accrual uniform presentation framework - australian government

Accrual

Uniform

Presentation

Framework

For the Presentation ofUniform Financial Informationby Commonwealth, State and

Territory Governments

April 2000

© Commonwealth of Australia 2000

ISBN 0642 74 0151

This work is copyright. Apart from any use as permitted under theCopyright Act 1968, no part may be reproduced by any process withoutprior written permission from the Commonwealth, available fromAusInfo. Requests and inquiries concerning reproduction and rightsshould be addressed to the Manager, Legislative Services, AusInfo,GPO Box 1920, Canberra ACT 2601.

Printed by CanPrint Communications Pty Ltd.

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Table of Contents

Foreword............................................................................................................v

Introduction.......................................................................................................1

The Uniform Presentation Framework ......................................................1The Transition to Accrual Reporting ..........................................................2Accrual Reporting Frameworks ..................................................................3Adoption of Accrual GFS for the UPF........................................................4Timetable for the Introduction of the Accrual UPF..................................5

Accrual GFS Reporting ..................................................................................7

The Accrual GFS Presentation.....................................................................7Institutional Sectors..................................................................................... 10Major Differences between GFS Cash and Accrual Reporting............. 11

Accrual GFS Fiscal Measures ....................................................................13

GFS Net Operating Balance ....................................................................... 13GFS Net Lending (Fiscal Balance) ............................................................. 14Cash Surplus ................................................................................................ 15Net Debt ........................................................................................................ 15Net Worth ..................................................................................................... 16Change in Net Worth.................................................................................. 17Net Financial Worth.................................................................................... 18

Loan Council Reporting...............................................................................19

The Australian Loan Council..................................................................... 19Loan Council Allocations ........................................................................... 20Timetable for Loan Council Reporting..................................................... 22

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Details of the Accrual Reporting Framework.........................................23

Budget Reporting ........................................................................................ 24Outcomes Report ......................................................................................... 24Mid-Year Report .......................................................................................... 24Additional Reporting.................................................................................. 25

Appendix A: Accrual Uniform Presentation FrameworkTables .....................................................................................27

Appendix B: Timetable for Accrual UPF ................................................43

Appendix C: Comparison of GFS and AAS31 AccrualReporting ...............................................................................45

Index .................................................................................................................49

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Foreword

This publication outlines the revised uniform presentation frameworkagreed to by the Australian Loan Council in March 2000.

The revised framework is the result of a review prompted bygovernments’ shift from cash to accrual reporting and by the AustralianBureau of Statistics’ adoption of an accrual based framework forGovernment Finance Statistics reporting. Whereas the previous uniformpresentation framework was based on cash budgeting and reporting,the new framework establishes the common accrual-based budgetaryand fiscal information which should be published by Commonwealth,State and Territory governments for external purposes.

The review of the uniform presentation framework was undertaken bythe Fiscal Reporting Committee, convened by Heads of Treasuries forthis task. The Committee comprised representatives fromCommonwealth, State and Territory Treasuries and the CommonwealthDepartment of Finance and Administration, as well as from theAustralian Bureau of Statistics and the Public Sector AccountingStandards Board.

The accrual uniform reporting framework is to be implementedbeginning with most jurisdictions’ 2000-2001 Budgets.

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Introduction

The Uniform Presentation Framework

The May 1991 Premiers’ Conference agreed to the introduction of theUniform Presentation Framework (UPF) in 1991.

The primary objective of the UPF is to ensure that Commonwealth, Stateand Territory governments provide a common ‘core’ of financialinformation in their budget papers. It was recognised that a moreuniform approach to the presentation of financial data would facilitate abetter understanding of individual governments’ budget papers andprovide for more meaningful comparisons of each government’sfinancial results and projections.

The format of the UPF is based on the reporting standards of theAustralian Bureau of Statistics (ABS) Government Finance Statistics(GFS) framework. This ensures a high degree of consistency in thepreparation and presentation of financial data.

In 1997 all jurisdictions agreed to a revised Uniform PresentationFramework which simplified, rationalised and enhanced reportingrequirements, while maintaining consistency with the ABS cash-basedGFS. The revised framework also previewed the shift from a cash to anaccrual reporting framework.

In line with moves internationally, the ABS has adopted an accrualframework for GFS. In line with this transition to accrual reporting, thisdocument outlines a revised framework for the presentation byCommonwealth, State and Territory governments of accrual budgetdata in accordance with the objectives of the original UPF.

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Subsequent chapters provide a summary of the key financial statementsused, and measures available, under the accrual GFS framework toassess the fiscal position of governments, and sets out the revisedframework for the uniform reporting of government financialinformation throughout the budget year. The following providesadditional background on accrual reporting and the choice of the GFSframework over the AAS31 framework as the basis for the revised UPF.

The Transition to Accrual Reporting

The adoption of accrual reporting by Australian governments representsthe major development in public sector financial management andreporting of recent years. Accrual measures provide a morecomprehensive picture than cash measures of the total activity ofgovernment and the long-term effects of current policy, therebyenhancing governments’ fiscal transparency and accountability.

Sustainability and sound fiscal management are emphasised under theaccrual framework, providing policy makers with information to assistthem in making decisions that have regard to the financial effects onfuture generations. Accrual information also allows markets, businessand consumers to more effectively assess governments’ fiscalperformance over time.

Cash measures remain advantageous for tracking expenditures in afiscal year and help to identify the short-term effect of fiscal policy onthe economy. The cash surplus, the main indicator for this purpose, willcontinue to be available in the cash flow statement under accrualfinancial statistics.

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Accrual Reporting Frameworks

There are two main accrual-based standards for public sector budgetingand reporting in Australia.

The Australian Accounting Standard (AAS31), Financial Reporting byGovernment is the relevant accounting standard for financial reportingby governments.

The ABS Government Finance Statistics (GFS) standard is an economicreporting standard for governments, based on relevant internationalstandards.

Australian Accounting Standard (AAS31)

The Public Sector Accounting Standards Board issued AAS31 in 1996,setting out standards for general purpose financial reporting by theCommonwealth, State and Territory governments. The standard’spurpose is to assist governments in discharging their financialaccountability.

AAS31 requires the adoption of a full accrual basis of accounting. Thismeans that assets, liabilities, revenues and expenses are recorded infinancial statements when they have their economic impact, rather thanwhen the cash flows associated with these transactions occur.

The standard prescribes model general-purpose reports which can bemodified to suit the particular needs of the reporting entity. Thesestatements, usually audited by the Auditor-General, present the wholeof government accounts using generally accepted accounting principles.These accounts, accompanied by various explanatory notes, arepresented in the form of an operating statement, statement of financialposition and a cash flow statement which resemble, but are different inconcept to, tables presented in Government Finance Statistics format.

Government Finance Statistics (GFS)

The GFS system employed by the ABS is designed to provide statisticsrelating to all Australian public sector entities such as governmentdepartments, statutory authorities, government businesses and local

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government authorities. The GFS is based on two internationalstandards, the United Nations’ System of National Accounts(revised 1993) SNA93 and the Manual on Government FinanceStatistics, which is currently being reviewed by the InternationalMonetary Fund (IMF). The statistics reported by the ABS show, for thepublic sector:

� The consolidated transactions of the various institutional sectors,from an economic viewpoint;

� The roles of the different levels of government in undertaking andfinancing their expenditure programs; and

� The transactions of the Commonwealth and individual State andlocal governments and universities, indicating the comparativestanding of each government in relation to its expenditure, itssources of revenue, its financing transactions and its holdings ofassets and liabilities.

In accordance with SNA93 and the current draft of the revised IMFManual, the ABS has updated its GFS framework from a cash reportingbasis to an accrual reporting basis. The new framework first appeared inthe 1999-2000 Government Financial Estimates publication(ABS Cat. No. 5501.0), released in April 2000.

Adoption of Accrual GFS for the UPF

The Commonwealth, States and Territories have agreed to adopt theABS accrual GFS framework as the basis for the accrual UPF. For thepurposes of the UPF, the accrual GFS has, at this time, a number ofadvantages relative to the AAS31 public sector accounting standard.

� The ABS will provide a consistent point of reference for theinterpretation of GFS standards and classifications decisions for allgovernments. This will ensure uniformity in the presentation ofbudget data and provide for meaningful inter-jurisdictionalcomparisons. In contrast, the interpretation and application ofAAS31 standards in governments’ budgets is the preserve of therespective treasury and audit office of each jurisdiction, providingscope for varying interpretations and potentially substantial

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differences in the reporting of financial information acrossjurisdictions. For example, jurisdictions do not apply the sametreatment for recognition of the net equity of governmententerprises in the General Government sector, making it difficult tocompare between jurisdictions at a sectoral level.

� There are a number of conceptual differences between GFS andAAS31 that mainly reflect the economic focus of the former and theaccounting focus of the latter. The GFS excludes revaluationincome and expenses because they are outside the control ofgovernment. As discussed later in this report, the GFS frameworkyields the net lending, or fiscal balance, measure, which isimportant in assessing the impact of a government’s policies on theeconomy. This concept is not found in AAS31 standards. Moregenerally, GFS data is broadly consistent with the data ongovernment transactions in the Australian National Accounts andreflected in measures of economic activity.

� As each jurisdiction’s UPF estimates add to the ABS’s accrual GFStime-series, a steadily growing database will be available for theanalysis of trends. This time series will be systematically backcastby the ABS in response to subsequent changes in data, andpublished regularly to ensure comparability over time.

An overview of the major differences between the GFS standard and theAAS31 standard is provided in Appendix C.

Timetable for the Introduction of the Accrual UPF

As noted above, the ABS introduced the accrual GFS framework withthe release of its 1999-2000 Government Financial Estimates publication inearly 2000. The new framework was developed in close consultationwith State and Territory Treasuries and the Commonwealth Treasuryand Department of Finance and Administration. The majority ofjurisdictions have also adopted accrual budget reporting in recent years.

It is expected that most jurisdictions will be able to conform with theaccrual UPF beginning with the 2000-01 budget cycle. Thosejurisdictions, whether bringing down an early or a late budget, should

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include in their 2000-01 budget documentation the accrual tablesoutlined in Appendix A, in accordance with the timetable presented inAppendix B.

Not all jurisdictions will be in a position to meet the accrual reportingrequirements of the revised UPF in their 2000-01 budgets. Suchjurisdictions have until the 2002-03 budget year to fully implementreporting on an accrual UPF basis, and are expected to continuereporting on a cash UPF basis in the interim.

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Accrual GFS Reporting

This chapter outlines the key features of the accrual GFS reportingframework and explains the institutional sectors into which the entitiescontrolled by the Commonwealth and State and Territory Governmentsare classified. This is followed by a discussion of the major differencesbetween cash and accrual reporting and a comparison of the GFS andAAS31 methodologies.

The Accrual GFS Presentation

The GFS gives details of the expenses, revenue, payments, receipts, andassets and liabilities of the public sector in Australia. The GFS includesonly those transactions over which a government exercises controlunder its legislative or policy framework. This means that, unlike theaccounting viewpoint, the GFS excludes from the calculation of netoperating balance both revaluations (holding gains or losses) arisingfrom a change in market prices, and other changes in the volume ofassets that result from discoveries, depletion and destruction of assets.This means that differences arise between the GFS and accountingframeworks, particularly within the operating statement. Thesedifferences are covered in more detail in a later section.

Details of public sector estimates and outcomes are presented within theaccrual GFS in three primary statements: operating statement, balancesheet, and cash flow statement. These statements form the core of theaccrual UPF.

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Operating Statement

The operating statement presents information on GFS revenue1 and GFSexpenses2. This statement is designed to capture the composition ofexpenses and revenues and the net cost of a government’s activitieswithin a fiscal year. It shows the full cost of resources consumed by thegovernment in achieving its objectives, and how these costs are metfrom various revenue sources.

Unlike a standard accounting operating statement, the GFS operatingstatement reports two major fiscal measures the GFS net operatingbalance and GFS net lending. The GFS net operating balance iscalculated as GFS revenue minus GFS expenses, while GFS net lending,or fiscal balance, includes net capital expenditure but excludesdepreciation, thereby giving a better measure of a jurisdiction’s call onfinancial markets.

Balance Sheet

The balance sheet records a government’s stocks of financial andnon-financial assets and liabilities. This statement, also referred to as a‘statement of assets and liabilities’ or a ‘statement of financial position’,discloses the resources over which a government maintains control. Thebalance sheet is a financial snap-shot of a government, taken at the endof each financial year. By providing information on the type of assetsand liabilities held by a government, the statement gives an indicationof the government’s financial liquidity.

The balance sheet includes data on the make up of a government’sfinancial assets, on its holdings of fixed assets, and on the extent ofliabilities such as borrowing and unfunded superannuation. This allows

1 GFS revenue differs from AAS31 revenue. GFS revenue includes all (mutuallyagreed) transactions that increase net worth. Revaluations, included in AAS31revenue, are not considered mutually agreed transactions, and so are excludedfrom GFS revenue. Included in this revaluations category are asset write-offs. Assetsales, which involve a transfer of a non-financial for a financial asset, are alsoexcluded.

2 GFS expenses differ from AAS31 expenses. GFS expenses encompasses alltransactions that decrease net worth, including dividend and TEP payments, andabnormal and extraordinary items (where relevant).

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for intertemporal and interjurisdictional comparisons of asset andliability levels.

The GFS balance sheet differs from the standard accountingpresentation in that it provides information on financial andnon-financial assets, and does not distinguish between current andnon-current assets and liabilities.

Cash Flow Statement

The cash flow statement records a government’s cash receipts andpayments. The cash flow statement reveals how a government obtainsand expends cash.

This statement requires cash flows to be categorised into operating,investing and financing activities. Operating activities are those whichrelate to the collection of taxes, the distribution of grants, and theprovision of goods and services. Investing activities are those whichrelate to the acquisition and disposal of financial and non-financialassets. Financing activities are those which relate to changing the sizeand composition of a government’s financial structure.

The signing convention within the cash flow statement is that all inflowscarry a positive sign and all outflows carry a negative sign (regardless ofwhether they are gross or net cash flows).

The GFS cash flow statement reports two major fiscal measures netincrease in cash held and cash surplus. Net increase in cash held is thesum of net cash flows from all operating, investing and financingactivities. The cash surplus comprises only net cash received fromoperating activities, and from sales and purchases of non-financialassets, minus distributions paid (in the case of public financialcorporations and public non-financial corporations), minus financeleases and similar arrangements.

The GFS cash surplus measure is broadly comparable with the oldcash-GFS surplus measure, allowing for comparisons between the twoframeworks.

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Institutional Sectors

The coverage of the UPF extends to the entire Australian public sector,comprising units which are owned and/or controlled by theCommonwealth and State governments. These units (such asgovernment departments, authorities and businesses) are grouped intothree institutional subsectors: the general government sector, the publicnon-financial corporations (PNFC) sector; and the public financialcorporations (PFC) sector.

General Government Sector

The general government sector comprises all government departments,offices and other bodies engaged in providing services free of charge orat prices significantly below their cost of production. Generalgovernment services include those which are mainly non-market innature, those which are largely for collective consumption by thecommunity, and those which involve the transfer or redistribution ofincome. These services are financed mainly through taxes, othercompulsory levies and user charges.

Public Non-financial Corporations (PNFC) Sector3

The PNFC sector comprises bodies mainly engaged in the production ofgoods and services (of a non-financial nature) for sale in the marketplace at prices that aim to recover most of the costs involved (egAustralia Post, Port Authorities and Railways). In general PNFCs arelegally distinguishable from the governments which own them.

Non-financial Public Sector (NFPS)

The non-financial public sector represents the consolidated transactionsand assets and liabilities of the general government and PNFC sectors.In compiling statistics for the non-financial public sector, transactionsand debtor-creditor relationships between subsectors are eliminated toavoid double counting. This process is known as consolidation.

3 The PNFC sector was formerly known as the public trading enterprises or PTEsector.

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Public Financial Corporations (PFC) Sector4

PFCs are bodies primarily engaged in the provision of financialintermediation services or auxiliary financial services. They are able toincur financial liabilities on their own account (eg taking deposits,issuing securities or providing insurance services). Central borrowingauthorities, including the Reserve Bank of Australia, are part of the PFCsector.

Total Public Sector

The total public sector incorporates the transactions of all sectors ofgovernment general government, the PNFC sector and the PFC sector(eliminating intersectoral transfers). Total public sector reporting is alsoknown as ‘whole of government’ reporting.

Major Differences between GFS Cash and AccrualReporting

The main differences between cash and accrual accounting fall into thetwo broad categories: recognition of transactions and timing oftransactions. In cash accounting, transactions are recognised only whencash flows into or out of an entity. Consequently, non-cash transactions(such as provisions and revaluations) are excluded. Accrual accountingrecords transactions when economic value changes rather than whencash changes hands. Accrual accounting covers some financial items ofsignificant size which are not included in cash-based statistics becausethey do not have an associated cash flow.

In regard to the timing of transactions, under a cash system transactionsare recorded in the period in which they occurred. An accrual systemrecords transactions in the period in which revenue is earned orexpenses incurred, regardless of whether a cash payment is made.

Some of the more important differences between the cash and accrualreporting frameworks relate to the treatment of unfunded

4 The PFC sector was formerly known as the public financial enterprises or PFEsector.

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superannuation liabilities, provisions for the depreciation of capitalassets, and treatment of public debt interest.

Superannuation

Cash accounting records the flow of cash into and out ofsuperannuation funds. Accrual accounting records the accruingsuperannuation expense whether the liability is funded or unfunded,thus showing the true cost of accruing superannuation liabilities. Factorstaken into account when calculating changes in the stock of unfundedsuperannuation liability include the number of employees, as well asassumptions relating to wages growth, inflation and the expected rate ofreturn on investment.

Depreciation

Cash accounting records capital expenditure in a given year whereas theoperating statement in accrual accounting records capital use(depreciation), defraying the cost of capital investment across the life ofthe asset. However, the net lending/fiscal balance accrual measure (seepage 14) is constructed so that it continues to measure capitalexpenditure rather than depreciation, and the cash flow statement willalso outline most capital expenditure in the category ‘purchases of newnon-financial assets’.

Public Debt Interest (PDI)

Under cash accounting PDI is recorded as the interest paid during theyear. Under an accrual approach, allowance is made for interestaccrued, but not actually paid, during the period.

A further difference between cash and accrual accounting for PDIconcerns the treatment of premia and discounts when debt is issued orrepurchased. Under the cash framework, an issue premium is recordedas an offset to PDI at the time of debt issue, and an issue discount isrecorded as PDI when that debt is cancelled. In the accrual GFSframework both issue premia and discounts are amortised over the lifeof the stock.

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Accrual GFS Fiscal Measures

GFS accrual reporting provides a number of measures for evaluating thesoundness of a government’s fiscal position and the effect of fiscalpolicy on economic conditions. These include measures on both a stockand flow basis. Stock measures (including net debt, net worth and netfinancial worth) highlight the fiscal position of a government at a pointin time, providing information on the results of past decisions. Stocksreflect holdings of assets and liabilities. Stocks at the beginning of aperiod plus the cumulative result of flows in the period are equal tostocks at the end of the period.

Flow measures (including the net operating balance, net lending (fiscalbalance), cash surplus and change in net worth) show annual changes inthe fiscal position, reflecting the impact of government decisions andactions in that year. Flows represent the creation, transformation,exchange, transfer or extinction of economic value.

The key measures in the GFS accrual framework are: GFS net operatingbalance, GFS net lending (fiscal balance), cash surplus, net debt, networth, change in net worth, and net financial worth.

GFS Net Operating Balance

The GFS net operating balance, or operating result, is the excess of GFSrevenue over GFS expenses. The net operating balance excludesexpenditure on the acquisition of capital assets, but includes non-cashcosts such as accruing superannuation entitlements and theconsumption of capital (depreciation). By including all accruing costs,including depreciation, the net operating balance encompasses the fullcosts of providing government services. This makes it a good measureof the sustainability of the government’s fiscal position over time and

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provides an indication of the sustainability of the existing level ofgovernment services.

The net operating balance can also be defined as the change in networth, less the effect of revaluations of financial assets and liabilities(where revaluations include changes in the volume of assets whichresult from discoveries, depletion and destruction of assets). Becauserevaluations are largely outside a government’s control, the netoperating balance is a better measure of a government’s financialactivity in a given period than the change in net worth (describedbelow).

The net operating balance5 is a flow measure on the operating statement.

GFS Net Lending (Fiscal Balance)

GFS net lending, or fiscal balance6, measures a government’sinvestment-saving balance. A fiscal surplus indicates that a governmentis saving more than enough to finance all of its investment spending andis therefore not contributing directly to the current account deficit.

The fiscal balance (which is recorded in the operating statement) differsfrom the net operating balance in relation to the treatment of capitalexpenditure. Unlike the net operating balance, the fiscal balanceincludes net capital expenditure, but not the use of capital(ie depreciation). In a year in which a government undertakes majorinfrastructure works, other things being equal, a fiscal surplus will besignificantly lower (or a fiscal deficit significantly larger) compared withthe net operating balance. Because it includes the full amount ofinvestment by a government in a particular period, the fiscal balance is abetter measure of the impact of a government's budget on the economyin a given period.

The fiscal balance is the accrual counterpart of the deficit in the cash GFSframework. Both measures provide estimates of a government’s

5 There are conceptual differences between the GFS operating balance and the AAS31operating result (see page 43).

6 The term ‘fiscal balance’ is not used by the ABS.

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investment-saving balance and hence their contribution to the currentaccount deficit. However, the two measures are unlikely to coincidebecause of the differences arising when transactions are recorded in cashand accrual terms. The fiscal balance has the advantage of aligning moreclosely with the accrual-based Australian National Accounts. Theequivalent of the deficit continues to be available in the accrualframework from the cash flow statement (see below).

Cash Surplus

The GFS cash surplus(+)/deficit(-), a flow measure reported in the cashflow statement, is similar in concept to the old cash-based measure, butuses a different sign convention, ie a positive sign now indicates asurplus. However, due to methodological and data-source changesassociated with the move to an accrual accounting framework, thesurplus/deficit aggregate contained in the cash flow statement is notdirectly comparable with the deficit measure obtained under the cashUPF. Time series data should therefore be used with caution.

Recording of cash transactions remains important for cash managementpurposes. In addition, cash measures provide the most useful indicationof a government’s need to call on financial markets to meet its budgetobligations.

The cash surplus has four components. The first is net cash receivedfrom operating activities (comprising tax revenue plus grants andsubsidies received plus revenue from sales of goods and services, lesspayments for goods and services, interest costs and grants and subsidiespaid). The second component is net cash inflow from sales andpurchases of non-financial assets. The third component (in the case ofPNFCs and PFCs) removes distributions paid. And the fourthcomponent removes the initial increase in liability accruing at thebeginning of finance leases and similar arrangements.

Net Debt

The concept of net debt is the same under cash and accrual-basedfinancial reporting. Net debt comprises the stock of selected gross

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financial liabilities less financial assets. The stock of net debt is acommon measure used to help judge the overall strength of ajurisdiction's fiscal position. High levels of net debt impose a call onfuture revenue flows to service that debt and can therefore limitgovernment flexibility to adjust expenditure. Excessive net debt can callinto question the ability of government to service that debt.

The net debt measure is limited in that it does not include accruedemployee liabilities or outstanding claims associated with insurancetype activities, which can be substantial. In addition, net debt does notprovide information on whether this debt has been incurred to financefixed asset accumulation or current expenditure. This additionalinformation is important in gauging the strength of a government’sfiscal position as well as issues of the sustainability of policy.

Despite these limitations, net debt still provides useful information forexamining the soundness of a government’s fiscal position.

Net debt is reported in the balance sheet and is the sum of deposits held,advances received and borrowing, minus the sum of cash and deposits,advances paid, and investments, loans and placements.

Net Worth

The net worth measure provides a more comprehensive picture of agovernment’s overall financial position than the net debt measure. It iscalculated as total assets (both financial and non-financial) minus totalliabilities, minus shares and other contributed capital.7 Net worthincorporates a government’s non-financial assets such as land, otherfixed assets etc, which may be sold and used to repay debt, as well ascertain financial assets and liabilities not captured by the net debtmeasure, most notably accrued employee superannuation liabilities,debtors and creditors.

The sale of physical assets only impacts on net debt as an increase infinancial assets, and hence a fall in net debt. Net worth incorporates

7 For the general government sector net worth is simply assets less liabilities sinceshares and contributed capital is zero.

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both sides of the story, showing the decrease in non-financial assets andthe increase in financial assets. Net worth also shows asset acquisitionsover time, giving an indication of the extent to which borrowings areused to finance asset purchases, rather than only current expenditure.

However, the net worth measure is not without limitations. The abilityto reliably value government assets (such as national parks andgovernment buildings) is an issue. Also, a government may notnecessarily be in a position to sell non-financial assets on its balancesheet to meet liabilities (eg, for policy reasons), or might find that to doso may involve selling at prices below the balance sheet valuation.

The net worth measure can be obtained from the balance sheet.

Change in Net Worth

Change in net worth measures the variation in a government’saccumulated assets and liabilities, and is the most inclusive measure ofthe change in a government’s financial position over a given period.

Change in net worth comprises two flows: change in net worth due totransactions (ie the net operating balance), and change in net worth dueto revaluations (where revaluations include changes in the volume ofassets which result from discoveries, depletion and destruction ofassets). Changes in net worth due to revaluations also encompasschanges in liabilities (eg revaluations of liabilities due to changes inexchange rate).

A problem with the change in net worth measure is that changes in assetvalues generally reflect factors external to a government’s control. Thusfavourable changes in asset valuations arising from external factorscould obscure deterioration in a government’s fiscal position resultingfrom policy decisions.

The total change in net worth can be measured by comparing successiveend-of-year balance sheets. That part of change in net worth due totransactions can also be seen in the operating statement, as the netoperating balance.

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Net Financial Worth

Net financial worth measures a government’s net holdings of financialassets. It is calculated from the balance sheet as financial assets minusliabilities.

Net financial worth is a broader measure than net debt, in that itincorporates provisions made (such as superannuation, but excludingdepreciation and bad debts) as well as holdings of equity. Net financialworth includes all classes of financial assets and liabilities, only some ofwhich are included in net debt.

As non-financial assets are excluded from net financial worth, this is anarrower measure than net worth. However, it avoids the concernsinherent with the net worth measure relating to the valuation ofnon-financial assets and their availability to offset liabilities.

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Loan Council Reporting

This chapter looks briefly at the role of the Australian Loan Council,before explaining the changes to Loan Council reporting with theintroduction of the accrual UPF.

The Australian Loan Council

The Australian Loan Council is a Ministerial Council comprising theCommonwealth Treasurer as Chairman and his counterparts from theStates and Territories. It was established in 1927 to coordinate publicsector borrowings in Australia.

The Loan Council is now mainly concerned with enhancing thetransparency and accountability of public sector finances rather than, asin the past, securing adherence to strict borrowing limits. The presentarrangements, introduced in 1993-94, are designed to enhance the role offinancial market scrutiny as a discipline on borrowings by the publicsector. The UPF complements these arrangements by assistingParliaments, financial markets and the public to make informedjudgements about each government’s financial performance.

Loan Council usually meets once a year, otherwise conducting businessby correspondence. Each jurisdiction nominates to Loan Council itsintended borrowing allocation for the forthcoming financial year,known as its Loan Council Allocation (LCA). The LCA provides anindication of a government’s probable cash call on financial marketsover the year. LCA nominations are then considered by Loan Councilhaving regard to each jurisdiction’s fiscal position and reasonableinfrastructure requirements, as well as to the macroeconomic

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implications of the aggregate figure. Since 1993-94, Loan Council hasapproved all jurisdictions’ LCA nominations without change.

Each jurisdiction is required to take into account its Loan Councilapproved LCA in formulating its budget. Significant departures fromLoan Council approved LCAs and budget time LCA estimates arerequired to be explained to Loan Council and the public.

Loan Council Allocations

Table 1 below shows the derivation of a jurisdiction’s LCA under thecash-based UPF reporting framework.

Table 1: LCA Format — Cash GFSLoan Council Allocation

General government sector headline deficit $plus PNFC sector net financing requirement $equals Non-financial public sector headline deficit $plus Memorandum items $

Loan Council Allocation $

A government’s LCA under cash accounting comprises its expectednon-financial public sector ‘headline’ deficit, adjusted for memorandumitems. The non-financial public sector headline deficit in turn comprisesthe general government headline deficit plus the PNFC (formerly PTE)net financing requirement (ie, the PNFC headline deficit less netadvances received from the general government sector). The headlinedeficit measure has been used in calculating LCAs because itincorporates a government’s net advances paid8 thereby providing abetter measure of its call on financial markets.

Memorandum items are used to adjust the headline deficit to include inLCAs certain transactions (such as operating leases) that have many ofthe characteristics of public sector borrowings but do not constituteformal borrowings. They are also used, where appropriate, to deductfrom the cash deficit certain transactions that Loan Council has agreed

8 Net advances paid involve the transfer or exchange of a financial asset.

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should not be included in LCAs (eg the funding of more than emergingcosts under public sector superannuation schemes, or borrowings byentities such as statutory marketing authorities).

The focus of Loan Council reporting in the accrual reporting frameworkwill remain on cash measures. A government’s cash position willdetermine the extent to which it must call on financial markets in agiven year to meet its budget obligations. However, changes in GFSreporting have necessitated some variation in the way in which LCAsare determined.

Table 2 shows how these changes have been incorporated to give arevised measure of a jurisdiction’s LCA that is equivalent to the currentmeasure.

Table 2: LCA Format Accrual GFSLoan Council Allocation Budget-time Estimate

General government sector cash deficit $ $

PNFC sector cash deficit $ $

Non-financial public sector cash deficit (a) $ $

minus Net cash flows from investments

in financial assets for policy purposes (b) $ $

plus Memorandum items (c) $ $

Loan Council Allocation $ $

(a) The sum of the deficits of the general government and PNFC sector may not equal the non-financial public sectordeficit due to intersectoral transfers, which are netted out in the calculation of the non-financial public sector figure.

(b) This item is the negative of net advances paid under a cash accounting framework.

The cash deficits reported in the UPF cash flow statements form thebasis of a jurisdiction’s LCA.

The item ‘net cash flows from investments in financial assets for policypurposes’ is from the non-financial public sector cash flow statement. Itcomprises net lending by governments with the aim of achievinggovernment policy, as well as net equity sales (eg privatising a PNFCthrough the sale of equity rather than assets) and net lending to othersectors or jurisdictions. Such transactions involve the transfer orexchange of a financial asset and are not included within the cashdeficit. However, the cash flow from investments in financial assets forpolicy purposes has implications for a government’s call on financialmarkets. Therefore it is included as part of a jurisdiction’s LCA.

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A jurisdiction’s LCA nomination is made on the basis of data in theprevious year’s Mid Year Report. The nomination is updated atbudget-time, to incorporate any parameter and policy changes reflectedin the aggregates presented in the budget, and the LCA outcome isreported in the Budget Outcome document. A tolerance limit appliesbetween the nomination and budget-time LCA, and between thebudget-time LCA and the LCA outcome. Tolerance limits recognise thatLCAs are nominated at an early stage of budget processes and thatestimates are likely to change as a result of policy and parameterchanges before and after budgets are brought down.

Under an accrual framework the tolerance limit is calculated astwo per cent of non-financial public sector cash receipts from operatingactivities, and applies either side of a jurisdiction’s LCA estimate.

Jurisdictions are required to explain expectations of breaches oftolerance limits to Loan Council and to make the explanations public.

Timetable for Loan Council Reporting

The timetable for the nomination and reporting of LCAs remainsunchanged.

� Governments will continue to nominate an LCA for theforthcoming financial year for Loan Council consideration inMarch/April.

� Budget reporting throughout the year will include a government’scurrent LCA estimate, with reasons for any significant changes.

� Agreed LCAs will continue to be released publicly following LoanCouncil consideration, along with an updated estimate of theexpected LCA outcome for the current financial year.

� The Loan Council Secretariat will also publish a compilation of fullyear LCA outcomes.

23

Details of the Accrual Reporting Framework

This chapter outlines the information to be presented under the accrualuniform presentation framework (UPF).

No distinction is made between the information required fromgovernments presenting early budgets (ie those brought down beforethe start of the budget year), and that required from governments withlate budgets.

Jurisdictions should provide full explanations for any departures fromthe ABS standards in presenting data in their UPF tables.

As was the case with the cash-based UPF, the focus remains on thegeneral government sector, with most tables requiring jurisdictions toprovide general government information for the budget year, the yearpreceding the budget year and for three forward years. This allowsusers to make assessments of the fiscal soundness and economic impactof a government’s policies by providing information on the futureimpact of those policies. PNFC and non-financial public sector reportingis required for the past year and budget year, while data availabilityrestricts PFC reporting to jurisdictions’ outcome statements. ABS GFSreporting includes the five previous years and budget year details forGG and PNFC subsectors, and the five previous years only for PFCs.The ABS will not include tables for the Non-Financial Public Sector in itsGFS publications, but they will be available on request.

24

Budget Reporting

All governments are required to present, as part of their budgetdocumentation, Tables 1 to 3, 5 to 7, 9 to 11, 13 and 14.9 The budget timeLoan Council Allocation (LCA) estimate should also be presented at thistime, as set out in Table 15.

Governments producing late budgets will, where available, include finalbudget outcomes for the year just completed. LCA outcomes for theyear just completed, as set out in Table 16, are to be presentedconcurrently with other outcomes data.

Outcomes Report

Governments producing early budgets, and other governments unableto present outcomes information in their budget documentation, shouldpublish a separate outcomes report presenting Tables 1 to 13, but onlyprovide information for the financial year just completed.

Governments should provide this information by the end of Octobereach year.

The full year LCA outcome (compared with the relevant budget timeLCA), as set out in Table 16, will also be presented in the outcomesreport if not included in late budgets.

Mid-Year Report

Each government is to publish a mid-year report consisting of Tables 1to 3, 5 to 7 and 9 to 11, but only for the budget and forward estimates.These revised estimates will take into account fiscal and economicdevelopments since the commencement of the budget year.

9 The ABS, in its Government Financial Estimates publication, will only publish generalgovernment data for one forward year, not the three forward years included in UPFgeneral government tables.

25

The mid year report will also include a revised estimate of the full yearLCA estimate compared with the budget time LCA, as set out inTable 17.

Governments should provide this information by the end of Februaryeach year.

Additional Reporting

Consistent with previous presentation frameworks, the accrualframework sets out the minimum information to be reported bygovernments. Governments should continue to publish additionalinformation they consider relevant for users assessing their fiscalposition.

Jurisdictions are encouraged to provide, as part of their budgetdocumentation, a reconciliation between the GFS net operating balanceand the AAS31 net operating result. The ABS is intending to publishsuch tables as part of their GFS reporting, providing all jurisdictionswith a suitable template.

Some jurisdictions may also be interested in providing detailsreconciling the flow information of financial and non-financial assetscontained in the operating statement, with the stock information onassets and liabilities contained in the balance sheet. Changes in agovernment’s stock of assets and liabilities over the financial year, aslisted in the balance sheet, can be disaggregated into those due to the netresult of transactions (largely cashflows associated with assets andliabilities), and those changes due to revaluations and other changes(such as discoveries of new mineral deposits). An appropriate format forthe presentation of this information would be the ABS GFS Statement ofStocks and Flows.

27

Appendix A

Accrual Uniform PresentationFramework Tables

Table 1: General Government Sector Operating Statement

-1 Budget 1 2 3

GFS Revenue (a)Taxation revenue $ $ $ $ $Current grants and subsidies $ $ $ $ $Capital grantsSales of goods and services $ $ $ $ $Interest income $ $ $ $ $Other $ $ $ $ $

Total revenue $ $ $ $ $less GFS Expenses (b)

Gross operating expenses (c) $ $ $ $ $Nominal superannuation interest expense $ $ $ $ $Other interest expenses $ $ $ $ $Other property expenses $ $ $ $ $Current transfers (c) $ $ $ $ $Capital transfers (c) $ $ $ $ $

Total expenses $ $ $ $ $equals GFS net operating balance $ $ $ $ $less Net acquisition of non-financial assets

Gross fixed capital formation $ $ $ $ $less Depreciation $ $ $ $ $plus Change in inventories $ $ $ $ $plus Other movements in non-financial assets $ $ $ $ $equals Total net acquisition of non-financial assets $ $ $ $ $

equals GFS Net lending / Borrowing (Fiscal balance) (d) $ $ $ $ $

Forward Estimates

General Government

(a) GFS revenue is not equal to AAS31 revenue. GFS revenue includes all (mutually agreed) transactions that increasenet worth. Revaluations are not considered mutually agreed transactions, and so are excluded from GFS revenue.

(b) GFS expenses is not equal to AAS31 expenses. AAS31 expenses include all transactions that decrease net worth.(c) These line items are disaggregated further in ABS GFS reporting.(d) GFS net lending also equals net transactions in financial assets less net transactions in liabilities. The term ‘fiscal

balance’ is not used by the ABS.$ Data required.

28

Table 2: Public Non-financial Corporation Sector OperatingStatement

-1 Budget

GFS Revenue (a)Sales of goods and services $ $Current grants and subsidies $ $Capital grants $ $Interest income $ $Other $ $

Total revenue $ $less GFS Expenses (b)

Gross operating expenses (c) $ $Property expenses (c) $ $Current transfers (c) $ $Capital transfers $ $

Total expenses $ $equals GFS net operating balance $ $less Net acquisition of non-financial assets

Gross fixed capital formation $ $less Depreciation $ $plus Change in inventories $ $plus Other movements in non-financial assets $ $equals Total net acquisition of non-financial assets $ $

equals GFS Net lending / Borrowing (Fiscal balance) (d) $ $

Public Non-Financial Corporations

(a) GFS revenue is not equal to AAS31 revenue. GFS revenue includes all (mutually agreed) transactions that increasenet worth. Revaluations are not considered mutually agreed transactions, and so are excluded from GFS revenue.Asset sales, which involve a transfer of a non-financial for a financial asset, are also excluded.

(b) GFS expenses is not equal to AAS31 expenses. GFS expenses include all transactions that decrease net worth.(c) These line items are disaggregated further in ABS GFS reporting.(d) GFS net lending also equals net transactions in financial assets less net transactions in liabilities. The term ‘fiscal


29

Table 3: Non-financial Public Sector Operating Statement-1 Budget

Non-Financial Public Sector

GFS Revenue (a)Taxation revenue $ $Current grants and subsidies $ $Sales of goods and services $ $Capital grantsInterest income $ $Other $ $

Total revenue $ $less GFS Expenses (b)

Gross operating expenses (c) $ $Nominal superannuation interest expense $ $Property expenses (c) $ $Current transfers (c) $ $Capital transfers (c)

Total expenses $ $equals GFS net operating balance $ $less Net acquisition of non-financial assets

Gross fixed capital formation $ $ less Depreciation $ $plus Change in inventories $ $plus Other movements in non-financial assets $ $equals Total net acquisition of non-financial assets $ $

equals GFS Net lending / Borrowing (Fiscal balance) (d) $ $




30

Table 4: Public Financial Corporations Sector Operating StatementBudget -1

Public Financial Corporations

GFS Revenue (a)Sales of goods and services $Current grants and subsidies $Capital grants $Interest income $Other $

Total revenue $less GFS Expenses (b)

Gross operating expenses (c) $Property expenses (c) $Current transfers (c) $Capital transfers $

Total expenses $equals GFS net operating balance $less Net acquisition of non-financial assets

Gross fixed capital formation $less Depreciation $plus Change in inventories $plus Other movements in non-financial assets $equals Total net acquisition of non-financial assets $

equals GFS Net lending / Borrowing (Fiscal balance) (d) $




31

Table 5: General Government Sector Balance Sheet

-1 Budget 1 2 3

AssetsFinancial assets

Cash and deposits $ $ $ $ $Advances paid $ $ $ $ $Investments, loans and placements $ $ $ $ $Other non-equity assets $ $ $ $ $Equity $ $ $ $ $Total financial assets $ $ $ $ $

Non-financial assetsLand and fixed assets $ $ $ $ $Other non-financial assets $ $ $ $ $Total non-financial assets $ $ $ $ $

Total assets $ $ $ $ $Liabilities

Deposits held $ $ $ $ $Advances received $ $ $ $ $Borrowing $ $ $ $ $Superannuation liability (a) $ $ $ $ $Other employee entitlements and provisions $ $ $ $ $Other non-equity liabilities $ $ $ $ $

Total liabilities $ $ $ $ $

Net worth $ $ $ $ $Net financial worth (b) $ $ $ $ $

Net debt (c) $ $ $ $ $

General Government

Forward Estimates

(a) For some jurisdictions this line item includes unfunded superannuation.(b) Net financial worth equals total financial assets minus total liabilities.(c) Net debt equals the sum of deposits held, advances received and borrowing, minus the sum of cash and deposits,

advances paid, and investments, loans and placements.$ Data required.

32

Table 6: Public Non-financial Corporation Sector Balance Sheet-1 Budget

Public Non-Financial Corporations Assets

Financial assetsCash and deposits $ $Investments, loans and placements $ $Other non-equity assets $ $Equity $ $Total financial assets $ $

Non-financial assetsLand and fixed assets $ $Other non-financial assets $ $Total non-financial assets $ $

Total assets $ $Liabilities

Deposits held $ $Advances received $ $Borrowing $ $Superannuation liability (a) $ $Other employee entitlements and provisions $ $Other non-equity liabilities $ $

Total liabilities $ $Shares and other contributed capital $ $

Net worth $ $Net financial worth (b) $ $

Net debt (c) $ $



33

Table 7: Non-financial Public Sector Balance Sheet-1 Budget



Cash and deposits $ $Advances paid $ $Investments, loans and placements $ $Other non-equity assets $ $Equity $ $

Total financial assets $ $Non-financial assets

Land and fixed assets $ $Other non-financial assets $ $Total non-financial assets $ $

Total assets $ $Liabilities

Deposits held $ $Advances received $ $Borrowing $ $Superannuation liability (a) $ $Other employee entitlements and provisions $ $Other non-equity liabilities $ $

Total liabilities $ $Shares and other contributed capital $ $

Net worth $ $Net financial worth (b) $ $Net debt (c) $ $



34

Table 8: Public Financial Corporations Balance SheetBudget -1

Public Financial Corporations


Cash and deposits $Investments, loans and placements $Other non-equity assets $Equity $

Total financial assets $Non-financial assets

Land and fixed assets $Other non-financial assets $Total non-financial assets $

Total assets $Liabilities

Deposits held $Advances received $Borrowing $Superannuation liability (a) $Other employee entitlements and provisions $Other non-equity liabilities $

Total liabilities $Shares and other contributed capital $

Net worth $Net financial worth (b) $Net debt (c) $



35

Table 9: General Government Sector Cash Flow Statement1

-1 Budget 1 2 3

Cash FlowCash receipts from operating activities

Taxes received $ $ $ $ $Receipts from sales of goods and services $ $ $ $ $Grants/subsidies received $ $ $ $ $Other receipts $ $ $ $ $Total receipts $ $ $ $ $

Cash payments for operating activitiesPayment for goods and services $ $ $ $ $Grants and subsidies paid $ $ $ $ $Interest paid $ $ $ $ $Other payments $ $ $ $ $Total payments $ $ $ $ $

Net cash flows from operating activities $ $ $ $ $Net cash flows from investments in non-financial assets

Sales of non-financial assets $ $ $ $ $Purchases of non-financial assets (a) $ $ $ $ $Net cash flows from investments in non-financial assets $ $ $ $ $

Net cash flows from investments in financial assets for policy purposes (b) $ $ $ $ $Net cash flows from investments in financial assets for liquidity purposes $ $ $ $ $Net cash flows from financing activities

Advances received (net) $ $ $ $ $Borrowing (net) $ $ $ $ $Deposits received (net) $ $ $ $ $Other financing (net) $ $ $ $ $ Net cash flows from financing activities $ $ $ $ $

Net increase (decrease) in cash held $ $ $ $ $Surplus (Deficit)

Net cash from operating activities and investmentsin non-financial assets $ $ $ $ $Finance leases and similar arrangements (c) $ $ $ $ $Surplus (+) / deficit (-) (d) $ $ $ $ $

General Government

Forward Estimates

(a) The ABS disaggregates this item into new and secondhand non-financial assets.(b) Includes equity acquisitions, disposals and privatisations (net).(c) Finance leases are shown with a negative sign as they are deducted in compiling the surplus/deficit.(d) Conceptually, the surplus/deficit aggregate contained in the cash flow statement is the same as the deficit measure

obtained under the cash UPF. However, in practice, the process of deriving these aggregates differs so that themeasures are not directly comparable. Time-series data created by splicing these measures together shouldtherefore be used with caution.

$ Data required.1 A positive number denotes a cash inflow, a negative sign denotes a cash outflow.

36

Table 10: Public Non-financial Corporation Sector Cash FlowStatement1

-1 Budget

Public Non-financial Corporations


Receipts from sales of goods and services $ $Grants/subsidies received $ $Other receipts $ $Total receipts $ $

Cash payments for operating activitiesPayment for goods and services $ $Grants and subsidies paid $ $Interest paid $ $Other payments $ $Total payments $ $

Net cash flows from operating activities $ $Net cash flows from investments in non-financial assets

Sales of non-financial assets $ $Purchases of non-financial assets (a) $ $Net cash flows from investments in non-financial assets $ $

Net cash flows from investments in financial assets for policy purposes (b) $ $Net cash flows from investments in financial assets for liquidity purposes $ $Net cash flows from financing activities

Advances received (net) $ $Borrowing (net) $ $Deposits received (net) $ $Distributions paid $ $Other financing (net) $ $ Net cash flows from financing activities $ $

Net increase (decrease) in cash held $ $Surplus (Deficit)

Net cash from operating activities and investmentsin non-financial assets $ $Distributions paid $ $Finance leases and similar arrangements (c) $ $Surplus (+) / deficit (-) (d) $ $



$ Data Required.1 A positive number denotes a cash inflow, a negative sign denotes a cash outflow.

37

Table 11: Non-financial Public Sector Cash Flow Statement1

-1 Budget



Taxes received $ $Receipts from sales of goods and services $ $Grants/subsidies received $ $Other receipts $ $Total receipts $ $

Cash payments for operating activitiesPayment for goods and services $ $Grants and subsidies paid $ $Interest paid $ $Other payments $ $Total payments $ $

Net cash flows from operating activities $ $Net cash flows from investments in non-financial assets

Sales of non-financial assets $ $Purchases of non-financial assets (a) $ $Net cash flows from investments in non-financial assets $ $

Net cash flows from investments in financial assets for policy purposes (b) $ $Net cash flows from investments in financial assets for liquidity purposes $ $Net cash flows from financing activities

Advances received (net) $ $Borrowing (net) $ $Deposits received (net) $ $Distributions paid $ $Other financing (net) $ $ Net cash flows from financing activities $ $

Net increase (decrease) in cash held $ $Surplus (Deficit)

Net cash from operating activities and investmentsin non-financial assets $ $Distributions paid $ $Finance leases and similar arrangements (c) $ $Surplus (+) / deficit (-) (d) $ $




38

Table 12: Public Financial Corporations Cash Flow Statement1

Budget -1

Public Financial Corporations Cash Flow

Cash receipts from operating activitiesReceipts from sales of goods and services $Grants/subsidies received $Other receipts $Total receipts $

Cash payments for operating activitiesPayment for goods and services $Interest paid $Other payments $Total payments $

Net cash flows from operating activities $Net cash flows from investments in non-financial assets

Sales of non-financial assets $Purchases of non-financial assets (a) $Net cash flows from investments in non-financial assets $

Net cash flows from investments in financial assets for policy purposes (b) $Net cash flows from investments in financial assets for liquidity purposes $Net cash flows from financing activities

Advances received (net) $Borrowing (net) $Deposits received (net) $Distributions paid $Other financing (net) $ Net cash flows from financing activities $

Net increase (decrease) in cash held $Surplus (Deficit)

Net cash from operating activities and investmentsin non-financial assets $Distributions paid $Finance leases and similar arrangements (c) $Surplus (+) / deficit (-) (d) $




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Table 13: General Government Sector Expenses by Function1

-1 Budget

General Government SectorGeneral public services $ $Defence $ $Public order and safety $ $Education $ $Health $ $Social security and welfare $ $Housing and community amenities $ $Recreation and culture $ $Fuel and energy $ $Agriculture, forestry, fishing and hunting $ $Mining, manufacturing and construction $ $Transport and communications $ $Other economic affairs $ $Other purposes $ $Total GFS Expenses $ $

1 Jurisdictions are encouraged to present expenses by function on a GFS basis. However should a jurisdiction beunable to meet this standard, then expenses may be presented on an AAS31 basis, including a reconciliation line inorder that the line items sum to Total GFS Expenses.

$ Data Required.

40

Table 14(a): Commonwealth General Government Sector Taxes-1 Budget

General Government SectorTaxes on income, profits and capital gains Income and capital gains levied on individuals $ $ Income and capital gains levied on enterprises $ $ Income taxes levied on non-residents $ $ Total $ $Taxes on employers' payroll and labour force $ $Taxes on property $ $Taxes on the provision of goods and services Sales tax $ $ Excises and levies $ $ Taxes on international trade $ $ Total $ $Taxes on use of goods and performance of activities $ $Total GFS taxation revenue $ $

$ Data Required

Table 14(b): State and Territory General Government Sector Taxes-1 Budget

General Government SectorTaxes on employers' payroll and labour force $ $Taxes on property Land taxes $ $ Stamp duties on financial and capital transactions $ $ Financial institutions' transaction taxes $ $ Other $ $ Total $ $Taxes on the provision of goods and services Excises and levies $ $ Taxes on gambling $ $ Taxes on insurance $ $ Total $ $Taxes on use of goods and performance of activities Motor vehicle taxes $ $ Franchise taxes $ $ Other $ $ Total $ $Total GFS taxation revenue $ $

$ Data Required

41

Table 15: Loan Council Allocation (Budget Presentation)Loan Council Allocation Budget-time Estimate

General government sector cash deficit $ $

PNFC sector cash deficit $ $

Non-financial public sector cash deficit (a) $ $minus Net cash flows from investments

in financial assets for policy purposes (b) $ $plus Memorandum items (c) $ $

Loan Council Allocation $ $

(a) May not directly equate to the sum of the general government and PNFC cash deficits due to intersectoral transferswhich are netted out.

(b) This item is the negative of net advances paid under a cash accounting framework.(a) Memorandum items are used to adjust the ABS deficit to include in LCAs certain transactions — such as operating

leases — that have many of the characteristics of public sector borrowings but do not constitute formal borrowings.They are also used, where appropriate, to deduct from the ABS deficit certain transactions that Loan Council hasagreed should not be included in LCAs — for example, the funding of more than employers’ emerging costs underpublic sector superannuation schemes, or borrowings by entities such as statutory marketing authorities.

$ Data required.

Table 16: Loan Council Allocation (Outcome Report Presentation)(a)

Budget-time Estimate Outcome

General government sector cash deficit $ $ PNFC sector cash deficit $ $

Non-financial public sector cash deficit (b) $ $minus Net cash flows from investments

in financial assets for policy purposes (c) $ $plus Memorandum items (d) $ $Loan Council Allocation $ $

(a) Should be included in late budget documentation where data are available.(b) May not equal the sum of the general government and PNFC cash deficits due to intersectoral transfers which are

netted out.(c) This item is the negative of net advances paid under a cash accounting framework.(d) Memorandum items are used to adjust the ABS deficit to include in LCAs certain transactions — such as operating


$ Data required.

Table 17: Loan Council Allocation (Mid-year Report Presentation)Budget-time Estimate MYR Estimate

General government sector cash deficit $ $ PNFC sector cash deficit $ $

Non-financial public sector cash deficit (a) $ $minus Net cash flows from investments

in financial assets for policy purposes (b) $ $plus Memorandum items (c) $ $Loan Council Allocation $ $

(a) May not equal the sum of the general government and PNFC cash deficits due to intersectoral transfers which arenetted out.

(b) This item is the negative of net advances paid under a cash accounting framework.(c) Memorandum items are used to adjust the ABS deficit to include in LCAs certain transactions — such as operating


$ Data required.

43

Appendix B

Timetable for Accrual UPF

April Early Budgets

May Accrual tables and LCAinformation for upcoming

June budget year

July Late Budgets

August Outcomes Reports Accrual tables and LCAinformation for current

September Accrual tables and LCA budget yearinformation for the past

October budget year

November

December Mid-year Reports

January Updated accrual tablesand LCA information

February for current budget year

MarchLoan Council Consider Allocations(a)

AprilLoan Council Allocation Press Release(a)

(by end of February)

(by end of October)

(before start of budget year)

(after start of budget year)

(a) The Loan Council may consider allocations as late as July, depending primarily on the timing of the CommonwealthBudget.

45

Appendix C

Comparison of GFS and AAS31Accrual Reporting

The Australian Accounting Standard No. 31 Financial Reporting byGovernments (AAS31) was issued in 1996. AAS31 is the relevantaccounting standard for financial reporting by governments, and itrequires the adoption of a full accrual basis of accounting.

There is a general consistency between the AAS31 accounting standardand the GFS economic reporting standard. GFS and AAS31 definitionsof the scope of the public sector agree in most cases, and both standardsallow for the division of the public sector into the institutional sectors ofgeneral government, PNFCs and PFCs.

Nevertheless, there are differences between the GFS and AAS31 withregard to the treatment of a number of items. Consequently, the AAS31operating result and the GFS net operating balance can be expected todiverge. The major differences between the two accounting standardsare set out in the table below.

There are also differences in the treatment of balance sheet items whichmay lead to differences in the measure of net worth, notablyadjustments for capitalised interest, provisions for bad debts,superannuation, coverage and valuation differences. These differencesare not covered below. For further information on the differencesbetween GFS and AAS31 refer to section 6 of the ABS Information PaperAccruals-based Government Finance Statistics, 2000 (ABS Cat. No. 5517.0),expected released in March 2000.

46

Major differences between AAS31 and Accrual GFS Operating StatementsIssue AAS31 Treatment GFS Treatment Impact

Allowances for bad and doubtfuldebts

Operating expense. Internal book keeping entry. Not recognised in GFS operatingstatement, therefore GFS net operatingbalance will be greater than AAS31result.

Profit/loss on sale of assets Operating revenue/expense. Revaluation adjustment. Not recognised in GFS operatingstatement, therefore GFS net operatingbalance will differ from AAS31 result.

Abnormal items Included in operating statement butdisclosed separately.

Included in GFS operating statementonly if treated as an economictransaction. Attributed to prior periodswhere appropriate.

May lead to the non-disclosure ofabnormal items that result from non-economic transactions.

Dividends(distributions to owners)

Disclosed after operating result inthe operating statement.

Disclosed before GFS net operatingbalance as an expense.

GFS net operating balance will be lesserthan AAS31 result.

Interest Capitalised in balance sheet incertain circumstances.

Reflected as interest expense in GFSoperating statement.

GFS net operating balance will be lessthan AAS31 result as capitalised interestis treated as an expense.

Superannuation All superannuation expenses arerecognised in the operatingstatement, including interest onliabilities incurred in previous years.Revisions to superannuation liabilitydue to actuarial re-assessment areincluded in operating statement.

GFS operating statement onlyrecognises expenses relating to liabilitiesincurred in the current period. Expensesrelating to liabilities incurred in previousyears are not recognised in theoperating statement. Revisions tosuperannuation liability due to actuarialre-assessment are either amortised ortreated as a revaluation.

GFS net operating balance will begreater than AAS31 result due to allinterest being expensed.

Benefits to households in goods andservices (social transfers in kindcomponent of personal benefitspayments)

Treated as ‘grant and transferpayments’ in operating statement.

Treated as ‘ other expenses’ in theoperating statement.

Difference in classification.No impact on GFS net operatingbalance.

47

Major differences between AAS31 and Accrual GFS Operating Statements (continued)Issue AAS31 Treatment GFS Treatment Impact

Regulatory Fees Recognised as ‘fines and regulatoryfees’ revenue in the operatingstatement.

Treated as user charges and included in‘sales of goods and services’non-taxation revenue.

Difference in classification.Under GFS, fees are treated as a sub-component of sales of goods andservices, while under AAS31 they arerecognised as a separate revenue itemin their own right.

Fines Included as ‘fines and regulatoryfees’ revenue in the operatingstatement.

Treated as transfer income as part ofnon-taxation revenue.

Difference in classification.Under GFS, fines are treated as a sub-component of sales of non-taxationrevenue, while under AAS31 they arerecognised as a separate revenue itemin their own right.

Gains/Losses on Debt Management Finance expense/revenue. Revaluation adjustment. Not recognised in GFS operatingstatement, therefore GFS net operatingbalance will differ from AAS31 result.

accrual uniform presentation framework - australian government

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