Implicit contingent liabilities (ETF 722)

A1B.26.

Implicit contingent liabilities (ETF 722) occur when it is assumed that one party (in this case, the government) will take on the liability of another. The most common form of implicit contingent liability for government is the assumption of the net obligations of future social security benefits for a population, such as age or disability pensions. Implicit contingent liabilities are not recorded in GFS unless the conditions associated with these are met (e.g. a person reaches an age where they are eligible to claim the age pension) and then the implicit contingent liability transforms into an actual liability and enters the GFS balance sheet. Until the time that the conditions associated with implicit contingent liabilities arise, the value of these are recorded as supplementary information. Further information on implicit contingent liabilities can be found in Chapter 13 Part C of this manual. In GFS, implicit contingent liabilities are further classified as:

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

A1B.27.

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 this context, social security benefits relate to the international GFS meaning of social security which does not exist in Australia. 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 in Australian GFS, the classification category of present value of implicit obligations for future social security benefits (ETF 7221) is maintained for conceptual completeness in alignment with the international standards and will report a zero balance.

A1B.28.

Other implicit contingent liabilities (ETF 7229) consist of the value of contingent liabilities that are under an implicit guarantee by government to assume these liabilities on behalf of another party if certain conditions arise.