Financial Reporting Cash vs Accrual

Hi all,

Just a quick question:

We have always prepare our SMSF financial reporting as a special purpose reporting using cash basis. However the auditor recently argue as the financial report consist of income tax payable/refundable, the report should in fact be prepared under accrual basis.

However under BGL360 default badges, the only way I can change from cash to accrual is if I change reporting method to reporting entity (general purposes). Is there anyway I can continue as non-reporting entity but using accrual basis?

what are your thought on accrual vs cash reporting?

Thank you,
Natalia

1 Like

Good question, & pick-up by the auditor!
I think the SMSF accounts need to be on an accruals basis so the member has a better understanding of what their actual balance is if they were to withdraw from the fund … so yes, tax accruals (including deferred tax) should be recorded.
How this is done in BGL, I don’t know. You could edit the wording in Note 1 (and wherever else required)? But ideally it would just be in settings.

1 Like

Thank you! That’s what I thought too, however BGL360 setting only allow accrual method to be use in the note if it is reporting entity. othwerwise non-reporting entity default to use cash basis.

Preferably not to export and edit the wording to accrual everytime we prepare the report.

You can edit the template for Note 1 - see Customising the Template for an Existing Report

1 Like

Yes that’s another option that we’re looking at, but not keen on the fact that if BGL updates their default template due to legislation updates, our custom report will not be updated. But seems like that would be the only option we have at the moment.

It is quiet odd because back in Simplefund desktop, it allow us to do non-reporting entity with accrual basis and it was just a setting option.

Have you spoken to them about it? I think they are quite responsive to product requests :slight_smile:

1 Like

Thank you! Yes I have contacted them and the only way to do is to do custom report. We might discuss this with our tax lawyer as we don’t want to be preparing as reporting entity just because it’s the only default way to prepare the account under accrual basis.

I agree that it need to be in accrual basis but it should be able to do it as non-reporting entity as well. Might check with other software if this is their default reporting option as well.

Thank you so much for your input! :slight_smile:

1 Like

I haven’t figured out how to post as a feature request?
ETA: So I’ve flagged your post for attention :grinning:

1 Like

Thank you so much! :smiling_face_with_three_hearts:

I came across this thread, which is on the subject of cash vs accrual accounting, but I don’t think answers the query I have, which is:

  • Does Simple Fund 360 accommodate the need for cash accounting?

To give my question some context, the primary investment made by my SMSF is lending money. When money is lent, the SMSF calculates interest daily, then capitalises that accrued interest in the last day of each calendar month.

The borrower does not necessarily make repayments on or before the date on which interest capitalises. In fact, a borrower may not make a repayment for some time.

SMSF accounting software which I used previously treated any billed interest, ie. the interest that capitalises (if not repaid) on the last day of each calendar month, as income. A problem with that is that the SMSF pays income tax on earnings not yet received. Cash accounting is more advantageous on that note, and so far as I know there is no reason why an SMSF can’t report earnings to the ATO on the basis of cash accounting.

Capitalised interest should reflect in an increased balance of the loan, so that the balance sheet of the SMSF at any given point should accurately reflect the SMSF’s value, at least to the extent of capitalised interest at the end of each calendar month.

So, would Simple Fund 360 accommodate my need?