Costs and revenues are presented in the Financial Report on an accrual basis, while the budget presents outlays and receipts, generally on a cash basis. The accrual basis of accounting is an accounting method that reflects expenses (costs) incurred and income (revenue) earned for a period. The cash basis reflects expenses (costs) paid and income (revenue) received for that period.
The consolidated financial statements consist of the accrual-based and sustainability statements. Collectively, the accrual-based financial statements, the sustainability financial statements, and the Notes to the Financial Statements represent basic information that is deemed essential for the consolidated financial statements to be presented in conformity with GAAP.
The accrual-based financial statements are: Statement of Net Cost, Statement of Operations & Changes in Net Position, Balance Sheet, Reconciliation of Net Operating Cost & Budget Deficit, and Statement of Changes in Cash Balance from Budget & Other Activities. They present historical information on what the federal government owns (assets) and owes (liabilities) at the end of the year, what came in (revenues) and what went out (net costs) during the year, and how accrual-based net operating costs of the federal government reconcile to the budget deficit and changes in its cash balance during the year.
The sustainability financial statements are: Statement of Long-Term Fiscal Projections, Statement of Social Insurance, and Statement of Changes in Social Insurance Amounts. They are designed to illustrate the relationship between projected receipts and expenditures if current policy is continued over a 75 year time horizon and are intended to help citizens understand current policy and the importance and magnitude of policy reforms necessary to make it sustainable. In preparing the sustainability financial statements, management selects assumptions and data that it believes provide a reasonable basis to illustrate whether current policy is sustainable. Current policy is based on current law, but includes several adjustments. Refer to the Notes to the Financial Statements in the published report for adjustment details. As the assumptions underlying these statements do not consider changes in policy or all potential future events that could affect future income, future expenditures, and, hence, sustainability, the projections do not reflect any adverse economic consequences resulting from continuously rising debt levels. A large number of factors affect the sustainability financial statements, and future events and circumstances cannot be estimated with certainty. Therefore, even if current policy is continued, there will be differences between the estimates in the sustainability financial statements and actual results, and those differences may be material.