  We present an improved version of the 3D Monte Carlo radiative transfer code
POSSIS to model kilonovae from neutron star mergers, wherein nuclear heating
rates, thermalization efficiencies and wavelength-dependent opacities depend on
local properties of the ejecta and time. Using an axially-symmetric
two-component ejecta model, we explore how simplistic assumptions on heating
rates, thermalization efficiencies and opacities often found in the literature
affect kilonova spectra and light curves. Specifically, we compute five models:
one ($\texttt{FIDUCIAL}$) with an appropriate treatment of these three
quantities, one ($\texttt{SIMPLE-HEAT}$) with uniform heating rates throughout
the ejecta, one ($\texttt{SIMPLE-THERM}$) with a constant and uniform
thermalization efficiency, one ($\texttt{SIMPLE-OPAC}$) with grey opacities and
one ($\texttt{SIMPLE-ALL}$) with all these three simplistic assumptions
combined. We find that deviations from the $\texttt{FIDUCIAL}$ model are of
several ($\sim1-10$) magnitudes and are generally larger for the
$\texttt{SIMPLE-OPAC}$ and $\texttt{SIMPLE-ALL}$ compared to the
$\texttt{SIMPLE-THERM}$ and $\texttt{SIMPLE-HEAT}$ models. The discrepancies
generally increase from a face-on to an edge-on view of the system, from early
to late epochs and from infrared to ultraviolet/optical wavelengths. Our work
indicates that kilonova studies using either of these simplistic assumptions
ought to be treated with caution and that appropriate systematic uncertainties
ought to be added to kilonova light curves when performing inference on ejecta
parameters.
