Part C - Time of recording of expenses
In the Australian GFS, expenses are recorded on an accruals basis when activities, transactions, or other events occur that create an unconditional obligation to make payments, or otherwise give up resources. However, an expense is not recorded for the payment of all goods. Paragraph 6.6 of the IMF GFSM 2014 states that goods which are not immediately consumed or otherwise utilised by a producer unit as part of the production process during the reporting period, are added to their stock of inventories rather than expensed. This is because the goods will be used as part of future production processes. In addition, where purchased goods are used in own-account capital formation for the creation of another asset, their value is recorded as a transaction in own-account capital formation (ETF 4113, TALC, COFOG-A) as part of acquisitions of non-financial assets, with a further break down classified to an appropriate category within own-account use of goods and services (ETF 76, TALC, COFOG-A) as part of supplementary information (see Appendix 1 Part B). However, where goods are consumed during the process of providing a service, an expense is recorded in the GFS system.
Timing adjustments of expenses in quarterly Australian GFS
Some GFS quarterly data supplied by state or territory treasuries, the Department of Finance, or other GFS data providers are only reported on a year-to-date basis, or on an annual basis. Where this is the case, the ABS applies timing adjustments so that the data better represent the actual economic activity over the four financial quarters. The ABS does this by pro-rating the value of the relevant expense across the four financial quarters, in consultation with the relevant state or territory treasury, the Department of Finance, or other GFS data providers.
Other GFS expense items which may attract timing adjustments are:
- Superannuation expenses (ETF 121) and other employee expenses (ETF 122) - payment may occur in the quarter before or after the period to which the employee work relates, due to public holidays or departmental shut down periods falling during scheduled pay days. In Australia, this can occur around the Christmas and Easter periods. Where these cases are identified, the ABS will request information from the relevant state or territory treasury, the Department of Finance, or other GFS data provider to move the payments to the quarter to which they relate.
- Social benefit to households in goods and services (ETF 1232) - payments that are due to occur during departmental holiday shut down periods pose a similar problem to the payment of wages and salaries. On some occasions, social benefit payments that are for the March quarter are made in the December quarter due to the Christmas shut down period. Where these cases are identified, the ABS will request information from the relevant state or territory treasury, the Department of Finance or other GFS data provider to move the payments to the quarter to which they relate.
- Land rent and royalty expenses (ETF 1283) - payment for royalty expenses may be annual or biannual. However, the production that gives rise to the royalties continues throughout the year and so royalties should be recorded in the period pertaining to the production regardless of when the actual payments are made. Where these cases are identified, the ABS will request information from the relevant state or territory treasury, the Department of Finance or other GFS data provider to move the payments to the quarter to which the production relates.
- Volatile data - where quarterly GFS data reported to the ABS are volatile and result in large movements which do not have a plausible economic explanation, the ABS may apply timing adjustments to provide for a GFS series that is more in line with the underlying activity rather than the financial reporting of the activity. An example might be where large increases in operating expenses are recorded in the June quarter which may reflect the payment of invoices from earlier periods, or the pre-payment of expenses for a future quarter (e.g. cash based rather than accrual reporting). In most cases, the year-to-date totals remain unchanged. In such a situation, the ABS would retain the year to date total but adjust the quarterly pattern of data according to the following criteria in consultation with the relevant state or territory treasury, the Department of Finance or other GFS data provider if:
- Movements exceed a pre-determined threshold (e.g. greater than 10%); and
- A plausible economic explanation for the large movement is not available.