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Statement 4: Financial Outlook

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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 be based on external reporting standards and that departures from applicable external reporting standards be identified.

The financial statements included in this budget statement have been prepared on an accrual basis in accordance with applicable Australian accounting standards, including Australian Accounting Standard 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 occur. Consistent with AAS31, a statement of revenue and expenses, a balance sheet 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 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 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. At this stage, the Commonwealth does not consider its taxation revenues can be reliably measured on this basis for budget reporting purposes. Taxation revenue in the budget is therefore recognised at the time a taxpayer makes a self-assessment or when a tax assessment is raised by the Australian Taxation Office (ATO) or the Australian Customs Service (ACS).

The Commonwealth collects a number of taxes on an agency basis for the States and Territories, principally `safety net' surcharge collections until 1 July 2000 (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 safety net revenue and mirror taxes). Estimates of taxes collected by the Commonwealth and passed to State and Territory Governments are provided in Note 4.

In regard to 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 (the IGA) 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.

In addition, non-accounting standard classifications have been used in different sections of the Budget. `Outcomes' is a Commonwealth classification framework that indicates the results, impacts or consequences of agencies activities. Functional classifications used in some tables are based on standards maintained by the ABS, but have been extended in some cases to provide greater detail.

Note 2: Reconciliation of Cash

Note: Net (decrease)/increase in cash held represents movements in cash and bank overdraft.

Note 3: Income Tax

Note 4: Indirect Tax

Note 5: Interest and Dividends

Note 6: Other Sources of Non-taxation Revenue

Note 6:  Other Sources of Non-taxation Revenue

Note 7: Employee Expenses

(a) Salaries and wages do not include superannuation.

Note 8: Suppliers' Expenses

Note 9: Depreciation and Amortisation

Note 10: Grants

Note 11: Other Non-financial Assets

Note 12: Employee Liabilities

Note 13: Grants Payable

Note 13: Grants Payable

Note 14: Government Securities

For 2000-01 and the forward years transactions relating to government securities and financial assets acquired for debt management purposes have been netted in the balance sheet and cash flows. In the balance sheet, 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 - net 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.

This netting treatment has not been applied in 1999-2000.

Note 15: Taxes

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