GFS treatment allowed the revaluation of these liabilities every five to seven

Gfs treatment allowed the revaluation of these

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GFS treatments of unfunded superannuation liabilities. GFS treatment allowed the revaluation of these liabilities every five to seven years, using a discount rate over which the respective government had some influence. The GAAP treatment, however, required discounting of this liability at the Commonwealth bond rate at every reporting date. According to the HoT, the liability was subjected to greater volatility and was more likely to have a negative impact on results in budgets and financial reports. This led to political pressure on the HoT (Interview 17/11/2010): “This unfunded super stuff is a case in point. The thing that really made it difficult for me to be able to maintain my position was at about that time, there were a number of major US firms who were effectively sprung using excessively high earning rates to value their liabilities. So instead of using a reasonable long- term earning rate to discount their liabilities, they were using quite high double
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218 digit type numbers. But because their assets were never going to earn that sort of rate, were under-reporting the value of the liabilities, and when you look at the differences between what was happening in a cash sense, and these reported numbers, and they got into trouble, and General Motors was a case in point.” Interviews suggested that HoTs predominantly preferred the GFS system, as they were mostly economists. One interviewee reported that during the late 1990s and early 2000s, there was only one HoT who had an accounting background. Ultimately, all jurisdictions supported GAAP/GFS harmonisation. Interview data indicated that HoT members were well aware of the importance of lobbying the wider policy community and to influence the FRC. One HoT (Interview 03/12/2010, emphasis added) noted: “I think there was a common view amongst Heads of Treasury that we needed to find a solution to having two different basis of reporting. Now, to do that it was clearly necessary to work with the accounting profession and the standard setting bodies to the maximum extent possible, get them to harmonise with the GFS basis of reporting because we really needed to basically influence the way in which the accounting standards were being framed and the reporting standards were being framed. So to do that, we needed to have a high level of engagement with the accounting profession including through the FRC. And given that the FRC provided strategic direction to the AASB, it was important to use them as a way of seeking to progress this agenda of greater harmonisation between the two bases of reporting . This last sentence emphasises the status of HoTs. They were an important player in the GAAP/GFS harmonisation agenda setting process and were part of the emerging epistemic community, which lobbied for the project. It also shows the political sophistication of at least one of its members. It is reasonable to assume that HoTs have some political sophistication because of the nature of their position. They have close interaction with politicians and need to negotiate the jurisdictions’ finances with a range of constituents.
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  • Fall '13
  • Government, The Land, International Financial Reporting Standards, Financial Accounting Standards Board, Australian Accounting Standards Board, Snow

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