Appendix A: Financial Statements

Date

The financial statements consist of an operating statement, including other economic flows, a balance sheet, and a cash flow statement for the Australian Government general government sector (GGS).

The Charter of Budget Honesty Act 1998 (the Charter) requires that the PEFO be based on external reporting standards and that departures from applicable external reporting standards be identified.

The external standards used for reporting purposes are:

  • the Australian Bureau of Statistics’ (ABS) accrual Government Finance Statistics (GFS) publication, Australian System of Government Finance Statistics: Concepts, Sources and Methods 2005, (cat. no. 5514.0), which in turn is based on the International Monetary Fund’s (IMF) accrual GFS framework; and
  • the Australian Accounting Standards (AAS) issued by the Australian Accounting Standards Board (AASB), which includes International Financial Reporting Standards (IFRS) as adopted in Australia and the public sector specific standard AASB 1049 Whole of Government and General Government Sector Financial Reporting.

The financial statements have been prepared on the same basis as the budget papers. The statements reflect the Government’s accounting policy that ABS GFS remains the basis of budget accounting policy, except where the Government applies the AAS because it provides a better conceptual basis for presenting information of relevance to users of public sector financial reports.

Fiscal reporting focuses on the GGS. The GGS provides public services that are mainly non-market in nature and for the collective consumption of the community, or involve the transfer or redistribution of income. These services are largely financed through taxes and other compulsory levies, user charging and external funding. This sector comprises all government departments, offices and some other bodies. In preparing financial statements for the GGS, all material transactions and balances between entities within the GGS have been eliminated.

The Government’s key fiscal aggregates are based on ABS GFS concepts and definitions, including the ABS GFS cash surplus/deficit and the derivation of the underlying cash balance and net financial worth. AASB 1049 requires the disclosure of other ABS GFS fiscal aggregates, including net operating balance, net lending/borrowing (fiscal balance) and net worth. In addition to these ABS GFS aggregates, the Uniform Presentation Framework (UPF) requires disclosure of net debt, net financial worth and net financial liabilities.

AASB 1049 requires disaggregated information, by ABS GFS function, for expenses and total assets to be disclosed where they are reliably attributable. ABS GFS does not require total assets to be attributed to functions. In accordance with ABS GFS, disaggregated information for expenses and net acquisition of non-financial assets by function was disclosed in the 2016-17 Budget.

Departures from external reporting standards

The Charter requires that departures from applicable external reporting standards be identified. The major differences between AAS and the ABS GFS treatments of transactions are outlined in the below table.

AASB 1049 requires AAS measurement of items to be disclosed on the face of the financial statements with reconciliation to ABS GFS measurement of key fiscal aggregates, where different, in notes to the financial statements. Differences from the AAS measurement of items outlined above and reconciliation have not been included as they would effectively create different measures of the same aggregate.

Further information on the differences between the two systems is provided in the ABS publication Australian System of Government Finance Statistics: Concepts, Sources and Methods, 2005 (cat. no. 5514.0).

Major differences between AAS and ABS GFS
Issue AAS treatment ABS GFS treatment Treatment adopted
Acquisition of defence weapons platforms (DWP) AASB 1049 allows cost to be used where fair value of assets cannot be reliably measured. ABS record DWP on a market value basis using the perpetual inventory method. AAS cost method until fair value can be measured reliably
Circulating coins — seigniorage The profit between the cost and sale of circulating coins (seigniorage) is treated as revenue. Circulating coins is treated as a liability, and the cost of producing the coins is treated as an expense. AAS
Provisions for bad and doubtful debts Reported in the balance sheet as an offset to assets. Under AASB 1049, it is included in the operating statement as other economic flows. Creating provisions for bad and doubtful debts is not considered an economic event and is therefore not considered to be an expense or reflected in the balance sheet. AAS
Concessional loans Discounts concessional loans by a market rate of a similar instrument. Does not discount concessional loans as no secondary market is considered to exist. AAS
Investment in other public sector entities Valued at fair value in the balance sheet as long as it can be reliably measured, otherwise net assets is permissible. Unlisted entities valued based on their net assets in the balance sheet. AAS
Advances to the International Development Association and Asian Development Fund Recorded at fair value in the balance sheet. Recorded at nominal value in the balance sheet. ABS GFS
Provision for restoration, decommissioning and make-good Included in the fiscal balance capital adjustment. Excluded from the calculation of net lending capital adjustment. AAS
Renewable Energy Certificates (RECs) The issuance and registration of RECs is considered to be an administrative function and does not result in the recognition of assets or liabilities and, consequently, no revenues or expenses are recognised. The issuance and registration of RECs is considered to be government financial transactions resulting in the recognition of assets, liabilities, revenue and expenses. AAS
Dividends paid by the Reserve Bank of Australia Dividends are recognised in the year profit was earned. Dividends are recognised when the Treasurer makes a determination. AAS
Fiscal aggregates differences
Finance leases Does not deduct finance leases in the derivation of the cash surplus/deficit. Deducts finance leases in the derivation of the cash surplus/deficit. Both are disclosed
Classification difference
Prepayments Treated as a non-financial asset. Treated as a financial asset. ABS GFS
Spectrum sales Recognise non-financial asset sales for fiscal balance when payment is made and the licences take effect, which may be after the auction of licences, as this is regarded as the point control is transferred. Recognise cash at the time of receipt. Recognise non-financial asset sales for fiscal balance at time of auction as this is regarded as the point control is transferred. Recognise cash at the time of receipt. AAS
Table A1: Australian Government general government sector operating statement
  Estimates   Projections
  2015-16 2016-17 2017-18   2018-19 2019-20
  $m $m $m   $m $m
Revenue            
Taxation revenue 371,923 391,283 419,944   449,793 478,563
Sales of goods and services 7,697 9,249 12,011   15,558 16,763
Interest income 3,506 4,280 4,841   5,775 6,825
Dividend income 5,564 3,242 3,666   4,045 3,845
Other 7,637 8,807 9,063   9,198 9,066
Total revenue 396,327 416,862 449,524   484,370 515,062
Expenses            
Gross operating expenses            
Wages and salaries(a) 19,767 20,074 19,866   20,017 20,418
Superannuation 7,052 4,618 4,693   4,783 4,828
Depreciation and amortisation 7,165 7,522 7,660   8,061 8,640
Supply of goods and services 81,411 86,745 87,558   97,400 101,857
Other operating expenses(a) 5,483 5,452 5,418   5,445 5,504
Total gross operating expenses 120,878 124,410 125,195   135,707 141,248
Superannuation interest expense 9,167 9,959 10,330   10,706 11,085
Interest expenses 16,774 18,725 19,764   20,539 20,818
Current transfers            
Current grants 128,393 138,965 148,478   162,167 168,781
Subsidy expenses 12,763 13,425 14,102   14,918 16,024
Personal benefits 133,416 132,562 134,844   137,165 146,374
Total current transfers 274,572 284,952 297,424   314,250 331,179
Capital transfers            
Mutually agreed write-downs 1,722 1,845 1,959   2,102 2,246
Other capital grants 8,354 10,663 10,138   6,017 5,022
Total capital transfers 10,076 12,508 12,098   8,119 7,268
Total expenses 431,467 450,554 464,811   489,320 511,598
Net operating balance -35,140 -33,693 -15,287   -4,951 3,464
Other economic flows - included in operating result            
Net write-downs of assets            
(including bad and doubtful debts) -7,106 -8,077 -8,602   -8,977 -9,350
Assets recognised for the first time 296 348 317   330 343
Liabilities recognised for the first time 0 0 0   0 0
Actuarial revaluations 0 0 0   0 0
Net foreign exchange gains -9 8 119   150 33
Net swap interest received -437 0 0   0 0
Market valuation of debt -4,673 3,156 2,547   2,350 1,960
Other gains/(losses) 713 4,705 7,205   6,305 6,298
Total other economic flows -            
included in operating result -11,215 140 1,586   157 -715
Operating result(b) -46,355 -33,553 -13,700   -4,793 2,749
Non-owner movements in equity            
Revaluation of equity investments -3,026 -2,880 31   49 0
Actuarial revaluations 1,032 -6 -16   -3 9
Other economic revaluations 371 53
6 		7   -30 509
Total other economic flows - included in equity -1,623 -2,350 21   16 518
Comprehensive result - Total change in net worth -47,978 -35,903 -13,679   -4,777 3,267
Net operating balance -35,140 -33,693 -15,287   -4,951 3,464
Net acquisition of non-financial assets            
Purchases of non-financial assets 11,559 11,417 12,994   13,255 14,046
less Sales of non-financial assets 404 932 2,030   562 233
less Depreciation 7,165 7,522 7,660   8,061 8,640
plus Change in inventories 310 449 239   260 346
plus Other movements in non-financial assets 56 26 -154   -7 -2
Total net acquisition of non-financial assets 4,355 3,438 3,389   4,885 5,517
Fiscal balance (Net lending/borrowing)(c) -39,495 -37,130 -18,675   -9,836 -2,053

(a) Consistent with ABS GFS classification, other employee related expenses are reported under other operating expenses. Total employee expenses equal wages and salaries plus other operating expenses.

(b) Operating result under AAS.

(c) The term fiscal balance is not used by the ABS.

Table A2: Australian Government general government sector balance sheet
  Estimates   Projections
  2015-16 2016-17 2017-18   2018-19 2019-20
  $m $m $m   $m $m
Assets            
Financial assets            
Cash and deposits 3,409 4,688 3,153   2,806 2,340
Advances paid 52,782 62,637 72,852   83,557 95,356
Investments, loans and placements 153,233 173,479 188,611   189,073 192,823
Other receivables 48,487 48,641 51,992   55,555 57,399
Equity investments            
Investment in other public sector entities 44,798 50,927 51,141   51,522 51,870
Equity accounted investments 344 354 364   374 384
Investments - shares 39,394 42,558 45,746   49,253 53,116
Total financial assets 342,447 383,285 413,860   432,141 453,288
Non-financial assets            
Land 9,729 9,674 9,610   9,604 9,617
Buildings 25,992 26,391 26,676   26,926 27,532
Plant, equipment and infrastructure 59,692 62,239 66,468   70,661 74,835
Inventories 8,195 8,184 7,933   7,691 7,513
Intangibles 6,881 7,414 7,822   8,019 8,175
Investment properties 200 200 200   200 200
Biological assets 44 44 44   44 44
Heritage and cultural assets 11,697 11,658 11,620   11,582 11,543
Assets held for sale 174 147 80   80 80
Other non-financial assets 262 288 134   127 125
Total non-financial assets 122,866 126,239 130,585   134,932 139,663
Total assets 465,313 509,523 544,446   567,073 592,952
Liabilities            
Interest bearing liabilities            
Deposits held 218 218 218   218 218
Government securities 476,999 549,537 594,439   614
,904 		628,828
Loans 16,425 15,739 15,732   15,731 15,643
Other borrowing 1,569 1,458 1,356   1,310 1,244
Total interest bearing liabilities 495,211 566,952 611,745   632,163 645,933
Provisions and payables            
Superannuation liability 169,308 175,661 182,026   188,394 194,739
Other employee liabilities 17,004 17,332 17,671   18,046 18,445
Suppliers payable 5,868 6,092 6,188   6,307 6,319
Personal benefits provisions and payables 14,446 13,542 12,294   11,883 12,086
Subsidies provisions and payables 4,908 5,216 5,489   5,816 6,211
Grants provisions and payables 10,466 10,876 10,246   10,386 11,714
Other provisions and payables 13,195 14,849 13,461   13,531 13,689
Total provisions and payables 235,195 243,568 247,375   254,362 263,204
Total liabilities 730,406 810,519 859,121   886,525 909,136
Net worth(a) -265,093 -300,996 -314,675   -319,452 -316,185
Net financial worth(b) -387,959 -427,235 -445,260   -454,384 -455,848
Net financial liabilities(c) 432,757 478,162 496,402   505,906 507,718
Net debt(d) 285,787 326,148 347,129   356,727 355,414

(a) Net worth is calculated as total assets minus total liabilities.

(b) Net financial worth equals total financial assets minus total liabilities.

(c) Net financial liabilities equals total liabilities less financial assets other than investments in other public sector entities.

(d) Net debt equals the sum of deposits held, government securities, loans and other borrowing, minus the sum of cash and deposits, advances paid and investments, loans and placements.

Table A3: Australian Government general government sector cash flow statement(a)
      Estimates   Projections
  2015-16 2016-17 2017-18   2018-19 2019-20
  $m $m $m   $m $m
Cash receipts from operating activities            
Taxes received 364,507 382,769 410,165   438,821 468,278
Receipts from sales of goods and services 7,686 9,176 11,954   15,499 16,709
Interest receipts 2,842 3,262 3,470   3,829 4,248
Dividends and income tax equivalents 5,332 5,833 3,462   3,886 4,304
Other receipts 7,218 7,879 7,737   7,324 6,970
Total operating receipts 387,585 408,919 436,788   469,358 500,509
Cash payments for operating activities            
Payments for employees -27,893 -28,261 -28,533   -29,130 -29,939
Payments for goods and services -80,834 -87,036 -87,498   -97,188 -101,994
Grants and subsidies paid -149,656 -161,852 -171,128   -180,042 -186,183
Interest paid -14,822 -15,903 -16,826   -18,054 -18,463
Personal benefit payments -134,887 -135,637 -138,318   -139,049 -147,135
Other payments -5,308 -5,141 -5,049   -5,060 -5,118
Total operating payments -413,400 -433,830 -447,352   -468,522 -488,831
Net cash flows from operating activities -25,815 -24,911 -10,564   836 11,678
Cash flows from investments in non-financial assets            
Sales of non-financial assets 339 2,365 597   562 233
Purchases of non-financial assets -11,559 -11,216 -12,582   -12,958 -13,719
Net cash flows from investments in non-financial assets -11,221 -8,852 -11,985   -12,396 -13,487
Net cash flows from investments in financial assets for policy purposes -14,553 -19,759 -11,799   -12,443 -12,562
Cash flows from investments in financial assets for liquidity purposes            
Increase in investments -9,396 -19,579 -13,223   1,719 -1,162
Net cash flows from investments in financial assets for liquidity purposes -9,396 -19,579 -13,223   1,719 -1,162
Cash receipts from financing activities            
Borrowing 63,753 77,572 49,696   25,470 17,927
Other financing 6 34 0   0 0
Total cash receipts from financing activities 63,759 77,606 49,696   25,470 17,927
Cash payments for financing activities            
Borrowing 0 0 0   0 0
Other financing -2,522 -3,227 -3,661   -3,533 -2,862
Total cash payments for financing activities -2,522 -3,227 -3,661   -3,533 -2,862
Net cash flows from financing activities 61,238 74,379 46,035   21,937 15,065
Net increase/(decrease) in cash held 253 1,279 -1,535   -346 -466
Net cash flows from operating activities and investments in non-financial assets (Surplus(+)/deficit(-)) -37,036 -33,762 -22,549   -11,560 -1,808
Finance leases and similar arrangements(b) -2 0 0   0 0
GFS cash surplus(+)/deficit(-) -37,037 -33,762 -22,549   -11,560 -1,808
less Net Future Fund earnings 3,012 3,321 3,574   3,843 4,140
Equals underlying cash balance(c) -40,049 -37,083 -26,123   -15,403 -5,949
plus Net cash flows from investments in financial assets for policy purposes -14,553 -19,759 -11,799   -12,443 -12,562
plus Net Future Fund earnings 3,012 3,321 3,574   3,843 4,140
Equals headline cash balance -51,590 -53,521 -34,348   -24,002 -14,370

(a) A positive number denotes a cash inflow; a negative number denotes a cash outflow.

(b) The acquisition of assets under finance leases decreases the underlying cash balance. The disposal of assets previously held under finance leases increases the underlying cash balance.

(c) The term underlying cash balance is not used by the ABS.