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ZSE extends 2021 reporting deadline

Under the bourse’s listing rules, counters whose year ends on December 31 have until March 31 to publish financial statements.

BY SHAME MAKOSHORI THE Zimbabwe Stock Exchange (ZSE) has given listed firms until April 30 to submit financial statements for the year ended December 31, 2021 after being overwhelmed with requests for extensions.

Under the bourse’s listing rules, counters whose year ends on December 31 have until March 31 to publish financial statements.

Companies falling under this category have until Thursday to issue comprehensive market updates about their state of affairs.

The ZSE said it would penalise firms that failed to beat the deadline.

As Zimbabwe’s economy relapses into chaos, there has been a growing trend by listed firms to delay publishing financial statements citing a string of reasons including a complex exchange rate regime that compromises credibility of their statements.

Listed firms have also generally been reluctant to disclose their quarterly performances.

In a market update, the ZSE gave a series of directives regarding financial statements.

“Due to overwhelming requests for extension of compliance by issuers to submit year-end financial statements, the ZSE has made the following decision: that issuers (listed firms) whose half-year or full-year financial period ended on 31 December 2021 and are due for publication by 31 March 2022 are hereby granted a 30-day compliance grace period to April 30 2022,” ZSE chief executive officer Justin Bgoni said yesterday.

“This will allow issuers to complete their audit processes and finalise financial statements and reports. (Those) who fail to meet the 30 April 2022 deadline will be penalised for non-compliance. (Those) who can meet the statutory deadlines, despite the foregoing, are encouraged to comply as usual,” he added.

Last month, the Institute of Chartered Accountants of Zimbabwe cast doubts over the validity of financial statements, citing these two factors.

It has been a recurring problem since 2019, when Zimbabwe relapsed into an exchange  rate crisis and high inflation.

But while inflation has slowed from a high of 839% in July 2020 to 60% currently, accountants say corporate planning has been complicated.

The Zimbabwe dollar was trading at US$1:$138 on the official market last week, against parallel market rates of up to US$1:$270.

Authorities want firms to use the official exchange in preparing accounts.

However, firms argued that most of their foreign currency is obtained on the expensive black market, which also determines the cost of doing business.

According to international reporting standards, when an economy averages an inflation rate of 100% over a three-year period, it is classified as hyperinflationary.

In July 2019, the Public Accountants and Auditors Board announced that Zimbabwe had slipped into hyperinflation.

This was guided by the international financial reporting standards, which guides how companies report under hyperinflation.

Speaking at the recently-held 2022 Monetary Policy Statement review webinar hosted by the Zimbabwe Independent, Icaz representative Esther Antonio said financial statements could now be unreliable.

“We have been having a situation where financial information has been rendered unreadable, difficult to compare, difficult to make decisions on and we look forward to that gap closing so that users of financial information are able to make meaningful decisions,” Antonio said.

Corporate data is also used by governments to measure economic growth or contraction.

With experts doubting the validity of data coming from local firms, it could mean the entire state of Zimbabwe’s economy is distorted, making it difficult to make correct and accurate decisions.

Many companies have indicated that it is now reliable to use volume growth or contraction as a measure of companies’ health.

“I think the profession welcomes a significant reduction in hyperinflation. It is worth noting that there is a very different definition of what constitutes hyperinflation between economists and accountants,” Antonio said.

“So, from an accounting standpoint, as long as inflation averages 100% over a three-year period an economy is considered to be hyperinflationary,” she added.

“So, for those that will be looking at the financial statements, it means that the financial statements for 2021 will continue to be prepared using the hyperinflationary standard.”

She said the parallel market was driving inflation.

“The next issue I will touch on is the issue of exchange rates and I think this has really been a challenge for the profession as a whole from both the preparer side and the auditing side. The question of what exchange rate is an appropriate exchange rate from a financial reporting standards framework,” Antonio said.

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