Introduction Of RTGS Dollars Forced Netone And Econet To Contravene Accounting Standards

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Zimbabwe currency, $5, Reserve Bank of Zimbabwe

You may perhaps have forgotten about Zim Dollar’s predecessor, the RTGS dollar which was introduced in February much to the ire of many people. The RTGS dollar was introduced to manage the foreign currency market by combining three financial instruments into one currency (the RTGS dollar) and then it was unleashed on floating exchange rate.

The introduction of the RTGS dollar disturbed the way things were done on both an individual/consumer basis but also on a corporate/enterprise level. For Econet and Netone (and just about any Zimbabwe Stock Exchange listed company), the introduction of the RTGS dollar forced them to violate a financial reporting standard, IAS 21 such than they both ended up getting adverse opinions.From Econet’s financial statement:

An adverse opinion was issued on the financial statements for non-compliance with International Accounting Standard 21, The Effects of Changes in Foreign Exchange Rates, and Valuation of Property, Plant and Equipment. The Key Audit Matters are valuation of expected credit losses on Financial Assets, Related Party transactions and Revenue recognition.

And from Netone’s financial statements which were given an adverse opinion:

The effect of non-compliance with IAS 21 has not been quantified however it is considered to be be material and pervasive to these financial statements

The non-compliance by Econet and Netone emanted from the fact that the Statutory Instrument (S.I 33) used to introduce RTGS dollars was not consistent with IAS 21. In a way, the Mobile Network Operators obeyed the law instead of upholding accounting standards.

As result, in Econet’s case, its Board failed to come up with a correct assessment to determine how the company performed last year. From Econet’s financial statement:

The Board is unable to comment factually and accurately on the financial performance of the business based on these results. Local and international accounting experts have concluded that there is ambiguity in the currency that existed during this period and the effective valuation of this currency, hence the modification to the auditors’ report for entities reporting in Zimbabwe.

And its not Econet (or Netone) alone that didn’t comply with IAS 21 but there are a number of Zimbabwe Stock Exchange listed companies which are in the same boots.

it was not the Listed Companies’ volition not to comply with financial reporting Standards but rather a matter of complying with the obtaining laws of the Country as prescribed by SI 33 of 2019.

Read this article for further context: Difficult To Tell Whether Econet Performed Well Or Not, Reason: Mangudya’s RTGS$