Latest release

Part D - Relationship to the Australian Accounting Standards

Australian System of Government Finance Statistics: Concepts, Sources and Methods
Reference period
2015
Released
23/12/2015
Next release Unknown
First release

17.69.

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.

Compliance with AGFS

17.70.

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.

Financial statements

17.71.

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

17.72.

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

Table 17.12 - Whole of government statement of comprehensive income

 

$

Revenue from transactions

 

Taxation revenue

xx

Other revenue

xx

 Interest, other than swap interest

xx

 Dividends from associates (part of share of net profit / (loss) from associates)

xx

 Sales of goods and services

xx

 Other current revenues

xx

Expenses from transactions

 

Employee benefits expense

xx

 Wages, salaries and supplements

xx

 Superannuation

xx

Use of goods and services

xx

Depreciation

xx

Interest, other than swap interest and superannuation interest expenses

xx

Subsidy expenses

xx

Grants

xx

Social benefits

xx

Superannuation net interest expenses

xx

Loss on write-off of financial assets at fair value through operating result

xx

Net result from transactions - net operating balance

xx

Other economic flows included in operating result

 

Other revenue

xx

 Net swap interest revenue

xx

Net foreign exchange gains

xx

Net gain on sale of non-financial assets

xx

Net gain on financial assets or liabilities at fair value through operating result

xx

Net actuarial gains

xx

Amortisation of non-produced assets

xx

Doubtful debts

xx

Share of net profit / (loss) from associates, excluding dividends

xx

Operating result

xx

Other economic flows - other comprehensive income

xx

Items that will not be reclassified to operating result

 

Revaluations

xx

Items that will not be reclassified subsequently to operating result

 

Net gain on financial assets measured at fair value

xx

Comprehensive result - total change in net worth before transactions with owners in their capacity as owners

xx

Key fiscal aggregates

 

Net lending / borrowing

xx

plus Net acquisition / (disposal) of non-financial assets from transactions

xx

Net operating balance

xx

plus Net other economic flows

xx

Total change in net worth before transactions with owners in their capacity as owners

xx

Table 17.13 - Whole of government statement of financial position

 

$

Assets

 

Financial assets

 

Cash and deposits

xx

Accounts receivable

xx

Securities other than shares

xx

Loans

xx

Advances

xx

Shares and other equity

xx

 Investments accounted fro using equity method

xx

 Investments in other entities

xx

Non-financial assets

 

Produced assets

xx

 Inventories

xx

 Machinery and equipment

xx

 Buildings and structures

xx

 Intangibles

xx

 Valuables

xx

Non-produced assets

xx

 Land

xx

 Intangibles

xx

Total assets

xx

Liabilities

 

Deposits held

xx

Accounts payable

xx

Securities other than shares

xx

Borrowing

xx

Superannuation

xx

Provisions

xx

Total liabilities

xx

Net assets / liabilities

xx

Accumulated surplus / (deficit)

xx

Other reserves

xx

Net Worth

xx

Table 17.14 - Whole of government statement of changes in equity

 

Accumulated surplus / (deficit)

Asset revaluation reserve

Accumulated net gain on financial assets

Total equity

Equity as at 1 July 20XX

xx

xx

xx

xx

Total comprehensive result

xx

xx

xx

xx

Equity at 30 June 20XX

xx

xx

xx

xx

Table 17.15 - Whole of government statement of cash flows

 

$

Cash Flows from Operating Activities

 

Cash received

xx

 Taxes received

xx

 Sales of goods and services

xx

 Interest, excluding swap interest

xx

 Dividends from associates

xx

 Other receipts

xx

Cash Paid

xx

 Payments to and on behalf of employees

xx

 Purchases of goods and services

xx

 Interest, excluding swap interest

xx

 Subsidies

xx

 Grants

xx

 Social benefits

xx

 Other payments

xx

Net cash flows from operating activities

xx

Cash flows from investing activities

 

Non-financial assets

 

 Sales of non-financial assets

xx

 Purchases of new non-financial assets

xx

Net cash flows from transactions in non-financial assets

xx

Financial assets (policy purposes)

xx

 Purchases of investments

xx

Net cash flows from investments in financial assets (policy purposes)

xx

Financial assets (liquidity purposes)

xx

 Sales of investments

xx

 Purchases of investments

xx

Net cash flows from investing activities

xx

Cash flows from financing activities

xx

Cash received

xx

 Borrowing

xx

 Deposits received

xx

 Swap Interest

xx

 Other financing

xx

Net cash flows from financing activities

xx

Net Increase in cash and cash equivalents

xx

Cash and cash equivalents at beginning of year

xx

Cash and cash equivalents at end of year

xx

Key fiscal aggregates

 

Net cash flows from operating activities

xx

Net cash flows from transactions in non-financial assets

xx

Cash surplus / (deficit)

xx

Classifications of flows and stocks

17.73.

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.

Time of recording

17.74.

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.

Valuation

17.75.

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.

Differences in the treatment of flows and stocks

17.76.

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
  1. in a whole of government context only:
  • the valuation and measurement of non-controlling interest in controlled entities; and
  • the classification of outgoing dividends.

17.77.

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.

17.78.

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.

17.79.

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.

17.80.

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.

17.81.

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.

17.82.

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.

Reconciliation between AASB 1049 and GFS

17.83.

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.