50 Government Finance Statistics Manual 2014
administrative accounting system. For instance, data
on payments for the delivery of goods and services
may frequently be more readily available than data on
the time of delivery. But while statistics based on cash
fl ows are of analytical value in their own right they
do not fully meet the government’s reporting needs.
Th erefore, the statistics on the accrual basis should be
seen as necessary for the proper recording of all gov-
ernments’ operations.Using the accrual basis of recording in
the Statements of Operations and Other
Economic Flows, and Balance Sheet of the
GFS framework
3.69 Using the accrual basis of reporting provides
the most comprehensive information because all eco-
nomic events and resource fl ows are recorded, in-
cluding internal transactions, in-kind transactions,
and other economic fl ows. Moreover, it is only this
comprehensive recording framework that permits the
full integration of all fl ows with stock positions in the
balance sheet. In general, accounts using the commit-
ment, due-for-payment, or cash basis are restricted to
monetary transactions.
3.70 Th e integrated framework of GFS uses the
accrual basis, primarily because the time of record-
ing matches the time of the actual resource fl ows and
economic events. As a result, the accrual basis pro-
vides the best estimate of the macroeconomic impact
of government fi scal policy. With the cash basis, the
time of recording may diverge signifi cantly from the
time of the economic activities and the transactions
to which they relate. For example, the interest accrued
on a zero-coupon bond would not be recorded until
the bond matures, which could be many years aft er
the expense was incurred. Th e due-for-payment basis
will frequently record transactions aft er the resource
fl ows have taken place, although the very long delays
permitted by the cash basis would, in most cases, be
reduced. Th e timing of the commitments basis will
precede the actual resource fl ow.3.71 Th e accrual basis of recording also fully cap-
tures all amounts receivable or payable in arrears.
Arrears are defi ned as amounts that are both unpaid
and past the due date for payment. Because the due-
for-payment date is always the same or later than the
date attributed to a fl ow under the accrual basis, all
arrears will be included in statistics compiled usingthe accrual basis. Without supplementary informa-
tion, however, it may be diffi cult to estimate the share
of total accounts payable that is in arrears as opposed
to the share that exists because of normal payment
delays. By defi nition, the due-for-payment basis will
clearly show the arrears arising from purchases on in-
stallment plans, but arrears from the failure to repay
debt obligations as scheduled, such as loans and debt
securities, will not always be apparent without supple-
mental information. With the commitments basis, the
availability of information on arrears will be the same
as with the accrual basis. With the cash basis, there is
no impact on the accounts when a unit does not pay
for purchases made or comply with the terms for the
repayment of debt. Th us, there will be no information
on arrears unless special compilation eff ort is made.3.72 In accrual accounting systems, provision is
usually made for a separate statement of cash fl ows
to be prepared as part of the comprehensive suite of
statements—implementing accruals accounting sys-
tems therefore usually maintains some information
on cash fl ows. Managing liquidity is crucial for the
operation of any unit, and information on cash fl ows
helps meet this need. Moreover, it may be diffi cult
to assess solvency and future cash fl ows without an
accrual-based system because information on arrears
and on other accounts payable/receivable, such as trade
credits and advances, is missing.
3.73 Accounts using the due-for-payment, com-
mitments, or cash basis normally do not diff erentiate
between the time of payment, acquisition, and use
of resources. With the accrual basis, acquisitions of
nonfi nancial assets are recorded separately and the
expense of using those assets in operating activities
is matched with the period of their use through the
consumption of fi xed capital.
3.74 Additionally, the other major macroeconomic
statistical frameworks (national accounts, balance of
payments, and monetary and fi nancial statistics) use
the accrual basis. Th us, the consistency of statistics
from the diff erent systems is facilitated greatly by
sharing the use of the accrual basis for all the macro-
economic frameworks.
3.75 Despite the advantages of the accrual basis
of recording, its implementation is likely to be more
complex than the other bases of recording and may
require additional estimates. For example, it may