By ETimes
HARARE – Fidelity Life Assurance of Zimbabwe and Zimre Holdings Limited received adverse opinions from their auditor, Grant Thornton, for their financial statements ending 31 December 2023.
An adverse opinion suggests that a company may violate accounting standards or significantly misstate their financial records.
Grant Thornton, in its adverse opinion, has said the financial statements of Fidelity Life Assurance of Zimbabwe “do not present fairly, in all material respects” the financial position of the company.
This comes as the group has yet to align its accounting, administration and information technology infrastructure with the requirements of International Financial Reporting Standards (IFRS 17).
“In preparing these consolidated inflation adjusted financial statements, the group utilised simplified models in accounting for insurance contracts and these do not track onerous and profitable contracts at policy level.
“Once the upgrade of the accounting, administration and information technology infrastructure to align with the requirements of IFRS 17 is complete, significant adjustments may have to be made to the amounts recognised in these financial statements with respect to the group’s insurance contracts.
“Accordingly, we were not able to determine the adjustments that might be necessary to the following financial statement line items: insurance contract revenue, insurance service expenses, insurance finance expenses for insurance contracts issued, insurance reserve and insurance contract liabilities,” reads the independent’s audit report.
Grant Thornton cited non-compliance with International Accounting Standard (IAS) 29—financial reporting in hyperinflationary economies.
“The group did not maintain monthly IFRS 17 financial reports given the ongoing upgrade to its accounting, administration and information technology infrastructure as described above.
“As a result, in applying IAS 29 – Financial Reporting in Hyperinflationary Economies, management used average inflation indices for the year ended 31 December 2023 to restate insurance contract revenue included in the consolidated inflation adjusted statement of profit or loss and other comprehensive income.
“This constitutes a departure from IAS 29, which requires that all amounts in the statement of profit or loss and other comprehensive income be restated by applying the change in the general price index from the dates when the items of income and expenses were initially recorded in the financial statements,” said the auditor.
The financial impact of non-compliance on the consolidated inflation adjusted financial statements has not been assessed.
Fidelity Life Assurance of Zimbabwe’s opening investment property balances as of January 1, 2022, which were recorded in the consolidated financial statements for the year that ended on December 31, 2022, were misstated, according to the auditor.
“Management could not provide sufficient appropriate audit evidence to support the valuator’s assumptions applied in the valuation of the properties as at 31 December 2021.
“As a result of the misstatement of the opening balances, the fair value gains on properties recognised in the comparative consolidated inflation adjusted statement of profit or loss and other comprehensive income for the year ended 31 December 2022 are misstated.
“The opinion for the year ended 31 December 2022 was modified in respect of this matter, and the misstatement has not been corrected in these consolidated inflation adjusted financial statements in accordance with the requirements of IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors,” Grant Thornton stated.
An important part of Fidelity Life Assurance of Zimbabwe Limited and its subsidiaries, Vanguard Life Assurance Limited, has unaudited financial statements included in the consolidated inflation-adjusted financial accounts.
“As a result, we were unable to satisfy ourselves that all necessary adjustments and disclosures have been made to the unaudited financial statements of Vanguard Life Assurance Limited for the year ended 31 December 2023.
“Accordingly, we were unable to determine the effect of this on the consolidated inflation adjusted financial statements of Fidelity Life Assurance of Zimbabwe Limited and its subsidiaries for the year ended 31 December 2023,” the auditor said.
As for financials, the group’s inflation adjusted profit rose 9945% to $101.1 billion in 2023 from $1 billion in 2022.
On the other hand, Grant Thornton conducted an audit of Zimre Holdings Limited’s inflation-adjusted consolidated financial statements, which are located on pages 55 to 160.
These statements include the consolidated statement of financial position as of December 31, 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows for the year that ended, and the notes to the consolidated financial statements, which include an overview of key Group accounting policies.
“In our opinion, because of the significance of the matters described in the Basis for Adverse Opinion section of our report, the inflation adjusted consolidated financial statements do not present fairly, in all material respects, the financial position of Zimre Holdings Limited as at 31 December 2023, and its financial performance and cash flows for the year then ended in accordance with IFRSs,” Grant Thornton stated.
In December 2020, ZHL acquired a controlling stake in Fidelity to boost the former’s asset base.