Other operating expenses, including depreciation of $2,100 million in 1974 and $2,000 million in 1973 (Note 10) UNITED STATES GOVERNMENT Notes to Illustrative Consolidated Financial Statements 1. SOURCES OF DATA (Unaudited) June 30, 1974 and 1973 The United States Government does not have a centralized accounting system which would furnish data necessary for the preparation of consolidated financial statements on an accrual basis. The asset and liability amounts included herein were obtained from several sources within the Government. For some agencies, numbers purporting to reflect the same items were available from more than one source and differed as to amount. In such instances, the sources which appeared to be the most reliable were used. 2. PRINCIPLES OF CONSOLIDATION The accompanying financial statements include the accounts of all sig. nificant agencies and funds included in the Unified Budget of the United States Government, plus those of the traditional "off budget" agencies and the Federal Reserve System. Government-sponsored enterprises such as Federal Land Banks have been excluded because they are privately owned. Amounts reflected are as of June 30, 1974 and 1973, except for the Federal Reserve System, which reports on a calendar-year basis and for which December 31, 1973 and 1972, amounts were used. Intragovernmental assets, liabilities and revenue/expense items of significance have been eliminated in consolidation. The Federal Reserve System (which operates independently from the Executive and Legislative branches of the Government) has been included in the accompanying financial statements because of the interrelation. ships between the Federal Reserve System and the Treasury. a. A large portion of the Federal debt is held by Federal Reserve banks. b. Virtually all of the gold has been "pledged" to the Federal Reserve banks in return for Treasury demand deposits. c. The net income of the Federal Reserve System is transferred annually to the Treasury. d. In the event of liquidation, after capital contributed by member banks is returned, residuals of Federal Reserve banks would be transferred to the Treasury. The effect of including the Federal Reserve System in the consolidated balance sheet as of June 30, 1974, is summarized below. Government trust funds have been included in the accompanying consolidated financial statements. This reporting has been adopted because the trust funds are included in the Unified Budget and because the assets in such funds are almost exclusively Federal debt securities. In substance, the Government trust funds serve as segregated accounts for specific purposes rather than as trusts. 3. GOLD Gold has been recorded at the official rate established by Congress ($42.22 per ounce at June 30, 1974, and $38.00 per ounce at June 30, 1973). Although the free market rate for gold is currently much higher, a different rate was not used because (1) the official rate is the basis upon which the Treasury uses the gold as security to increase its demand deposits with the Federal Reserve (most of the gold has been utilized in this way) and (2) it is not possible to determine what effect sales of the Treasury's gold would have on the free market price and, therefore, what alternative value would be appropriate. If the free market rate as of June 30, 1974, of $144.50 per ounce had been used, the aggregate carrying value of gold would have been $39,586 million. The effect of the change in the official rate for gold between June 30, 1973, and June 30, 1974, is reflected as revenue of the Government in the accompanying consolidated statement of revenues and expenses because such a valuation increase allows the Treasury to increase its cash balances. 4. TAXES RECEIVABLE The total for taxes receivable includes $5.0 billion (net) for delinquent taxes owed and $10.0 billion of accrued corporate income taxes receivable as of June 30, 1974; the comparable amounts as of June 30, 1973, were $5.1 billion and $7.7 billion, respectively. No accrual has been made for individual income taxes because of the payroll withholding system. Also, assessed tax deficiencies pending settlement have not been included in receivables because the ultimate settlement value is indeterminable. 5. LOANS RECEIVABLE Interest rates and loan repayment terms vary considerably for outstanding loans, with rates ranging from zero to 12.0% and terms from as short as 90 days to well over 40 years. The longer terms and lower rates generally apply to loans to foreign governments. Outstanding balances and allowances for losses have been recorded as reported by the various lending agencies. No attempt has been made to evaluate collectibility or the adequacy of the allowances for losses. Loans outstanding are summarized below by major classification of borrower. |