• Thu. Sep 21st, 2023

Imara says more companies are likely to change their functional currency to USD

ByEconomic Times

Oct 12, 2022

By ETimes

A number of Zimbabwean companies are likely to switch to the greenback as the functional currency as the majority of their revenues are now in US dollars, says Imara Asset Management Zimbabwe.

The operating environment is showing that customers are preferring to settle their transactions in US dollars.

The data in corporate financial accounts has lost all historical value due to historically high rates of inflation. Previously, several researchers believed that biases in inflation indexes made it difficult to read the inflation adjusted numbers.

“The one headache for both listed and privately owned companies is the hassle of producing annual accounts in ZWL under inflation accounting,” said John Legat, chief executive of Imara Asset Management Zimbabwe.

“This is apparent for listed companies who continually request extensions from the Zimbabwe Stock Exchange (ZSE) as their accounts are not ready to publish.”

In October of this year, Lafarge Cement Zimbabwe said it would postpone the release of the interim financial results for the six-month period ended 30 June 2022. Following the ZSE’s extension of time to the company, the interim financial results that were scheduled to be released on or before 30 September 2022 will now be released on or before 31 October 2022.

The company’s new external auditors’ review work is the cause of the delay.

Legat said: “This is not necessarily due to our local accounting firms not being able to produce them, but, for the international accounting groups, the accounts need to be signed off by the technical departments in South Africa, who have little experience of inflation accounting.”

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More companies are poised to trade less in local currency.

“As a result, we expect to see more companies changing their functional currency to the USD now that the bulk of their revenues are in USD.”

He added that “We might also see more companies move from the ZSE to the VFEX for similar reasons.”

Simbisa Brands intends to transfer to the VFEX from the ZSE. It will be the fifth stock to list on the USD exchange as a result, which might provide the exchange with much-needed momentum – Harare

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