In Australia, Governments prepare financial statements in accordance with two reporting frameworks: Australian Accounting Standards (AAS), based on generally accepted accounting principles (GAAP), and Government Finance Statistics (GFS).

In December 2002, the Financial Reporting Council issued a broad Strategic Direction that requires the Australian Accounting Standards Board (AASB) to pursue the harmonisation of GFS and AAS for public sector reporting.

The objective of harmonisation is to achieve an Australian Accounting Standard for a single set of Government reports which are auditable, comparable between jurisdictions, and in which the outcome statements are directly comparable with the relevant budget statements. The result will be an improvement in the quality, clarity and transparency of government financial statements, and will remove the source of confusion as to which set of financial reports presents a more reliable portrayal of financial results.

The AASB is currently developing plans for the implementation of this strategic direction to achieve an Australian Accounting Standard for a single set of government reports. To achieve this, it will draw on the best of GFS principles and existing AAS, including detailed recognition and measurement rules that are not part of the GFS framework. The AASB will issue exposure drafts and consult with constituents in accordance with its normal due process.

Updates on the GFS-GAAP harmonisation process can be found on the AASB Web site at www.aasb.com.au. An issues paper prepared by the Department of Treasury and Finance on GFS-GAAP Harmonisation is available .