KPMG Chartered Accountants has delivered a scathing verdict on Seed Co Limited’s financial statements, issuing an adverse audit opinion that highlights multiple material weaknesses and non-compliance with International Financial Reporting Standards (IFRS).
The audit firm’s latest report, released, raises serious questions about the company’s financial reporting practices and its ability to accurately reflect its financial position.
Accordingly, the auditors have issued an adverse audit opinion on Seed Co Limited’s financial statements for the year ended March 31, 2024.
The company’s determination of its functional currency as the Zimbabwean Dollar (ZWL) is questioned, as there was a mix of functional currency indicators between the US$ and ZWL during the year.
“The Company determined the functional currency for the year ended 31 March 2024 as the Zimbabwean Dollar (ZWL) during the year ended 31 March 2024, there was a mix of functional currency indicators between the US$ and the ZWL when assessing the primary indicators per IAS 21.9, with the weighting between US$ and ZWL indicators shifting throughout the year. The weighting of US$ indicators increased significantly towards the end of the year,” the audit report states.
The auditors noted that the company’s use of an internally generated exchange rate to record foreign currency transactions and balances was not in compliance with IAS 21, The Effects of Changes in Foreign Exchange Rates.
“Non-compliance with IAS 21, The Effects of Changes in Foreign Exchange Rates (IAS 21) Use of internally generated exchange rate.
“The material accounting policy of the Company, as disclosed in note 2.4 (f), is to record foreign currency denominated transactions and balances at the foreign currency exchange rate ruling of the transaction date (spot rate).
“Purchases of seed from growers recognised in inventory and sales of farming inputs to growers, disclosed in other income, are undertaken with the growers using US$ values and invoiced in US$.
“The invoices are then recorded in the system on transaction date at a translated amount using an internally generated exchange rate,” the audit report states.
Seed Co Limited’s valuation of property, plant, and equipment was also not in compliance with IFRS 13, Fair Value Measurement.
The company’s accounting for investments in associates and joint ventures is not in compliance with IAS 28, Investments in Associates and Joint Ventures.
“As disclosed in note 9.1, the Company’s Property, Plant and Equipment (“PPE”), which is carried at inflation adjusted ZWL 1.129.725.868.778, includes land and buildings of inflation adjusted ZWL 582.146,932.019. which are revalued annually.
“The market approach was applied for the valuation of land and buildings and key inputs into the calculations include rentals per square metre and yield rates.
“In the prior year, the valuation of land and buildings, which was carried at inflation adjusted ZWL 439,031,624,958, was performed based on US$ denominated inputs and converted to ZWL reporting currency at closing spot foreign currency exchange rates.
“This constituted a departure from IFRS 13 as valuing in US$ and applying a conversion rate to USS valuation inputs may not provide an accurate reflection of market dynamics and fair values in ZWL.
“Our prior year audit opinion was modified due to this matter but was not quantified as was deemed impracticable.
“Management has corrected the valuation approach at 31 March 2024, however, the prior year error was not corrected retrospectively, which is not in compliance with the requirements of IAS 8.
“Accordingly, the inflation adjusted statement of other comprehensive income and inflation adjusted statement of financial position for the year ended 31 March 2023 were not restated.
“Our opinion on the current year’s financial position and financial performance is also qualified because of the possible effects of this matter on the comparability of the current year’s financial position and performance with that of the prior year, Non-compliance with IAS 28, Investments in Associates and Joint Ventures – Inconsistent application of policies,” the auditors noted.
Changing of money it happens , remember they remove zeros to ZIG