MIDLANDS STATE UNIVERSITY

ACCOUNTING DEPARTMENT

ELEAZAR SIMBA R135134G HACC CON 2.1

ADRIAN MURENGA R135740N HACC CON 2.1
EUNICE SITHOLE R135939G HACC CON 2.1
DOREEN DENHERE R136015J HACC CON 2.1
TANATSWA SHAVA R136543h HACC CON 2.1
RUMBIDZAI MUZVIWANA R136815W HACC CON 2.1

QUESTION: FINANCIAL REPORTING, LEGAL PROVISIONS AND IMPLIMITATIONS

Company financial reporting- refers to comprehensive financial statements which are a report on
a company’s activities throughout the preceding year. Annual reports are intended to give
shareholders and other interested people information about the companies’ activities and
financial performance. The financial statements should comply with the International Financial
Reporting Standards (IFRS)

IFRS-refers to accounting rules used to prepare and standardized the reporting of financial
statements. It regulates legal provision and the implementation of financial reporting.

Legal provisions - these are principles and guidelines enforced by the state through the
companies act. The following are required when preparing Annual financial statements.

Implementation - Performance of an obligation/ put into effect legal provisions.

Annual financial statements – Report created annually that quantifiably describes the financial
viability of the company.

Group accounts – a set of financial statements for a group of subsidiaries prepared by the
holding company.

Most of the legal provisions of the companies act are in compliance with the IFRS, we are now
going to look at these provisions in detail.

Legal provisions- these are principles and guidelines enforced by the state through the
Companies Act chapter 24:03 to be implemented in the preparation and presentation of
Financial Statements by companies. The following are required when preparing Annual financial
statements.

 Companies are required to prepare in English language proper books of accounts and all
receipts and expenditures shall recorded under section 140(1).
 Shall give a true and fair view of the company affairs and be available for inspection by
the directors and shall be kept at a registered office.
 Shall be prepared for each financial year thus a period of twelve months.
 The books can be destroyed after eight years.
 Failure to meet these requirements a fine of not more that level six is given to the
director.
 Financial highlights of the previous and current financial period e.g.(2010-2011) must be
provided to allow comparability to users of financial statements
 The financial statements shall include the statement of comprehensive income and the
statement of financial position
 The financial year of the subsidiaries of a company shall be in line with that of the
holding company.Section 141
 The Act under section 142 (1) requires that Financial Statements present a fair view of
the company operations (and its subsidiaries if group). According to section 140(2), if the
financial statements do not present a fair view of the business then proper books shall not
be deemed to be kept.
 Financial statements must be prepared in compliance with regulations set by the
International Accounting Standard Board which takes forms of IASs and IFRSs. Section
142 (2)
 All items of income and expense recognized in a period shall be included in profit or loss
unless a Standard or an Interpretation requires otherwise. This is also made a provision
by the Act under section 142 (7b)
 They should be without prejudice leading to the books not giving a true and fair of the
state of the company and the minister has the power to change the regulation of this act
and any other regulation in the preparation of the books of the company upon request or
application.Section 142 (3) and (4)
 A directors report-according to section 147 (1) should be attached to the financial
statements.
 Directors’ report- highlights the standing of the company’s share capital, retirement,
removal and appointment of directors, register of members and principle activities

 Name and address of the reporting entity to enable users of financial statements to
identify the company’s name and location of the reporting entity e.g. Delta Beverages on
top of financial statements. In the case where a company is to change its name it has to
indicate both the old name and the new name only in the first year of change.
 Organisational value statements (vision) - shows are company’s far sightedness i.e.
showing the going concern of the company and growth intent.
 Financial highlights – shows the group summary, share performance and financial
statistics. It includes the consolidated revenue, profit, total assets, earnings per share,
dividend per share and return on equity.
 Corporate profile (if it is a Holding company) - this is a report relating to or involving a
group as a whole.
 Board of directors – list of names of the directorate, executive and non-executive,
chairman, CEO, finance director.
 Executive reports such as the chair persons report, CEOs report, directors report and the
auditor’s report.
 Social investment- it is the responsibility for organisations to repatriate profits to society
this entails investing in the success of communities in which companies are privileged to
serve.
 Directors’ responsibility for financial reporting- directors are responsible for maintenance
of adequate accounting records, preparation, integrity and fair presentation of financial
statements. They disclose the basis of presentation(IFRS) and the compliance with
disclosure requirements of the Companies Act.
  Directors are also responsible for the systems of internal control and approval of financial
statements.
 Corporate governance- shows a company’s influence over business operations and
financial reporting, transparency, responsibility and accountability
 Relevant note stating the adoption of the IAS and IFRS in the relevant notes to the
financial statements.

ACCOUNTS AND ANNUAL FINANCIAL STATEMENTS

Accounts are a company’s group accounts as defined by the Company Act [ chapter 24:03] and
to further explain group accounts refer to the accounts and statements of the subsidiary
companies of a holding company this is endowed in Section 144 (1). There are five main
elements of financial statements these are statement of comprehensive income, statement of
financial position, statement of cash flow, statement of changes in equity and the notes and other
reports accompanying financial statements.

Statement of comprehensive income

This reveals a summary of an entity’s results of operation for the financial period as it provides
information about revenues generated and expenses incurred, the difference of which is
identified as the net profit or loss.

Statement of financial position

This is a list of balances of the resources of an entity and the claims against those enlisted
resources. This statement also shows the equity and reserves of the firm.

Statement of cash flows

This is in accordance with IAS7 and it is the statement reflecting the inflows and outflows of
cash and cash equivalents in the different activities of a firm in a bid to expose the liquidity of
the company.

Statement of changes in equity

This is an instrument of the financial statements used to show the changes in the capital structure
of an entity. This shows how the events which occurred during the financial year have altered the
equity of the shareholders.

Notes to the financial statement

These are ought to be prepared as specified by the IFRS and the Companies act of Zimbabwe,
these are supporting qualitative information to back up the qualitative financial statements. These
must be prepared in accordance with IAS1.

The legal framework of Zimbabwe adopts the IAS and mostly in conformance with the IFRSs
this hereby means that the financial statements are of a regularised state and format with
international standards which are pre-set. The financial statements of the entity must be in
accordance with section 140 more so subsection (1a, b and c) the statement of financial position
and the statement of comprehensive income are greatly mentioned in section 141 (1 and 2) these
statements must give a true and fair view of the company’s affairs as laid out in section 142. It
also suggests that the information spelt out in the statement of financial position should be aided
by financial notes of the financial statements. Ways of presenting financial statements also differ
from firm to firm since sub section (4) of Section 142 that the requirements of stakeholders differ
from firm to firm.

Group accounts are provided for by statute on section 144 of the companies act and they are also
mentioned of in section 142 (5). The forms and contents of group accounts are encompassed in
section 145 but provided it would show a clearer and fairer position the law can also allow the
companies to modify the contents. All books of accounts of the entity must be in accordance
with IAS1.

• Supplementary information- shows shareholders and other relevant information annexed

in the financial statements as stated in section 149

• Detachable proxy form for AGM- the company gives notice of the next AGM, that is, the
date, place, time and agenda
 AUDITOR’S REPORT
 It is mandatory (required by the law) to include an auditor’s report in the financial
statements.
 It is therefore the auditor’s role and duty to carry out the financial audit and come up with
a report. The inclusion of an auditor’s report in the financial statements enhances the
degree of confidence in the financial statements.
 According to the companies act section 146 sub-section 1 the auditor’s report must be
annexed or joined with the financial statements asreferred in section 153.
 A director’s report-according to section 147 Directors’ report to be attached to the
statement of financial position (balance sheet).
 The chairman’s statement is from the chairman of the board to the shareholders of the
company.
REMEDIES AND CONCLUTION
Remedies when a company’s financial reporting fails to comply with
regulations

If an officer fails to monitors that the company’s financial reporting comply with the
requirements of the regulations he/she is liable

According to section 142 subsection (6)

If a director of a company fails to take all reasonable steps to secure compliance by the company
as respects any accounts required to be laid before the company in general meeting with the
provisions of this section and with the other requirements of this Act as to the matters to be
stated in accounts he shall, subject to section one hundred and forty-eight, be guilty of an offence
and liable, to a fine not exceeding level three or to imprisonment for a period not exceeding level
three or to imprisonment for a period not exceeding one month or to both such fine and such
imprisonment.
According to 148 there are remedies for the director when the company fails to comply with the
financial regulations.