2.166. Depreciation is recorded as an expense and as a negative component of net acquisition of non-financial assets. This ensures its exclusion from GFS net lending(+)/borrowing(-), which is derived as the GFS net operating result plus net acquisition of non-financial assets.
2.167. Changes in inventories refers to the change in the value of inventories arising from transactions over the accounting period. It is recorded as part of net acquisition of non-financial assets because it represents a change to the public sector’s assets during the accounting period. As previously discussed, usage rather than purchases of inventories is included as an expense and a component of the GFS net operating balance. Adding changes in inventories to net acquisition of non-financial assets therefore ensures that GFS net lending(+)/borrowing(-) reflects the net purchases (purchases less sales) of inventories in the accounting period.
2.168. As shown in table 2.4, the cash flow statement identifies the cash flows from the operating, investing and financing activities of government. ‘Cash’ refers to cash on hand and cash equivalents. Cash equivalents are highly liquid investments which are readily convertible to cash on hand at the investor’s option.
2.169. ‘Operating activities’ are the types of activities recorded in the operating statement. Cash flows from operating activities include cash receipts from taxation, sales of goods and services, grants and subsidies, property income, and all other revenue earning activities recorded in the operating statement. The item also includes cash payments for employee expenses, including cash contributions to superannuation schemes, purchases of goods and services, and payment of subsidies and grants, current and capital transfers, property expenses and all other expense-incurring activities recorded in the operating statement. Cash flows related to acquisition and disposal of non-financial assets (other than inventories), financial assets, liabilities and equity, are excluded.
2.170. Cash flows from investments in non-financial assets is a net measure representing cash receipts from sales of non-financial assets less cash payments for acquisition of non-financial assets. Non-financial assets are defined in the section ahead relating to the balance sheet. Receipts from sales of non-financial assets include disposal of previously rented dwellings, non-residential buildings, used plant and equipment, and sales of land (including the sale of residential leases in the ACT). Payments for acquisition of non-financial assets includes payments for acquisition of new and second-hand assets, non-produced assets such as land, mineral deposits, timber tracts, and patents and copyrights. Included are capitalised payments for employee read this post here and non-employee expenses associated with capital works. The item includes reimbursements received by public authorities, for amounts spent on capital works, while acting as an agent for other government and private bodies.
Cash on hand includes notes and coins held, and deposits held at call with a bank or financial institution
2.171. Cash flows from investments in financial assets for policy purposes refers to cash receipts from repayment and liquidations of investments in financial assets for policy purposes less cash payments for acquiring financial assets for policy purposes. Acquisition of financial assets for policy purposes is distinguished from investments by the underlying government motivation for acquiring the assets. Acquisition of financial assets for policy purposes is motivated by government policies such as encouraging the development of certain industries or assisting citizens affected by natural disaster. On the other hand, investments are motivated by a desire to maximise returns on surplus funds.
Cash flows from operating activities is a net measure representing cash receipts arising from operating activities less cash payments arising from operating activities
2.172. Acquisitions of financial assets, other than equity, for policy purposes are called ‘advances’. Advances can be made by public authorities to persons, private schools, religious organisations, etc. (e.g. for housing, school building). They include loans for the purchase of homes (e.g. Commissioner for Housing loans in the ACT), war service land settlement and, occasionally, for the purchase of assets sold to persons and non-profit institutions. Advances are often made by public sector units to other public sector units, for example one level of government to another and between units at the same level of government (e.g. general government to public corporations). Included also is provision of funds to public financial corporations for re-lending. Advances can also be made to foreign governments and organisations, such as when subscriptions are made to the International Bank for Reconstruction and Development and the International Development Association.