malvernmugadzikwa
Tapiwanashe Mangwiro
Financial reporting in the country has been difficult in the past three years due to hyperinflation, currency changes, currency depreciation and now the country has a problem of a three tier ZWL/USD exchange rate and accountants need to navigate through the situation.
Tumai Mafunga, president of the Institute of Chartered Accountants of Zimbabwe (ICAZ) said; “The gist of it all is that this situation is causing headaches for us accountants, we have a situation where we need to find a solution to an extremely difficult situation.”
Last week, the Reserve Bank of Zimbabwe (RBZ) resolved to liberalise the foreign exchange market by allowing banks to conduct foreign exchange transactions of up US$1 000 in which individuals and corporates can sell foreign currency to banks.
According to the foreign currency rules, individuals with free funds and entities/corporations holding foreign exchange in their foreign currency accounts (after meeting the statutory surrender requirements) can sell foreign currency to banks on a willing-buyer willing-seller basis.
This development comes after the country already has a foreign currency auction system, which has been in place since June 2020. These two are in addition to the informal parallel market rate which has been in place since 2018.
Mafunga added that; “The situation at hand is one where reality defies all laws of accounting standards, but at the end the job needs to be done. At the end we have a governing body, the Public Accountants and Auditors Board (PAAB) and we believe they will give us the correct position.”
These rates have a high discrepancy with the auction rate sitting at $150/USD, the newly reintroduced interbank rate debuting at $219/USD.
The parallel market rate currently is hovering between $300-330/USD.
“Major issue is that we have international laws which are interlocking with local laws, and this creates a vacuum of confusion, so eventually the PAAB will have to give direction on how to deal with the three exchange rates,” Mafunga added.
It is such a situation that has made financial reporting even more difficult to come to terms with a median and single exchange rate to use.
“It really is a headache, but I think in the interim, accountants will use the rate at which their company is getting foreign currency. A company that gets cash from the auction will use the auction rate, whilst those that generate foreign currency will use the exchange rate they see fit be it the auction rate or the interbank rate,” Mafunga said.
The governing body on the laws that guide accountants and auditors, the PAAB said that the situation is unique but the body believes it already has enough arsenal at its disposal to deal with the situation.
PAAB chief executive officer, Admire Ndurunduru, said the guidelines are there and they do not take away the international financial reporting standard (IFRS). Thus, directors still have the responsibility of selecting the appropriate accounting policies.
“We are dealing with something which is live and revolving and we will adjust when we see the need to do so, but so far what is there will still work,” Ndurunduru said.
“Every time we deal with one problem, issues keep developing and coming. With distortions in the market, it is difficult for companies to come up with fair presentations, resulting in the figures presented really not making sense,” he added.
Bongani Ndlovu