BY FIDELITY MHLANGA A PROFESSIONAL accountants’ body has raised the red flag over factoring blended inflation data during the preparation of statements, saying firms pursuing this model risked distorting their organisations’ state of affairs. The Institute of Chartered Accountants of Zimbabwe (Icaz) became the latest body to raise concerns over blended inflation data after several organisations slammed government for pursuing this strategy. Icaz’s call for sanity is likely to move authorities to review the way inflation data will be treated in future as it is one of the most specialised organisations which advises both companies and government on trends in the accounting profession. In August, the Zimbabwe National Statistics Agency (ZimStat) announced that government will be publishing blended inflation and Consumer Price Index (CPI) data. Under the system, authorities blend the inflation rate for Zimdollar and US dollar-quoted prices. This model is in line with Statutory Instrument 185 of 2020, which gave firms the greenlight to quote and sell goods and services in both the US dollar and the Zimbabwe dollar. “Selection and use of the general price index in the restatement of financial statements in accordance with (International Accounting Standard) IAS 29 requires the use of a general price index that reflects changes in general purchasing power,” Icaz said in a note sent to its membership, most of them chief executive officers and finance directors in Zimbabwe’s biggest companies. “In Zimbabwe, the currency which was assessed to be in hyperinflation is the ZWL (Zimbabwe dollar). Entities that still use the ZWL as the functional currency should continue to use the ZWL CPI and not a blended CPI in the preparation of inflation adjusted financials,” said Icaz. “Entities that see an increase in US dollar transactions over ZWL transactions will need to do an assessment of whether their functional currency has changed from ZWL to US$ in accordance with IAS 21; the effects of changes in foreign exchange rates,” said Icaz. It said a blended inflation index was not appropriate in the preparation of inflation-adjusted financial statements as these were prepared in a particular functional currency, either the Zimbabwe dollar or the US dollar, not a blended currency. Similarly, any inflation index should also be specific to the reporting currency, said Icaz. It said those entities whose functional currency was the Zimbabwe dollar should continue preparing hyperinflation accounts using the Zimdollar CPI. Last year, the Public Accountants and Auditors Board (PAAB) advised companies to apply hyperinflation reporting standard IAS 29 from July. Companies were instructed to use both historic cost and inflation-adjusted financial figures in line with the requirements of the standard. Before that, accountants had a torrid time in finding an index to use as authorities in July last year suspended the publication of official inflation data. This has since been lifted. Last week, economic analysts slammed the blended inflation model say