THE Securities Commission of Zimbabwe (SEC) will now require listed companies to fully comply with international financial reporting requirements, failure of which will result in suspension or delisting from the local exchange, an official said.
SEC head of corporate finance Kundai Msemburi said the commission had come up with a list of procedures to address non-compliance with financial reporting standards and Zimbabwe Stock Exchange (ZSE) listing requirements.
“The high cost of non-compliance is a risk that ZSE-listed companies cannot afford to take as complying with listing requirements is part of the continuing obligations of a listed company,” Msemburi said.
He said in terms of Section 3 of the ZSE listing requirements under disclosure of periodic financial information, the commission had the power to suspend or terminate the listing of a company.
Technical expert Graham Cheater said there was still a shortfall in the manner that listed companies were reporting their financial results in Zimbabwe even though the listing requirements were clear and provided scope on the procedure.
Cheater said section 8 of the requirements set out that financial information should be anchored in the circular yet there were continuing obligations on relating to the release of the information.
In a survey that was done by SEC in partnership with the Public Accountants and Auditors Board, only 6% out of 31 companies that published their results in September had complied with the requirement of attributing responsibility of the accounts to the directors.
One company out of those surveyed had simply made an indication “by order of the board”.
Cheater said responsibility of financial accounts in terms of International Financial Reporting Standards lay in the hands of company directors and this fact had to be stated in the report.
“It is not the auditors’ responsibility. The auditors’ responsibility is to express an opinion,” said Cheater.
In terms of section 8:57 of the listings requirements, companies must produce comprehensive accounts. “It’s full compliance or none at all. Companies should be able to provide additional information to give readers a clearer understanding of the business,” he said.
Giving an example of borrowings, Cheater said that companies should include the effect of increased borrowings on the earnings per-share and on headline earnings per-share.
He added that any change, be it an acquisition or investment, should be clearly stated in the results.
From the findings, Cheater said 12% of the companies complied by identifying significant changes, while 12% had changes but no comment. He noted, however, that the companies did not consider headline earnings per-share (HEPS) to be a requirement even though it was on the listing requirements. “Compliance on HEPS was 0%,” he said.
Msemburi said when a company fails to comply, SEC will, on the day following the due date of issue of the company’s interim report, send a letter of reminder to the listed company requesting that it rectify the situation.
Failure to do so would result in the company’s listing being suspended while a meeting of the ZSE would be convened to consider the continued suspension or termination of the issuer, he said.
“If the company fails to comply within 14 days, the ZSE will publish an announcement via the press, informing shareholders that the issuer’s listing is under threat of suspension and possible termination,” Msemburi said. –– Staff Writer.