Financial Reporting Implication of the Monetary Policy on NPOs
Posted on 12 March, 2019 at 12:28
By Epaphras Chinyakuza
The February 2019 Monetary Policy brought an end to the sleepless nights of those in the accounting profession in Zimbabwe. The US Dollar had been unanimously declared the functional currency as the multiple currency regime was introduced in 2009. However, as the years went by, the dominance of the dollar started being questioned as variants of the evidently weaker bond notes, RTGS and mobile money. It became more and more unrealistic to continue reporting in US dollar whilst complying with the fair presentation principle. Whilst there was multiple pricing in the economy, where different prices were quoted for the same commodity depending on mode of payment (Ecocash/Bond notes/RTGS/USD), the central bank was adamant to maintain that all forms of money (Ecocash, Bond notes, RTGS) were at par with the US Dollar. Statutory Instrument 122A of 2017 actually introduced consequences of illegal currency trading at exchange rate other than 1:1.
pronouncement of the RTGS Dollar as the new born in the basket of multiple
currency was confirmation that indeed the money in the banking system was not
US Dollar and that the US Dollar is no longer the dominant currency for the
buying and selling of goods and services. The Monetary Policy Statement
IAS 21: The Effects of Changes in Foreign Exchange,
Implications for NPOs in Zimbabwe
It then follows that NPOs in Zimbabwe can to present the actual financial statements using a different presentation currency to its functional currency as long as the reason is disclosed and this might be the case if the donors require them to present using the currency in which they received the donations or as per the requirements of the agreement.
receive most of their funding in hard currency – US Dollars, Euros etc, and
they conduct most of their activities using such currencies and this could
provide reasonable grounds for consolidation and presentation in US Dollars
rather than RTGS. Statutory compliance may also call for presentation in US
Dollars. The 2019 National Budget Statement
On the other hand, organisations registered as Private Voluntary Organisations have a mandate to produce Audited Financial Statements for purposes of inspection by the Ministry Of Labour and Social Welfare. The Ministry may, for their purposes want to have financials prepared in RTGS Dollars for their reporting and comparison purposes since the RTGS Dollars is the functional currency in Zimbabwe. This may oblige NPOs to also prepare Financial Statements stated in RTGS Dollars.
The providers of funding may require organisations to submit financial reports in their currency of choice. It would be necessary for the NPOs to continue adhering to such regulations.
All the bank accounts need to be identified as either Nostro FCA or RTGS Dollars accounts. Depending on the presentation currency of the specified financial statements, all balances need to be restated in the presentation currency and any exchange rate gains or losses should be recognized.
Accounts Receivables and Payables Balances
Statutory Instrument 33 of 2019
From the analyses given above, it will be likely that NPOs would need to be prepared to report in both RTGS Dollars and US Dollars in order to cater for the needs of the various users. Whilst the funders might prefer financial statements stated in US Dollars, regulators might require financials in the functional currency (RTGS$). Fair presentation for taxation purposes might also oblige NPOs to also report to Zimra in US Dollars because they are required to settle their taxes in the currency of trade.
IFRS Foundation. (2016). International Accounting
Standard 21. The Effects of Changes in Foreing Exchange Rates.
Retrieved March 11, 2019, from
Ministry of Finance and Economic Development. (2018, November 22). The 2019 National Budget Statement. Austerity for Prosperity. Retrieved November 30, 2018, from http://veritaszim.net/sites/veritas_d/files/Zimbabwe%202019%20National%20Budget%20Statement%2022%20Nov%202019.pdf
Reserve Bank of Zimbabwe. (2019, February 20). Monetary Policy Statement. Establishment of an Inter-Bank Foreign Exchange Market to Restore Competitiveness. Retrieved February 24, 2019, from https://www.rbz.co.zw/documents/mps/mpsfeb2019.pdf
The Government Gazette. (2019, February 22). Statutory Instument 33 of 2019. Retrieved from http://www.veritaszim.net/sites/veritas_d/files/SI%202019-33.pdf
The Public Accountants and Auditors Board (PAAB) is the Zimbabwe standard setter and regulator of accounting and auditing practices in Zimbabwe. Therefore, official treatment of financial statement matters will be sought from the official guidance to be issued. Whilst KFM Consultants provides technical guidance based on the information available, our advice cannot be quoted or referenced to in relation to regulatory or statutory issues