344 Government Finance Statistics Manual 2014
create GFS reports for individual institutional units,
separate statistical reports for individual units are
usually not disseminated. Each individual entity in
the economy is analyzed with respect to its ability to
hold assets and liabilities and exercise full economic
ownership over them, to determine if it can be con-
sidered an institutional unit.
A6.14 Th ose government-controlled units that are
primarily engaged in nonmarket (including redis-
tributive) activities are included within the general
government sector. Although all resident government-
controlled entities, including public corporations en-
gaged in market activities, are included within the
public sector, nonmarket activities determine the de-
lineation of the general government sector, as a dis-
tinct subsector within the public sector. Th e general
government sector does not include institutional units
primarily engaged in market activities. Th e general
government sector presents consolidated data, which
means that transactions and stock positions between
general government sector units are eliminated.
A6.15 In IPSASs, the “reporting entity” is a gov-
ernment or other public sector organization, pro-
gram, or identifi able activity that prepares general
purpose fi nancial reports (GPFRs). Within a jurisdic-
tion, reports may be prepared on either a compulsory
or voluntary basis. A key characteristic of a reporting
entity is that there are users who depend on GPFRs
for information about the entity. A reporting entity
may be a “group reporting entity.”
A6.16 A group reporting entity consists of two or
more separate entities that present GPFRs as if they
are a single entity. A group reporting entity is identi-
fi ed where one entity has the authority and capacity
to direct the activities of one or more other entities
so as to benefi t from the activities of those entities. It
may also be exposed to a fi nancial burden or loss that
may arise as a result of the activities of entities whose
activities it has the authority and capacity to direct. If
these conditions are met, then the entity is described
as a “controlling entity,” with control defi ned accord-
ing to the principle of exercisable power to govern the
fi nancial and operating policies of another entity so as
to benefi t from its activities.
A6.17 Th e requirement to consolidate entities dif-
fers in IPSASs and GFS. Under IPSAS 6, Consolidated
and Separate Financial Statements, consolidated fi -nancial statements are the fi nancial statements of a
group of entities presented as those of a single entity.
Th is means that a controlling entity will consolidate
the fi nancial statements of all of its controlled entities,
irrespective of whether they are: (i) resident units,
(ii) market/nonmarket entities, or (iii) the IPSAS
equivalent of a market entity—that is, a “government
business enterprise” (GBE). Th is contrasts with the
general government sector consolidation approach,
described earlier, where nonresident and resident
market institutional units are included as a single line
showing net investment, rather than fully consoli-
dated into the general government sector.
A6.18 Nevertheless, IPSASs provide for the dis-
closure of fi nancial information about the general
government sector. IPSAS 22, Disclosure of Finan-
cial Information about the General Government Sec-
tor, specifi cally sets aside the application of IPSAS 6
while retaining the application of all other IPSASs.
Th is allows—though does not require—an aggregate
presentation that does not consolidate controlled in-
terests in entities in other sectors.
A6.19 IPSASs also have a requirement (see IPSAS
18, Segment Reporting) that a reporting entity pro-
vides disaggregated fi nancial information about each
of its segments. Th e information provided includes
segment assets, liabilities, revenue, and expense.
Segments are usually defi ned either in terms of geo-
graphical regions or services. GFS include data on ex-
penditure by function of government.Recognition criteria
A6.20 GFS reporting guidelines and IPSASs both
aim to recognize economic events in the period in
which they occur. Neither GFS reporting guidelines
nor IPSASs allow the application of precaution or
prudence to justify the reporting of provisions that
anticipate future possible events. However, they diff er
in their recognition criteria for certain liabilities, be-
cause GFS treats uncertainty about future economic
outfl ows diff erently from IPSASs. Th e eff ect of this
diff erence is that IPSASs require more items to be rec-
ognized as liabilities than does GFS.
A6.21 In macroeconomic statistics, a liability is not
recognized until a claim by the counterparty exists.
Maintaining symmetry in the macroeconomic sta-
tistical system is a fundamental principle. Th erefore,