This week, the Institute of Chartered Accountants of Zimbabwe (ICAZ), issued a guideline following the confusion in the market.
ICAZ said entities that see an increase in US$ transactions over ZWL$ transactions will need to do an assessment of whether their functional currency has changed from ZWL$ to US$ in accordance with International Accounting Standard (IAS) 21 on the effects of changes in foreign exchange rate.
It also highlighted that selection and use of the general price index in the restatement of financial statements in accordance with IAS 29 requires the use of a general price index that reflects changes in general purchasing power.
In Zimbabwe, the currency which was assessed to be in hyperinflation is the ZWL$ while the US$ is not and accountants do not need to do an assessment because this does not concern them. “Entities that still use the ZWL$ as the functional currency should continue to use CPI and not a blended CPI in the preparation of inflation adjusted financials. “A blended inflation adjustment index is not appropriate in the preparation of inflation adjusted financial statements as the financials are prepared in a particular functional currency (either ZWL$ or US$) and not reported in a blended currency,” ICAZ said. “Similarly, any inflation index should also be specific to the reporting currency. “Therefore those entities whose functional currency is ZWL$ should continue preparing hyperinflation accounts using the ZWL$ CPI. ”. 🔗 Read Full Article
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