Financial Reporting and Auditing Guidance

Transcription

1 PUBLIC ACCOUNTANTS AND AUDITORS BOARD Key highlights on the Financial Reporting and Auditing Guidance under the Environment Prevailing Meikles Hotel, Harare, 27 March 2019

2 What are PAAB s functions? The Board s legislated functions include, inter alia: (g) to represent the views of the accountancy profession on national, regional and international issues; The Board may, among other things, make regulations prescribing: (a) auditing standards, accounting standards and accountancy reporting standards for use in Zimbabwe, including the application of internationally recognized auditing, accounting and reporting standards. Protecting the Public Interest

3 What are PAAB s functions? (Continued) On the 1 st of March 2019, the Minister of Finance and Economic Development, through Statutory Instrument 41 of 2019, prescribed the following standards; International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), Interpretations originated from the International Financial Reporting Interpretations Committee (IFRICs), Interpretations originating from the Standing Interpretations Committee (SICs), IFRS for SMEs Standards, International Standards on Auditing (ISAs), International Public Sector Accounting Standards (IPSASs), International Education Standards (IESs) and International Code of Ethics for Professional Accountants (including International Independence Standards) Protecting the Public Interest

4 Who has been involved and consulted on the journey? Zimbabwe Accounting Practices Board (ZAPB) ZAPB relevant sub-committees namely; The Accounting Standards Committee (ASC); The Committee For Auditing Standards (CFAS); Underlying taskforces (working groups) The Committees are comprised of representatives from preparers, auditors and users of financial statements, as well as Professional Accountancy Organisations (PAOs).

5 Who has been involved and consulted on the journey? Consultations with other regulators, e.g The Reserve Bank of Zimbabwe Engagements with CFOs across the country and sectors(about 35 engaged) Forum of large firms (regionally and globally) SAICA Lawyers and legal opinions have been sought

6 What was the Journey? The accounting profession seized with the issue since the introduction of the multi-currency system in Previous guidance issued in February 2018 and concluded that: Functional and presentation currency had not changed for the financial year ended 31 December 2017 Significant developments in the 2018 financial year mostly second half and in particular third quarter, including: Protecting the Public Interest

7 What was the Journey? Multi-tiered pricing Separation of bank accounts Inflation differentials (42% versus 1.9%) Official acknowledgement of premiums to access foreign currency Generally increasingly constrained exchangeability Meetings at PAOs level and then escalated to PAAB Working groups have included : ZAPB, CFAS, ASC, - comprised of auditors, preparers, academia etc Current guidance issued on the 21 st of March 2019 Protecting the Public Interest

8 What are IFRS considerations and factors? Attributes of a Fair presentation framework like IFRS include: Relevance, Completeness, Reliability, Neutrality and understandability Currency and modes of payments Identification of suitable exchange rates between two or more currencies Lack of an official foreign exchange rate market Existence of the official foreign exchange rate of 1:1. Protecting the Public Interest

9 What are the legal considerations? Companies Act section 142: Every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of its financial year and every profit and loss account of a company, shall give a true and fair view of the profit or loss of the company for the financial year Statutory Instrument (S.I.) 33 of (22 nd of February 2019) Protecting the Public Interest

10 What are the legal considerations? S.I.32 of 2019 (22 nd of February 2019) S.I.41 of 2019 (1 March 2019) Legal opinion is that SI 33 supercedes other pieces of legislation or quasi-legislation Protecting the Public Interest

11 What is the final recommendation in the guidance? Directors have responsibility of selecting appropriate accounting policies Report the 2018 financial statements in USD Assess impact of inability to comply with IAS21 on fair presentation on financial statements Events after reporting period note to be expanded in accordance with requirements of IAS 10 Note on currency considerations to be expanded.

12 What is the final recommendation in the guidance? Key assumptions Income statement Useful narrative Etc

13 trative sensitivity analysis for events after the reporting period them here. What are the Recommended Disclosures? Components of reported amounts Sensitivity Analysis Element Monetary Assets/ Liabilities Nostro FCA USD Monetary Assets/ Liabilities RTGS Dollar Non- Monetary Assets/ Liabilities USD Total 1:1 Total RTGS 1:2.5 Total RTGS 1:X Total RTGS 1:Y Bank and Cash 100, , ,000 XXX XXX YYY Property andequipment - - 1,000,000 1,000,000 XXX XXX YYY Accounts Payable (200,000) (3,000,000) - (3,200,000) XXX XXX YYY

14 What are the ISAs considerations and auditing guidance? Assess impact of inability to comply with IAS21 on the fair presentation of the 2018 financial statements. Where there is no impact, consider an unmodified audit opinion with an emphasis of matter paragraph Where the impact is NOT significant, consider the following: Adequate disclosures, unmodified opinion with emphasis of matter Inadequate disclosures, qualified or adverse opinion Where the impact is significant, consider the following: Adequate disclosures, adverse opinion Inadequate disclosures, adverse or disclaimer of opinion.

15 What is the proposed decision tree for possible Audit Opinions? Financial Statements Impact of IAS 21 No Impact Impact Not significant Significant Impact Unmodified Opinion Emphasis of Matter maybe appropriate Adequate Disclosure Consider Whether Disclosures are adequate and result in fair presentation Inadequate Disclosure Financial Statements adequately describe the impact (Nostro FCA, RTGS FCA and Non-Monetary Assets and Liabilities together with sensitivity analysis) Financial Statements do not adequately describe the impact (Nostro FCA, RTGS FCA and Non-Monetary Assets and Liabilities together with sensitivity analysis) Unmodified Opinion Emphasis of Matter maybe appropriate Qualified or Adverse Opinion Adverse Opinion Adverse Opinion or Disclaimer of Opinion

16 What have foreign entities done on consolidation? For consolidation purposes, foreign entities are adjusting the Zimbabwe results by factors ranging from 2,5 to 4.0. The adjustments are based on the impact that the inability to comply with IAS 21 by a Zimbabwean entity s had on achieving fair presentation of the financial statements.

17 What is the way forward? February, March and June year ends on the horizon Given SI 33, for accounting purposes, the PAAB is engaging the relevant authorities to consider changing the effective date of change in functional currency from 22 nd of February 2019 to the 1 st of January 2019, when SI is enacted. Taxation considerations capital allowances, tax tables etc Legacy debt/obligations and crystallisation of the implementation Watch inflation trends

18 What is the way forward? Get involved with the work and initiative you are closest to your issues and situation Be part of the solution and the shaping provcess as far as possible

19 THANK YOU