Members of Safaricom Investment Co-operative (SIC) will not earn any return from their share capital for the year ended December 2019 after revenues plunged 89.3 percent on adoption of a new accounting standard.
Its annual report for the period shows that the board has not proposed any dividends, also disclosed as rebates, to its 4,538 members.
This is in contrast to the Ksh375 million ($3.75 million) paid on the year before, with SIC skipping payouts to members for the first time since 2012. The society defines rebates as returns on a member's shares.
SIC’s revenues declined to Ksh55.9 million ($559,000) in the review period compared to Ksh525 million ($5.25 million) a year earlier as the accounting standard resulted in deferment of Ksh217 million ($2.17 million) worth of income that will now be booked in the current fiscal year.
“Our financial report is prepared in full compliance with International Financial Reporting Standards, including IFRS 15,” SIC said in the report.
“This means that a substantial percentage of our income has been deferred to 2020.”
Under IFRS 15, the society recognises revenue only when the land has been sold and transferred to the customer as opposed to the previous practice of booking sales after clients pay a deposit.
This saw income from sale of land drop 97.6 percent to Ksh9.78 million ($97,800). Total income from projects –mainly sale of land and housing- dropped by the same margin to Ksh12.7 million ($127,000).
This led to deferred income rising 2.5 times to Ksh290.3 million ($2.9 million). The society says Ksh217.8 million ($2.178 million) relates to land and housing income that was booked as deferred income following the switch to the new accounting standard.
SIC posted a net deficit of Ksh88.5 million ($885,000) from previous year’s surplus of Ksh6.9 million ($69,000), reflecting the big impact of the more conservative accounting system.
Chief executive Humphrey Njeru says the full adoption of IFRS 15 saw a substantial percentage of income deferred to 2020.
“Having fully complied with IFRS 15, we expect to turn back to profitability effective this (2020 financial year),” said Mr Njeru in the annual report.
The deferred income will only be recognised once the selling process has been completed and the assets passed to customers.
Its auditors, Mbaya & Associates, note that the society was still owed Ksh1.5 billion ($15 million) by customers and that some clients withdrew out of projects worth Ksh90 million ($900,000) in the year under review.