bpm6 accounting principles time of recording of flows and valuation course on balance of payments...
Post on 28-Dec-2015
214 Views
Preview:
TRANSCRIPT
BPM6 Accounting PrinciplesTime of Recording of Flows and Valuation
Course on Balance of Payments and International Investment Position Manual
(BPM6)
IMF-PFTACNadi
November 22-December 1, 2010
BP03b
Introduction
Time of Recording of Flows Alternative recording basis Use of accrual accounting and its application to
Goods Services Primary income and transfers Financial assets Other flows
Timing adjustments04/19/23 2
Introduction cont.
Valuation Transactions Positions Other flows Unit of Account and Currency Conversion
Changes from BPM5
04/19/23 3
Timing
Everything is in the timing Rules to determine when flows occur Ensure in quadruple accounts that all flows are
recorded simultaneously
04/19/23 4
Timing: There are four basis
Accrual the time economic value is created, transformed,
exchanged, transferred, or extinguished Due-for-payment
time the payments fall due Commitment
when a unit has committed itself to a transaction Cash
when cash is received or disbursed04/19/23 5
Accrual is internationally recommended
The change of economic ownership is central in determining the time of recording on an accrual basis for transactions in goods, nonproduced nonfinancial assets, and financial assets.
04/19/23 6
Timing: Accrual accounting, Goods
The time when economic ownership occurs When the parties enter the goods in their books and
make a corresponding change to their financial assets and liabilities
High value goods and construction As agreed to by the parties
A difference in timing between the change of ownership and payments may give rise to trade credit and advances
04/19/23 7
Timing: Accrual accounting, Goods Cont.
When goods cross border - an approximation Goods on consignment - when ownership changes Goods under financial lease – inception of lease Goods for processing – no change of ownership Goods moved between parent & branch - who
assumes the risks and rewards Merchanting - when purchases and sales are
recorded.04/19/23 8
Timing: Accrual accounting, Services
Services are recorded when provided Services may be
Discrete period services (e.g. some transport) Continuous services (construction, operating
leasing, and insurance) For continuous services there may be advance
payments or settlements at later dates
04/19/23 9
Timing: Accrual, Primary inc. & transfers
Distributive transactions are recorded at the moment the related claims arise. For some As amount payable accrues
Compensation of employees, interest, social contributions and benefits, reinvested earnings, & interest
On the unit’s decision as to when to distribute Dividends when shares go exdividend Withdrawals from quasicorporations when they occur
04/19/23 10
Timing: Accrual, Primary inc. & trans Cont.
Taxes and transfers generally when income is earned. However, flexibility may be needed.
Grants Generally when corresponding entry is made
04/19/23 11
Timing: Accrual, Financial assets
Transactions (including payments of cash) - when economic ownership changes
Trade credit may be implicit -in some cases Float – the date creditor receives payment Securities – when ownership changes, and as a proxy
settlement may be ok, but not always Arrears – this depends on the contract Activation of guarantees - in some circumstances Employee stock options – at grant date
04/19/23 12
Timing: Accrual, Other flows
Volume changes, including reclassifications, are recorded as these changes occur.
Revaluations Can occur continuously as prices and exchange rates
change. In practice, revaluations are usually computed
between two points in time at which the relevant assets/liabilities are valued.
04/19/23 13
Timing adjustments
Timing adjustments are made to international merchandise trade statistics when practices in customs statistics lead to distortions Ships and aircraft Goods on consignment if not sold
Adjustments may also be made to ITRS data
04/19/23 14
Valuation: Transactions
Market prices are the basis for valuation in the international accounts Current exchange value, i.e., the values at which
goods and other assets, services, and labours are exchanged or else could be exchanged for cash. Willing buyers and seller Independent parties Commercial considerations only — “at arm’s length.”
04/19/23 15
Valuation: Transactions Cont.
Market prices Cont.
Transactions that involve dumping and discounting represent market prices
Market price is the price payable by the buyer after taking into account any rebates, refunds, adjustments, etc. from the seller.
Imports and exports of general merchandise are recorded at FOB values, which take into account any export taxes payable or any tax rebates receivable
04/19/23 16
Valuation: Transactions Cont.
Market prices Cont.
Explicit fees in financial assets transactions should be excluded and recorded separately
Use of market-price-equivalents Barter Grant and donation in kind - cost of acquisition, or donors’
value Goods under financial lease – market prices at the time of
acquisition, written down current, or present value of expected future returns
04/19/23 17
Valuation: Transactions Cont.
Market prices Cont.
Goods sold under contract - price is unknown. Initially price is estimated and revised when known
Prices may be under-or over invoiced. An adjustment should be made and corresponding
adjustments in other accounts
04/19/23 18
Valuation: Positions
Financial assets and liabilities Mainly should be valued as if they were acquired in market
transactions on the balance sheet date. For equity and securities record
Price quotation (where asset is regularly traded), Fair value (where not), or The present value of future cash flows
Market values, fair values, and nominal values should be distinguished from such notions as amortized values, face values, book values, and historic cost
04/19/23 19
Valuation: Positions Cont.
Debt securities include negotiable de facto loans, reclassified to securities
Record at nominal value Loan – incl. nonperforming loans Deposits and accounts receivable/payable,
including those at institutions in liquidation until they are written off
04/19/23 20
Valuation: Positions Cont.
Where market and nominal rates diverge, publish memorandum series
Where valuation does not comply with market value (commercial, supervisory, tax, or other accounting standards) they should be adjusted
Where spreads are involved, use midpoint rate. The spread is an implicit service fee
04/19/23 21
Valuation: Other flows
Holding gains and losses Arising from changes in market values May accrue continuously. But are calculated between two points in time
Valuation changes may record the difference between nominal and transaction value
Other changes in the volume are recorded at the market-equivalent prices
04/19/23 22
Valuation: Other flows Cont.
For writing-off of financial instruments that are valued at nominal values, the value recorded in the other changes should correspond to their nominal value prior to being written off.
For all reclassifications of assets and liabilities, values of both the new and old instruments should be the same
04/19/23 23
Unit of Account & Currency Conversion
Unit of account Domestic vs. foreign currency Currency conversion principles
04/19/23 24
Unit of Account
Is the currency in which the statistics are expressed Domestic currency Foreign currency (e.g. USD, even SDRs)
For international comparison, a standard (stable) currency needs to be used
04/19/23 25
Domestic vs. foreign currency Domestic currency
Is the legal tender in an economy issued by the monetary authority
All other currencies are foreign currencies Where in Pacific countries, the US, Oz or NZ dollar is
legal tender, they are a foreign currency Gold type accounts - in foreign currency
Note the distinction currency of denomination/currency of settlement
04/19/23 26
Currency conversion
For converting from foreign currency to domestic currency Flows - rate prevailing when the flows take place Positions - rate prevailing at balance sheet date Midpoint (buying and selling) rate should be used Transactions at the date they occur
In principle and in practice ...
04/19/23 27
Currency conversion Cont.
Derived measures are calculated by subtracting one type of flow from another
A multiple exchange rate regime, including black market regimes, need to take into account the implicit taxes and subsidies
04/19/23 28
Timing & Valuation: Changes from BPM5
Timing Dividends – when stocks or shares go ex-dividend Repayments of debts when they are extinguished
rather than when due i.e. paid, rescheduled, or forgiven
Activation of one-off guarantees clarified
04/19/23 29
Timing & Valuation: Changes - BPM5 Cont.
Valuation - currency Definition - domestic & foreign currencies provided
Currency union issues related to definition of domestic/foreign currency discussed
Currency conversion is clarified for exchanges, continuous transactions, other flows, including revaluations, and positions
Terms “currency of denomination” and “currency of settlement” are introduced and their use explained
04/19/23 30
top related