Senator JOYCE—Returning to AASB 1049, at what point in time should an issue that you are aware of strike a feature on the budget financials and to what consequence should it hit the financials? I will give you two examples. Obviously, we have the emissions trading scheme. We have had evidence that that proposed scheme will be revenue positive. It is a government policy to introduce it in 2010, and it is on the record that it will be revenue positive. But they are not part of the financials, nor do they even get a notation in the budget papers. Why is that the case? I will give you a further working example. One of the government’s positions is that it has mothballed a major asset at Rockhampton, an undercover beef facility worth many millions of dollars. It was a very specialised asset in a very specialised area. I anticipate, being an old bush accountant, that they would definitely require a diminution of the asset. Under the accountancy standards, you have to reflect fair market value. Its fair market value is now obviously overtly influenced by the fact that we have a pointless facility stuck out in the scrub. But they also do not crack a feature or even a note on the financials. For those two instances—and this is my only question—can you give me your opinion as to whether they should have struck a feature on the budget papers and, if not, why not?

Talk
Prof. Boymal—Accounting standard 1049 is dealing with the reporting of outcomes. As an accountant, I would say it is dealing with historical occurrences. After the year is over and you report what the year looked like, that is accounting standard 1049. Accounting standard 1049 is not absolutely designed to deal with budgets. It is not a requirement that the budget be drawn up in accordance with 1049, although I do see that the budget papers have prepared the budget very much in accordance with accounting standard 1049. I emphasise again that 1049 is about historical accounting, not looking into the future.

In terms of emissions trading, and the budget, it is really a matter of government policy the extent to which the government would put into its budget matters that it has not as yet totally put into place. Therefore, it is not for me to comment on whether that ought to be there or not as a matter of government policy. In terms of your other example, if it is something that has already happened, a decision relating to assets—and that decision is already over and done with—then I would say that ought to be incorporated in the budget papers. But it has to be of a sufficient size to be, if you like, specified or to be able to be pinpointed in both the budget papers and the outcome papers.

Talk
Senator JOYCE—What standard should they use in prospective cash flow analysis if they are not using 1049?

Talk
Prof. Boymal—I think they probably should be using accounting standard 1049. But accounting standard 1049 was not written to deal with future numbers. I appreciate budgetary information is most important from a government point of view, but accounting standard 1049, whilst it does ask governments to indicate how their actual outcomes compare with their budgets, is not an accounting standard that says, ‘This is the way that your budget paper should be written.’

Talk
Senator JOYCE—They really have free rein in their prospectives that way.

Talk
Prof. Boymal—Yes.

Talk
Senator JOYCE—How do you feel about that?

Talk
Prof. Boymal—The government has chosen to use 1049. But that is not prescribed in this accounting standard.

Talk
Senator JOYCE—Are there other accounting standards in the public forum that are quite explicit about how you deal with prospective cash flows?

Talk
Prof. Boymal—I would say the answer is, no, there are not.

Talk
Senator JOYCE—In the financials of any company there are certainly accountancy standards on cash flow statements.

Talk
Prof. Boymal—Yes. But our standards deal with historical reporting. It is after it happens, not what is going to happen.

Talk
Senator JOYCE—When a decision is made that is going to happen, a decision is imminent, it is a decision of budget night and therefore the decision is made that there will be a change in the usage of an asset that will bring about a diminution of its value?

Talk
Prof. Boymal—Yes.

Talk
Senator JOYCE—Does that change have to be reflected in the budget papers under 1049?

Talk
Mr Thomson—There is a requirement in 1049 that, if a budget is made publicly available, then there is a comparison between that and the historical or outcome information that Mr Boymal spoke about. I guess if the budget papers did not reflect something that should have been written down and it was a material item, the outcomes prepared in accordance with 1049 would reflect that and, therefore, there would be a disclosure that there is a difference between what was budgeted and what the outcome was.

Talk
Senator JOYCE—Thank you very much for that.

Talk
CHAIR—Thank you for your attendance tonight. I will call the Takeovers Panel.

[6.19 pm]