Part D - Relationship to the Australian Accounting Standards
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).
| $ |
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 |
| $ |
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 |
| 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 |
| $ |
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:
- 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
- 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.