INSTITUTE of Chartered Accountants of Zimbabwe (Icaz) technical manager Tonderai Mabambe expects Statutory Instrument (SI) 34 of 2025 to allow for greater transparency for local businesses in preparing their financial reporting.
Last month, Treasury through SI34 of 2025 repealed SI81A of 2024, which penalised anyone pricing goods or services above the official exchange rate.
The repeal allows businesses to price their goods and services according to market dynamics, as the parallel forex market has a more favourable exchange rate than its official counterpart.
In terms of financial reporting, the central bank and Treasury mandated that all financial reporting be in ZiG, despite the economy’s functional currency being the greenback.
When a company’s functional currency is the US dollar, but is forced to report in ZiG, distortions arise as a result of using a controlled exchange rate, as is the case.
This is because the financial statements no longer reflect the true economic substance of transactions.
This results in undervaluation of income, overstated costs, or skewed profits, leading to misleading financial ratios, poor comparability and weakened investor confidence.
“Zimbabwe’s financial landscape took a pivotal turn with the issuance of Statutory Instrument 34 of 2025, which repealed the May 2024 regulation restricting businesses from using exchange rates higher than the RBZ’s official interbank rate,” Mabambe said in an analysis over the repeal shared with NewsDay Business.
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“While this development reflects current market realities, it also marks a significant alignment with IAS [International Accounting Standards] 21, which governs how businesses handle foreign exchange in financial reporting.”
He added that the policy shift would help reduce pricing distortions and promote a more realistic application of International Financial Reporting Standards (IFRS), especially for companies preparing general purpose financial statements that must present fair, transparent, and comparable information.
IAS21 requires that transactions be recorded using the spot exchange rate on the transaction date.
In jurisdictions where multiple exchange rates exist, as is often the case in Zimbabwe, entities are allowed to apply the rate at which they could settle the transaction.
“Paragraph 26 of IAS21 acknowledges that where multiple exchange rates exist, the rate used should be the rate at which the entity could settle the transaction on the measurement date,” Mabambe said.
“This underscores the principle of substance over legal form and supports the use of market-based exchange rates when they better reflect economic reality.”
IAS21 also guides businesses in determining their functional currency, which should be based on the currency that most influences sales prices, labour and input costs.
“The repeal of the restriction now permits companies to use credible closing market rates, which may differ from the RBZ [Reserve Bank of Zimbabwe] interbank rate, as long as those rates are independently verifiable,” Mabambe said.
Businesses must now justify the exchange rates they apply and ensure those rates are consistent, well-sourced and clearly disclosed.
Mabambe said this should be done with sound economic rationale and apply the same rate policy consistently across reporting periods.
He also urged regulators and tax authorities to provide enhanced guidance to ensure alignment in tax and audit assessments.
