GROUP 3 ACCT1002 document 2010 final draft 1

GROUP 3 ACCT1002 document 2010 final draft 1 - GROUP 3...

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GROUP 3 NEWSPAPER TASK ‘ACCOUNTABLE TO NO ONE’ Group Members: Rebecca Linigen 306142589 Sam Mcowan Dinghua Xiao
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INTRODUCTION As Tony Harris simply states in the first line of his article, “Governments try to avoid accountability by abusing accounting rules”. Throughout this article, Harris attempts to outline a various number of instances where the Australian Government has mislead the general public, changing or manipulating certain monetary figures for the purpose of protecting their own integrity. Ultimately, it comes down to the promises that certain Politicians convincingly propose and the extent at which they decide to abide by their own policies, whether ethical or not. ACCOUNTING ISSUES As we are dealing with a government budget rather than a company’s financial statements, our focus is on deficits and surpluses rather than profit and loss. The most significant accounting issue is the misclassification of taxes in government’s budgets. Due to pledges made by Political parties such as Costello’s ‘no new taxes’, a 15% superannuation surcharge was not classed as a tax in Peter Costello’s first budget. Dependant on whether the government’s fiscal policy was neutral, expansionary or contractionary, the declaration of a tax would not only misrepresent their political promises, but affect the balance of the budget, which in turn may result in a surplus or deficit (Mackenzie 1989). Recently, a proposed maternity leave policy was put forward as a levy in classification, rather than a tax, which the corresponding 1.7 percent increase in company tax would suggest. The motivations behind this again lay in party promises, as the opposition had pledged in 1996 that they would introduce no new taxes. Another pertinent accounting issue relates to the classification of borrowings for the proposed $43 billion investment in a national broadband network. These borrowings will be recognised as liabilities in the government’s general statement of financial position, thus ensuring that any reduction in the value of the broadband network if unprofitable will not increase budget deficits. The classification of spending for example in the national broadband network makes analysts unable to track the consequences of government spending, as the budget documents provide limited detail on reasons behind changes in balance sheet items. Essentially the government avoid accountability by avoiding accounting. A major flaw in budget documents is the scarcity of information on below the line funding of government programs (Harris
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2010). Under previous accounting standards, any policy expenditures were treated as either decreasing surpluses or increasing deficits, but under current accounting standards, governments are able to use
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This note was uploaded on 06/10/2011 for the course ACCT 1002 taught by Professor Angela during the Three '10 term at University of Sydney.

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GROUP 3 ACCT1002 document 2010 final draft 1 - GROUP 3...

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