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Wednesday, 19 May 1993
Page: 849


Senator SHORT (3.35 p.m.) —I move:

  That the Senate take note of the document.

The Financial statement guidelines for departmental secretaries—(accrual reporting) is the most important of the three Department of Finance guidelines documents being presented to the Senate today. This is a new document and a new concept, whereas the other two documents are revisions of earlier guidelines.

  This document follows an announcement on 4 December 1992 by the Minister for Finance (Mr Willis) that Commonwealth departments are to move to financial reporting on an accrual basis as the next step in the Government's public sector reform program. This is the first document to come forward as a result of that announcement. As the document says, these guidelines prescribe reporting requirements for Commonwealth departments that have elected to prepare financial statements on an accrual basis for the year ending 30 June 1993. The document says that that election should be evidenced in the accounting policy note.

  In other words, this is the first step along a process that will eventually become mandatory for Commonwealth departments to account on an accrual rather than a cash basis. In that sense it is breaking new ground. It is long overdue. The Opposition has long argued that accrual accounting should be the essential component of financial accounting for the Commonwealth, despite there being some traps along the way. It is not a simple concept at all but, unless one has accrual accounting and reporting on an accrual basis, it is impossible to know from looking at the financial statements of government departments precisely what their financial position is. Cash accounting and reporting on a cash basis is insufficient in that sense, despite its being important in its own right for appropriation purposes while we still have the annual appropriation procedures that prevail.

  Those departments that have not yet elected to go onto the accrual reporting basis are dealt with in the next document to be discussed, and I will make a couple of comments on that. In the meantime, I commend this particular document to the Senate. It deserves our careful consideration. It is a very worthwhile development and I commend the Department of Finance on its work in this area. I seek leave to continue my remarks later.

  Leave granted; debate adjourned.