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INTRODUCTION

7.3. The IMF GFS standard is described in Appendix 2 and the system of national accounts (SNA93) with which the IMF system is harmonised in Appendix 1. As noted in chapter 1, the current IMF system is a revised version of the initial (1986) cash-based system and was published in December 2001. Australia’s GFS system follows the conceptual basis of the revised IMF standard but includes minor variations in the way the statistics are presented. The system can nevertheless be used by the ABS to provide the IMF with international government finance statistics that are in full accordance with the revised IMF standard.


SCOPE

7.4. The IMF manual provides detailed guidance for compilation of data for the general government sector, whereas Australia’s GFS system covers the entire public sector. The IMF manual describes the components of the public sector and notes that analysts may wish to compile statistics for the public sector and/or its components, but does not provide very detailed sector-specific guidance on such compilations. Australia has opted to compile statistics for the widest possible coverage of government operations recommended by the IMF.

7.5. The 1986 IMF standard related mainly to general government, but additional guidance was provided on compilation of statistics for the non-financial public sector (i.e. the combination of general government and public non-financial corporations). The previous ABS system, which was based on the 1986 standard, initially covered the non-financial public sector and was later extended to cover the public sector by the introduction of public financial corporations to the analysis. The principles that applied to non-financial corporations were readily extended to public financial corporations.

7.6. In the absence of a detailed IMF standard for the public sector the ABS has used (with essential adaptations) the IMF’s revised general government standard, taking into account the principles underlying SNA93 and those previously applied in compilation of data for the non-financial public sector. The specific requirements of users, including the ASNA, have also influenced the design. The discussion in this chapter is necessarily restricted to comparison of the revised IMF standard with Australia’s GFS system as it relates to the general government sector.

7.7. The IMF standard provides for compilation of statistics about ‘quasi-fiscal activities’ (QFAs) and ‘non-government activities’ (NGAs) to supplement statistics for the general government sector. QFAs are government-type functions carried out by units outside the general government sector (e.g. policy-motivated loans or advances made by public financial corporations). NGAs are non-government activities carried out by units of the general government sector. The compilation of statistics on QFAs and NGAs is intended to enable derivation of data relating to all government activities and excluding all non-government activities (i.e. ‘government’ defined on a functional rather than a unit basis). Data for QFAs and NGAs are not compiled in Australia because they are not considered of sufficient importance here to warrant such compilation. In any case, because Australia’s GFS system covers the whole of the public sector, it effectively covers most QFAs (i.e. those performed by public corporations) that might occur. Furthermore, most potential NGAs have been included in quasi-corporations (see paragraph 7.9), which are treated as public corporations outside of the general government sector.


UNITS AND UNITS CLASSIFICATIONS

7.8. The basic unit in the IMF GFS standard is the institutional unit, which is defined in the same way as the unit of the same name in SNA93 (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, the enterprise unit used in Australia’s GFS system is effectively equivalent to the institutional unit. Although an enterprise can consist of a group of related legal entities, grouping of legal entities generally does not occur in the general government sector.

7.9. The concept of quasi corporations which is applied in SNA93 is also applied in the IMF GFS standard. Application of 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, resulting in the classification of the quasi-corporations as non-financial or financial corporations rather than as government units.

7.10. The IMF manual recommends that government finance statistics be presented for subsectors of the general government sector. A maximum of four subsectors is recommended: central government, state government, local government, 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 standard 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 multi-jurisdictional units.

7.11. As previously noted, the IMF standard is restricted to the general government sector. The definition of the general government sector that is applied in the IMF standard is the same as in SNA93. The same definition is also applied in Australia's GFS system.


FLOWS, STOCKS AND ACCOUNTING RULES

7.12. The IMF standard includes the same definitions of economic stocks and flows, and of transactions and other economic flows, as are applied in SNA93. Australia’s GFS system applies identical concepts. The double-entry accounting model followed in the IMF standard 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.

7.13. The Australian system employs an accrual basis of recording that is defined in much the same way as the accrual system employed in the IMF standard. 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.

7.14. In accordance with SNA93, the IMF standard 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, for practical reasons, valuations recorded in government accounts are generally accepted without any attempt to convert non-market values to market values. Market values are recorded for most transactions, but for many types of stocks the recorded values are not market values. As a result, recording of revaluations is effectively delayed until reviews of asset and liability values are undertaken.

7.15. Contingencies are defined by the IMF as conditions that may affect the financial performance or position of the government depending on the occurrence or non-occurrence of future events specified in the contingency contract. A government guarantee of a loan is quoted as an example. The IMF standard requires that contingencies be excluded from recorded stocks and flows, but states that important contingencies should be reported in memorandum items. Contingencies, as defined by the IMF, are excluded from recorded stocks and flows but, to date, the ABS has not adopted the IMF recommendation that important contingencies should be reported in memorandum items.


ANALYTICAL FRAMEWORK

7.16. Given the pace at which accrual accounting was being adopted by Australian governments, the ABS had to develop its revised GFS framework ahead of the IMF, using SNA93 and the 1986 version of the IMF manual as references. 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 application of the following identity:

(1) Value of opening stocks

plus

(2) Value of transactions

plus

(3) Value of revaluations and other economic flows

equals

(4) Closing value of stocks.

7.17. The financial statements recommended in the IMF standard and the corresponding statements in Australia’s GFS system are set out in table 7.1 below.

Items in IMF Government Operations Table				Corresponding item in Australia's GFS System
TRANSACTIONS AFFECTING N ET WORTH
	Revenue			GFS Revenues
		Taxes			Taxation revenue
		Social contributions	}
		Grants			Current grants and subsidies, sales of goods and services, interest income, other revenue
		Other revenue
	Expense			GFS Expenses
		Compensation of employees			Employee expenses
		Use of goods and services			Other operating expenses (part)
		Interest			Other interest expenses
		Subsidies			Subsidy expense
		Grants			Current grant expenses, other current, transfers, capital grants
		Social benefits	}		Other property expenses, other operating expenses (part)
		Other expenses
Gross operating balance				Not recorded as such, but can be derived
		Consumption of fixed capital			Depreciation
Net operating balance				GFS net operating balance
TRANSACTIONS IN CAPITAL ASSETS
	Net acquisition of capital assets				Net acquisition of non-financial assets
		Fixed assets				Gross fixed capital formation less depreciation
		Change in inventories				Change in inventories
		Valuables	}			Other movements in non-financial assets
		Non-produced assets
Net lending/borrowing				GFS net lending(+)/borrowing(-)
TRANSACTIONS IN FINANCIAL ASSETS AND LIABILITIES
	Net acquisition of financial assets on a non-market basis				Advances paid
Policy balance				Not recorded as such, but can be derived
	Net acquisition of financial assets for liquidity management purposes				Total net result of transactions in financial assets less advance paid
	Net incurrence of liabilities				Total net result of transactions in liabilities
		Domestic				Not recorded separately
		Abroad				Not recorded separately

Items in IMF Statement of Sources and Use of Cash			Corresponding items in Australia's GFS System
REVENUE AND EXPENSE TRANSACTIONS
	Revenue		Cash receipts from operating activities
	Expense		Cash payments for operating activities
Net cash received from current operations			Net cash flows from operating activities
TRANSACTIONS IN CAPITAL ASSETS			Net cash flows from investments in non-financial assets
	Disposals of capital assets		Sales of non-financial assets
	Acquisitions of capital assets		Purchases of new non-financial assets, purchases of second-hand non-financial assets
Net cash received from transactions in capital assets			Not derived
TRANSACTIONS IN FINANCIAL ASSETS AND LIABILITIES
	Disposals of financial assets and liabilities on a non-market basis	}	Net cash flows from investments in financial assets for policy purposes
	Acquisition of financial assets on a non-market basis
	Incurrences of liabilities and disposals of financial assets for liquidity management	}	Net cash flows from investments in financial assets for liquidity purposes, net cash flows from financing activities
	Liquidations of liabilities and acquisition of financial assets for liquidity management
Net cash from financing transactions			Not derived
Net change in cash balance			Net increase/decrease in cash held
SELECTED CASH-ACCRUAL RECONCILIATION ITEMS
	Change in taxes receivable		Increase in receivables and investments (part)
	Change in unpaid tax refunds	}	Increase in payables and borrowings
	Change in accounts payable, including with respect to transactions in capital assets
	In kind revenue and expense transactions	}	Assets acquired below fair value, assets donated, increase in other non-cash items
	In kind transactions in capital assets

• Cash receipts from operating activities:
  
  Taxes received;
  
  Receipts from the sale of goods and services;
  
  Grants and subsidies received;
  
  Other receipts.

• Cash payments for operating activities:
  
  Payments for goods and services;
  
  Grants and subsidies paid;
  
  Interest paid;
  
  Other payments.

ITEMS in IMF Statement of Other Economic Flows			Corresponding items in Australia's GFS System
Change in net worth from other economic flows			Changes in net worth from revaluations and other changes
	Changes in capital assets			Changes in non-financial assets
		Revaluations			Revaluations
		Other changes in volume			Other changes
	Changes in financial assets			Changes in financial assets
		Revaluations			Revaluations
		Other changes in volume			Other changes
	Changes in liabilities			Changes in liabilities
		Revaluations			Revaluations
		Other changes in volume			Other changes

Items in the IMF Balance Sheet					Corresponding items in Australia's GFS System
Capital assets					Non-financial assets
	Fixed assets					Land and other fixed assets
	Inventories			}
	Valuables					Other non-financial assets
	Non-produced assets
Financial assets					Financial assets
	Acquired by non-market means			}		Advances paid
		Equities
			Central bank
			Other financial corporations
			Non-financial corporations
	Financial assets other than equities
	Acquired for liquidity management			}		Cash and deposits, investments loans and placements, other non-equity assets, equity.
		Central bank
		Other financial corporations
		All other units
Liabilities					Liabilities
	Domestic			}		Deposits held, advances received, borrowing, unfunded superannuation liability, other employee entitlements and provisions, other non-equity liabilities.
		Central bank
		Other financial corporations
		All other units
	Foreign
		General government
		All other units
Net financial worth					Net financial worth
Net worth					Net worth