Ellchart Business School

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“GIVE US THE RATE!” — WHY ALLOWANCE FOR CREDIT LOSSES DOESN’T WORK LIKE DEPRECIATION RATES by Elles Mukunyadze

One of the most common questions we receive from public sector entities grappling with IPSAS implementation is this: "Can you just give us a rate we can use for our provision for credit losses — like the ZFRM gives us depreciation rates for fixed assets? "

It is a fair question. The Zimbabwe Financial Reporting Manual (ZFRM) has been incredibly helpful in giving practical guidance, particularly on property, plant, and equipment — specifying useful lives and depreciation rates for different asset classes so that entities do not have to start from scratch. The expectation, understandably, is that the same logic should apply to credit losses. If there is a rate for a building or a motor vehicle, surely there must be a rate for trade receivables or loans?

The short answer is: it does not work that way. And this article explains why — and more importantly, what you actually need to do instead.

The Ellchart team can help you build Expected Credit Loss (ECL) models for the different financial instruments on your balance sheet — receivables, loans, advances, guarantees, and more. We can also train your finance teams to build and maintain these models internally. Reach out to us at.

ellchart.ac.zw
[email protected]
+263781591780
Follow our WhatsApp channel for regular updates. https://whatsapp.com/channel/0029VaDvKVDK0IBmX513YS0o

1️⃣ Why There Are No Standard Rates for Credit Losses

Depreciation rates work because the pattern of consumption of a physical asset is largely predictable. A building loses value over time through wear and tear. A motor vehicle has an estimable useful life. These patterns are observable across many entities and contexts, so benchmark rates are a practical and defensible shortcut.

Credit losses are different. They depend on the specific creditworthiness of your debtors, the nature of the financial instruments you hold, the economic environment in which those debtors operate, and the historical repayment behavior of your specific debtor book. A Ministry of Health may have very different receivable recovery patterns from a local authority or a revenue authority. A loan to a parastatal carries different risk from a loan to a community group.

Applying a blanket rate would produce numbers that are either grossly overstated or dangerously understated, neither of which serves faithful financial reporting. IPSAS 41 Financial Instruments requires entities to exercise genuine judgement and build estimates grounded in evidence — not apply a shortcut that was never designed for this purpose.

Read more...

https://ellchart.ac.zw/2026/05/27/give-us-the-rate-why-allowance-for-credit-losses-doesnt-work-like-depreciation-rates-by-elles-mukunyadze/

1 Week to go!!

Stay ahead of the curve with the IFRS & Sustainability Standards Technical Update Workshop.

Join us from 04–05 June at Rainbow Towers Hotel, Harare for an intensive 3-day experience tailored for entities reporting under IFRS. This workshop unpacks critical areas shaping financial reporting today — from navigating hyperinflation and currency complexities under IAS 29 and IAS 21, to understanding key updates in IFRS 18, IAS 1, IFRS 16, and IAS 12.

You’ll also gain practical insights into fair value measurement under IFRS 13, as well as emerging ESG and climate-related disclosure requirements guided by IFRS S1 and S2. Designed to be practical and relevant, this session equips you with the clarity and confidence needed to respond to evolving standards.

Register now : https://forms.cloud.microsoft/r/zwaeUvTxB9

Contact: 0781591780 | [email protected]

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Advance your Public Sector Accounting career with the PSPA(Z) Qualification.
Gain the financial reporting, auditing, and governance expertise needed to lead with confidence in Zimbabwe’s public finance sector.
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Free Webinar Recording: IFRS 16 Accounting for Lessee (15 May)

Missed the live session?
Catch the full webinar recording and discover powerful insights, practical strategies, and expert discussions designed to help you grow professionally and stay ahead.

Whether you joined us live or not, this is your chance to revisit the key highlights and gain valuable knowledge at your own pace.

Free Webinar: IFRS 16 Accounting for Lessee Free Webinar: A practical and insightful webinar, as we unpack the key accounting requirements for lessees under IFRS 16.Topics to be covered include:- Diffe...

Join us in Chinhoyi for an exclusive 4-day IPSAS-focused workshop on Mastering Asset Management for IPSAS Compliance from 26–29 May at CUT Hotel, Chinhoyi.
Why Attend?
As the public sector shifts toward IPSAS compliance, asset management has become a critical pillar of transparency and accountability. This workshop equips participants with Practical IPSAS-aligned asset management skills and tools to identify, value, record, and report assets in line with international public sector accounting standards.

Register Now on
https://forms.cloud.microsoft/r/vGQRrpCvJK
or call/app 0781591780
e-mail [email protected]

A few minutes to go!!

Free Webinar: Join us for a practical and insightful webinar, as we unpack the key accounting requirements for lessees under IFRS 16.

Topics to be covered include:
- Differentiating rental contracts from lease contracts
- Determining the lease term
- Assessing extension options in lease agreements
- Accounting for fixed and variable lease payments
- Calculating Lease Liabilities and Right-of-Use Assets
- Presentation in the financial statements

📅 Date: 15 May 2026
📍 Platform: Microsoft Teams

Whether you are in finance, accounting, audit, or business management, this session will provide practical guidance to strengthen your understanding of lease accounting under IFRS 16.

🔗 Register now
89a05390-4605-4197-ab76-d865e87a1c5e@796878d7-74a3-49ea-98e1-2db2fdf63380" rel="ugc" target="_blank">https://events.teams.microsoft.com/event/89a05390-4605-4197-ab76-d865e87a1c5e@796878d7-74a3-49ea-98e1-2db2fdf63380

Ready to boost your ACCA exam performance?

Join the ACCA Revision Classes at Ellchart Business School and strengthen your understanding through:
✅ Intensive revision sessions
✅ Past paper practice
✅ Exam techniques & tips
✅ Flexible online & physical classes
✅ Support for all ACCA levels

Whether you’re preparing for your first paper or aiming for a distinction, these classes are designed to help you approach your exams with confidence. 💪

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📞 +263 78 889 3818
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📝 Register now using the link below:
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Start your ACCA journey with a head start!
Secure your place today for the February 2026 intake.

Apply now!!
https://apply.ellchart.com
for more information get InTouch us on

[email protected]