Main Features of GFSM 2014
GFSM 2014 provides a harmonized systematic basis for reporting and analyzing government finances. Compared with GFSM 1986, GFSM 2014, and its predecessor, GFSM 2001 is a major step forward—it integrates flows and stocks through balance sheets and removes classification asymmetries. Further, it shifts the emphasis to accrual accounting, recording, and reporting (while maintaining information on a cash basis) and emphasizes economically meaningful fiscal indicators.
A. The GFSM 2014 Analytical Framework
GFSM 2014 harmonizes the system used to report fiscal statistics with other macroeconomic statistical systems—most notably with the national accounts (the 2008 SNA) and, therefore, also the European System of Accounts 2010 (2010 ESA). In this way, GFSM 2014 formalizes and standardizes many adjustments made to fiscal statistics. Moreover, fiscal accounting and reporting are brought closer into line with private sector practice (that is, a profit and loss statement, a balance sheet, and a cash statement). The linkages in the GFSM 2014 framework are summarized in Table 1. In particular, a set of well-defined relationships between flows and stocks—presented in integrated balance sheets—underpins GFSM 2014. Specifically, the framework reconciles the government's opening and closing balance sheets with the flows derived from government operations and the other economic flows.
A key feature of GFSM 2014 is its distinction between transactions and other economic flows. Transactions cover all exchanges or transfers that take place by mutual agreement and the consumption of fixed capital (the economic equivalent of "depreciation"). Mutual agreement does not mean that transactions have to be entered into voluntarily (the payment of taxes is treated as a transaction despite being compulsory). Additionally, transactions cover monetary exchanges and in-kind activity (such as the receipt of commodity grants and noncash remuneration). Other economic flows are the result of events that affect the value of nonfinancial assets, financial assets, and liabilities but that are not exchanges or transfers. These flows can reflect either price changes (including exchange rate movements) or volume changes due to one-off events (such as mineral discoveries or natural disasters).
While countries can apply the GFSM 2014 framework to cash data, ideally, transactions and other economic flows should be recorded on an accrual basis. This means countries record these flows when the economic consequences associated with an event occur or when future consequences can be measured reliably. Thus they record an expense when the government uses resources. This recording will, in practice, usually be when government incurs an obligation to pay for those resources (e.g., when contracted goods are delivered as stipulated in the contract), rather than when it actually pays for the resources. An obligation to pay is distinct from a commitment, which occurs when contracts are signed, orders are placed, etc.
Similarly, in principle, revenue should be recorded when a liability to government is exchanged and not when payment is made. However, difficulties exist in identifying revenue on an accrual basis, and especially in determining precisely when an activity gives rise to a tax liability. In practice, governments would normally record a tax liability at the time of assessment and base it on the amount they realistically expect to collect. Governments also record transactions in nonfinancial assets, financial assets, and liabilities at the time assets change ownership and liabilities are incurred. Other economic flows accrue when an economic asset (or liability) is created, extinguished, or transformed.
The GFSM 2014 increases the comprehensiveness of fiscal data through accrual reporting, allows data inconsistencies to be detected, and thereby strengthens fiscal transparency—all of which will aid fiscal analysis. At the same time, it should be emphasized that the GFSM 2014 system continues to recognize the importance of monitoring cash flows and the crucial role these play in fiscal analysis. Therefore, a separate statement on the sources and uses of cash is an integral part of the GFSM 2014 statistical framework. This statement shows fiscal flows in terms of pure cash, while it follows the same basic structure as the statement on operations.
B. GFSM 2014 Fiscal Tables
The GFSM 2014 analytical framework can be summarized as a set of three fiscal tables.
• The Statement of Operations distinguishes between revenue and expense (or operating) transactions and among transactions in nonfinancial assets, financial assets, and liabilities. Revenue covers all transactions that increase net worth, and expense covers all transactions that decrease net worth (including importantly the consumption of fixed capital). In essence, this balance is akin to the government's profit and loss statement for a given year. Transactions in nonfinancial assets, financial assets, and liabilities are not included in revenue or expense.2 Under GFSM 1986, transactions in nonfinancial assets—and in financial assets for public policy (as distinct from liquidity management) purposes—are treated as expenditure. But under GFSM 2014, they are not treated as an expense because they are exchanges that do not affect net worth. This removes the asymmetry that exists in the GFSM 1986 system "above-" and "below-the-line."3
Figure 1. The GFSM 2014 Analytical Framework
• The difference between revenue and expense is the net operating balance. Subtracting the net acquisition of nonfinancial assets from the net operating balance yields net lending/ borrowing, which in turn is equal to the net acquisition of financial assets less the net incurrence of liabilities (that is, government's financing).
• The Balance Sheet shows the government's net worth at the end of a fiscal year, which is equal to the stock of nonfinancial assets plus net financial worth (i.e., the difference between the stocks of financial assets and liabilities). The change in net worth during a year is the sum of changes due to revenue and expense transactions and to other economic flows. An integrated balance sheet shows the opening balance of assets and liabilities, as well as transactions and other economic flows in these assets and liabilities that explain the closing balance of these assets and liabilities.
• The Statement of Sources and Uses of Cash shows purely cash flows associated with revenue and expense transactions and transactions in nonfinancial assets, which yields the cash surplus/deficit. Adding cash flow transactions in financial assets (other than cash) and liabilities to the cash surplus/deficit gives the net change in the stock of cash. This cash flow statement provides useful information to link the fiscal impacts with relevant monetary variables.
Detailed data reflecting balance sheet information that integrates transactions with other economic flows and generates stock positions for government assets and liabilities, appropriate for fiscal policy analysis (see Box 1) are available through:
- The GFS Yearbook contains detailed data on revenue, expense, transactions in assets and liabilities, and stocks of assets and liabilities of general government and its subsectors, for the general government and its subsectors.
- The GFS Database and Browser on CD-ROM (1990-present in GFSM 2014 format). These data comprise all historic data from 1990 onward which were reclassified from the old framework to the GFSM 2014 framework for all reported subsectors, as relevant.
The Data Mapper provides access to a limited amount of country specific data expressed as a percentage of GDP. For each country, standardized metadata indicate the general government sector/subsector for which data, as a percentage of GDP, are provided along with information on accounting practices. This should assist users of the Data Mapper to identify countries that report data according to a reporting basis other than that being queried. For countries that report noncash data for all or some subsectors of general government, all statements and detailed tables are presented, where available.4
CD-ROM
The Government Finance Statistics Database and Browser on CD-ROM (1990-present in GFSM 2014 format), which contains annual time series for all reported subsectors of general government, is issued quarterly and is updated as new data are received. Most of the data prior to 2000 reflect reclassified data previously reported by member countries using the GFSM 1986 format. Users should exercise caution when comparing data over time because shortcomings have been identified in the data for the years prior to 2000 that have been reclassified according to the GFSM 2001 framework.
The browser enables users to view and extract data for analytical purposes. The browser software is an easy-to-use Windows interface for accessing the database, selecting specific data series, displaying the selected series in a spreadsheet format, and saving the selected series for transfer to other software systems, such as Microsoft Excel.
There are five complementary views for browsing the database contained within the CD-ROM:
• a "table view" corresponding to the tables contained within the GFS Yearbook;
• an "economic concept view" providing access to similar concepts across countries;
• a view/search facility based on the structure of the time series codes;
• a matrix view for enhanced data analysis; and
• an integrated balance sheet view.
An extensive help facility is incorporated into the browser, including a list of frequently-asked-questions (FAQs).
For users seeking access to historical data, the Historical Government Finance Statistics Database and Browser on CD-ROM contains time series for 149 countries from 1972 to 1989, presented in the framework of the GFSM 1986. Users interested in converting the historical series may refer to the document "Classification of GFSM 1986 Data to the GFSM 2001 Framework," available on the IMF's website: (http://www.imf.org/external/pubs/ft/gfs/manual/comp.htm)
The Government Finance Statistics Database and Browser on CD-ROM (1990-present in GFSM 2014 format), which contains annual time series for all reported subsectors of general government, is issued quarterly and is updated as new data are received. Most of the data prior to 2000 reflect reclassified data previously reported by member countries using the GFSM 1986 format. Users should exercise caution when comparing data over time because shortcomings have been identified in the data for the years prior to 2000 that have been reclassified according to the GFSM 2001 framework.
The browser enables users to view and extract data for analytical purposes. The browser software is an easy-to-use Windows interface for accessing the database, selecting specific data series, displaying the selected series in a spreadsheet format, and saving the selected series for transfer to other software systems, such as Microsoft Excel.
There are five complementary views for browsing the database contained within the CD-ROM:
• a "table view" corresponding to the tables contained within the GFS Yearbook;
• an "economic concept view" providing access to similar concepts across countries;
• a view/search facility based on the structure of the time series codes;
• a matrix view for enhanced data analysis; and
• an integrated balance sheet view.
An extensive help facility is incorporated into the browser, including a list of frequently-asked-questions (FAQs).
For users seeking access to historical data, the Historical Government Finance Statistics Database and Browser on CD-ROM contains time series for 149 countries from 1972 to 1989, presented in the framework of the GFSM 1986. Users interested in converting the historical series may refer to the document "Classification of GFSM 1986 Data to the GFSM 2001 Framework," available on the IMF's website: (/external/pubs/ft/gfs/manual/comp.htm)
Box 1. The GFSM 2001 Statements and Core Balances
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The Statement of Operations (GFS Yearbook) records transactions on an accrual basis. The statement distinguishes between the following transactions:
Revenue: Transactions that increase net worth.
Expense: Transactions that reduce net worth.
Net acquisitions of nonfinancial assets: Transactions that affect the stock of nonfinancial assets, without changing net worth (acquisitions minus disposals).
Financing: Transactions that affect the stock of financial assets and liabilities, without changing net worth (net acquisition of financial assets minus net incurrence of liabilities).
The analysis of government operations is supported by two key fiscal indicators:
Operating balance: Summary measure of the effects of revenue and expense transactions on net worth. Net operating balance (NOB) equals revenue minus expense. The gross operating balance (GOB) equals revenue minus expense other than consumption of fixed capital. 1/
Net lending/borrowing: Represents the financial resources that the government absorbs from, or releases to, other sectors of the economy. It is calculated as the NOB minus the net acquisition of nonfinancial assets. Net lending/borrowing is also equal to the net acquisition of financial assets minus net incurrence of liabilities.
The Integrated Balance Sheet (GFS CD-ROM), focuses on an assessment of the sustainability of government operations from a fiscal perspective. It shows the government's net worth at the beginning and end of each fiscal year, as well as the related transactions and other economic flows. The sustainability of fiscal policy depends in part on how the government's net worth changes over time. Changes in net worth can be explained not only by government transactions but also by other economic flows attributable to gains or losses resulting from changes in the prices of assets and liabilities, as well as other changes in their volume.
Net worth: The total stock of assets minus liabilities. The net worth in period (t) can also be calculated as the net worth of the previous period (t-1), plus changes in net worth in period (t) due to transactions (the NOB), plus changes in net worth in period (t) due to other economic flows.
The Statement of Sources and Uses of Cash (GFS Yearbook) shows purely cash flows associated with revenue and expense transactions and transactions in nonfinancial assets, which yields the cash surplus/deficit. The assessment of the government's level of cash holdings (liquidity) and its determinants is a key element in analyzing interrelationships with monetary policy.
Cash surplus/deficit: Net cash inflow from operating activities minus the net cash outflow from investments in nonfinancial assets
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1 International Monetary Fund, Government Finance Statistics Manual 2014 , Washington, D.C., 2014; also available online at /external/pubs/ft/gfs/manual/gfs.htm.
2 In GFSM 1986, capital expenditure covered capital transfers, purchases of fixed assets, stocks (strategic), land, and intangible assets. In comparison, in GFSM 2014, capital transfers are classified as expense (because they affect net worth), and the net acquisition of nonfinancial assets covers purchases and sales of all those nonfinancial assets, as well as valuables. (See also Table 2)
3 However, transfers of assets, which would occur for example when government securities are issued to recapitalize a bank but the government does not acquire an effective claim on the bank, are recorded as the incurrence of a liability (the securities) and a counterpart expense (transfer from government to the bank) because the transfer affects net worth. Any subsidy element in government lending also would be treated as an expense.
4 EU country data reported by Eurostat do not include cash-based components, aggregates, and analytical balances because the European System of Accounts 2010 source data do not provide this information.
1/ The NOB/GOB excludes the net acquisition of nonfinancial assets. The latter does not affect net worth because it represents only an accumulation of assets in exchange for an accumulation of liabilities or use of exit assets.
