is short, when interest rates, wages and prices are linked to a price index and the cumulative inflation rate over three years is approaching or exceeding 100%.