Notes to the AAS31 Financial Statements
Note 1: External reporting standards
The Charter of Budget Honesty Act 1998 requires that the Budget be based on external reporting standards and that departures from applicable external reporting standards be identified.
The financial statements included in this Statement have been prepared on an accrual basis in accordance with applicable Australian Accounting Standards, including Australian Accounting Standard No. 31: Financial Reporting by Governments (AAS31). AAS31 is the relevant accounting standard for financial reporting by governments.
AAS31 requires adoption of the full accrual basis of accounting. This means that assets, liabilities, revenues and expenses are recorded in financial statements when they have their economic impact on the government, rather than when the cash flow associated with these transactions occurs. Consistent with AAS31, a statement of financial performance, a statement of financial position and a statement of cash flows have been prepared using estimates for the budget year and the three forward years.
The accounting policies in this budget document are generally consistent with the accounting policies in AAS31. While the scope for financial reporting recommended in AAS31 is the Whole of Government (that is, the Commonwealth public sector), in accordance with the Charter of Budget Honesty Act 1998, the budget presentation of financial estimates covers the general government sector only.
In relation to taxation revenue, AAS31 and other relevant accounting standards suggest revenue be recognised at the time the income (or economic activity) giving rise to a tax liability occurs, where this can be measured reliably. At this stage, the Commonwealth does not consider its taxation revenues can be reliably measured on this basis for budget reporting purposes. Taxation revenue is therefore recognised the earlier of when an assessment of a tax liability is made or a cash payment is received by the Australian Taxation Office or the Australian Customs Service.
In regard to goods and services tax (GST) revenue, AAS31 and other relevant accounting standards would suggest the gross amount of GST be included in the Commonwealth's financial statements. However, the clear policy intent of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations is that the GST is a State tax collected by the Commonwealth in an agency capacity. Therefore, accrued GST revenues and associated payments to the States and Territories are not recorded in the budget financial statements.
Note 2: Reconciliation of cash
Note 2(a): Consolidated Revenue Fund
The estimated and projected cash balance reflected in the statement of financial position for the Commonwealth general government sector (Table 2) includes the reported cash balances controlled and administered by Commonwealth agencies subject to the Financial Management and Accountability Act 1997 (FMA Act) and the reported cash balances controlled and administered by entities, subject to the Commonwealth Authorities and Companies Act 1997, that implement public policy through the provision of primarily non-market services.
Revenues or moneys raised by the Executive Government automatically form part of the Consolidated Revenue Fund by force of Section 81 of the Constitution. There is, however, no requirement for the Consolidated Revenue Fund to be accounted for in any particular form. For practical purposes, total Commonwealth general government sector cash, less cash controlled and administered by Commonwealth Authorities and Companies Act 1997 entities, represents the Consolidated Revenue Fund referred to in Section 81 of the Constitution. On this basis, the estimated and projected balance of the Consolidated Revenue Fund is shown below.
Further information on the Consolidated Revenue Fund is included in Budget Paper No. 4, Agency Resourcing 2003-04.
Note 3: Income tax revenue - accrual AAS31
Note 4: Indirect tax revenue - accrual AAS31
Note 5: Interest and dividend revenue
