Part B - Types of expenses

The most common types of expenses for most public sector units are employee expenses, non-employee expenses and transfer expenses. In the GFS system, expenses are recorded net of recoverable GST, and consist primarily of:

• Superannuation expenses (ETF 121);
• Other employee expenses (ETF 122);
• Non-employee expenses (ETF 123);
• Depreciation (ETF 124);
• Current transfer expenses (ETF 125);
• Capital transfer expenses (ETF 126);
• Interest expenses (ETF 127); and
• Other property expenses (ETF 128).

There are two types of transactions that are treated as decreases in expense rather than revenue in GFS. These are:

• Refunds paid, recoveries of overpayments, and erroneous payments - these transactions are adjustments that correct an excessive decrease in net worth previously recorded. As such, these transactions are treated as a reduction in expense, with a corresponding reduction in accounts payable / cash; and
• The costs incurred in the production of goods and services - these are recorded as expenses despite the fact that the goods and services may have been sold for a price that exceeded the cost of production, thereby increasing net worth. The amount receivable for the sale of the goods and services is recorded as revenue and not as a reduction in expense.

Paragraph 6.5 of the IMF GFSM 2014 further indicates that some transactions are exchanges in assets and / or liabilities and should not be recorded as expenses. The acquisition of a non-financial asset by purchase or barter does not affect net worth, and these transactions are not expenses. They are transactions in nonfinancial assets as described in Chapter 9 of this manual. However, when ownership of an asset is given up without receiving anything of value in return, the net worth of the unit has decreased. This increase in expense is recorded as a capital transfer. Amounts payable on loans extended, and repayments on loans incurred are also not recorded as expenses. These are transactions in financial assets or liabilities as described in Chapter 10 of this manual.