The accrual-based consolidated accounts for the financial year 2003-04 have reported a surplus of $9.5 billion, a difference of $49.6 billion from the cash-based deficit of $40.1 billion.

Despite the small surplus, the structural deficit problem remains a concern and the Government's operating revenue has not been able to match operating expenditure.

In the accrual-based consolidated accounts for the financial year 2003-04 published today, the statement of financial performance reported a surplus of $9.5 billion whereas the cash-based accounts showed a deficit of $40.1 billion.

The turnaround, with a difference of $49.6 billion, from a cash-based deficit to an accrual-based surplus is mainly due to the inclusion of the surplus of the Exchange Fund which more than offset the provisions for expenses in the accrual accounts.

Government net assets at $672.2b

According to the statement of financial position, the Government's net assets stood at $672.2 billion on March 31. These assets were represented by three reserves: general reserve of $155.9 billion, Exchange Fund reserve of $396.1 billion and capital expenditure reserve of $120.2 billion.

The general reserve was $119.4 billion less than the fiscal reserves of $275.3 billion as reported in the cash-based accounts, owing to the inclusion of the Government's liabilities such as pensions and untaken staff leave, offset partly by financial assets such as investments in MTR Corporation Limited and the Airport Authority not recognised in the cash-based accounts.

The cash resources available for the Government's spending at March 31 remained to be the fiscal reserves of $275.3 billion.

The publication of the accrual-based accounts followed the recommendations of the report Review of Government Financial Reporting Policy published in June 2002 after public consultation.

Accrual-based accounts present more information

The cash-based accounts serve mainly to show that money has been paid within the limits and ambits approved by the legislature.

The accrual-based accounts, on the other hand, aim to present more comprehensive information on the Government's financial position and performance.

The cash-based accounts cover the general revenue account and the funds established under section 29 of the Public Finance Ordinance. In addition to these funds, the accrual-based accounts include the Exchange Fund, the Housing Authority, government business enterprises such as the MTR Corporation Limited and Kowloon-Canton Railway Corporation, and other government funds such as the Quality Education Fund.

There are also more disclosures of the Government's assets and liabilities in the accrual-based accounts, such as the provision for pensions.

2004-05 accounts to include stewardship statement

The Government will refine the accrual accounts on a progressive basis. Starting with the accounts for 2004-05, government-owned fixed assets and depreciation will be included, and a stewardship statement describing in terms of physical measurements the major items such as land, buildings and infrastructure assets employed by the Government in the delivery of public services will be published.

A post-implementation review will be carried out in 2006-07 to take stock of the results achieved and identify areas for further improvement.