Australia’s GFS system follows the conceptual basis of the IMF GFSM 2014 but has some differences. These include:

1. Debt Valuation
   For consistency with Australia’s System of National Accounts (ASNA), AGFS15 requires the valuation of debt at the current market value (also known as the fair value or creditor approach) for all debt instruments. IMF GFSM 2014 uses the debtor approach for non-tradable debt instruments;
2. Debt Presentation
   While AGFS15 has adopted the essence of the matrix style presentation of public sector debt by type of instrument and level of government as outlined in What Lies Beneath: The Statistical Definition of Public Sector Debt, IMF Staff Discussion Note. IMF July 27, 2012; the debt and other liabilities matrix as shown in paragraphs 13.14 to 13.16 of this manual has been modified for Australia’s purposes;
3. Derivatives
   IMF GFSM 2014 recognises derivatives as financial claims but does not recognise them as debt instruments. To provide a more complete picture of government financial exposure AGFS15 defines derivatives as a debt instrument;
4. Compensation of Employees
   AGFS15 records salary sacrifice expenses as supporting information, whereas IMF GFSM 2014 does not require their disclosure; AGFS15 seeks additional detail for superannuation that is not required by IMF GFSM 2014. This is to provide a more complete set of data to be available and used in the national accounts;
5. Breakdown of own-account capital formation as supporting information
   AGFS15 records a breakdown of own-account capital formation as supporting information. IMF GFSM 2014 does not separately identify it. This is to provide a more complete set of data to be available and used in the national accounts;
6. Gold Swaps and Repurchase Agreements
   In AGFS15 gold swaps and repurchases are treated as sales and forward purchases of derivatives. IMF GFSM 2014 treats them as collateralised loans. This is because the ABS considers its treatment better reflects the fact that the economic ownership has changed. Further the IMF GFSM 2014 treatment could result in negative assets which cannot exist in the Australian GFS.
7. Debt Assumptions and Secondary Trades in Securities
   AGFS15 treats debt assumptions and secondary trades in securities as transactions. IMF GFSM 2014 treats them as reclassifications. The ABS considers that debt assumptions and secondary trades in securities are transactions between all three parties involved and that treating them as reclassifications recognises the public sector unit assuming the liability and the public sector unit which passes on the liability as the only parties involved; the lending body is not recognised.
8. Holding Companies
   Holding companies are classified according to the activities of the subsidiaries in AGFS15, in order to align with other macroeconomic classifications used in Australia. They are treated as financial corporations by IMF GFSM 2014.

There are also variations in the way that the ABS GFS are presented as output. Statistics compiled in accordance with AGFS15 can be used by the ABS to satisfy the GFS requirements of the IMF. Further information on the AGFS15 departures from the IMF GFSM 2014 can be found in Appendix 3 of this manual.

The IMF GFSM 2014 provides guidance for compiling data for the general government sector, the broader public sector and their subsectors (public non-financial corporations and public financial corporations). The ABS compiles statistics for the widest possible coverage of government operations recommended by the IMF, and has adopted the guidance set out in the IMF GFSM 2014.

The basic unit in the IMF GFSM 2014 is the institutional unit, which is defined in the same way as the unit of the same name in 2008 SNA (i.e. as an entity capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other units). As noted in Chapter 2 of this manual, the Australia’s GFS system also recognises the institutional unit as the basic statistical unit.

The concept of quasi-corporations in the 2008 SNA is also applied in the IMF GFSM 2014. The concept effectively reduces the scope of the general government sector by excluding government market entities that operate like corporations. In Australia’s GFS system, the same concept is applied.

The IMF GFSM 2014 recommends that GFS be presented for subsectors of the general government sector. A maximum of four subsectors is recommended: central government, state / territory government, local government, and social security funds. With the exception of social security funds which do not exist in Australia, the subsectors coincide with Australia’s level of government classification. Social security funds are institutional units which provide social benefits to the entire community, or large sections of it, through a social insurance scheme which generally involves compulsory contributions by participants. The IMF GFSM 2014 does not include the concepts of jurisdictions and of multi-jurisdictional units that are applied in Australia and therefore does not have a concept of national government, which is the combination of the central government and control not further defined units.

The definition of the general government sector applied in the IMF GFSM 2014 is the same as in the 2008 SNA. The same definition is also applied in Australia's GFS system.

The IMF GFSM 2014 includes the same definitions of economic stocks and flows, and of transactions and other economic flows, as are applied in the 2008 SNA. Australia’s GFS system applies identical concepts. The double-entry accounting model followed in the IMF GFSM 2014 is also applied in the Australian system. The IMF recommends full consolidation of flows and stock holdings between units contributing to the same aggregates, which is the practice followed in Australia's GFS system.

The Australian GFS system employs an accrual basis of recording that is defined in the same way as the accrual system employed in the IMF GFSM 2014. The IMF standard provides guidelines on accrual recording of specific types of transactions, including taxes, grants, dividends, transactions in non-financial assets, inventories and financial assets. In Australia’s GFS system, the accrual practices adopted in government accounting systems are the starting point of recording GFS on an accrual basis. These practices may depart from the IMF guidelines in matters of detail but generally follow the principles underlying the IMF guidelines. The ABS adjusts the accounting data where material departures from the IMF principles come to notice.

In accordance with the 2008 SNA, the IMF GFSM 2014 states that, in general, all flows and stocks should be valued at market prices. The standard provides guidelines on how market values of flows and stocks might be estimated, if not directly available from accounting records. In Australia’s GFS system, market values are recorded for most flows and stocks (with the exception of depreciation, which is recorded instead of consumption of fixed capital).

The ABS GFS framework is the same as the IMF framework in all conceptual respects, but differs slightly in terms of structure, presentation and level of classificatory detail. It incorporates the recommended integration of economic stocks and flows that is achieved by applying the formula in Table 17.1 below.

The financial statements recommended in the IMF standard and the corresponding statements in Australia’s GFS system are set out in Table 17.2 below.

The statements in the IMF and Australian GFS systems cover the same economic flows with minor differences in terminology and arrangement of the statements evident in Table 17.2.

The main differences are that the Australian system includes a statement of stocks and flows that is not included in the IMF system, and includes a summary statement of explicit contingent liabilities and implicit contingent liabilities rather than a summary statement of explicit contingent liabilities and net implicit obligations for future social security benefits. The reason for this is because the present value of implicit obligations for future social security benefits is zero for Australia. The only type of social security benefits that involve a contractual liability for Australian public sector units relate to employment related retirement benefits which have always been included in Australia's GFS.

Of the basic elements included in the IMF statement of operations, the ABS GFS statement of operations covers all except transactions in financial assets and liabilities (ETF 3). In the Australian GFS system, details of transactions in financial assets and liabilities are included in the statement of stocks and flows. The broad items covered in the IMF revenue and expense classification and the corresponding items in the Australian system are shown in Table 17.3 below.

All of the Australian GFS items which correspond to items in the IMF statement of sources and uses of cash are recorded in the Australian GFS statement of sources and uses of cash. Table 17.4 lists the cash flow items in the IMF GFSM 2014 and those in the Australian GFS system that correspond to the IMF items.

Australia’s GFS system covers essentially the same conceptual categories for transactions in financial assets and liabilities that are included in the IMF at the lower classification levels, with the only differences being in the structural headings of the ABS classification. Table 17.5 lists the transactions in financial assets and liabilities classification items in the IMF GFSM 2014 and those in the Australian GFS system that correspond to the IMF items.

Australia’s GFS system covers essentially the same conceptual categories for transactions in non-financial assets that are included in the IMF at the lower classification levels, with the only differences being in the structural headings of the ABS classification. Table 17.6 lists the transactions in non-financial asset classification items in the IMF GFSM 2014 and those in the Australian GFS system that correspond to the IMF items.

The IMF system includes a statement of other economic flows which is not required in the Australian system because the items are recorded in the columns for holding gains and losses and other changes in the volume of assets in the Australian statement of stocks and flows. The Australian GFS items corresponding to items in the IMF statement of other economic flows are shown in Table 17.7. As can be seen, Australia’s GFS system covers essentially the same conceptual categories that are included in the IMF at the lower classification levels, with the only differences being in the structural headings of the ABS classification.

Intra-unit transfers (ETF 6) are used exclusively by ABS compilers and hence are not discussed here.

In Australia, extra supporting information is collected for national accounting purposes. This supplementary information includes salary detail on sacrifice expenses and a detailed breakdown of own-account capital formation. The Australian GFS items corresponding to supplementary information in the IMF GFS system are shown in Table 17.7.

Unlike some other countries, Australian GFS is not derived from the national accounts, but feeds into the national accounts as a separate statistical stream in its own right. The ABS compiles GFS for the general government sector and the total public sector and their subsectors (public non-financial corporations and public financial corporations). In addition to feeding into the national accounts, the ABS also publish separate quarterly and annual GFS.

In order to enhance domestic fiscal analysis and meet its national accounting obligations, the ABS has extended the GFS supporting information to include:

• Salary sacrifice expenses; and
• Own-account capital formation.

The first extension to the ABS GFS supporting information concerns the recording of salary sacrifice expenses. Paragraph 7.47 of the 2008 SNA describes salary sacrifice as benefits (such as a motor vehicle or extra pension contributions) that may be purchased by an employee from an employer by foregoing some salary with the purpose of utilising the tax advantages connected to doing so.

In order to provide more complete measurements of wages and salaries for the distribution of income account in the Australian national accounts, the ABS GFS records salary sacrifice expenses in the context of public sector employment related pensions (known as superannuation in Australia) and also in the context of items other than superannuation as part of other public sector employee expenses in the statement of operations input classification (see Appendix 1 Part B of this manual for further information).

Another extension to the ABS GFS supporting information is the detailed breakdown of own account capital formation. Own-account capital formation is the production of goods and services by a unit for their own use, often involving the construction of non-financial assets using a public sector unit's own materials, labour, and expertise.

In order to provide better measurements of compensation of employees for the income account, the production account, and for the capital account in the national accounts, the ABS GFS records the value of payments relating to own-account capital formation as part of the supporting information (ETF 7) in the context of own-account superannuation expenses; own-account employee expenses other than superannuation expenses; and own-account non-employee expenses.

In both the IMF and the ABS GFS systems, information in each of the asset categories and the liabilities categories can be further disaggregated according to types of assets and liabilities. All of the concepts in the IMF balance sheet have a corresponding item in Australia's GFS system. Table 17.9 compares the ABS and IMF balance sheet classifications.

Concessional debt is comprised of loans that are extended by public sector units to other units, with the contractual interest rate or other condition set intentionally below the market interest rate or condition. Australian GFS includes the value of advances in the form of concessional debt as part of financial assets and liabilities separately in the balance sheet, but no imputations are made for the concessional element. The revaluation and concession element are not distinguished although the concessional element is disclosed as a memorandum item. The IMF GFSM 2014 records both the concessional debt and the implicit transfer or concessional element as memorandum items. The concessional loan is recorded together with other debt in the core balance sheet.

For further information on the treatment of concessional debt in the GFS system, see Chapter 8, Chapter 10, Chapter 13, and Appendix 1 Part A of this manual.

Australian GFS recognises financial derivatives as debt instruments. A financial derivative is a financial instrument that is linked to another specific financial instrument, indicator or commodity, and through which specific financial risks (such as interest rate risk, foreign exchange risk, equity and commodity price risks, credit risk, and so on) can be traded in their own right in financial markets. Although the IMF GFSM 2014 recognises financial derivatives as financial assets and liabilities it does not classify them as debt instruments. Paragraph 7.237 states that financial derivatives are not debt instruments because they do not supply funds or other resources, but rather shift the exposure to risks from one party to another.

The Australian GFS differs from the IMF GFSM 2014 in the valuation of all financial assets and liabilities at current market values. The IMF GFSM 2014 values debt instruments at the nominal value. Market value is conceptually equal to the required future payments of principal and contractual interest discounted at the existing market yield. For further information on the valuation of financial assets and liabilities in the GFS system, see Chapter 8, Chapter 10, Chapter 13, and Appendix 1 Part A of this manual.

The conceptual framework of the Australian System of National Accounts (ASNA) is based on the 2008 SNA. The IMF standard for GFS is closely ‘harmonised’ with the 2008 SNA, and it follows that Australia’s GFS system is harmonised with the ASNA. Indeed, the use of common concepts, items and classifications in the ASNA and Australia’s GFS system is essential because the GFS system is the main provider of data for compiling ASNA information about the general government sector and public non-financial corporations. The following section provides a broad analysis of the links between the ASNA and the GFS system.

The ASNA is designed to provide information about the Australian economy in total and similar supporting information about individual institutional sectors within the economy. The scope of the ASNA is the whole of the Australian economy. The scope of Australia’s GFS system is the public sector, which comprises the general government sector and the public non-financial and financial corporations. Although the ASNA does not provide consolidated information about the public sector as such, it provides information about the following institutional sectors: 

• Non-financial corporations sector;
• Financial corporations sector;
• General government sector;
• Households (incorporating non-profit institutions serving households); and
• Rest of the world sector.

The scope of the general government sector in the ASNA is exactly the same as in the GFS system. In the ASNA, public non-financial corporations form part of the non-financial corporations sector and public financial corporations form part of the financial corporations sector. As previously discussed, the public sector defines the scope of the GFS system, which consists of the general government sector, the public non-financial corporations and the public financial corporations.

The ASNA distinguishes between the public and private corporations within the non-financial and financial corporations sectors. When the distinction is made, the scope of the public corporations in ASNA coincides with the scope of the public corporations in the GFS system. Therefore, it is possible to directly compare common ASNA and GFS information about general government, public non-financial corporations and public financial corporations.

The ASNA presents information on economic flows and stocks using a framework of linked accounts that differs from the GFS framework of financial statements, but includes many common links. The differences arise because of the different objectives of the two systems. In the national accounts, emphasis is placed on economic concepts of production, income, consumption, saving, capital accumulation and wealth, with the aim of measuring the economic performance of the whole economy. In the GFS system, emphasis is placed on fiscal concepts such as revenues, expenses, and financing, with the aim of measuring the financial performance of the public sector.

The ASNA framework includes the following set of accounts:

• Production account;
• Income account;
• Capital account;
•  Financial account;
• Balance sheet;
• Revaluation account; and
• Other changes in the volume of assets account.

In broad terms, the production account records production, the income generated from production and the expenditure of income on final consumption and capital formation. The income account records the disposable income of residents (i.e. after taxes and other current transfers), the current use of that income and the resultant saving, which can be positive or negative. The capital account records the sources (net saving and net capital transfers) of funds available for the acquisition of non-financial assets on one side and the actual net acquisition of non-financial assets on the other. The balance of the account can be positive (net lending) or negative (net borrowing). The financial account records the net transactions in financial assets, liabilities and equity that occur as a result of net lending or borrowing. The balance sheet records the opening and closing values of assets and liabilities. The revaluation and other changes in the volume of assets accounts record changes to net worth arising from revaluations and events other than transactions and revaluations. The closing values of assets and liabilities in ASNA are equal to selected transactions from the capital and financial accounts, plus net revaluations, plus net other changes in the volume of assets.

Each of the ASNA accounts includes information that can be directly related to GFS data. Information in the gross domestic product, income and capital accounts can be linked to information included in the GFS statement of operations; the balance sheet information can be linked to information included in the GFS balance sheet; and information in the revaluation and other changes in volume of assets accounts can be linked to information included in the GFS statement of stocks and flows. The items in the accounts and the links to GFS items are discussed in the next section. There is no equivalent of the GFS statement of sources and uses of cash in the ASNA, although the change in cash balances is recorded in the system.

The major aggregates and balancing items included in the main ASNA accounts and the corresponding GFS items and the statements in which they are recorded are shown in Table 17.10 below. In the table items that do not appear in the GFS system but are derived for national accounting purposes are labelled ‘derived’. The symbol * against an entry in the right-hand column indicates that the item is identical in concept to the ASNA item, but is measured from different sources with the result that values recorded for the item in the two systems are not identical. The content of the table is explained in the following paragraphs.

The Australian System of National Accounts (ASNA) records gross domestic product (GDP, the economy’s production), the income generated by GDP (comprising mainly taxes, compensation of employees and the gross operating surplus and gross mixed income of producers) and the expenditure of GDP on final consumption, inventories, gross fixed capital formation and net exports.

Most income components for general government and public corporations can be linked to expense items in the GFS statement of operations or can be derived from items in the statement of operations. Gross operating surplus of public corporations is not recorded in the GFS statement of operations but, in the case of public non-financial corporations, the ASNA information is derived from data recorded in the GFS system. It is defined as the excess of gross output over the sum of intermediate consumption, compensation of employees, and taxes less subsidies on production and imports. In the general government sector, most output is not marketed and is valued in the national accounts at its cost of production. The ASNA 'grosses up' certain items such as payroll taxes paid by units to others within the same jurisdiction. These transactions are consolidated out in the GFS system but the source of 'grossing up' is GFS counterparty data. The gross operating surplus of general government is equal to general government consumption of fixed capital, which is the only cost of production not deducted in the derivation of gross operating surplus, less sales. However, because many of the ASNA items do not use GFS data, but are derived through supply use tables, the ASNA values for general government gross operating surplus are not the same as those that can be derived from GFS data. Gross mixed income does not apply to public sector entities.

The expenditure components included in the production account that can be linked to GFS statement of operations items are government final consumption expenditure, gross fixed capital formation of general government and public corporations, and changes in inventories. Government final consumption expenditure is current expenditure by general government bodies on services to the community. Because these are provided free of charge or at charges which cover only a small proportion of costs, the government is considered to be the consumer of its own output. This output has no directly observable market value and so is valued in the national accounts at its cost of production. Property income (e.g. interest payments on government debt and social assistance benefits) is not included. The major part of government final consumption expenditure is derived from GFS data but the item is not included in the GFS system because it includes imputed expenses that are not derived in the GFS system. For example, it includes ‘financial intermediation services indirectly measured’ (FISIM), which is an imputed part of the output of financial institutions and part of the final consumption expenditure of general government units that use the financial institutions’ services.

Gross fixed capital formation is defined and measured in the same way in the GFS system and the ASNA. The ASNA data for general government and public non-financial corporations are derived directly from GFS data. In the ASNA, capitalised wages and salaries are included in gross fixed capital formation as well as in compensation of employees (no duplication is involved because of the linked structure of the national accounts).

In general, the income items included in the ASNA income and use of income account can be related to GFS revenue items. Each of the items is discussed in the following paragraphs.

Gross operating surplus is discussed in paragraph 17.45 of this manual.

Property income comprises interest, dividends, reinvested earnings on direct foreign investment, and rent on natural assets. The data for interest income that are recorded in the ASNA are not comparable with the data recorded in the GFS system because the ASNA data are adjusted to exclude FISIM (see paragraph 6.129 of this manual). All other items of property income are defined and measured in the ASNA in the same way as in the GFS system, which provides the ASNA data for general government and public nonfinancial corporations.

Taxes on production and imports represents taxation revenue of general government, and the ASNA values are derived directly from GFS data. The GFS categories of revenue included in the item are taxes on products and other taxes on production. Because some of these taxes are payable by non-producers as well as producers, adjustments (based on non-GFS data) are made to eliminate tax payments made by nonproducers. Taxes are reported using either the Tax liability method (TLM) (cash accounting) or the Economic Transaction Method (ETM) (closer to an accruals basis). For some tax items in GFS which are reported on TLM basis, these are adjusted to get back to an accruals basis for taxes in ASNA.

Taxes on income and wealth receivable is an item that is unique to general government, and the ASNA data are derived directly from GFS data. The GFS revenue categories included in the item are taxes on income (which comprise all taxes included in the tax item ‘taxes on income, profits and capital gains’) and other current taxes (which comprise all taxes included in the tax items ‘motor vehicle taxes’ (except road transport and maintenance taxes) and ‘departure tax’). Because some of these taxes when paid by producers are classifiable as taxes on production and imports, other non-GFS information is used to identify and eliminate such tax payments made by producers. Therefore, the ASNA data for this item cannot be related directly to the GFS data.

Other current transfer revenue that are relevant to the public sector include current grants and subsidies receivable by public corporations (which are defined and measured in the ASNA as in the GFS system); and regulatory fees and fines collected by general government (which are also defined and measured as in the GFS system). ASNA data for these components are derived from GFS data.

The use of income items included in the ASNA income account can be related to GFS expense items in general. They are discussed in the following paragraphs.

Property expenses includes the same components as property expenses and the discussion relating to property income receivable applies equally here. That is, all property expenses except interest expense is recorded in the same way in ASNA and the GFS system and interest expense in ASNA is not comparable with GFS interest expense for the same reasons as in relation to interest income.

Subsidies and social assistance benefits in cash to residents are items unique to general government that are defined and measured in the ASNA in the same way as in the GFS system, which provides the data that are included in the ASNA. In the GFS system, social benefits in cash to residents is called ‘current monetary transfers to households’ and is included in expenses under current transfer expenses.

In the GFS system, current taxes on income and wealth payable are payable only by public non-financial and financial corporations (any taxes payable by general government units are eliminated in the consolidation of GFS output). The ASNA data for current taxes payable by all sectors are derived from GFS data for taxation revenue and distinguish taxes payable by public non-financial corporations.

Items in the ASNA capital account correspond to items recorded in the GFS statement of operations, mainly in the section relating to net acquisition of non-financial assets.

The balancing item net saving is the balance of the income account and is carried forward to the capital account. Net saving is not recorded in the GFS financial statements but can be derived, albeit with measurement differences compared with the ASNA.

Consumption of fixed capital is also not recorded in the GFS system, which uses instead the accounting measure of depreciation.

Capital transfers (receivable and payable) in the ASNA capital account are defined and measured in the same way as in the GFS system. They include capital grants between levels of government directly from the GFS system. Also included are so-called ‘capital taxes’. In Australia, these are confined to the GFS tax classification category ‘estate, inheritance and gift taxes’, which is the sole source of information for the ASNA capital taxes item.

Gross fixed capital formation, changes in inventories and acquisitions less disposals of non-produced nonfinancial assets are defined and measured in the ASNA in the same way as in the GFS system. ASNA data for general government and public non-financial corporations are derived directly from the GFS system. Gross fixed capital formation comprises the following: acquisitions less disposals of new and second-hand produced assets, whereas acquisitions less disposals of non-financial non-produced assets relates to assets, such as mineral deposits and virgin forests, that have not been produced.

The net lending (+) / borrowing (–) in the ASNA is conceptually equal to the balancing item of the same name in the GFS system. However, in practice these items are different due to the use of different data sources and benchmarking.

Similarly, the ASNA item gross saving and capital transfers is equivalent, apart from minor measurement differences, to the GFS net operating balance plus depreciation (sometimes referred to as the ‘gross operating balance’). The measurement differences affecting the equivalence are those (discussed in previous paragraphs) that affect comparability of common components of gross saving and the gross operating balance.

The ASNA financial account records all changes to financial assets and liabilities arising from transactions. It corresponds to the financial assets and liabilities section of the transactions column in the GFS statement of stocks and flows. Net acquisition of financial assets refers to acquisition less disposal of financial assets and net acquisition of liabilities refers to acquisition less disposal of liabilities and equity. These items are equivalent in concept to the GFS items relating to net transactions in financial assets and net transactions in liabilities and equity, respectively. However, the GFS system is not the source of data for the ASNA financial account, with the result that these items are unlikely to carry exactly the same values in ASNA and the GFS system. There are also differences between ASNA and the GFS system in the way that these broad items are broken down into financial instrument categories. The ASNA financial instrument classification is more detailed, but does not include the GFS distinction between acquisition of financial assets for policy and liquidity management purposes.

The balancing item net change in financial position in the ASNA financial account is identical conceptually to net lending / borrowing, but is derived differently. As a result of the different methods of derivation, recorded values for the two items are usually quite different. In the ASNA, the difference between the two items is recorded in an item called ‘errors and omissions’. Thus, although GFS values for net lending / borrowing should be equal to the ASNA values for change in financial position, in practice they are not.

The ASNA balance sheet records the value of assets and liabilities (including equity) and is identical in concept to the GFS balance sheet. However, GFS data are not used in the compilation of the ASNA balance sheet and the values recorded are not likely to be identical. Most of the ASNA data are compiled using the perpetual inventory method in relation to the estimation of consumption of fixed capital whereas the GFS data are obtained directly from public sector accounting records. The classification of assets and liabilities in the two systems has points of concordance at a broad level, but the ASNA classification is generally more detailed than the GFS classification.

The ASNA accumulation and revaluation accounts record net capital formation, financial transactions, and changes to the balance sheet values of assets, liabilities and equity arising from revaluations (i.e. price changes) and events other than transactions and revaluations. The accounts record the same information (albeit in a different format) to that recorded respectively in the columns relating to transactions, revaluations and other changes in the volume of assets in the GFS statement of stocks and flows. The item net capital formation is equal to net acquisition of non-financial assets less consumption of fixed capital and cannot be derived exactly in the GFS system because it uses depreciation in lieu of consumption of fixed capital. The item financial transactions refers to net acquisition of financial assets and liabilities and can be derived in the GFS system, but will carry different values due to the use of different data sources. The ASNA data relating to revaluations and other changes in the volume of assets are identical in concept to the GFS items of the same name, but the data for the items are derived from different sources and the recorded values are unlikely to be the same. As well, revaluations arising from interest rate changes to marketed securities are not captured in the GFS system).

The main sources of GFS data are the accounting and budget management systems that underlie public sector accounts and are in compliance with Australian Accounting Standards AASB 1049: Whole of Government and General Government Sector Financial Reporting. Accounting and statistical reports serve different purposes and differences between the underlying concepts are to be expected. On the other hand, there are many similarities between the purposes and concepts. For example, in AASB 1049 the term ‘entities’ is used rather than ‘units’, and the reporting entity is the whole of government, which corresponds to the total public sector in GFS terms, and the General Government Sector.

Paragraphs 9 to 18D of AASB 1049 set out the compliance requirements of Australian Accounting Standards and AGFS. In particular, paragraph 13 of the AASB 1049 states: where compliance with the ABS GFS Manual would not conflict with Australian Accounting Standards, the principles and rules in the ABS GFS Manual shall be applied. In particular, certain Australian Accounting Standards allow optional treatments within their scope. Those optional treatments in Australian Accounting Standards aligned with the principles or rules in the ABS GFS Manual shall be applied.

AASB 1049 requires that governments prepare a specified set of financial reports for the whole of government comprising a:

• statement of comprehensive income;
•  statement of financial position;
• statement of changes in equity; and
• statement of cash flows

Tables 17.12 to 17.15 provide examples of each of the financial statements, which are reproduced (without the notes to the accounts).

AASB 1049 does not specify requirements for standard classification of stocks and flows in the same way as the GFS system. Certain classification requirements are specified, but a degree of judgement is implied in the document. The illustrative examples that accompany AASB 1049 provide explanations of selected key technical terms, which contain information on certain standard classification items in the GFS.

Both AASB 1049 and the GFS system require an accrual basis of recording. The time of recording a transaction is elaborated in the GFS system while the time of recording for the application of AASB 1049 needs to be undertaken in conjunction with other accounting standards as appropriate. Nevertheless, because the ABS is generally not in a position to obtain data initially on any timing basis other than that recorded in the accounts of each jurisdiction, differences between jurisdictions’ AASB 1049 reports and GFS will only arise if significant divergences come to the ABS’ notice.

As discussed in previous sections of this manual, the ABS GFS standard recommend valuation of all economic stocks and flows are at the current market value. In general, accounting standards uses historical cost (i.e. cost of acquisition) as a starting point and depending on the type of economic stocks and flows, accounting standards permit and / or require fair value measurement valuation bases. For example, current replacement cost may be used as a fair value measurement basis for the valuation of non-current. Market value is recommended for certain marketed securities and preparation of supporting reports on current cost accounting basis is recommended but not mandated.

While there are many similarities between the purposes and concepts contained in both AASB 1049 and the ABS GFS Manual, there are also some differences. Paragraph 42 of AASB 1049 lists some examples of differences in the treatment of flows and stocks for GFS purposes as:

1.  in a whole of government and General Government Sector context:

• the recognition of doubtful debts;
• provisions recognised as liabilities;
•  valuation of inventories; and
•  valuation of investments in associates

2. in a whole of government context only:

• the valuation and measurement of non-controlling interest in controlled entities; and
• the classification of outgoing dividends.

Certain internal transfers that are recognised as revenues or expenses in accounting standards are not regarded in the GFS system as economic flows and so are not recorded in the GFS system. Allowances for bad or doubtful debts are an important example. These are not recognised in the GFS system. In the GFS system, bad debts are only recognised when written off. Bad debts written off are treated as other changes in the volume of assets if they are written off unilaterally by the creditor, or as capital transfers if they are written off by mutual agreement between creditor and debtor.

In accounting standards the revision of an accounting estimate is recognised as a revenue or an expense in the accounting period in which the estimate is revised. Where the revised estimates affect the current reporting period, the revised estimate is recognised in that reporting period only. However, where the revised estimates affect both the current and future reporting periods, the revised estimate is recognised for the period of change and future reporting periods. Importantly from a GFS perspective, Australian accounting standards require that accounting estimates recognised in prior accounting periods must not be revised with retrospective effect on prior financial statements.

In the GFS system, material revisions affecting prior-period statistics are usually applied to the past data and are not applied as a cumulative amendment to current-period data. In ABS GFS statistics such adjustments are made to past periods if: (i) the information could reasonably have been expected to be known in the past; (ii) is material in at least one of the affected periods; and (iii) can be reliably assigned to the relevant period(s). In all other cases, the adjustment would be recognised as a current period 'other economic flow'. In other words, there is no embargo on amendment of statistics for prior periods as in Australian accounting standards. Where revisions of past data are identified in accounting reports, the different treatment will result in differences between GFS and AASB 1049 financial statements for the current period and prior periods affected by the revision.

In accounting standards, dividend payments are recorded as distributions and do not affect the derivation of the operating surplus / deficit. In the GFS system, dividends paid by public corporations are treated as expenses and as determinants of the GFS net operating balance of the public corporations. This treatment is adopted in order to maintain a correspondence between the GFS net operating balance and ASNA saving concepts. Subject to measurement differences, the GFS net operating balance is equal to the ASNA concept of net saving plus capital transfers. The different treatment in the GFS system of dividend payments affects comparisons of public corporations’ data relating to the GFS net operating balance and the operating surplus / deficit in AASB 1049 financial statements.

In certain circumstances, the GFS system may treat transactions as repayments of equity that would be recorded as dividend payments in accounting standards. In the GFS system, dividends are viewed as payable from savings. Conversely, dividends not arising from savings, such as dividends arising from sales of assets, may be viewed as return of equity to owners. Such instances, which affect dividend receipts by public sector entities as well as dividend payments by public corporations, are rare and are treated on a case by case basis.

The GFS system treats unincorporated entities in the public sector as quasi-corporations if they operate in the same way as corporations (see Chapter 2 of this manual). By definition, quasi-corporations that are classified as public non-financial corporations or financial corporations are owned by general government units. The equity of general government units in such quasi-corporations is defined as equal to the total value of the quasi-corporations’ assets less the total value of their liabilities. No such recognition of quasicorporate equity is made in accounting standards, which record only documented equity (e.g. shares on issue). This difference between the GFS system and accounting standards affects only comparisons of data for the GFS institutional components (i.e. general government, public non-financial corporations, public financial corporations) with similarly segmented accounting data. Comparisons of data for the public sector as a whole are not affected because the equity holdings are eliminated in consolidation.

Paragraph 18B of AASB 1049 requires that where key fiscal aggregates presented on the face of the financial statements differ from those measured in accordance with the ABS GFS manual, a reconciliation of the two measures and / or an explanation of the differences is required to be disclosed so that users are informed about the relationship between GAAP and GFS.