FBC Holdings’ financials raise long-term stability...

FBC Holdings’ financials raise long-term stability concerns

Zim Now Reporter

FBC Holdings Limited’s latest consolidated financial statements for the year ended December 31, 2023, raise concerns about the long-term stability of the company.

While the Group boasts a significant increase in profit before tax, adjusted for inflation, to ZWL$403.5 billion, a closer look reveals potential underlying issues.

A key concern lies in the adoption of IFRS 17, a new accounting standard for insurance contracts. FBC Holdings acknowledges the significant impact of this transition but has not disclosed the specific financial statement line items affected. The lack of transparency makes it difficult for investors to fully assess the company’s true financial health.

“The Group has applied the transition provisions in IFRS 17 and has not disclosed the impact of the adoption of IFRS 17 on each financial statement line item and EPS,” the statement reads.

“The effects of adopting IFRS 17 on the consolidated financial statements at 1 January 2022 are presented in the statement of changes in equity.”

Furthermore, the company relies heavily on estimates and assumptions, particularly when it comes to insurance contracts.

These estimates involve factors like “expectations at contract inception about policyholders’ shares of the returns on underlying items at contract inception” and “assumptions about discount rates”.

The company admits that such estimates “could not be made without the use of hindsight”.

Another point of contention is the company’s justification for using the going concern basis in preparing its financial statements.

“The Group’s forecasts and projections, taking account of changes in trading environment and performance, show that the Group should be able to operate within the level of its current financing.

“After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements,” the company noted.

While FBC Holdings expresses confidence in its ability to operate within its current financing level, the statement highlights the use of forecasts and projections, which can be inherently subjective.