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Which is the proper valuation of SMSF Financial Statements (FS)- on accrual or cash basis, some accountants value their FS including members balance on cash basis. Is this correct?
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Hi Maria
A SMSF's financial statements are prepared as special purpose financial statements so can be prepared on a cash or on an accruals basis. The notes to the financial statements should disclose on what basis the financial statements have been prepared.
Often financial statements for a SMSF are prepared on a cash basis other than investments which are at market value. The notes to the accounts provide additional details for example that dividends are accounted for on a cash basis and distributions are accounted for in the period the Fund is entitled to them.
Regulation 8.02B of SIS requires:
"when preparing accounts and statements required by subsection 35B(1) of SISA, an asset must be valued at its market value".
Thanks
SMSF AAA