Latest release

Contingent liabilities (ETF 72)

Australian System of Government Finance Statistics: Concepts, Sources and Methods
Reference period
2015
Released
23/12/2015
Next release Unknown
First release
A1A.187.

Contingent liabilities (ETF 72) consists of the value of obligations that do not arise unless a particular, discrete event(s) occurs in the future. The key difference between contingent liabilities and actual liabilities is that one or more conditions must be fulfilled before a financial transaction is recorded. Contingent liabilities are not recognised as liabilities prior to their associated condition(s) being fulfilled. This category is further classified into:

  • explicit contingent liabilities (ETF 721); and
  • implicit contingent liabilities (ETF 722).

Explicit contingent liabilities (ETF 721)

A1A.188.

Explicit contingent liabilities (ETF 721) consists of legal or contractual financial arrangements that give rise to conditional requirements to make payments of economic value. The requirements become effective if one or more stipulated conditions arise. This category is further classified into:

  • loan and other debt instrument guarantees (ETF 7211);
  • other one-off guarantees (ETF 7212);
  • legal claims (ETF 7213);
  • indemnities (ETF 7214);
  • uncalled share capital (ETF 7215); and
  • explicit contingent liabilities not elsewhere classified (ETF 7219).

Loan and other debt instrument guarantees (ETF 7211)

A1A.189.

Loan and other debt instrument guarantees (ETF 7211) consists of publicly guaranteed debt that is defined as debt liabilities of public and private sector units, the servicing of which is contractually guaranteed by public sector units. Guarantors guarantee the servicing of existing debts of other public and private sector units. Guarantors are only required to make a payment if the debtor defaults.

Other one-off guarantees (ETF 7212)

A1A.190.

Other one-off guarantees (ETF 7212) consists of commitments by one party to bear the risk of non-payment by another party for instruments other than loan and other debt instruments.

Includes:   Credit guarantees such as lines of credit and loan commitments which provide a guarantee that undrawn funds will be available in the future but no financial asset/liability exists until such funds are actually provided or advanced — the undrawn lines of credit and undisbursed loan commitments are contingent liabilities of the issuing institutions; contingent “credit availability” guarantees; contingent credit facilities; letters of credit which are promises to make payment upon the presentation of pre-specified documents; underwritten note issuance facilities which provide a guarantee that a borrower will be able to issue short-term notes and that the underwriting institution(s) will take up any unsold portion of the notes (a liability / asset will be created only when funds are advanced by the underwriting institution(s) and the unutilised portion is a contingent liability); other note guarantee facilities providing contingent credit or back-up purchase facilities such as revolving underwriting facilities, multiple options facilities, and global note facilities (these back-up purchase facilities are provided by banks and non-bank financial institutions and the unutilised amounts of these facilities are contingent liabilities).

Legal claims (ETF 7213)

A1A.191.

Legal claims (ETF 7213) consists of potential legal claims stemming from pending court cases.

Indemnities (ETF 7214)

A1A.192.

Indemnities (ETF 7214) consists of commitments to accept the risk of loss or damage another party might suffer.

Includes:    Indemnities against unforeseen tax liabilities arising in government contracts with other units.

Uncalled share capital (ETF 7215)

A1A.193.

Uncalled share capital (ETF 7215) consists of obligations for units to provide additional capital, on demand, to an entity of which they are a shareholder, such as an international financial institution.

Explicit contingent liabilities not elsewhere classified (ETF 7219)

A1A.194.

Explicit contingent liabilities not elsewhere classified (ETF 7219) consists of other explicit contingent liabilities that cannot be classified to loan and other debt instrument guarantees (ETF 7211), other one-off guarantees (ETF 7212), legal claims (ETF 7213), indemnities (ETF 7214) or uncalled share capital (ETF 7215).

Implicit contingent liabilities (ETF 722)

A1A.195.

Implicit contingent liabilities (ETF 722) consists of obligations that do not arise from a legal or contractual source but are recognised after a condition or event is realised. This category is further classified into:

  • present value of implicit obligations for future social security benefits (ETF 7221); and
  • implicit contingent liabilities not elsewhere classified (ETF 7229).

Present value of implicit obligations for future social security benefits (ETF 7221)

A1A.196.

Present value of implicit obligations for future social security benefits (ETF 7221) consists of the present value of obligations for future social security benefits (other than employment-related retirement benefits) that are under an implicit guarantee by government to assume these liabilities on behalf of another party if certain conditions arise. In Australia, the only type of social security benefits that involve a contractual liability for public sector units relate to employment related retirement benefits. Therefore a zero balance is reported for this category in Australian GFS. The category is maintained as part of the classification to align with the international GFS standards.

Implicit contingent liabilities not elsewhere classified (ETF 7229)

A1A.197.

Implicit contingent liabilities not elsewhere classified (ETF 7229) consists of implicit contingent liabilities that cannot be classified to present value of implicit obligations for future social security benefits (ETF 7221).

Includes: Ensuring solvency of the banking sector; covering the obligations of state / territory and local governments or the central bank in the event of a default; assuming unguaranteed debt of public sector units; potential spending for natural disaster relief.