When calculating income for death benefits, start with same accounting method as deceased: Saskatchewan Court

When determining death benefits under the province’s Automobile Accident Insurance Act, Saskatchewan’s government auto insurer, SGI, should use the same accounting method for calculating income as the deceased, the Court of Appeal for Saskatchewan has ruled.
The decision considered whether the income of a self-employed farmer, Roger Howard Schmitz, who died in an auto accident on Apr. 4, 1999, should be based on a cash method of accounting or an accrual method of accounting.
Under the cash method, income is not counted until a cash or cheque is received, and expenses are not counted until paid, according to nolo.com.
Under the accrual method, however, transactions are counted when the order is made, the item is delivered or the services occur, regardless of when the money for them (receivables) is actually received or paid.
In Saskatchewan Government Insurance v. Schmitz, the difference between the two methods was the difference between an annual income of Cdn$41,964 for Schmitz (using the accrual method) or Cdn$33,790 (the cash method used by SGI).
A trial judge agreed with the widow, Terry-Lynn Schmitz, that SGI should have used the accrual method to get a true and accurate picture of the deceased’s farm income.
But the Appeal Court noted that Schmitz himself, with the consent of Revenue Canada, used the cash method for determining his income.
The Appeal Court noted Saskatchewan’s legislation does not specify which accounting method should be used to calculate the deceased’s income.
“SGI, when faced with such claims, must start somewhere in determining a deceased’s income, and the logical place to start is the deceased tax returns for the relevant period and to calculate the income using the same method as by the deceased,” the Court of Appeal ruled.