INTERVIEW: MELODY CHIKONO
Gloria Zvaravanhu was recently appointed chief executive of the Institute of Chartered Accountants of Zimbabwe (ICAZ). NewsDay reporter Melody Chikono (ND) caught up with Zvaravanhu (GZ) to talk about her new role at the helm of the accountants body. Below are the excerpts;
ND: What have been the main issues affecting the accounting practice in Zimbabwe?
GZ: The topical issue has been the accounting and reporting implications of the multi-tier pricing system that was prevalent in the market. The separation of the nostro and the RTGS FCAs in October 2018 brought about questions about which reporting currency should be used for financial reporting. The lack of a market observable exchange between the two types of accounts complicated issues of asset and liabilities valuations. The monetary policy review of February 20, 2019 has, however, sought to address that and the Reserve Bank governor makes mention of these valuations and accounting complications, as one of the reasons for the reforms in his monetary policy statement. What remains to be attended to is how these developments affect the reporting for companies with December year ends, whose reports are still to be finalised. The institute has submitted its recommendations to the Public Accountants and Auditors Board (PAAB) and a position from PAAB is expected soon.
Another fundamental issue affecting the practice of accounting principles in Zimbabwe and globally is that of corporate governance. The risk of weakened corporate governance practices influencing accounting principles and affecting the functioning of public and private institutions is a real threat that could pose great compromise on financial reporting integrity. A functional economy requires functional and strong institutions in which sound corporate governance is a key ingredient. A compromise on the governance systems also negatively affects investment attractiveness. As ICAZ, we see it as our duty to play a crucial role in ensuring that good systems of governance are practised, and where they are not, that these are reported to enable corrective action to be taken so as to preserve integrity of the financial management and reporting ecosystem.
MC: There has been debate on the appropriate classification of Treasury Bills (TBs) under accounting standards, more so, the treatment of discounted bills. What is the best way for accounting for such?
GZ: As an institute, we have invested extensively on the issue and in accordance with International Financial Reporting Standards (IFRS), the TBs are financial instruments and should be accounted for as such in accordance with IFRS 9, which is the relevant accounting standard for such instruments. IFRS 9 gives clear guidance on how financial instruments should be classified, as well as the impairment considerations thereof.
Without going into too much technical detail on the classification guideline Under IFRS 9, financial assets are classified and valued at either amortised cost, fair value through other comprehensive income or fair value through profit and loss, based on the entity’s business model and the contractual cash flow characteristic of the instrument.
At first, there seemed to be a lot of debate with respect to what the right accounting treatment of the TBs should be, given the peculiar characteristics exhibited by the instruments in the Zimbabwean economy, as you rightly pointed out. The institute, through its continuous professional development programmes as well as through the activities of its various member firms, has issued guidance papers on this matter and believes at this stage that the market is congruent on the treatment.
ND: Many organisations are struggling with how to report cash and cash equivalents, especially under an environment where they have money in the banks, but failing to pay their creditors due to unfunded nostro accounts. From an accounting perspective, what do you think should be done to address the challenge in a professional way?
GZ: These are the reporting complications mentioned above, which the monetary policy review has sought to address. The introduction of the interbank foreign exchange trading will provide a formal system of accessing foreign currency to those who were not getting allocations previously. The interbank trade will also provide an observable exchange rate for the valuation of cash and cash equivalents and assets and liabilities as a whole.
The PAAB is expected to issue guidance on the accounting, reporting and audit considerations of the functional currency developments, to which process ICAZ provided input.
As we deal with these issues, there is a need to make this a collective responsibility in ensuring that the accounting or other complications faced by public and private sectors, are not by design arising from weak governance systems, as this has a huge impact on the country’s fiscal and monetary dynamics.
ND: As ICAZ, what challenges have you faced over the years that you feel need attention?
GZ: The major challenge that the accounting profession in Zimbabwe faces, which ICAZ needs to address, is the lack of public sector accounting and professional qualifications, so as to improve financial management in the public sector. The ICAZ, together with PAAB and the International Federation of Accountants (IFAC), is seized with rolling out the public sector qualification in the immediate term. Of great concern to ICAZ, in relation to this matter, has been the lack of sufficient representation of chartered accountants serving in the public sector. ICAZ will work on creating a pathway for the public sector professional to becoming a chartered accountant. This will be done while upholding the quality of the chartered accountant qualification at the highest level. The institute applauds the Public Entities Corporate Governance Act for calling for representation by chartered accountants in relevant governance structures, such as audit committees. The private sector has been steps ahead in terms of ensuring chartered accountants are represented on their relevant governance structures, as evidenced by board and committee compositions of most private entities.
The other key area of development for ICAZ is the need to develop capacity for local universities to run the Zimbabwe Certificate in Theory of Accounting, which is a prerequisite for the ICAZ qualification pathway. Currently, NUST (National University of Science and Technology) is on board and various other universities are at different stages of accreditation. There is also need for ICAZ to fully localise the setting and marking of its qualification exams in the medium to long-term as this will ensure full customisation of the qualification to address local needs. This will be done without compromising the global flair of the qualification through the various global reciprocal arrangements the institute has in place with internationally renowned chartered accountancy bodies.
Another area which is already being addressed by the recently introduced ICAZ Vimbiso Scholarship Fund, is to ensure that all capable and deserving students with a desire to study accounting are able to do so without facing financial barriers, through the provision of financial assistance by the institute and its members.
ND: What are the challenges being faced by your practitioners in the country?
GZ: The practitioners in the country are subject to the same economic challenges that all other businesses in Zimbabwe are facing, and for most practitioners, the challenge is around ensuring that the value they deliver is seen beyond cost-management initiatives and that they are remunerated appropriately for the quality of their work, time and effort in an economy facing liquidity and affordability challenges. Under the prevailing circumstances, the institute continues to stress, support and monitor the integrity and professionalism of its practitioners, and works to ensure that fair value and recognition is continuously accorded to them.
More hard-facing for the institute and its practitioners is the issue of brain drain, where experienced and qualified staff members are leaving the profession and country for greener pastures. Practitioners are failing to retain qualified members in the country. Currently, over 50% of the institute’s members are outside the country. South Africa has 33% of the institute’s members and this is the reason why the South African chapter is hosting the ICAZ 2019 Winter School at Sun City in August 2019. The Winter School is aimed at connecting with members outside the country as well as pushing the foreign direct investment agenda for the country. Most ICAZ members outside the country hold positions of influence, even as it relates to investment destinations for the portfolios they manage.
MC: You have just been appointed as the new ICAZ chief executive, what’s your vision for the institute?
GZ: I have joined the institute at a milestone juncture when ICAZ has just celebrated 100 years of existence. It is a period of reflection and envisioning of how the next 100 years should look like for the institute. ICAZ’s vision is to be the pre-eminent professional body in the development and promotion of accountancy, assurance and advisory services, business and good corporate governance practices. This was the primary purpose for which ICAZ was enacted through an Act of Parliament.
The ICAZ council has a vision and strategy which is clearly articulated for the coming number of years, which I will spearhead and deliver on. Key amongst the desires of the institute is the public sector project articulated above, which will see ICAZ playing a critical role in the standardisation and strengthening of public sector financial management. It is also hoped that this will encourage professionals to take an interest in serving in both central government and local authorities for the betterment of the country.
ICAZ also aims to widen and strengthen the influence of CA(Z) in Zimbabwe and abroad and a key imperative is the widening of reach of the CA(Z) through growing the membership while bettering the quality. ICAZ membership currently stands at about 2 400, of which 50% of these members are outside the country. This number is way too little to fully serve the economy and will need to grow in line with the economic growth projections.
There is also a lot that needs to be done by the institute in increasing the service offering for its members so that they are well supported to serve the various industries they are in.
MC: What is it that you will do differently at ICAZ?
GZ: The issue shouldn’t be so much what I will do differently as it should be about the results that need to be achieved. My aim is to build on the work done before me, (surely 100 years of strong existence means things were being done right!), carry on from where the institute was left off and get it to its desired destination for the period that I will be at the helm. Whether I do more of what was done before or something different should still result in the desired vision of the institute being achieved.
Having said the above, there are, however, always individual biases to certain matters when one is at the helm and I am no exception to such biases;
One, I desire to see the institute and its members being more actively engaged in the economy and influence the economic direction of the country from a policymaking perspective and wherever else the expert contribution of chartered accountants is required.
Two, the issue of ethics and good governance has been topical, both locally and internationally. It encompasses the fight against corruption, which is imperative in investment attractiveness. ICAZ’s core value is integrity and under my leadership the institute will position itself to perpetuate the adoption of good business and personal governance practices and ethical behaviour for the betterment of the institute and the country.
Three, the current environment is characterised by significant changes especially related to technological advancement. The issue of relevance of the profession becomes key.
Continuous professional development in the emerging technologies and trends to remain relevant and alive to changes will be a focus area. This will also encompass other key skills required in business to enable the chartered accountants to give of their best value.
MC: What is the institution’s outlook for 2019?
GZ: The outlook is bright and exciting. That’s how I can sum it up. The proof of the pudding is in the eating. Let’s do another interview again in 10 months. A lot will have happened. But before that, let’s meet at the Investment Attraction Winter School at Sun City in South Africa, August 29 to September 1 2019.