1. The Australian Taxation Office (ATO) intends that self managed superannuation funds should use market values for all valuation purposes. This includes valuations for determining the purchase price of a pension and the use of market value accounting for all financial statements.
2. The purpose of this Circular is to provide the basis for conducting these valuations.
3. Australian Accounting Standard AAS 25 which applies to reporting entities requires superannuation funds to value their assets at their net market value as at the reporting date. However, most self managed superannuation funds can appropriately be classified as non-reporting entities and therefore not required to comply with this standard.
4. Regardless of this, the Tax Office’s position is that self managed superannuation funds should use market value reporting for their financial statements, even where the auditor has determined that the fund is a non-reporting entity.
5. This view is shared [BH1]by APRA and is set out in their Addendum to Circular No. IV.A.4.
Benefits of market value financial reporting
6. By using market value reporting, self managed superannuation funds will ensure that members’ benefits, as reported in the annual statements, will reflect all market value movements of the reporting period.
7. This consistent accounting approach by all superannuation funds will assist trustees with the investment decisions of the fund by allowing for the comparison of financial statements from subsequent periods and with other superannuation funds. It will also assist trustees to determine whether the mix of investments in the fund is in accordance with the investment strategy.
8. Market value reporting will also allow trustees to easily determine the resources that the fund has available for payment of benefits. For example, if a member was to leave the fund the trustees could easily determine the member’s account balance as at the reporting date.