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The Government published today (December 17) its accrual-based consolidated accounts for the financial year 2003-04. These accrual-based accounts have been compiled for the second year in addition to the annual cash-based accounts.
A government spokesman said that the accrual-based accounts differ from the existing cash-based ones in the purposes they serve. "The cash-based accounts serve mainly to demonstrate that money has been paid within the limits and ambits approved by the legislature. The accrual-based accounts, on the other hand, aim to present more comprehensive information on the financial position and performance of the Government," he said.
"The cash-based accounts cover the General Revenue Account and the Funds established under section 29 of the Public Finance Ordinance. In addition to these Funds, the accrual-based accounts include the Exchange Fund, the Housing Authority, government business enterprises such as MTR Corporation Limited and Kowloon-Canton Railway Corporation, and other government funds such as the Quality Education Fund. There are also more disclosures of the Government's assets and liabilities in the accrual-based accounts, e.g. the provision for pensions," he continued.
The key figures shown in the accrual-based accounts compared with those in the cash-based accounts are highlighted below:
2003-04
Cash-based Accrual-based
($ billion) ($ billion)
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Financial results
* Fiscal surplus / (deficit) (40.1)
* Net surplus / (deficit) 9.5
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Reserves
* Fiscal Reserves 275.3
* General Reserve 155.9
* Exchange Fund Reserve 396.1
* Capital Expenditure Reserve 120.2
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275.3 672.2
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Net assets 275.3 672.2
The accrual-based Consolidated Statement of Financial Performance reports a surplus of $9.5 billion whereas the cash-based accounts show a deficit of $40.1 billion. The turnaround (with a difference of $49.6 billion) from a cash-based deficit to an accrual-based surplus is due mainly to the inclusion of the surplus of the Exchange Fund which more than offset the provisions for expenses in the accrual accounts.
"Despite a small surplus under the 2003-04 accrual accounts, the structural deficit problem remains a material concern. Whether under the cash-based or accrual-based accounts, Government's operating revenue has not been able to match operating expenditure," the government spokesman said.
According to the accrual-based Consolidated Statement of Financial Position, the Government's net assets were $672.2 billion as at 31 March 2004. These net assets were represented by three reserves: General Reserve of $155.9 billion, Exchange Fund Reserve of $396.1 billion and Capital Expenditure Reserve of $120.2 billion.
"The purpose of representing the Government's net assets by three reserves is to avoid possible confusion as to the resources available for disposal. The Capital Expenditure Reserve represents money already spent on fixed assets, whereas the Exchange Fund Reserve refers to the net assets of the Exchange Fund whose use is governed by the Exchange Fund Ordinance. The General Reserve is the net financial assets of the Government excluding fixed assets and the net assets of the Exchange Fund," the government spokesman explained.
"The Government's General Reserve as at March 31, 2004 was $119.4 billion less than the Fiscal Reserves of $275.3 billion as reported in the cash-based accounts. The difference was due to the inclusion of the Government's liabilities such as pensions and untaken leave of staff, offset partly by financial assets such as investments in MTR Corporation Limited and the Airport Authority not recognised in the cash-based accounts. The cash resources available for the Government's spending at March 31, 2004 remained to be the Fiscal Reserves of $275.3 billion."
The publication of the accrual-based accounts followed the recommendations of the report entitled "Review of Government Financial Reporting Policy" published by the Government in June 2002 after public consultation. The government spokesman pointed out that the accrual accounts would be refined on a progressive basis. He added: "Starting with the accounts for 2004-05, we plan to include government-owned fixed assets and depreciation, and publish a stewardship statement describing in terms of physical measurements the major items such as land, buildings and infrastructure assets employed by the Government in the delivery of public services. We will also carry out a post-implementation review in 2006-07 to take stock of the results achieved and identify areas for further improvement."
The public can access the accrual-based and the cash-based accounts at Treasury's website: www.try.gov.hk.
Ends/Friday, December 17, 2004
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