Document Index Budget Paper 1 Budget Statement 4

Appendix A -- Statistics, Concepts and Notes to the Financial Statements

Note 1: External Reporting Standards

The Charter of Budget Honesty Act 1998 requires that the budget is based on external reporting standards and that departures from applicable external reporting standards are identified.

The 1999-2000 Budget financial statements 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 the adoption of a full accrual basis of accounting. This means that assets, liabilities, revenues and expenses are recorded in financial statements when they have their economic impact, rather than when the cash flows associated with these transactions occur. Consistent with AAS31, an operating statement, a statement of financial position and a statement of cash flows have been prepared using estimates for the current year, budget year and the three forward years.

The accounting policies in this budget document are 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), the 1999-2000 Budget financial estimates cover the general government sector only. However, a whole-of-government approach for reporting financial outcomes is adopted in the Commonwealth's Consolidated Financial Statements.

In relation to revenue, AAS31 suggests revenue be recognised at the time the income (or economic activity) giving rise to a tax liability occurs, where this can be measured reliably. The Commonwealth does not consider its revenues can be reliably forecast on this basis. Revenue in the budget is therefore recognised at the time the relevant tax law indicates the existence of a requirement to pay an amount in tax or when a tax assessment is raised by the Australian Taxation Office (ATO) and the Australian Customs Service (ACS). That is, revenue is only recognised when the taxpayer makes a self-assessment or the ATO/ACS issues an assessment. This differs from the method used for recording taxation revenue in previous accrual outcome reports.

In order to ensure that all dividends are reported on a consistent basis, in the Budget Financial Statements for the forecast years, dividends are recorded in the year that they are declared, rather than the year in which the income was earned. For the RBA dividend this treatment differs from that applied in the 1997-98 Consolidated Financial Statements.

The Commonwealth collects a number of taxes on an agency basis for the States and Territories, principally Revenue Replacement Taxes (which replaced business franchise fees), mirror taxes on Commonwealth places and from 1 July 2000, the goods and services tax. The revenue from these taxes is passed to State and Territory Governments (with an adjustment for administration costs in the case of Revenue Replacement taxes). AAS31 and other relevant accounting standards would suggest the gross amount of these taxes be included in the Commonwealth's financial statements. However, given the Commonwealth's agency role in the collection of these taxes, the accrued revenues and associated payments to the States and Territories are not recorded in the budget estimates.

Note 2: Indirect Tax

Note 3: Interest and Dividends

Note 4: Other Sources of Non-taxation Revenues

Note 5: Employees

Note 6: Suppliers

Note 7: Depreciation and Amortisation

Note 8: Grants

Note 9: Other Non-financial Assets

Note 10: Employee Liabilities

Note 11: Grants Payable

Note 12: Government Securities

Transactions relating to government securities and financial assets acquired for debt management purposes have been netted in the statements of financial position and cash flows. In the statement of financial position, the financial assets - investments category excludes financial assets acquired for debt management purposes, while the debt - government securities category is shown net of financial assets acquired for debt management purposes. Likewise, in the statement of cash flows, the investing activities - cash used - other category excludes cash used to acquire financial assets for debt management purposes while the financing activities - cash used - repayment of borrowings category includes cash used to acquire financial assets for debt management purposes.

This netting treatment has been applied because of the considerable uncertainty associated with the split between government securities and financial assets acquired for debt management purposes. Debt management strategies in respect of government securities and financial assets are highly dependent on prevailing market conditions and other factors. The balance to be struck between gross debt retirement and financial asset acquisition cannot be accurately estimated in advance.

Note 13: Taxes Fees and Fines

[1] The amounts contained in this note do not reflect the Commonwealth's total superannuation expense. That can be obtained from the GFS operating statement (superannuation expense and superannuation interest) in Statement 9.