Preparing for year end: a working checklist for Zimbabwean companies

Year end is a deadline that never moves and is nonetheless treated as a surprise by a remarkable number of businesses. The work that determines whether it goes smoothly is done before the year end date, not after it.

This is the checklist we work through with clients. It assumes a company preparing financial statements under IFRS or IFRS for SMEs, with or without a statutory audit.

Four to six weeks before year end

Agree the reporting framework and timetable

Confirm which framework applies — full IFRS or IFRS for SMEs — and whether an audit is required. Where an audit is required, agree the dates now: when the trial balance will be final, when the audit fieldwork starts, when the signed accounts are needed. Working backwards from a filing or lender deadline usually reveals that the trial balance has to be closed sooner than anyone assumed.

Plan the stock count

If inventory is material, the count must be planned in advance. Written count instructions, sections assigned to counters, a second-count process for discrepancies, and a clear cut-off procedure for goods in transit. Where the accounts are audited, the auditor will normally want to attend the count — which means they need notice, not an invitation the day before.

Clear the reconciliations

Bank, debtors, creditors, intercompany, VAT and payroll control accounts should be reconciled and the reconciling items understood before year end, not after. Unexplained differences that have sat in a control account for months become audit findings and, occasionally, prior-period adjustments.

At year end

1. Cut off properly. Sales invoiced after year end for goods delivered before it belong in the old year; the reverse is equally true. Record the last document numbers used before the cut-off — delivery notes, invoices, goods received notes — so the boundary can be tested later.
2. Count and value inventory, and document obsolete or slow-moving lines with the basis for any write-down.
3. Confirm bank balances for every account, including dormant ones, in every currency held.
4. Circularise material debtors and creditors, or gather the statements needed to substantiate the balances.
5. Fix exchange rates used at the reporting date and record the source of each.

After year end: the closing entries that need judgement

These are the areas that consume the most time in review, because each requires a documented basis rather than a number.

• Accruals and prepayments — supported by the underlying invoice or contract, not by last year’s figure rolled forward.
• Depreciation — consistent with policy, with additions and disposals reflected from the correct dates.
• Expected credit losses on receivables — a documented methodology applied consistently, not a round-number provision.
• Inventory valuation — lower of cost and net realisable value, with the evidence supporting realisable value.
• Provisions — recognised only where there is a present obligation from a past event that can be reliably estimated.
• Leases and borrowings — classified and measured under the applicable standard, with the agreements on file.
• Related-party transactions — identified and quantified for disclosure. These are almost always understated on first draft.
• Events after the reporting period — identified up to the date the accounts are authorised, and split between adjusting and non-adjusting.

Tax at year end

The tax computation is a separate exercise from the accounts, and it is where the two disciplines meet. Accounting profit is reconciled to taxable income through adjustments for non-deductible expenditure, capital allowances in place of accounting depreciation, and timing differences.

Reconcile the provisional tax already paid through QPDs to the computed liability, and identify the balance payable or recoverable. Where deferred tax is recognised, it flows from these same differences and should be computed from the reconciliation rather than estimated separately.

If your accounts are audited

An audit is faster and cheaper when the client is prepared. Practically, that means a final trial balance the client is willing to stand behind, a lead schedule for every material balance agreeing to that trial balance, and the supporting documentation filed against each schedule.

It also means understanding what an audit is not. The auditor does not prepare your records, does not make your accounting judgements, and cannot design or implement the controls they are testing. Where the same firm assists with preparation, independence requirements govern what is permissible — a matter that is regulated for auditors registered with the Public Accountants and Auditors Board (PAAB).

Scope this at the start. Discovering in week three that your accountant cannot also be your auditor is an expensive discovery.