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Rajesh Sethi

Nov 17, 2021

Market Valuation of Asset under dispute/Liquidation

in SMSF Technical Forum

Hello,

A client has bought a share in a company which owns big parcel of Land. Now the company has gone into liquidation / external administration & the client is unable to reach out to the directors of the company & attain a market valuation certificate. No other expert is willing to give a market valuation since it has become a legal matter.

My question is that since the client is unable to attain a proper market valuation letter, can the trustee value the share at "NIL "value, as Company is under liquidation / external administration and recovery is in doubt for now? If so, do the auditor still have to lodge a contravention report.

If the report is to be lodged & we don't get an outcome for the next year or so, does the auditor continue to lodge the contravention report each year?

Thank you

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

Nov 19, 2021

Hi Rajesh

The auditor is required to audit compliance with Reg 8.0B that requires:

"when preparing accounts and statements required by subsection 35B(1) of SISA, an asset must be valued at its market value".

If it is likely that the investment has $0 value then it is reasonable for the trustees to value the investment at that amount even though it is yet to be confirmed. On that basis you would normally not be required to qualify your audit report and not be required to lodge an audit contravention report (ACR).

From an audit perspective I would expect the trustees to provide a declaration that they believe the current market value is $0 and there would be an explanation and documentation (if available) to support this view.

You could consider advising the ATO through the ACR where you can provide "other information" if you believe that will assist them as the regulator of the Fund.

Thanks

SMSF AAA