Notes (AASB1049_10-07_COMPdec19_01-20)

In addition to the disclosures required by other Australian Accounting Standards in the note containing the summary of significant accounting policies, the following disclosures shall be made prominently in that note:

(a) for the whole of government and the GGS:

(i) a statement that the financial statements are prepared in accordance with this Standard;

(ii) a reference to the version of the ABS GFS Manual used as the basis for GFS information included in the financial statements, and when an entity has not applied the most recent version of the ABS GFS Manual (including when an entity has elected to adopt the relief available in paragraph 13C):

(A) this fact; and

(B) known or reasonably estimable information relevant to assessing the possible impact that application of the latest version of the ABS GFS Manual will have on the financial statements in the period of initial application; and

(iii) where the GGS financial statements and whole of government financial statements are presented separately from each other, a cross-reference to each other; 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; and

(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.

In complying with paragraph 39(a)(ii), an entity considers disclosing:

(a) the version of the latest ABS GFS Manual;

(b) the nature of the impending change or changes in the ABS GFS Manual;

(c) the date by which application of the latest version of the ABS GFS Manual is required;

(d) the date as at which it plans to apply the latest version of the ABS GFS Manual initially; and

(e) either:

(i) a discussion of the impact that initial application of the latest version of the ABS GFS Manual is expected to have on the entity’s financial statements; or

(ii) if that impact is not known or reasonably estimable, a statement to that effect.

An example of the information to be included in the summary of significant accounting policies disclosed for the GGS in accordance with paragraph 39 is provided in Illustrative Example C.

In addition to the disclosures required to be made in other explanatory notes in accordance with other applicable Australian Accounting Standards, the following disclosures shall be 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 this Standard:

(A)

(1) the key fiscal aggregates measured in accordance with the ABS GFS Manual; and

(2) a reconciliation of the two measures of key fiscal aggregates and an explanation of the differences; or

(B) an explanation of how each of the key fiscal aggregates provided pursuant to paragraph 16 of this Standard is calculated and how it differs from the corresponding key fiscal aggregate measured in accordance with the ABS GFS manual;

(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

(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.

In relation to the requirements in paragraph 41(a)(i), differences in the key fiscal aggregates determined under the ABS GFS Manual and pursuant to paragraph 16 of this Standard arise from differences in definition, recognition, measurement and certain classification requirements. Each difference gives rise to the need for disclosure of a reconciliation and an explanation of the difference. Examples of such differences include:

(a) in a whole of government and GGS context:

(i) doubtful debts – although the ABS GFS Manual recognises bad debts written off, it does not recognise write-downs of accounts receivable in relation to doubtful debts;

(ii) provisions recognised as liabilities – in the absence of a counter-party recognising a related financial asset, the ABS GFS Manual does not recognise a liability arising from a constructive obligation;

(iii) inventories – under the ABS GFS Manual, inventories are measured at current prices, whereas under AASB 102 Inventories (as amended by AASB 2007-5 Amendments to Australian Accounting Standard – Inventories Held for Distribution by Not-for-Profit Entities), depending on their nature, inventories are measured at the lower of cost and net realisable value or at cost adjusted when applicable for any loss of service potential; and

(iv) investments in associates – under the ABS GFS Manual, those assets are measured at current prices where current prices exist, whereas under AASB 128 Investments in Associates the equity method of accounting generally applies; and

(b) in a whole of government context only:

(i) non-controlling interest in controlled entities – under the ABS GFS Manual, minority interest is classified as a liability and measured at current prices, whereas under AASB 10 non-controlling interest that is classified as equity is not remeasured; and

(ii) outgoing dividends – under the ABS GFS Manual, outgoing dividends are classified as an expense, whereas under AASB 101 a dividend is treated as a distribution to owners.

Illustrative Examples A and B illustrate some of these and other possible circumstances where differences arise and the manner in which they are reflected in reconciliation notes.

In relation to the whole of government, for the purpose of paragraph 41(a)(i)(A), the ABS GFS Manual key fiscal aggregate that corresponds to the requirement in paragraph 32(b) to present ‘total change in net worth before transactions with owners in their capacity as owners’ is ‘total change in net worth’ (after transactions with owners in their capacity as owners). Accordingly, the reconciliation required to be disclosed for the whole of government by paragraph 41(a)(i)(B) is from ‘total change in net worth before transactions with owners in their capacity as owners’ as presented in accordance with paragraph 32(b) to ‘total change in net worth’ measured in accordance with the ABS GFS Manual. As noted in paragraph 34B, transactions with owners in their capacity as owners do not arise in a GGS context.

Some differences between GAAP and GFS requirements relate to differences in classification or differences in consolidation eliminations that do not cause a difference in measurements of key fiscal aggregates and therefore do not need to be included in the reconciliation notes. However, they do give rise to the need for explanations of the differences to be disclosed. Examples of such differences include:

(a) for both the whole of government and the GGS:

(i) AASB 132 Financial Instruments: Presentation classifies certain prepaid expenses as non-financial assets, whereas the ABS GFS Manual classifies them as financial assets;

(ii) AASB 137 Provisions, Contingent Liabilities and Contingent Assets may classify an amount within provisions, whereas the ABS GFS Manual classifies them as accounts payable; and

(iii) paragraph 31(a)(iv) of this Standard notes that consumption of capital of investment property is classified separately from depreciation, whereas the ABS GFS Manual classifies it as depreciation; and

(b) for the whole of government, consolidation eliminations. Under the ABS GFS Manual, certain transactions between the GGS and entities within the PNFC sector and PFC sector are not eliminated on whole of government consolidation, whereas under AASB 10 intragroup transactions that are not, in substance, transactions with external parties are eliminated in full. The GFS treatment has the effect of ‘grossing up’ both GFS revenue and GFS expenses by equal amounts and though the key fiscal aggregates remain the same, the differences in GAAP and GFS revenues and expenses should be disclosed. For example, a GGS may compensate a PNFC sector entity for a community service obligation, imposed by the GGS, that requires the PNFC sector entity to provide free services to a cohort of private individuals. The compensation provided by the GGS to the PNFC sector entity is not eliminated for whole of government reporting under the ABS GFS Manual (instead it is ‘rerouted’ through the household sector of the economy and therefore treated as an expense of the GGS to the household sector, and an expense of the household sector to the PNFC sector entity, and therefore revenue of the PNFC sector entity).

The GGS is not subject to the disclosures required by AASB 12 Disclosure of Interests in Other Entities. The requirements in AASB 12 are either addressed elsewhere in this Standard or are not significant for GGS financial reporting.

In relation to the requirement in paragraph 41(a)(iii) to disclose explanations of key technical terms, key technical terms include:

(a) transactions;

(b) other economic flows;

(c) net operating balance;

(d) net lending/(borrowing);

(e) financial assets;

(f) non-financial assets;

(g) net worth;

(h) cash surplus/(deficit);

(i) operating result;

(j) comprehensive result (total change in net worth [before transactions with owners in their capacity as owners]);

(k) total change in net worth; and

(l) net debt.

An example of the disclosures required by paragraph 41(a)(iii) is provided in Illustrative Example D.

Paragraph 112 of AASB 101 requires additional information to be provided in notes that is not presented in the statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows but is relevant to an understanding of them. Consistent with this, the components of aggregate numbers presented in those statements, including key fiscal aggregates, are disclosed in the notes where relevant.

In respect of each broad function identified in Table 2.6 “Government Purpose Classification: Major Groups” of the ABS publication Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2005 (ABS Catalogue No. 5514.0), the whole of government and the GGS shall disclose by way of note:

(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.

The information provided by way of note in accordance with paragraph 48 shall be aggregated. 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 shall be disclosed.

Paragraph 48 requires disclosure of information about the recognised expenses, excluding losses, included in operating result and assets that are reliably attributable to broad functions determined to at least the ABS GFS Manual two-digit level of classification shown in Table 2.6 of the ABS publication Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2005 (ABS Catalogue No. 5514.0). Disclosure of this information assists users in identifying the resources committed to particular functions and the costs of service delivery that are reliably attributable to those functions. Functional classification of financial information, where it can be determined reliably, will also assist users in assessing the significance of financial or non-financial performance indicators reported by the government.

AASB 114 (AASB 8) does not apply to the whole of government or the GGS. The bases used in the ABS GFS Manual for identifying functions do not necessarily accord with the criteria for identifying segments contained in AASB 114 (AASB 8). However, AASB 114 (AASB 8) may be useful in identifying the expenses, excluding losses, included in operating result and assets that are reliably attributable to each function. An example of the disclosures required by paragraphs 48(b) and 48(c) in respect of each function of the whole of government and the GGS is provided in Illustrative Examples A and B respectively.

The whole of government shall disclose by way of note, in respect of the GGS, PNFC sector and PFC sector as defined in the ABS GFS Manual:

(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 this Standard;

(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 this Standard:

(A)

(1) the key fiscal aggregates measured in accordance with the ABS GFS Manual; and

(2) a reconciliation of the two measures of key fiscal aggregates and an explanation of the differences; or

(B) an explanation of how each of the key fiscal aggregates provided pursuant to paragraph 16 of this Standard is calculated and how it differs from the corresponding key fiscal aggregate measured in accordance with the ABS GFS manual; and

(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, a 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 (see, for example, Illustrative Example A).

Sector information prepared in accordance with paragraph 52(b) is determined before consolidation eliminations. Accordingly, GGS investments in PNFC sector and PFC sector entities are included in the GGS information that is disclosed for the whole of government. They are measured at the carrying amount of net assets disclosed by the whole of government for the PNFC sector and PFC sector.

Notes to the sector statements of financial position, statements of comprehensive income, statements of changes in equity and statements of cash flows, other than those required by paragraph 52, are not required to be disclosed.

In relation to the requirements in paragraph 52(b)(ii), differences in the key fiscal aggregates determined under the ABS GFS Manual and consistent with paragraph 16 of this Standard arise from differences in definition, recognition, measurement and certain classification requirements. Each difference gives rise to the need for disclosure of a reconciliation and an explanation of the difference. Examples of such differences for the PNFC sector and the PFC sector include those identified in paragraph 42 of this Standard, as well as:

(a) ownership interest in PNFC sector and PFC sector entities – in contrast to Australian Accounting Standards, under the ABS GFS Manual, the carrying amount of ownership interest in PNFC sector and PFC sector entities is deducted in the determination of net worth of those sectors. In particular:

(i) where the market value of ownership interest in PNFC sector and PFC sector entities is reliably measurable, GFS deducts it in determining net worth of those sectors. Accordingly, negative GFS net worth arises if the market value exceeds the recognised carrying amount of net assets. Under Australian Accounting Standards, the market value of ownership interest is not recognised; and

(ii) where ownership interest in PNFC sector and PFC sector entities is measured by GFS at the carrying amount of net assets, GFS net worth is nil. Under Australian Accounting Standards, the carrying amount of net assets is not deducted in determining net worth; and

(b) deferred tax assets and deferred tax liabilities of PNFC sector and PFC sector entities – the ABS GFS Manual does not recognise deferred tax assets and deferred tax liabilities that are recognised by PNFC sector and PFC sector entities in accordance with AASB 112 Income Taxes. Like the approach in paragraph 61A of AASB 112, a deferred tax revenue or expense recognised in accordance with AASB 112 is classified in the statement of comprehensive income as a transaction or an other economic flow consistent with the underlying event giving rise to the related deferred tax asset or liability. For example, when a deferred tax liability arises from the revaluation of an asset, the related deferred tax expense is classified as an other economic flow because the asset revaluation itself is recognised as an other economic flow.

For the purpose of paragraph 52(b)(ii)(A), the ABS GFS Manual key fiscal aggregate that corresponds to the requirement implicit in paragraph 52(b)(i) to present ‘total change in net worth before transactions with owners in their capacity as owners’ for the PNFC sector and PFC sector is ‘total change in net worth’ (after transactions with owners in their capacity as owners). Accordingly, the reconciliation required to be disclosed by paragraph 52(b)(ii)(B) is from ‘total change in net worth before transactions with owners in their capacity as owners’ as presented in accordance with paragraph 52(b)(i) to ‘total change in net worth’ measured in accordance with the ABS GFS Manual.

A government may choose to disclose sectors in addition to the GGS, PNFC sector and PFC sector. For example, a government may disclose information about the total non-financial public sector, comprising the GGS and PNFC sector. Where that is the case, the additional sectors are disclosed on a comparable basis to the information disclosed for the GGS, PNFC sector and PFC sector.

The sector statements of financial position, statements of comprehensive income, statements of changes in equity and statements of cash flows could be presented in a single schedule that includes an adjustments column or row to facilitate reconciliation to the corresponding whole of government statements in accordance with paragraph 52(c). Alternatively, those sector financial statements may be presented in columns, with or without an adjustments column, in the whole of government statement of financial position, statement of comprehensive income, statement of changes in equity and statement of cash flows. Where an adjustments column is not provided in those whole of government financial statements, the reconciliation required by paragraph 52(c) is provided in the notes. Disclosure of the individual eliminations between the sectors is not required.