[2008-03-14]  ZSE, accountants institute hold talks
THE Zimbabwe Stock Exchange last week met with the Institute of Chartered Accountants of Zimbabwe officials to discuss issues relating to inflation-adjusted accounting and implementation of International Accounting Standard 29.

The Zimbabwe Stock Exchange last year announced that it planned to make it mandatory for listed companies to account for inflation in their financial results and was looking at doing away with reporting in historic terms.

However, some companies, accountants and financial analysts have been reluctant to accept that inflation-adjusted financial statements provide a more realistic view of the state of a company than accounts expressed in terms of historical cost.

ICAZ held the meeting to explain technical aspects of implementation of IAS 29 and to exchange views with ZSE chairman Mr Bart Mswaka, chief executive Mr Emmanuel Munyukwi and committee member and stockbroker Mr Geoff Mhlanga.

IAS 29 requires that financial reporting figures in a hyperinflationary economy be inflation-adjusted.

ICAZ has insisted on the importance of complying with IAS 29 and other international standards issued by the International Accounting Standards Board of the International Federation of Accountants (IFAC), of which the institute is a member.

Institute president Mr Tawanda Gumbo and technical expert Mr Roy Chimanikire said that historical cost figures cannot provide an accurate picture of a company’s financial position, when the value of the Zimbabwe dollar and the value in Zimbabwe dollar terms of assets changes as rapidly as it is doing.

Mr Gumbo conceded that there were difficulties in coming up with accurate inflation-adjusted figures, particularly when accurate figures on inflation were sometimes unavailable, out of date or inaccurate.

He said historical cost figures would for the time being have to be produced in addition to inflation-adjusted figures, because historical cost figures were required by the tax authorities for the purpose of tax assessment.

However, he said analysts should view the inflation-adjusted figures as being a truer reflection of a company’s financial position than the historical cost figures.

One of the problems was the lack of universal acceptance of the importance of inflation-adjusted figures even among members of ICAZ.

But Mr Gumbo said there had been a shift towards fair value accounting internationally. "This means standards had changed and so had the concept of what constituted income". Some accountants brought up in the old school of thought found it difficult to accept the new standards. The issue of fair value was controversial internationally as well as locally.

Mr Mswaka said "we are grateful for ICAZ for its efforts to ensure that international standards were complied with".

He said he thought the fact that there was a professional accounting body implementing international standards would impress foreign investors who in future considered investing in Zimbabwe.

Source: The Heroid