Delta Defies Ernst & Young On Exchange Rate
Zimbabwe’s largest beverage producer, Delta, has turned down professional advice from the multinational auditing firm, Ernst &Young (EY), to apply foreign currency auction system exchange rates in the preparation of financial statements.
Delta said EY’s counsel was out of touch with reality.
Delta said at the weekend that foreign currency auction system rates, which have traded at about US$1:$85 most of 2021, did not reflect the real value of the Zimbabwe dollar.
This was after EY argued that by determining its own exchange rate during the preparation of financial statements for the period ended September 30, 2021, Delta failed to adhere to International Financial Reporting Standards.
But the beverage manufacturer made an executive decision to work with estimates, which is allowed under International Accounting Standard (IAS) 21.
IAS 21 gives guidance relating to the effects of changes in foreign exchange rates in volatile markets. Delta chairperson Stanford Moyo said in a commentary to the financial statements:
The directors and management disagree with the professional conclusion of our auditors on the application of IAS 21.
The independent auditors, EY have issued a modified review opinion for the period ended 30 September 2021 as they believe that the determination of an estimate exchange rate is not compliant with International Financial Reporting Standards. The auditors believe that the auction exchange rate is the appropriate spot exchange rate…This is contrary to the circumstances applicable to the entity … There are varying views on the matter and we urge the Public Accountants and Auditors Board to provide appropriate guidance to the market.
Officially, the country has an exchange rate that is determined weekly at the foreign currency auction at the Reserve Bank of Zimbabwe (RBZ).
Most goods and services in the country are charged at parallel market rates, as the official platform has mostly run out of liquidity to fund allotted bids.
