African Sun corrects financials

Published: 02 October 2013

AFRICAN Sun Limited has republished interim financial results showing a detailed account of adjustments to the income statement and balance sheet to correct earlier accounting errors.

The adjustments had been included in the financial statements published in June for the group's interim results to March 2013 showing restatements regarding free hold and leased properties as well as treatment of equity related earnings from associate Dawn Properties Limited.

The republication of the financial statements follows a directive from the Zimbabwe Stock Exchange review committee for more details on prior period errors to enhance financial disclosure.

Africa Sun said the restatement relates to inclusion of staff houses and time share cottages omitted from valuation in 2009 upon dollarisation, having been written off during hyperinflation. The restated amount of the assets was $6 711 452, split as $4 654 309 freehold property and $2 057 143 leasehold property based on revaluation was carried out in February and April 2013, which were restated back to 2011 as it was impractical to restate to 2009.

Another error that was restated in the group's accounts involved treatment of equity accounted earnings where African Sun would deduct from Dawn Properties profit a portion of rentals paid to the 28 percent owned associate, relative to its stake in the properties company. The method is a departure from International Accounting Standard 28, Investment in Associates, and would have resulted in perpetual loss to the group as Dawn's revenue is predominantly from rentals from African Sun. This error was corrected retrospectively to 2009.

"The correction of the error resulted in aggregate increase in assets (investments in associates) of $1 416 161," African Sun said in a statement to the March 2013 interim results.

In the interim to March 2011 the corrections decreased profits by $551 447, declining to $103 396 in 2012 and $206 792 in 2013, but understating deferred tax expense by $191 242 in 2011, $35 858 in 2012 and $71 716 in 2013 and increasing depreciation by $742 689 in 2011, U$$139 254 in 2012 and $278 508 in the interim to March 2013.

Against this background, the group's total equity and liabilities increased by $6 711 452 in 2011, but declined by $103 396 in 2011 and $206 792 in the six months interim to March 2013.

The group had omitted the valuation of staff houses, 142 in Victoria Falls and nine in Kariba while 11 blocks of time share cottages where excluded in Kariba with a total of 24 left out in Nyanga.

African Sun said it does not collect rentals for staff houses occupied by workers from its three hotels in Victoria Falls and one in Kariba as maintenance or repairs are done by occupants of the houses. Normally, this is when one would note such errors for accounting purposes. The time share cottages are owned by Sun Vacation, which is a subsidiary of African Sun Limited.

The comparative figures were restated from 2011 although the error occurred in 2009 as there is inadequate information currently available to support the valuation as from the year 2009.
- herald

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