government finance statistics

Copyright 2010, The World Bank Group. All Rights Reserved.

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GOVERNMENT FINANCE STATISTICS

TRANSACTIONS IN NONFINANCIAL ASSETS

Part 1

This lecture discusses the principles for recording GFS transactions in nonfinancial assets.


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THIS LECTURE

The previous lecture, on the Balance Sheet, discussed the principles and classification categories used to record and present the stock of assets and liabilities included in the GFS system. This lecture describes the transactions in nonfinancial assets and the principles and classification categories used to record them.


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• As an integrated system, the GFS system includes all the flows necessary to explain all changes between the balance sheet at the end of one period and the balance sheet at the end of the next period.

• Both, transactions and other economic flows, can affect stocks of assets and liabilities.

• This lecture describes the transactions that affect holdings of nonfinancial assets.

TRANSACTIONS ONLY


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TYPES OF TRANSACTIONS

The more important types of transactions in nonfinancial assets are:

- Assets acquired from other units by purchase, barter, payment in kind, or transfer,

- Assets sold or otherwise disposed of by their producers,

- Major renovations, reconstructions, or enlargements of assets,- Consumption of fixed capital,

- Inventories internal transactions and transactions with other units.


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TERMINOLOGY

• All transactions that increase a unit’s holdings of assets are labeled acquisitions.

• All transactions that decrease a unit’s holdings of assets are labeled disposals.


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VALUATION

• Acquisitions of nonfinancial assets, other than inventories, are valued at their exchange price plus all transport and installation charges.

• Assets produced on own account are valued at their cost of production.

• Disposals of existing nonfinancial assets are valued at their exchange value less any costs of ownership transfer.

• Additions to and withdrawals from inventories are valued at the prices applicable at the time of the addition or withdrawal.


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NONMARKET DISPOSALS

Purchases or sales of assets as part of fiscal policy involve a transfer component.


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TIME OF RECORDING

• For transactions in nonfinancial assets, time of recording is when the ownership of the nonfinancial assets is obtained or relinquished.

• The time of recording of the acquisition of a new nonfinancial asset depends on how the asset is acquired:

- Whether the asset is acquired from the producing unit as afinished good,

- Whether produced by another unit over more than one accounting period,

- Whether produced on own account.


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• Consumption of fixed capital, in principle, should be recorded continuously throughout each accounting period.

• Fixed assets acquired or disposed of by means of a financial lease are deemed to be acquired or disposed of when the lease is signed or control of the asset otherwise changes hands.

TIME OF RECORDING (cont’d)


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CONSUMPTION OF FIXED CAPITAL

• Because it is an internal transaction, consumption of fixed capital is recorded as an expense and as a transaction in nonfinancial assets.

• Consumption of fixed capital is valued in the average prices of the period.

• Consumption of fixed capital is the decrease in the present value of the remaining expected rentals the owner of a fixed asset could expect.


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• Consumption of fixed capital is estimated with respect to all tangible and intangible fixed assets.

• Consumption of fixed capital excludes the loss of value when fixed assets are destroyed.

• Linear or geometric patterns of decline, or some combination of them, are the most commonly assumed in calculating the decline in the service life of nonfinancial assets.

CONSUMPTION OF FIXED CAPITAL


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NETTING OF FLOWS

• It is recommended that transactions in nonfinancial assets other than inventories be classified as acquisitions, disposals, and consumption of fixed capital.

•The net of those three components is used in the presentation of balance sheet data.

• Changes in inventories should be netted.

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