15.10    Financial assets, for the most part, represent a contractual claim on another institutional unit (resident or non-resident) and entitle the holder to receive an agreed sum at an agreed date, with the exception being shares. Shares are treated as financial assets even though the financial claim their holders have on the corporation is not a fixed or predetermined monetary amount. Liabilities are the counterparts of financial assets and there are no non-financial liabilities recognised in the 2008 SNA; thus, the term 'liability' necessarily refers to a liability that is financial in nature.

15.11    The acquisition of a financial asset by an institutional unit involves a counterpart liability on the part of another institutional unit. Monetary gold is treated as a financial asset even though the holders do not have a claim on other designated units.⁵⁴ Because of the symmetry of financial claims and liabilities, the same classification is used to portray both assets and liabilities in the financial accounts and balance sheets. The ASNA adopts the 2008 SNA term "instrument" to relate to the asset or liability aspect of an item in the financial account and balance sheet.

15.12    The ASNA financial instrument classification follows that recommended in 2008 SNA with some adaptation to suit the Australian financial environment and ASNA compilation practices:

• where additional classification points are employed to provide more detail for debt securities to show "domicility" of securities (issued in Australia or issued offshore);
• to discriminate short-term securities between bills of exchange (three name paper) and other securities (one name paper);
• where the 2008 SNA instrument classification embeds counterparty sector information which ABS believes more properly belongs to the sector classification; for example, inter-ADI positions and investment funds shares and units; and
• because of lack of data or workload considerations, for example, there is no discrimination between shares and other equity.
   

15.13    The ASNA financial assets and liabilities are classified according to financial instruments as follows:

• monetary gold and SDRs;
• currency;
• transferable deposits and other deposits;
• short-term securities;
• long-term securities;
• short-term loans;
• long-term loans;
• derivatives;
• shares and other equity;
• insurance technical reserves; and
• trade credits and advances and other accounts receivable and payable.
   

15.14    The system also includes a sector and subsector classification of financial assets and liabilities, which categorises financial claims according to the sectors and subsectors of counterparties. Counterparties are the institutional units on which claims are held by creditors, and the institutional units holding claims against debtors.

15.15    Financial assets and liabilities attributable to foreign direct investment are not recorded separately within financial instrument categories.

15.16    Financial claims can be disaggregated into negotiable and non-negotiable instruments. A claim is negotiable if its legal ownership is readily capable of being transferred from one unit to another unit by delivery or endorsement. While any financial instrument can potentially be traded, negotiable instruments are designed to be traded on organised markets (such as the stock exchange) and other informal markets (often referred to as over-the-counter markets). Negotiability is a matter of the legal form of the instrument. Those financial claims that are negotiable are referred to as securities and include shares and debt securities.

15.17    In the financial accounts, transactions are recorded at the value actually exchanged; that is, market value. Exchange of value implies a change of ownership of an asset, and this is a central principle in classifying a change in value to either a transaction or other economic flow. Examples of changes of ownership include purchase/sale of shares, issue/take up of debt securities, deposit of cash in an ADI, and provision of funds in exchange for a mortgage for a housing loan. In the case of the financial accounts these transactions take place in formally organised financial markets (such as the stock exchange) or in informally organised markets (often referred to as over-the-counter markets), such as the market for ADI deposits.

15.18    The market value may differ from the contractual value of claims arising from the transaction. Examples include the sale value of shares compared to the par value of the shares, or the proceeds value of a debt security issue rather than the nominal value of the debt securities.

15.19    Transaction values are recorded without deducting transaction costs such as brokerage fees or commissions. This ensures that debtors and creditors record the same amount for the financial instrument. Such fees or commissions are treated as sales of services, which are current account transactions rather than financial account transactions. The valuation of financial instruments (excluding commission charges) differs from the valuation of non-financial assets, which includes any cost of ownership transfer.

15.20    The payments required under a contract relating to financial assets and liabilities almost always represent more than one transaction in the sense used in the 2008 SNA. Payments of interest on loans and deposits, as specified by financial institutions, involve both interest and a service fee, which is the service payment to the financial institution for making the loan available, or safeguarding the deposit. For some financial instruments, such as bonds, the increase in value over time is taken to represent interest, not simply a price increase in the value of the asset. Therefore, the value of the transactions in financial instruments recorded in the financial account excludes these service charges and interest payments.

15.21    The exchange of value is recorded on an accrual basis; that is, in the period when ownership changes. This may be different to when cash relating to the transaction is paid or falls due for payment. For example, an enforceable contract for the purchase/sale of shares comes into existence when a deal is struck on the stock exchange. This has to be settled two days later, and the settlement date may be in a different quarter to when the deal was made, giving rise to a further financial claim in the form of an account payable/receivable to bridge the settlement period.

15.22    Exchanges of financial assets are requited in the sense that the provision of a resource (say cash) is exchanged for an obligation or claim (share, deposit account balance, debt security or mortgage documentation). These claims are legally enforceable according to general commercial law or specific agreements between the parties. In some cases, the legal nature of the transaction and the economic effect of the transaction may be different. The 2008 SNA makes a small number of exceptions to the legal change of ownership principle to an economic change of ownership basis. For the financial accounts, the major exception is financial leasing, where the legalities of the transaction are modified such that the leased asset is deemed to have been sold to the lessee in exchange for a loan, or the financial lease. Commercial accounting standards also treat financial leasing in this manner.

15.23    Transactions for any particular class of transactor are recorded on a net basis in the financial accounts. For example, ADI deposit transactions are the net of new deposits less withdrawals, transactions in shares are the net of purchases and sales. For some economic analysis, the components of net transactions are of interest, and there are some limited data on gross transactions available on request, such as new share issues.

15.24    Stocks of financial assets and liabilities are valued using prices that are current on the date to which the balance sheet relates and that refer to specific assets. These prices should be observable prices on markets whenever such prices are available. In practice, there are some cases where the prices of analogous assets are used to estimate prices for assets where there are no observable prices.

15.25    A key principle for 2008 SNA, as outlined above, is to record financial transactions and stock at market valuation. A consequence of this is the role that the Revaluations account has in reconciling price changes in financial assets and liabilities during a period with stock values at the end of each period.

15.26    Revaluations occur when the price of financial assets and/or liabilities changes causing an increase or decrease in the stock value. Revaluations are an economic flow that does not result from a change of ownership. Examples of the causes of revaluation are share price changes and the impact of exchange rate changes on assets denominated in foreign currency. While not transactions, revaluations have a significant impact on stock values from period-to-period and may have a significant impact on economic behaviour. For example, the run-down in valuation of superannuation assets in response to a fall in the price of shares may result in employees deferring retirement.

15.27    Values of stocks of financial assets and liabilities may change over time through causes other than transactions and price changes. These changes in value are classified as Other changes in volumes (OCV). For financial assets and liabilities, the most significant OCV result from phenomena such as bad debt write-offs or corporate failures. In such cases, it is often difficult to distinguish between price changes (debt write down, share price fall) and OCV. In practice, the ASNA combines the known OCV with revaluations to account for non-transaction changes in stock value for financial assets and liabilities.

15.28    OCVs also record statistical artefacts; for example, sectoral classification changes that might occur through privatisation of a public sector corporation. Although the change in classification may be the result of transactions (such as share sales), treating the reclassification of all the assets and liabilities represented by the share value as transactions is not a satisfactory explanation of what has occurred. Another statistical artefact arises in discontinuities in time series that arise because of the workloads involved in maintaining consistency over the full period of long time series. At some point in the time series, the inconsistency in treatment between opening and closing stocks will be allocated to OCV, rather than being allowed to contaminate the transaction series.

15.29    See Chapter 16 for more information on revaluation and other changes in volumes.

15.30    The institutional sector classification used in the financial accounts and balance sheets is the same as that used in the rest of the ASNA and the SESCA:

• non-financial corporations;
• financial corporations;
• general government;
• households (including non-profit institutions serving households); and
• rest of the world.
   

15.31    In the financial accounts and balance sheets, the non-financial corporations, financial corporations and general government sectors are broken down into subsectors, as shown below:

• Non-financial corporations
  • Private
    • Non-financial investment funds
    • Other private non-financial corporations
  • Public
• Financial corporations
  • Central bank
  • Authorised deposit-taking institutions (ADIs)
  • Other broad money institutions
  • Pension funds
  • Life insurance corporations
  • Non-life insurance corporations
  • Money market financial investment funds
  • Non-money market financial investment funds
  • Central borrowing authorities
  • Securitisers
  • Other financial corporations
• General government
  • National
  • State and local.
     

15.32    The institutional sector and subsector classification shown above is also used to classify the counterparty transactions and positions shown for each institutional sector and subsectors. Chapter 4 provides a description of the sectors and subsectors used in the financial accounts.

15.33    As financial transactions and other flows take place between institutional units, and financial positions are held between institutional units, the transactions, flows and positions are classified to the sectoral classification twice, once from the asset holder's point of view and the other from the liability issuer's point of view. For example, household deposits with ADIs are classified to household sector assets and ADI sector liabilities as a party/counterparty pair. The double classification is applied symmetrically for parties and counterparties to flows or positions.

15.34    In the formal sectoral presentation of the financial accounts, all transactions and positions between entities in the same subsector or each successive aggregation of subsectors is eliminated. Consider an ADI that incurs a deposit liability and in turn places the funds on deposit with another, but unrelated, ADI. The question of ''what is the value of ADI sector deposits'' is most properly answered from a sectoral behaviour point of view by consolidation (elimination) of the intra-ADI sector deposits. One consequence of this type of consolidation is that aggregation of subsectors to broad sectors, say all subsectors of the financial corporations sector, will produce a lower aggregate value for a particular transaction category than the simple summation of the components. Consolidation of financial accounts for all domestic sectors to a whole of economy aggregate will result in an exact counterpart to the Rest of World accounts.

15.35    For some types of economic analysis, the formal sectoral consolidation has some drawbacks. For financial market analysis, say, for determining potential for issuing various instruments, it is useful to know the gross rather than net size of the market. The entries eliminated in the example given above are thus retained for the financial accounts presentation of financial instrument markets data. The ADI deposits markets table will disclose the value of ADI deposits with ADIs.

15.36    The compilation of the financial accounts and financial balance sheets are mainly based on administrative data collected by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001, and ABS statistical surveys. Of particular importance are the ABS Survey of Financial Information (SFI) and the Survey of International Investment (SII), both of which are conducted quarterly. Other data sources are used to supplement the ABS and APRA sources, such as market capitalisation for different sector and subsector share issuance from the Australian Securities Exchange; information on Commonwealth Government from ledgers obtained from Government Finance Statistics; and bond price indexes from private financial market analysts.

15.37    Balance sheet information:

• from the ABS Survey of Financial Information – Non-Market Investment Funds; and
• supplementary counterparty and market capitalisation information from the Australian Securities Exchange (ASX), annual company reports and the ABS Survey of International Investment.

15.38    Balance sheet information:

• from the ABS Survey of Financial Information – Non-Market Investment Funds; and
• supplementary counterparty and market capitalisation information from the Australian Securities Exchange (ASX), annual company reports and the ABS Survey of International Investment

15.39    Balance sheet information:

• from the ABS Survey of Financial Information – Government and Other Entities; and
• supplementary counterparty information from Central Borrowing Authorities (CBAs), the ABS Survey of International Investment and annual reports of State and Territory housing authorities.

15.40    Balance sheet information:

• from the ABS Survey of Financial Information – Reserve Bank of Australia (RBA); and
• supplementary counterparty information from the ABS Survey of International Investment.

15.41    Balance sheet information:

• from the suite of returns submitted by banks, credit unions and building societies under the monthly APRA Economic and Financial Statistics (EFS) collection; and
• supplementary counterparty information from the ABS Survey of International Investment.

15.42    Balance sheet information:

• from the suite of returns submitted by Registered Financial Corporations (RFCs) under the monthly APRA Economic and Financial Statistics (EFS) collection (only units with total assets greater than $50 million are required to submit a return to APRA); and
• supplementary counterparty information from the ABS Survey of International Investment.

15.43    Balance sheet information:

• from returns submitted by registrable superannuation entities under the quarterly APRA Superannuation Reporting Standards (SRF 320.0 Statement of Financial Position) and;
• from annual returns submitted by regulated self-managed superannuation funds to the Australian Taxation Office (ATO), to which the ABS-modelled quarterly estimates are benchmarked.

15.44    Balance sheet information:

• from the ABS Survey of Financial Information – Life Insurance Companies and Friendly Societies; and
• supplementary information for total assets submitted under the quarterly APRA Statement of Financial Position.

15.45    Balance sheet information:

• from returns submitted by private general insurers under the quarterly APRA Statement of Financial Position – General Insurance;
• from the ABS Survey of Financial Information – Government and Other Entities for public insurers; and
• from the quarterly APRA private health insurance statistics publication

15.46    Balance sheet information from the ABS Survey of Financial Information – Money Market Funds.

15.47    Balance sheet information from:

• the ABS Survey of Financial Information – Non-Money Market Funds;
• Supplementary counterparty information from market capitalisation information from the Australian Securities Exchange, and the ABS Survey of International Investment; and
• counterparty information from domestic investors (such as pension funds, life insurance corporations and other investment funds) of wholesale trusts with assets of wholesale trusts modelled using the ABS Survey of Financial Information – Investment Managers.

15.48    Balance sheet information:

• from the ABS Survey of Financial Information – Government and Other Entities;
• quarterly data on semi-government bonds on issue from State government Treasury Corporations; and
• supplementary counterparty information from ADIs and the ABS Survey of International Investment.

15.49    Balance sheet information from:

• the ABS Survey of Financial Information – Securitisers; and
• supplementary counterparty information from the ABS Survey of International Investment.

15.50    Balance sheet information:

• for financial auxiliaries, from the ABS Survey of Financial Information – Investment Managers;
• for public sector units, from the ABS Survey of Financial Information – Government and Other Entities; and
• supplementary counterparty and market capitalisation information from the Australian Securities Exchange (ASX); ADIs; securitisers; Sydney Futures Exchange (SFE); and the ABS Survey of International Investment.

15.51    Balance sheet information from:

• the ABS Survey of Financial Information – Government and Other Entities;
• Commonwealth government ledgers from Government Finance Statistics (GFS);
• Australian Office of Financial Management (AOFM); and
• supplementary counterparty information from the RBA; ADIs; and the ABS Survey of International Investment.

15.52    Balance sheet information from:

• from the ABS Survey of Financial Information – Government and Other Entities;
• State and local general government balance sheet estimates from Government Finance Statistics (GFS); and
• supplementary counterparty information from central borrowing authorities, National general government and ADIs.

15.53    Information from:

• supplementary counterparty information from RBA; ADIs; securitisers; National general government; and the ABS Survey of International Investment;
• residual allocation of transactions and holdings of securities; and
• allocation of insurance technical reserves from compilation models.

15.54    Balance sheet information from:

• from the ABS Survey of International Investment; and
• supplementary counterparty information from domestic sectors (such as pension funds, life insurance corporations and non-money market investment funds).

15.55    There is no balance sheet source data from small non-financial corporations; solicitors and similar trust funds; and financial auxiliaries (such as stockbrokers), some of which buy securities on their own account.

15.56    Certain market practices result in commercial accounting data that are difficult to interpret within a 2008 SNA accounting framework. Under 'exposure' or 'hedge' accounting, the emphasis is on the net effect of various contractual obligations on profits and net worth; the practice is extended by bundling together contracts associated with a particular deal or strategy, and recording the net results at that level of detail.

15.57    This accounting practice for contracts involves foreign-exchange risk. An example is the issue of debt security liabilities which are (a) denominated in US dollars; (b) issued to investors in the USA; and (c) bundled with the contracts hedging foreign currency risk, such as a USD-AUD derivative, negotiated with an Australian bank. The outcome of this bundling is that there is no foreign currency exposure resulting from the combination. The problem that bundling poses for recording in the financial accounts is that it is netting two contracts with different contractual parties in different sectors. In this example, they are in different countries where one contract is a liability, and the other is in an asset position potentially. The bundled result cannot be sensibly aggregated with any particular asset class or under any sector classification, and, hence, cannot contribute usefully to economic analysis.

15.58    Another example of bundling of contracts for a net result is the notion of structured finance, where various combinations of debt, equity and derivatives can be bundled to give a tailored outcome, quite often associated with tax effective outcomes. The results can also be represented as ''hybrid'' or ''synthetic'' securities. Another practice with similar aims is ''stapled securities''.

15.59    For the financial accounts, the data in respect of structured products, bundled products and contracts reported under exposure methods is to unbundle and classify the components on the basis of the legalities of the situation, not the economic effect. The overall economic effect of such contracts will be reflected in the aggregate balancing items in the national accounts, reflecting accurately the operating surplus; property income flows; financial transactions; revaluations and net worth that result and also provide the basis for how those outcomes evolved.

15.60    Most of the information obtained from the APRA collections and surveys is financial balance sheet information. It is used to estimate sectoral (and subsectoral) transactions and stocks of financial assets and liabilities by financial instrument and counterparty:

• The compilation methodology ensures that the most reliable estimates are used. As the APRA collections and surveys collect information from both parties to a financial transaction, a choice is often possible because the different data sources provide alternative or counterpart measures of the same item. For example, private non-financial corporation loans data collected from ADIs is used and not the estimates collected for private non-financial corporations from the ABS Survey of Financial Information.
• In many cases, financial transactions are derived by taking the difference between closing and opening levels of balance sheet items and, where possible, eliminating the component of the change caused by valuation effects such as exchange rate movements and changes in financial instrument prices. For example, the opening stock of securities denominated in foreign currencies (which is reported in Australian dollars) is first revalued using the exchange rates prevailing at the end of the period. The recalculated opening stock is subtracted from the reported closing stock to obtain an estimate of the value of transactions (in Australian dollars). The estimated value of transactions is then subtracted from the difference between the actual reported opening and closing stocks to obtain an estimate of the valuation effect.
• Some transactions are recorded using directly collected data. Most of the estimates of transactions involving non-residents are based on directly collected data from the Survey of International Investment.
• In some cases, it is possible to undertake validation for some estimates. After the initial estimates of stocks and transactions have been prepared, estimates of valuation changes are calculated as a residual. These estimates are then used to test the plausibility of the initial estimates of stocks and transactions and, if necessary, adjustments may be made to these initial estimates.
• The compilation methodology ensures that the best estimates for rest of the world assets and liabilities are used. A data confrontation process selects the best estimates amongst the ABS Survey of Financial Information (SFI); the APRA administered collections; and the ABS Survey of International Investment. Estimates for some sectors are derived from SFI and APRA data over the ABS’ Survey of International Investment, for example, pension funds and life insurance corporations. A balancing process is undertaken to ensure that the major aggregates (such as Australia's international investment position) and sub-aggregates derived in the ASNA are the same as is published in Balance of Payments and International Investment Position, Australia.

15.61    The 2008 SNA recommends that interest on debt securities be recorded in accordance with the ''debtor principle''. Under this principle, interest payments are the contractual payments evidenced by the ''coupon'' payable in these contracts. To the extent that coupon interest is not aligned with market yields, the market value of the debt securities will adjust downwards if coupon is less than market yield, and upwards if coupon is greater than market yield. There are some difficulties implementing the debtor principle for securities where the contractual interest is variable through referencing external indicators.

15.62    The alternative to the debtor principle is to use market values and interest yields consistently, which is called the ''creditor principle''. The creditor principle is conceptually coherent, and it also copes with variable interest instruments. If market valuations of debt securities' stocks are undertaken (as recommended by the 2008 SNA) by discounting future cash flows by the prevailing interest rate, then it makes sense to use the same interest rate to value the associated flows, including interest transactions. Using another interest rate (e.g. the rate at the time the debt instrument was issued) to calculate interest transactions would mean that stocks and flows are calculated using different prices. The adjustment in value of debt securities is seen as a financial transaction (new issue if value increases and repayment if value decreases) under this scenario. Sometimes, interpretation of creditor principle data conflicts with an interpretation derived from accounting standards; for example, debt value and interest expenditure can change not through the activity of debt issuers (such as government) but by variations in the market. The ASNA applies the creditor principle in the national accounts, including the financial accounts.

15.63    A repurchase agreement (repo) involves the sale of securities or other assets with a commitment to repurchase equivalent assets at a specified date. The buyer may on-sell these securities to another party. The 2008 SNA treats repos as collateralised loans, or as other deposits if repos involve liabilities classified under national measures of broad money. The collateralised loan treatment is not supported by the ABS. The ABS maintains that the best statistical representation of a repo is that of a sale of securities, with the obligation to sell/buy-back similar securities recorded as a forward contract; that is, a form of derivative. This treatment has the advantage of unduplicated recording of securities assets whereas the collateralised loan approach requires recording of negative security assets to maintain equality between total securities' asset holdings and total securities' liabilities on issue. The ASNA treatment will impact on compositional aspects (e.g. securities versus loans, classification of asset holders) but will have no impact on analytical aggregates (e.g. net assets, net lending/borrowing).

15.64    Financial institutions make a general provision for loan losses based on known characteristics of the loan portfolio and its performance over time. Because the provision is general, the specific loan contracts and the counterpart liability incurred are not identifiable, making it conceptually difficult to record such a provision in the 2008 SNA accounting structure. By contrast, specific provisions for impairment arising from poor performance (non-performing) of an individual loan contract are more certain as to likely occurrence and counterparty identification.

15.65    The 2008 SNA recommends valuation of loans in the balance sheet at nominal value, with non-performing loans identified and two memorandum items concerning them included in the balance sheet of the creditor. The first is the nominal value of the loans so designated, including any accrued interest and service charges. The second is the market equivalent value of these loans.

15.66    The ABS considers that market valuation of loans or a close approximate should be recorded in order to maintain consistency regarding the valuation of all financial instruments. The ASNA takes into account specific loan loss provisions in valuing loan portfolios and their counterparts, and, as a result, the closest approximation to market value or fair value is recorded in the ASNA. The ASNA does not take account of general loan loss provisions. Valuation of loans at nominal values is produced in supplementary tables in the ASNA.

15.67    The 2008 SNA definition of monetary gold is gold to which the monetary authority has title and is held as reserve assets. All monetary gold is included in reserve assets or is held by international financial organisations and is treated as a financial asset even though the holders do not have a claim on other designated units.

15.68    The ASNA treatment of monetary gold departs slightly from the treatment outlined in the 2008 SNA in that a liability of the rest of the world is imputed. The reason for not adopting the 2008 SNA treatment is to preserve consistency with the international investment position (IIP) for Australia within the Financial Accounts. The IIP according to BPM6 permits recording of assets in the form of monetary gold as assets of the domestic economy (i.e. external claims). In re-presenting external claims data in a 2008 SNA framework, the major presentation is to show cross-border positions as assets and liabilities of rest of world. The external assets of BPM6 are thus represented as foreign liabilities, and external liabilities are represented as foreign assets in the financial accounts. The international investment position — external assets less external liabilities — should be derivable from the Rest of World accounts in the ASNA; that is, foreign liabilities less foreign assets. Omitting monetary gold from liability positions of the rest of the world will not produce this result. This treatment in ASNA has been adopted mainly to minimise confusion among the users of the statistics.

15.69    A holding company is a unit which holds the assets of subsidiary corporations but does not undertake any management activities. According to 2008 SNA, such units receive the sectoral classification of captive financial institutions and money lenders. This treatment would result in the creation of additional enterprises in situations where there are currently no financial intermediary enterprises in the group. The ASNA treatment for holding companies in the financial accounts and balance sheets is that they receive a sector classification reflecting the major economic activities of the controlled entities.

15.70    The 2008 SNA defines monetary gold as gold to which the monetary authority has title, and that is held as reserve assets by a central bank or another authority.⁵⁵ It comprises bullion held in allocated gold accounts; other bullion; and unallocated gold accounts with non-residents, giving title to claim delivery of that gold. All monetary gold is included in reserve assets or is held by international financial organisations. Only gold that is held as a financial asset (and as a component of foreign reserves) is classified as monetary gold. Gold can be a financial asset only for the central bank or central government, except in limited institutional circumstances. In the 2008 SNA, gold bullion held as a reserve asset is the only financial asset with no corresponding liability.

15.71    The ASNA treatment of monetary gold differs slightly from the treatment outlined in the 2008 SNA, in that a liability of the rest of the world is imputed. All other gold held is treated as a physical commodity and is classified as either valuables (if the sole purpose is a store of wealth), or as final or intermediate consumption; change in inventories; and exports or imports.

15.72    SDRs are international reserve assets created by the International Monetary Fund (IMF) and allocated to its members to supplement existing reserve assets. The Special Drawing Rights Department of the IMF manages reserve assets by allocating SDRs among member countries of the IMF, and certain international agencies (collectively known as the participants).

15.73    The mechanism by which SDRs are created (referred to as allocations of SDRs) and extinguished (cancellations of SDRs) gives rise to transactions. These transactions are recorded at the gross amount of the allocation. They are recorded in the financial accounts of the monetary authority or government of the individual participant on the one hand, and the rest of the world, representing the participants collectively on the other hand.

15.74    SDRs are held exclusively by official holders, which are central banks and certain other international agencies, and are transferable among participants and other official holders. SDR holdings represent each holder's assured and unconditional right to obtain other reserve assets, especially foreign exchange, from other IMF members. SDRs are assets with matching liabilities but the assets represent claims on the participants collectively and not on the IMF. A participant may sell some or all of its SDR holdings to another participant and receive other reserve assets, particularly foreign exchange, in return.

15.75    In Australia, the SDR allocation is recorded by the central government, and the SDR asset is recorded by the Reserve Bank of Australia. The RBA has a deposit liability to the central government.

Sources and methods - quarterly

15.76    The table below outlines the data sources and methods used in the estimation of quarterly monetary gold and SDRs in current prices. Real estimates are calculated for the national balance sheet.

15.77    Currency consists of notes and coins that are of fixed nominal values and are issued or authorised by the central bank or government. A distinction is drawn between domestic currency — which is the liability of resident units, such as the central bank and central government — and foreign currencies that are liabilities of non-resident units, such as foreign central banks, other banks and governments.

15.78    For Australia, the currency asset refers solely to domestic currency. There is little foreign currency in general circulation, and significant holdings are classified as foreign deposits.

15.79    Notes and coins are treated as liabilities at full face value. The cost of producing the physical notes and coins is recorded as government expenditure, and not netted against the receipts from issuing the currency.

15.80    In the currency market, all sectors and subsectors can hold currency as assets. In the ASNA, the RBA and the national general government sectors issue domestic currency, with the RBA issuing notes and the national general government issuing coins.

15.81    The table below outlines the data sources and methods used in the estimation of quarterly currency by sector in current prices. Real estimates are calculated for the national balance sheet.

15.82    The 2008 SNA does not provide a precise definition of a deposit. As a result, the distinction between deposits and loans in the ASNA is made by the convention that deposit liabilities can only be incurred by institutions included in RBA broad money, and therefore their asset counterpart is similarly restricted. Additionally, the conventions are adopted that all account balances (not evidenced by a security) between broad money institutions are classified as deposits or withdrawable share capital of building societies and that all domestic non-security borrowings by broad money institutions are classified as deposits are adopted. There are some classes of financial asset that may be described as deposits as a result of these conventions, such as account balances at State Treasuries, but which are classified as loans in the ASNA.

15.83    It follows from the convention above that deposit liabilities can only be incurred by institutions included in RBA broad money. The following financial institutions should therefore be classified as deposit taking in ASNA: the RBA; banks; credit unions; building societies; cash management trusts; and registered financial corporations. There have been minor changes to the definition of deposit-taking institution with the implementation of 2008 SNA in the ASNA. For example, cash management trusts are no longer included as deposit-takers. The units issued by cash management trusts were previously classified as deposits and are now classified as equity in money market investment funds.

15.84    In the ASNA, deposits are further classified into transferable deposits and other deposits.

15.85    Transferable deposits comprise all deposits that are exchangeable for banknotes and coins on demand — at par and without penalty or restriction — and are directly usable for making payments by cheque, draft, direct debit/credit, or another direct payment facility. A transferable deposit cannot have a negative value. For example, a bank current (or checking) account is normally treated as a transferable deposit but, if overdrawn, the withdrawal of funds to zero is treated as the withdrawal of a deposit, and the amount of the overdraft is treated as the granting of a loan.

15.86    Other deposits comprise all claims that are represented by evidence of deposit, other than transferable deposits. Typical forms of deposits that should be included are savings deposits (which are always non-transferable), fixed-term deposits and non-negotiable certificates of deposit. Deposits of limited transferability that are excluded from the category of transferable deposits are included here. Claims on the IMF that are components of international reserves, and not evidenced by loans, are recorded in other deposits. Repayable margin payments in cash related to derivative contracts are included in other deposits only when the counterparty is a broad money institution; otherwise, they are included as loans.

15.87    Deposits data in the ASNA is compiled for both 'Transferable Deposits' and 'Other Deposits'. Data sources defined below have available detailed information on the type of deposit accounts allowing a clear distinction between those of a short-term and long-term nature.

15.88    The ASNA does not make a distinction between deposits and loans for balances and transactions between ADIs. For practical reasons, all balances and transactions related to deposits and loans between such institutions are classified as deposits. Similarly, most liability account balances of ADIs which are not evidenced by a security are treated as deposits. This treatment is not extended to the rest of the world. The ABS Survey of International Investment provides clear direction for institutions to report their loans and deposits in the survey form.

15.89    The table below outlines the data sources and methods used in the estimation of quarterly deposits by sector in current prices. The estimates are derived at face value. Real estimates are calculated for the national balance sheet.

15.90    A debt security is a negotiable instrument that does not entitle the holder to participate in the residual value of the issuer on liquidation. Debt securities are divided into short-term and long-term securities using the original (rather than the remaining) term to maturity of the instruments.

15.91    Short-term debt securities are those with an original term to maturity of one year or less. For Australia, most short-term debt securities on issue are discount instruments (the issue value is lower than the face value, the difference representing interest payable) with an original term to maturity ranging from 30 to 180 days.

15.92    Issuers of promissory notes and bills of exchange may negotiate rollover facilities which allow them to use these instruments as sources of floating-rate long-term funds. In the ASNA, the existence of rollover facilities is not treated as converting what are legally short-term instruments into long-term instruments. The ASNA classifies the instrument according to the contracted term at the time of the original drawdown, rather than anticipating use of the rollover facility.

15.93    Apart from promissory notes, short-term securities are traded on well-established secondary markets. Treasury Notes are inscribed, but the other instruments in this category are bearer securities.

15.94    There are two types of short-term securities presented in the ASNA:

1. bills of exchange; and
2. one name paper.

15.95    The 2008 SNA uses the term ''bankers' acceptance'' to describe the instrument known in Australia as a bill of exchange. A bill of exchange is an unconditional order drawn (issued) by one party, sent to another party (usually a bank) for acceptance, and made out to, or to the order of, a third party, or to bearer (holder). It is a negotiable instrument with an original term to maturity of 180 days or less. Almost all bills are bank accepted or endorsed because investors expect bills to be the obligation of a first-class credit.

15.96    The bill of exchange represents an unconditional claim on the part of the holder and an unconditional liability on the part of the accepting bank; the bank's counterpart asset is a claim on its customer. As such the ASNA shows two instruments in order to demonstrate each side of this three-way transaction. Bills of exchange are treated as financial assets from the time of acceptance, even though funds may not be exchanged until a later stage.

15.97    Bills of exchange are used in international trade finance, liquidity management by banks, money market dealers and corporate treasuries. The data cover only those bills accepted by Australian residents.

15.98    By contrast with bills of exchange, one name paper is the liability of a single issuer and does not rely on the credit enhancement provided by acceptance. The ASNA data are further classified by ''domicility''; that is, the market into which the issue was made, being in Australia or offshore.

15.99    One name paper includes promissory notes, Treasury Notes and negotiable certificates of deposit issued by banks.

15.100    A promissory note — also called commercial paper — is a written promise to pay a specified sum of money to the bearer at an agreed date. It is usually issued for an original term between 30 and 180 days and is sold to an investor at a simple discount, to the value shown on the face of the document. A promissory note is not accepted by a bank and, unlike a bill of exchange, is not endorsed by the parties which sell it in the market.

15.101    Treasury Notes are inscribed instruments issued by the Commonwealth Government, and have an original maturity of five, thirteen or twenty-six weeks.

15.102    Bank certificates of deposit are similar to promissory notes except that the drawer is a bank rather than (say) an industrial company. Bank-issued certificates of deposit with an original term to maturity of one year or less are called negotiable certificates of deposit.

15.103    The tables below outline the data sources and methods used in the estimation of quarterly short-term debt securities in current prices. The estimates are valued at market prices. Real estimates are calculated for the national balance sheet.

15.104    Long-term debt securities include those securities that have an original maturity of more than one year. Each consists of a document that represents the issuer's pledge to pay the holder the sum of money shown on the face of the document, on a date which at the time of issue is more than one year in the future. Many bonds on issue in Australia pay interest at a set percentage of face value every six months (known as ''coupon interest'') for the life of the bond. Such bonds are known as fixed interest bonds. There is a significant amount of variable rate bonds, and some deep discount (or zero coupon) bonds on issue.

15.105    Long-term debt securities are frequently borrowed by market makers to cover short positions. Where identified, stock loans of this nature are treated in the ASNA as securities' trades. Repurchase agreements, which are also used to cover short positions, are treated as purchases and sales of debt securities.

15.106    Asset-backed securities are arrangements under which payments of interest and principal are backed by payments on specified assets or income streams. They may be issued by a specific holding unit or vehicle, for the purpose of raising funds in order to pay the originator for the underlying assets. Asset-backed securities are classified as debt securities because the security issuers have a requirement to make payments, while the holders do not have a residual claim on the underlying assets. They are backed by various types of financial assets; for example, mortgages and credit card loans.

15.107    Non-participating preferred stocks or shares are those that pay a fixed income but do not provide for participation in the distribution of the residual value of an incorporated enterprise on dissolution. These shares are classified as debt securities. Bonds that are convertible into equity are classified in this category prior to the time that they are converted.

15.108    Long-term debt securities issued in Australia include:

• Treasury bonds issued by the Commonwealth Government;
• Various series of inscribed stock which are issued by the central borrowing authorities and other government-owned corporations. These are known as semi-government securities;
• Debentures, transferable certificates of deposit, and unsecured notes, which are collectively called corporate securities or medium-term notes;
• Asset-backed bonds including mortgage-backed bonds;
• Covered bonds, issued by authorised deposit taking institutions;
• Kangaroo bonds, which are foreign bonds issued in the Australian market,
• Convertible notes prior to conversion; and
• Renewable energy certificates (RECs) issued by the Commonwealth Government.

15.109    The data are further classified by 'domicility'; that is, the market into which the issue was made, being in Australia (onshore) or offshore.

15.110    The table below outlines the data sources and methods used in the estimation of quarterly long-term debt securities, i.e. bonds in current prices. The estimates are valued at market prices. Real estimates are calculated for the national balance sheet.

15.111    Derivatives are financial instruments that are linked to a specific financial instrument or commodity, through which specific financial risks can be traded in financial markets in their own right. Examples include swaps; forward contracts; futures contracts; and options. In the ASNA, derivatives are treated as debt securities irrespective of the nature of the underlying asset. The value of a derivative derives from the price of the underlying item: the reference price. This price may relate to a commodity; a financial asset; an interest rate; an exchange rate; another derivative; or a spread between two prices.

15.112    An employee stock option is an agreement made on a given date (the ''grant'' date). An employee may purchase a given number of shares of the employer's stock at a stated price (the ''strike'' price) either at a stated time (the ''vesting'' date) or within a period of time (the ''exercise'' period) immediately following the vesting date. Transactions in these options are recorded in the financial account as the counterpart to the element of compensation of employees represented by the value of the stock option. The ASNA does not record employee stock options separately, due to unavailability of source data.

15.113    Margins are payments of cash or collateral that cover actual or potential obligations under derivatives, especially futures contracts or exchange-traded options. Repayable margins consist of deposits or other collateral deposited to protect a counterparty against default risk, but which remain under the ownership of the unit placing the margins. Although its use may be restricted, a deposit is classified as repayable if the depositor retains the risks and rewards of ownership.

15.114    Repayable margin payments in cash are transactions in deposits, not transactions in a derivative. The depositor has a claim on the exchange or other institution holding the deposit. In the ASNA, margins on derivatives are recorded as loans rather than deposits.

15.115    The table below outlines the data sources and methods used in the estimation of quarterly derivatives in current prices. Real estimates are calculated for the national balance sheet.

15.116    Loans are borrowings which are not evidenced by the issue of debt securities. They are not usually traded, and their value does not decline even in a period of rising interest rates. Examples are an overdraft from a bank; money lent by a building society with a mortgage over a property as collateral; and a financial lease agreement with a finance company. Repurchase agreements between deposit-taking institutions are treated as purchases and sales of debt securities, not collateralised loans. Undrawn lines of credit are not recognised as loans because the liabilities are contingent.

15.117    Placements are customers' account balances with entities not regarded as deposit-taking institutions. Examples are account balances of State and local public non-financial corporations with their central borrowing authorities; balances of public-sector pension funds with their State Treasuries; and 11am money placed with corporate treasuries.

15.118    The values of loans to be recorded in the balance sheets of both creditors and debtors are the amounts of the market value of the principal and interest outstanding. This amount includes any interest that has been earned but not been paid. It should also include any amount of indirectly measured service charge (the difference between bank interest and SNA interest) due on the loan that has accrued and not been paid. Accrued interest is shown under accounts receivable or payable. The value of a loan does not reflect the consequences of any interest payments due after the date of the balance sheet, even if these were specified in the original loan agreement. In practice, loans are valued at nominal value less specific loan loss provisions.

15.119    Loans may be divided, on a supplementary basis, between short- and long-term loans. Short-term loans comprise loans that have an original maturity of one year or less. Loans repayable on the demand of the creditor should be classified as short-term even when these loans are expected to be outstanding for more than one year. In the ASNA, they include credit cards and other forms of revolving credit, as well as some placements between state governments and their respective central borrowing authorities.

15.120    Long-term loans comprise loans that have an original maturity of more than one year. This category includes residential mortgages.

15.121    As recommended by the 2008 SNA, the ASNA splits the loans market between short-term and long-term loans and placements. Broadly speaking, this is defined according to original term to maturity. Unlike those for deposits, short and long-term splits for loans are not available directly from most data sources (except banks, building societies, credit unions and registered financial corporations where the forms on APRA’s EFS Statement of Financial Position provide detailed splits for households between short and long-term loans).

15.122    The ASNA makes the assumption that the majority of loans for the non-household sector are of a long-term nature, and an approximate ratio of 80:20 is implemented to dissect data between long-term and short-term maturities.

15.123    The table below outlines the data sources and methods used in the estimation of quarterly loans and placements by sector in current prices. They are valued at market prices. Volume/real estimates are calculated for the national balance sheet.

15.124    Equity has the distinguishing feature that the holders of equity own a residual claim on the assets of the institutional unit issuing the equity. It represents the owner's funds in the institutional unit. In contrast to debt, equity does not generally provide the owner with a right to a predetermined amount, or an amount determined according to a fixed formula. Equity is treated as a liability of the issuing institutional unit (e.g. a corporation or other unit). Ownership of equity in legal entities is usually evidenced by shares, stocks or investment fund units.

15.125    Equities are sub-divided into listed shares and unlisted shares; both types of shares are negotiable and are classified as equity securities.

15.126    The 2008 SNA also recommends that equity other than shares be presented separately. The ASNA has not followed this recommendation because of the data requirements and workloads associated with this recommendation. The 2008 SNA 'Other equity' is combined with shares data in the financial accounts. In practice, this means units in investment funds are treated as shares.

15.127    Listed shares are equity securities listed on an exchange. They are also referred to as quoted shares. The existence of quoted prices of shares listed on an exchange means that current market prices are usually readily available. In the ASNA, statistics for listed shares are restricted to those equities listed on the Australian Securities Exchanges (ASX). Data sources cannot support classification of foreign shares to listed or unlisted categories.

15.128    Unlisted shares are equity securities not listed on an exchange. They can also be called private equity; venture capital usually takes this form. Unlisted shares tend to be issued by direct foreign investment subsidiaries and smaller scale businesses. They typically have different regulatory requirements but neither qualification is necessarily the case.

15.129    For unlisted shares, there may be no observable market prices for positions in equity not listed on a stock exchange. This situation often arises for direct investment enterprises; private equity; equity in unlisted and delisted companies; listed but liquid companies; joint ventures; and unincorporated enterprises. An estimate is required when actual market values are unavailable, such as estimating own funds at net asset value of an enterprise.

15.130    The tables below outline the data sources and methods used in the estimation of quarterly listed and unlisted shares and other equity in current prices. The estimates for listed shares are valued at market prices. Volume/real estimates are calculated for the national balance sheet.

15.131    Net equity in reserves represents policy-holders' claims on life insurance businesses and pension funds. These technical reserves are calculated by deducting all repayable liabilities from the value of total assets. It comprises the following:

• Household claims on technical reserves of life insurance corporations and pension funds: this category represents households' net equity in, or claims on, the reserves of life insurance corporations and pension funds. In the case of life insurance corporations, it equates in large measure with the net policy liabilities of life offices to households. In the case of pension funds, it represents the funds' obligations to members including any surpluses and reserves. A claim by householders on insurance technical reserve of non-resident pension funds is also included in the ASNA.
• Pension fund claims on life insurance corporations reserves: This category represents pension funds' net equity in, or claims on, life insurance corporation reserves. A significant number of pension funds invest their members' contributions in the statutory funds of life insurance corporations. These investments are typically held as unit-linked insurance or investment policies.

15.132    The table below outlines the data sources and methods used in the estimation of quarterly net equity in reserves in current prices. Volume/real estimates are calculated for the national balance sheet.

15.133    Unfunded superannuation claims represent the liabilities of the general government sector to public sector employees in respect of unfunded retirement benefits. In Australia, most governments operate, or used to operate, superannuation schemes for their employees that are unfunded or only partly funded. Some government unfunded superannuation schemes have one component funded through direct employee contributions, and another (the employers' contributions) which is unfunded. Other government unfunded superannuation schemes comprise only an unfunded employer component.

15.134    Direct data sources are used to compile unfunded public sector superannuation claims. The outstanding liability in relation to unfunded superannuation claims is recorded as a liability in the general government sectors and as an asset in the pension fund and household sector.

15.135    The main data on National General Government by counterparties are obtained from balance sheet information from Commonwealth Government Ledgers from the Department of Finance and APRA Statement of Financial Position - Superannuation. The main data on State and Local General Government by counterparties are obtained from Government Finance Statistics. Unfunded superannuation claims have been recognised in government accounts since jurisdictions moved to accrual accounting. Prior to the change in accounting methods, the ABS developed a set of historical estimates for outstanding liabilities and changes in liabilities for national accounting purposes.

15.136    Transactions are derived as the difference in the balance sheet positions. When annual balance sheet positions are revised due to annual actuarial assessments, an estimate is derived for the actuarial adjustments and recorded as other volume changes and price changes.

15.137    Prepayments of premiums and reserves against outstanding claims represents policy-holders’ net equity in, or claims on, the reserves of general insurance corporations. They equate to prepayments of premiums and reserves held to cover outstanding claims.

15.138    They consist of premiums paid but not yet earned (called unearned premiums) and claims due but not yet settled, including cases where the amount is in dispute or the event leading to the claim has not yet been reported (called claims outstanding).

15.139    The table below outlines the data sources and methods used in the estimation of quarterly prepayments of premiums and reserves against outstanding claims in current prices. Volume/real estimates are calculated for the national balance sheet.

15.140    This category comprises trade credit for goods and services extended to corporations, government, NPISHs, households and the rest of the world, and advances for work that is in progress (if classified as such under inventories), or is to be undertaken. Trade credits and advances do not include loans to finance trade credit, which are classified as loans.

15.141    The ASNA does not separate the two categories of accounts payable/receivable into short-term and long-term.

15.142    The table below outlines the data sources and methods used in the estimation of quarterly accounts receivable and accounts payable by sector in current prices. The estimates are derived at face value. Volume/real estimates are calculated for the national balance sheet.

15.143    Annual financial accounts and balance sheets are not compiled separately in the ASNA. Annual estimates published in the ASNA for financial accounts are the sum of four quarters, and the annual stock estimates are the quarterly estimates as at 30 June.