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Statement 10: Australian Accounting
Standard No. 31
Budget 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, an operating statement, a balance sheet 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 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 is therefore recognised at the time a taxpayer makes a self-assessment or when the Australian Taxation Office (ATO) or the Australian Customs Service (ACS) raises a tax assessment.
The Commonwealth collected 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 (GST). 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 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 3: Income tax
Note 4: Indirect tax
Note 5: Interest and dividends
Note 6: Other sources of non-taxation revenue
Note 7: Employees expenses
(a) Salaries and wages do not include superannuation.
Note 8: Suppliers expenses
Note 9: Depreciation and amortisation
Note 10: Grants
Note 11: Non-financial assets
Note 12: Employee liabilities
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 net investing cash paid category excludes 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 15: Taxes