We have extracted the Chairman’s Statement from the 2019 Abridged report of Proplastics Limited (PROL.zw), listed on the Zimbabwe Stock Exchange:
The Company’s Directors are responsible for the preparation and fair presentation of the Group’s financial statements, of which this press release represents an extract. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and in the manner required by the Companies and Other Business Entities Act (Chapter 24:31).
As explained below, the Group has also restated 2018 financial statements to comply with International Accounting Standard (IAS) 21 (The Effects of Changes in Foreign Exchange Rates). The principal accounting policies of the Group are consistent with those applied in the previous financial year, except for the effects of adoption of IFRS 16. This is further defined within the Notes to the financial statements.
The Directors, having considered the macro economic environment and IFRS guidance on the matter provided by the Auditors, have continued to report in US$ in compliance with (IAS) 21 and have restated 2018 financial statements using the first observable exchange rate of 1:2.5 between RTGS$ balances, bond notes; and the US$ for the period October 2018 to December 2018.
The Group’s functional currency in terms of IFRS remains the United States Dollar (US$). The Group has adopted this currency as its presentation currency.
Compliance With IFRSs
The financial statements are prepared with the objective of complying fully with the IFRSs. Complying with IFRSs achieves consistency with the financial reporting framework adopted by the Group since 2010. Using a globally recognized reporting framework also facilitates understandability and comparability with similar businesses and allows consistency in the interpretation of the financial statements.
Whilst full compliance with IFRSs has been possible in previous reporting periods, only partial compliance was achieved in 2018. In respect of International Financial Reporting Standards IAS 21 “The Effects of Changes in Foreign Exchange Rates” (“IAS 21”) “if the primary economic environment in which an entity operates is normally the one in which it primarily generates and expends cash, an entity considers the following factors in determining its functional currency:
- the currency:
(i) that mainly influences sales prices for goods and services (this will often be the currency in which sales prices for its goods and services are denominated and settled); and
(ii) of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services.
- (b) the currency that mainly influences labour, material and other costs of providing goods or services (this will often be the currency in which such costs are denominated and settled).
- the currency in which funds from financing activities (i.e.issuing debt and equity instruments) are generated.
- the currency in which receipts from operating activities are usually retained”.
Given the context of the environment, management assessed whether there had been a change in the functional currency used by the Group. The assessment included consideration of whether the various modes of settlement may represent different forms of currency. It was observed that whether cash, bond notes, electronic money transfers or point of sale transactions, the unit of measure across all these payment modes remained US Dollars. Management therefore concluded that the US dollar is still the functional currency and has restated its 2018 financials to reflect the impact of exchange rates between the US dollar and the Local Zimbabwe dollar for the period 1 October 2018 to 31 December 2018. In the prior year, an exchange rate of 1:1 was applied between the two currencies.
Pursuant to the requirements of IFRS, the first observable exchange rate of 1:2.5 between RTGS$ balances, bond notes; and the US$ for the period October 2018 to December 2018 was used. The Directors have noted the complications in respect of whether this first observable rate meets the IFRS requirements for a spot rate. This requirement to comply with IFRSs presented challenges in terms of compliance with Government legislation (SI 33; SI142 of 2019).
These condensed financial results should be read in conjunction with the complete set of consolidated financial statements for the year ended 31 December 2019, which have been audited by Ernst & Young Chartered Accountants (Zimbabwe).
The Auditors’ independent report is modified for the consequential impact of the use of an exchange rate that does not meet the IFRS requirement for a spot rate. In all other respects the financial results are consistent with IFRSs. The auditor’s independent report on the consolidated financial statements (from which these results were extracted) is available for inspection at the Company’s registered office and is posted on the Company’s website. (www.padenga. com).
The Group’s FY19