Compliance with Australian Accounting Standards and the ABS GFS Manual (AASB1049_10-07_COMPdec19_01-20)

Unless otherwise specified in this Standard, the whole of government financial statements and the GGS financial statements shall adopt the same accounting policies and be prepared in a manner consistent with other applicable Australian Accounting Standards.

With limited significant exceptions, this Standard requires the definition, recognition, measurement, classification, consolidation, presentation and disclosure requirements specified in other applicable Australian Accounting Standards to be adopted. This Standard only requires a different treatment from another applicable Australian Accounting Standard when the requirements of this Standard directly conflict with the requirements of that other Standard. In particular, in relation to the GGS, in conflict with AASB 10 Consolidated Financial Statements, paragraph 19 prohibits the consolidation of controlled entities in other sectors.

Where an Australian Accounting Standard:

(a) explicitly excludes from its scope not-for-profit entities, such as AASB 8 Operating Segments; or

(b) [deleted by the AASB]

(c) only applies to certain entities, such as listed companies, that are required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act 2001, such as AASB 133 Earnings per Share;

the whole of government financial statements and the GGS financial statements are not required to adopt the requirements of that Standard.

Paragraph 9 of AASB 1054 Australian Additional Disclosures applies to the whole of government. It does not apply to the GGS. Accordingly, the GGS is not required to disclose whether its financial statements are general purpose financial statements or special purpose financial statements.

In satisfying paragraph 9 of this Standard, subject to paragraph 13A, 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. In particular, certain Australian Accounting Standards allow optional treatments within their scope. Those optional treatments in Australian Accounting Standards aligned with the principles or rules in the ABS GFS Manual shall be applied.

A government is not required to early adopt Australian Accounting Standards.

Subject to paragraph 13C, for the purpose of this Standard, a government shall apply the version of the ABS GFS Manual effective at the beginning of the previous annual reporting period or any version effective at a later date, as the basis for GFS information included in the financial statements under this Standard. The date on which amendments to the ABS GFS Manual become effective is, for the purpose of this Standard, the publication date if no effective date is specified by the ABS.

A government may elect not to apply Chapter 2 Amendments to Defence Weapons Platforms of the ABS publication Amendments to Australian System of Government Finance Statistics, 2005 (ABS Catalogue No. 5514.0) – published on the ABS website on 5 April 2011 – in the financial statements prepared in accordance with this Standard for reporting periods ending before 30 June 2015.

Notwithstanding paragraph 13, a government may elect to measure a class of right-of-use assets at cost or at fair value in accordance with AASB 16 Leases for leases that had at inception significantly below-market terms and conditions principally to enable the entity to further its objectives.

Examples of particular optional treatments in Australian Accounting Standards that paragraph 13 of this Standard has the effect of limiting, include:

(a) assets within the scope of AASB 116 Property, Plant and Equipment, AASB 138 Intangible Assets or AASB 140 Investment Property that may be measured at cost or at fair value. Those assets that are assets under the ABS GFS Manual that are within the scope of those Standards are required to be measured at fair value because the ABS GFS Manual requires those assets to be measured at market value.

However, the fair value options allowed under AASB 116, AASB 138 and AASB 140 are not amended by paragraph 13 of this Standard. If the fair value of an asset cannot be reliably measured in accordance with an Australian Accounting Standard that allows a choice between fair value and cost, then that asset is to be measured at cost. Where historical cost is adopted because fair value cannot be measured reliably, historical cost is not characterised as fair value. Also, for example, the requirement for the fair value of an intangible asset to be determined by reference to an active market under AASB 138 continues to apply;

(b) certain financial instruments that may be measured at fair value or on another basis under AASB 9 Financial Instruments. Where financial instruments meet the criteria for measurement at fair value under AASB 9, they are required to be measured at fair value where the ABS GFS Manual requires market value as the measurement basis.

Although fair value measurement in the statement of financial position may be mandated through paragraph 13 of this Standard, the accounting for changes in fair value in the statement of comprehensive income is not mandated by paragraph 13. Rather, changes in fair value are classified in the statement of comprehensive income in accordance with AASB 9. AASB 9 anticipates certain financial assets being classified as either:

(i) ‘fair value through profit or loss’, with changes in fair value included in operating result; or

(ii) ‘fair value through other comprehensive income’, with changes in fair value included in the other comprehensive income section of the statement of comprehensive income;

(c) [deleted]

(d) [deleted]

(e) cash flows from operating activities that may be reported using either the direct method or the indirect method in the statement of cash flows under AASB 107 Statement of Cash Flows. Because the direct method is consistent with the format of the cash flow statement under the ABS GFS Manual, paragraph 13 of this Standard has the effect of requiring the direct method to be adopted;

(f) dividends paid by entities within the PNFC sector and PFC sector that may be classified by those sectors as a financing cash flow or as a component of cash flows from operating activities under AASB 107. Because classification as a financing cash flow is consistent with the format of the cash flow statement under the ABS GFS Manual, paragraph 13 of this Standard has the effect of requiring classification of dividends paid as a financing cash flow; and

(g) government grants accounted for by entities within the PNFC sector and PFC sector in accordance with AASB 120 Accounting for Government Grants and Disclosure of Government Assistance. In accordance with paragraphs 52(b)(i) and 53 of this Standard, information about the PNFC sector and PFC sector disclosed for the whole of government is prepared in a manner consistent with the accounting policies adopted in the whole of government statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows. Therefore, the options in AASB 120 are not adopted and instead the principles in AASB 1004 Contributions are applied.

Certain Australian Accounting Standards do not prescribe specific treatments for all items and issues within their scope. An example is AASB 101, which requires additional line items, headings and subtotals to be presented when such presentation is relevant to an understanding of the entity’s financial position. The ABS GFS Manual specifies principles and rules for the presentation of a balance sheet prepared for GFS purposes. Those ABS GFS Manual principles and rules are required to be applied in the presentation of the whole of government statement of financial position and the GGS statement of financial position to the extent that they do not conflict with AASB 101.

Subject to paragraphs 41(a)(i)(A) and 52(b)(ii)(A) of this Standard, key fiscal aggregates that are disclosed for the whole of government or the GGS, either because they are required by this Standard or a government elects to provide additional information, shall be measured in a manner that is consistent with amounts recognised in the corresponding statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows.

This Standard requires certain information that is relevant to an assessment of the macro-economic impact of:

(a) a whole of government and GGS to be included in the statements of financial position, statements of comprehensive income and statements of cash flows (see paragraphs 28, 32 and 37); and

(b) a government’s sectors to be included in the sector statements of financial position, statements of comprehensive income and statements of cash flows required to be disclosed for the whole of government by paragraph 52(b)(i).

This Standard requires the information to be determined in a manner consistent with other amounts recognised in the statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows. Corresponding amounts, determined in accordance with the ABS GFS Manual, are required to be disclosed in the notes where they differ from the amounts presented in the statement of financial position, statement of comprehensive income and statement of cash flows (see paragraphs 41(a)(i)(A) and 52(b)(ii)(A)).

A government may elect to disclose key fiscal aggregates (as defined) or other information additional to the requirements of this Standard. If a government elects to make additional disclosures, they are made in a way that does not detract from the information prescribed in this Standard.

Examples of additional disclosures that may be made voluntarily include the classification of other economic flows consistent with Table 7.4 of the ABS publication Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2005 (ABS Catalogue No. 5514.0) and additional key fiscal aggregates, such as change in net worth due to revaluations and change in net worth due to other changes in the volume of assets.

Consistent with the requirements in paragraph 16 of this Standard, additional key fiscal aggregates are measured in a manner consistent with recognised amounts. Consistent with paragraphs 41(a)(i) and 52(b)(ii) of this Standard, where they differ, corresponding key fiscal aggregates measured in accordance with the ABS GFS Manual are disclosed, together with a reconciliation of the two measures of each key fiscal aggregate.

Fiscal aggregates that are not measured in a manner consistent with recognised amounts or the ABS GFS Manual may be disclosed, but are not presented as key fiscal aggregates.

If a government elects to disclose aggregates that are not key fiscal aggregates, they are made in a way that clearly differentiates them from key fiscal aggregates.