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I am auditing a fund that has a new accountant this year. The accountant has done the following on the financial statements:
Stated the prior year comparatives to include the total capital loss made in that year, on the balance sheet (not deferred tax asset value, but the entire capital loss). However, the officiall issued financial statements from the prior year did not have such a line item.
Carried forward the capital loss balance to the current financial year under audit.
He has included this carried forward capital loss in the "equity" section of the balance sheet. He has one line item "retained earnings" and "capital loss brought forward" is another item. The sum of the two items being the member balance (the opening and closing balances are correct).
I will tell the accountant to make the prior year comparatives on the balance sheet to be per the official signed financial statements from the prior year.
My main question is, is it incorrect/invalid to state total capital loss as a line item in equity section of the balance sheet and carry that forward? I know the fund can state the deferred tax asset/liability, but I have never before seen the total capital loss/gain itself.
Thank you.
Hi Jason
I have never seen what you refer to before re the capital loss being recorded in the Balance Sheet. I do not believe it is incorrect just not common.
My view is it can be shown this way on the basis that they are special purpose financial statements and assuming the notes to the accounts refer to the policy.
BGL or Class do not record a capital loss in their standard accounts in the Balance Sheet. Is the accountant using superannuation software to do the accounts?
Re the comparatives you could show the comparatives differently to as signed in the prior years accounts if the notes to the accounts explained the change.
Thanks
The Auditors Institute