Zimbabwe

Zimbabwe Financial Reporting Manual ϭ

Foreword

I am pleased to introduce the first edition of the Zimbabwe Financial Reporting

Manual to support the implementation of the accrual-based International Public
Sector Accounting Standards (IPSAS).

The adoption and implementation of IPSAS is in line with the public financial
management principles enunciated in section 298 of the Constitution of Zimbabwe.
In the 2018 National Budget Statement, the Government confirmed its commitment

to migrate to the Framework with effect from the 1st of January 2018 and this was
followed by the gazetting of Statutory Instrument 41 of 2019 which formally
adopted IPSAS as the reporting framework in Zimbabwe.

Reiterating the message, I gave at the launch of the IPSAS Implementation

Strategy and Plan in April 2019, the IPSAS Framework will support Government’s
efforts to achieve the desired results-based performance through the efficient use
of resources, timely and transparent reporting. The migration is an essential aspect
of the ongoing efforts to enhance and strengthen our Public Finance Management
System.

The successful development of the Zimbabwe Financial Reporting Manual is an

important milestone in the journey to successful implementation of IPSAS.

I would like to thank all those involved in developing this manual with particular
thanks to the World Bank for supporting this process. I look forward to the
successful implementation of this important project.

Professor M. Ncube

Minister of Finance and Economic Development

Zimbabwe Financial Reporting Manual Ϯ

Preamble

The ongoing project for the migration to the accrual-based International Public
Sector Accounting Standards (IPSAS) framework, by December 2025, forms part
of wider government’s Public Finance Management (PFM) reforms and is aimed
at enhancing transparency and accountability. This is consistent with the principles
of public financial management in section 298 of the Constitution of Zimbabwe,
which requires transparency and accountability in financial matters as well as
responsible and clear financial management and fiscal reporting.

The development of the Zimbabwe Financial Reporting Manual (ZFRM) is a

recommendation of the IPSAS Implementation Strategy and Plan (ISP) launched
in 2019. The manual is expected to guide the implementation of IPSAS by
providing local interpretations and clarifying options thereby ensuring consistency
of application of the various standards by reporting entities.

It is with immense gratitude that I would like to acknowledge everyone involved in

this project for their financial, technical and advisory support during the
development of the Zimbabwe Financial Reporting Manual.

G. T. Guvamatanga.

Secretary for Finance and Economic Development

Zimbabwe Financial Reporting Manual ϯ

 Acknowledgements



This Zimbabwe Financial Reporting Manual has been prepared for use by the
Zimbabwe Public Sector in the migration to International Public Sector
Accounting Standards (IPSAS) program through the facilitation of the Zimbabwe
Treasury








with funding from the World Bank,

















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Zimbabwe Financial Reporting Manual ϰ

 Abbreviations used in this document

COFOG Classification of Functions of Government

GPFS General Purpose Financial Statements

IFAC International Federation of Accountants

IFRS International Financial Reporting Standard

IPSAS International Public Sector Accounting Standard

IPSASB International Public Sector Accounting Standards Board

ISP IPSAS Implementation Strategy and Plan

IMAP Implementation Matrix and Action Plan

MDA Ministries, Departments and Agencies (Reporting Entity/Public

Sector Entity)

MOFED Ministry of Finance and Economic Development

NSSA National Social Security Authority

PAAB Public Accountants and Auditors Board

PFM Public Financial Management

PFM Act Public Finance Management Act (Chapter 22:19)

PPE Property, Plant and Equipment

SOE State Owned Enterprise

VAT Value Added Tax

CPI Consumer Price Indices

ZIMRA Zimbabwe Revenue Authority

ZFRM Zimbabwe Financial Reporting Manual

Zimbabwe Financial Reporting Manual ϱ

 Table of Contents

1. Introduction ________________________________________________ 8

2. First Time Adoption of the IPSAS ______________________________ 13

3. Presentation of the annual report _______________________________ 17

4. Presentation of Financial Statements ___________________________ 21

5. Accounting Policies, Changes in Accounting Estimates and Errors _____ 25

6. Cash Flow Statement ________________________________________ 27

7. The Effects of Changes in Foreign Exchange Rates ________________ 28

8. Financial Reporting in Hyperinflationary Economies ________________ 29

9. Events after the Reporting Period ______________________________ 30

10. Related party disclosures _____________________________________ 31

11. Borrowing Costs ____________________________________________ 34

12. Measurement ______________________________________________ 35

13. Investment Properties _______________________________________ 45

14. Property, Plant and Equipment ________________________________ 47

15. Impairment of Non-Cash-Generating Assets ______________________ 56

16. Impairment of Cash-Generating Assets __________________________ 59

17. Agriculture ________________________________________________ 60

18. Intangible Assets ___________________________________________ 61

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19. Inventories ________________________________________________ 68

20. Assets held for sale and discontinued operations __________________ 73

21. Financial Instruments ________________________________________ 74

22. Revenue__________________________________________________ 83

23. Transfer Expenses __________________________________________ 99

24. Provisions, Contingent Liabilities and Contingent Assets ___________ 101

25. Employee Benefits _________________________________________ 107

26. Leases __________________________________________________ 115

27. Service Concession Arrangements: Grantor _____________________ 118

28. Segment Reporting ________________________________________ 121

29. Consolidations ____________________________________________ 124

30. Appendices to the reporting manual ___________________________ 128





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1. Introduction

1.1. Objective of the ZFRM

1.1.1. The Zimbabwe Financial Reporting Manual (ZFRM) has been developed to
support the adoption and implementation of International Public Sector
Accounting Standards (IPSAS). Zimbabwe adopted IPSAS as a reporting
framework following the gazetting of Statutory Instrument 41 of 2019 Public
Accountants and Auditors (Prescription of International Standards)
Regulations, 2019. The adoption of the accrual based and the migration to
IPSAS framework is necessary for the fulfilment of the public financial
management principles in Section 298 of the Constitution of Zimbabwe
which requires:
a. Transparency and accountability in financial matters
b. Public funds to be expended transparently, prudently, economically,
and effectively
c. Financial management and fiscal reporting to be responsible and
clear.
1.1.2. The key objectives of the ZFRM are as follows:
a. To provide local interpretation and guidance in the implementation of the
IPSAS framework by reporting entities in Zimbabwe
b. To narrow accounting policy choices provided by IPSAS thereby
ensuring consistency in application by various reporting entities.
c. To provide policy direction on the implementation of IPSAS by various
reporting entities
1.1.3. The ZFRM is prepared following consultation with various stakeholders and
is issued by the Zimbabwe Treasury.

1.2. Scope of the ZFRM

1.2.1. The ZFRM should be followed by Public Sector Entities (Reporting
Entities) required to apply the IPSAS framework in preparation of general-
purpose financial statements and reports as required by Public Finance
Management Act (Chapter 22:19).

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1.2.2. The ZFRM applies to entities (Reporting Entities) that are required to
prepare financial statements using IPSAS as follows:
a. Ministries, Departments, and Agencies funded from the Consolidated
Revenue Fund;
b. Rural District Councils established under the Rural District Councils
Act (Chapter 29:13);
c. Urban Councils established under the Urban Councils Act [Chapter
29:15]
d. Constitutional Entities;
e. Statutory Funds;
f. Designated corporate bodies and public entities

1.2.3. The full list of entities expected to apply this manual is on Appendix 9 List
of Entitles on IPSAS & IFRS and Consolidation Groups. Treasury will
continuously review and update the list of entities.
1.2.4. Reporting entities are required to fully comply with IPSAS and this manual
does not replace/change/supersede any IPSAS.

1.3. Compliance with the IPSAS Financial Reporting Framework

1.3.1. Zimbabwe adopted IPSAS as a financial reporting framework through the

promulgation of Statutory Instrument 41 of 2019 underpinning the migration
of public sector entities to IPSAS through the IPSAS Implementation
Strategy and Plan launched in 2019 by the Minister of Finance and
Economic Development.

1.3.2. All reporting entities are required to migrate to the IPSAS framework by
2025 and produce IPSAS compliant financial statement by that date. The

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 full IPSAS standards can be accessed here
(https://www.ipsasb.org/standards-pronouncements)

1.3.3. Entities are required to apply all IPSAS standards even if they are not
dealt with by the ZFRM. ZFRM only focuses on standards or areas where
specific guidance is needed.
1.3.4. Entities are required to apply new standards as issued by the IPSASB as
and when they become effective regardless of whether or not the ZFRM
has been updated to include guidance on these standards.
1.3.5. The ZFRM has incorporated the following standards which are not yet
effect but will be early adopted for use in Zimbabwe:
a. IPSAS 43 Leases
b. IPSAS 44 Non-current assets held for sale
c. IPSAS 45 Property, Plant and Equipment
d. IPSAS 46 Measurement
e. IPSAS 47 Revenue
f. IPSAS 48 Transfer Expenses

1.4. Development of IPSAS Implementation Matrix and Action Plan (IMAP)

1.4.1. All reporting entities migrating to IPSAS are required to develop IPSAS
Implementation Matrix and Action Plans (IMAP) to guide the implementation
of IPSAS. A standard template to be used by all entities is included in
Appendix 12.

1.5. Supporting Legislation

1.5.1. Constitution of Zimbabwe gives oversight responsibility to Parliament for

State revenues and expenditures through creation of Acts of Parliament that
give power to the Minister responsible for Finance to issue regulations and

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 instructions. The relevant Acts of Parliament and regulations/instructions
are;

a. Public Finance Management Act, [Chapter 22:19],

b. Public Procurement and Disposal of Public Assets (PPDA) Act [Chapter
22: 23]
c. Appropriation Acts
d. Finance Acts
e. Public Debt Management Act, [Chapter 22:21],
f. Rural District Councils established under the Rural District Councils Act
(Chapter 29:13).
g. Urban Councils established under the Urban Councils Act [Chapter
29:15].
h. Public Procurement and Disposal of Public Assets (General)
Regulations, 2018.
i. Public Finance Management (Treasury Instructions), 2019.
j. Public Finance Management (General) Regulations, 2019.
k. Public Debt Management Regulations, SI 79 of 2019.
l. And any other relevant legislation.

1.6. IPSAS Conceptual Framework

1.6.1. IPSASB’s Conceptual Framework for General Purpose Financial Reporting

by Public Sector Entities (Conceptual Framework) establishes the principles
that the IPSASB believes should underlie the preparation and presentation
of general-purpose financial statements and general purpose financial
reports. In particular, preparers should be familiar with the objective of
financial statements, which is to provide financial information about the
reporting entity or reportable activity that is useful for accountability and
decision-making purposes.

1.6.2. For reporting entities the objective of the financial statements is also to
provide information about its financial position, financial performance,

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 changes in financial position and cash flows that is useful to a wide range
of users to permit them to assess the stewardship and accountability of
management for the resources entrusted to them.

1.6.3. The key users of the information in the financial statements of reporting
entities and for reportable activities are Treasury and Parliament, the latter
as representatives of the public as well as the voter of resources. Other
users include the financiers, shareholders, regulators, supervisory
structures, and the taxpayers.

1.6.4. In presenting information in their financial statements, preparers should also

have regard to the;

a. underlying assumption (financial statements shall be prepared on

a going concern basis, as set out in IPSAS 1, Presentation of
Financial Statements, paragraphs 38 to 41),
b. qualitative characteristics of financial statements,
c. elements of financial statements,
d. recognition of the elements of financial statements, and
e. measurement of the elements of financial statements.
1.6.5. The Conceptual Framework notes that the primary objective of most public
sector entities is to deliver services to the public rather than to make profits
and generate a return on equity to investors. Consequently, the financial
statements cannot meet all the information needs of user.











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2. First Time Adoption of the IPSAS


2.1. Applicable Accounting Standard

2.2.1. IPSAS 33 applies in full to all reporting entities covered by the ZFRM

2.2. Objective

2.2.2. The objective of this section is to provide guidance to reporting entities

adopting IPSAS for the first time in line with the requirements of IPSAS 33
and as they transition to full compliance with IPSAS.
2.3. Adoption of IPSAS
2.3.2. The date of adoption of IPSAS is 1 January 2023 for all entities within the
scope of this manual. This date will be regarded as the date of adoption
irrespective of the previous basis of accounting that the entity used. From
that date entities will present transitional financial statements taking into
account transitional provisions below.
2.3.3. Regardless of the date of adoption, all reporting entities are required to
produce their first IPSAS fully compliant financial statements on or before
financial period ending 31 December 2025. By this date entities are required
to make an explicit and unreserved statement of compliance with IPSAS.
2.3.4. Entities will not be required to present comparative information in their first
transitional financial statements following adoption of IPSAS on the set
adoption date. However entities that have applied accrual reporting before
the date of adoption may present comparative information in line with their
previous basis of accounting.
2.3.5. Where entities produce transitional financial statements, they will be
required to produce full financial statements using their previous basis of
accounting. Entities will only stop producing financials statements based on
the previous accounting basis when they produce a full IPSAS compliant
financial statement.

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2.4. Exemption that affect fair presentation and compliance with accrual
basis IPSAS
2.4.2. IPSAS 33 provides three year transitional relief period for the recognition
and/or measurement of assets and liabilities.
2.4.3. These transitional reliefs will only apply to central government entities as
listed in Group 1 Appendix 9. Regardless of IPSAS providing three year
transitional relief, central government entities are required to be fully
compliant with IPSAS in their 2025 financial statements.
2.4.4. In transitioning to IPSAS, the following is the order of priority that should be
followed in compliance with recognition and measurement requirements:
a. Property, plant and equipment (see IPSAS 17, Property, Plant and
Equipment);
b. Inventories (see IPSAS 12, Inventories);
c. Investment property (see IPSAS 16, Investment Property);
d. Biological assets and agricultural produce (see IPSAS 27, Agriculture);
e. Intangible assets (see IPSAS 31, Intangible Assets);
f. Revenue (see IPSAS 23, IPSAS 9, IPSAS 11);
g. Financial instruments (see IPSAS 41, Financial Instruments);
h. Right-of-use assets and the related lease liabilities (see IPSAS 43,
Leases);
i. Defined benefit plans and other long-term employee benefits (see
IPSAS 39, Employee Benefits);
j. Service concession assets and the related liabilities, either under the
financial liability model or the grant of a right to the operator model (see
IPSAS 32, Service Concession Arrangements: Grantor);
k. Social benefits (see IPSAS 42, Social Benefits);
l. All other remaining standards.
2.5. Exemptions that do not affect fair presentation and compliance with
accrual basis IPSASs

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2.5.2. All other reporting entities except for central government are required to
apply exemptions that do not affect fair presentation and compliance with
IPSAS.
2.5.3. The only exception to above is in the recognition and measurement of
infrastructure assets. If entities had not recognised infrastructure assets in
the previous basis of accounting, they are permitted to continue so until they
have completed IPSAS implementation on other elements of the financial
statements.
2.5.4. Entities are only required to recognise and measure infrastructure assets
on completion of implementing all other requirement of accruals IPSAS.
This relief does not invalidate the requirement to be fully compliant by 31
December 2025.
2.5.5. IPSAS 33 allows use of deemed costs to measure assets and liabilities
where reliable cost information about the assets and liabilities is not
available. The deemed cost would be the fair value on the date of adoption.
Deemed cost can be applied for the following:
a. Inventory (see IPSAS 12).
b. Right-of-use assets (see IPSAS 43).
c. Property, plant and equipment (see IPSAS 17).
d. Intangible assets, other than internally generated intangible assets (see
IPSAS 31) that meets:
(i) The recognition criteria in IPSAS 31 (excluding the reliable
measurement criterion); and
(ii) The criteria in IPSAS 31 for revaluation (including the existence of an
active market);

e. Financial Instruments (see IPSAS 41); or

f. Service concession assets (see IPSAS 32).

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2.5.6. Entities that have applied hyperinflation reporting in their previous
accounting bases, should use inflation adjusted numbers as opening
balances on the date of adoption
2.5.7. Reporting Entities are required to recognise an investment in entities that
they control, jointly control or have significant influence. An investment
register should be kept that clearly identifies all such entities where there is
control, joint control or significant influence including how such assessment
of control, joint control or significant influence has been done. Such
investments are measured based the net assets value of the that entity on
the date of IPSAS adoption as the deemed cost. The net assets value
should be based on the latest statements of financial position of the
investee. Where the investee has negative net assets, the investment value
should be limited to zero.

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3. Presentation of the annual report

3.1. Objective
3.1.1. This chapter sets out the requirements for preparation and publishing of
the annual report by reporting entities.
3.1.2. The objective of the annual report is to provide information to users for
accountability and decision-making purposes.
3.2. The annual report
3.2.1. The Reporting Entity shall prepare and publish an annual report
annually.
3.2.1. The annual report and financial statements must be prepared and
published as a single document unless Treasury has specifically agreed
otherwise.
3.2.2. The annual report at a minimum shall include:
a. complete financial statements
b. statement of responsibility and the accuracy of the annual report
c. governance statement
d. annual service performance report; and
e. the audit opinion and report
3.2.3. Reporting entities are encouraged to present sustainability and
integrated reports as part of the annual report.
3.2.4. Although auditors are required to provide an opinion on the financial
statements, they will also review other reports contained in the Annual
Report for consistency with other information in the financial statements.
3.3. Statement of responsibility and the accuracy of the annual report
3.3.1. The statement of responsibility and accuracy of the annual report shall
be signed by the executive head of the reporting entity (i.e Chief Executive
Officer, Town Clerk, Permanent Secretary) and the accounting officer
where the accounting officer is not the executive head.
3.3.2. The report should clearly communicate;
a. that the annual report is complete, accurate and free from omissions

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 b. that the annual report has been prepared in accordance with the
Zimbabwe Financial Reporting Manual
c. that financial statements have been prepared in compliance with
International Public Sector Accounting Standards (IPSAS)
d. the responsibility of the accounting officer in relation to the financial
statements
e. that the financial statements have been audited
f. that in their opinion the annual report fairly reflects the operations, the
performance information and the financial affairs for the year ended.
3.3.3. An Example of Statement of responsibility and the accuracy of the
annual report is illustrated in the table below:

Model Statement of responsibility and the accuracy of the annual report

To the best of my knowledge, I confirm the following;

-all information and amounts disclosed in the Annual Report are consistent with the
Annual Financial Statements audited by the Auditor-General.
-the Annual Report is complete, accurate and free from any omissions. This report
has been prepared in accordance with the Zimbabwe Financial Reporting Manual
issued by National Treasury.
-the Annual Financial Statements included in this Annual Report were prepared in
accordance with International Public Sector Accounting Standards (IPSAS).
-the Accounting Officer is responsible for preparing the Annual Financial Statements,
the Annual Performance Report, as well as the Annual Report and the judgements
contained therein.
-the Accounting Officer is also responsible for establishing and implementing a system
of internal controls that have been designed to provide assurance as to the integrity
and reliability of the performance information, and the Annual Financial Statements.
-the Auditor-General was engaged to express an independent opinion on the Annual
Financial Statements.

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In my opinion, the Annual Report fairly reflects the operations, the performance
information, the human resource information, and financial affairs of <Name of Entity>
for the financial year ended <Year End>.
Signed
………………………

3.4. Governance Statement

3.4.1. The reporting entity shall prepare a governance statement which will be
included as part of its annual report.
3.4.2. The governance statement shall contain at a minimum the following
information:
a. governance structures (i.e board and board committee
structures),
b. governance structure meetings (ie. board and board committee
meetings)
c. annual board evaluations,
d. internal Audit report,
e. report of the audit and risk committee,
f. enterprise risk management,
g. compliance with laws and regulations,
h. fraud and corruption,
i. corporate social responsibility.
3.4.3. The Accounting Officer shall sign and date the Governance Statement.
3.5. Annual Service Performance Report
3.5.1. The reporting entity shall prepare an annual service performance report
which will be included as part of its annual report.
3.5.2. The annual service performance report shall contain at a minimum the
following information:

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 a. vision and mission of the reporting entity,
b. overview of the reporting entity,
c. nature of the service that the entity provides,
d. the regulatory environment in which the entity operates,
e. key strategic objectives,
f. analysis of performance against key strategic objectives.
3.5.3. In presenting analysis of performance against key strategic objectives,
the following information should be displayed:
a. Service performance objectives;
b. Performance indicators; and,
c. Total costs of the services.
3.5.4. With respect to performance indicators and the total costs of the
services, the entity should display:
a. Planned and actual information for the reporting period;
and
b. Actual information for the previous reporting period.

3.5.5. Where service performance information includes information that is

also in the financial statements, cross-references to the financial
statements should be presented so that users can assess the information
within the context of the financial information reported in the financial
statements.











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4. Presentation of Financial Statements

4.1. Applicable Standards

4.1.1. IPSAS 1 Presentation of Financial Statements and IPSAS 24
Presentation of Budget Information in Financial statements applies, as
interpreted, to all reporting entities covered by the requirements of the
ZFRM.

4.2. Objective
4.2.1. The objective of this section is to provide guidance on the basis for
presentation of general purpose financial statements to ensure
comparability with the entity’s financial statements of previous periods and
with the financial statements of other entities.

4.3. Statement of Financial Performance

4.3.1. Reporting entities shall prepare a Statement of Financial Performance in

accordance with the format shown in [Appendix 2].

4.3.2. In applying IPSAS 1, reporting entities should be aware of the following

general interpretation for the public sector context:
a. profit on disposal of an asset can be accounted for as negative expenditure
to the extent that the profit represents a final adjustment of depreciation.
Where this is not the case, profit on disposal should be accounted for as
other income.
b. expenses will be presented on the face of the Statement of Financial
Performance by nature of expenses thus the option to present by function
of expense is withdrawn. However entities are required to disclose in the
notes expenses by function so that it is clear to the users to which
program/function the expense relates.

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4.4. Statement of Financial Position
4.4.1. IPSAS 1 requires reporting entities to prepare a Statement of Financial
Position and provides guidance on the minimum presentation required on
the face of the statement of financial position.
4.4.2. The flexibility provided in IPSAS 1.90 to select the order of presentation
of line items on the Statement of Financial Position is withdrawn. To ensure
consistency and comparability, reporting entities should prepare their
Statements of Financial Position in accordance with the format shown in
Appendix 1, with additional line disclosure as necessary so as properly to
reflect the entity’s financial position and net Assets/Equity.
4.5. Statement of Changes in Net Assets/Equity
4.5.1. All reporting entities shall present a Statement of Changes in Net
Assets/Equity following the format shown in Appendix 3.
4.6. Presentation of a comparison of budget and actual amounts
4.6.1. Reporting entities are required to present a comparison of the budget
and actual amounts as a separate additional financial statement in line with
IPSAS 24 paragraph 14 thus the option to present comparison of budget
and actual amounts as an additional budget column is withdrawn.
4.6.2. All comparisons of budget and actual amounts shall be presented on a
comparable basis to the budget.
4.6.3. A template which entities are required to use is included in Appendix 5.
4.7. Reconciliation of Actual Amounts on a Comparable Basis and Actual
Amounts in the Financial Statements
4.7.1. In line with IPSAS 24 paragraph 47, reporting entities are required to do
a reconciliation where the financial statement and the budget are not
prepared on a comparable basis.
4.7.2. The reconciliation should be disclosed on the face of the statement of
comparison of budget and actual amounts.

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4.8. Comparative information
4.8.1. IPSAS 1 provides guidance on the comparative information to be
disclosed in the financial statements.
4.8.2. The IPSAS 1 comparative information requirements should be applied
in full.

4.9. Reporting Period

4.9.1. The financial reporting period for all reporting entities shall be 1 January
to 31 December of each year.

4.10. Reporting Timelines

4.10.1. The reporting entity shall present financial statements within the
timelines the Public Financial Management Act(22:19).
4.11. Notes to the financial statements

4.11.1. IPSAS 1 requires that entities present a summary of accounting

policies which will disclose the measurement basis used in preparing
financial statements and all other accounting policies that are significant to
the understanding of the financial statements. Entities should only disclose
accounting policies only for items in their financial statements.

4.11.2. In presenting the notes, the following structure of notes shall be

followed by reporting entities :

a. Corporate information
b. Significant accounting policies
I. Basis of preparation
II. Basis of Consolidation.
III. Summary of significant accounting policies
IV. Changes in accounting policies and disclosures
V. Correction of an error.
c. Significant accounting judgements, estimates and assumptions
4.11.3. Further notes shall be provided as required by other IPSAS or as
necessary to provide additional information that is not presented on the

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 face of the Statement of Financial Position, Statement of Financial
Performance or Cash Flow Statement but is relevant to provide an
understanding of such statements.




























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5. Accounting Policies, Changes in Accounting Estimates and Errors

5.1. Applicable Standards

5.1.1. IPSAS 3 applies in full to all reporting entities and reportable activities
covered by the ZFRM.

5.2. Objective
5.2.1. The objective of this section is to provide guidance on the criteria for
selecting and changing accounting policies, together with the accounting
treatment and disclosure of changes in accounting policies, changes in
accounting estimates and correction of errors.

5.3. Interpretation of IPSAS 3 for the Zimbabwe Public Sector context

5.3.1. IPSAS 35, Consolidated Financial Statements, requires that uniform

group accounting policies should generally be used in preparing the
consolidated financial statements. If members of the group use accounting
policies other than those adopted in the consolidated financial statements,
appropriate adjustments are made when preparing the consolidated
financial statements.

5.3.2. Reporting entities within the remit of the ZFRM and those that will be
consolidated will be expected to observe the broad principles and policies
set out in the ZFRM.

5.3.3. Observance of the ZFRM should therefore result in sufficient uniformity

to satisfy the requirements of the standard, but it is for preparers of the
consolidated financial statements to ensure an appropriate degree of
consistency within their reporting group. This does not preclude variation
in the specific application of policies, for example, the selection of
appropriate useful economic lives for calculating depreciation, in order to

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 reflect the particular business circumstances of individual reporting
entities.

5.3.4. Compliance with the requirements of the ZFRM as set out above will
provide sufficient convergence of accounting policies for the purposes of
any wider government consolidations.
5.3.5. The following requirements should be observed:
a. reporting Entities should consult the Treasury about any novel or
contentious accounting policies they are considering adopting to reflect their
specific circumstances: and
b. where preparers consider it necessary to adjust retrospectively for changes
in accounting policies or material errors, they should do so after consulting
Treasury













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6. Cash Flow Statement

6.1. Applicable Standards

6.1.1. IPSAS 2 applies in full to all reporting entities covered by the

requirements of the ZFRM.

6.2. Objective

6.2.1. The objective of this section is to provide information about the historical
change in cash and cash equivalents of an entity by means of a Statement
of Cash Flows that classify cash flows during the period from operating,
investing, and financing activities.

6.3. Interpretation of IPSAS 2 for the Zimbabwe Public Sector context

6.3.1. The following requirements should be observed:

a. the cashflow statement should be prepared using the indirect method
thus the option to present the cashflow using the direct method is
withdrawn. Entities however may present as additional disclosures, the
operating activities using the direct method in the notes to the financial
statements.
b. the notes to the Cash Flow Statement should be placed within the
notes to the financial statements, and not on the face of the Cash Flow
Statement.
c. in analysing capital expenditure and financial investment, reporting
entities should adjust for debtors and creditors relating to capital
expenditure and those relating to loans issued to or repaid by other
bodies.






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7. The Effects of Changes in Foreign Exchange Rates

7.1. Applicable Reporting Standards

7.1.1. IPSAS 4 applies, as interpreted, to all reporting entities covered by the

ZFRM.

7.2. Objective of IPSAS 4

7.2.1. The objective of IPSAS 4 is to prescribe how to include foreign currency

transactions and foreign operations in the financial statements of an entity
and how to translate financial statements into a presentation currency.

7.2.2. An entity may carry on foreign activities in two ways. It may have
transactions in foreign currencies, or it may have foreign operations. The
principal issues are which exchange rate(s) to use and how to report the
effects of changes in exchange rates in financial statements.

7.3. Interpretation of IPSAS 4 for the Zimbabwe Public Sector context

7.3.1. Reporting entities shall apply the requirements of IPSAS 4 in

determining the functional currency.

7.3.2. The presentation currency for all reporting entities based in Zimbabwe
shall be the Zimbabwe dollar.
7.3.3. Reporting entities outside Zimbabwe shall apply the requirements of
IPSAS 4 in determining the functional currency. Such entities will use the
Zimbabwe dollar as the presentation currency.

7.3.4. Entities will use the Reserve Bank of Zimbabwe official rate as directed
by Treasury in converting/translating foreign currency balances and
transactions to local currency.

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8. Financial Reporting in Hyperinflationary Economies

8.1.1. IPSAS 10 applies, as interpreted, to all reporting entities covered by the

requirements of the ZFRM.

8.2. Objective

8.3. The objective of this section is to provide guidance on the accounting treatment
in the consolidated and individual financial statements of an entity whose
functional currency is Applicable Standards

8.3.1. the currency of a hyperinflationary economy. IPSAS 10 also specifies

the accounting treatment where an economy ceases to be
hyperinflationary

8.4. Interpretation of IPSAS 10 for the Zimbabwe Public Sector context

8.4.1. As all entities covered by the ZFRM have a functional currency of the
Zimbabwe dollar, the Public Accountants and Auditors Board (PAAB) will
notify classification of the economy as hyperinflationary or out of
hyperinflation if appropriate.

8.4.2. In the reporting period in which a reporting entity first adopts IPSAS 10,
the entity shall apply the requirements of IPSAS 10 as if the economy had
always been hyperinflationary.

8.4.3. Reporting entities should use the Consumer Price indices (CPI) provided
by the Zimbabwe National Statistical Office or as directed by Treasury.

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9. Events after the Reporting Period

9.1. Applicable Standards

9.1.1. IPSAS 14 applies, as interpreted, to all reporting entities covered by the

requirements of the ZFRM.

9.2. Objectives

9.2.1. The objectives of this section are to prescribe when an entity should
adjust its financial statements for events after the reporting period and
what disclosures should be given about events after the reporting period,
and to require disclosure of the date when the financial statements are
authorised.

9.3. Interpretations of IPSAS 14 for the Zimbabwe Public Sector context

9.3.1. The following interpretations of IPSAS 14 for the Zimbabwe public sector
context apply:
a. the date of authorisation of financial statements is the date that
the accounting authority/board/governance structure’s approves
the financial statements.
b. The date of authorisation for issue must be included in the Annual
Report and financial statements.





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10. Related party disclosures

10.1. Applicable Standards

10.1.1. IPSAS 20 applies, as interpreted, to all reporting entities covered

by the ZFRM.

10.2. Objective of IPSAS 20

10.2.1. The objective of this section is to require the disclosure of the

existence of related party relationships, and the disclosure of financial
information about transactions between the entity and its related parties in
certain circumstances. This information is required for accountability
purposes, and to facilitate a better understanding of the financial position
and performance of the reporting entity.

10.3. Interpretation of IPSAS 20 for the Zimbabwe Public Sector context

10.3.1. In applying IPSAS 20, reporting entities should be aware of the

following interpretations for the Zimbabwe public sector context:
a) key management personnel;
b) reporting entities should disclose details of material transactions
between the reporting entity and individuals who are regarded as related parties
c) reporting entities should disclose the names of the main entities within
government with which the reporting entity has had dealings (no information
needs to be given about these transactions);
e) in considering materiality, regard should be given to the definition in
IPSAS 1. Materiality should be judged from the viewpoint of both the entity and
the related party.

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 10.4. Examples of related party relationships and types of transactions
10.4.1. The table below shows examples of related parties for different
entities. The information in the table contains examples and is not
exhaustive.
Table 10a
Name of Example related parties Types of transactions with
entities related party

key management personnel • Remuneration and

and close members of the condition of service
Minister, Deputy Minister, benefits
Permanent secretary, Chief • Business transactions
Directors, Directors, their
spouses, children and entities

Central controlled by them.

Government State Owned Enterprises • Payments on behalf of

(SOEs) under the Ministry’s ministry by State Owned
purview Enterprise
• Central Government
borrowings/lending’s on
behalf of SOE
• Grants to SOE

State Owned Board of Directors, Chief • Remuneration and

Enterprises Executive Officer and condition of service
Executive management, their benefits
spouses, children and entities • Business transactions
controlled by them
Minister and Permanent
secretary for the parent
ministry

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 • Parent Ministry • Payments on behalf of
• Subsidiaries and ministry by State Owned
associates Enterprise
• Central Government
borrowings/lending’s on
behalf of SOE
• Grants to SOE

Local Authorities Mayor, Councillors, Town Condition of service benefits

clerk, Chairman, Chief and their remuneration,
Executive Officer, Directors stands and hiring council
and family members and the properties
business they control Business transactions
Minister and permanent
secretary or responsible
ministry

Responsible Ministry Grants by ministry


10.4.2. Appendix 6 has been included with illustrative disclosure of the related party
note.












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11. Borrowing Costs

11.1. Applicable Standards

11.1.1. IPSAS 5 applies, as interpreted, to all reporting entities covered

by the ZFRM.

11.2. Objective

11.2.1. The objective of IPSAS 5 is to prescribe the accounting treatment

of borrowing costs. The Standard generally requires the immediate
expensing of borrowing costs but permits the capitalisation of borrowing
costs that are directly attributable to the acquisition, construction, or
production of a qualifying asset.

11.3. Interpretation of IPSAS 5 for the Zimbabwe Public Sector context

11.3.1. In applying IPSAS 5, reporting entities shall follow the benchmark
treatment set out in IPSAS 5.14 and expense all borrowing costs.
11.3.2. This means that the alternative treatment to capitalise borrowing
costs is withdrawn for all reporting entities
11.3.3. Reporting entities that have capitalised borrowing costs in their
previous accounting bases before the date of adoption, should change the
accounting policy on borrowing costs from the date of adoption of IPSAS.
Opening balances which include borrowing costs capitalised before the
adoption date will be considered as correct deemed cost on the date of
adoption.

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12. Measurement

12.1. Applicable IPSAS Standards

12.1.1. IPSAS 46 Measurement applies as interpreted by the ZFRM. The
following standards will have a direct impact in the on measurement :
a. IPSAS 1 Presentation of financial Information
b. IPSAS 12 Inventories
c. IPSAS 16 Investment Property
d. IPSAS 21 Impairment of Non-Cash Generating Assets
e. IPSAS 26 Impairment of Cash-Generating Assets
f. IPSAS 27 Agriculture Activity
g. IPSAS 31 Intangible Assets
h. IPSAS 33 First Time Adoption of IPSAS
i. IPSAS 44 Non-current assets held for sale
j. IPSAS 45 Property, Plant and Equipment
k. IPSAS 46 Measurement

12.2. Objective

12.2.1. The goal of this section is to assist entities with the application
principles of IPSAS 46 and also to give a guidelines for the performance
of valuations.

12.3. Purpose of valuation

12.3.1. Valuation of assets will be required at two distinct levels:

a. First time adoption - Entities have an option to use deemed cost on the date of
adoption of IPSAS where cost information is not available or unrealizable.
Deemed cost are based on the fair value or current operational value of such
assets on the date of adoption

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b. Subsequent Measurement - Select accounting policies for various assets will
require entities to value asset at fair value or current operational value at the
end of the reporting period.

12.4. Assets to be valued

12.4.1. The list below is a non-exhaustive list of assets that will be

subjected to valuation:
a. Land
b. Buildings
c. Infrastructures
d. Land Improvements
e. Transport equipment
f. Information, Computer & Telecommunication (ICT) Equipment
g. Machinery & Equipment
h. Biological assets
i. Furniture, fixtures, and fittings
j. Heritage assets
k. Security, Military and Weaponry System
l. Assets Under Construction
m. Intangible assets
n. Inventories (Finished and WIP)

12.5. Currency of valuation

12.5.1. Entities will determine the functional currency based on the
assessments of underlying transactions. Valuations of non-financial assets
should be done in the functional currency of the reporting entity.
12.5.2. For reporting purposes, entities are required to present their
financial statements in ZWL thus any assets reported in foreign currency
will need to be translated to ZWL on reporting date.

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12.6. Considerations in planning for a valuation
12.6.1. Key considerations in doing valuation will be based on:
a. Complexity of the valuation – Complexity of valuation will determine the need
to engage experts by reporting entities. Assets like land, buildings and
infrastructures will need to be valued by experts whilst assets like furniture etc
may not require much expertise. Management is required to exercise
judgement in the determination on who can perform a valuation and engage
with auditors
b. Objectivity – for a valuation to be relied upon, it must be objective. There should
be measures put in place by management to ensure that valuation is done in
an objective manner.
c. Cost – cost is an important element but the need to reduce costs must not come
at the expense of the need to be accountable and transparent in the use of
public resources.

12.7. Who can perform a valuation

12.7.1. Responsibility for obtaining a valuation of asset(s) or liability(ies)
for financial accounting and reporting purposes rests with the preparer of
the relevant financial statements. However, the valuation should be carried
out by an individual (or organization) with the relevant expertise to provide
a valuation that faithfully represents the values of the asset(s) or
liability(ies) in the financial statements.
12.7.2. The nature of the asset(s) or liability(ies) will guide the preparer
of the financial statements in determining what field of expertise is
required. For example: the measurement of liabilities arising under a
pension scheme will require the input of an actuary; the measurement of
medical plant and equipment assets will involve discussions with clinicians
and procurement experts; those responsible for the management of
vehicle fleets will need to be involved with the valuation of those fleets; the
measurement of any legal claims against the entity (liabilities) will involve
discussions with the entity’s legal advisors; the valuation of infrastructure

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 assets will involve engineers and surveyors; and the valuation of land and
buildings will need to be carried out by appropriately qualified surveyors.

12.8. Valuation Techniques

12.8.1. For all assets to be that are subsequently measured at current
value, reporting entities will be required to measure the current value
amount as being the current operational value if the asset is being held for
its operational capacity and at fair value if the asset is being for its financial
capacity.
12.8.2. For assets which have dual use i.e used for both operational and
financial capacity management must apply judgement on whether to use
fair value or current operational value. For an asset to be held for its
financial capacity, the use for its operational capacity should be
insignificant i.e less than 20%.
12.8.3. The determination of whether the current value should be based
on fair value or current operational value is done on an asset-by-asset
basis and not at asset class level. Therefore, it is possible that assets in
the same class be valued differently
12.8.4. IPSAS 46 Measurement requires that assets acquired, or
liabilities assumed not in an orderly transaction be recognized at deemed
cost which is essentially the current value of such assets or liabilities. In
determining the current value measure to be used for assets (current
operational value or fair value) entities are required to consider where
those assets will be held for operational capacity or financial capacity.
12.8.5. IPSAS 46 gives circumstances of where the transaction price may
not be observable or may not faithfully present relevant information. Below
we analyze and give examples for such circumstances:

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Table 12a

Circumstance Example

Transaction prices that have concessionary • Loans with very nominal or no interest
element.
• Subsidies prices of raw materials or
inputs

Assets transferred to the entity free of charge by a • Asset donations

government or donated to the entity by another
• Land distributed
party;

Liabilities imposed by legislation or regulation; Operating/business licences, permits

Liabilities to pay compensation or a penalty arises All various forms of fines

from an act of wrongdoing or breach of contract;

Transaction prices are affected by relationships Related party transactions

between the parties, or by financial distress or other
duress of one of the parties; and

Transaction prices are not available on the date of Inflation impacted prices
adoption of IPSAS as defined in IPSAS 33.
Assets prices affected by currency
conversions

12.8.6. Entities should clearly document their assessment of transactions

not in orderly market and any judgement make concerning them. Unless
the treatment of the difference between deemed cost and any
consideration given or received is dealt with by another standards, entities

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 should treat the revenue or expense arising as a measurement gain or
loss.
12.9. Subsequent measurement model

12.9.1. The diagram below shows the different measurement models

͘ ^ƵďƐĞƋƵĞŶƚ
DĞĂƐƵƌĞŵĞŶƚ

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DŽĚĞů
ƵƌƌĞŶƚsĂůƵĞ
DŽĚĞů

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ĂƐĞƐ ,ŝƐƚŽƌŝĐĂůŽƐƚ
ĂƐŝƐ
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sĂůƵĞ
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&ĂŝƌsĂůƵĞ

dĞĐŚŶŝƋƵĞƐ DĂƌŬĞƚ ŽƐƚ /ŶĐŽŵĞ DĂƌŬĞƚ ŽƐƚ /ŶĐŽŵĞ

12.9.2. Attributes of each of the measurement basis

Table 12b

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12.10. Summary guidance in Current operational value
12.10.1. Current operational value is the amount the entity would pay for
the remaining service potential of an asset at the measurement date.
12.10.2. Reflecting the remaining service potential of an asset? Service
potential is the capacity to provide services that contribute to achieving the
entity’s policy objectives. Service potential enables an entity to achieve its
objectives without necessarily generating net cash inflows. To reflect the
remaining service potential, the age, functionality, and condition of the
asset need to be reflected in the measurement. For example, a new asset
is expected to have more remaining service potential than an asset that is
midway through its service life. The age of the asset is correlated with the
remaining service potential. Reflecting the age of the asset in the
measurement, ensures the remaining service potential is estimated
appropriately. The current age, functionality, and condition of an asset is
reflected in the asset valuation by considering physical, functional,
economic obsolescence.
a. Physical Obsolescence – Physical obsolescence relates to any loss of service
potential due to the physical deterioration of the asset or its components
resulting from its age and use. In assessing physical obsolescence, an entity
should also consider any probable future routine, regular maintenance, as such
maintenance may provide insight into the asset or its components’ useful lives
and their rate of deterioration.
b. Functional Obsolescence – Functional obsolescence relates to any loss of
service potential resulting from inefficiencies in the asset that is being valued
compared with its modern equivalent – is the asset suitable for its current
function? Functional obsolescence might occur because of advances or
changes in the design and/or specification of the asset, or because of
technological advances. For example, advances in health care technology
might mean that the asset in use is outdated, or technological advances in
educational material could mean that chalk/white boards would be replaced by

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 digital screens. Such advances will need to be incorporated into the
assessment of functional obsolescence.
c. Economic (or External) Obsolescence – Economic obsolescence relates to any
loss of utility caused by economic or other factors outside the control of the
entity. This may include, for example, capacity that is excess to the usage
requirements of the existing asset.

12.10.3. Calculating the current operational value of an asset when there

is no active market? Current operational value can be determined using a
price from an inactive market when the price for an identical asset in an
active market is unavailable. Generally, if the price for an identical, or
similar, asset is unavailable in an active market, it will also be unavailable
in an inactive market and current operational value will be determined
based on the cost to construction or develop an identical, or similar, asset
(i.e., the cost approach).
12.10.4. Is the currently unused capacity of an asset excluded from the
current operational value of an asset? It depends. Any part of the asset
that is currently unused is evaluated to determine whether the unused part
is held for an operational purpose associated with the asset. This may
occur when an asset has security requirements, legal or other restrictions,
or when the unused portion is necessary for future use. For example, a
community center in a municipality prone to natural disasters has a
capacity of 700 individuals even though only 200 individuals currently use
the location on a regular basis. The unused portion still has operational
capacity because the building has a dual purpose. It is operated as both a
community center and as a shelter for the community in the event of a
natural disaster. The currently unused capacity of 500 individuals is still
required for the municipality’s broader operational purpose and so the
whole asset is included in the measurement of its current operational
value.

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12.11. Minimum information content of a valuation report

12.11.1. At a minimum the following information must be contained in a

valuation report
a. Asset description
b. Confirmation/non-confirmation of physical verification of the asset
c. Value of the property
d. Assessment of remaining useful life of assets
e. Assessment of residual values
f. Any evidence of impairment of asset e.g damage or obsolescence
g. Any improvements on the property from the last valuation
h. Locality and environment
i. Previous property valuation
j. Valuation methodology
k. Key assumptions
l. Restrictions on assets or encumbrances or caveats on the asset
m. Valuation standards used
n. Validity period
o. Unlawful use

12.12. Other issues

a. Unit of Account – The unit of account should be clear in the valuation report for
example if in valuing a building, the value must indicate if the value includes
other features in and around the building for example installed air conditioning,
paving outside, Durawall, installed solar system etc In some cases, an asset
being used for both cash-generating and non-cash-generating purposes may
be an indicator there each part of the asset should be measured separately and
measured using a different measurement basis. For example, the part of the
asset used for operational purposes is measured using current operational
value, and the part of the asset used for financial purposes is measured using
fair value. This may occur when one wing of a hospital generates a financial

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 return by charging for health care services, while another wing of a hospital is
held only for its operational capacity where health care services are delivered
free of charge to citizens.
b. Land and buildings - Land and building values should be reported separately in
the valuation report. Land values should also be separated from any
improvement in the land
c. Net basis - Valuation will be presented in the financial statement on a net basis
i.e Net replacement cost. Whilst valuers are not precluded from showing the
gross values, the valuation report should clearly state the fair value or current
operation value on a net basis
d. Measurement and valuation experts - IPSAS 46 Measurement will be the
guiding standards on valuations. Valuers are expected to fully knowledgeable
of the requirements of this standards particularly the determination of “Current
Operational Value” and the traditional “Fair Value”.

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13. Investment Properties

13.1. Applicable Standards

13.1.1. IPSAS 16 applies as interpreted to all reporting entities covered

by the ZFRM that hold (or are constructing or developing) properties only
for the purpose of earning rentals or for capital appreciation or both.

13.2. Objectives of IPSAS 16

13.2.1. The objective of IPSAS 16 is to prescribe the accounting

treatment for investment property and related disclosure requirements.

13.3. Interpretation of IAS 40 for the Zimbabwe public sector context

13.3.1. In applying IPSAS 16, reporting entities should be aware of the

following interpretation for the Zimbabwe public sector context.

13.4. Interpretation of IPSAS 16 for the Zimbabwe Public Sector context

a) All investment property should be accounted for under the fair value
model – that is, the option given in IPSAS 16 to adopt the cost model
has been withdrawn.
b) Buildings or land for which the Reporting Entity provides to other entities
or individuals to use for no consideration or for very minimal payments
(less than 50% of market rental) will not be considered as investment
property but rather accounted for in IPSAS 17.
c) In line with the requirements of IPSAS 16, land for which there is no
decided use will be accounted for as Investment property.

13.5. Guidance on maintenance of asset registers

13.5.1. An asset register is a complete and accurate list of assets

controlled by the reporting entity that is regularly updated and validated.

13.5.2. It is crucial in managing assets information and normally will

contain information beyond that required for financial reporting. For each

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 Investment Property, an effective asset register should contain the
following information:
a. name of the Investment Property;
b. description;
c. unique asset number;
d. date when the asset is available for use;
e. expected useful life;
f. date investment property useful life last reviewed;
g. acquisition value; and
h. current fair Value
i. date of de-recognition.






















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14. Property, Plant and Equipment

14.1. Applicable Standards

14.1.1. IPSAS 45 Property, Plant and Equipment applies, as interpreted,

to all reporting entities covered by the ZFRM.

14.2. Objective
14.2.1. The goal of this section is to present relevant property, plant, and
equipment guidance in order for the reporting entities to adopt and apply a
comprehensive and consistent accounting treatment of property, plant,
and equipment across its entities.

14.2.2. IPSAS 45 Property, Plant, and Equipment provides the

fundamental requirements surrounding the classification, recognition,
measurement, and disclosure requirements of property, plant, and
equipment.

14.2.3. Property, plant and equipment (PPE) are tangible non-current

assets that are:
a. expected to be used in more than one reporting period and that can be used
in production, or for administration,
b. are held by the reporting entity for use in the production or supply of goods
or services, for rental to others, or for administrative purposes; and
c. are expected to be used during more than one reporting period.

14.3. Interpretation of IPSAS 45 for the Zimbabwe Public Sector context

14.3.1. The table 14a below shows PPE classes and the accounting
policy for subsequent measurement of such PPE classes. Appendix 11
provides guidance that should be followed by reporting entities in
determining useful life of different assets and the depreciation method.

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 Table 14a
Asset class Description Subsequent Frequency of
Measurement Revaluation
(Maximum)

Land The surface of the land that is Revaluation 5 years

not covered by water, which
is controlled by the entity.

Buildings An enclosed structure with a Revaluation 5 years

roof and walls.

Infrastructures An asset that is part of a Revaluation 10 years

network or the basic
physical and organisational
structures and facilities
needed for the operation of
a society or organisation

Land Improvements Enhancements to make the land Revaluation 5 years

more usable.

Transport equipment Equipment for moving people Cost N/A

and objects

Information, Computer Equipment that store, process, Cost N/A

& transmit, convert, duplicate,
Telecommunication or received electronic
(ICT) Equipment information

Machinery & Equipment Machinery and equipment other Cost N/A

than ICT and transport

Biological resources Assets that are living in nature Revaluation N/A

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Furniture, fixtures and Items of equipment that are used Cost N/A
fittings to furnish

Heritage assets It is an asset that has value Cost N/A

because of its contribution
to the nation, society,
knowledge and / culture

Security, Military and Machinery and equipment Cost N/A

Weaponry System acquired for security,
military purposes and
weapons systems.

Assets Under Includes all assets that as still Cost N/A

Construction being constructed by the
entity

14.3.2. For all assets to be revalued, reporting entities will be required to

measure the revalued amount as being the current operational value if the
asset is being held for its operational capacity and at fair value if the asset
is being for its financial capacity.
14.3.3. For assets which have dual use i.e used for both operational and
financial capacity management must apply judgement on whether to use
fair value or current operational value. For an asset to be held for its
financial capacity, the use for its operational capacity should be
insignificant i.e less than 20%.
14.3.4. The determination of whether the current value should be based
on fair value or current operational value is done on an asset-by-asset
basis and not at asset class level. Therefore, it is possible that assets in
the same class be valued differently
14.3.5. IPSAS 45 requires that revaluations be made with sufficient
regularity to ensure that the carrying amount does not differ materially from
that which would be determined using current value at reporting date. The
revaluation period set out in the table above represent maximum periods
thus entities can perform revaluations more regularly.

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 14.3.6. Revaluations need not to be performed for all assets in the same
class at the same time but must be done on a rolling basis that ensures all
assets are revalued within a short period of time and that there is no
selective revaluations.
14.3.7. In accounting for revaluations entities are required to eliminate
the accumulated depreciation against the gross carrying amount (This is
option (b) on IPSAS 45 para 31. Thus, the option to adjust the gross
carrying amount is withdrawn.
14.3.8. Reporting entities are allowed to set capitalisation thresholds for
the recognition of property, plant and equipment. Capitalisation thresholds
should be set in the context of materiality. Materiality might take the form
of amount or nature or both depending on the type of event or transaction.
Reporting entities need to consider the nature of their activities and the
type of asset base with which they operate to make the relevant
judgements. In applying materiality judgements on capitalisation threshold,
total un-capitalised expenditure should not exceed 0.25% (i.e 0.0025 X
Value of total assets) total assets in any given year. Uncapitalised assets
should be treated as inventory until they are derecognised.
14.3.9. Determination of control of an asset should be based on the
substance of the transaction and not merely the legal form. In line with
IPSAS 45, entities should consider the following factor for determination of
control:
a. Legal ownership
b. Access to the resource, or the ability to deny or restrict others to
access the resource;
c. The means to ensure that the resource is used to achieve its
objectives; or
d. The existence of enforceable right to service potential or the ability to
generate economic benefits arising from the resource.

14.3.10. Where control is contested or not clear, entities should seek

guidance from treasury on the appropriate accounting treatment. Schools,

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 deep tanks, clinic and such similar assets should be recognised based on
control which normally rests with the responsible authority.

14.3.3. The depreciation of an asset begins when the reporting entity has
obtained control over the asset and the asset is available for use. The
reporting entity will depreciate the asset as of the first day of the month the
control over the asset is obtained by the reporting entity. No depreciation
is charged in the month of disposal.

14.3.4. All assets are depreciated to a maximum of 99% of the cost of the
asset. When 99% of the cost has been depreciated, no depreciation should
be charged. The remaining 1% will be only charged on derecognition or
impairment of the asset.
14.3.5. Local Authorities are required to recognise all land where there
is a deed of grant by the state, title deeds, permit, cession or warrant.
Only state land that has been surveyed and whose location and size is
known can be recognised by the relevant ministry.
14.3.6. Where asset construction is completed in phases and certain
phases are put to use before the whole project is completed, the
completed phases would be treated as available for use thus should be
depreciated. For example, the government may have a project to
complete a 100km road and structures the project in such a way that
completed sections are opened to be used. The completed parts are
considered as available for use thus should be depreciated.
14.3.7. Books that meet the recognition criteria for PPE will be classified
under machinery and equipment.

14.3.8. The reporting entity should not recognize in the carrying amount
of an item of PPE the costs of the day-today servicing of the item. Day-to-
day servicing generally includes repair and maintenance costs, such as
the cost of labour and consumables, and may include the cost of small
parts. These costs are recognized in the statement of financial
performance as incurred. For example, heavy plant vehicles require

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 regular servicing and maintenance including brakes and tyres. However, a
major engine and transmission rebuild extending the vehicle life may
qualify as capitalizable major repairs and maintenance.
14.3.9. With regard to measuring the fair value of donated PPE, the
following procedures are recommended in descending order of best
practice:
a. the reporting entity should attempt to obtain a market price for similar
asset;
b. if market prices are not practically available, the entity should
reference recent acquisition costs for recent similar item;
c. if prices cannot be obtained from the market or internal purchasing
data, the entity should solicit an indication of value or cost from
donor. In this instance, the entity needs to assess the
reasonableness of the data provided and if deemed reasonable, use
the provided value or cost as a representation of fair value;
d. lastly, if the machinery and equipment in question is thought to have
significant values, solicit the services of a third party - a valuation
expert.
14.3.10. The cost of a self-constructed asset comprises any costs directly
attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management.
IPSAS 46 allows capitalization of costs to take place only in respect of the
period in which the activities necessary to bring the asset to location and
condition necessary for it to be capable of operating in the manner
intended by management are being undertaken. Thus capitalization
should cease when substantially all of the activities necessary to get the
asset “available for use” are complete, even if the asset has not yet been
brought into use. “Available for use” means when the physical construction
of the asset is complete even though routine administrative work might still
continue
14.3.11. Assets in transit are those assets that are controlled by the
reporting entity but have not yet been delivered to their final destination in

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 which they will be fully used for their intended purpose. Assets in transit
will be subject to depreciation when the reporting entity gains control over
them and are available for use.

14.3.12. Leasehold improvements to land and buildings are valued at cost

and recognized as assets based on the threshold guidance. They shall be
pre-designated as capital improvement projects. Internal labour costs
incurred during upgrades and improvements will be capitalized when they
are specific to the project and can be discerned as part of the particular
asset. Leasehold improvements must be depreciated over the remaining
lease term. The term of the lease includes any options, where there is a
reasonable expectation at the commencement of the lease that the option
will be exercised.
14.3.13. Reporting entities will be required to recognized heritage assets
as part of PPE except where the cost or the fair value of the assets cannot
be measured reliably. Where information about the cost or fair value
becomes available, heritage assets should be recognised from that date.
Subsequent expenditure on heritage assets that meets the recognition
criteria of PPE should be capitalised regardless of whether the underlying
heritage asset was recognised.
14.3.14. Heritage asset with an indefinite useful life will not be depreciated
but will need to be tested for impairment annually. For heritage assets not
recognised, reporting entities should include a high-level description of
significant heritage assets and / or transactions in the notes to the financial
statements and also why the cost or fair value could not be determined.
The high-level summary description on holdings and acquisitions may be
presented in the notes under these classes:
a. real Estate and Monuments;
b. works of Art;
c. books and Maps; and
d. other heritage assets.
14.3.15. Appendix 8 provide illustrative disclosure of the PPE note.

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 14.3.16. An asset register is a complete and accurate list of assets
controlled by the reporting entity that is regularly updated and validated. It
is crucial in managing assets information and normally will contain
information beyond that required for financial reporting. For each PPE
asset, an effective asset register should contain the following information:

a. name of the PPE;

b. asset class
c. description;
d. unique asset number;
e. cost of the asset
f. date when the asset is available for use;
g. expected useful life;
h. date PPE useful life last reviewed;
i. Source (purchased, donated, forfeited)
j. depreciation method (straight line);
k. location of asset
l. Date of de-recognition.

14.4. Considerations to distinguish a building from machinery and

equipment

a. Upon installation of the item, if the intention to eventually remove and reuse the
item then the item is classified as machinery and equipment.
b. If the item cannot be removed from the building without causing significant
damage to the building or the item, then the item is part of a component of the
building.
c. If the item is typically found in a building and typically included as part of the
original construction (items such as heating and air-conditioning, plumbing
fixtures, cabinetry, doors, and general-purpose lighting) then they are part of
the building
d. If the cost of removal exceed the cost or value of the item, then the item is part
of the building.

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 e. Once removed, if the item is typically reinstalled in another building then it will
be machinery and equipment
f. If the item can be operated independent of the building or easily reinstalled in
a different building without incurring installation costs that are substantially
greater than the original cost of installation, then the item is machinery and
equipment.

14.5. Considerations to distinguish an infrastructure asset from

machinery and equipment

14.5.1. Parking lots, roads, and air fields are generally considered long-
lived improvements that are made to land. As none of these are installed
with the intent of being removed and reinstalled elsewhere, nor are they
able to be removed without significant damage to the item, based on the
criteria described for a building, these items should be recognized as
infrastructure assets. The following is a list of criteria that can be used in
distinguishing infrastructure assets from machinery and equipment.
a. Upon installation or development of the item, if the intention is to eventually
remove and reuse the item, then the item is machinery and equipment.
b. If the item cannot be removed from the land without causing significant damage
to the item, then the item is an infrastructure asset.
c. If the cost of removal exceed the cost or value of the item then the item is an
infrastructure asset.

14.6. Considerations to distinguish building from infrastructure assets

a. Upon installation of the item, if the majority of the item imbedded within the
confines of the building structure, then the item is part of the building.
„Ǥ If the destruction or demolition of the building render the item unusable or
destroy the item altogether, then item is part of the building.


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15. Impairment of Non-Cash-Generating Assets

15.1. Applicable Standards

15.1.1. IPSAS 21 applies, as interpreted, to all reporting entities covered
by the ZFRM.
15.2. Objective of IPSAS 21
15.2.1. The objective of IPSAS 21 is to ensure that assets are carried at
no more than their recoverable amount. An asset is carried at more than
its recoverable amount if its carrying amount exceeds the amount to be
recovered through use or sale of the asset. If this is the case, the asset is
described as impaired, and the Standard requires the recognition of an
impairment loss. In other words, an impairment reflects a permanent
diminution in the value of an asset as a result of a clear consumption of
economic benefits or service potential. Downward revaluations resulting
from changes in market value do not necessarily result in an impairment.
15.3. Interpretation of IPSAS 21 for the Zimbabwe Public Sector context
15.3.1. Development expenditure that is directly linked to a tangible non-
financial asset should be impaired only where the tangible non-financial
asset becomes impaired. Where the intangible asset relates to a group of
tangible non-financial assets, any impairment will be charged only where
the entire group is impaired and will be proportionate to the impairment of
the group of tangible assets. For example, development expenditure
related to a fleet of aircraft will be impaired only where the entire fleet is
impaired and not if less than the whole fleet is impaired.
15.3.2. Abandonment of assets during construction as a result of a
management decision to abandon the construction process (i.e.,
management decides that it no longer requires the facility under
construction) is a type of impairment where the construction costs to date
are completely written off or substantially written off to reflect reduced
utility. This category includes the abandonment of software assets during
construction.

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 15.3.3. Use of asset for lower specification purpose may indicate that an
asset is impaired. Over specification of assets (Gold plating) is the
unnecessary over-specification of assets at the point at which the asset is
first constructed or purchased. Gold plating of assets may lead to an
impairment either because the asset is valued at its utility value to the
business, or because the gold plating cannot be reflected in the
recoverable amount. Care should be taken not to impair assets as being
gold plated where they are of a high specification by necessity. For
example, the high specification of embassies is in part a result of security
and other factors relating to location and the needs of a representational
building. The higher specification due to justified security and operational
considerations should not lead to an impairment down to the value of
ordinary office accommodation. The key is that the higher specification
must be justifiable: if it is not an impairment should be taken.
15.3.4. A catastrophe is defined as an event or events that will be
generally easy to identify. They include major earthquakes, exceptionally
severe cyclones, droughts, and other natural disasters; acts of war, riots,
and other political events; and technological accidents such as major toxic
spills or release of radioactive particles into the air. Where a reporting
entity believes an impairment should be recorded as a Catastrophic Loss
rather than ‘Loss or Damage resulting from normal business operations’ it
should first consult with Treasury. For the avoidance of doubt, the following
are not catastrophes within the meaning of this definition: prison or street
riots; loss or damage due, for example, to an ingress of water that could
have been avoided by better maintenance or that resulted from relocation
to a site where flooding was likely. These are all examples of losses
resulting from management action or inaction.
15.3.5. All assets are subject to obsolescence. However, the rate of
obsolescence tends to be category specific: e.g., IT assets suffer a faster
rate of obsolescence than do buildings. Reporting entities will take account
of foreseeable obsolescence when establishing asset lives. Unforeseen
obsolescence will generally only occur either as the result of the

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 introduction of a completely new technology or a change in legislation
rendering use of the asset illegal.
15.3.6. Other Impairments
a. Write Downs of Development Land – This occurs where land is purchased for
some form of social development. The cost of the land and any clean-up cost
can be greater than the disposal value resulting in an impairment.
b. Changes in Use – This usually occurs where specialised assets no longer
required for their original purpose are put to a non-specialised use or where an
asset becomes permanently underused. However, impairment can result from
the change of use of any asset including non-specialised assets.
c. Disposals – Impairments can occur where assets are moved from ‘in use’ to
‘available for sale’.
d. Uncompensated Seizures – The seizure of assets by governments or
institutional units, other than for the settlement of fines or taxes, for which full
compensation is not provided.

















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16. Impairment of Cash-Generating Assets
16.1. Applicable Standards

16.1.1. IPSAS 26 applies, as interpreted, to all reporting entities covered

by the ZFRM.
16.2. Objective of IPSAS 26

16.2.1. The objective of IPSAS 26 is to prescribe the procedures that an

entity applies to determine whether a cash-generating asset is impaired,
and to ensure that impairment losses are recognised. IPSAS 26 also
specifies when an entity should reverse an impairment loss and prescribes
disclosures.
16.3. Interpretation of IPSAS 26 for the Zimbabwe Public Sector context

16.3.1. The general interpretation of IPSAS 21 for the Zimbabwe Public

Sector context apply equally to IPSAS 26.


















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17. Agriculture
17.1. Applicable Standards

17.1.1. IPSAS 27 applies in full to agricultural activities undertaken for

commercial gain by any reporting entity covered by the ZFRM.
17.2. Objectives of IPSAS 27

17.2.1. The objective of IPSAS 27 is to prescribe the accounting

treatment and disclosures related to agricultural activity. Agricultural
activity is the management by an entity of the biological transformation of
biological assets for sale, into agricultural produce, or into additional
biological assets.

17.3. Interpretation of IPSAS 27 for the Zimbabwe Public Sector context

17.3.1. No specific guidance or interpretation is provided for this

standard.

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18. Intangible Assets
18.1. Applicable Standards
18.1.1. IPSAS 31 applies, as interpreted, to all reporting entities covered
by the ZFRM
18.2. Objective

18.2.1. The objective of this section of the manual is to provide relevant

intangible assets guidance in order for the reporting entities to adopt and
apply a comprehensive and consistent accounting treatment of intangible
assets.

18.2.2. This chapter sets out policy guidance and application principles
in the classification, recognition, measurement, derecognition and
disclosure requirements of intangible assets.

18.2.3. An intangible asset is an identifiable non-monetary asset without

physical substance and capable of being separated or divided from the
entity.

18.3. Interpretation of IPSAS 31 for the Zimbabwe public Sector context

18.3.1. Intangible assets shall be classified into classes and subclasses

as detailed in the table 17a below. The subclasses are not exhaustive and
entities will need to apply reasonable judgement when dealing with assets
that have not been mentioned on the subclasses. The table 18a also
provides the estimated useful lives for each asset class.
Table 18a

Asset class Description Sub asset class Useful life

Computer Internally Enterprise resources SUL* (3 – 10

Software generated or planning systems year range)
acquired

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 computer Standalone software
software packages e.g
accounting package
Websites

Software Externally Software licences SUL* (2 – 6 year

Licences acquired range)
licences to use
software owned
by third parties

Intellectual Internally Publications SUL* (3 – 10

Material generated or Trademarks, year range)
externally copyrights and
acquired Patents
intellectual Entertainment, Literary
material & Artistic Originals
Databases

Licences and Other licences Mining rights SUL* (3 – 10

rights and rights other Import quotas year range)
than software Weapon system rights
licences Security equipment
rights
Franchises

Intangible Intangible Intangible assets under N/A

assets under assets that are construction
construction still being
developed and
not yet available
for use

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 Good will Good will Goodwill N/A
acquitted though
an acquisition

Heritage Heritage intangible N/A

Intangible assets
assets
SUL* - Specific useful lives and residual values will be applied.

18.3.2. Some assets incorporate both tangible and intangible elements,

in which case judgment must be used to assess which element is more
significant. If an intangible asset is an integral part of a tangible asset, it is
recognised together with that asset for example an operating system in
computer will form part of that computer.

18.3.3. Software licenses acquired for a period of one year or longer

should be capitalized as an intangible asset and amortized over the useful
life of the license if they meet the capitalization threshold. All fees,
including annual fixed fees to cover all required software maintenance and
specified updates issued during the year are expensed

18.3.4. An intangible asset such as airport landing rights, licenses to

operate radio or television stations, import licenses or quotas or rights to
access other restricted resources may be acquired through non-exchange
transactions. IPSAS 31 paragraphs 42 and 43 state that intangible assets
acquired through a non-exchange transaction, including licenses to use a
radio frequency, should be recorded at fair value. The license to use a
radio frequency meets the recognition criteria (amongst others control
within the parameters of rights granted) as an externally acquired
intangible asset through a non-exchange transaction. The intangible asset
is recorded at fair value and because of the restrictions related to use of

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 the license (for example it cannot be used for commercial purposes, sold,
etc.), the fair value is close to zero.
18.3.5. Documents and publications have been central to articulating the
aspirations of the most entities in the public sector. Costs incurred to come
up with these documents and publications raises questions as to how the
costs will be accounted for under IPSAS. This section provides an
overview on how to account for costs incurred at various stages.
Documents include reporting entity resolutions, meeting agenda and
minutes, annual reports, transcripts, and international treaties etc.
Documents are generated as part of the day-to-day operations of the
reporting entity and represent mandatory activities of the organization.
Consequently, these documents cannot be viewed separately from the
operations of the reporting entity. The costs incurred to create a document
cannot be recognized as inventory or an intangible asset. Accordingly, the
cost should be expensed as incurred.
18.3.6. Publications are distributed in hard copy (book) and/ or soft copy
(digital) form. Publications are copyrighted and are sometimes available
for free depending on decisions made by the author’s department, but
some available for sale (commercially). Publications may also act as
advertising and promotional material for the reporting entity activities. The
costs related to those publications are always expensed as incurred.

18.3.7. Internally generated goodwill: An expenditure that is used to

generate future economic benefits or service potential, but fails to meet the
criteria for an intangible asset (i.e. it is not an identifiable resource
controlled by the reporting entity that can be measured reliably at cost) is
often described as contributing to internally generated goodwill. Internally
generated goodwill cannot be recognized because it is not an identifiable
resource.

18.3.8. Internally generated brands, mastheads, publishing titles, list of

users of a service, and other items similar in substance cannot be

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 recognized as an intangible asset as they cannot be distinguished from the
costs of developing the reporting entity as a whole.

18.3.9. Other items that do not meet intangible asset criteria, for example:
Expenditure on training activities; and Expenditure on relocation and
reorganization.

18.3.10. Past expenses: Any expenditure expensed during the research or

development phase in a previous financial year cannot subsequently be
capitalized if the project meets the recognition criteria at a later date.

18.3.11. The reporting entity is not required to recognize intangible

heritage assets. However, the reporting entity to include a high-level
description of significant intangible heritage assets in the notes to the
financial statements.

18.3.12. Capitalization of costs ceases when the intangible asset is in the

condition for its intended use by management. Therefore, costs incurred
while an intangible asset is capable of being operated in the manner
intended by management, but the asset has yet to be brought into use, are
not eligible for capitalization.

18.3.13. In some cases, intangible assets can be acquired through non-

exchange transactions such as donations. In these situations, the item is
measured at fair value on the date of acquisition.

18.3.14. An asset registers provides complete and accurate list of assets

owned by the reporting entity that is regularly updated and validated. It is
crucial in managing assets information and normally will contain
information beyond that required for financial reporting. For each intangible
asset, an effective asset register should contain the following data:

a. Name of the intangible;

b. Description;

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 c. Asset class
d. Unique asset number;
e. Date when the asset is available for use;
f. Expected useful life;
g. Date intangible useful life last reviewed;
h. Date of last impairment test;
i. Depreciation method (straight line);
j. Cost; and
k. Date of de-recognition.

18.3.15. The following steps illustrate the procedures and processes

necessary to appropriately classify and account for intangible assets held
by the reporting entity. Applying these procedures across the reporting
entity will lead to a comprehensive and consistent approach of reviewing,
classifying, and accounting for intangible assets.

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 a. Identify all potential intangible assets
b. First, it is important for the Reporting Entity to identify all potential
intangible assets. For example, potential intangibles include externally
acquired software.
c. Apply recognition criteria for intangible assets. From the compiled list,
the reporting entity must apply the recognition criteria to evaluate each
intangible.
d. Measure recognized intangible assets. The reporting entity initially
measures intangibles at cost unless it is donated; donated items are measured
at fair value.
e. Identify the useful lives and residual values in order to calculate
amortization
f. For each of the intangible assets, the useful life and residual values
(presumed to be 0) should be identified in order to calculate amortization. The
amortization method is straight-line.
g. Make required disclosures
h. Regular testing for impairment

18.3.16. The reporting entity must test intangibles with an indefinite useful
life or intangible assets under construction for impairment annually, and
other intangibles (e.g. finite life) when there is an indication of impairment.










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19. Inventories

19.1. Applicable accounting standards
19.1.1. IPSAS 12 Inventories

19.2. Objective
19.2.1. The objective of this section of the manual is to provide relevant
guidance for the reporting entities to adopt and apply a comprehensive and
consistent accounting treatment of inventory assets.
19.3. Interpretation of IPSAS 12 for the Zimbabwe Public Sector context

19.3.1. The following table 19a provides classes and sub classes of
inventory to be applied by all the reporting entities.
Table 19a

Asset class Sub asset class

Held for sale Trading stock

Held for external Items held for sale or external distribution

distribution

Strategic reserves Grain strategic stocks

Fuel reserves

Consumable and supplies Fuel for operations

Engineering supplies
IT and communication supplies
Motor vehicle spare parts, electrical spare parts, and
other spare parts for operations
Medicine, sundries, and medical and surgical supplies
Safety and security supplies and ammunition
Office, welfare, cleaning and sanitary supplies
Uniforms and badges

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 Raw Materials and Work in Printing supplies
progress Construction material and supplies
Work in progress

19.3.2. The following table (table 19b) provide guidance in the

classification of items between inventory and PPE

Table 19b

Item type Description Accounting treatment

Raw materials A basic material that is Inventory

used to produce finished
products, goods for
internal use such as PPE,
or intermediate materials
which are used to produce
finished products or
goods.

Work in progress An unfinished project that Inventory

is still being developed
and will result in the
creation of inventory held
for sale or consumption

Supplies (short-life) Items that can be used Inventory

without being installed or
transformed and that have
a short life i.e. will be used
for less than one year after
their issuance out of stock.
E.g. medicine Office

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 supplies, cleaning
supplies, fuel

Spare parts Items for which there is no Inventory

use without installation on
an existing asset. E.g.
tires, screws, windshield

Items requiring assembly Items that cannot be used Inventory

or erection in their current condition
as they require assembly
or construction. E.g.
Prefabs, Solar panels,
racks

Equipment (long- life) Apparatus or tools used to Above threshold -> PPE
carry out work. E.g. Below threshold ->
Engineering, Inventory
transportation, safety,
security, medical, mine
detection and water
sanitation equipment
Printing and Office
equipment IT and
communication equipment

Other long life items Items that do not require Above threshold -> PPE
significant alteration for Below threshold ->
use. E.g. Vehicles, trailers Inventory
and attachments

19.3.3. Donated inventory is measured at fair value at acquisition date.

The following procedures are recommended to determine the fair value

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 of donated inventory; they are ranked in descending order of best
practice:
a. Obtain a market price for similar inventory items;
b. If market prices are not practically available, the office should reference recent
acquisition costs for recent similar item;
c. If prices cannot be obtained from the market or prior purchases data, then a
solicitation to the donor as to the value should be made. Once the
reasonableness of the data provided is assessed then it can be used as a
representation of fair value;
d. If not none of the above methods can be relied upon, an alternative procedure
to determine the best value to assign to the inventory item needs to be
identified. For example, inquiring from other similar entities experiences in
valuing such items in kind, which were donated to them and retain such
inquiries as alternative proof of documentation for audit; or
e. Lastly, if the inventory item in question is thought to have significant values,
solicit the services of a third-party valuation expert.
19.3.4. In accordance with IPSAS 12, Inventories, inventory held for sale
are to be measured at the lower of cost and net realizable value (NRV) on
an item-by-item or group basis. Inventories held for distribution at no
charge, or for a nominal charge, are to be measured at the lower of cost
and current replacement cost.

19.3.5. Inventory should be analysed for obsolescence (e.g. old

publications, spare parts related to assets that are at the end of their useful
lives, etc.) to ensure that they reflect assets with future economic benefits
or service potential. Apart from physically checking for obsolete items
during the physical verification, if the items on hand are significantly larger
in quantity than those issued out during the period, this may be a sign of
an obsolescence issue. In general, inventory without consumption/
distribution over more than two years should be analysed in detail to see
if obsolete to ensure that they reflect assets with future economic benefits
or service potential. However, consideration as to the future economic

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 benefit and service potential should be taken into account, before
automatically applying the two-year rule. Once obsolete inventory has
been identified, the total cost of the obsolete, damaged, or expired
inventory should be written off as an expense in the statement of financial
performance.

19.3.6. Inventory costs may become unrecoverable when inventory has:

a. Been damaged;
b. Have become wholly or partially obsolete; OR
c. If their selling price / replacement cost has declined.
d. A write-down occurs to reflect the unrecoverable portion of an item. A write-off
occurs when it is determined the entire amount of the item is unrecoverable.






















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20. Assets held for sale and discontinued operations
20.1. Applicable Standards
20.1.1. IPSAS 44 applies in full to all reporting entities covered by the
ZFRM.
20.2. Objective
20.2.1. The objective of this section is to specify the accounting for assets
held for sale, and the presentation and disclosure of discontinued
operations.

20.3. Interpretation of IPSAS 44 for the Zimbabwe Public Sector context

20.3.1. In line with IPSAS 44,:

a. Assets that meet the criteria to be classified as held for sale to be measured
at the lower of carrying amount and fair value less costs to sell, and
depreciation on such assets to cease; and
b. Assets that meet the criteria to be classified as held for sale should be
presented separately in the statement of financial position and the results of
discontinued operations to be presented separately in the statement of
financial performance.
c. In addition, for accountability purposes, IPSAS 44 requires disclosure in the
notes to the financial statements, the fair value of the non-current asset (or
disposal group) classified as held for sale when that non-current asset (or
disposal group) is measured at a materially lower carrying amount than fair
value.

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21. Financial Instruments


21.1. Applicable Accounting Standards
a. IPSAS 28, Financial Instruments Presentation
b. IPAS 30, Financial Instruments Disclosures
c. IPAS 41, Financial Instruments

21.2. Objective
21.2.1. The goal of this section is to present relevant guidance in order
for the reporting entities to adopt and apply a comprehensive and
consistent accounting treatment of financial instruments.

21.2.2. IPSAS 28, IPSAS 30 and IPSAS 41 are three of the most complex
standards - they are lengthy, use technical language. This section is not
intended to explain every aspect of the standards on financial instruments.
Rather, it summarizes the main challenges that the reporting entities would
typically encounter and prioritizes and identifies the key issues with
financial instruments

21.3. Understanding Financial Instruments

21.3.1. A financial instrument is any contract that gives rise to both a
financial asset of one entity and a financial liability or equity instrument of
another entity. The following table provides additional definitions of such
financial instruments.

Table 21a

A financial asset is any asset that is: Examples of financial asset

(a) Cash; Cash balance;

Bank balance;

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 Term deposits with initial maturity of less
than three months

(b) An equity instrument of another A number of public sector entities hold

entity; equity securities of various companies
listed on the Zimbabwe Stock Exchange

(c) A contractual right: Accounts and other receivables

to receive cash or another financial asset Term deposits with maturity of more than
from another entity; or three months
To exchange financial assets or financial Currency forward contracts,
liabilities with another entity under
conditions that are potentially favourable
to the reporting entity; or

(d) A contract that will or may be settled Very rare to have such contracts in the
in the reporting entity’s own equity public sector and at the time of writing
instruments. this manual there were no such financial
assets

A financial liability is any liability that Examples of financial liabilities

is:

(a) A contractual obligation: Accounts payables;

To deliver cash or another financial asset Borrowings; or
to another entity; or Currency forward contracts.
To exchange financial assets or financial
liabilities with another entity under
conditions that are potentially
unfavourable to the reporting entity; or

(d) A contract that will or may be settled Very rare to have such contracts in the
in the reporting entity’s own equity public sector and at the time of writing
instruments. this manual there were no such financial
liabilities

Zimbabwe Financial Reporting Manual ϳϱ

 21.3.2. At the date of this manual, there are no significant derivative or
embedded derivative contracts hence this manual does not focus on
identification and accounting for a derivative and embedded derivative

21.4. Interpretation of the applicable standards for the Zimbabwe Public

sector context

21.4.1. Reporting entities are required to classify financial assets as

subsequently measured at amortized cost, fair value through net
assets/equity or fair value through surplus or deficit on the basis of both:
a. The entity's management model for financial assets and
b. The contractual cash flow characteristics of the financial asset.

21.4.2. The table 21b below provides various classification of financial

assets.
Table 21b

Asset class Description Sub asset class

Financial Assets The financial asset is held Cash and cash equivalents
at amortised within a management model Loans and Receivables
cost whose objective is to hold Term deposits
financial assets in order to Treasury bills and bonds
collect contractual cash flows Debentures
The contractual terms of the Letters of credit
financial asset give rise on Concessional loans
specified dates to cash flows Non-concessionary loans
that are solely payments of Debt securities
principal and interest on the Trade and credit advances
principal amount outstanding. Convertible bonds
Special drawing rights (XDR)

Zimbabwe Financial Reporting Manual ϳϲ

Financial Assets The financial asset is held Equity investments
at fair value within a management model (Designated by entity)
through net whose objective is achieved Treasury bills and bonds
assets/equity by both collecting contractual
cash flows and selling
financial assets and
The contractual terms of the
financial asset give rise on
specified dates to cash flows
that are solely payments of
principal and interest on the
principal amount outstanding.

Financial Assets Assets that fail the Equity investments

at fair value classification of the first two Treasury bills and bonds
through surplus classes.
or deficit

21.4.3. Reporting entities shall classify all financial liabilities as

subsequently measured at amortized cost
21.4.4. Gold and other minerals which are held for the with the objective
of storing value or as an investment will be accounted for as financial
instruments. Such gold and other minerals will be accounted for at fair
value through surplus and deficit account.

21.4.5. In financial markets, a settlement mechanism exists under which

transactions in financial instruments (particularly quoted equities and
bonds) entered into on a particular date are settled a few days after this
transaction date. The date on which the transaction is entered into is called
the 'trade date'. It is the date on which the reporting entity commits to

Zimbabwe Financial Reporting Manual ϳϳ

 purchase or sell an asset. The date on which the transaction is settled by
delivery of the underlying asset is called the 'settlement date'. For example,
the standard settlement periods for equity market securities are trade date
plus 3 business days (T+3). The reporting entity must account for the
transactions on the trade date.

21.4.6. When the reporting entity enters into a firm commitment to

purchase a non-financial asset in the future, it does not have the
contractual rights that comprise the asset. This means that the reporting
entity cannot use that asset, or sell it, or pledge it as collateral until the
contract matures and the underlying asset is acquired. Therefore, assets
to be acquired and liabilities to be incurred as a result of a firm commitment
to purchase or sell goods or services are generally not recognized as
assets or liabilities until at least one of the parties has performed under the
agreement

21.4.7. When a financial asset or financial liability is recognized initially,

the standard requires that the reporting entity measures it at its 'fair value'
plus, in certain situations, transaction costs. Fair value is the amount for
which an asset could be exchanged, or a liability settled, between
knowledgeable willing parties in an arm's length transaction. Given that fair
value is the price that arm's length market participants would pay or receive
in a routine transaction under the market conditions at the date at which
the asset or liability is to be measured for accounting purposes (the
measurement date), it follows that a financial instrument's initial fair value
will normally be the transaction price, that is, the fair value of the
consideration given or received.

21.4.8. The reporting entity should account for transaction costs in a

financial instrument's initial measurement as follows:

Zimbabwe Financial Reporting Manual ϳϴ

Table 21c

Financial Instrument Accounting for transaction costs

class

Financial Assets/liabilities Added to the initial fair value i.e. for financial
at amortised cost assets, such costs are added to the amount
originally recognized and financial liabilities, such
costs are deducted from the amount originally
recognized

Financial Assets/liabilities Added to the initial fair value i.e. for financial
at fair value through net assets, such costs are added to the amount
assets/equity originally recognized and financial liabilities, such
costs are deducted from the amount originally
recognized

Financial Assets/liabilities Transaction costs are immediately recognized in

at fair value through Statement of Financial Performance on initial
surplus or deficit recognition

21.4.9. Transaction costs expected to be incurred on a financial

instrument's transfer or disposal are not included in the financial
instrument's initial measurement.

21.4.10. Following their initial recognition, financial instruments’

classification determines how the financial assets and financial liabilities
are subsequently measured in the reporting entity’s financial statements.
The following table summarizes the accounting for financial assets.

Table 21d

Zimbabwe Financial Reporting Manual ϳϵ

 are subsequently measured in the reporting entity’s financial statements.
The following table summarizes the accounting for financial assets.

Table 21d
Financial Asset Financial Measurement Changes in Impairment
class
Financial Asset
Asset Financial Basis
Measurement Carrying in Impairment
Changes test
class Asset Basis amount
Carrying test

Financial Assets Debt Amortised amount

Statement of Yes
at amortisedAssets
Financial cost Debt Cost
Amortised Financial of Yes
Statement
at amortised cost Cost Performance
Financial
Zimbabwe
FinancialFinancial
AssetsReporting
Debt Manual Fair Value Performance
Net Assets Yes ϳϵ

at fair
Financial value Debt
Assets Fair Value /Statement
Net Assets Yes
through
at fair net
value of Financial
/Statement
assets/equity net
through Performance
of Financial
assets/equity Equity Fair Value Performance
Net Assets No

Financial Assets Equity

Debt Fair
Fair Value
Value Net Assets of No
Statement No
at fair
Financial value Debt
Assets Fair Value Financial of No
Statement
through
at fairsurplus or
value Performance
Financial
deficit surplus or
through Performance
Equity Fair Value Statement of No
deficit Financial of No
Equity Fair Value Statement
Performance
Financial
Performance
21.4.11. The effective interest rate is the rate that exactly discounts
estimated
21.4.11. Thefuture cashinterest
effective payments
rate or receipts
is the through
rate that the discounts
exactly financial
instrument'sfuture
estimated expected
cashlife payments
or, when appropriate,
or receiptsa shorter
throughperiod,
the to the net
financial
carrying amount
instrument's of the
expected lifefinancial
or, whenasset or financial
appropriate, liability.
a shorter Thetoeffective
period, the net
interest rate
carrying is essentially
amount the internal
of the financial assetrate of returnliability.
or financial of the financial asset
The effective
or liability
interest for is
rate that period. The
essentially theinternal
internalrate
rateofofreturn can
return of be
thecalculated using
financial asset
a liability
or financialforcalculator orThe
that period. theinternal
internalrate
rate of return
of return can (IRR) functionusing
be calculated in a
aspreadsheet.
financial calculator or the internal rate of return (IRR) function in a
21.4.12. A financial asset measured at amortized cost is impaired when its
spreadsheet.
carrying Avalue
21.4.12. exceeds
financial the present
asset measured value of cost
at amortized the isfuture cash
impaired flows
when its
discounted
carrying at theexceeds
value financial the
asset’s original
present effective
value interest
of the rate.cash
future A financial
flows
asset that is
discounted at carried at fairasset’s
the financial value original
througheffective
surplus interest
or deficitrate.
does not give
A financial
asset that is carried at fair value through surplus or deficit does not give

Zimbabwe Financial Reporting Manual ϴϬ

Zimbabwe Financial Reporting Manual ϴϬ

 rise to any impairment issues as diminution in value due to impairment is
already reflected in the fair value and, hence, in the Statement of Financial
Performance.
21.4.1. For reporting entities, impairment issues are primarily relevant to
financial assets that are carried at amortized cost. Entities are required to
apply the general model in calculation of expected credit losses except for
accounts receivables and lease receivables. The determination of
impairment under the general model, is inherently complex and entities
should engage appropriate experts to help with the designing of
impairment models.
21.4.2. Appendix 7 provide illustrative disclosures on financial
instruments.

21.5. Guidance on financial guarantees

21.5.1. IPSAS 41 Financial Instruments, requires financial guarantee

contracts to be recognised at fair value. This is normally straightforward in
a commercial transaction, as the fair value at inception will typically be
equal to the value of the premium paid in exchange for being granted a
guarantee. However, most of the time the government provides
guarantees at no cost so the amount to be recorded for each financial
guarantee so issued will need to be determined on an alternative basis.
21.5.2. IPSAS 41 provides guidance on determining a fair value in these
circumstances, through the use of a valuation technique to establish what
the transaction price should have been on the measurement date. These
need to be assessed as if the guarantee had been issued in return for a
premium in an arm’s length exchange, motivated by normal operating
considerations.
21.5.3. A key consideration at this point is whether there is necessary
information to determine the fair value, which is likely to be very
challenging given the uniqueness of the support being provided by
government. There is unlikely to be an active market with observable

Zimbabwe Financial Reporting Manual ϴϭ

 prices for these guarantees and valuation techniques may rely on
mathematical models which consider financial risk.
21.5.4. IPSAS 41 states that if no reliable measure of fair value can be
determined, either by direct observation of an active market or through
another valuation technique, then an entity is required to measure the
financial guarantee contract at the amount that is expected to be paid out
under the guarantee - the ‘loss allowance’ or the ‘expected credit losses’
expected to be incurred on the guarantee.

Zimbabwe Financial Reporting Manual ϴϮ

22. Revenue
21.1. Applicable accounting standards
a. IPSAS 47, Revenue

22.2. Objective
22.2.1. This chapter deals with the recognition and measurement of
revenue by reporting entities including revenue collected by entities on
behalf of the Consolidated Revenue Fund (CRF).
22.2.2. The majority of the revenue from transactions without binding
arrangements covered by this chapter are either taxation or fines and
penalties. This chapter also covers revenue from transactions with binding
arrangement transactions which would be categorised as sale of goods
and rendering of service.
22.3. Interpretation of the applicable standards for the Zimbabwe Public
Sector context
22.3.1. In classifying revenue, entities will need to be guided by the
following:

Zimbabwe Financial Reporting Manual ϴϯ

 ZĞǀĞŶƵĞ

ZĞǀĞŶƵĞĨƌŽŵ ZĞǀĞŶƵĞĨƌŽŵ
ƚƌĂŶƐĂĐƚŝŽŶƐ ƚƌĂŶƐĂĐƚŝŽŶƐǁŝƚŚ
KƚŚĞƌZĞǀĞŶƵĞ
ǁŝƚŚŽƵƚďŝŶĚŝŶŐ ďŝŶĚŝŶŐ
ĂƌƌĂŶŐĞŵĞŶƚƐ ĂƌƌĂŶŐĞŵĞŶƚƐ

ŽŵƉůŝĂŶĐĞ ŽŵƉůŝĂŶĐĞ
ŽďůŝŐĂƚŝŽŶƐ ŽďůŝŐĂƚŝŽŶƐ
ƐĂƚŝƐŝĨŝĞĚŽǀĞƌ ƐĂƚŝƐŝĨŝĞĚĂƚĂ
ƚŝŵĞ ƉŽŝŶƚŝŶƚŝŵĞ

22.3.2. In table 21a below provide the revenue classes that should be
presented on the face of the statement of financial performance.
Table 22a
Revenue Description Guidance on recognition
Class

Revenue from transactions without binding arrangements

Transfers This includes transfers Mostly recognised on receipt

from the CRF and all as there is no enforceable right
other forms of before the transfer is made.
transfers from other
government entities

Grants and Grants, donations and Mostly recognised on receipt

Donations other gifts from other as there is no enforceable right
entities which could before funds are received.
be monetary or in-kind Some come with conditions
including services in and appropriate judgment in
kind. This excludes line with IPSAS 47 need to be
transfers from one made.

Zimbabwe Financial Reporting Manual ϴϰ

Revenue Description Guidance on recognition
Class

government entity to
another which will be
classified as transfers.

Taxes All different forms of Recognition should follow

taxes by different IPSAS 47 guidance i.e.
government entities recognition on the basis of the
and include taxable event.
compulsory
contributions and
levies.

Fines, All forms of fines, Recognition should only be

penalties, and penalties and forfeits done whether there is high
forfeits likelihood that the revenue will
be received

Revenue from transactions with binding arrangements

Revenue from Where an entity Revenue recognised with

compliance obtains control of a reference to relevant input or
obligations goods or service over output model.
satisfied over time and, therefore,
time satisfies a compliance
obligation and
recognizes revenue
over time

Revenue from Where compliance Revenue is recognised on

compliance obligation is not transfer of risk and rewards
obligations satisfied over time incidental to ownership

Zimbabwe Financial Reporting Manual ϴϱ

 Revenue Description Guidance on recognition
Class

satisfied at a
point in time

Other This includes but not Based on the guidance from

Revenue/ limited to: the relevant standard
Income * Lease Income
Interest income

* - Other revenue should be separately presented on the face of the

Statement of financial performance if it is material.

22.3.3. Table below shows the various revenue classes for classification
and presentation of the statement of financial performances
Table 22b
Revenue Revenue Subclasses Additional subclass category
Class

Revenue from transactions without binding

arrangements

Transfers Transfers from Consolidated Transfers based on budget

Revenue Fund allocations from CRF

Other Transfers Other transfers from other levels

of government

Grants and Grants Conditional and unconditional

Donations grants that meet recognition
criteria

Donations, gifts and bequests Other donations, gifts and

bequests

Taxes Taxes Payable by individuals

Zimbabwe Financial Reporting Manual ϴϲ

Revenue Revenue Subclasses Additional subclass category
Class

Taxes on income, profits, and Taxes payable by corporations

capital gains and other enterprises

Other taxes on income, profits,

and capital gains

Capital gains Taxes

Capital Gains Withholding tax

Dividends, Interest, Fees,

Royalties and Remittances

Informal Traders' Tax

Taxes on Payroll and Manpower Development Levy

Workforce (ZIMDEF)

Standard Development Levy

(SDF)

Taxes on property Recurrent taxes on immovable

property

Estate, inheritance, and gift Estate, inheritance, and gift

taxes taxes

Taxes on goods and services General taxes on goods and

services

Value-added taxes

Taxes on Gross Revenue Royalties

Airtime Levy -Health Levy

Airtime Levy - General

Tobacco Levy

Zimbabwe Financial Reporting Manual ϴϳ

Revenue Revenue Subclasses Additional subclass category
Class

Withholding Tax on Tenders Withholding Tax on Tenders

Turnover & other general taxes Turnover & other general taxes
on goods and services on goods and services

Taxes on financial and capital Intermediated Money Transfer

transactions Tax

Excise Duty Excise duty on fuel

Taxes on specific services Energy Taxes

Taxes on the use of goods and Business Licences

on permission to use goods or
perform activities

Taxes on international trade Taxes on international trade and

and transactions transactions

Customs and other import Customs and other import

duties duties

Other taxes stamp duty

Fines, Fines, penalties, and forfeits Fines, penalties, and forfeits

penalties, and
forfeits

Revenue from transactions with binding arrangements

Revenue from Sales of goods and services Sales of goods and services
compliance
Sales by market establishments Sales by market establishments
obligation
Incidental sales by nonmarket Incidental sales by nonmarket
establishments establishments

Zimbabwe Financial Reporting Manual ϴϴ

Revenue Revenue Subclasses Additional subclass category
Class

satisfied over Imputed sales of goods and Imputed sales of goods and
time services services

Revenue from Administrative and other fees Administrative fees

compliance
obligation
satisfied over
time

Consulting fees Consulting fees

Construction fees Construction fees

Various services Various services

Other Property income Property income

Revenue
Interest Interest

Dividends Dividends

Withdrawals of income from Withdrawals of income from

quasi-corporations quasi-corporations

Property income from Property income from

investment income investment income
disbursements disbursements

Rent Rent

Reinvested earnings on foreign Reinvested earnings on foreign

direct investment direct investment

22.3.4. Taxes, duties and other such revenue (tax revenue) are
recognised on an accrual basis and will be measured at the fair value of

Zimbabwe Financial Reporting Manual ϴϵ

 the consideration received or receivable, net of repayments. Tax revenue
is recognised when a taxable event has occurred, the revenue can be
measured reliably and it is probable that the economic benefits from the
taxable event will flow to the collecting entity. All these elements are
required to be satisfied.

22.3.5. Tax revenues are deemed to accrue equally over the period for
which they are due. No revenue is recognised if there are significant
uncertainties regarding the recovery of the taxes due. The term “probable”
means that the flow of revenue should be more likely than not to occur.
Revenue should be accrued net of amounts not expected to be collected,
which might be determined by reference to past trends in write-offs and
remissions, the emerging position in-year, historic debt collection
performance, a combination of the foregoing or by other appropriate
means.

22.3.6. Where, exceptionally and with the consent of Treasury, taxes and
other compulsory contributions are not recognised due to collection
uncertainty , they will be recognised in the accounting period in which the
tax is received or receivable by the entity and are measured at the cash
amount received or receivable.
22.3.7. Fines and penalties are recognised at the time that the fine or
penalty is imposed and becomes receivable by the entity. Where, on
appeal, or for other legal reasons, the penalty is cancelled, the amount
receivable is derecognised at the date of the successful appeal. Where a
financial penalty is imposed, but with an alternative of a non-financial
penalty, the financial penalty is recognised initially but is derecognised
when (and if) the option of the non-financial penalty is taken up.

22.3.8. Where fines and penalties are uncollectible or, for policy reasons,
(other than the imposition of an alternative penalty), the entity decides that
it is inappropriate to pursue collection, the amounts not collected are

Zimbabwe Financial Reporting Manual ϵϬ

 recorded as an expense. The amounts not collectible are estimated from
the most appropriate data available to the entity.

22.4. Accounting for the binding arrangement

22.4.1. In line with IPSAS 47 par 57, the reporting entity shall account
for a binding arrangement using the binding arrangement accounting
model if all of the following criteria are met:

(a) The parties to the binding arrangement have approved the binding
arrangement (in writing, orally or in accordance with other customary
practices) and are committed to perform their respective obligations;

(b) The entity can identify each party's rights under the binding
arrangement;

(c) The entity can identify the payment terms for the satisfaction of each
identified compliance obligation;

(d) The binding arrangement has economic substance (the risk, timing or
amount of the entity's future cash flows or service potential is expected to
change as a result of the binding arrangement); and

(e) It is probable that the entity will collect the consideration to which it will
be entitled for satisfying its compliance obligations in accordance with the
terms of the binding arrangement. In evaluating whether collectability of an
amount of consideration is probable, an entity shall consider only the
resource provider's ability and intention to pay that amount of
consideration when it is due. The amount of consideration to which the
entity will be entitled may be less than the transaction consideration stated

Zimbabwe Financial Reporting Manual ϵϭ

 in the binding arrangement if the consideration is variable because the
entity may offer the resource provider a price concession.

22.5. Requirements for preparation of Exchequer Trust Financial

Statements
22.5.1. ZIMRA and certain other receivers of revenue (collecting agents)
which is by law payable into the CRF are required to prepare Exchequer
Trust Financial Statements (Refer to Appendix 10 for templates on
Exchequer Trust Financial Statement)
22.5.2. Exchequer Trust Financial Statements are financial reports on all
income, expenses that have been collected or paid on behalf of the CRF
and the related balances on those income and expenses.

22.5.3. The intention is to require those entities collecting revenue on

behalf of the CRF to prepare Exchequer Trust Financial Statements which
are separate statements from the entity’s own financial statements and to
include in Exchequer Trust Statements details of the collection and
allocation of that revenue.

22.5.4. Where an entity collects revenue on behalf of the CRF, it shall

prepare an Exchequer Trust Financial Statement (Refer to Appendix 10 for
templates) which include:

a. Exchequer Trust Statement of Financial Performance

b. Exchequer Trust Statement of Financial Position

c. Exchequer Trust Statement of Cashflows

d. Exchequer Trust Statement of comparison of budget to actual

e. Exchequer Trust notes to the financial statements

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 22.5.5. Where legislation requires or permits part of the revenue collected
to be surrendered and part to be retained by the entity, the full amount
shall be included in the Trust Financial Statements, and the amount to be
retained shall be recorded as an appropriation of net revenue (expenses)
in the Trust Statement (and, equally, as revenue in the Statement of
Financial Performance).

22.5.6. Where revenue collected on behalf of the CRF is not material to

the entity, it need not prepare the Trust Statement set out in the preceding
paragraph but may do so if it provides a clearer interpretation of the state
of affairs. Where the entity does not produce the statements in the
preceding paragraph, it shall set out in a note to the Statement of Financial
Position details of the amounts collected and surrendered or otherwise
expended (but shall not include them in its statement of income and
expenditure) and of the amounts receivable and payable at the end of the
reporting period.
22.6. Disclosures
22.6.1. An entity shall disclose:

22.7. in the notes to the Exchequer Trust Financial Statements, the main
accounting policies, estimates and judgements used to assess income,
expenditure, assets and liabilities, including any provision created in respect of
income deemed uncollectible;

22.8. In the notes to the Exchequer Trust Financial Statement, a statement of

those incomes reported on an accrual basis and those on a cash basis; and
any additional supporting information which might aid the understanding of
users of the accounts. This may include, but will not be limited to, details of
fraud, evasion and error and accounting estimates of accrued revenue.

22.9. The following is an example of note for select revenue items

Zimbabwe Financial Reporting Manual ϵϯ

Notes to the Financial Statements

Accounting Policies

Recognition of Revenue from Transactions without Binding Arrangements

1. Assets and revenue arising from taxation transactions are recognized as

revenue from transactions without binding arrangements in accordance with
the requirements in paragraphs 20–56 of IPSAS 47. However, the
Government takes advantage of the transitional provisions in that Standard
in respect of income taxes and estate taxes.

2. Apart from income taxes and estate taxes, assets and revenue arising from
taxation transactions are recognized in the period in which the taxable event
occurs, provided that the assets satisfy the definition of an asset and meet
the criteria for recognition as an asset. Income taxes and estate taxes are
recognized in the period in which payment for taxation is received (see
notes 4 and 6).
3. Assets and revenue arising from transfer transactions are recognized in the
period in which the transfer arrangement becomes binding, except for some
services in-kind. The Government recognizes only those services in-kind
that are received as part of an organized program and for which it can
determine a fair value by reference to market rates. Other services in-kind
are not recognized.
4. Where a transfer is subject to an enforceable obligation, if unsatisfied,
requires the return of the transferred resources, the Government recognizes
a liability until the requirements are satisfied.

Basis of Measurement of Major Classes of Revenue Transactions

Taxes

4. Income tax revenue is measured at the nominal value of cash, and cash
equivalents, received during the reporting period. The Government is currently

Zimbabwe Financial Reporting Manual ϵϰ

developing a statistical model for measuring income tax revenue on an accrual
basis. This model uses taxation statistics compiled since 19X2 as well as other
statistical information, including average weekly earnings, gross domestic product,
and the consumer and producer price indexes. The Government anticipates that
the model will enable it to reliably measure income tax revenue on an accrual
basis for the reporting period ended December 31, 20X4. The Government does
not recognize any amount in respect of income taxes receivable.

5. Assets and revenue accruing from goods and services tax are initially
measured at the transaction consideration of assets accruing to the
Government during the reporting period, principally cash, cash equivalents,
and goods and services tax receivable. The information is compiled from
the goods and services tax returns submitted by taxpayers during the year
and other amounts estimated to be due to the Government. Taxpayers have
a high compliance rate and a low error rate, using the electronic return
system established in 20X0. The high compliance and low error rates have
enabled the Government to develop a reliable statistical model for
measuring the revenue accruing from the tax.

Goods and services taxes receivable is the estimate of the amount due
from taxes attributable to the reporting period that remain unpaid at
December 31, 20X2, less a provision for bad debts.

6. Estate tax of xx% is levied on all deceased estates; however, the first $x of
each estate is exempt from the tax. Assets and revenue from estate taxes
are measured at the nominal value of the cash received during the reporting
period, or the transaction consideration as at the date of acquisition of other
assets received during the period, as determined by reference to market
valuations or by independent appraisal by a member of the valuation
profession.

Transfer Revenue

Zimbabwe Financial Reporting Manual ϵϱ

 7. Assets and revenue recognized as a consequence of a transfer are
measured at the transaction consideration of the assets recognized as at
the date of recognition. Monetary assets are measured at their nominal
value unless the time value of money is material, in which case present
value is used, calculated using a discount rate that reflects the risk inherent
in holding the asset. Non- monetary assets are measured at their
transaction consideration, which is determined by reference to observable
market values or by independent appraisal by a member of the valuation
profession. Receivables are recognized when a binding transfer
arrangement is in place, but cash or other assets have not been received.

Taxes not Reliably Measurable in the Period in which the Taxable Event Occurs

8. The Government is unable to directly measure the assets arising from

income tax during the period in which all taxpayers earn income and is,
therefore, taking advantage of the transitional provisions of IPSAS 47, to
develop a model to indirectly measure taxation revenue in the period in
which taxpayers earn income. The Government estimates that it will be able
to reliably measure income tax on an accrual basis using the model for the
reporting period ending December 31, 20X4.
9. In respect of estate taxes, due to current high levels of noncompliance with
the law, the government is unable to measure the amount of assets and
revenue accruing in the period in which persons owning taxable property
die. The Government therefore recognizes estate taxes when it receives
payment for the tax. The tax department is continuing work to develop a
reliable method of measuring the assets receivable and revenue in the year
in which the taxable event occurs.

Liabilities Recognized in Respect of Transfers

At December 31, 20X2, the Government recognized a liability of $X related to a

transfer to build a public hospital. As at December 31, the Government had
received a cash payment, however, construction of the hospital had not

Zimbabwe Financial Reporting Manual ϵϲ

commenced, although tenders for construction were called for on November 30,
20X2.

Assets Subject to Enforceable Obligations

11. Land with a fair value of $X was received as part of a binding arrangement
in 20X2. The binding arrangement included a compliance obligation which
requires the entity to use the land for public health purposes and cannot be
sold for 50 years.
12. Plant and equipment includes an amount of $X, which is the carrying
amount of a painting donated in 19X2 to an art gallery controlled by the
Government. The painting was received as part of an arrangement that that
included an enforceable obligation (but did not include an enforceable right).
Under the agreement, the entity cannot sell the painting for a period of 40
years. The painting is measured at its fair value, determined by independent
appraisal.

Major Classes of Bequests, Gifts, Donations, and Goods In-Kind Received

13. Transfers are received in the form of gifts, donations and goods in-kind –
most notably medical and school supplies (inventory), medical and school
equipment, and works of art (classified as equipment). Gifts and donations
are received primarily from private benefactors. Hospitals, schools, and art
galleries controlled by the Government recognize these assets when control
passes to them, usually on receipt of the resources, either cash or plant and
equipment. The Government does not accept these transfers with either
conditions or restrictions attached unless the value of the transfer exceeds
$X.
14. During 20X2, as part of an external assistance agreement with Government
C, computer equipment with a fair value of $X was provided to the
Government on condition that it be used by the education department or be
returned to Government C.

Zimbabwe Financial Reporting Manual ϵϳ

Services In-kind

15. Hospitals controlled by the Government received medical services in-kind

from medical practitioners as part of the medical profession’s organized
volunteer program. These services in- kind are recognized as revenue and
expenses in the statement of financial performance at their fair value, as
determined by reference to the medical profession’s published schedule of
fees.
16. Hospitals, schools, and art galleries controlled by the Government also
received support from volunteers as part of organized programs for art
gallery greeters and guides, teachers’ aides, and hospital visitor guides.
These volunteers provide valuable support to these entities in achieving
their objectives; however, the services provided cannot be reliably
measured as there are no equivalent paid positions available in the local
markets and, in the absence of volunteers, the services would not be
provided. The Government does not recognize these services in the
statements of financial position or financial performance.

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23. Transfer Expenses

23.1. Applicable accounting standards
IPSAS 48, Transfer Expenses

23.2. Objective
23.2.1. This chapter deals with the recognition and measurement of
transfer expense by reporting entities
23.3. Interpretation of the applicable standards for the Zimbabwe Public
Sector context
23.3.1. In table 21a below provide the transfer expenses classes that
should be presented on the face of the statement of financial performance
and statement of financial position.

Statement of Financial Performance

Transfer expenses with binding
arrangements
Transfer expenses without binding
arrangements

Statement of Financial Position

Current Assets
Transfer expense assets Related to advance payments on
transfer expenses with binding
arrangements. Should be shown on the
face if material and if not material can
be included in prepayments

Current Liabilities
Transfer expense obligation Related to both transfer obligations with
or without binding arrangements.

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 Should be shown on the face if material
and if not material can be included in
other payables or provisions

21.2.1. ZFRM requires that expenses be presented by nature of the expenses

rather than by function. This therefore means that transfer expenses will be
presented as a line item in the statement of financial performance.
21.2.2. Additionally and in line with IPSAS 1 para 111, reporting entities shall
provide an analysis in the notes of expenses by function by allocating of
transfer expenses to the various programs or purposes for which the transfers
were made.
21.2.3. The reporting entity shall disclose in the notes transfer expenses
breakdown of transfers with and without binding arrangements including
qualitative to enable users to understand how the entity’s resources are spent
on its programs, activities, and services.


















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24. Provisions, Contingent Liabilities and Contingent Assets

24.1. Applicable accounting standards
24.1.1. IPSAS 19 Provisions, contingent liabilities and contingent assets
applies in full for all reporting entities

24.2. Objective

24.2.1. The objective of this section is to provide guidance on when to

recognise provisions in the statement of financial position or disclose
contingent liabilities and contingent assets, how to measure such entries,
and which disclosures are necessary for these items. Key to this is the
clarification of how provisions differ from other liabilities, such as payables
and accruals through the level of uncertainty associated with each class of
liability.

24.2.2. During its operations and activities, the reporting entity will take
actions which will invariably result in future payments or outflows of
resources. Under IPSAS 19, such actions and events may require the
reporting entity to recognise provisions in addition to the more traditional
liabilities recognised during a financial year. Provisions appear as short
and/or long-term liabilities on the statement of financial position and are
defined as “liabilities of uncertain timing or amount”. Where provisions are
not recognised, disclosures regarding contingent liabilities may still be
required.

24.3. Interpretation of IPSAS 19 for the Zimbabwe Public Sector context

24.3.1. The following are the main classes of provisions. A new class of
provision should only be used where a material provision is recognised for
an obligation which cannot be covered by narratives for the classes below
a. Restoration costs
b. Restructuring costs

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c. Onerous contracts
d. Legal cases
e. Warranties
f. Other

24.3.2. Provisions should be presented as separate lines (current and

non-current) on the face of the statement of financial position. In the
supporting notes to the financial statements, provisions may be classed
together (i.e. aggregated) when the narrative disclosures can cover all of
the relevant provisions in a single statement.

24.3.3. The likelihood or probability of outflows occurring is a key factor

in determining whether a provision should be recognised, or whether a
note disclosure as a contingent liability is instead necessary. In addition,
recognition of a provision will also depend on whether the actions of the
reporting entity have led to an “obligation” to pay future costs – this may
not always be a legal obligation, but can also include cases where past
behaviour and precedents create a “constructive” obligation for the
reporting entity to pay costs.
24.3.4. Specifically, and in line with IPSAS 19 the reporting entity should
recognise a provision when all of the following three key criteria have been
met:
a. The reporting entity has a present obligation (legal or constructive) as a
result of a past event;
b. It is probable that an outflow of resources embodying economic benefits
or service potential will be required to settle the obligation; and
c. A reliable estimate can be made of the amount of the obligation.
24.3.5. it is important to note that in many cases the criteria will need to
be applied with professional judgement dependent on the overall
substance of actions and events – not all cases will have an immediate,
definitive answer and expert advice may be required.

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 24.3.6. Other typical examples where provisions may need to be
considered include future clean up and decontamination costs,
refurbishing of buildings at the end of leases, restructuring plans, and
onerous contracts.

24.3.7. The classification of liabilities between provisions, accruals and

payables will depend on the degree of certainty of the timing or amount of
the future settlement of an obligation. Payables have the greatest degree
of certainty, as they are based on invoices received, or where final
amounts have been agreed with suppliers. For those goods and services
received but not yet invoiced, or formally agreed, accruals are recognised
within accounts payable. Accruals may therefore be considered as similar
to provisions, as final amounts may not have yet been agreed.

24.3.8. The key difference between accruals and provisions however is

the degree of certainty of timing or amount of the outflow. Although it is
sometimes necessary to estimate the amount or timing of accruals, the
uncertainty is generally much less than for provisions. Accruals and
payables are presented together within “accounts payable” on the
statement of financial position, whereas provisions are presented
separately.

24.3.9. The term contingent liability is used for liabilities that do not meet
the recognition criteria. Such a distinction is very important as contingent
liabilities are not recognised as liabilities in the statement of financial
position, but disclosed in the notes to the financial statements.

24.3.10. Any provision raised should relate to the financial position of the
reporting entity at the end of the financial year, and not its possible position
in the future. Costs that need to be incurred to continue reporting entity’s
ongoing activities in the future should not be provided for. Provisions are
therefore only recognised for obligations resulting from past events
existing independently from the reporting entity’s future actions. In other

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 words, if the reporting entity ceased operations on the last day of the
financial year, it would still need to pay the costs provided for, independent
of future activities.
24.3.11. Provisions should not be raised for future losses or deficits
occurring from future operations. These do not meet the definition of a
liability, as in these cases there is no “present obligation” from a “past
event”. Future operating losses however may indicate that any asset used
in the relevant operations may be impaired.

24.3.12. It may be difficult in some cases to determine whether the

reporting entity has a legal obligation, particularly in lawsuits against the
reporting entity where a formal judgement has not been made by the court
in question by the date of the preparation of the financial statements. In
such examples, experts where appropriate - to assist in judging whether a
legal obligation exists for the purposes of preparing the financial
statements.

24.3.13. The existence of a constructive obligation may not be straight-

forward in some cases and will require professional judgement in terms of
whether past behaviour or certain communications have raised a valid
expectation with the counterparty that the reporting entity will discharge its
responsibilities.

24.4. Summary of recognition of provisions and contingent liabilities

Table 24a
Where, as a result of past events, there may be an outflow of resources embodying
future economic benefits or service potential in settlement of: (a) a present
obligation, or (b) a possible obligation whose existence will be confirmed only by the

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occurrence or non-occurrence of one or more uncertain future events not wholly
within the control of the Reporting entity.

There is a present There is a possible There is a possible

obligation that probably obligation or a present obligation or a present
requires an outflow of obligation that may, but obligation where the
resources. probably will not, require likelihood of an outflow of
an outflow of resources. resources is remote.

A provision is recognized No provision is recognized No provision is recognized

Disclosures are required Disclosures are required No disclosure is required

for the provision for the contingent liability

24.4.1. A contingent liability also arises in the extremely rare case where
there is a liability that cannot be recognized because it cannot be
measured reliably. Disclosures are required for the contingent liability.

24.5. Summary of recognition of assets and contingent assets

Where, as a result of past events, there is a possible asset whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Reporting entity.

The inflow of economic The inflow of economic The inflow of economic

benefits or service benefits or service benefits or service
potential is virtually certain potential is probable, but potential is not probable.
not virtually certain.

The asset is not contingent No asset is recognized No asset is recognized.

and recognized in the
financial statements.

Disclosures in line with Disclosures are required. No disclosure is required.

specific IPSAS disclosure

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requirements for asset (s)
contained in relevant
Standard.

24.5.1. Any proceeds anticipated from the disposal of assets to be used

in settlement of the obligations should not be taken into account when
measuring a provision, even if the disposal is closely linked to the
obligating event. Instead, such gains or losses on disposal should be
recognised and measured in line with the Standard relevant for the asset.

24.5.2. In the case of some provisions, the Reporting entity may receive
reimbursement from a third party (e.g. a contractor or Government) for full
or partial settlement of an obligation. Where such reimbursements meet
the definition of an asset:
a. A separate asset should be recognised on the statement of financial
position - the “debit” entry is not offset against the provision (i.e. balances
are shown gross on statement of financial position); and
b. The corresponding “credit” entry of the reimbursement may be offset
against (i.e. deducted from) the expense recognised for the provision
(i.e. “revenue” and expense are shown net on statement of financial
performance). This means that no revenue is shown for the
reimbursement, but instead reduced or zero expense.
c. The amount of reimbursement recognised should not exceed the
amount of the provision

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25. Employee Benefits

25.1. Applicable Accounting Standards
25.1.1. IPSAS 39 Employee Benefits applies in full for all reporting
entities

25.2. Objective

25.2.1. The objective of this section is to provide guidance on the

application of IPSAS 39 by reporting entities.

25.2.2. IPSAS 39 Employee Benefits provides the fundamental

requirements surrounding the classification, recognition, measurement,
and disclosure requirements of employee benefits.

25.3. Definition of employee

25.3.1. Whilst the different categories of employee benefits are relatively
straight forward and they only qualify as employee benefits if they are
provided to employees, it is important that reporting entities understand
who is considered to be an employee.
25.3.2. For purposes of IPSAS accounting, employees are considered to
be individuals providing services to an entity on a full-time, part-time,
permanent, casual or temporary basis.
25.3.3. IPSAS does not focus on the legal aspects of employment, but
rather focuses on the substance of the arrangement between the individual
and the employer when determining what falls under the term “employee”.
25.3.4. Therefore, the reporting entities should consider all such
individuals as employees and consequently account for all their benefits in
accordance with IPSAS 39 Employee Benefits, where the organization is
exposed to risks consistent with a contract of employment irrelevant of
whether there is an actual arrangement in place or not.

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 25.3.5. While this assessment is generally relatively straight forward
regarding normal employed staff, the question becomes more complex
regarding contractors, consultants and similar types of individuals and a
thorough assessment of each of these individuals should therefore be
made to assess whether payments made to these individuals falls under
the scope of IPSAS 39 Employee Benefits.
25.3.6. An initial assessment of the different types of individuals working
for different reporting entities has been made to assess whether payments
made to such individuals fall under the scope of IPSAS 39 Employee
Benefits or not.
Table 25a
Type of Additional Information Within scope of IPSAS 39
individual

Staff Individual with a normal Yes

(Temporary, employment contract
permanent and
part-time staff)

Staff On a regular basis, staff is Yes

Transferred in transferred While the expectation would
or out between different entities be that such individuals
(Secondments) within government. The qualify as employees, the
question arises which question is which
organization should account organization should account
for them as employees and for their benefits. This
consequently should account decision generally depends
for short-term benefits, other- on the arrangements
long term benefits, post- between the receiving and
employment benefits and releasing organizations
termination benefits such
individuals are entitled to.

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Individual An individual consultant is an Based on the information
consultants individual who is a recognized provided, the expectation is
authority or specialist in a that these individuals do not
specific field of study engaged qualify as employees under
by the Reporting Entity under a IPSAS. The Reporting Entity
temporary contract but only for should however assess for
a specific period to deliver a each individual consultants,
specific output, as specified in whether it is exposed to risks
the Terms of Reference, in an consistent with a contract of
advisory or consultative employment. Generally, for
capacity. individual consultants, the
office have observed that:
The contract with the
individual contractor does not
give an indication on their
status.
Individual consultants get
monthly pay based on
submission on bill with
number of days worked in a
month.
The reporting entity does not
face similar risks as for their
staff members.
Individual consultants are in
substance not treated like
employees.
Performance of Staff
members may be reviewed
through a robust
performance appraisal

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 system; however, this is not
applicable for individual
consultants

Institutional Institutional consultants are No

consultants consulting companies
generally hired by
Procurement Divisions. As the
individual consultants
supporting the
Reporting entity are employed
by the consulting company,
they do not fall under the scope
of IPSAS 39 for the purpose of
the
Reporting entity’s financial
statements.

Volunteers On a regular basis, entities in Yes

the public sector incorporates Based on the information
volunteers in its operations and provided, the expectation is
the question is therefore that these individuals qualify
whether these individuals fall as employees under IPSAS.
under the scope of IPSAS 39. The Reporting Entity should
however assess, whether it is
exposed to risks consistent
with a contract of
employment.

25.3.7. Please note that with regards to the accounting for employee
benefits under IPSAS, the source of the funds whether budgetary or extra-
budgetary, is irrelevant.

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 25.4. Interpretation of IPSAS for the Zimbabwe Public Sector context
25.4.1. The following are the different classes of employee benefits and
the examples of the employee benefits in that class
Table 25 b

CLASS EXAMPLES

Salaries and wages

Social security contributions
Housing allowance
Transport allowance
Medical Aid
Covid 19 Allowances
Professional /Technical allowances
Food hamper
Night allowance
Acting Allowance
Short-term employment Medical Aid
benefits Responsibility allowance
Fuel
Paid sick and annual leave
M/V Benefit
Accommodation
Airtime and data
Housing loan
Maids and garden boy salaries
Security at residences
Bonus
Performance Bonus

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CLASS EXAMPLES

Retirement
Monthly pension
Post-employment Benefits Post Medical Aid
Life Insurance
Gratuity

Long-term service awards

Long term leave
Sabbatical leave
Other long-term employee Disability benefits
benefits Profit sharing and bonuses
Deferred remuneration
Compensation is payable by the entity until an individual
enters new employment

Retrenchment
Death
Termination Benefits
Retirement
Discharge

25.4.2. Compared to post-employment benefits discussed below, the

accounting treatment for short-term benefits is relatively straight forward.
In very simple terms, the expense for these benefits is recognized in the
statement of financial performance when incurred (i.e. the corresponding
service is delivered by the employee) and the statement of financial
position is only affected when there is a timing difference between when
the expense is incurred and when payment for these benefits is made.
25.4.3. Similarly, to all other employee benefits, the Reporting Entity
recognizes the expense for short-term benefits when it is incurred, i. e.
when the employee provides the service, which entitles him/her to the

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 benefit. Consequently, the cost is recognized in the statement of financial
performance as the employee works throughout the year, or more
specifically: every month.
25.4.4. Even though the nature of short-term benefits is that payments
are generally made shortly after an employee earns the right to the benefit,
i.e. when he provides the service, it can happen that at the end of the year
not all payments have been made and that consequently some benefits
earned by Reporting Entity employees during the year remain unpaid.
Such amounts need to be recognized as a liability in the Reporting Entity’
financial statements.
25.4.5. Where an employee is provided a condition of service vehicle
which is then sold to the employee after a specified period of time, the
employee benefit will be calculated as the difference between the market
value and the disposal amount to the employee.

25.5. Post-employment defined benefit schemes

25.5.1. IPSAS 39 defines defined benefit plans as post-employment
benefit plans other than defined contribution plans.
25.5.2. Defined benefit accounting is complex because actuarial
assumption and valuation methods are required to measure the position in
the statement of financial position. The Reporting Entity promises to pay a
fixed sum to their employees at a point in the future. At the time the
Reporting Entity makes that promise, management does not know how
long any individual employee will work, whether they will reach retirement
age, how long they will live beyond retirement age and what their final
salary will be when they retire.
25.5.3. The Reporting Entity’ defined benefit liabilities for each defined
benefit plan are determined by actuaries and take into consideration the
following three aspects:
o Attribute benefits to periods of service (current vs. prior periods);
o Make actuarial assumptions;

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 o Discount the benefit to present value using the Projected Unit Credit
Method.

25.5.4. Compared to the accounting requirements for defined benefit

schemes, the accounting for defined contribution schemes is relatively
straight forward. The amount to be recognized as an expense each period
is the contribution to the plan, which the employee earned throughout the
period. The Reporting Entity would only recognize a liability in its statement
of financial position for the contributions, if part of the contributions, due
for the period, remain unpaid at the end of the financial period.
25.5.10. For post-employment benefits, the event that gives rise to the
benefit is the service provided by the employee. For termination benefits
however, the event giving rise to the cost is not the service provided by the
employee, but rather the termination of the employee. With regards to the
recognition of termination benefits, it is therefore key to identify the actual
termination event.
25.5.11. Identification of termination event: Before the Reporting Entity can
recognize termination benefits, two requirements need to be met:
25.5.12. The Reporting Entity is demonstrably committed to a detailed,
formal plan to either
25.5.13. Terminate an employee or employees before the normal
retirement date;
I. Provide termination benefits in return for voluntary redundancy; AND
II. There is no realistic possibility that the Reporting Entity can withdraw
from the plan.
III. Or, in simpler terms, the Reporting Entity should recognize of termination
benefits when it has communicated its plan of terminating employees to
those affected.




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26. Leases
26.1. Applicable Accounting Standards
26.1.1. IPSAS 43 Leases

26.2. Objective
26.2.1. IPSAS 43 provides the fundamental guidance surrounding the
classification, recognition, and measurement of leases, which is essential
to ensure appropriate accounting treatment for individual agreements.
26.2.2. This section presents, additional guidelines Reporting Entity
should apply IPSAS 43. The objective of this document is to present
relevant leasing guidance in order for the Reporting Entity to adopt and
apply a comprehensive and consistent accounting treatment to its various
leases

26.3. Interpretation of IPSAS 43 for the Zimbabwe Public Sector context

26.3.1. Reporting entities will enter into various arrangement and
contracts. IPSAS 43 requires that the reporting entity assess whether the
contract is or contains a lease. It is common in the public sector for one
entity to convey the right to control use of an identified asset to other
government entities. For such arrangement to be classified as leases the
following elements should be there:
a. A contract between two entities
b. The asset should be identifiable
c. The period of time should be stated
d. The consideration should be stated

26.3.2. IPSAS 43 also requires reporting entities to account for each

lease component within the contract as a lease separately from non-lease
components of the contract. For a contract that contains a lease
component and one or more additional lease or non-lease components, a
lessee shall allocate the consideration in the contract to each lease
component on the basis of the relative stand-alone price of the lease

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 component and the aggregate stand-alone price of the non-lease
components.

26.3.3. IPSAS 43 provide exemption for applying the right of use model
for certain type of leases and for the application by reporting entities the
following leases are exempted from applying the right of use model:
a. Leases of less than 12 months
b. Leases of assets with value of less than US$5000 when new.
c. Lease payments for such assets should be expensed on a straight-line
basis.
26.3.4. Incremental borrowing rate: Reporting entities should apply the
Reserve Bank of Zimbabwe Bank Policy Rate as the incremental
borrowing rate

26.3.5. Contingent rents - Contingent rents are charged as expenses in

the period in which they are incurred. They are not included in the
measurement of the lease or liability.

26.3.6. Lessor Accounting

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Summary Lessor Accounting

.
26.3.7. Lease revenue (excluding receipts for services provided, such as
insurance and maintenance) is recognized as revenue on a straight-line
basis over the lease term, even if the receipts are not on such a basis.

26.3.8. Lessors present assets subject to operating leases in their

statements of financial position according to the nature of the asset.

26.3.9. The depreciation policy for depreciable leased assets should be

consistent with the lessor’s standard depreciation policy for similar assets.

26.3.10. To determine whether a leased asset has become impaired, an

entity applies relevant impairment tests
.







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27. Service Concession Arrangements: Grantor

25.1. Applicable Standards
27.1.1. PSAS 32 applies, as interpreted, to all reporting entities covered
by the ZFRM.
25.2. Objectives of IPSAS 32
27.1.1. The objective of IPSAS 32 is to prescribe the accounting for
service concession arrangements by the grantor, a public sector entity.
27.1.1. Interpretation of IPSAS 32 for the Zimbabwe public sector context
27.1.2. Initial recognition and measurement of assets and liabilities in
new arrangements and contracts
27.1.3. Where there is infrastructure, whether previously owned by the
contractor or the grantor, or constructed or acquired from a third party for
the purpose of the service arrangement, and the grantor:
a. controls or regulates what services the operator must provide with the
infrastructure, to whom it must provide them and at what price; and
b. controls through beneficial entitlement or otherwise, any significant residual
interest in the infrastructure at the end of the term of the arrangement (or
there is no residual interest).
27.1.4. Then the PPP (Public Private Partnerships) arrangement contract
is a service concession within the meaning of IPSAS 32 from the grantor’s
viewpoint.
27.2. Interpretation of IPSAS 32 for the Zimbabwe Public Sector context
27.2.1. The grantor should recognise the infrastructure as a non-current
asset and value it in the same way as other non-current assets of that
generic type. The asset will be recognised when:
a. it is probable that future economic benefits associated with the asset will
flow to the organisation; and
b. the cost of the asset can be measured reliably.
27.2.2. The grantor should consider the asset recognition criteria,
together with the specific terms and conditions of the binding arrangement,

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 when determining whether to recognise the service concession asset
during the period in which the asset is constructed or developed. If the
asset recognition criteria have been met a work-in-progress service
concession asset and associated liability should be recognised. If not and
the grantor makes contributions to the operator in advance of the asset
coming into use, the grantor should account for those payments as
prepayments.
27.2.1. The asset will be measured in one of two ways:
a. where the contract is separable between the service element, the interest
charge and the infrastructure asset, the asset will be initially measured
following the principles contained within in IPSAS 43 Leases), with the
service element and the interest charge recognised as incurred over the
term of the concession arrangement; or
b. where there is a unitary payment stream that includes infrastructure and
service elements that cannot be separated, the various elements will be
separated using estimation techniques.
27.2.1. The grantor should separate out the service, interest and
infrastructure elements. A contract may be separable in a variety of
circumstances, including but not limited to the following:
a. the contract identifies an element of a payment stream that varies according
to the availability of the property itself and another element that varies
according to usage or performance of certain services;
b. different parts of the contract run for different periods or can be terminated
separately. For example, an individual service element can be terminated
without affecting the continuation of the rest of the contract; or
c. different parts of the contract can be renegotiated separately. For example,
a service element is market tested and some or all of the cost increases or
reductions are passed on to the grantor in such a way that the part of the
payment by the grantor that relates specifically to that service can be
identified.
27.2.2. In situations where it is not possible to separate the contract due
to commercial reality, the service element of the payments must be

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 estimated, which could be achieved by obtaining information from the
operator or by using the fair value approach. The fair value of the asset
determines the amount to be recorded as an asset with an offsetting
liability. The total unitary payment is then divided into three: the service
charge element, repayment of the capital element of the contract obligation
and the interest expense on it (using the interest rate implicit in the
contract).
27.2.3. For both existing and new contracts, where it is not practicable to
determine the interest rate implicit in the contract, the grantor shall use its
cost of capital rate (including inflation). It is expected that this situation
would be rare. The rate should not be changed unless the infrastructure
element or the whole of the contract is renegotiated.
27.2.4. Under either approach, the grantor will recognise a liability for the
capital value of the contract. That liability does not include the interest
charge and service elements, which are expensed annually to the
Statement of Performance.
27.2.5. Reporting entities should adopt an appropriate asset revaluation
approach as set out earlier in this chapter. Liabilities will be measured
using the appropriate discount rate, taking account of the reduction arising
from the capital payments included in the unitary payment stream.
27.2.6. Revenue received under any revenue sharing provision in the
service concession arrangement should be recognised when all the
conditions as laid down in IPSAS 32 have been satisfied.

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28. Segment Reporting
28.1. Applicable Standards
28.1.1. IPSAS 18 Segment Reporting applies, as interpreted, to all
reporting entities covered by the ZFRM.

28.2. Objective
28.2.1. The goal of this section is to present relevant guidance on the
identification of segments and segment disclosure requirements for
reporting entities applying this standard.
28.2.2. Key aspect in the identification of segments is that IPSAS
guidance is principle based which means that the application will require
management judgment based on facts and circumstances of each entity.
28.2.3. Since there is no set rule on segment identification, an entity
may prepare segment information which may be different from the other
reporting entities.
28.2.4. Another key aspect in applying segment reporting disclosures is
that the underlying data should be available to generate the necessary
reports for segment reporting disclosures.
28.2.5. Needless to say, that the financial reporting systems should
support the drafting of segment disclosures

28.2.6. Interpretation of the IPSAS 18 for the Zimbabwe Public

Sector context Some of the sources for identifying key activities in the
identification of reportable segments of an entity can be derived from
answering the following questions:
a. What is the mandate for setting up the entity?
b. What are specific activities mentioned in approved the budget documents of
the entity?
c. What is the governance structure of the entity?
d. Is the past performance evaluated based on certain activities carried out by
the entity?

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 28.2.7. Grouping of activities requires exercise of judgment based on
the following guiding principles:
a. The objective of reporting financial information by segment i.e. help user to
understand past performance, identify resources allocated to support major
activities, enhance the transparency of financial reporting and enable the
entity to better discharge its accountability obligations;
b. The expectations of users of financial statements regarding the key activities
of the entity;
c. The qualitative characteristics of financial reporting i.e. the relevance,
reliability, and comparability
d. time of financial information; and
e. Whether a particular segment structure reflects the basis on which the
governing body require financial information to evaluate past performance in
achieving objectives and make future resource allocation decisions.

28.2.8. The following table provides examples of the different segments

that can be identified by reporting entity. The examples are not
exhaustive.

Table 28a

Entity group Types of Examples of segments

segments

Central Service and The major classifications of activities

Government Geographical identified in budget documentation will
reflect the segments for which information is
reported
By Service eg Health, Education, Defence
etc
By Geography e.g the 10 provinces

Zimbabwe Financial Reporting Manual ϭϮϮ

 Local Service The major classification of activities can be
Government segments aligned to the requirements of council laws
and regulations
By Service eg water, waste management,
housing and social amenities, road etc

State Owned Service and The segments reported to the governing

Entities geographical body will also reflect the segments reported
(SOEs) in the financial statements. This is because
the governing board will require information
about segments to enable them (a) to
discharge their managerial responsibilities
and to evaluate the performance of the
entity in achieving its objectives in the past,
and (b) to make decisions about the
allocation of resources by the entity in the
future.
By Service, Geographical or any other
suitable classification

Zimbabwe Financial Reporting Manual ϭϮϯ

29. Consolidations

29.1. Accounting standards

29.1.1. The following accounting standards deal with accounting

boundaries:

a. IPSAS 34, Separate Financial Statements

b. IPSAS 35, Consolidated Financial Statements

c. IPSAS 36, Investments in Associates and Joint Ventures

d. IPSAS 37, Joint Arrangements

e. IPSAS 38, Disclosure of Interests in Other Entities

f. IPSAS 40, Public Sector Combinations

Zimbabwe Financial Reporting Manual ϭϮϰ

29.2. Objective

29.2.1. This chapter sets out the accounting principles and standards that
should be applied in determining the accounting boundaries of the
reporting entities covered by the ZFRM.

29.2.2. This accounting policy:

a. Requires the reporting entity (the controlling entity) that controls one or more
other entities (controlled entities) to present consolidated financial
statements;

b. Provides the consolidation structure that will be followed by reporting entities

in consolidating various entities

29.3. Interpretation of the relevant IPSAS standard for the Zimbabwe

Public Sector context

29.3.1. For consolidation purposes the public sector may be divided into
three main sub sectors, namely, Central Government, Sub National
Government, and Public Corporations. The general government is
comprised of the first two of these sectors, while the public sector is
composed of all three sectors.

29.3.2. The Central Government is composed of budgetary entities and

extra budgetary entities. Sub National Governments are comprised of
Local Authorities, Provincial Councils and Metropolitan Councils. Public
Corporations comprise public financial corporations and public non-
financial corporations.

29.3.3. Individual ministries will not be required to produce consolidated

financial statements. Consolidation financials statements will be done at
Central Government level where all the different ministries and other
entities are consolidated. Ministries will therefore be required to show in

Zimbabwe Financial Reporting Manual ϭϮϱ

 their financial statement all the entities that they control as investments.
The investment will be carried at cost i.e the net asset value of the
controlled entity on the date of IPSAS adoption.
29.3.4. Based on assessment of the relevant laws and the practices, all
schools built by Rural District Councils are considered to be controlled by
the Ministry of Primary and Secondary Education whilst schools built by
the Urban Councils are considered to be controlled by the relevant Urban
council.

29.3.5. Consolidation structure will follow three main levels.

a. Level 1 : Reporting Entities identify all entities that it control or jointly
control or has significant influence for example a local authorities identifies
schools, which it control within its locality. The reporting entity is therefore
required to produce IPSAS consolidated financial statements.
b. Level 2 : Consolidation of Group 1 to Group 4 as shown in the diagrams
below. Group 1 would be consolidation of Central Government (Refer to
Appendix 9 for list of entities that consolidate in this group), Group 2 will
consolidate Sub-National Government (Refer to Appendix 9 for list of
entities that consolidate in this group), Group 3 will consolidate State
Owned Enterprises (SOE) on IPSAS (Refer to Appendix 9 for list of
entities that consolidate in this group) and group 4 will consolidate SOEs
on IFRS.
c. Level 3 : This level is the final consolidation level where all the groups from
1 to 4 are now consolidated.

29.3.6. As explained in previous paragraph, the consolidation will follow

the groupings that are provided in the tables below before the various
consolidation groups are consolidated. Appendix 9 provides a detailed list

Zimbabwe Financial Reporting Manual ϭϮϲ

 of entities within each consolidation group and the transactions that will
need to be tracked and eliminated.

a. CONSOLIDATION STRUCTURE
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Zimbabwe Financial Reporting Manual ϭϮϳ

30. Appendices to the reporting manual
30.1. Appendix 1: Statement of Financial Position Template
The table below presents an example of the statement of financial position to be
used by the Reporting entity:

STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20XX

IN THOUSANDS OF ZWL$
Note Current Previous
# Year Year
ASSETS
Non-current Assets
Receivables x xx xx
Property, plant and equipment x xx xx
Plan Assets x xx xx
Intangible assets x xx xx
Investment Properties x xx xx
Investment in other entities x xx xx
Long term portion of loans receivable x xx xx
Current Assets
Cash and cash equivalents x xx xx
Short-term investments x xx xx
Loans receivable x xx xx
Transfer Expense (prepaid) x xx xx
Receivables from Exchange x xx xx
Transactions
Recoverable from non-exchange x xx xx
transactions
Pledges receivable x xx xx
Other current assets x xx xx
Inventories x xx xx
TOTAL ASSETS XX XX
LIABILITIES
Current liabilities
Payables and accruals x xx xx
Provisions x xx xx

Zimbabwe Financial Reporting Manual ϭϮϴ

 STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 20XX
IN THOUSANDS OF ZWL$
Note Current Previous
# Year Year
Employee benefits x xx xx
Derivative financial instruments x xx xx
Other current liabilities x xx xx
Taxes (for quasi-governmental entities x xx xx
required to pay taxes)
Non-current liabilities
Employee benefits x Xx xx
Provisions x Xx xx
Defined obligations for Pension funds x Xx xx
Other noncurrent liabilities x Xx xx
Deferred Taxes (for quasi- x Xx xx
governmental entities required to pay
taxes)
TOTAL LIABILITIES XX XX
NET ASSETS XX XX
NET ASSETS / EQUITY
Other reserves x Xx xx
Contributed capital x Xx xx
Non-Controlling Interest (for quasi- x Xx xx
governmental entities)
TOTAL NET ASSETS / EQUITY XX XX
30.2. Appendix 2: Statement of Financial Performance
The table below presents an example of the statement of financial performance to be
used by the reporting entity
Reporting entity
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER 20xx
IN THOUSANDS OF ZWL$
Note Current Previous
# Year Year
REVENUE

Zimbabwe Financial Reporting Manual ϭϮϵ

 Reporting entity
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER 20xx
IN THOUSANDS OF ZWL$
Note Current Previous
# Year Year
Revenue without binding
arrangements
Taxes X XX XX
Transfers X XX XX
Fines, penalties, and forfeits X XX XX
Sale of goods X XX XX
Revenue without binding
arrangements
Revenue from compliance obligations X XX XX
satisfied at a point in time
Revenue from compliance obligations X XX XX
satisfied over time
Other revenue X XX XX
Total Revenue X XX XX
Expenses
Compensation of Employees X XX XX
Use of Goods and services X XX XX
Transfer Expenses with binding X XX XX
arrangements
Transfer Expenses without binding X XX XX
arrangements
Interest X XX XX
Grants X XX XX
Social Benefits X XX XX
Subsidies X XX XX
Other Expenses X XX XX
Surplus/ Deficit XX XX

30.3. Appendix 3: Statement of changes in net assets

Zimbabwe Financial Reporting Manual ϭϯϬ

The table below presents an example of the statement of changes in Net
Assets/Equity performance to be used by the Reporting entity
Not Hedging / Other Total
e Revaluati Reserv
on es
Reserve
31 December 20XX (previous year) X XX XX XX
Change in accounting policy and
other adjustments (Note ……….)
Initial recognition of property, plant X XX XX
and equipment
Initial recognition of employee X XX XX
liabilities
Other adjustments to equity X XX XX XX
balances
Total recognised changes in net XX XX XX
assets since last published
accounts
Adjusted opening balance
1 January 20XX (current year) X XX XX XX
Changes in net assets / equity for
20XX
Surplus (deficit) for the period X XX
Gain / Loss on revaluation of X XX XX
derivative financial instruments
Gain / Loss on revaluation of non- X XX XX
financial assets
Revenue / (expenses) recognised X XX XX
directly in equity
Specific Donations X XX
Total movement during the year XX XX
TOTAL NET ASSETS / EQUITY XX XX XX

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 30.4. Appendix 4: Cashflow Statement
The table below presents an example of the statement of financial position to be
used by the

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 20XX (In Thousands of ZWL$)
Note Current Previous
# Year Year

Surplus/Deficit
Non-Cash Movements
Depreciation X XX XX
Amortization X XX XX
Increase in provision for doubtful debts X XX XX
Increase in payables X XX XX
Increase in borrowings X XX XX
Increase in social benefits liabilities X XX XX
Increase in provisions relating to employee costs X XX XX
(Gains)/losses on sale of property, plant and
equipment (Gains)/losses on sale of investments
Increase in other current assets X XX XX
Increase in investments due to revaluation X XX XX
Increase in receivables X XX XX
Net cash flows from (Used in) operating activities XX XX
Cash flows from investing activities:
Purchase of property, plant and equipment X XX XX
Proceeds from sales of property, plant and X XX XX
equipment
Purchase of short-term investments X XX XX
Proceeds from sale of short-term investments X XX XX
Purchase of intangible assets X XX XX
Net cash flows from (Used in) investing activities XX XX
Cash flows from financing activities:

Zimbabwe Financial Reporting Manual ϭϯϮ

Loans received X XX XX
Loans paid X XX XX
Lease payments under finance leases X XX XX
Net cash flows from (Used in) financing activities XX XX
Net effect of foreign exchange rates XX XX
Net increase (decrease) in cash and cash XX XX
equivalents
Cash and cash equivalents at beginning of the year X XX XX
Cash and cash equivalents at end of the year XX XX
The method used in the above cashflow statement example is the indirect approach
to preparing cashflow statements

Zimbabwe Financial Reporting Manual ϭϯϯ

 Appendix 5: Statement of Comparison of budget to actual amounts

The table below presents an example of the Statement of Comparison of Budget and
Actual Amounts to be used by the Reporting entity:
STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS
FOR THE YEAR ENDED 31 DECEMBER 20XX
IN ZWL$
Notes Budgeted Actual Difference Comment
Amounts Amounts on between Ref
Comparable final budget
Basis and actual
Original Final
REVENUE
Taxes
Taxes on income, profits, and
capital gains
Payable by individuals X XX XX XX XX XX
Payable by corporations and X XX XX XX XX XX
other enterprises
Other taxes on income, profits,
and capital gains
Capital gains Taxes X XX XX XX XX XX
Capital Gains Withholding tax X XX XX XX XX XX
Dividends, Interest, Fees, X XX XX XX XX XX
Royalties and Remittances
Informal Traders' Tax X XX XX XX XX XX
Taxes on Payroll and Workforce
Manpower Development Levy X XX XX XX XX XX
(ZIMDEF)
Standard Development Levy X XX XX XX XX XX
(SDF)
Taxes on property
Recurrent taxes on immovable X XX XX XX XX XX
property
Estate, inheritance, and gift taxes X XX XX XX XX XX
Taxes on goods and services

Zimbabwe Financial Reporting Manual ϭϯϰ

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS
FOR THE YEAR ENDED 31 DECEMBER 20XX
IN ZWL$
Notes Budgeted Actual Difference Comment
Amounts Amounts on between Ref
Comparable final budget
Basis and actual
Original Final
General taxes on goods and
services
Value-added taxes X XX XX XX XX XX
Taxes on Gross Revenue
Royalties X XX XX XX XX XX
Airtime Levy -Health Levy X XX XX XX XX XX
Airtime Levy - General X XX XX XX XX XX
Tobacco Levy X XX XX XX XX XX
Withholding Tax on Tenders X XX XX XX XX XX
Turnover & other general taxes
on G & S
Taxes on financial and capital
transactions
O/w: Intermediated Money X XX XX XX XX XX
Transfer Tax
Excise Duty
o/w: fuel X XX XX XX XX XX
Taxes on specific services
o/w Energy Taxes X XX XX XX XX XX
Taxes on use of goods and on
permission to use goods or
perform activities
Business Licences X XX XX XX XX XX
Taxes on international trade and
transactions
Customs and other import duties X XX XX XX XX XX
Other taxes

Zimbabwe Financial Reporting Manual ϭϯϱ

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS
FOR THE YEAR ENDED 31 DECEMBER 20XX
IN ZWL$
Notes Budgeted Actual Difference Comment
Amounts Amounts on between Ref
Comparable final budget
Basis and actual
Original Final
stamp duty X XX XX XX XX XX
Other revenue
Property income
Interest X XX XX XX XX XX
Dividends X XX XX XX XX XX
Withdrawals of income from X XX XX XX XX XX
quasi-corporations
Property income from investment X XX XX XX XX XX
income disbursements
Rent X XX XX XX XX XX
Reinvested earnings on foreign X XX XX XX XX XX
direct investment
Sales of goods and services
Sales by market establishments X XX XX XX XX XX
Rentals X XX XX XX XX XX
Administrative fees X XX XX XX XX XX
Incidental sales by nonmarket X XX XX XX XX XX
establishments
Imputed sales of goods and X XX XX XX XX XX
services
Fines, penalties, and forfeits
Transfers not elsewhere
classified
Expenses
Compensation of Employees X XX XX XX XX XX
Use of Goods and services X XX XX XX XX XX
Interest X XX XX XX XX XX

Zimbabwe Financial Reporting Manual ϭϯϲ

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS
FOR THE YEAR ENDED 31 DECEMBER 20XX
IN ZWL$
Notes Budgeted Actual Difference Comment
Amounts Amounts on between Ref
Comparable final budget
Basis and actual
Original Final
Grants
Current grants
o/w compensation of Employee X XX XX XX XX XX
Social Benefits X XX XX XX XX XX
Subsidies X XX XX XX XX XX
Other Expenses X XX XX XX XX XX
TOTAL SURPLUS / (DEFICIT) X XX XX XX XX XX
FOR THE YEAR*
Material variances should be explained in a note of the financial statements.

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 30.5. Appendix 6: Related Party Note

Note (X) to the Reporting Entity’s Financial Statements “Related Parties:

Disclosures”:
Proposed Note (x) to the Financial Statements “Related Party Transactions”:
The reporting entity’s related parties represent, directors and key management
personnel of the MDA entities controlled by such parties. Pricing policies and terms
of these transactions are approved by the reporting entity’s management.
Note (x): Balances with related parties included in the statement of financial position
are as follows:

Current Year Previous Year

Description
ZWL$ ZWL$
Due from (to) XXXX * Xx Xx
Due from (to) Key Management Personnel ** Xx Xx
Total XX XX

* Balances due from (to) related parties have resulted from ………………... The
balance due from (to) related parties bears no interest.
** Balances due from (to) Key Management and their close family members. In
respect of loans to disclose amount advanced during the period…………………….
amount paid during the period…………………….and the closing balance for each
related party………………

Note (x): Transactions with related parties included in the statement of financial
performance are as follows:

Current Year Previous

Description Year
ZWL$ ZWL$
Salaries of senior management Xx Xx
Benefits of senior management Xx Xx
Transactions with related party XXX Xx Xx
Revenue from contribution by XXX to Xx Xx
international staff costs

Zimbabwe Financial Reporting Manual ϭϯϴ

 Total XX XX

30.6. Appendix 7: Financial Instruments Note

Note (X) to the Reporting Entity’s Financial Statements “Financial Instruments:

Disclosures”:

(X) FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The reporting entity’s principal financial liabilities are comprised of overdrafts, finance
leases and trade payables. The main purpose of these financial liabilities is to raise
finance for the reporting entity’s operations. The reporting entity has various financial
assets such as trade receivables and cash and short-term deposits which arise
directly from its operations.
The main risks arising from the reporting entity’s financial instruments are interest
rate risk, foreign currency risk, credit risk, and liquidity risk. The reporting entity’s
Director of Finance reviews and agrees on policies for managing each of these risks
which are summarized below.
A) Interest rate risk
The following table demonstrates the sensitivity of the statement of financial
performance to reasonably possible changes in interest rates, with all other variables
held constant.
Sensitivity of the statement of financial performance is the effect of the assumed
changes in interest rates on the reporting entity’s profit for one year, based the
floating rate financial assets and financial liabilities held at 31 December 20XX.
There is no other impact on the reporting entity’s equity.
Financial Assets

20XX Increase Effect on Decrease Effect on

in basis Surplus in basis Surplus
points for the year points for the year
ZWL$ “000” ZWL$ “000”
20XX 20X1 20XX 20X1
ZWL$ 50 xx xx (50) (xx)
Euro 50 xx xx (50) (xx)

Zimbabwe Financial Reporting Manual ϭϯϵ

JOD 50 xx xx (50) (xx)
Financial Liabilities
20XX Increase Effect on Decrease Effect on
in basis Surplus in basis Surplus
points for the year points for the year
ZWL$ “000” ZWL$ “000”
20XX 20X1 20XX 20X1
ZWL$ 50 xx xx (50) (xx)
Euro 50 xx xx (50) (xx)
JOD 50 xx xx (50) (xx)

B) Foreign currency risk

As a result of significant investment operations for the reporting entity in other
countries, the reporting entity’s statement of financial position can be affected
significantly by movements in ZWL$ against those countries’ currencies. The
reporting entity seeks to mitigate the effect of its structural currency exposure by
borrowing in ZWL$ and also establish the relationship with its main customers in
ZWL$.
The reporting entity also has transactional currency exposure. Such exposure arises
from sales or purchases by an operating unit in currencies other than the unit’s
functional currency. To reduce such risk the reporting entity requires operating units
and its subsidiaries to transact with its customers and suppliers as much as possible
in ZWL$.
The reporting entity has a translation currency exposure mainly resulting from the
entities where their functional currency is other than ZWL$. Those entities are the
entities under the reporting entity where the functional currency is mainly other than
ZWL$. The effect of transactional to reporting currency is shown as part of equity.
The main effect of foreign currency risk that may affect is related to translation of
monetary assets denominated in other currencies. Those assets are not significant
to the reporting entity’s financial statements.
C) Credit risk
The reporting entity trades only with recognised, creditworthy third parties. It is the
reporting entity’s policy that all customers who wish to trade on credit terms are
subject to credit verification procedures. In addition, receivable balances are

Zimbabwe Financial Reporting Manual ϭϰϬ

monitored on an ongoing basis with the result that the reporting entity’s exposure to
bad debts is not significant. The maximum exposure is the carrying amount as
disclosed in Note (X).
For transactions that do not occur in the country of the relevant operating unit, the
reporting entity offers credit terms and negotiates the contracts upon the approval of
the area Director. The reporting entity Head Office also monitors the aging of the
trade receivables continuously and follows up with relevant operating unit on
overdue balances. There are no significant concentrations of credit risk within the
reporting entity; it operates in a number of geographical segments across various
areas of activity. The customer base consists of large number of customers with
different types such as private and International funds. Management, therefore,
believes that there are no significant concentrations of credit risk within the reporting
entity.
With respect to credit risk arising from other financial assets of the reporting entity,
which comprise of cash and cash equivalents, and notes, the reporting entity’s
exposure to credit risk arises from default of the counterparty, with a maximum
exposure equal to the carrying amount of these instruments.

D) Liquidity risk
The reporting entity monitors its risk to a shortage of funds using a recurring liquidity
planning tool. This tool considers the maturity of both, its financial investments and
financial assets (e.g. accounts receivables, other financial assets) and projected
cash flows from operations. The reporting entity’s objective is to maintain a balance
between continuity of funding and flexibility through the use of bank overdrafts, bank
loans and finance leases.
The table below summarises the maturities of the reporting entity undiscounted
financial liabilities at 31 December, based on contractual payment dates and current
market interest rates.

Zimbabwe Financial Reporting Manual ϭϰϭ

31 December 20XX 1-6 6- 12 1-5 >5 Total
Months Months years Years
(ZWL$ 000's) (ZWL$ (ZWL$ (ZWL$ (ZWL$
000's) 000's) 000's) 000's)
Accounts payable and Xx xx xx Xx XX
other liabilities
Bank overdrafts Xx xx xx Xx XX
Finance lease Xx xx xx Xx XX
Other Xx xx xx Xx XX
Total XX XX XX XX XX

31 December 20XX 1-6 6- 12 1-5 >5 Total

Months Months years Years

(ZWL$ 000's) (ZWL$ (ZWL$ (ZWL$ (ZWL$

000's) 000's) 000's) 000's)
Accounts payable and Xx xx xx Xx XX
other liabilities
Bank overdrafts Xx xx xx Xx XX
Finance lease Xx xx xx Xx XX
Other Xx xx xx Xx XX
Total XX XX XX XX XX

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 30.7. Appendix 8: Property Plant and Equipment Note

The tables below present an example of PPE disclosures

Description Land Building Infrastructures Transport ICT Machinery Total

Equipment Equipment &
Equipment

COST:

Cost at 01/01/20XX Xx xx Xx xx Xx Xx XX
+ Additions in20XX * Xx xx Xx xx Xx Xx XX
(-) Disposals in 20XX Xx xx Xx xx Xx Xx XX
+ (-) Transfers in 20XX** Xx xx Xx xx Xx Xx XX
+ Revaluation adjustment Xx xx Xx xx Xx Xx XX
+ (-) Foreign exchange Xx xx Xx xx Xx Xx XX
adjustments in 20XX
= Balance as at 31/12/20XX (A) XX XX XX XX XX XX XX

DEPRECIATION AND
IMPAIRMENT:

Balance at 01/01/20XX Xx xx Xx xx Xx Xx XX

Zimbabwe Financial Reporting Manual ϭϰϯ

Description Land Building Infrastructures Transport ICT Machinery Total
Equipment Equipment &
Equipment
+ Depreciation and impairment in Xx xx Xx xx Xx Xx XX
20XX **
(-) Depreciation disposals in 20XX Xx xx Xx xx Xx Xx XX
+ (-) Transfers in 201X (Non-cash Xx xx Xx xx Xx Xx XX
item) **
+ Revaluation adjustment Xx xx Xx xx Xx Xx XX
+ (-) Foreign exchange Xx xx Xx xx Xx Xx XX
adjustments in 20XX
= Balance as at 31/12/20XX (B) XX XX XX XX XX XX XX

Net Book Value as at 31/12/20XX XX XX XX XX XX XX XX

(A) – (B)

Work in Progress 20XX 20XX

COST:

Cost at 01/01/20XX Xx XX
+ Additions Xx XX
+ (-) Transfers to PPE ** Xx XX
+ (-) Foreign exchange adjustments Xx XX

Zimbabwe Financial Reporting Manual ϭϰϰ

 Work in Progress 20XX 20XX

= Balance as at 31/12/20XX (A) XX XX

* This item shall match the cash outflow from the reporting entity’s investing activities in the cash flow statement (as purchase of
PPE).
** These amounts shall be taken into consideration by the reporting entity in preparing the cash flow statements (Non-cash items).
Any restriction on title and PPE pledged as securities for liabilities
The amount of expenditure recognised in the carrying amount of item of PPE in the course of construction
The contractual commitments amount for the acquisition of PPE; and
The compensation amount from a third party for an item of PPE that was impaired, lost, or given up and included in surplus or
deficit.

Zimbabwe Financial Reporting Manual ϭϰϱ

 30.8. Appendix 9: List of Entitles on IPSAS & IFRS and Consolidation
Groups
Group 1: Central Government Entities to report using IPSAS

NO. MINISTRY/COMMISSION
1 Parliament
2 Finance and Economic Development
3 Public Service Commission
4 Judicial Service Commission
5 Energy and Power Development
6 Industry, Commerce and Enterprise Development
Information Communication Technology and Courier
7
Services
8 Information, Publicity and Broadcasting Services
9 Local Government and Public Works
10 Mines and Mining Development
Women Affairs, Community, Small and Medium Enterprise
11
Development
12 Zimbabwe Media Commission
13 National Peace and Reconciliation Commission
14 Zimbabwe Gender Commission
15 Zimbabwe Anti - Corruption Commission
16 Zimbabwe Electoral Commission
17 Office of the Auditor General
18 National Council of Chiefs
19 National Prosecuting Authority
20 Zimbabwe Human Right Commission
21 Lands Commission
22 Office of the President and Cabinet
23 Defence and War Veterans Affairs
24 Foreign Affairs and International Trade
25 Health and Child Care
Higher and Tertiary Education, Science and Technology
26
Development
27 Home Affairs and Cultural Heritage
28 Justice, Legal and Parliamentary Affairs
29 Public Service, Labour and Social Welfare
Lands, Agriculture, Fisheries, Water, Climate and Rural
30
Resettlement
31 Primary and Secondary Education
32 Youth, Sport, Arts and Recreation
33 Environment, Tourism and Hospitality Industry
34 Transport and Infrastructural Development
35 National Housing and Social Amenities

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 30.9. Local authorities

Group 2.1: Rural District Council

No. MASHONALAND EAST PROVINCE

1. Goromonzi RDC
2. Hwedza RDC
3. Manyame RDC
4. Marondera RDC
5. Murewa RDC
6. Uzumba Maramba Pfungwe Zvataida RDC
7. Mutoko RDC
8. Mudzi RDC
9. Chikomba RDC
MASHONALAND CENTRAL PROVINCE
10. Bindura RDC
11. Chaminuka RDC
12. Guruve RDC
13. Mazowe RDC
14. Mbire RDC
15. Muzarabani RDC
16. Pfura RDC
17. Rushinga RDC
MASHONALAND WEST PROVINCE
18. Chegutu RDC
19. Hurungwe RDC
20. Makonde RDC
21. Mhondoro- Ngezi RDC
22. Nyaminyami RDC
23. Sanyati RDC
24. Zvimba RDC
MATABELELAND NORTH PROVINCE
25. Binga RDC
26. Bubi RDC
27. Hwange RDC
28. Kusile RDC
29. Nkayi RDC
30. Tsholotsho RDC
31. Umguza RDC
MATABELELAND SOUTH PROVINCE
32. Beitbridge RDC
33. Bulilima RDC
34. Gwanda RDC
35. Mangwe RDC
36. Matobo RDC
37. Umzingwane RDC

Zimbabwe Financial Reporting Manual ϭϰϳ

No. MASHONALAND EAST PROVINCE
38. Insiza RDC
MIDLANDS PROVINCE
39. Chirumanzu RDC
40. Gokwe North RDC
41. Gokwe South RDC
42. Mberengwa RDC
43. Runde RDC
44. Tongogara RDC
45. Vungu RDC
46. Zibagwe RDC
MANICALAND PROVINCE
47. Buhera RDC
48. Chimanimani RDC
49. Makoni RDC
50. Mutare RDC
51. Nyanga RDC
52. Chipinge RDC
53. Mutasa RDC
MASVINGO PROVINCE
54. Bikita RDC
55. Chiredzi RDC
56. Chivi RDC
57. Gutu RDC
58. Masvingo RDC
59. Zaka RDC
60. Mwenezi

Group 2.2: Urban Councils

No URBAN COUNCIL
1. Rusape
2. Epworth
3. Victoria Falls
4. Bulawayo
5. Karoi
6. Ruwa
7. Mvurwi
8. Mutare
9. Norton
10. Kadoma
11. Zvishavane
12. Lupane
13. Kwekwe

Zimbabwe Financial Reporting Manual ϭϰϴ

No URBAN COUNCIL
14. Gwanda
15. Shurugwi
16. Masvingo
17. Redcliff
18. Chegutu
19. Chinhoyi
20. Chipinge
21. Kariba
22. Marondera
23. Chitungwiza
24. Bindura
25. Beitbridge
26. Harare
27. Hwange
28. Gweru
29. Chirundu
30. Plumtree
31. Gokwe
32. Chiredzi

Zimbabwe Financial Reporting Manual ϭϰϵ

 30.10. Group 3 State Owned Enterprises on IPSAS

No. STATE ENTERPRISE OR PARASTATAL RESPONSIBLE MINISTRY

Environment, Tourism and Hospitality
1 Zimbabwe Tourism Authority
Industry
Zimbabwe National Statistics Agency
2 Finance and Economic Development
(ZIMSTAT)
3 Insurance and Pensions Commission (IPEC) Finance and Economic Development
4 Zimbabwe Revenue Authority (ZIMRA) Finance and Economic Development
5 Chitungwiza Hospital Health and Child Care
6 Food Standards Advisory Board Health and Child Care
7 Harare Central Hospital Health and Child Care
8 Health Service Board Health and Child Care
9 Ingutsheni Central Hospital Health and Child Care
10 Mpilo Hospital Health and Child Care
11 National Aids Council Health and Child Care
12 National Pharmaceutical Company Health and Child Care
13 Parirenyatwa Group of Hospitals Health and Child Care
14 United Bulawayo Hospitals Health and Child Care
15 Zimbabwe National Family Planning Council Health and Child Care
Higher and Tertiary Education,
16 Bindura University of Science Education
Innovation, Science and Technology
Higher and Tertiary Education,
17 Bulawayo School of Hospitality and Tourism
Innovation, Science and Technology
Higher and Tertiary Education,
18 Chinhoyi University of Technology
Innovation, Science and Technology
Higher and Tertiary Education,
19 Great Zimbabwe University
Innovation, Science and Technology
Higher and Tertiary Education,
20 Harare Institute of Technology
Innovation, Science and Technology
Higher and Tertiary Education,
21 Lupane State University
Innovation, Science and Technology
Higher and Tertiary Education,
22 Midlands State University (MSU)
Innovation, Science and Technology
Higher and Tertiary Education,
23 National Biotechnology Authority
Innovation, Science and Technology
Higher and Tertiary Education,
24 National University of Science and Technology
Innovation, Science and Technology
Higher and Tertiary Education,
25 University of Zimbabwe
Innovation, Science and Technology
Higher and Tertiary Education,
26 Zimbabwe Council for Higher Education
Innovation, Science and Technology
Higher and Tertiary Education,
27 Zimbabwe Manpower Development Fund
Innovation, Science and Technology
Higher and Tertiary Education,
28 Zimbabwe Open University
Innovation, Science and Technology
Higher and Tertiary Education,
29 Gwanda State University
Innovation,Science and Technology

Zimbabwe Financial Reporting Manual ϭϱϬ

No. STATE ENTERPRISE OR PARASTATAL RESPONSIBLE MINISTRY
Marondera University of Agricultural Sciences Higher and Tertiary Education,
30
and Technology Innovation, Science and Technology
Manicaland State University of Applied Higher and Tertiary Education,
31
Sciences Innovation, Science and Technology
Pan African Minerals University of Science Higher and Tertiary Education,
32
Technology Innovation, Science and Technology
Higher and Tertiary Education,
33 Harare Polytechnic
Innovation, Science and Technology
Higher and Tertiary Education,
34 Bulawayo Polytechnic
Innovation, Science and Technology
Higher and Tertiary Education,
35 Gweru Polytechnic
Innovation, Science and Technology
Higher and Tertiary Education,
36 Kwekwe Polyechnic
Innovation, Science and Technology
Higher and Tertiary Education,
37 Mutare Polytechnic
Innovation, Science and Technology
Higher and Tertiary Education,
38 Masvingo Polytechnic
Innovation, Science and Technology
Higher and Tertiary Education,
39 Kushinga Phikelela Polytechnic
Innovation, Science and Technology
Higher and Tertiary Education,
40 Zimbabwe School of Music
Innovation, Science and Technology
Higher and Tertiary Education,
41 Hillside Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
42 Belvedere Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
43 Mutare Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
44 Masvingo Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
45 Morgenster Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
46 Bondolf Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
47 Seke Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
48 Nyadire Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
49 Morgen Zintec
Innovation, Science and Technology
Higher and Tertiary Education,
50 United College of Education
Innovation, Science and Technology
Higher and Tertiary Education,
51 Madziwa Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
52 Mkoba Teachers College
Innovation, Science and Technology
Higher and Tertiary Education,
53 Chinhoyi Teachers Technical College
Innovation, Science and Technology

Zimbabwe Financial Reporting Manual ϭϱϭ

No. STATE ENTERPRISE OR PARASTATAL RESPONSIBLE MINISTRY
54 National Archives of Zimbabwe Home Affairs and Cultural Heritage
55 National Arts Council of Zimbabwe Home Affairs and Cultural Heritage
56 National Gallery of Zimbabwe Home Affairs and Cultural Heritage
57 National Library and Documentation Service Home Affairs and Cultural Heritage
National Museums and Monuments of
58 Home Affairs and Cultural Heritage
Zimbabwe
59 State Gaming and Lotteries Board Home Affairs and Cultural Heritage
Industry, Commerce and Enterprise
60 Consumer Council of Zimbabwe
Development
Industry, Commerce and Enterprise
61 National Handicraft Centre
Development
Industry, Commerce and Enterprise
62 Standards Association of Zimbabwe
Development
Industry, Commerce and Enterprise
63 Zimbabwe International Trade Fair Company
Development
Industry, Commerce and Enterprise
64 National Competitiveness Commission
Development
Industry, Commerce and Enterprise
65 Competition and Tariff Commission
Development
Lands, Agriculture, Fisheries, Water,
66 Agricultural Marketing Authority (AMA)
Climate and Rural Resettlement
Agricultural Rural Development Authority Lands, Agriculture, Fisheries, Water,
67
(ARDA) Climate and Rural Resettlement
Lands, Agriculture, Fisheries, Water,
68 Agriculture Research Council
Climate and Rural Resettlement
Lands, Agriculture, Fisheries, Water,
69 Pig Industry Board (PIB)
Climate and Rural Resettlement
Lands, Agriculture, Fisheries, Water,
70 Tobacco Industry and Marketing Board
Climate and Rural Resettlement
Lands, Agriculture, Fisheries, Water,
71 Tobacco Research Board
Climate and Rural Resettlement
72 Zimbabwe School of Mines Mines and Mining Development
73 Research Council of Zimbabwe Office of The President and Cabinet
Scientific and Industrial Research and
74 Office of The President and Cabinet
Development Centre (SIRDC)
75 District Development Fund Office of The President and Cabinet
76 State Enterprises Restructuring Agency Office of The President and Cabinet
Zimbabwe Investment and Development
77 Office of The President and Cabinet
Authority
78 Procurement Regulatory Authority Office of the President and Cabinet
79 Zimbabwe Schools Examination Council Primary and Secondary Education
Public Service, Labour and Social
80 National Social Security Authority (NSSA)
Welfare
Zimbabwe Institute of Public Administration Public Service, Labour and Social
81
and Management (ZIPAM) Welfare
Transport and Infrastructural
82 Civil Aviation Authority of Zimbabwe (CAAZ)
Development

Zimbabwe Financial Reporting Manual ϭϱϮ

No. STATE ENTERPRISE OR PARASTATAL RESPONSIBLE MINISTRY
Transport and Infrastructural
83 Traffic Safety Council of Zimbabwe
Development
Zimbabwe National Road Administration Transport and Infrastructural
84
(ZINARA) Development
85 Zimbabwe Youth Council Youth, Sport, Arts and Recreation
86 Sports and Recreation Commission Youth, Sport, Arts and Recreation

Group 4: State Owned Enterprises on IFRS

The public sector entities in the table below are not expected to migrate to IPSAS but
will reporting using the International Financial Reporting Standards (IFRS)
framework.

No. STATE ENTERPRISE OR PARASTATAL RESPONSIBLE MINISTRY

1 Petrotrade (Private) Limited Energy and Power Development
2 ZESA Enterprises (Private) Limited (ZENT) Energy and Power Development
3 ZESA Holdings (Private) Limited Energy and Power Development
Zimbabwe Electricity Transmission and
4 Energy and Power Development
Distribution Company (ZETDC)
Zimbabwe Power Company (Private) Limited
5 Energy and Power Development
and its Subsidiary
6 Rural Electrification Authority Energy and Power Development
7 Zimbabwe Energy Regulatory Authority Energy and Power Development
8 Petrozim Line Energy and Power Development
Environment, Tourism and Hospitality
9 Allied Timbers Zimbabwe (Private) Limited
Industry
Environment, Tourism and Hospitality
10 Environmental Management Agency (EMA)
Industry
Environment, Tourism and Hospitality
11 Forestry Commission
Industry
Environment, Tourism and Hospitality
12 Rainbow Tourism Group
Industry
Zimbabwe Parks and Wildlife Management Environment, Tourism and Hospitality
13
Authority Industry

Zimbabwe Financial Reporting Manual ϭϱϯ

No. STATE ENTERPRISE OR PARASTATAL RESPONSIBLE MINISTRY
Environment, Tourism and Hospitality
14 Mosia Oa Tunya Development Company
Industry
15 CBZ Holdings Finance and Economic Development
16 Deposit Protection Corporation Finance and Economic Development
17 Infrastructure Development Bank of Zimbabwe Finance and Economic Development
18 Printflow (Private) Limited Finance and Economic Development
19 People’s Own Savings Bank (POSB) Finance and Economic Development
Public Accountants and Auditors Board
20 Finance and Economic Development
(PAAB)
Securities and Exchange Commission of
21 Finance and Economic Development
Zimbabwe
22 ZB Holdings Finance and Economic Development
23 ZIMRE Holdings Finance and Economic Development
24 Reserve Bank of Zimbabwe Finance and Economic Development
25 Zimtrade Foreign Affairs and International Trade
26 Allied Health Practitioners Council Health and Child Care
Environmental Health Practitioners Council of
27 Health and Child Care
Zimbabwe
28 Health Professions Authority Health and Child Care
Medical Laboratory and Clinical Scientists
29 Health and Child Care
Council of Zimbabwe
30 Medicines Control Authority of Zimbabwe Health and Child Care
31 Medical Rehabilitation Practitioners Council Health and Child Care
32 Nurses Council of Zimbabwe Health and Child Care
33 Pharmacist Council of Zimbabwe Health and Child Care
Higher and Tertiary Education,
34 Verify (Pvt) Ltd
Innovation,Science and Technology
Higher and Tertiary Education,
35 Finealt Engineering
Innovation,Science and Technology
Industry, Commerce and Enterprise
36 Chitungwiza Garment Factory
Development
Industry, Commerce and Enterprise
37 Industrial Development Corporation
Development
Industry, Commerce and Enterprise
38 Litefold Engineering (Private) Ltd
Development
Industry, Commerce and Enterprise
39 Mellofieldde Chemicals (Private) Limited
Development
Industry, Commerce and Enterprise
40 Zimbabwe Iron and Steel Company (ZISCO)
Development
Industry, Commerce and Enterprise
41 Sunway City Harare (Pvt) Ltd
Development

Zimbabwe Financial Reporting Manual ϭϱϰ

 30.1. Appendix 10: Template for Exchequer Trust Financial
Statements
A10.1. Exchequer Trust Statements: Statement of assets and Liabilities
The table below presents an example of the statement of assets and liabilities to
be used by the Reporting entity:

STATEMENT OF ASSETS AND LIABILITIES AT 31 DECEMBER 20XX

IN THOUSANDS OF ZWL$
Note Current Previous
# Year Year
ASSETS
Current Assets
Cash and cash equivalents x xx xx
Receivables from Exchange x xx xx
Transactions
Recoverable from non-exchange x xx xx
transactions
Other current assets x xx xx
TOTAL ASSETS XX XX
Current liabilities
Payables and accruals x xx xx
Other current liabilities x xx xx
TOTAL LIABILITIES XX XX
NET DUE TO/FROM EXCHEQUER XX XX

Zimbabwe Financial Reporting Manual ϭϱϱ

A10.2 Exchequer Trust statement of financial performance
The table below presents an example of the exchequer statement of financial
performance to be used by the reporting entity
EXCHEQUER STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER 20xx
IN THOUSANDS OF ZWL$
Note Current Previous
# Year Year
REVENUE
Taxes X XX XX
Transfers X XX XX
Fines, penalties, and forfeits X XX XX
Sale of goods X XX XX
Other revenue X XX XX
Total Revenue X XX XX
Expenses
Revenue retained by collecting entity X XX XX
Expenses incurred X XX XX
Surplus/ Deficit XX XX

Zimbabwe Financial Reporting Manual ϭϱϲ

 A10.3. Exchequer Trust Cashflow Statement
The table below presents an example of the statement of financial position to be
used by the Reporting entity:

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 20XX (In Thousands of ZWL$)
Note Current Previous
# Year Year
Total Cash received from operating activities
Other Cash received
Total cash inflows
Less X XX XX
Revenue retained by collecting entity X XX XX
Expenses incurred X XX XX
Net increase (decrease) in cash and cash XX XX
equivalents
Cash and cash equivalents at beginning of the year X XX XX
Less transferred to CRF X XX XX
Cash and cash equivalents at end of the year XX XX
The method used in the above cashflow statement example is the indirect
approach to preparing cashflow statements

Zimbabwe Financial Reporting Manual ϭϱϳ

 A10.4. Exchequer Trust Statement of Comparison of budget to actual
amounts

The table below presents an example of the Statement of Comparison of Budget

and Actual Amounts to be used by the Reporting entity:
STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS
FOR THE YEAR ENDED 31 DECEMBER 20XX
IN ZWL$
Notes Budgeted Actual Difference Comment
Amounts Amounts on between Ref
Comparable final budget
Basis and actual
Original Final

Taxes X XX XX XX XX XX
Transfers X XX XX XX XX XX
Fines, penalties, and forfeits X XX XX XX XX XX
Sale of goods X XX XX XX XX XX
Other revenue X XX XX XX XX XX
Total Revenue
Expenses X XX XX XX XX XX
Revenue retained by collecting X XX XX XX XX XX
entity
Expenses incurred X XX XX XX XX XX
TOTAL SURPLUS / (DEFICIT) FOR X XX XX XX XX XX
THE YEAR*

Material variances should be explained in a note of the Trust financial

statements.

Zimbabwe Financial Reporting Manual ϭϱϴ

 Appendix 11 : Depreciation Rates and useful lives

Asset class Asset Useful life Depreciation method

Land Urban land Indefinite N/A

Agriculture land Indefinite N/A

Range land Indefinite N/A

Forest land Indefinite N/A

Water land Indefinite N/A

Barren land/ Indefinite N/A

Surveyed land Indefinite N/A

Other land Indefinite N/A

Buildings Residential 60 Years Straight line

Buildings
Caravans

Houseboats 10 Years Straight line

Mobile Homes 10 Years Straight line

Staff houses 30 Years Straight line

Commercial 60 Years Straight line

Buildings (for own
use)

Industrial Buildings 60 Years Straight line

Institutional 60 Years Straight line

Buildings

Zimbabwe Financial Reporting Manual ϭϱϵ

 Buildings not 60 Years Straight line
classified above

Ablution blocks 60 years Straight line

Toilets/rest rooms

Leaseholds Life of lease Straight line

Improvements (max)

Watch houses 50 Years Straight line

Trigonometrical 50 years Straight line

beacons

Infrastructure Roads - tarred 30 years Straight line

-gravel 10 years

Airport Runway 30 years Straight line

Bridges 30 years Straight line

Civil Works 30 years Straight line

Dams 30 years Straight line

Water works- 20 to 50 years Straight line

engineered

Water Works 10 years Straight line

Boreholes

Dip Tanks & 50 years Straight line

Live Stock

Management 5 to 10 years Straight line

Facilities

Irrigation 20 to 50 years Straight line

infrastructure

Zimbabwe Financial Reporting Manual ϭϲϬ

 Sewerage 20 to 50 years Straight line
Infrastructure

Water 30 years Straight line

Infrastructure

Energy 30 years Straight line

Infrastructure

Temporary 10 to 15 years Straight line

Buildings

Stadiums (stadia) 50 to 70 years Straight line

Other structures 5 to 10 years Straight line

not classified

Land Fencing and 5 to 10 years Straight line

Improvements Durawall

Land contouring 5 years Straight line

Side walls and 5 years Straight line

driveways 20 years Straight line

Streetlighting 5 years Straight line

Streets 10 years Straight line

Storm drains 5 to 10 years Straight line

Geological survey 10 years Straight line

Transport Aircraft (Non- 15 to 25 years Straight line basis (per

equipment Military) identifiable components

Boats & Water 5 to 10 years Straight line basis

Craft
Motor Cycles

Motor Vehicles 2 to 3 years Straight line basis

Zimbabwe Financial Reporting Manual ϭϲϭ

 Tractors and 5 to 10 years Straight line basis

Earthmoving 12 years Straight line basis

Equipment

Plant Equipment 10 years Machine hours or Units

of production

Specialised 10 years Mileage

Vehicles, trailers
and attached

Other Machinery 10 years Machine hours or Units

and of production
Equipment

Information, Information, 3 to 6 years Straight line basis

Computer & Computer &
Telecommunicat Telecommunicatio
ion (ICT) n (ICT) Equipment
Equipment

Machinery & Generators 5 to 10 years Straight line basis

Equipment
Survey Equipment 5 to 10 years Straight line basis

Funeral Equipment 7 years Straight line basis

Photographic/Medi 3 to 10 years Straight line basis

a Equipment

Sports Equipment 7 to 12 years Straight line basis

Teaching and 7 to 12 years Straight line basis

Training
Equipment

Zimbabwe Financial Reporting Manual ϭϲϮ

 Navigational and 3 to 6 years Straight line basis
Telecommunicatio
ns Equipment

Camping 3 to 5 years Straight line basis

equipment Kitchen
and Culinary
Equipment

Office Equipment 7 to 10 years Straight line basis

Furniture and 7 to 10 years Straight line basis

Fittings

Laboratory 7 to 10 years Straight line basis

Equipment

Hospital 7 to 10 years Straight line basis

Equipment

Scales and 20 to 25 years Straight line basis

Measures

Fire Fighting 12 years Straight line basis

Equipment

Play Centre 5 to 10 years Straight line basis

Equipment

Equipment 15 to 20 years Straight line basis

Prepaid water
meter

Street Lighting Hours Straight line basis

Water Tank 10 to 15 years Straight line basis

Solar Equipment 5 to 10 years Straight line basis

Zimbabwe Financial Reporting Manual ϭϲϯ

 Grass cutting 5 years Straight line basis
Equipment

Tools and 5 to 10 years Straight line basis

Equipment general

Biological Animal Resources 5 to 10 Years Straight line basis

resources Yielding Repeat
Products

Office furniture, Desks 10to 15years Straight line basis

fixtures and
Chairs 10 to 15 years Straight line basis
fittings
Air conditioners 15 to 20 years Straight line basis

Ceilings 20 years Straight line basis

Curtains and blinds 15 to 20 years Straight line basis

Filling cabinets 10 to 15 years Straight line basis

Fire place 20 to 30 years Straight line basis

Sofas 7 to 15 years Straight line basis

Heritage assets Real Estate and N/A N/A

Monuments;

Works of Art; N/A N/A

Books and Maps; N/A N/A

and

Other heritage N/A N/A

assets.

Military aircraft 20 years Straight line basis

Zimbabwe Financial Reporting Manual ϭϲϰ

Security, Military Guns, 10 to 20 years Straight line basis
and Weaponry
System

Zimbabwe Financial Reporting Manual ϭϲϱ

 Appendix 12 : IPSAS Implementation Matrix and Action Plan

{INSERT NAME OF ENTITY}

IPSAS IMPLEMENTATION MATRIX AND ACTION PLAN FOR THE ADOPTION

AND MIGRATION

Zimbabwe Financial Reporting Manual ϭϲϲ

 IPSAS IMPLEMENTATION MATRIX AND ACTION PLAN (IMAP) FOR THE
ADOPTION AND MIGRATION

Instructions for completing the IPSAS IMAP

a. IPSAS IMAP
The National IPSAS Strategy and plan requires individual entities to prepare
their own strategy and this template is prepared to guide entities in the
preparation of such a plan. The IMAP has been developed as both a guide
and template to be used by all reporting entities in implementing IPSAS.

b. IPSAS IMAP Approval

The IPSAS IMAP should be prepared in consultation with all relevant parties within
the entity. It should be approved by the highest governance structure within that
reporting entity. All entitles are required to have submitted their action plan to the
National Project Implementation Team by Friday 28 April 2023. The action plans
should be submitted to mugumbateprecious27@gmail.com,
mshumbaimwe@gmail.com

c. Communicate action plan

The IPSAS IMAP should be communicated to all individuals within the reporting
entities who are expected to play any role in the migration to IPSAS. This include
the governance structure (i.e councillors, board of directors, audit committee),
non-finance managers and low level staff within the finance function.

d. Zimbabwe Financial Reporting Manual

The ZFRM guides the accounting policies and practice that needs to be taken by
entities, entities are therefore required to ensure the following:

Zimbabwe Financial Reporting Manual ϭϲϳ

 • The ZFRM document should be communicated to all relevant staff within the
reporting entity
• A comprehensive training has to be performed to all relevant staff expected to
be involved in the financial reporting chain of the reporting entity including
internal audit
• An awareness training should be conducted for the governance structure and
all non-finance managers

e. ICT PFMS
Entities are expected to ensure that they have IT systems that support IPSAS
adoption and implementation. In line with that, all reporting entities will be expected
to:
• To confirm they have IT system that are adequate to support IPSAS. Where
entities indicate deficiencies in the system, a clear plan should be in place that
addresses those deficiencies.
• Engagement with ICT providers and support should be prioritized and entities
should communicate promptly with PIT any significant challenges that will be
faced.
• Ensure that business processes and procedures have been updated and staff
have been training on these

f. Risk management plan

Each entity will need to have a risk management plan. The plan identifies the key
risks related to the project and how those risks will be mitigated.

g. Change management plan

Each entity should have a change management plan which should be
continuously implemented.

h. Legacy Issues
There should be a clear roadmap to ensure that the audits are up to date.

i. Training

Zimbabwe Financial Reporting Manual ϭϲϴ

Entities should do a gap analysis and identify the training needs for each of the
relevant personnel that would be involved in the migration process. A
comprehensive training plan should be developed and implemented.

Zimbabwe Financial Reporting Manual ϭϲϵ

IPSAS Implementation Matrix and Action Plan (IMAP)

(The IMAP should be completed and submitted to the IPSAS Project Implementation Team (mugumbateprecious27@gmail.com,
mshumbaimwe@gmail.com ) By 28 April 2023.

Entity Details

Name of Entity :

Overall Responsible Person:

Contact Details:

Technical Resource Persons/Consultants :

Date:

IPSAS Implementation Team

(Please attached the IPSAS implementation team terms of reference when you submit the action plan)

Team Members Responsibility

Zimbabwe Financial Reporting Manual ϭϳϬ

 IPSAS Implementation Matrix

In developing the key action and setting deadlines, entities should be guided by the Audit protocols which is included in Appendix
12.1.

1 IPSAS Implementation Activity Key Actions to be taken Deadline Individual Responsible

(Entity to complete) for actions

1.1 Approval of IPSAS Implementation Matrix

and Action Plan (IMAP)

1.2 Communicate

1.3 IMAP Awareness

Zimbabwe Financial Reporting Manual ϭϳϭ

1.4 IMAP Template for entities

2 Zimbabwe Financial Report Manual

2.1 Adopting the ZFRM by entity governance

2.2 Training and Awareness on the ZFM within

the entity

3 ICT PFMS & COA

3.1 Analysis of state of ICT to support IPSAS

3.2 Strategy to ICT

3.3 Engagement with providers

3.4 Development of changeover plan

3.5 Training and capacitation on ICT

3.6 Business process documentation

3.7 Procedure manual

3.8 Strategy on other ICT enables

4 Implementation tools and templates

4.1 Accounting Policies

Zimbabwe Financial Reporting Manual ϭϳϮ

4.2 Financial Statements template

4.3 Procedure manual

4.4 Risk Management matrix template

4.5 Change management plan template

5 Training and Capacitation

5.1 Gap analysis

5.2 Strategy for training and capacitation

5.3 Strategy for staff retention

6 Chart of accounts

6.1 Implementation of the COA

6.2 Validation of COA

7 Legacy Issues

7.1 Survey on state of Legacy Issues

7.2 Plan on clearing legacy issues (entity level)

8 IPSAS Implementation

Zimbabwe Financial Reporting Manual ϭϳϯ

8.1 PPE (Excluding Infrastructure assets) &
Investment property

8.1.1 Updating the asset register

8.1.2 Opening balances of PPE

8.1.3 Configuring depreciation in system

8.1.4 Validation of PPE opening balances

8.1.5 Documentation of PPE process

8.1.6 Training on PPE process

8.1.7 Go live on PPE

8.2 Inventory

8.2.1 Updating the inventory register

8.2.2 Opening balances of Inventory

8.2.3 Validation of opening balances

8.2.4 Documentation of inventory process

8.2.5 Training on inventory process

8.2.6 Go live on Inventory

Zimbabwe Financial Reporting Manual ϭϳϰ

8.3 Intangible assets

8.3.1 Updating the asset register

8.3.2 Opening balances

8.3.3 Validation of take on balances

8.3.4 Documentation of business process

8.3.5 Training on business process

8.3.6 Go live

8.4 Investments

8.4.1 Updating the asset register

8.4.2 Opening balances

8.4.3 Validation of take on balances

8.4.4 Documentation of business process

8.4.5 Training on business process

8.4.6 Go live

8.5 Accounts and other receivables

8.5.1 Updating the asset register

Zimbabwe Financial Reporting Manual ϭϳϱ

8.5.2 Opening balances

8.5.3 Validation of take on balances

8.5.4 Documentation of business process

8.5.5 Training on business process

8.5.6 Go live

8.6 Other Assets

8.6.1 Updating the asset register

8.6.2 Opening balances

8.6.3 Validation of take on balances

8.6.4 Documentation of business process

8.6.5 Training on business process

8.6.6 Go live

8.7 Liabilities

8.7.1 Updating the Liabilities schedules

8.7.2 Opening balances

8.7.3 Validation of take on balances

Zimbabwe Financial Reporting Manual ϭϳϲ

8.7.4 Documentation of business process

8.7.5 Training on business process

8.7.6 Go live

8.8 Revenue Lines including Exchequer trust

revenue

8.8.1 Update revenue recognition policy

8.8.2 Configure system in line with policy

8.8.3 Validate the system ability to process

revenue

8.8.4 Documentation of business process

8.8.5 Training on business process

8.8.6 Go live

8.9 Expenditure Lines

8.9.1 Update recognition and measurement policy

8.9.2 Configure system in line with policy

8.9.3 Validate the system ability to process

expenditure

Zimbabwe Financial Reporting Manual ϭϳϳ

8.9.4 Documentation of business process

8.9.5 Training on business process

8.9.6 Go live

8.10 Infrastructure assets

8.10.1 Updating the asset register

8.10.2 Opening balances

8.10.3 Configuring depreciation in system

8.10.4 Validation of opening balances

8.10.5 Documentation of process

8.10.6 Training on process

8.10.7 Go live on Infrastructure assets

9 Communication and Change management

9.1 Communication and Change management

frameworks

9.2 Rollout of the frameworks

10 Reporting and Monitoring

Zimbabwe Financial Reporting Manual ϭϳϴ

 10.1 Reporting to Governance structure

10.2 Reporting to PIE Quarterly

10.3 Project half year report

10.4 Project Annual Report

10.5 2023 Financial Statements

IPAS Implementation Risk Matrix

Highlight the major implementation risks and key actions to mitigate the risk to be taken by the entity

Risk Risk Assessment (Low/ Action Plan Deadline

Medium/High)

IPSAS Implementation Budget

Please provide a detailed budget for the next three years to support IPSAS implementation. Indicate how the entity intends to
finance the budget.

Zimbabwe Financial Reporting Manual ϭϳϵ

Signed :
Date :

Zimbabwe Financial Reporting Manual ϭϴϬ

Appendix 12.1 : Audit Protocols Extract

AUDIT CONSIDERATIONS AND EXPECTATION DURING THE MIGRATION

PERIOD

The overarching requirement is that where entities are still producing IPSAS
transitional financial statements, they will still be required to produce full financial
statements based on the existing accounting framework. Entities will only be required
to stop producing financial statements based on existing framework when they achieve
full IPSAS compliance.

Year ended 31 December 2022

The following are the expectations for year ended 31 December 2022

Sector Financial Reporting Audit Expectation

Expectation

All Reporting Entities produce Perform the traditional audit and produce
financial statements based audit opinion on compliance with existing
on the existing financial framework.
reporting framework e.g
IFRS/Cash basis

Year ending 31 December 2023

The following are the expectations for year ending 31 December 2023

Sector Financial Reporting Audit Expectation

Expectation

Zimbabwe Financial Reporting Manual ϭϴϭ

SOEs - Option 1 SOE Entities produce Perform the audit and produce Audit
financial statements Opinion on compliance with IPSAS
based on full IPSAS and and ZFRM
ZFRM

SOEs – Option 2 Entities Produce full Perform the audit and produce Audit
IFRS Financial Opinion on compliance with IFRS
Statements

Entities produce Review IPSAS transitional financial

Transitional IPSAS statements for compliance with
Financial Statements specified standards. Review should
only be based on the standards that
the entity has indicated that they
complied with.

Central Entities produce financial Perform the audit and produce Audit
Government statements on based on Opinion on compliance with existing
entities with 1 the existing framework framework
January 2023 i.e cash

Entities produce Review IPSAS transitional financial

Transitional IPSAS statements for compliance with
Financial Statements specified standards. Review should
only be based on the standards that
the entity has indicated that they
complied with.

Local Authorities Entities not on IPSAS

currently:
Entities produce financial
statements on based on Perform the audit and produce Audit
the existing framework Opinion on compliance with existing
i.e IFRS framework i.e IFRS

Zimbabwe Financial Reporting Manual ϭϴϮ

 Entities produce Review IPSAS transitional financial
Transitional IPSAS statements for compliance with
Financial Statements specified standards. Review should
only be based on the standards that
the entity has indicated that they
complied with.

Entities currently on Audit Opinion on compliance with

IPSAS : existing framework
Entities produce IPSAS
Financial statements
with the exception of
Infrastructure Assets

Year ending 31 December 2024

The following are the expectations for year ending 31 December 2024

Sector Financial Reporting Audit Expectation

Expectation

SOEs Entities produce financial Audit Opinion on compliance with

statements based on full IPSAS and ZFRM
IPSAS and ZFRM

Central Entities produce financial Perform the audit and produce Audit
Government statements on based on the Opinion on compliance with existing
existing framework i.e cash framework

Entities produce Transitional Review IPSAS transitional financial

IPSAS Financial Statements statements for compliance with

Zimbabwe Financial Reporting Manual ϭϴϯ

 specified standards. Review should
only be based on the standards that
the entity has indicated that they
complied with.

Local Authorities Entities produce financial Audit Opinion on compliance with

statements based on full IPSAS and ZFRM
IPSAS and ZFRM

Year ending 31 December 2025

The following are the expectations for year ending 31 December 2025

Sector Financial Reporting Audit Expectation

Expectation

SOEs Entities produce financial Audit Opinion on compliance with

statements based on full IPSAS and ZFRM
IPSAS and ZFRM

Central Entities produce financial Audit Opinion on compliance with

Government statements based on full IPSAS and ZFRM
IPSAS and ZFRM

Local Authorities Entities produce financial Audit Opinion on compliance with

statements based on full IPSAS and ZFRM
IPSAS and ZFRM

Zimbabwe Financial Reporting Manual ϭϴϰ