A sector specialist has reminded accountants and advisers servicing SMSF clients of the important role the notes to the fund’s financial statements play in the reporting process.
Accurium head of SMSF education Mark Ellem acknowledged the notes to the financial statements are critical because a super fund of this type is not a reporting entity, meaning its year-end accounts are considered of a special-purpose nature and the accounting standards do not apply when they are being drafted.
“So how the [accounts] are prepared is determined by the trustees and need to be disclosed in the notes to the financial statements,” Ellem told attendees of a recent technical webinar.
Given their standing, he highlighted how vital it is for everyone associated with servicing an SMSF to have a grasp of the detail the notes stipulate.
“I ask you, have you actually read them? Or do you think no one cares about them [and ask] who reads them?” he said.
“Well, I’ll tell you who reads them, auditors read them. Over the years I’ve received questions and comments from auditors asking about whether accountants or administrators read the notes because there have been scenarios where they read the notes that say the accounts should be prepared this way, and when they look at the actual financials, they are not in line with the notes themselves.”
According to Ellem, there are certain elements needing to be included in the notes, such as recognition the SMSF is not a reporting entity.
“[They should also confirm the financial statements] are prepared [in order] to meet the requirements of the SIS (Superannuation Industry (Supervision) (SIS)) Act and SIS Regulations, and the requirements under the trust deed,” he explained.
To this end, he warned the trust deed could actually declare the SMSF’s financial statements will be prepared as if the fund is a conventional reporting entity, but suggested it should not impose this standard of practice.
