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Chapter 3 Stocks, flows, and accounting rules

Australian System of National Accounts: Concepts, Sources and Methods
Reference period
2020-21 financial year

Flows and stocks

3.1    The system of national accounts records two basic kinds of information: flows and stocks. Flows refer to actions and to the effects of events that take place within a given period of time, while stocks refer to positions in, or holdings of, assets and liabilities at a given point in time. Unless otherwise indicated, the definitions and rules described are as recommended in 2008 SNA and are applied without variation in the ASNA.

3.2    In the national accounts, flows are recorded in the current accounts, which deal with production, income and the use of income, and in the accumulation accounts, which record capital formation, financial flows, revaluations and other changes in the volume of assets. Stocks, which represent the value of the stock of assets and liabilities at the beginning and end of the accounting period, appear in the balance sheet accounts.


3.3    Economic flows reflect the creation, transformation, exchange, transfer or extinction of economic value. They involve changes in the volume, composition or value of an institutional unit's assets and liabilities. Economic flows are of two kinds: transactions, and other flows. Most flows are transactions which are recorded in the current accounts and accumulation accounts. Other flows, which are changes in the value of assets and liabilities that do not result from transactions, are recorded in the revaluation account and the other changes in volume of assets account.


3.4    A transaction is defined in 2008 SNA as:

. . . An economic flow that is an interaction between institutional units by mutual agreement or an action within an institutional unit that it is analytically useful to treat like a transaction, often because the unit is operating in two different capacities.²⁸

3.5    The latter types of actions are internal transactions. Apart from these, transactions are interactions between institutional units. While the definition of a transaction stipulates that an interaction between institutional units must be by mutual agreement, this does not mean that both units necessarily enter a transaction voluntarily; some transactions, such as payments of taxes, fees or fines, are imposed by force of law. In these cases, there is collective acceptance by the community of the obligation to make the required payments, which are therefore regarded as transactions for national accounting purposes. The system of national accounts recognises and accounts for numerous types of transactions, both monetary and non-monetary, which are described in the following paragraphs.

Monetary transactions

3.6    Most transactions recorded in the national accounts are monetary transactions, where the institutional units involved make or receive payments or incur liabilities or receive assets denominated in units of currency. All monetary transactions are two-party transactions between institutional units. Common monetary transactions included in the ASNA are expenditure on consumption of goods and services, expenditure on capital formation, deposits, loans, wages and salaries, interest, dividends, rent on natural assets, taxes, and social assistance benefits in cash.

3.7    Expenditures on consumption of goods and services, capital formation, deposits, loans, payment or receipt of wages and salaries, and payment or receipt of interest, dividends and rent on natural assets, are two-party transactions involving the provision of a good, service or asset in exchange for a monetary counterpart. These kinds of transactions can be termed 'something for something' transactions, or transactions with a quid pro quo.

3.8    Two-party transactions where goods, services or assets are supplied without a direct counterpart can be termed 'something for nothing' transactions, or transactions without a quid pro quo. Transactions without a quid pro quo are called transfers in the national accounts. Examples of transfers are taxes, social assistance benefits, gifts, and international cooperation (foreign aid). Transactions such as the payment of premiums for non-life insurance, where receipt of benefits is contingent upon some future event, are also classified as transfers. (Strictly speaking, insurance premiums are divided into two components in the national accounts: an imputed service charge; and net premiums, which are equal to premiums less the imputed service charge. Net premiums are a transfer payment while the imputed service charge is included in household or intermediate consumption.)

3.9    A distinction is made between capital and current transfers in the national accounts. Capital transfers involve the transfer of ownership of an asset or oblige one or both parties to acquire or dispose of an asset. Investment grants are examples of capital transfers. Capital transfers redistribute saving or wealth. Current transfers, on the other hand, redistribute income in the form of, for example, income taxes or social assistance benefits.

3.10    Most transactions are treated in the national accounts in a straightforward way; that is, the transactions are recorded in the same way as they appear in the accounts of the institutional units involved. However, some transactions are rearranged to bring out the underlying economic relationships more clearly. Transactions can be rearranged in three ways: rerouting, partitioning, and recognising the principal party to a transaction.

Rerouted transactions

3.11    A transaction that appears to the units involved as taking place directly between units A and C may be recorded as taking place indirectly through a third unit B. Thus, the single transaction between A and C is recorded as two transactions: one between A and B, and one between B and C. In this case the transaction is considered to be “rerouted”.

3.12    Rerouting of three types of transactions occurs in the national accounts:

  1. Employers' social contributions - workers' compensation premiums, and contributions made by employers on behalf of their employees to superannuation funds, are recorded as two transactions: employers are deemed to pay the contributions to their employees and the employees are then deemed to pay the same contributions to non-life insurance corporations or superannuation funds. Although the contributions are paid directly by employers to the funds, this treatment makes it clear that such contributions are part of the compensation of employees and are recorded as a part of labour costs.
  2. Retained earnings of foreign direct investment enterprises and resident and non-resident investment funds - the retention of some or all of the earnings of a foreign direct investment enterprise and investment funds within the enterprise or investment fund can be regarded as a deliberate investment decision by the foreign owners and fund investors. Accordingly, the retained earnings are rerouted in the national accounts by showing them as first remitted to the foreign owners and fund investors as property income and then reinvested in the equity of the direct investment enterprise and investment funds.
  3. Property income of non-life insurance corporations or pension funds - in the national accounts, the property income earned on the reserves of certain insurance and pension funds is deemed to be earned on assets owned by policyholders. The property income is recorded as being paid out to policyholders and then paid back again as premium supplements even though the property income is retained by the corporation.

Partitioned transactions

3.13    When a transaction appearing to the parties involved as a single transaction is recorded as two or more differently classified transactions, the transaction is partitioned. Partitioning does not usually imply the involvement of additional institutional units in the transactions.

3.14    Payments and receipts of interest by financial intermediaries, and non-life insurance premiums, are typical partitioned transactions. In the case of interest, the payments are considered to comprise a pure interest component and a charge for the financial service rendered by the financial institution. Similarly, non-life insurance premiums are considered to constitute a payment to cover the insurance risk and a service charge for arranging the insurance. The individual components are recorded separately in the national accounts.

3.15   A further example of partitioning is the recording of transactions for wholesalers and retailers. Wholesalers and retailers are viewed in 2008 SNA as selling the service of storing and displaying goods. As a result, the output of wholesalers and retailers is measured by the value of the trade margins on the goods they purchase for resale, not the total value of their sales.

Recognising the principal party to a transaction

3.16    When a unit carries out a transaction on behalf of another unit, the transaction should be recorded exclusively in the accounts of the principal, although some service output by the intermediary may be recognised. For example, if a commercial agent makes purchases under the order and at the expense of another party, the purchases are attributed to the latter. The accounts relevant to the agent should only show the fee charged to the principal for the services rendered by the agent.

Non-monetary transactions

3.17    Transactions that do not involve the exchange of cash, or assets or liabilities that are not denominated in units of currency, are non-monetary transactions. As the national accounts record all transactions in monetary values, the values recorded for non-monetary transactions must be estimated. Non-monetary transactions can be either two-party transactions or actions within an institutional unit (internal transactions).

Two-party non-monetary transactions

3.18    Two-party non-monetary transactions consist of the following:

  • Barter transactions, which involve one party providing a good, service or asset other than cash to another party in return for a good, service or asset other than cash.
  • Remuneration in kind, which occurs when an employee accepts payment from an employer in the form of goods and services instead of money (or some other financial asset). Some of the most common types of remuneration in kind are meals and drinks, accommodation, vehicles for personal use of employees, and goods and services produced as outputs from the employer's own production processes.
  • Payments in kind other than remuneration in kind, which occur when payments are made in the form of goods and services, rather than money or some other financial asset (e.g. landlords accepting produce in lieu of rent).
  • Transfers in kind, which occur when one party provides a good, service or asset to the other without receiving anything in return. These can also be called 'something for nothing' transactions, or transactions without a quid pro quo. The most common types of transfers in kind are international aid in the form of goods or services; gifts and charitable contributions in the form goods or services; and social assistance benefits in forms such as the provision of education, health, housing and other services provided to households by government or non-profit institutions. Also included are social transfers in kind which consist of government final consumption expenditure (GFCE) which is undertaken (by government) on the behalf of households.

Internal transactions

3.19    While most transactions recorded in the national accounts are interactions between institutional units, some actions that occur within institutional units are also recorded as transactions. These are known as internal, or intra-unit transactions, which are recorded to give a more analytically useful picture of output and final use.

3.20    Consumption of fixed capital is an important example of an intra-unit transaction which is recorded in the ASNA. The estimation of consumption of fixed capital ensures that the decline in the value of a fixed asset used in production is included as a cost of production.

3.21    Estimates of the value of intra-unit transactions are also made to account for output which is produced and used within the same institutional unit. These transactions include the value of fixed assets produced for own use and the value of goods produced and consumed within households (such as agricultural produce and other 'backyard' production). The supply of output produced within an enterprise for use as intermediate input in the same enterprise is also regarded as an intra-unit transaction, although estimates of the value of such transactions are only recorded in national accounts if the supplying and receiving establishments are geographically separated.

Externalities and illegal actions

3.22    Externalities are unsolicited services, or 'disservices', delivered by one unit to another without mutual agreement. A typical example is a producer's pollution of air or water which is used by other units. Externalities are not market transactions into which institutional units enter of their own accord, and there is no mechanism to ensure that the positive or negative values attached to them by the various parties involved would be mutually consistent. For this reason, 2008 SNA recommends against recording the values of externalities in the national accounts.

3.23    2008 SNA treats illegal actions that fit the characteristics of transactions (notably the characteristic that there is mutual agreement between the parties) in the same way as legal actions. Thus, although the production or consumption of certain goods such as narcotics may be illegal, market transactions in such goods should, in principle, be recorded in the national accounts. Due to the difficulty in identifying and valuing illegal transactions, no explicit estimates for such activities are made in the ASNA. However, some illegal transactions are likely to be included in the national accounts if they are reported as part of legal activities or as income for taxation purposes.

3.24    As illegal actions which constitute crimes against persons or property (e.g. theft or violence) do not meet the criterion of transactions by mutual agreement they are not recorded as transactions.

Other flows

3.25    Other flows are changes in the value of assets and liabilities that do not take place through transactions. They are either other changes in the volume of assets or liabilities or holding gains and losses. Entries classified as other flows all appear in the other changes in volume of assets account or the revaluation account. Both accounts are components of the balance sheet accounts in the ASNA.


3.26    Stocks are a position in, or holdings of, assets and liabilities at a point in time. Stocks are usually recorded at the beginning and end of each accounting period. The values of stocks of assets and liabilities are shown in the balance sheets of the system. Stocks are connected with the flows in that changes in their levels result from the accumulation of transactions and other flows over the accounting period in question. In the ASNA, closing balance sheet levels could be viewed as being obtained by the addition to the opening balance sheet levels of net capital formation, financial transactions, other changes in the volume of assets, and revaluations of assets and liabilities. However, in practice the balance sheet values for many components of financial assets and liabilities are obtained directly from survey data.

3.27    Values are recorded for non-financial assets, both produced and non-produced, and for financial assets and liabilities. The coverage of assets is limited to those assets used in economic activity and that are subject to ownership rights. Thus, stocks are not recorded for assets such as human capital and natural resources over which ownership rights cannot be enforced.

3.28    In order to discuss stocks, it is necessary to define assets and liabilities and these definitions depend crucially on the concepts of benefits and ownership. This is described as the asset boundary.

Economic benefits

3.29    An economic benefit is defined as denoting a gain or positive utility arising from an action. It implies a comparison between two states. Sometimes the immediate benefit is in terms of goods and services directly, for example own account production or wages and salaries in kind. More often a benefit is in the form of the medium of exchange (money), for example as wages and salaries. Consumption is an activity that takes place in the current period only but may be financed from past benefits. Production and accumulation also involve benefits postponed to future periods. Thus, means of allowing benefits to be moved from one accounting period to another must be recognised. These take the form of assets and liabilities where a benefit in one period is converted to a benefit in one or more future periods. Similarly, goods and services, or current benefits, may be acquired by committing future benefits in the form of financial liabilities.


3.30    Two types of ownership can be distinguished, legal ownership and economic ownership. The legal owner of entities such as goods and services, natural resources, financial assets and liabilities is the institutional unit entitled in law and sustainable under the law to claim the benefits associated with the entities. The economic owner of entities such as goods and services, natural resources, financial assets and liabilities is the institutional unit entitled to claim the benefits associated with the use of the entity in question in the course of an economic activity by virtue of accepting the associated risks.

3.31    Every enterprise has both a legal owner and an economic owner, though in many cases the economic owner and the legal owner of an entity are the same. Where they are not, the legal owner has handed responsibility for the risk involved in using the entity in an economic activity to the economic owner along with associated benefits. In return the legal owner accepts another package of risks and benefits from the economic owner. In general, within the SNA, when the expression “ownership” or “owner” is used and the legal and economic owners are different, the reference should be understood to be to the economic owner.


  1. SNA, 2008, para.3.51.

Balancing items

3.32    A balancing item is obtained by subtracting the total value of the entries on one side of an account from the total value of entries the other side. It cannot be measured independently of the other entries. It does not relate to any specific set of transactions, or any set of assets, and so it cannot be expressed in terms of its own price or quantity units.

Balancing items in the flow accounts

3.33    Balancing items are not simply devices to ensure that accounts balance. They are often used as key macroeconomic indicators to assess economic performance. They encapsulate a great deal of information and include some of the most important entries in the accounts, for example:

  • value added or domestic product;
  • operating surplus;
  • disposable income;
  • saving;
  • net lending or net borrowing;
  • net change in financial position; and
  • current external balance.

Balancing item in the balance sheets

3.34    Net worth, which is defined as the value of all the non-financial and financial assets owned by an institutional unit or sector less the value of all its outstanding liabilities, is the balancing item in the balance sheets. Net worth cannot be measured independently of the other entries, nor does it relate to any specific set of transactions.

3.35    As well as net worth appearing as a stock level, changes in net worth due to different sorts of transactions and other flows may also be derived. Just as the changes in the levels of any asset can be traced through changes in transactions and other flows throughout the period, so changes in total net worth can be exhaustively described according to the transactions and other flows that led to changes in the total level of assets and liabilities.

Grouping stocks and flows in the accounts

3.36    2008 SNA groups flows and stocks according to the classification of transactions, other flows, and entries related to stocks of assets and liabilities. The classification of transactions and other flows has five headings at the highest level, dealing with transactions in products, transactions showing how income is distributed and redistributed within the SNA, transactions in non-produced assets, financial assets and liabilities, and other accumulation entries.

3.37    In general, flows and stocks are entered either in the accounts of the institutional units that own or owned the goods and assets involved; the accounts of units that deliver or take delivery of services; or the accounts of units that provide labour and capital or use them in production.

Accounting rules

3.38    The ASNA's accounting rules cover the quadruple entry accounting principle, valuation, time of recording and grouping by aggregation, netting and consolidation of individual stocks and flows.

Quadruple-entry accounting

3.39    The accounting system underlying the ASNA derives from broad bookkeeping principles. To understand the accounting system for the ASNA, three bookkeeping principles should be outlined:

  1. Vertical double-entry bookkeeping, also known simply as double-entry bookkeeping used in business accounting - each transaction leads to at least two entries, traditionally referred to as a credit entry and a debit entry, in the books of the transactor. It ensures the total value of assets equals the total value of liabilities plus net worth of a unit’s balance sheet;
  2. Horizontal double-entry bookkeeping - is useful for compiling accounts that reflect the mutual economic relationships between different institutional units in a consistent way. It ensures the consistency of recording for each transaction category by counterparties; and
  3. Quadruple-entry bookkeeping - the simultaneous application of both the vertical and horizontal double-entry bookkeeping, which is the accounting system underlying the recording of transactions in the ASNA.

3.40    Quadruple- entry bookkeeping deals in a coherent way with multiple transactors or groups of transactors, each of which satisfies vertical double-entry bookkeeping requirements. A single transaction between two counterparties thus gives rise to four entries. In contrast to business bookkeeping, national accounts deal with interactions among a multitude of units in parallel, and thus require special care from a consistency point of view. As a liability of one unit is mirrored in a financial asset of another unit, for instance, they should be identically valued, allocated in time and classified to avoid inconsistencies in aggregating balance sheets of units by sectors or for the total economy. The same is also true for all transactions and other flows that affect balance sheets of two counterparties.


General rules

3.41    The underlying principle of valuation in the system of national accounts is that all entries are recorded, in money terms, at the exchange value current during the accounting period; that is, the value at which flows and stocks are, or could be, exchanged for cash (including transferable deposits). The system does not attempt to determine the utility of the flows and stocks within its scope.

3.42    When goods and services are exchanged for cash or its equivalent, the required values are directly available. In addition, values are directly observable for flows and stocks that concern financial instruments, such as cash holdings or liabilities. The majority of flows and stocks in the national accounts fall into these categories.

3.43    In other cases, where no actual exchange values are available, the preferred method of valuation is by reference to the market value of similar goods, services, or assets. This method is used to estimate the value of the services of owner-occupied dwellings, and of 'backyard' production by households for their own use.

3.44    When no prices for similar products exist, it may be necessary to value goods or services by the amount that it costs to produce them. This is the case for most non-market goods and services produced by general government units and non-profit institutions serving households.

3.45    For some assets, it is necessary to estimate a value by writing down (depreciating) the initial acquisition costs. The value of such assets at a given point in their life is equal to their acquisition cost less the accumulated value of these write-downs. Typically, the current value of fixed assets is estimated by writing down current market prices for the accumulated consumption of fixed capital.

3.46    Where none of the above valuation methods is feasible, flows and stocks can be recorded at the net present value of expected future returns. This method is not generally recommended, as it involves a number of assumptions and the possibility of substantial future revisions to estimates. However, 2008 SNA recognises that it is the most appropriate method of valuation in circumstances where returns from assets are either delayed (as is the case with timber plantations) or spread over a lengthy period (as for mineral and energy resources).

3.47    Flows and stocks concerning foreign currency are converted to their value in national currency at the exchange rate prevailing when the transaction or flow takes place, or in the case of balance sheet items, the date to which the balance sheet applies. The exchange rate used for conversion to national currency is the mid-point between the buying and selling rate, so as to exclude any implicit foreign exchange service charge.

3.48    Valuations contained in business accounts, tax returns and other administrative records, which are widely used sources of data for national accounts purposes, often do not conform to the national accounting valuation standard. This is especially so in the case of depreciation, where rates of depreciation for tax purposes normally deviate from those underlying the national accounting concept of the consumption of fixed capital. In particular, depreciation for tax purposes is based on the historical cost of the assets whereas consumption of fixed capital in the national accounts is based on the current cost of the assets involved.

3.49    In some cases, invoice values may not accord with prices paid in the market for similar items. Where transactions are between affiliated enterprises under common management, the prices adopted for bookkeeping purposes - referred to as transfer prices - may not correspond to prices that would be charged to independent parties. By using artificially high or low prices, transfer pricing could be used as a device for shifting profits among enterprises within a group for taxation (or other) purposes. In principle, such transactions should be identified and re-valued if they are likely to significantly affect the interpretation of the accounts. Instances of transfer pricing are difficult to identify, and subsequently adjust for. In the ASNA, transactions prices are used as there is no current data on transfer pricing.

3.50    To maximise concordance with 2008 SNA accounting rules, surveys of businesses conducted by the ABS request data, where possible on a national accounts basis. Adjustments are made to source data that are not recorded on the required basis.

Special valuations concerning products

3.51    The producer and the user of a given product usually perceive its value differently, because of intervening transport costs, trade margins, taxes, and subsidies on products. In order to keep as close as possible to the views of the transactors, 2008 SNA recommends that outputs of products be valued at basic prices, while inputs, or final purchases, should be valued at purchasers' prices.

3.52    The basic price is the amount receivable by the producer from the purchaser for a unit of a good or service, minus any tax payable (including deductible value added taxes such as the GST) plus any subsidy receivable, as a consequence of production or sale of the unit. Subsidies artificially reduce the sale price, so they are included in the basic price to obtain a measure of the true value of the goods or services produced. Taxes on products, if included, would artificially increase the price, and so are deducted. The basic price also excludes any transport charges invoiced separately by the producer. The basic price therefore measures the amount retained by the producer in respect of the good or service that is produced as output.

3.53    The major output of the wholesale and retail trade industries is the value of the service provided in selling goods (i.e. goods purchased and resold are not treated as part of intermediate consumption). The value of the service is equal to the trade margins realised on the goods sold. The measurement of this service at basic prices is analogous to that for goods producing industries: output at basic prices is the value of the trade margins, including the value of any subsidies received by the wholesaler or retailer, and excluding taxes on production of the service.

3.54    The purchaser's price is the amount paid by the purchaser in order to take delivery of goods or services. Purchasers' prices include any taxes payable (less any subsidies receivable) on production and imports, and any transport charges paid separately by the purchaser to take delivery of goods. Value added taxes, such as the GST, are included in purchasers' prices unless they are allowable as deductions from the purchaser's value-added tax liability. Purchasers' prices are also referred to as market prices.

3.55    Imports and exports of goods are valued free-on-board (f.o.b.); that is, at the exporter's customs frontier.

3.56    The ASNA follows the 2008 SNA recommendations with respect to the valuation of products: in the I-O tables and the associated measures of value added by industry, gross output is measured at basic prices and intermediate inputs are measured at purchasers' prices. Expenditure items are recorded at purchasers' prices. Imports and exports of goods are valued f.o.b.. Details of other aspects of the valuation of imports and exports are contained in the ABS publication, Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods.

Valuation of other flows

3.57    For the valuation of the other changes in the volume of assets, it is usual to take the value of the asset before and after the change in volume and then to take the difference that is not explained by any transaction as the value of the other change.

3.58    Holding gains and losses accrue continuously and apply to both non-financial and financial assets and liabilities. In general, they are estimated by deducting from the total change in the value of assets those that can be attributed to transactions and to other changes in volumes. Since most financial assets are matched by liabilities, either within the domestic economy or with the rest of the world, it is important that holding gains in one are matched by holding losses in the other and vice versa.

Valuation of positions of financial assets and liabilities

3.59    Stocks of financial assets and liabilities should be valued as if they were acquired in market transactions on the balance sheet reporting date (or on the closest preceding date if the markets are closed on that date). Valuation according to market-value equivalent is needed for valuing financial assets and liabilities that are not traded in financial markets or are traded only infrequently. For these assets and liabilities, it will be necessary to estimate fair values that, in effect, approximate market prices. The present value of future cash flows can also be used as an approximation to market prices provided an appropriate discount rate can be used.

Time of recording

3.60    Flows in the national accounting system are ideally recorded on an accrual basis. Accrual accounting records flows at the time economic value is created, transformed, exchanged, transferred, or extinguished. Accrual accounting enables the profitability of productive activities to be evaluated without the disturbing influences of leads and lags in cash flows, and net worth to be calculated correctly at any given point. In terms of entries in the national accounts this means that:

  • flows which imply a change of ownership are entered when legal ownership changes (this applies to financial assets as well as goods);
  • services are recorded when provided;
  • distributive transactions, such as compensation of employees, interest, rent on land, and social contributions and benefits are recorded in the period during which the amounts payable are built up. Interest on debt is recorded in the accounting period in which it accrues, regardless of whether or not it is actually paid in that period;
  • output is recorded at the time products are created (not when paid for by a purchaser); and
  • intermediate consumption is recorded in the period when the materials are used.

Change of ownership

3.61    In transactions involving the purchase of goods, accrual accounting usually arises naturally from the nature of the transaction. When goods are exchanged for financial assets (e.g. cash), accounting entries reflecting the change of ownership will be recorded at the same time for both the seller and the purchaser. However, the identification of the time of change of ownership is not always straightforward where exports and imports are concerned. In the absence of sources specifying the date of change of ownership, the time at which goods cross the frontiers of countries concerned (obtained from customs records) is usually taken as a proxy for this date. However, for certain exports and imports timing adjustments are made where supplementary information is available to more accurately reflect the time that ownership changes.

3.62    To accord with accrual accounting principles, transactions in financial assets should also be recorded on a change of ownership basis. Financial transactions are shown in the ASNA in the financial accounts.

Acquisition of services

3.63    Services are to be recorded when they are provided. While in most cases this is straightforward, there are types of services that require special treatment. The main types falling into this category are insurance, where the payments of premiums are made in advance, and housing, where the services provided by home ownership are continuous. In the ASNA, provisions are made to account for the services of insurance and housing in each accounting period.

Distributive transactions

3.64    Distributive transactions can be difficult to record on an accrual basis, as the accounting practices of the units involved are not always consistent with national accounting requirements. The most important item (in terms of size) affected in this way in the ASNA is wages and salaries, a component of compensation of employees. In addition, provisions for employee entitlements which qualify as liabilities should also be included, rather than the cash payments of these entitlements. Such liabilities include provisions for long service leave and annual leave, and contributions by employers to unfunded superannuation schemes. Interest on debt is recorded in the period during which the interest accrues. Dividend levels, however, are not unambiguously attributable to a particular earning period, and are therefore recorded when they are declared payable.

Output, intermediate input, changes in inventories, and consumption of fixed capital

3.65    The principle of recording on an accrual basis implies that output is recorded over the period in which the process of production takes place, and the intermediate consumption of goods or services is recorded at the time when the goods or services enter the process of production. Additions to inventories are recorded when products are purchased, produced or otherwise acquired, and deductions from inventories are recorded when products are sold, used up as intermediate consumption or otherwise relinquished.

3.66    In general, the collection methods used in the ASNA result in estimates on an accrual basis, although the extent to which this is possible depends upon the information received from the respondents to ABS economic statistics collections. Consumption of fixed capital is a cost which accrues over the whole period the fixed asset is available for productive purposes. The apportioning to accounting periods depends on the rate of depreciation used to estimate the using up of the asset. To be consistent with other entries in the accounts, consumption of fixed capital must be valued at the prices prevailing during the current accounting period (unlike depreciation for tax purposes, which is based on the historical cost of the assets).

Other flows

3.67    Other changes in the volume of assets are usually discrete events that accrue at precise moments or within fairly short periods of time (e.g. assets being destroyed in a natural disaster such as a bush fire).

Holding gains and losses

3.68    Changes in prices often have a more continuous character, particularly in respect of assets for which active markets exist. In practice, nominal holding gains or losses will be computed between two points in time:

  1. The moment at which:
    • The accounting period begins; or
    • Ownership is acquired from other units (through purchase or a transaction in kind); or
    • An asset is produced; and
  2. The moment at which:
    • The accounting period ends; or
    • The ownership of an asset is relinquished (through sale or a transaction in kind); or
    • An asset is consumed in the production process.

Timing adjustments for international transactions

3.69    Differences in the time of recording by partner economies may occur due to various factors. One of the intrinsic problems with recording international transactions is the difference in time zones as well as from delays in mail deliveries or settlement clearing processes. In most cases, data at some aggregate level rather than individual records are used in the compilation of international accounts. Several data sources may often only approximate the required basis. It is important to make timing adjustments where there are major divergences from the required basis.

Aggregation netting and consolidation


3.70    The vast number of individual transactions, other flows and assets within scope of the national accounts have to be arranged in a manageable number of analytically useful groups. Such groups are formed by crossing two or more classifications. For example, the classification of institutional sectors or industries is crossed with the classification of transactions, other accumulation entries or assets. In addition, incomes need to be distinguished from uses and assets from liabilities.


3.71    Individual units or sectors may have the same kind of transaction both as a receivable and as a payable (e.g. they both pay and receive interest) and the same kind of financial instrument as both an asset and a liability. Where all the items are shown at their full values, the recording is on a gross basis. Where the values of some items are offset against items on the other side of the account, or against items which have an opposite sign, the recording is on a net basis. Gross recording is applied in most cases, except where a degree of netting is inherent in the classifications themselves. Within the ASNA, an example of net recording is the aggregate for changes in inventories. Rather than record all individual additions to and withdrawals from inventories, the resulting overall changes are recorded in order to show the final effect on gross capital formation. Similarly, the financial accounts record increases in assets and liabilities on a net basis (i.e. acquisitions and disposals are offset) to bring out the final consequences of these types of flows at the end of the accounting period.


3.72    Consolidation refers to the elimination of transactions which occur between two transactors belonging to the same institutional sector or subsector. Consolidation within sectors or subsectors can be useful for the kinds of analysis which focus on the interactions between subsectors of the economy and between resident sectors and the rest of the world, where the overall final position is more significant than the details of gross transactions within sectors. Consequently, in the sector income, capital and financial accounts, transfer flows are generally consolidated. Likewise, the national income, capital and financial accounts are prepared on a consolidated basis; however, non-consolidation is the general rule in some parts of the national accounts, such as the I-O tables.