Changing from Cash to Accrual Basis on Forms

[BG5150]

In the past, a plan's 5500 was produced using a cash basis. They are now our client. We generally do the forms on an accrual basis for our clients.

If we change it to accrual, how do we go about it?

Small plan filer. Just adjust in other income what's necessary? Any thing else? Is there a footnote somewhere?

[chc93]

Our understanding is that whatever method is used should be consistent year-to-year. But, changing in one year is OK, as long what's changed remains consistent. In the past, we've changed contributions from cash basis to accrual. What we did was to show 2 year's contributions as "contributions" on the 5500 in the year of switch from cash basis to accrual, then stayed on accrual after that. Only thing is to alert the client that the "contributions" shown on the 5500 represents 2 years (prior year deposit in current year, current year accrual). We didn't note it anywhere on the 5500, and never had any problem.

[doombuggy]

I have the same problem as the OP. I got a plan from an old ER of mine (BISYS) and the 2010 5500 is on a cash basis. The plan sponsor deposits the s/h annually, and did so timely in 2011 for 2010. But we treat the plan as accrual, so I need to account for those deposits in 2011 on the 2011 5500. I was thinking of putting them on the "other" line as well.

[ESOP Guy]

If it is a contribution I would put it on the contribution line.

I understand you might worry it exceeds a limit, but I have not found that to be a problem. It has been a long time since I had this issue come up with a plan I was working on for someone.

[BG5150]

So there are no footnotes or anything? (except for large-plan filers) Just prepare it with the same opening balance, put a note in the file and move on?

[Bird]

So there are no footnotes or anything? (except for large-plan filers) Just prepare it with the same opening balance, put a note in the file and move on?

Yes.

[Bill Presson]

So there are no footnotes or anything? (except for large-plan filers) Just prepare it with the same opening balance, put a note in the file and move on?

I remember back in the "olden" days in the '80's when I actually typed the 5500's (and the IRS actually read them) we would put footnotes for various items. But in this cold, cruel world, I don't think they would matter anymore.