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Final Budget Outcome 1999-2000

Attachment B

Reconciliation of GFS and AAS31 aggregates

There is a general consistency of treatment between GFS and accounting standards. The GFS and AAS31 definitions of the scope of the public sector are similar in almost all cases. AAS31 recommends the same segmentation of the public sector into general government, public non-financial corporations (PNFC) and public financial corporations (PFC) sectors. The general government sector and PNFCs together make up the non-financial public sector (NFPS).

Transactions are generally treated in a similar manner by GFS and accounting standards; however, where GFS is a framework designed to facilitate macro-economic analysis, AAS31 is designed as a standard for general purpose financial reporting. The different objectives of the two systems lead to some variation in the treatment of certain items.

In particular, revaluations of financial and non-financial assets and liabilities are classified differently under the AAS31 and GFS standards. Major revaluations include: writedowns of bad and doubtful debts (excluding those that are mutually agreed); changes in the valuation of superannuation liabilities; and foreign exchange gains and losses.

Under AAS31 reporting, valuation changes may affect revenues or expenses. However, under GFS reporting revaluations are not considered to be transactions (that is, they are considered to be other economic flows) and accordingly do not form part of revenues or expenses. Therefore, most revaluations are not taken into account in the calculation of the GFS net operating balance or fiscal balance.

Some of the major differences between the GFS and AAS31 treatments of transactions are outlined in Table 5. Further information on the differences between the two systems is provided in the ABS information paper Accruals-based Government Finance Statistics (Cat. No. 5517.0).

Table 5: Selected differences between AAS31 and GFS reporting standards

Issue

AAS31 Treatment

GFS Treatment

Provisions for bad and doubtful debts and asset writedowns

Treated as part of operating expenses.

Treated as revaluations, except for mutually agreed writedowns, and therefore are removed from operating expenses.

Profit/loss on sale of assets

Treated as part of operating revenues/expenses.

Treated as revaluations and therefore are removed from operating revenues/expenses.

Interest flows related to swaps and other financial derivatives

Treated as operating revenues and expenses.

Treated as financing transactions and hence not included in operating revenues and expenses.

Benefits to households in goods and services (social transfers in kind) component of personal benefits payments

All personal benefits payments are treated as transfers in operating expenses.

Personal benefits payments that are not paid as direct cash transfers are treated as part of other expenses in the operating statement.

Regulatory Fees

Included in non-taxation revenue.

Predominantly treated as user charges and included in the `Sales of Goods and Services' component of non-taxation revenue.

Fines

Included in non-taxation revenue.

Treated as transfer income as part of non-taxation revenue.

Public debt net interest

Under accounting standards, premia and discounts on the repurchase of debt are included in public debt net interest at the time of repurchase, regardless of whether the stock is cancelled at that time. Issue premia and discounts are amortised over the life of the stock.

Repurchase premia and discounts are treated as economic revaluations at the time the debt is repurchased (provided it is valued at historical cost). The GFS cash flow statement includes repurchase premia or discounts in the year that the repurchased stock is cancelled or matures.

Finance Leases

Treats finance leases as if an asset were purchased from borrowings ie the lease payment is split into an interest component (which is shown as an operating expense) and a principal component.

The asset and the liability are recorded on the balance sheet.

However, this convention does not apply to the cash flow statement, which does not record the acquisition of the asset or the liability.

As per the accounting standard, except that the GFS cash flow statement includes the acquisition of the asset and the liability.

Table 6 reconciles GFS revenue and expenses (which appear in Parts I and III) with their AAS31 counterparts (which are reported in Part II).

Table 6: Reconciliation of GFS and AAS31 revenue and expenses

Table 7 reconciles the accounting operating result to the GFS net operating balance and the fiscal balance (GFS net lending).

The reconciliation can be divided into two parts. The first part shows classification differences between the AAS31 operating result before extraordinary items and the GFS net operating balance. (The classification differences are those shown in Table 6.)

The second part of the reconciliation shows the adjustment for net capital investment required to derive the fiscal balance from the GFS net operating balance. Net capital investment is measured as net purchases of property, plant and equipment, plus net investment in other non-financial assets less depreciation.

Table 7: Reconciliation of AAS31 net operating result and
fiscal balance

Table 7: Reconciliation of AAS31 net operating result and fiscal balance

Issue	AAS31 Treatment	GFS Treatment
Provisions for bad and doubtful debts and asset writedowns	Treated as part of operating expenses.	Treated as revaluations, except for mutually agreed writedowns, and therefore are removed from operating expenses.
Profit/loss on sale of assets	Treated as part of operating revenues/expenses.	Treated as revaluations and therefore are removed from operating revenues/expenses.
Interest flows related to swaps and other financial derivatives	Treated as operating revenues and expenses.	Treated as financing transactions and hence not included in operating revenues and expenses.
Benefits to households in goods and services (social transfers in kind) component of personal benefits payments	All personal benefits payments are treated as transfers in operating expenses.	Personal benefits payments that are not paid as direct cash transfers are treated as part of other expenses in the operating statement.
Regulatory Fees	Included in non-taxation revenue.	Predominantly treated as user charges and included in the `Sales of Goods and Services' component of non-taxation revenue.
Fines	Included in non-taxation revenue.	Treated as transfer income as part of non-taxation revenue.
Public debt net interest	Under accounting standards, premia and discounts on the repurchase of debt are included in public debt net interest at the time of repurchase, regardless of whether the stock is cancelled at that time. Issue premia and discounts are amortised over the life of the stock.	Repurchase premia and discounts are treated as economic revaluations at the time the debt is repurchased (provided it is valued at historical cost). The GFS cash flow statement includes repurchase premia or discounts in the year that the repurchased stock is cancelled or matures.
Finance Leases	Treats finance leases as if an asset were purchased from borrowings ie the lease payment is split into an interest component (which is shown as an operating expense) and a principal component. The asset and the liability are recorded on the balance sheet. However, this convention does not apply to the cash flow statement, which does not record the acquisition of the asset or the liability.	As per the accounting standard, except that the GFS cash flow statement includes the acquisition of the asset and the liability.