Appendix A: 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 major external standards used for budget reporting purposes are:
- the Australian Bureau of Statistics’ (ABS) accrual Government Finance Statistics (GFS) publication Australian System of Government Finance Statistics: Concepts, Sources and Methods Cat. No. 5514.0, which in turn is based on the International Monetary Fund (IMF) accrual GFS framework; and
- Australian Accounting Standards (AAS), including AAS 31 Financial Reporting by Governments.
The operating statement and balance sheet include an adjustment to take account of the estimated impact of the Australian Equivalents to International Financial Reporting Standards (AEIFRS) on Australian Government general government sector reporting. There is no immediate direct impact on the underlying cash balance and the GFS surplus/deficit in this statement and in Statement 9. There is an impact on both the fiscal balance and net worth in this statement and in the general government sector of Statement 9. The AEIFRS reporting requirements and impact on the AAS Statement of Financial Performance and Statement of Financial Position are outlined in Note 2 of Statement 10.
The Budget tables, with the exception of tables in Statement 9, do not include goods and services tax (GST) collections and equivalent payments to the states. However, under the Intergovernmental Agreement on the Reform of Commonwealth State Financial Relations, all GST receipts are appropriated to the states and territories and thus are not available for expenditure by the Australian Government. Because the Australian Taxation Office collects GST as an agent for the states and territories, GST receipts are not shown as Australian Government revenue. Estimates of GST receipts are provided in Table 2 of Statement 8.
ABS GFS requires that provisions for bad and doubtful debts be excluded from the balance sheet. This treatment has not been adopted because excluding such provisions would overstate the value of Australian Government assets in the balance sheet (and would, therefore, be inconsistent with the market valuation principle).
The AAS financial statements currently record IMF Special Drawing Rights (SDRs) as a liability. This is consistent with AAS. The GFS statements also record SDRs as a liability. However, in accordance with the IMF’s GFS manual, IMF SDRs are not treated as a liability in ABS GFS although they are treated this way in other IMF documentation. In view of these differences, the current approach will remain in place pending further consultation with the IMF, and developments in train to harmonise GFS and AAS.
Similarly, the GFS financial statements currently adopt the AAS treatment for circulating coins. Under this treatment revenue is recognised upon the issue of coins and no liability is recorded, as there is no legal obligation requiring coins on issue to be repurchased by the Australian Government. However, in ABS GFS, coins on issue are treated as a liability and no revenue is recognised. The current accounting treatment will remain in place pending further consultation with the IMF, and developments in train to harmonise GFS and AAS.
The ABS GFS also requires defence weapons be treated as expenses. Defence weapons inventories are recorded as capital investment rather than expenses until such inventories can be reliably identified and measured. This treatment does not affect the underlying cash or fiscal balances.
In order to ensure the reporting of reliable AAS and GFS budget estimates and outcomes, taxation revenue is recognised the earlier of when an assessment of a tax liability is made or cash payment is received by the Australian Taxation Office or the Australian Customs Service. This method is permitted under both GFS and AAS when there is an inability to reliably measure taxation revenue at the time the underlying transactions or events occur. Accordingly, for most categories of taxation revenue, there is a short lag between the time at which the underlying economic activity giving rise to the tax liability occurs and when the revenue is recognised. Longer lags of up to a year occur for some elements of company and superannuation funds taxation.
Additional information on the reporting standards and budget concepts is provided in Statement 8.