Harare – Latest financial statements released by Old Mutual Zimbabwe for the 12 months period to December 2018 shows that its banking arm, CABS lost value in assets to the tune of $19 million after adopting new financial reporting standards.
In 2018, IFRS 9 was adopted as a replacement to IAS 39 bringing with it changes to classification, measurement and impairement of financial assets. The standard is more conservative and prudential in its classification of financial assets as it recognises and provides for potential losses earlier than the IAS 39.
In accounting terms IFRS 9 recognises losses in anticipation as expected credit losses while IAS 39 recognises losses retrospectively after they have been incurred losses.
The change in standard would therefore result in a shock at the point of adoption as classification and measurement discounts financial assets position.
Announcing its 2018 financials Old Mutual said “As a consequence of the new standard, the Group has revised its impairment methodology under IFRS 9 for each of these classes of assets. The impact of the change in impairment methodology on the company’s total equity is disclosed in note 13.”
At the beginning of the 2018, total loans and advances on Old Mutual’s financial statements stood at $669 million and after re-measurement, the same portfolio closed the year 2018 at $650 million which implied a loss of -$19 million in value.
The $195.4 million TBs portfolio shed $2.5 million on re-measurement, however the losses were mitigated by a $1.9 million gain on the back of reclassification.
For the period under review it is likely that financial services companies across the sector are also likely to report weaker balance sheet positions before factoring value earned from 2018 activities.
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