Part H - Consolidation

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Australian System of Government Finance Statistics: Concepts, Sources and Methods
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Consolidation is the process of eliminating intra-group flows and stocks from aggregates for a group of units for which statistics are to be presented. In the GFS system, data are consolidated whenever they are presented for a group of units. In Australian GFS, data have to be consolidated for many different groups of units, covering the nation as a whole, and each jurisdiction individually.

Intra-sectoral and inter-sectoral consolidation


Intra-sectoral consolidation is defined in paragraph 3.155 of the IMF GFSM 2014 as the in-principle elimination of flows and stocks that occur within a particular group of units, a sector or subsector. An institutional unit requires consolidation when the unit has multiple funds and accounts to carry out its operations and there are flows and stock positions among those funds. Failure to eliminate intra-sectoral flows and stock positions results in aggregates that cannot measure interaction with outside units exclusively. An example of intra-sectoral consolidation is that which is undertaken within the central government, or within the public non-financial corporations subsector, or within a state / territory government.


Inter-sectoral consolidation is defined in paragraph 3.156 of the IMF GFSM 2014 as the in-principle elimination of flows and stocks that occur between a particular group of units, subsectors or sectors. An example of inter-sectoral consolidation is that which occurs between central, state and local governments, or between the general government and public non-financial corporations, or between the general government and public financial corporations.


Paragraph 3.157 of the IMF GFSM 2014 recommends that intra-sectoral consolidation is undertaken before inter-sectoral consolidation takes place, and states that for international statistical purposes the general government sector and each of its subsectors should be presented on a consolidated basis. It further states that consolidated data for public corporations should also be presented together with general government units for the consolidated total public sector.


Because consolidation is performed in GFS under a double entry system of accounting (where credit entries are matched with debit entries of equal value), the adjustments to GFS data made through consolidation do not affect the GFS balancing items. Paragraph 3.166 of the IMF GFSM 2014 states that balancing items which are produced by simple aggregation are the same as those produced by consolidation due to the symmetry of the consolidation process. Therefore, when consolidated data produces different balancing items from the unconsolidated data, this is a good indication that recording errors have been made.

Consolidation groupings in Australian GFS


In the Australian GFS framework, data are presented on an intra-sectoral and inter-sectoral consolidated basis for each of the consolidation groupings that appear in Table 3.5 below.

Table 3.5 - Australian GFS Consolidation Groupings
Level of Government

General Government


Public Non-Financial Corporations


Non-Financial Public Sector

(1) + (2)

Public Financial Corporations


Total Public Sector

(1) + (2) + (3)

State / Territory     
State / Territory and Local     
Control not further defined     
All Levels of Government     



In the Australian GFS system, data are consolidated whenever they are presented for a group of units. For example, each of the cells in Table 3.5 represents a grouping for which consolidated data must be produced. In addition, separate consolidation must be undertaken for each of the nine jurisdictions (including multi-jurisdictional units).

Conceptual guidelines for consolidation


Consolidation requires the in-principle elimination of all intra-governmental and inter-governmental flows and stock positions among a group of public sector units or entities. Consolidation requires a review of the accounts that are to be consolidated in order to identify inter-sectoral and intra-sectoral flows and stock positions. Box 3.3 contains guidance as to the types of transactions, flows or stock positions that require consolidation, and has been reproduced from paragraphs 3.162 to 3.164 of the IMF GFSM 2014:

Box 3.3 - Practical guidelines for consolidation in GFS

1. Consolidation covers a range of categories of flows and stock positions that can vary in significance and value in GFS. The major transactions, in likely order of importance, are:

  • grants (current and capital) among general government units or entities;
  • transactions in financial assets and liabilities;
  • interest income/expense;
  • taxes paid by one government unit or entity to another;
  • purchases/sales of goods and services; and
  • acquisitions/disposals of non-financial assets.

2. The following major transactions, other economic flows, and stock positions, (in likely order of importance) should be consolidated for general government statistics covering financial assets and liabilities:

  • loans;
  • debt securities; and
  • other accounts receivable/payable.

3. For the public sector (in addition to the above financial instruments), the following flows and stock positions should also be eliminated – in principle– in both intra-sectoral and inter-sectoral consolidation:

  • equity and investment fund shares;
  • currency and deposits; and insurance, pension, and
  • standardised guarantee schemes.


Source: Paragraphs 3.162 to 3.164, International Monetary Fund Government Finance Statistics Manual 2014

Implementing consolidation in GFS


Paragraphs 3.165 and 3.166 of the IMF GFSM 2014 provide some practical guidance to help to determine if there are flows or stock positions to be consolidated, whether or not to measure the consolidation items based on their magnitude and cost of collection, and which unit may be considered to have the most reliable records. This guidance for implementing consolidation in GFS has been reproduced below.

  • Step 1. Begin all consolidation exercises with an analysis of the accounts involved to determine if there are flows or stock positions internal to the units(s) to be consolidated. This will depend on knowledge of the relationships among the units involved. Do some units incur expenses or receive revenue from another unit? Do some units extend loans to other units? Do they buy debt securities issued by others? Do they have currency and deposits held by others?
  • Step 2. Once these relationships are established, compilers must determine whether the intrasectoral and / or inter-sectoral flows and stock positions can be measured or estimated, and whether the amounts will be significant in terms of analytical importance.
  • Step 3. If the amounts are likely to be significant, are they large enough to justify the effort to collect the data and other information for consolidation purposes? The effort and cost to identify an amount to be consolidated should be directly proportional to the expected amount and its impact on the aggregates.
  • Step 4. The 'one-side' rule of thumb is commonly used in consolidation. If there is convincing evidence from one of the transactors that a flow or stock position exists, it should be imputed to the other transactor, even in the absence of the counterpart records. When such an adjustment is made in the data for a unit where the flow or stock position cannot be directly identified, it will be necessary to ensure that the records for that unit are properly modified.
  • Step 5. For flows and stock positions in financial assets and liabilities, normally the creditor can be expected to maintain the most reliable records. For loans, the creditor unit usually maintains the most complete records. For debt securities, especially bearer instruments, only the creditor may have the information needed for consolidation. For example, when a central government issues securities, some of which are acquired by public corporations, the central government may have no direct information on who is holding the securities, especially if they can be acquired on secondary markets. It is therefore necessary to rely on the creditors' records for this kind of information.
  • Step 6. Sometimes discrepancies may exist between data for two units that are being consolidated. There are many reasons for such discrepancies, such as coverage, time of recording, valuation, classification, etc. Resolving these discrepancies will promote proper consolidation and improve the overall quality of GFS compiled. However, where a discrepancy cannot be resolved, decisions need to be made about which unit or group of units has the most reliable source data. Generally, the higher level of government is considered to have more reliable records than the lower levels of government.
  • Step 7. To create consistency with other macroeconomic data sets, components of the data for the public sector should be arranged in such a way to show the data before consolidation and after consolidation. This will allow for the unconsolidated data to be consistent with the data required in the national accounts and other data sets that are presented before consolidation.
  • Step 8. Certain transactions that seemingly occur between units in the same sector should not be consolidated. An example of this is re-routed transactions involving employer social schemes, and employee related premiums to an insurer within the sector.
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