Transactions represent economic flows that are interactions between institutional units by mutual agreement or through the operation of the law (see Chapter 4 of this manual for further information on transactions). The GFS statement of operations records transactions that increase or decrease net worth in the form of revenue (ETF 11) and expenses (ETF 12), but excludes economic flows such as holding gains and losses (ETF 51) and other changes in the volume of assets and liabilities (ETF 52).

Revenue (ETF 11) is defined as an increase in net worth resulting from transactions. The main way that governments raise revenue is through the imposition of taxes on individuals and businesses, sales of goods and services, property income, other current revenue, and capital revenue.

Paragraph 4.23 of the IMF GFSM 2014 states that the disposal of a non-financial asset by sale or barter is not considered to be revenue because it has no effect on net worth. Rather, it changes the composition of the balance sheet by exchanging one asset (the non-financial asset) for another (the proceeds of the sale). Similarly, amounts receivable from loan repayments and loan disbursements are not considered to be revenue.

Expenses (ETF 12) are defined as the decrease in net worth resulting from transactions. The most common types of expenses for most public sector units are employee expenses and transfer expenses. Expenses are incurred by public sector units when supplying goods and services to the community.

Paragraph 6.2 of the IMF GFSM 2014 states that a government unit may generate expenses by producing goods and services itself and distributing them, purchasing them from a third party and distributing them, or transferring cash to households so they can purchase the goods and services directly.

Analytical aggregates are economic constructs that are obtained by calculating the sum and / or residual values of various GFS aggregates and are particularly useful in fiscal analysis. The analytical aggregates that are recorded in the GFS statement of operations are the net acquisition of non-financial assets, the GFS net operating balance, and GFS net lending (+) / net borrowing (-).

Non-financial assets are defined as economic assets other than financial assets. The net acquisition of nonfinancial assets records the transactions that change a government's net investment in non-financial assets. The calculation of the net acquisition of non-financial assets is shown in Table 5.1 below:

GFS net operating balance is a key analytical balance in the GFS statement of operations. It is derived by subtracting total expenses from total revenues in the GFS. The net operating balance may be positive or negative in value. When the net operating balance is positive, it indicates that surplus funds have been generated from current operations and are available to finance capital acquisitions. When the net operating balance is negative, it indicates that a shortfall has been incurred on current operations and that it has been necessary to liquidate assets, incur liabilities or increase equity in order to finance the operations. The net operating balance is comparable to the national accounts concept of saving plus net capital transfers receivable.

The gross operating balance is derived by adding depreciation (ETF 124) to the net operating balance. However, the net operating balance is the preferred measure because it captures all of the operating costs during the reporting period.

GFS net lending (+) / net borrowing (-) is the summary balance of GFS revenue minus GFS expenses minus transactions in non-financial assets. This is represented by the net operating balance minus the net acquisition of non-financial assets. The GFS net lending (+) / net borrowing (-) is equivalent in concept to the national accounting balance of the same name, but may not be equal in value due to some measurement differences for government. The GFS net lending (+) / net borrowing (-) position may be positive or negative. When positive, it indicates a surplus of funds that may be used to purchase assets and / or repay liabilities. When GFS net lending (+) / net borrowing (-) is negative, it indicates that there are insufficient funds available to finance current operations, and may require the liquidation of assets or the incurrence of liabilities to continue to fund current operations.

Gross fixed capital formation is measured as acquisitions of fixed produced assets (ETF 411, TALC 1) less disposals of fixed produced assets (ETF 421, TALC 1). Fixed produced assets are goods and services that are used in production for more than 1 year. Valuables are excluded from GFCF because, although they may be produced assets, valuables are not used in production. Although inventories form part of capital formation, they do not form part of GFCF because inventories have a production life of less than one year.

The broad classification of the statement of operations is presented in Table 5.2 below. The more detailed classification of revenue and expenses may be found in Chapter 6, Chapter 7 and Appendix 1 Part A of this manual.