Listed cement manufacturer PPC Zimbabwe, says it will utilise the RTGS dollar as its book-keeping currency, but still awaits advice on when the United States dollar stopped being the functional currency.
Zimbabwe adopted a multicurrency system in 2009, which was largely underpinned by the United States dollar, and listed firms adopted the US dollar as their book keeping currency.
But there have been significant monetary shifts in the period between then and now.
These include the introduction of export incentives in the form of bond notes in October 2016 through Statutory Instrument 133, which amended section 44 of Reserve Bank of Zimbabwe Act (the bond notes eventually became a surrogate currency); separation of RTGS (real time gross settlement) bank accounts and US dollar Nostro accounts last year, and very recently the announcement of the Monetary Policy Statement which saw the floating foreign currency trading through the introduction of an inter-bank foreign exchange market.
The Monetary Policy also created the RTGS dollar (a combination of the bond notes and electronic bank balances) as the functional currency in Zimbabwe.
PPC has said it has already begun adjusting its systems accordingly.
“The functional reporting currency will be the RTGS$. A full impact assessment including systems alignment is underway,” said the group.
“The Public Accountants and Auditors Board (PAAB) is expected to pronounce on the impact of the monetary policy statement.
“In particular the determination of the effective date of conversion to the RTGS$ being October 2018 or February 2019.”
Reserve Bank of Zimbabwe governor Dr John Mangudya has since confirmed that the PAAB approached his offices over accounting implications of measures announced in the Monetary Policy.
The RBZ said the RTGS$ will become the functional currency in Zimbabwe, but experts say to the extent that the country has maintained the multicurrency system a firm can chose a different reporting currency as long as they justify their reasons.
“There is a local currency, namely RTGS dollar. Hence, a Zimbabwe dollar (ZW$). It also provides a formal platform for market observable exchange rate between the ZW$ and other currencies through the inter-bank exchange market,” writes local International Financial Reporting Standards (IFRS) expert and trainer Anesu Daka.
“This now mirrors the reality that the US$ was and is no longer the dominant (functional/booking-keeping currency) in Zimbabwe.
“Thus, the ZW$ will now be used as the book-keeping or functional currency, however, an entity can choose to present the actual financial statements using a different presentation currency to its functional currency as long as the reason is disclosed.”
PPC reported a cash balance of US$63 million at the end of September 2018, which was reduced to US$60 million by a debt repayment at the end of February 2019.
And the company said the initially set rate of 2,5 RTGS dollars to 1 US dollar applies to only a portion of that debt.
“The initial rate of 2.5 RTGS $:1 US$ applies only to a portion of the US$60 million cash balance, amounting to US$30 million to US$35 million.
“The remaining balance including US$16 million in dividends and US$5 million rights offer proceeds, qualifies as legacy debt due to PPC RSA which is awaiting repatriation.
“In terms of group liquidity, PPC Zimbabwe is excluded from covenant calculations,” said the cement producer.
The RBZ has said all foreign liabilities or legacy debts and declared dividends, will be treated separately after registering such transactions with its exchange control department.