WINES and spirits maker, African Distillers Limited (Afdis), profit after tax for its financial year ended March 31, 2024, rose nearly 392% to US$7,62 million as the firm changed its functional currency to US dollar.
This comes as the period under review saw the former local currency, Zimbabwe dollar, taking a sharp depreciation which rendered reporting of financial results inflationary.
The increase in profit after tax for the period under review was from a 2023 comparative of US$1,55 million, owing to net monetary and forex gains.
In a statement attached to its financial report for the year ended March 2023, Afdis board chairperson Matlhogonolo Valela revealed the changes in functional currency.
“In line with IFRS Accounting Standards requirements,the company changed its functional currency to US$, effective October 1, 2023 hence all the financial records are now maintained in US$. Revenue and costs contribution in US$ increased to above 80% over the period under review,” he said.
“In other words, an entity translates all items into the new functional currency using the exchange rate at the date of the change, being October 1, 2023. The resulting translated amounts for non-monetary items are treated as their historical cost. Comparatives are not restated for a change in functional currency.”
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Valela said the change in presentation currency required current and prior year comparatives to be restated.
“The company changed its presentation currency to US$, previously this was reported in ZW$, a currency under hyperinflation after restatement of its historical financial statements in accordance with IAS Standards 29, ‘Financial Reporting in Hyperinflationary statements in economies’,” Valela said.
He said that for the period up to September 30, 2023, the entity had been using the Zimbabwe dollar, before it was abandoned by the firm.
“Thus, for this period, the results and financial position of an entity whose functional currency is the currency of a hyperinflationary economy shall be translated into a different presentation currency,” Valela said.
The procedures used in presenting the currency included all amounts, that are, assets, liabilities, equity items, income and expenses, including comparatives, translated at the closing rate at the date of the most recent statement of financial position.
“…except that when amounts are translated into the currency of a non-hyperinflationary economy, comparative amounts shall be those that were presented as current year amounts in the relevant prior year financial statements (that is, not adjusted for subsequent changes in the price level or subsequent changes in exchange rates),” Valela said.
Revenue for the period under review increased by 26% to US$51,8 million, compared to the 2023 comparative, partly due to a growth of 1% in volumes.
Valela noted, however, that due to the change in functional currency comparing the figures under review to the prior period was difficult.
Afdis was in a liquid position following the change in functional currency having US$1,79 to every dollar of short-term debt.
Total assets were recorded at US$23,7 million in the period under review, from a 2023 comparative of US$22,35 million.
“Management will continue to put in place measures to exploit the available opportunities to defend market share and sustain profitability growth. Focus will be on product innovation, production efficiencies and cost containment measures,” Valela said.