FACT SHEET April 2010 1049 Whole of Government and General Government Sector Financial Reporting (This fact sheet is based on the standard as at 1 January 2010.) Important note: This standard is an Australian specific standard with no international equivalent. application date 1049 is applicable for annual reporting periods commencing on or after 1 January 2009. scope/objective To specify the requirements for whole of government general purpose financial statements and General Government Sector (GGS) financial statements of each government. 1049 is part of the Australian Accounting Standards Board s () work to achieve the Financial Reporting Council s strategic direction to harmonise the Government Finance Statistics (GFS) and Generally Accepted Accounting Principles (GAAP) reporting by an Australian Accounting Standard for a single set of government reports that are comparable with budget statements. The reporting of the GFS is in accordance with the Australian Bureau of Statistics GFS Manual. ACCOUNTING AND FINANCIAL REPORTING PRINCIPLES OF 1049 The following are the principles that are applied to 1049: 1. The financial statements for the whole of government (being the GGS, PNFC and PFC sectors) and separately the GGS (being the budget sector that includes government departments) shall be prepared according to 1049. 2. The whole of government and GGS financial reports shall be prepared in a manner consistent with other Australian Accounting Standards, unless indicated otherwise by 1049. 3. Where compliance with the ABS GFS Manual would not conflict with Australian Accounting Standards, the principles and rules in the ABS GFS Manual shall be applied. 4. A government shall not make its GGS financial statements available prior to its whole of government financial statements being made available. 5. The GGS financial statements are not required to disclose that the financial statements are a set of general purpose financial statements or special purpose financial statements. However, the whole of government financial statements are required to disclose in the notes that it is general purpose. 6. A government presents GGS financial statements which consolidates only entities within the GGS because the GFS Manual does not allow GFS reporting of the GGS to include entities external to the GGS. Based on the procedures outlined in 127 Consolidated and Separate Financial Statements, partial consolidation as required by 1049 for GGS financial statements are not consistent with the GAAP requirements. The whole of government financial statements are not subject to similar limitations, hence consolidation in accordance to 127 is possible. 7. GGS equity investments in government controlled entities that are within the PNFC and PFC sectors shall be recognised as a single line item asset at fair value. The change in carrying amount is a change in fair value shall be accounted for according to 139 Financial Instruments: Recognition and Measurement. Government controlled entities that are within the PNFC and PFC sectors are subject to consolidation in accordance with 127.
PRESCRIBED ACCOUNTING TREATMENT 1049 limits the options that are otherwise available based on the Australian Accounting Standards. This is to achieve harmonisation with GFS. Examples include: a) assets may be measured at cost or fair value based on the relevant Australian Accounting Standards; the ABS GFS requires those assets to be measured at market value, which is an equivalent to fair value. Consequently, assets shall not be measured at cost to comply with 1049, unless fair value cannot be reliably measured. b) certain financial instruments may be measured at fair value or an alternative basis according to 139 but the ABS GFS prescribes fair value or market value measurement. The alternative basis permitted under 139 shall not be used for the purposes of 1049. c) actuarial gains and losses relating to defined benefit superannuation plans may be recognised in full through operating result, recognised in full directly in the accumulated results or partially deferred using a corridor approach under 119 Employee Benefits but the ABS GFS does not accept the corridor approach. The ABS GFS permits the other two options (i.e. recognised in full through operating result or recognised in full directly in accumulated results) and correspondingly so does 1049. d) investments in jointly controlled entities may be accounted for using proportionate consolidation under 131 Interests in Joint Ventures (in addition to the equity method); proportionate consolidation is not consistent with ABS GFS, hence 1049 permits equity method only. e) 107 Statement of cash flows permits both the direct or indirect methods of reporting cash flows from operating activities; however only the direct method is consistent with ABS GFS. Consequently 1049 effectively permits the direct method. f) dividends paid by entities within the PNFC and PFC sectors may be classified by those sectors as financing cash flow or a component of cash flows from operating activities according to 107; however ABS GFS classifies such dividends as a financing cash flow, consequently 1049 adopts the common treatment of financing cash flow. g) government grants which are accounted for by entities in the PNFC and PFC sectors based on 120 Accounting for Government Grants and Disclosure of Government Assistance shall be accounted for in a similar manner to the whole of government for whole of government financial reporting; i.e. whole of government financial reporting applies 1004 Contributions. Key fiscal aggregates, that are included in the face of the financial statements because they are required by 1049 or government election, shall be measured in a manner that is consistent with the amounts recognised on the face of the financial statements. There may be differences between these key fiscal aggregates and those measured in accordance with the ABS GFS Manual. A reconciliation of the two measures of key fiscal aggregates and an explanation of the differences are required in the notes. The face of the statement of financial position and the related notes shall be presented in a consistent manner with 101. Net worth shall be presented on the face of the whole of government and GGS statement of financial positions and measured in a manner consistent with other amounts recognised on the faces of the respective statements of financial position. PRESENTATION The whole of government and GGS financial reports shall comprise of a statement of financial position (that shall be consistent with 101), a statement of comprehensive income (that shall be consistent with 101), a statement of changes in equity, a statement of cash flows (that shall be consistent with 107) and notes comprising of a summary of significant accounting policies and other explanatory notes. Key presentation requirements 1. Statement of financial position net worth shall be presented on the face of the statement of financial position. 2. Statement of comprehensive income shall include all items included in the determination of comprehensive result (total change in net worth [before transactions with owners in their capacity as owners]) classified as transactions or other economic flows consistent with the principles in the ABS GFS. The following shall be presented on the face of the statement of comprehensive income: net operating balance, total change in net worth, and net lending/(borrowing) and its derivation from net operating balance measured consistently with other amounts recognised on the face of the statement of comprehensive income. 2
3. Statement of changes in equity to be presented in a manner consistent with the requirements in 101. 4. Statement of cash flows cash flows relating to investing in financial assets for policy purposes and for liquidity management purposes shall be presented separately on the face of the statement, and determined in a manner consistent with ABS GFS. The face of the statement of cash flows shall include cash surplus/deficit and its derivation without the deduction of the value of assets acquired under finance leases and similar arrangements. DISCLOSURES Refer Appendix 1 for a checklist to assist with 1049 disclosure requirements. important DEFINITIONS ABS GFS Manual Cash surplus/(deficit) General Government Sector (GGS) Government Government units Institutional units Key fiscal aggregates Net lending/(borrowing) Net operating balance Net worth Non-profit institution The Australian Bureau of Statistics (ABS) publication Australian System of Government Finance Statistics: Concepts, Sources and Methods as updated from time to time. Net cash flows from operating activities plus net cash flows from acquisition and disposal of non-financial assets less distributions paid less value of assets acquired under finance leases and similar arrangements. Defined in the ABS GFS Manual (paragraph 2.124). Institutional sector comprising all government units and non-profit institutions controlled and mainly financed by government. Defined in the ABS GFS Manual (Glossary, p. 256). The Australian Government, the Government of the Australian Capital Territory, New South Wales, the Northern Territory, Queensland, South Australia, Tasmania, Victoria or Western Australia. Unique kinds of legal entities established by political processes which have legislative, judicial or executive authority over other institutional units within a given area and which: 1. provide goods and services to the community and / or individuals free of charge or at prices that are not economically significant; and 2. redistribute income and wealth by means of taxes and other compulsory transfers. Defined in the ABS GFS Manual (Glossary page 257). An economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities. Defined in the ABS GFS Manual (Glossary, page 257) Referred to as analytical balances in the ABS GFS Manual, are data identified in the ABS GFS Manual as useful for macro-economic analysis purposes, including assessing the impact of a government and its sectors on the economy. They are: opening net worth, net operating balance, net lending/(borrowing), change in net worth due to revaluations, change in net worth due to other changes in the volume of assets, total change in net worth, closing net worth and cash surplus/(deficit). The financing requirement of government, calculated as the net operating balance less the net acquisition of non-financial assets. A positive result reflects a net lending position and a negative result reflects a net borrowing position. Based on the definition in the ABS GFS Manual (Glossary, p. 259). This is calculated as income from transactions minus expenses from transactions. Based on the definition in the ABS GFS Manual (Glossary, p. 259). Assets less liabilities and shares/contributed capital. For the GGS, net worth is assets less liabilities since shares and contributed capital is zero. It is an economic measure of wealth and reflects the contribution of governments to the wealth of Australia. Defined in the ABS GFS Manual (Glossary, p. 259). A legal or social entity that is created for the purpose of producing or distributing goods and services but is not permitted to be a source of income, profit or other financial gain for the units that establish, control or finance it. Defined in the ABS GFS Manual (Glossary, p. 260). 3
Other economic flows Public Financial Corporations (PFC) sector Public Non-Financial Corporations (PNFC) sector Quasi-corporation Transactions Whole of government financial statements Changes in the volume or value of an asset or liability that do not result from transactions (i.e. revaluations and other changes in the volume of assets). Defined in the ABS GFS Manual (Glossary, p. 260). Institutional sector comprising resident government controlled corporations and quasicorporations mainly engaged in financial intermediation or provision of auxiliary financial services. Based on the definition in the ABS GFS Manual (Glossary, p. 261). Institutional sector comprising resident government controlled corporations and quasicorporations mainly engaged in the production of market goods and/or non-financial services. Based on the definition in the ABS GFS Manual (Glossary, p. 261). An unincorporated enterprise that functions as if it were a corporation, has the same relationship with its owner as a corporation, and keeps a separate set of accounts. Defined in the ABS GFS Manual (Glossary, p. 261). Interactions between two institutional units by mutual agreement or actions within a unit that it is analytically useful to treat as transactions. Defined in the ABS GFS Manual (Glossary, p. 263). A set of financial statements prepared by a government that is prepared in accordance with other Australian Accounting Standards, including 127 Consolidated and Separate Financial Statements, and thereby separately recognises assets, liabilities, income, expenses and cash flows of all entities under the control of the government on a line-by-line basis. 4
Appendix 1 Disclosure checklist This checklist can be used to review your financial statements you should complete the Yes / No / NA column about whether the requirement is included and provide an explanation for no answers to ensure the completeness of disclosures. Yes / No / N/A Explanation (if required) Summary of significant accounting policies 1049.39 In addition to the disclosures required by other Australian Accounting Standards in the note containing the summary of significant accounting policies, have the following disclosures been made prominently in that note: a) For the whole of the government and the GGS: i. A statement that the financial statements are prepared in accordance with 1049; and ii. A reference to the ABS GFS Manual as being the basis for GFS information that is included in the complete set of financial statements; and b) For the GGS only: i. A statement of the purpose for which the GGS financial statements are prepared; ii. A description of the GGS; iii. A description of how the GGS financial statements differ from the whole of government financial statements in terms of the treatment of the government s investments in PNFC sector and PFC sector entities; and iv. Where the GGS financial statements are presented separately from the whole of government financial statements, a cross-reference to the whole of government financial statements that have been prepared for the same period and made available at the same time as the GGS financial statements. Other explanatory notes 1049.41 In addition to the disclosures required to be made in other explanatory notes in accordance with other applicable Australian Accounting Standards, have the following disclosures been made: a) For the whole of government and the GGS: i. Where the key fiscal aggregates measured in accordance with the ABS GFS manual differ from the key fiscal aggregates provided pursuant to paragraph 16 of 1049: A. The key fiscal aggregates measured in accordance with the ABS GFS manual; and B. A reconciliation of the two measures of key fiscal aggregates and an explanation of the differences. ii. Where the key fiscal aggregates measured in accordance with the ABS GFS Manual do not differ from the key fiscal aggregates provided pursuant to paragraph 16, a statement of that fact; and iii. Explanations of key technical terms used; and 5
Yes / No / N/A Explanation (if required) Functional information b) for the GGS: i. a list of entities within the GGS, and any changes to that list that have occurred since the previous reporting date and the reasons for those changes ii. a list of significant investments in PNFC sector and PFC sector entities, including: A. the name; B. proportion of ownership interest and, if different, proportion of voting power held; and C. the measurement basis adopted for the amount recognised in accordance with paragraph 20; and iii. the aggregate amount of dividends and other distributions to owners in their capacity as owners from PNFC sector and PFC sector entities to the GGS and the aggregate amount of the comprehensive result attributable to the GGS of the PNFC sector and PFC sector entities disclosed in the whole of government statement of comprehensive income by sector for the reporting period. 1049.48 1049.49 In respect of each broad function identified in Table 2.6 Government Purpose Classification: Major Groups of the ABS GFS Manual; have the financial statements disclosed: a) a description of that function b) the carrying amount of assets recognised in the respective statements of financial position that are reliably attributable to that function and c) expenses, excluding losses, included in operating result in the respective statements of comprehensive income for the reporting period that are reliably attributable to that function. Has a reconciliation of the aggregate amount of expenses, excluding losses, included in operating result to the aggregate of expenses from transactions recognised in the statement of comprehensive income been disclosed? Whole of government sector information 1049.52 Has the whole of government disclosed, by way of a note, in respect of the GGS, PNFC sector and PFC sector: a) a description of each sector; b) for each sector i. a statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows that are consistent with the whole of government s corresponding financial statements prepared in accordance with 1049; ii. where the key fiscal aggregates measured in accordance with the ABS GFS Manual differ from the key fiscal aggregates determined in a manner consistent with paragraph 16 of 1049: A. the key fiscal aggregates measured in accordance with the ABS GFS manual and B. a reconciliation of the two measures of key fiscal aggregates and an explanation of the differences. 6
Yes / No / N/A Explanation (if required) Budgetary information Other measures of the key fiscal aggregates shall not be disclosed. iii. where the key fiscal aggregates measured in accordance with the ABS GFS Manual do not differ from the key fiscal aggregates determined in a manner consistent with paragraph 16 of 1049, statement of that fact and c) a reconciliation between the information disclosed for the sectors in total and the corresponding information in the whole of government s statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows. 1049.59 Where one or more of the following whole of government or GGS budgeted: a) statements of financial position b) statements of comprehensive income c) statements of changes in equity and d) statements of cash flows is or are presented to parliament, has the whole of government or GGS, respectively disclosed: e) that original budgeted financial statements or those original budgeted financial statements that were presented to parliament, prescribed on a basis that is consistent with the basis prescribed for financial statements by 1049; and f) explanations of major variances between the actual amounts presented in that financial statement or those financial statements and corresponding original budget amounts. 7
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