The Government Finance Statistic (GFS) reporting framework is an accrual financial measurement and reporting system designed to support economic analysis of the public sector. The GFS focuses on the size of the public sector; its contribution to aggregate demand, investment, and saving and provides for cross-country comparison. It is not an accounting system but is a statistical framework that uses data from a government’s accounting system. The major differences with accounting systems are:
- GFS consistently uses market or fair value for assets and liabilities; and
- Revaluations of assets and liabilities are regarded as ‘other economic flows’ and do not impact the calculation of the accrual deficit or surplus (fiscal balance).
The fiscal balance is therefore expenses and revenue (net of other economic flows) less net capital investment (in capital assets). The underlying cash balance is the cash equivalent of fiscal balance.
The GFS principles are issued by the International Monetary Fund (IMF) and the Australian Bureau of Statistic (ABS) publish an Australian version of the GFS manual providing guidance on the application of GFS by the Australian public sector.
The initial GFS manual issued by the IMF in 1986 was cash-based focus. The focus was shifted to accrual-based reporting with the publication of the IMF’s Government Finance Statistics Manual 2001. The accrual-based GFS manual was updated by the IMF in 2014. The ABS has also published Australian versions of this framework, Australian System of Government Finance Statistics: Concepts, Sources and Methods, in 2005 and 2015.
The Charter of Budget Honesty Act 1998 stipulates that the Australian Government should report on external reporting standards and provides the following definition:
“external reporting standards means:
(a) the concepts and classifications set out in GFS Australia; and
(b) public sector accounting standards developed by the Public Sector
Accounting Standards Board.”
The functions of the Public Sector Accounting Standards Board was subsequently incorporated into the Australian Accounting Standards Board (AASB). The Government is therefore required to produce financial reports both on an accounting and GFS basis. The implementation of accrual budgeting in 1999 required the Government to produce two sets of financial reports i.e. AAS and GFS basis. This created confusion for users of the financial reports. The Fiscal Reporting Council that oversees the work of the AASB directed the establishment of a harmonised AAS and GFS financial reporting for the Australian public sector. The introduction of the AASB1049 Whole of Government and General Government Sector Financial Reporting (AASB 1049) harmonises the ABS GFS Manual and Generally Accepted Accounting Principles. From 2008, the Australian Government applied AASB1049 to publish a single set of financial reports for budget papers, final budget outcome and monthly reporting.
The Australian, State and Territory governments have an agreed framework – the Uniform Presentation Framework (UPF) – for the presentation of government financial information on a basis broadly consistent with the Australian Accounting Standards Board standard AASB1049. The financial statements included in the Australian Government’s budget papers, final budget outcome and monthly reporting are consistent with the requirements of the UPF.