In GFS, assets are defined as instruments or entities over which ownership rights must be able to be enforced, and from which economic benefits may be derived by holding them, or using them, over a period of time. In GFS, only two types of ownership of assets are recognised, legal ownership and economic ownership. Paragraph 7.5 of the IMF GFSM 2014 states:

• The legal owner of resources (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 resources. Only if such resources have a legal owner (either on an individual or collective basis), are they recognised in macroeconomic statistics.
• The economic owner of resources (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 resource by virtue of accepting the associated risks. Examples of where the economic owner is different to the legal owner of resources include financial lease arrangements (where the lessee is the economic owner but not the legal owner for the life of the lease).

Only economic assets are included within the asset boundary in the GFS framework, and they appear in the balance sheet of the unit that is the economic owner of the asset. Paragraph 7.6 of the IMF GFSM 2014 defines economic assets as:

1. Resources over which economic ownership rights are enforced by institutional units, individually or collectively; and
2. From which economic benefits may be derived by their owners by holding them or using them over a period of time.

In the GFS framework, economic assets provide benefits by functioning as a store of value. Paragraph 7.7 of the IMF GFSM 2014 indicates that some benefits are derived by using assets (such as buildings or machinery) in the production of goods and services; and some benefits consist of income from property (such as interest, dividends, and rents received by the owners of financial assets, land, and certain other assets).

In GFS, resources are not considered to be economic assets if ownership rights over them have not been established, or are not (or cannot be) enforced. Paragraph 7.10 of the IMF GFSM 2014 states that in some cases, ownership rights may be established but it may not be feasible to enforce them. An example of this is for land that is so remote or inaccessible that the government cannot exercise effective control over it. In such cases, it is a matter of judgment as to whether the degree of control exercised by the government is sufficient for the land to be classified as an economic asset. Even if ownership rights can be enforced, if the assets are not capable of bringing economic benefits to their owners, then they should be excluded from GFS.

In some cases, governments can create economic assets by exercising the powers delegated to them. An example given in paragraph 7.12 of the IMF GFSM 2014 is where a government uses its authority to assert ownership rights over naturally occurring assets that otherwise would not be subject to ownership (such as the electromagnetic spectrum), or natural resources in international waters subject to designation as an exclusive economic zone. These assets are classified as economic assets only if the government uses its authority to establish and enforce ownership rights over them.

Governments use assets to produce goods and services (albeit primarily as non-market producers), much like corporations do. An example given in paragraph 7.11 of the IMF GFSM 2014 is that of government office buildings (together with the services of government employees, office equipment, and other goods and services) that are used to produce collective or individual services, such as general administrative services. Governments often own assets whose services are consumed directly by the general public, and assets that require preservation because of their historic or cultural importance. Thus, when the asset boundary is applied to the general government sector, it often incorporates a wider range of assets than is normally owned by a private organisation. Government units frequently own:

• General-purpose assets - assets that other units would be likely to possess and use in similar ways, such as schools, road-building equipment, fire engines, office buildings, furniture, and computers;
• Infrastructure assets - immovable non-financial assets that generally do not have alternative uses and whose benefits accrue to the community at large. Examples are streets, highways, lighting systems, bridges, communication networks, and canals; and
• Heritage assets - assets that a government intends to preserve indefinitely because they have unique historic, cultural, educational, artistic, or architectural significance.

In the GFS framework, assets are identified as either financial assets or non-financial assets, rather than current and non-current as is the case in commercial accounting.

Financial assets are assets that are in the form of financial claims on other economic units. They are the counterparts of liabilities of the units on which the claims are held (with the exception of monetary gold in the form of gold bullion held as reserve assets). All other assets in GFS are described as non-financial assets. Financial assets are further discussed in paragraphs 8.148 to 8.201 of this manual.

Non-financial assets are stores of value which provide benefits to owners either through their use in the production of goods and services, or in the form of property income. Non-financial assets are all economic assets other than financial assets. Paragraph 7.17 of the IMF GFSM 2014 states that unlike financial assets, non-financial assets have no counterpart liability (that is, the owner of the non-financial asset does not have a claim on another institutional unit). Non-financial assets come into existence as outputs from a production process, or in ways other than through processes of production, such as through natural occurrences. The production of non-financial assets may occur over two or more accounting periods depending on the type of non-financial asset. The recording of non-financial assets over two or more accounting periods is further discussed in Chapter 13 Part S.

In GFS, non-financial assets are described as non-financial produced assets, and non-financial nonproduced assets.

In GFS, non-financial produced assets are described as fixed produced assets, inventories, or valuables.

Fixed produced assets are those types of non-financial produced assets that are used repeatedly or continuously in production processes for more than one year. The key feature of fixed produced assets are that they are used repeatedly or continuously in production over a long period of time, rather than the physical durability of the asset itself. Some goods may be used repeatedly or continuously in production over many years but may be small, inexpensive, and used to perform relatively simple operations. Small hand tools such as saws, spades, knives, axes, hammers, screwdrivers, and spanners or wrenches are excluded from the non-financial produced asset boundary. If the expense on such tools takes place at a fairly steady rate and if their value is small compared with amounts payable on more complex machinery and equipment, the tools are treated as use of goods and services (ETF 1233). Non-financial produced assets are further discussed in paragraphs 8.55 to 8.117 of this manual.

Inventories are defined in paragraph 7.18 of the IMF GFSM 2014 as non-financial produced assets consisting of goods and services, which came into existence in the current period or in an earlier period, and that are held for sale, use in production, or other use at a later date. Paragraph 7.76 of the IMF GFSM states that the concept of inventories consist of stocks of:

• Goods that are still held by the units that produced them prior to their being further processed, sold, delivered to other units, or used in other ways;
• Products acquired from other units for use in the production of market and non-market goods and services by units, or for resale without further processing;
• Strategic stocks that are goods held for strategic and emergency purposes, goods held by market regulatory organisations, and other goods of special importance to the nation, such as grain, military inventories, and petroleum; and
• Services such as architectural drawings in the process of completion.

In GFS, inventories include materials and supplies, work in progress, finished goods, goods for resale and military inventories. It is important to note that military inventories are separately identified in Australian GFS. Inventories are further discussed in paragraphs 8.97 to 8.112 of this manual.

Valuables are defined in paragraph 7.18 of the IMF GFSM 2014 as non-financial produced assets of considerable value that are not used for the purpose of production or consumption, but are held primarily as stores of value over time. Paragraph 7.88 of the IMF GFSM 2014 notes that the concept of valuables includes:

• Non-monetary gold and other precious stones and metals that are not intended to be used as materials and supplies in the processes of production;
• Paintings, sculptures, and other objects recognised as works of art, or antiques held primarily as stores of value over time; and
• Jewellery of significant value fashioned out of precious stones and metals, collections, and miscellaneous other valuables.

Valuables are further discussed in paragraphs 8.112 to 8.115 of this manual.

Non-financial non-produced assets are defined in paragraph 7.19 of the IMF GFSM 2014 as naturally occurring assets and constructs of society. Naturally occurring assets include tangible non-financial nonproduced assets such as land, mineral and energy resources, non-cultivated biological resources and water resources. Non-financial non-produced assets also include intangible assets that are constructs of society, such as a licence to use an electromagnetic spectrum. In GFS, non-financial non-produced assets include tangible and intangible non-produced assets.

Tangible non-produced assets are assets that occur in nature and over which ownership may be acquired and transferred. Examples include assets such as land, mineral and energy resources, non-cultivated biological assets, water resources, radio spectra, and other types of natural resources. Tangible nonproduced assets are further discussed in paragraphs 8.118 to 8.133 of this manual.

Intangible non-produced assets are defined in paragraph 7.104 of the IMF GFSM 2014 as constructs of society as evidenced by legal or accounting actions. In GFS, these include assets such as marketable operating leases, permits to use natural resources, permits to undertake specific activities, entitlement to future goods and services on an exclusive basis, goodwill and marketing assets and other intangible assets. Intangible non-produced assets are further discussed in paragraphs 8.134 to 8.144 of this manual.

Liabilities are defined in paragraph 7.15 of the IMF GFSM 2014 as established when one unit (the debtor) is obliged, under specific circumstances, to provide funds or other resources to another unit (the creditor). Liabilities are the counterparts of financial assets held by the claimant economic units (other than monetary gold in the form of gold bullion held as reserve assets). In the GFS framework, all liabilities are considered to be financial in nature, and no distinction is made between financial and non-financial as it is for assets.

Only actual (outstanding) liabilities and their corresponding assets are included in the GFS balance sheet. Contingent liabilities are defined in paragraph 7.251 of the IMF GFSM 2014 as obligations that do not arise unless a particular, discrete event(s) occurs in the future. The key difference between contingent liabilities and actual liabilities is that, for a contingent liability, one or more conditions must be fulfilled before a financial transaction is recorded. In GFS, contingent liabilities are not recognised as liabilities prior to their associated condition(s) being fulfilled. However, explicit contingent liabilities provide valuable information regarding potential obligations to provide economic value to another unit, and so these are recorded as memorandum items to the GFS balance sheet. Memorandum items in GFS differ to those of commercial accounting in that they are compulsory in the GFS framework rather than optional as in commercial accounting. Contingent liabilities are further discussed in Chapter 13 Part C and paragraphs A1B.17 to A1B.28 of this manual

Paragraph 7.15 of the IMF GFSM 2014 states that whenever a liability exists, the creditor in the transaction has a corresponding financial claim on the debtor. A financial claim is an asset that typically entitles the owner of the asset (the creditor) to receive funds or other resources from another unit (the debtor), under the terms of a liability. Like liabilities, financial claims are not dependant on any other associated condition(s) being fulfilled. Financial claims consist of debt instruments (including financial derivatives and monetary gold in the form of allocated and unallocated gold accounts), and equity and investment fund shares.

• Debt instruments are financial instruments that are created when one unit provides funds or other resources (for example, goods in the case of trade credit, or funds in the case of a loan) to a second unit and the second unit agrees to provide a return in the future.
• Equity and investment fund shares issued by corporations and similar legal forms of organisation are treated as liabilities of the issuing units even though the holders of the claims do not have a fixed or predetermined monetary claim on the corporation. Equity and investment fund shares entitle their owners to benefits in the form of dividends and other ownership distributions, and they often are held with the expectation of receiving holding gains. In the event that the issuing unit is liquidated, shares and other equities become claims on the residual value of the unit after the claims of all creditors have been met. If a public corporation has formally issued shares or another form of equity, then the shares are a liability of that corporation and an asset of the government or other unit that owns them. If a public corporation has not issued any type of shares, then the existence of other equity is imputed.
• Monetary gold in the form of allocated and unallocated gold accounts is a financial claim and a liability of another unit in the form of currency and deposits. Monetary gold in the form of bullion is not a financial claim, because it is not the liability of any other unit. Monetary gold provides economic benefits by serving as a store of value and a means of international payment to settle financial claims and finance other types of transactions. As a result, monetary gold in the form of bullion is treated as a financial asset only.

Liabilities are further discussed in paragraphs 0 to 8.200 of this manual.

All assets and liabilities should be valued as if they were acquired in current market transactions on the balance sheet reporting date (reference date). Paragraph 7.20 of the IMF GFSM 2014 states that the value of an asset (or liability) at any given time is its current market value, which is defined as the amount that would have to be paid to acquire the asset on the reporting date, taking into account its age, condition, and other relevant factors. This amount depends on the economic benefits that the owner of the asset can derive by holding or using it. The remaining benefits expected to be received from most assets diminish with the passage of time through depreciation / amortisation, which reduces the value of the asset. However, the remaining benefits of some assets (such as valuables), may increase or appreciate with the passage of time. The value of the remaining benefits may also increase or decrease because of changes in economic conditions.

If the market value of assets or liabilities increase or decrease during the financial reporting period, then holding gains and losses on the value of the assets or liabilities are recorded in GFS as other economic flows. Holding gains and losses are further discussed in Chapter 11 of this manual.

If the volume of non-financial assets increases through the addition of assets not previously recognised on the GFS balance sheet (such as the discovery of a mineral deposit), or decreases through destruction or depletion of the assets (such as through fire, flood, or other damage), then an other change in the volume of assets entry is recorded in the GFS accounts as other changes in volume of non-financial assets (ETF 5212, TALC). Similarly, if the volume of liabilities increase through situations such as the unilateral write off of debt by government as part of a bail out or other operation, then this is recorded as other change in the volume of liabilities (ETF 5213, TALC). However, if the volume of liabilities increase or decrease due to debt forgiveness or debt rescheduling, these are recorded as transactions in liabilities (ETF 3211, TALC, SDC) due to the mutually agreed nature of the transaction and not as an other volume change. Debt forgiveness and debt rescheduling are discussed in Chapter 13 Part B of this manual. Other changes in the volume of assets are further discussed in Chapter 11 of this manual.

Paragraph 7.24 of the IMF GFS 2014 recommends that observable market prices be used to value all assets and liabilities in the GFS balance sheet. However, in estimating the current market price for balance sheet valuation, a price averaged over all transactions in a market can be used if the market is one on which the items in question are regularly, actively and freely traded. Where there are no observable prices because the assets or liabilities in question have not been purchased or sold on the market in the recent past, then an attempt should be made to estimate what the prices would be, were the assets or liabilities to be acquired on the market on the date to which the balance sheet relates. Such estimates may be obtained by (i) accumulating and revaluing transactions, or (ii) calculating the present value of future returns.

In the Australian macroeconomic statistics, the value of an acquisition or disposal of an existing financial asset or liability is its current market value under the creditor approach (or from the perspective of the unit holding the security). Paragraph 17.261 of the 2008 SNA states that the creditor approach uses the current rate to estimate the value of interest between any two points in the instrument’s life. Market value is conceptually equal to the required future payments of principal and contractual interest discounted at the existing market yield. The current IMF GFSM 2014 no longer recognises the use of the creditor approach, and only refers to it indirectly in paragraph 6.66. The Australian GFS diverges from the IMF GFSM 2014 in the valuation of all government assets and liabilities at the current market value using the creditor approach. The creditor approach is further discussed in Chapter 13 Part B of this manual.

The 2008 SNA and the IMF GFSM 2014 value their financial assets and liabilities using the nominal value under the debtor approach. The nominal value is conceptually equal to the required future payments of principal and interest discounted at the contractual interest rate. The debtor approach assumes that interest payments are fixed in advance, and accrued interest is determined using the original yield-tomaturity which is established at the time of the security issuance.

The essential difference between nominal and market valuation is the use of the current market yield instead of the contractual rate(s) as the discount rate(s) applicable. The relevance of historical (contractual) interest rates to reflect current valuation is not supported by the ABS. The market valuation principle using the creditor approach (from the perspective of the unit holding the security) reflects the current market value of assets and liabilities, and is a fundamental principle across ABS economic statistics. It should be noted that for consistency, valuation of debt at current market values requires measurement of interest payments and receipts at the current market yield, not contractual rates. The market value is further discussed in Chapter 13 Part B of this manual.

Debt data will be sought at market value, but if only available on a nominal value basis the ABS will work with providers to find a suitable solution which may entail modelling to estimate the market value using the data which is available.

Paragraphs 8.34 to 8.40 below provide general descriptions of methods used to estimate current market prices, and are extracted from paragraphs 7.26 to 7.33 of the IMF GFSM 2014. Because the valuation of liabilities in GFS is the same as the valuation of their corresponding financial assets, references to financial assets in this chapter should be read as including liabilities as well.

The ideal source of price observations for valuing balance sheet items is a market (like the stock exchange), in which each asset traded is completely homogeneous, is often traded in considerable volume, and has its market price listed at regular intervals. Such markets yield data on prices that can be multiplied by indicators of quantity in order to compute the total market value of different classes of assets held by sectors and of different classes of their liabilities.

For securities quoted on a stock exchange, it is feasible to gather the prices of individual assets and broad classes of assets of all existing securities. The global valuation of existing securities may also be determined to assist in valuation of the assets. Debt securities traded (or tradeable) in organised and other financial markets (such as bills, bonds, debentures, negotiable certificates of deposit, asset-backed securities, etc.) should be valued at the current market value. The treatment of debt in GFS is further discussed in Chapter 13 Part B of this manual.

If assets of the same kind are being produced and sold on the market, an existing asset may be valued at the current market price of a newly produced asset adjusted for depreciation in the case of non-financial produced assets, and any other differences between the existing asset and a newly produced asset. This adjustment for depreciation should be calculated on the basis of the asset prices prevailing on the balance sheet reference date rather than the actual amounts previously recorded as an expense.

In addition to providing direct observations on the prices of assets actually traded there, information from such markets may also be used to price similar assets that are not traded. For example, information from the stock exchange also may be used to price unlisted shares by analogy with similar, listed shares, making some allowance for the inferior marketability of the unlisted shares. Similarly, appraisals of assets for insurance or other purposes generally are based on observed prices for items that are close substitutes, although not identical, and this approach can be used for balance sheet valuation.

In the absence of observable market prices, the balance sheet value of an asset may be obtained by accumulating and revaluing transactions. The values of most non-financial assets change year by year reflecting changes in market prices. At the same time, initial acquisition costs are reduced by depreciation (in the case of non-financial produced assets), or amortisation, or depletion over the expected life of the asset. The value of such an asset at a specific point in its life is given by the current acquisition price of an equivalent new asset minus the depreciation, amortisation, or depletion imputed by applying the chosen pattern of decline to that price. This valuation is referred to as the written-down replacement cost. When directly observed prices for used assets are not available, this procedure gives a reasonable approximation of what the market price would be, were the asset to be offered for sale.

• In the absence of observed market values, most non-financial produced assets are recorded in the balance sheet at their written-down replacement cost.
• Intangible non-produced assets (such as goodwill and marketing assets), are typically valued at their initial acquisition costs (using observed prices or the historical value revalued to the current period price using an appropriate price index) minus an allowance for amortisation. For this method, a pattern of decline must be chosen, which may be based on tax laws and accounting conventions.
• It may be possible to value subsoil and other naturally occurring assets at their initial acquisition costs (using observed prices or the historical value revalued to the current period price using an appropriate price index) minus an allowance for depletion.

The perpetual inventory method (PIM) is commonly used to estimate the written-down replacement cost of a category of assets, especially tangible non-financial produced assets. Under this method, the value of the stock is based on estimates of acquisitions and disposals that have been accumulated (after deduction of the accumulated depreciation, amortisation, or depletion imputed by applying the chosen pattern of decline to that price), and revalued over a long enough period to cover the acquisition of all assets in the category. The PIM may be viewed as the macroeconomic equivalent of an asset register, with the difference being that the PIM calculates the written-down replacement cost for large groups of assets, while an asset register does them for individual assets or asset types.

In some cases, current market prices may be approximated by the present value of the future economic benefits expected from a given asset. The present value is the value today of a future payment or stream of payments discounted at some appropriate compounded interest rate. It is also referred to as the time value of money or discounted cash flow. This method may be feasible for a number of assets such as naturally occurring assets and intangible assets. For example, timber and subsoil assets are assets whose benefits are normally receivable well in the future and / or spread over several years. Current prices can be used to estimate the gross return from the disposal of these assets and the costs of bringing them to market. These returns and costs can then be discounted to estimate the present value of the expected benefits.

The current market value of non-financial assets (except land but including all other tangible non-produced assets) includes all costs of ownership transfer to the extent they have not been expensed as depreciation. The costs of ownership transfer on land are not included in the value of the land itself, but are included as part of the value of land improvements (TALC 113). The reason for this is because the costs of ownership transfer relate to the items that are built on the surface of the land (these are produced assets and therefore seen as improvements to the land) rather than the land itself (which is treated as a non-produced asset in GFS). Land only includes the ground, including the soil covering and any associated surface waters, over which ownership rights are enforced. Therefore, there are no costs of ownership transfer shown separately in the GFS balance sheet.

Paragraph 8.8 of the IMF GFSM 2014 indicates that costs of ownership transfer are attributed to the purchaser or seller of the asset according to which unit bears the responsibility of meeting the costs in the purchase / sale agreement. Examples of costs of ownership transfer include fees paid to surveyors, engineers, architects, lawyers, estate agents, trade and transport costs separately invoiced to the purchaser, and taxes payable on the transfer. Paragraph 6.60 of the IMF GFSM 2014 notes that costs of ownership transfer are estimated at the time of the acquisition of an asset and are written off through depreciation over the period the asset is expected to be held by the purchaser rather than over the whole life of the asset.

Also included as part of costs of ownership transfer are terminal costs (also known as decommissioning or make-good costs). These are estimated at the time of the acquisition of the asset by the owner, but differ to other costs of ownership transfer because they are written off over the life of the associated asset, regardless of the number of owners during the life of the asset. Paragraph 6.60 of the IMF GFSM 2014 notes that in the case of large assets, such as oil rigs and nuclear power stations, there may be large terminal costs associated with the decommissioning of the assets at the end of their productive life. For some land sites, such as those used for landfill, there may be large terminal costs associated with rehabilitation of the site.

The costs of ownership transfer on financial assets are excluded from the current market value of the financial assets themselves. Counterpart financial assets and liabilities refer to the same financial instrument and so debtors and creditors record the same value. Therefore, the costs associated with the acquisition of a financial asset are treated as use of goods and services (ETF 1233, COFOG-A, SDC) at the time the financial asset is acquired. Costs of ownership transfer and decommissioning costs are also excluded on inventories and military inventories. The reason for this is because inventories are held for specific use by producer units for use in the production of goods or services.

The value of financial assets and liabilities denominated in foreign currencies should be converted to the domestic currency value at the market exchange rate prevailing on the date to which the balance sheet relates. Paragraph 3.119 of the IMF GFSM 2014 recommends that the rate used is the mid-point between the buying and selling spot rates for currency transactions. When a multiple exchange rate system is in operation, the valuation should be based on the rate applicable to the type of asset in question.

If a transaction expressed in a foreign currency involves the creation of a financial asset or liability, such as other accounts receivable / payable, and is followed by a second transaction in the same foreign currency that extinguishes the financial asset or liability, then both transactions are valued at the exchange rates effective when each takes place.

The GFS net worth is a key economic measure which represents the value of a government entity’s assets at market value at a point in time less the value of financial claims on the entity by other units. The excess of the value of assets over the value of liabilities and shares and other equity is defined as a unit’s net worth. Net worth may be positive, negative, or zero in value.

Paragraph 7.229 of the IMF GFSM 2014 states that for most government units, the net worth is the economic value of the unit because they usually have no issued shares and other equity. In the case of quasi-corporations, net worth is zero because the value of the owners’ equity is assumed to be equal to its assets minus its liabilities. Even when general government units have liabilities in the form of equity, the net worth of such government units is zero (similar to that of quasi-corporations), if these shares are not traded or the value of the shares cannot be determined independently.

The net worth at the end of a reference period less the net worth at the beginning of the period gives a measure of the change in net worth over the period. This change in net worth is made up of contributions from the following three components:

• Change in net worth due to transactions i.e. as reflected by the net operating balance;
• Change in net worth due to holding gains and losses (also known as revaluations); and
• Change in net worth due to other changes in the volume of assets.

In GFS, the balance sheet records the stock positions of assets and liabilities owned by an institutional unit (or group of units) at their current market value, at the end of an accounting (or reference) period. The GFS balance sheet identifies financial assets, non-financial assets, liabilities and net worth as appears in Table 8.1 below:

In GFS, input data are sourced from the financial accounts of the state and territory treasuries, the Department of Finance, local government units, and universities. These input data are classified to the GFS framework using a variety of input classifications in order to produce the variety of output statements that the ABS publish on a quarterly and annual basis. Table 8.2 below shows the broad framework of assets and liabilities as it appears in the economic type framework (ETF).

As shown in Table 8.2 above, the economic type framework (ETF) contains the asset and liability framework at its broadest level. In order to populate the GFS balance sheet with the detail required for output purposes, a number of additional input classifications must be used. These additional classifications include the:

• Type of asset and liability classification (TALC) - this identifies non-financial and financial assets and liabilities by type of asset / liability (see Chapter 4 and Appendix 1 Part A for further information).
• Source destination classification (SDC) - this identifies the sector that is the source or destination of transactions in, and stocks of, financial assets and liabilities in GFS (see Chapter 4 and Appendix 1 Part A of this manual for further information).

The detailed framework of assets and liabilities is shown in Table 8.3 below. This includes a hierarchical classification of non-financial assets, financial assets and liabilities pertaining to the GFS balance sheet, and the additional classifications required to populate the GFS balance sheet for output purposes.

As can be seen from Table 8.3, non-financial assets and financial assets and liabilities are classified to the GFS balance sheet (ETF 8) by type using the type of asset and liability classification (TALC). Non-financial assets are identified in GFS balance sheet as produced assets in the form of fixed produced assets (ETF 81) and other produced assets (ETF 82); and as non-financial non-produced assets in the form of nonproduced assets (ETF 83).

Fixed produced assets (ETF 81) are types of non-financial produced assets that are owned by public sector units, and are created rather than occurring naturally in nature. These are assets that are made by humans or machines. The current market value of fixed produced assets are recorded in the GFS balance sheet. In this context, the current market value includes the un-depreciated component of costs of ownership transfer on all non-financial assets except for land (which are recorded as land improvements (ETF 8113)) and inventories. In GFS, fixed produced assets are further classified as:

• Buildings and structures (ETF 811);
• Machinery and equipment (ETF 812);
• Cultivated biological resources (ETF 813);
• Intellectual property products (ETF 814); and
• Weapons systems (ETF 815).

Buildings and structures (ETF 811) records the current market value of buildings and associated structures. In GFS, buildings and structures are further classified as:

• Dwellings (ETF 8111);
• Buildings other than dwellings (ETF 8112);
• Land improvements (ETF 8113); and
• Structures not elsewhere classified (ETF 8119).

Dwellings (ETF 8111) records the current market value of dwellings including the costs of ownership transfer. Dwellings are defined in paragraph 7.44 of the IMF GFSM 2014 as buildings, or designated parts of buildings, that are used entirely or primarily as residences, including any associated structures (such as garages), and all permanent fixtures customarily installed in residences, excluding the land upon which the dwelling exists.

Included as part of the concept of dwellings (ETF 8111) are houseboats; barges; mobile homes; caravans that are used as principal residences; and public monuments identified primarily as dwellings. Dwellings acquired by government for military personnel are also included in this category because they are used in the same way as dwellings acquired by civilians. Incomplete dwellings are included to the extent that the ultimate user is deemed to have taken economic ownership; because the construction is on own account; the ultimate user assumed the risks and benefits of the asset; or as evidenced by the existence of a contract of sale or purchase.

Buildings other than dwellings (ETF 8112) records the current market value of buildings other than dwellings including the costs of ownership transfer. Buildings other than dwellings are defined in paragraph 7.46 and 7.47 of the IMF GFSM as whole buildings or parts of buildings not designated as dwellings, excluding the land upon which the building other than dwellings exists.

Included as part of the concept of buildings other than dwellings (ETF 8112) are fixtures, facilities, and equipment that are integral parts of the structures, and the costs of site clearance and preparation for new buildings. The types of buildings included in this category are office buildings, schools, hospitals, buildings for public entertainment, warehouses and industrial buildings, commercial buildings, hotels, and restaurants. Public monuments identified primarily as non-residential buildings are also included. Prisons, schools, and hospitals are regarded as buildings other than dwellings despite the fact that they may shelter institutional households.

Land improvements (ETF 8113) records the current market value of improvements to land including the costs of ownership transfer on land. Paragraph 8.50 of the IMF GFSM 2014 describes land improvements as actions that lead to major improvements in the quantity, quality, or productivity of land, or prevent its deterioration (such as land clearance, land contouring, creation of wells and watering holes that are integral to the land in question).

Land improvements are non-financial produced assets that are distinct from the non-financial nonproduced asset land (ETF 8311). In GFS, the unimproved value of land must be separately identified from land improvements, and is subject to holding gains and losses separately from price changes due to improvements to the land. In cases where it is not possible to separate the value of the land before improvement and the value of those improvements, paragraph 7.50 of the IMF GFSM 2014 notes that the asset should be allocated to the category that represents the greater part of the value. Land improvements are further discussed in Chapter 13 Part F of this manual.

Included as part of the concept of land improvements (ETF 8113) are activities that are integral to the land in question such as land reclamation, land clearance, land contouring, creation of wells and watering holes; preparation for the erection of buildings; planting of crops; and the costs of ownership transfer on land.

Excluded from the concept of land improvements (ETF 8113) are the construction of seawalls, dykes, dams and major irrigation systems that are not integral (or part of) the land, and often affect land belonging to several owners, and which are often carried out by government (classified to other structures not elsewhere classified (ETF 8119)).

Structures not elsewhere classified (ETF 8119) records the current market value of other structures that are not elsewhere classified, including the costs of ownership transfer. Paragraph 7.48 of the IMF GFSM 2014 defined other structures as all structures other than buildings, excluding the land upon which the other structure not elsewhere classified exists.

Included as part of the concept of structures not elsewhere classified (ETF 8119) are highways; streets; roads; bridges; elevated highways; tunnels; railways; subways; airfield runways; sewers; waterways; harbours; dams; shafts, tunnels and other structures associated with mining mineral and energy resources; communication lines; power lines; long distance pipelines; local pipelines; cables; outdoor sport and recreation facilities; mining and manufacturing constructions; construction of sea walls, dikes, flood barriers and similar structures intended to improve the quality and quantity of land adjacent to them; infrastructure necessary for aquaculture such as fish farms and shellfish beds; public monuments that cannot be identified as dwellings or buildings other than dwellings; structures acquired for military purposes that are used repeatedly (or continuously) in processes of production for more than one year; and the costs of site clearance and preparation.

Machinery and equipment (ETF 812) records the current market value of machinery and equipment including the costs of ownership transfer. In GFS, machinery and equipment are further classified as:

• Transport equipment (ETF 8121);
• Information, computer, and telecommunications equipment (ETF 8122); and
• Machinery and equipment not elsewhere classified (ETF 8129).

Transport equipment (ETF 8121) records the current market value of transport equipment including the costs of ownership transfer. Paragraph 7.54 of the IMF GFSM 2014 states that the concept of transport equipment (ETF 8121) includes equipment for moving people and objects, including motor vehicles, trailers and semitrailers, ships, railway locomotives and rolling stock, aircraft, spacecraft (e.g. satellite launch vehicles), motorcycles, and bicycles.

Information, computer, and telecommunications equipment (ETF 8122) records the current market value of information, computer, and telecommunications equipment including the costs of ownership transfer. Paragraph 7.56 of the IMF GFSM 2014 defines information, computer, and telecommunications equipment as computer hardware and telecommunications equipment consisting of devices using electronic controls and also the electronic components forming part of these devices.

Included in the concept of information, computer, and telecommunications equipment (ETF 8122) are products that form part of computing machinery and parts and accessories thereof; television and radio transmitters; television, video, and digital cameras; satellites, and telephone sets.

Machinery and equipment not elsewhere classified (ETF 8129) records the current market value of other machinery and equipment that is not elsewhere classified, including the costs of ownership transfer. Paragraph 7.57 of the IMF GFSM 2014 notes that this category includes all machinery and equipment not classified in any of the other machinery and equipment categories.

Included as part of the concept of machinery and equipment not elsewhere classified (ETF 8129) are general-purpose and special-purpose machinery; office and accounting equipment; electrical machinery; medical appliances; precision and optical instruments; furniture; watches and clocks; musical instruments; and sports goods. Also included are paintings, sculptures, other works of art or antiques, and other collections of considerable value that are owned and displayed for the purpose of producing museum and similar services, in other words, for production purposes.

Excluded from the concept of machinery and equipment not elsewhere classified (ETF 8129) are similar items owned primarily as stores of value that are not intended for use in production (classified as valuables (ETF 8221)). Also excluded from this category are inexpensive durable goods such as small / hand tools that are recorded as use of goods and services (ETF 1233).

Cultivated biological resources (ETF 813) records the current market value of cultivated biological resources including the costs of ownership transfer. In GFS, cultivated biological resources are further classified as:

• Animal resources yielding repeat products (ETF 8131); and
• Tree, crop, and plant resources yielding repeat products (ETF 8132).

Animal resources yielding repeat products (ETF 8131) records the current market value of animal resources yielding repeat products, including the costs of ownership transfer. Paragraph 7.63 of the IMF GFSM 2014 indicates that only animals and plants cultivated under the direct control, responsibility, and management of institutional units are considered to be cultivated assets in GFS.

Paragraph 7.60 of the IMF GFSM 2014 notes that the concept of animal resources yielding repeat products (ETF 8131) includes breeding stocks, dairy cattle, draft animals, sheep, or other animals used for wool production, animals used for transportation, racing, or entertainment, and aquatic resources yielding repeat products.

Excluded from the concept of animal resources yielding repeat products (ETF 8131) are immature cultivated assets (unless produced for own use), and animals raised for slaughter, including poultry (classified as inventories (ETF 821)).

Tree, crop, and plant resources yielding repeat products (ETF 8132) records the current market value of tree, crop, and plant resources yielding repeat products, including the costs of ownership transfer.

Paragraph 7.61 of the IMF GFSM 2014 notes that the concept of tree, crop, and plant resources yielding repeat products (ETF 8132) includes trees (including vines and shrubs) cultivated for fruits and nuts, for sap and resin, and for bark and leaf products.

Excluded from the concept of tree, crop, and plant resources yielding repeat products (ETF 8132) are trees grown for timber that yield a finished product once only when they are ultimately felled (classified to the appropriate category within inventories (ETF 821)), and grains or vegetables that produce only a single crop when they are harvested (classified to the appropriate category within inventories (ETF 821)).

Paragraph 7.62 of the IMF GFSM 2014 notes that in general, when the production of non-financial produced assets takes a long time to complete, those assets for which production is not yet completed at the end of the reporting period are recorded as inventories in the form of work in progress (ETF 8212). These general principles also apply to the production of cultivated assets, such as animals or trees that may take a long time to reach maturity. Two cases need to be distinguished from each other: the production of cultivated products by specialised producers (such as breeders or tree nurseries), and the own-account production of cultivated assets by their users:

• In the case of the specialist producers, animals or trees whose production is not yet complete and are not ready for sale or delivery are recorded as inventories - work in progress (ETF 8212). 
• However, when animals or trees intended to be used as non-financial produced assets are produced on own account on farms or elsewhere, incomplete assets in the form of immature animals, trees, etc. not ready to be used in production are treated as the acquisition of non-financial produced assets by the producing public sector unit in its capacity as the eventual user, and not as work in progress.

Intellectual property products (ETF 814) records the current market value of intellectual property products including the costs of ownership transfer. In GFS, intellectual property products are further classified as:

• Research and development (ETF 8141);
• Mineral exploration and evaluation (ETF 8142);
• Computer software (ETF 8143);
• Databases (ETF 8144);
• Entertainment, literary, and artistic originals (ETF 8145); and
• Intellectual property products not elsewhere classified (ETF 8149).

Research and development (ETF 8141) records the current market value of research and development including the costs of ownership transfer. Research and development is defined in paragraph 7.66 of the IMF GFSM 2014 as the value of expenditure on creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of humankind, culture, and society, and use of this stock of knowledge to devise new applications.

Included as part of the concept of research and development (ETF 8141) is research and development that provides an economic benefit to its owner.

Excluded from the concept of research and development (ETF 8141) is any research and development that does not provide an economic benefit to its owner (classified as other non-employee expenses not elsewhere classified (ETF 1229, COFOG-A, SDC)).

Mineral exploration and evaluation (ETF 8142) records the current market value of mineral exploration and evaluation, including any costs of ownership transfer. Paragraph 7.68 of the IMF GFSM 2014 indicates that mineral exploration and evaluation consists of the value of expenditure on exploration for petroleum and natural gas, and for non-petroleum deposits, and subsequent evaluation of the discoveries made.

The concept of mineral exploration and evaluation (ETF 8142) includes the costs of actual test drilling and boring; pre-license, license, acquisition, and appraisal costs; the costs of aerial and other surveys; and transportation and other costs incurred to make the exploration possible.

Computer software (ETF 8143) records the current market value of computer software, including costs of ownership transfer. Paragraph 7.70 of the IMF GFSM 2014 notes that computer software may be purchased from other units or developed on own account, and may be intended only for own use or may be intended for sale by means of copies.

Included as part of the concept of computer software (ETF 8143) are computer programs, program descriptions, and supporting materials for both systems and applications software that are expected to be used for more than one year.

Databases (ETF 8144) records the current market value of databases, including the costs of ownership transfer. Paragraph 7.70 of the IMF GFSM 2014 defines databases as consisting of files of data organised in such a way as to permit resource effective access and use of the data, including the value of the information content. The costs associated with the purchase, development, or extension of databases are recorded as assets when they are used in production for more than one year.

Entertainment, literary, and artistic originals (ETF 8145) records the current market value of entertainment, literary, and artistic originals, including the costs of ownership transfer. Paragraph 7.72 of the IMF GFSM 2014 defines entertainment, literary, and artistic originals as original films, sound recordings, manuscripts, tapes, and models in which drama performances, radio and television programming, musical performances, sporting events, and literary and artistic output are recorded or embodied.

Intellectual property products not elsewhere classified (ETF 8149) records the current market value of other intellectual property products not elsewhere classified. Paragraph 7.73 of the IMF GFSM 2014 defines other intellectual property products not elsewhere classified as consisting of new information and specialised knowledge not elsewhere classified, the use of which is restricted to the units that have established ownership rights over the information or to other units licensed by the owners.

Included as part of the concept of intellectual property products not elsewhere classified (ETF 8149) are intellectual property products other than research and development, mineral exploration and evaluation, computer software, databases, and entertainment, literary and artistic originals.

Weapons systems (ETF 815 and ETF 851) (also known as defence weapons platforms in Australian GFS) record the current market value of military weapons systems, including the costs of ownership transfer (these include fees for transport costs separately invoiced to the purchaser, and decommissioning costs). Included as part of the concept of weapons systems (ETF 815, and ETF 851) are specialised vehicles and other equipment such as warships, submarines, military aircraft, tanks, missile carriers; launchers; singleuse weapons with a highly destructive capability which provide an ongoing service of deterrence against aggressors such as ballistic missiles, used repeatedly or continuously in the provision of defence services over a period of more than one year, even if their peacetime use is simply to provide deterrence.

Excluded from the concept of weapons systems (ETF 815 and ETF 851) is expenditure on military goods such as single-use weapons (ammunition, missiles, rockets, bombs, torpedoes) and spare parts. Paragraph 7.74 of the IMF GFSM 2014 notes that expenditure on military goods such as single-use weapons and spare parts are recorded as transactions in acquisitions of non-financial assets via change in inventories (military inventories) (ETF 4111, TALC 215). When military inventories are used, they are withdrawn from inventories and recorded as use of goods and services (ETF 1233, COFOG-A, SDC).

Other produced assets (ETF 82) record the current market value of other non-financial produced assets, including any costs of ownership transfer. In GFS, other non-financial produced assets are further classified as:

• Inventories (ETF 821);
• Valuables (ETF 822); and
• Other produced assets (ETF 823).

Inventories (ETF 821) record the current market value of inventories. Paragraph 7.75 of the IMF GFSM 2014 defines inventories as produced assets consisting of goods and services, which came into existence in the current period or in an earlier period, and that are held for sale, use in production, or other use at a later date. It is important to note that the current market value of inventories does not include any costs of ownership transfer (including transport, storage and decommissioning costs). The reason for this is because inventories form part of the production of goods and services, and are held by producer units specifically for the purpose of being further processed, sold, delivered to other units, or used in other ways as part of a production process. Inventories may also consist of products acquired from other units that are intended to be used in the production of market and non-market goods and services by producer units, or for resale without further processing. In GFS, inventories are further classified as:

• Inventories - materials and supplies (ETF 8211);
• Inventories - work in progress (ETF 8212);
• Inventories - finished goods (ETF 8213);
• Inventories - goods for resale (ETF 8214); and
• Military inventories (ETF 8215).

Inventories - materials and supplies (ETF 8211) records the current market value of inventories of materials and supplies excluding costs of ownership transfer. Paragraph 7.79 of the IMF GFSM 2014 defines materials and supplies to be all goods held with the intention of using them as inputs to a production process. Every public sector unit may be expected to hold some materials and supplies, if only office supplies.

Included as part of the concept of inventories - materials and supplies (ETF 8211) are office supplies, fuel, and foodstuffs.

Excluded from the concept of inventories - materials and supplies (ETF 8211) are the costs of ownership transfer (including transport, storage and decommissioning costs).

Inventories - work in progress (ETF 8212) records the current market value of inventories of work in progress excluding costs of ownership transfer. Paragraph 7.80 of the IMF GFSM 2014 defines work in progress as goods and services that are not yet sufficiently processed to be in a state in which it is normally supplied to other institutional units.

Paragraph 7.80 of the IMF GFSM 2014 notes that public sector units that primarily produce non-market services are likely to have little or no work in progress because the production of such services are completed in a short time span, or continuously. Work in progress must be recorded for any output that is not complete at the end of the accounting period, such as construction or growing crops. The only exceptions to recording incomplete work as work in progress are for partially completed projects for which the ultimate owner is deemed to have taken ownership, either because the production is for own use or as evidenced by the existence of a contract of sale or purchase. In these exceptions, the partially complete products are recorded as the acquisition of non-financial produced assets rather than work in progress.

Included as part of the concept of inventories - work in progress (ETF 8212) are immature animal resource assets unless produced for own use; animals raised for slaughter, including poultry; trees grown for timber that yield a finished product once only when they are ultimately felled; grains or vegetables that produce only a single crop when they are harvested; and immature tree, crop and plant resource assets unless produced for own use.

Excluded from the concept of inventories - work in progress (ETF 8212) are partially completed projects for which the ultimate owner is deemed to have taken economic ownership in stages, either when the production is for own use and the new owner assumes the risks and benefits associated with the incomplete asset, or when evidenced by specific clauses in a contract of sale or purchase (classified to the appropriate category under fixed produced assets (ETF 81)); and costs of ownership transfer (including transport, storage and decommissioning costs).

Inventories - finished goods (ETF 8213) records the current market value of inventories of finished goods excluding costs of ownership transfer. Paragraph 7.83 of the IMF GFSM 2014 defines finished goods as goods that are the output of a production process, are still held by their producer, and are not expected to be processed further by the producer before being supplied to other units. Finished goods may only be held by the units that produce them. Public sector units will have finished goods only if they produce goods for sale or transfer to other units. Inventories of finished goods are valued at their current market value (before the addition of any taxes, transport, or distribution charges) or at their current replacement price, and exclude costs of ownership transfer.

Inventories - goods for resale (ETF 8214) records the current market value of inventories of goods for resale excluding costs of ownership transfer. Paragraph 7.84 of the IMF GFSM 2014 defines goods for resale as goods acquired for the purpose of reselling or transferring to other units without being further processed. Goods for resale may be transported, stored, graded, sorted, washed, or packaged by their owners to present them for resale in ways that are attractive to their customers or beneficiaries, but they are not otherwise transformed.

Public sector units that sell goods at economically significant prices are likely to possess an inventory of goods for resale. Paragraph 7.83 of the IMF GFSM 2014 states that this category also includes goods purchased by public sector units for provision free of charge or at prices that are not economically significant to other units. By convention, goods acquired for distribution as social transfers in kind but that have not yet been so delivered are also included in goods for resale.

Included as part of the concept of inventories - goods for resale (ETF 8214) are strategic stocks which are held for strategic and emergency purposes; goods held by market regulatory organisations; and commodities of special importance to the nation such as grain and petroleum.

Excluded from the concept of inventories - goods for resale (ETF 8214) are costs of ownership transfer (including transport, storage and decommissioning costs).

Inventories - military inventories (ETF 8215) records the current market value of military inventories excluding costs of ownership transfer and decommissioning costs. Paragraph 7.86 of the IMF GFSM 2014 defines military inventories as comprising single-use items, such as ammunition, missiles, rockets, bombs, etc., delivered by weapons or weapons systems. As noted in the discussion in paragraphs 8.147 and 8.85 of this manual, most single-use items are treated as inventories but some types of missiles with highly destructive capability may be treated as non-financial produced assets because of their ability to provide an ongoing deterrence service against aggressors. Military inventories are valued at their current market value or at their current replacement cost.

Included as part of the concept of inventories - military inventories (ETF 8215) is expenditure on military goods such as single-use weapons (ammunition, missiles, rockets, bombs, torpedoes) and spare parts. Paragraph 7.74 of the IMF GFSM 2014 notes that expenditure on military goods such as single-use weapons and spare parts are recorded as transactions in acquisitions of non-financial assets via change in inventories (military inventories) (ETF 4111, TALC 215). Once used, they are withdrawn from inventories and recorded as use of goods and services (ETF 1233, COFOG-A, SDC).

Excluded from the concept of inventories - military inventories (ETF 8215) are specialised vehicles and other equipment such as warships, submarines, military aircraft, tanks, missile carriers; launchers; singleuse weapons with a highly destructive capability which provide an ongoing service of deterrence against aggressors such as ballistic missiles, used repeatedly or continuously in the provision of defence services over a period of more than one year, even if their peacetime use is simply to provide deterrence. These are classified as weapons systems (ETF 8151). Costs of ownership transfer (including transport, storage and decommissioning costs) are also excluded on military inventories (and all other inventories). The reason for this is because inventories are specifically held for use as part of the production of goods and services process.

Valuables (ETF 8221 and TALC 221) record the current market value of valuables, including the costs of ownership transfer. Paragraph 7.87 of the IMF GFSM 2014 defines valuables as produced goods of considerable value that are not used primarily for purposes of production or consumption but are held as stores of value over time. The nature of valuables is that they are expected to appreciate, and increase their value over time, and not deteriorate over time under normal conditions. Any increase / decrease in value of an individual valuable is treated as a holding gain / loss.

Included as part of the concept of valuables (ETF 822 and ETF 8221) are non-monetary gold and other precious stones and metals that are not intended to be used as materials and supplies in the processes of production; paintings, sculptures and other objects recognised as works of art or antiques held primarily as stores of value over time; jewellery of significant value fashioned out of precious stones and metals; collections; and commemorative coins that are not in circulation as legal tender.

Excluded from the concept of valuables (ETF 822 and ETF 8221) are produced goods of considerable value that are used in the production process, such as works of art, jewellery collections, etc., held for display for the production of museum, art gallery etc., services (classified as other machinery and equipment not elsewhere classified (ETF 8129)).

Other produced assets (ETF 823 and ETF 8239) record the current market value of other non-financial produced assets, including costs of ownership transfer.

Excluded from the concept of other produced assets not elsewhere classified (ETF 823 and ETF 8239) are assets classified to the appropriate category of inventories (ETF 821), and valuables (ETF 8221).

Non-produced assets (ETF 83) records the current market value of non-financial non-produced assets, including the costs of ownership transfer. Paragraph 7.90 of the IMF GFSM 2014 defines non-produced assets as consisting of tangible, naturally occurring assets (known as natural resources) over which ownership rights are enforced; and intangible non-produced assets that are constructs of society. If ownership rights have not (or cannot) be enforced over naturally occurring resources, then they are not considered to be economic assets, and are not recognised as part of the GFS. In GFS, non-financial nonproduced assets are further classified as:

• Tangible non-produced assets (ETF 831);
• Intangible non-produced assets (ETF 832); and
• Other non-produced assets (ETF 833).

Tangible non-produced assets (ETF 831) records the current market value of tangible non-produced assets, including costs of ownership transfer (except for land). In GFS, tangible non-produced assets are further classified as:

• Land (ETF 8311);
• Mineral and energy resources (ETF 8312);
• Non-cultivated biological resources (ETF 8313);
• Water resources (ETF 8314);
• Radio spectra (ETF 8315); and
• Tangible non-produced assets not elsewhere classified (ETF 8319).

Land (ETF 8311) records the current market value of land excluding costs of ownership transfer. The reason that costs of ownership transfer are treated as land improvements is because they relate to the items that are built on the surface of the land (these are produced assets that are treated as improvements to the land) rather than the land itself (which is treated as a non-produced asset). Paragraph 7.92 of the IMF GFSM 2014 defines land as the ground, including the soil covering, the land under roads and railway lines, and any associated surface waters over which ownership rights are enforced and from which economic benefits can be derived by their owners by holding or using them. Paragraph 7.91 of the IMF GFSM 2014 states that all immovable non-produced assets such as land and other natural resources within the economic territory are owned by resident units.

Included as part of the concept of land (ETF 8311) are land holdings; reservoirs, lakes, rivers, and other inland waters over which ownership rights can be exercised.

Excluded from the concept of land (ETF 8311) are water bodies from which water is regularly extracted, against payment, for use in production (including for irrigation) (classified to water resources (ETF 8314)); buildings and other structures constructed on the land or through it, such as roads, office buildings and tunnels (classified to buildings other than dwellings (ETF 8112); land improvements (ETF 8113); or other structures not elsewhere classified (ETF 8119)); the costs of ownership transfer on land (classified to land improvements (ETF 8113)); cultivated components of vineyards, orchards and other plantations of trees, animals and crops (classified to cultivated biological resources (ETF 813)); subsoil assets (classified to mineral and energy resources (ETF 8312)); non-cultivated biological resources (classified to non-cultivated biological resources (ETF 8313)); and water below the ground (classified to water resources (ETF 8314)).

Mineral and energy resources (ETF 8312) records the current market value of mineral and energy resources including costs of ownership transfer. Paragraph 7.97 of the IMF GFSM 2014 defines mineral and energy resources as mineral and energy reserves located on or below the earth’s surface that are economically exploitable, given current technology and relative prices. Mineral and energy deposits may be located on or below the earth’s surface, including deposits under the sea, but they must be economically exploitable to be included as part of this classification category.

Paragraph 7.99 of the IMF GFSM 2014 notes that often the enterprise extracting a resource is different from the owner of the resource. In Australia, natural resources are the property of the Australian government. While an extractor may or may not have the right to extract until the resource is exhausted, it is the extractor who determines how fast the resource will be depleted. In such an arrangement, it can sometimes appear as if there has been a change of economic ownership to the extractor, even if this is not the legal position. In GFS, because there is no wholly satisfactory way in which to show the value of the asset split between the legal owner and the extractor, the whole of the resource is shown on the balance sheet of the legal owner (classified as mineral and energy resources (ETF 8312)) and the payments from the extractor to the owner are shown as rent (classified as royalty income (ETF 1135, SDC)).

Included as part of the concept of mineral and energy resources (ETF 8312) are deposits under the sea; known reserves of oil, natural gas and coal; known reserves of metallic ores including ferrous, non-ferrous and precious metal ores; non-metallic mineral reserves including stone quarries, clay and sand pits, chemical and fertiliser mineral deposits, deposits of salt, quartz, gypsum, natural gem stones, asphalt, bitumen, and peat.

Excluded from the concept of mineral and energy resources (ETF 8312) are mine shafts, wells and other subsoil extraction facilities (classified to other structures not elsewhere classified (ETF 8119).

Non-cultivated biological resources (ETF 8313) record the current market value of non-cultivated biological resources including costs of ownership transfer. Paragraph 7.101 of the IMF GFSM 2014 defines non-cultivated biological resources as consisting of animals, birds, fish and plants that yield both once-only and repeat products over which ownership rights are enforced but for which natural growth or regeneration is not under the direct control, responsibility and management of any institutional units. Only those resources that have economic value which is not included in the value of the associated land are included in this item.

Included as part of the concept of non-cultivated biological resources (ETF 8313) are virgin forests, and fisheries that are commercially exploitable.

Excluded from the concept of non-cultivated biological resources (ETF 8313) are resources that have economic value that are included in the value of the associated land (classified to land (ETF 8311)).

Water resources (ETF 8314) records the current market value of water resources including costs of ownership transfer. Water resources are defined in paragraph 7.102 of the IMF GFSM 2014 as consisting of surface and ground water resources used for extraction to the extent that their scarcity leads to the enforcement of ownership or use rights, market valuation and some measure of economic control.

Excluded from the concept of water resources (ETF 8314) are any surface waters that are included as part of the concept of land (classified to land (ETF 8311)).

Radio spectra (ETF 8315) records the current market value of radio spectra, including costs of ownership transfer. Radio spectrum forms a part of the electromagnetic spectrum that is allocated for telecommunication purposes (for example mobile phone coverage). Paragraph 7.103 of the IMF GFSM 2014 describes radio spectra as the range of radio frequencies used in the transmission of sound, data, and television. The government enforces ownership rights over the radio spectrum by issuing licences which constitutes the existence of an economic asset, and therefore is recognised as part of the GFS. Paragraph 7.109 of the IMF GFSM 2014 states that payment for a mobile phone license constitutes the sale of an asset, not payment for rent, when the licensee acquires effective economic ownership rights over the use of the spectrum.

Tangible non-produced assets not elsewhere classified (ETF 8319) records the current market value of natural resources that cannot be classified under land (ETF 8311); mineral and energy resources (ETF 8312); non-cultivated biological resources (ETF 8313); water resources (ETF 8314); or radio spectra (ETF 8315).

Intangible non-produced assets (ETF 832) records the current market value of intangible non-produced assets including costs of ownership transfer. Paragraph 7.104 of the IMF GFSM 2014 defines intangible nonproduced assets as constructs of society evidenced by legal or accounting actions. Such assets entitle their owners to engage in certain specific activities or to produce certain specific goods or services, and to exclude other units from doing so except with the permission of the owner. The owners of the assets may be able to earn monopoly profits by restricting the use of the assets to themselves. In GFS, intangible nonproduced assets are further classified as:

• Marketable operating leases (ETF 8321);
• Permits to use natural resources (ETF 8322);
• Permits to undertake specific activities (ETF 8323);
• Entitlement to future goods and services on an exclusive basis (ETF 8324);
• Goodwill and marketing assets (ETF 8325); and
• Intangible non-produced assets not elsewhere classified (ETF 8329).

Marketable operating leases (ETF 8321) records the current market value of marketable operating leases, including costs of ownership transfer. Paragraph 7.108 of the IMF GFSM 2014 defines marketable operating leases as third-party property rights relating to non-financial produced assets. The lease confers economic benefits to the holder in excess of the fees payable and the holder can realise these benefits legally and practically, through transferring them. An example is where a tenant of a building has a fixed rental but the building could fetch a higher rental in the absence of the lease. If, in these circumstances, the tenant is able both legally and practically to sublet the building, then the tenant has an asset of the type of a marketable operating lease.

Permits to use natural resources (ETF 8322) records the current market value of permits that gives applicants the right to use natural resources, including costs of ownership transfer. Paragraph 7.109 of the IMF GFSM 2014 defines permits to use natural resources as third-party property rights relating to natural resources. An example is where an institutional unit holds a fishing quota and is able (both legally and practically) to sell this to another unit.

Permits to undertake specific activities (ETF 8323) records the current market value of permits that gives applicants the right to undertake specific activities, including costs of ownership transfer. Paragraph 7.110 of the IMF GFSM 2014 states that a permit to undertake a specific activity is an asset for the holder when:

• The permits are limited in number and so allow the holders to earn monopoly profits;
• The monopoly profits do not come from the use of an asset belonging to the permit issuer; and
• A permit holder is able both legally and practically to sell the permit to a third party.

Paragraph 7.111 of the IMF GFSM 2014 indicates that when governments restrict the number of cars entitled to operate as taxis or limit the number of casinos by issuing permits or licenses, they are in effect creating monopoly profits for the approved operators and recovering some of the profits as the fee. For government, such proceeds are classified as other taxes on the use of goods and on permission to use goods or perform activities (ETF 1111, TC 53, SDC) (for further information, see Chapter 6 of this manual). For the permit holder, the incentive to acquire such a license is that the licensee believes that it will thereby acquire the right to make monopoly profits at least equal to the cost of the license. This permission to create monopoly profits creates an asset for the holder if the licensee can realise these profits by on-selling the asset, that is, the license is tradeable. Licences and permits are further discussed in Chapter 13 Part H of this manual.

Entitlement to future goods and services on an exclusive basis (ETF 8324) records the current market value of entitlement to future goods and services on an exclusive basis, including costs of ownership transfer. Paragraph A1A.304 states that entitlement to future goods and services on an exclusive basis relates to cases where one party that has contracted to purchase goods or services at a fixed price at a time in the future is able to transfer the obligation of the second party to the contract to a third party. An example is a publisher’s exclusive right to publish new works by a named author or issue recordings by named musicians.

Goodwill and marketing assets (ETF 8325) records the current market value of goodwill and marketing assets, including costs of ownership transfer. Paragraph 7.113 of the IMF GFSM 2014 defines goodwill as the excess premium that potential purchasers of an enterprise are prepared to pay above the net value of the individually identified and valued assets and liabilities of the enterprise. This excess is described as goodwill and reflects the value of corporate structures and the value to the business of an assembled workforce and management, corporate culture, distribution networks, and customer base. It may not have value in isolation from other assets, but it enhances the value of those other assets.

Paragraph 7.114 of the IMF GFSM 2014 further states that the value of goodwill and marketing assets is the difference between the value paid for an enterprise as a going concern and the sum of its assets minus the sum of its liabilities, each item of which has been separately identified and valued. Although goodwill is likely to be present in most corporations, for reasons of reliability of measurement it is recorded in GFS only when its value is evidenced by a market transaction, usually the sale of the whole corporation. In some exceptions, identified marketing assets may be sold individually and separately from the whole corporation, in which case their value should also be classified as goodwill and marketing assets (ETF 8325).

Included as part of the concept of goodwill and marketing assets (ETF 8325) are items such as brand names, mastheads, trademarks, logos, and domain names.

Intangible non-produced assets not elsewhere classified (ETF 8329) records the current market value of other intangible non-produced assets that are not elsewhere classified, including costs of ownership transfer.

Included as part of the concept of intangible non-produced assets not elsewhere classified (ETF 8329) are assets other than those classified as marketable operating leases (ETF 8321); permits to use natural resources (ETF 8322); permits to undertake specific activities (ETF 8323); entitlement to future goods and services on an exclusive basis (ETF 8324); and goodwill and marketing assets (ETF 8325).

Other non-financial non-produced assets (ETF 833 and ETF 8339) records the current market value of all non-financial non-produced assets other than tangible non-produced assets (ETF 831), and intangible non-produced assets (ETF 832).

All financial assets (with the exception of monetary gold in the form of gold bullion held as reserve assets) have matching counterpart liabilities in GFS. Paragraph 7.15 of the IMF GFSM 2014 indicates that monetary gold in the form of bullion held as reserve assets is not considered to be a financial claim, because it is not the liability of any other unit. Monetary gold does, however, provide economic benefits by serving as a store of value and a means of international payment to settle financial claims and finance other types of transactions. As a result, gold in the form of bullion held as reserve assets is treated as financial assets in GFS. Monetary gold in the form of allocated and unallocated gold accounts is a financial claim and, therefore, a liability of another unit in the form of currency and deposits. Monetary gold is further discussed in paragraphs 8.156 to 8.158 of this manual, and in Chapter 10 of this manual.

In this chapter, financial assets and liabilities are discussed together to emphasise the counterparty relationship between them. As can be seen from Table 8.3 each classification category contains letters and numbers in brackets which signify the GFS classification codes related to each category. In GFS, assets and liabilities are classified to the balance sheet (ETF 8) using the type of asset and liability classification (TALC) to identify the type of financial asset or liability. Additionally, an appropriate code within the source destination classification (SDC) is applied to identify the institutional sector and level of government of the unit that is the holder of the asset or issuer of the liability.

These items record the current market value of financial assets and liabilities. In GFS, all financial assets (except for monetary gold in the form of gold bullion held as reserve assets) have counterpart liabilities. If these types of assets or liabilities are denominated in a foreign currency or held as unallocated gold accounts, their value in domestic currency can change through holding gains and losses due to changes in the exchange rate, or change in the value of the precious metal. Financial assets and liabilities include:

• Currency and deposits (ETF 841, SDC and ETF 851, SDC);
• Securities and related assets / liabilities (ETF 842, SDC and ETF 852, SDC);
• Loans and placements (ETF 843, SDC and ETF 853, SDC);
• Insurance, superannuation and standardised guarantee schemes (ETF 844, SDC and ETF 854, SDC); and
• Other financial assets / liabilities (ETF 845, SDC and ETF 855, SDC).

Currency and deposits (ETF 841, SDC and ETF 851, SDC) record the current market value of currency and deposits in the context of financial assets or liabilities. In GFS, currency and deposits are further identified as:

• Cash and deposits (ETF 8411, SDC and ETF 8511, SDC)
• Special drawing rights (SDRs) (ETF 8412, SDC 130 and ETF 8512, SDC 130);
• Monetary gold (bullion) (ETF 8413); and
• Monetary gold (allocated and unallocated) (ETF 8414, SDC 130 and ETF 8511, SDC 130).

Cash and deposits (ETF 8411, SDC and ETF 8511, SDC) record the current market value of cash and deposit financial assets (ETF 8411, SDC) and liabilities (ETF 8511, SDC). In Australian GFS, cash consists of notes issued by the Reserve Bank of Australia, coins issued by the Australian Treasurer and any foreign currency held. Currency on issue constitutes a liability of the issuing unit. Unissued currency is not treated as a financial asset of the public sector, or a liability of the Reserve Bank of Australia but is classified as nonfinancial assets in the form of valuables (ETF 8221, SDC) or inventories - materials and supplies (ETF 8211, SDC) (whichever is the more appropriate). The value of foreign denominated currency held by a public sector unit is converted to the domestic currency at the exchange rate valid on the date to which the balance sheet relates. The rate used should be the midpoint between the buying and selling spot rates for currency transactions.

Deposits are all claims, represented by evidence of deposit, on the deposit-taking corporations (including the Reserve Bank of Australia) and, in some cases, general government or other institutional units. A deposit is usually a standard contract open to the public at large, that allows the placement of a variable amount of money. Public sector units may hold a variety of deposits as assets, including deposits in foreign currencies. It is also possible for a government unit to incur liabilities in the form of deposits. For example, a court or tax authority may hold a deposit pending resolution of a dispute. Public financial corporations (for example the Reserve Bank of Australia) typically incur liabilities in the form of deposits, including to government units. Unallocated accounts for precious metals are also deposits, with the exception of unallocated gold accounts held by monetary authorities for reserves purposes, which are treated as monetary gold (allocated and unallocated) (ETF 8414, SDC), with the counterpart liability being recorded as cash and deposits (ETF 8511, SDC).

Seigniorage is the profit earned by the Commonwealth Treasury and the Reserve Bank of Australia (RBA) on the issue of coins and notes (i.e. the difference between the value of coins and notes and their cost of production including the cost of base metals). Because notes and coin on issue are liabilities of the issuer, the value of note and coin issues including any seigniorage, is recorded as a financial transaction (i.e. incurring a liability). The costs of minting coins and printing notes are recorded as other non-employee expenses not elsewhere classified (ETF 1229, COFOG-A, SDC) in GFS. Seigniorage profits for the issuer of currency are implicitly included as part of cash and deposits (ETF 8411) and are not treated as revenue in GFS

Included as part of the concept of cash and deposits (ETF 8411, SDC and ETF 8511, SDC) are notes and coins on hand; cheques held but not yet deposited; cash and deposits in both Australian currency and foreign currency; deposits placed in the short-term money market such as grants received from the Commonwealth and deposited overnight; units issued by cash management trusts; withdrawable share capital of building societies; claims on the IMF that are components of international reserves and are not evidenced by loans; repayable margin payments in cash related to financial derivative contracts; unallocated accounts for precious metals; sight deposits that permit immediate cash withdrawals but not direct third-party transfers; savings and fixed-term deposits; foreign currency deposits that are blocked because of the rationing of foreign exchange as a matter of national policy; and seigniorage.

Excluded from the concept of cash and deposits (ETF 8411, SDC and ETF 8511, SDC) is gold and commemorative coins that are not in circulation as legal tender, and monetary gold not held as reserve assets (classified to valuables (ETF 8221) or inventories – materials and supplies (ETF 8211)); and claims on the IMF that are evidenced by loans (classified to other loans and placements not elsewhere classified (ETF 8439; and ETF 8539)). Unallocated gold accounts held by monetary authorities as reserves are classified as monetary gold (allocated and unallocated) (ETF 8414, SDC) with the counterpart liability in cash and deposits (ETF 8511, SDC).

Special Drawing Rights (SDRs) (ETF 8412, SDC 130 and ETF 8512, SDC 130) record the current market value of Special Drawing Rights (SDRs) financial assets (ETF 8412, SDC 130) and Special Drawing Rights (SDRs) liabilities (ETF 8512, SDC 130) held by the Commonwealth Government of Australia. SDRs are international reserve assets created by the International Monetary Fund (IMF) and allocated to its members to supplement reserve assets. SDRs are essentially contracts between the IMF and national governments. SDR holdings are part of the public sector's financial assets (on which interest accrues) because they represent each holder’s unconditional right to obtain foreign exchange, or other reserve assets from other IMF members. Paragraph 7.133 of the IMF GFSM 2014 states that SDR allocations constitute a liability of the recipients which forms part of the public sector’s debt liabilities, and the SDR holdings form part of the public sector’s financial assets. The allocation and holdings are recorded on a gross basis. The value of an SDR is calculated on a daily basis by the IMF, based on a basket of key currencies and converted to US dollars. Therefore, the value of SDRs are subject to holding gains and losses in each reporting period.

Monetary gold (bullion) (ETF 8413, SDC) records the current market value of gold in the form of bullion held as reserve assets. Monetary gold in the form of bullion is a type of financial asset that has no counterpart liability in GFS. Paragraph 7.126 of the IMF GFSM 2014 notes that monetary gold in the form of gold bullion is a financial asset that is restricted to central banks or central governments. A central bank is a public financial corporation that issues bank notes and coins and holds the international reserves of the country (in Australia, this is the Reserve Bank of Australia). Paragraph 7.128 of the IMF GFSM 2014 states that gold bullion takes the form of coins, ingots or bars with a purity of at least 995 parts per 1000. Gold bullion is traded on organised markets or through bilateral arrangements between central banks. The price of gold is usually quoted in US dollars, and so monetary gold in the form of bullion is subject to holding gains and losses because of changes in the exchange rate as well as in the price of gold itself.

Excluded from the concept of monetary gold (bullion) (ETF 8413, SDC) are deposits, loans and debt securities denominated in gold - these are classified to cash and deposits (ETF 8411, SDC and ETF 8511, SDC), debt securities (ETF 8421, SDC and ETF 8521, SDC); and other loans and placements not elsewhere classified (ETF 8439, SDC and ETF 8539, SDC); gold not held as a reserve asset but held primarily as a store of value is classified to valuables (ETF 8221, SDC); and gold not held as a reserve asset but used in a production process is classified to inventories – materials and supplies (ETF 8211, SDC).

Monetary gold (allocated and unallocated) (ETF 8414, SDC and ETF 8511, SDC) records the current market value of gold in the form of allocated and unallocated gold accounts held as reserve assets and liabilities. Paragraph 7.127 of the IMF GFSM notes that allocated gold accounts provide ownership of a specific piece of gold. The ownership of the gold remains with the entity placing it for safe custody. When held as reserve assets, allocated and unallocated gold accounts are classified as monetary gold (allocated and unallocated) (ETF 8414, SDC) with the counterpart liability recorded as cash and deposits (ETF 8511, SDC). Otherwise, allocated gold accounts are treated as representing the ownership of a non-financial asset (classified to valuables (ETF 8221)). In contrast, unallocated gold accounts represent a claim against the account custodian to deliver gold. For these accounts, the account provider holds title to a reserve base of physical gold and issues claims to account holders denominated in gold.

Securities and related assets (ETF 842, SDC) and liabilities (ETF 852, SDC) record the current market value of securities and related financial assets (ETF 842, SDC) or liabilities (ETF 852, SDC). In GFS, securities and related assets / liabilities are further identified as:

• Debt securities (ETF 8421, SDC and ETF 8521, SDC);
• Financial derivatives (ETF 8422, SDC and ETF 8522, SDC);
• Employee stock options (ETF 8423, SDC and ETF 8523, SDC);
• Equity including contributed capital (ETF 8424, SDC and ETF 8524, SDC); and
• Investment fund shares or units (ETF 8425, SDC and ETF 8525, SDC).

Debt securities (ETF 8421, SDC and ETF 8521, SDC) record the current market value of debt security financial assets (ETF 8421, SDC) and liabilities (ETF 8521, SDC). Debt securities are defined as negotiable financial instruments serving as evidence of a debt. A debt security normally specifies a schedule for interest and principal payable.

Included as part of the concept of debt securities (ETF 8421, SDC and ETF 8521, SDC) are bills of exchange; promissory notes; treasury notes and bonds; banker’s acceptances; commercial papers; negotiable certificates of deposit; long term notes; bonds and debentures, including bonds that are convertible into shares; loans that have become negotiable from one holder to another; non-participating preferred stocks or shares; asset-backed securities and collateralised debt obligations; zero-coupon bonds; deep-discount bonds; stripped securities; and index-linked securities. Debt securities are further discussed in Chapter 13 Part B of this manual.

Financial derivatives (ETF 8422, SDC and ETF 8522, SDC) record the current market value of financial derivative assets (ETF 8422, SDC) and liabilities (ETF 8522, SDC). Paragraph 7.204 of the IMF GFSM 2014 defines a financial derivative as a financial instrument that is linked to another specific financial instrument, indicator or commodity, and through which specific financial risks (such as interest rate risk, foreign exchange risk, equity and commodity price risks, credit risk, and so on) can be traded in their own right in financial markets. Financial derivatives are valued at their current market value on the balance sheet recording date. The market value of financial derivatives should be recorded when they are created, traded, extinguished, or when there are increases and decreases in their market value.

Included as part of the concept of financial derivatives (ETF 8422, SDC and ETF 8522, SDC) are foreign exchange contracts; options, warrants including detachable warrants, forward-type contracts such as futures, forward rate agreements and forward foreign exchange contracts; swap contracts such as currency swaps, interest rate swaps and cross-currency interest rate swaps; and credit derivatives such as total return swaps and credit default swaps. Also included are repurchase agreements and securities repurchase agreements which involve the sale of securities for cash (at a specified price), with a commitment to repurchase the same or similar securities at a fixed price either on a specified future data or with an open maturity; securities lending which involves security holders transferring securities to another party, subject to the stipulation that the same or similar securities be returned on a specified date or on demand; gold swaps which involve an exchange of gold for foreign exchange deposits with an agreement that the transaction be reversed at an agreed future date at an agreed gold price; and off-market swaps which involve swap contracts that have a non-zero value at inception as a result of having reference rates priced differently from current market values.

Excluded from the concept of financial derivatives (ETF 8422, SDC and ETF 8522, SDC) are insurance and standardised guarantees (classified to insurance, superannuation and standardised guarantee schemes ETF 844, SDC; and ETF 854, SDC); contingent assets such as one-off guarantees (classified to loan and other debt instrument guarantees (ETF 7211) or other one off guarantees (ETF 7212)); and letters of credit (classified to other one off guarantees (ETF 7212)); and instruments with embedded derivatives (classified according to the primary characteristics of the instrument). Financial derivatives are further discussed in Chapter 13 Part B of this manual.

Employee stock options (ETF 8423, SDC and ETF 8523, SDC) record the current market value of employee stock options in the form of financial assets (ETF 8423, SDC) and liabilities (ETF 8523, SDC). Paragraph 7.221 of the IMF GFSM 2014 defines employee stock options as options to buy the equity of an entity, that are offered to employees of that entity as a form of remuneration. The IMF manual further states that although employee stock options have similar pricing behaviour to financial derivatives, they have a different nature and purpose to financial derivatives. Nevertheless, if an employee stock option granted is one that can be traded on financial markets without restriction, then it should be classified as a financial derivative.

In Australia, it is not usual for employee stock options to be used within the general government level, but they could be used by public financial corporations and public non-financial corporations, and so they form part of GFS.

Included as part of the concept of employee stock options (ETF 8423, SDC and ETF 8523, SDC) are stock options provided to suppliers of goods and services.

Excluded from the concept of employee stock options (ETF 8423, SDC and ETF 8523, SDC) are stock options granted to employees that can be traded on financial markets without restriction (classified to financial derivatives (ETF 8422, SDC and ETF 8522, SDC)).

Equity including contributed capital (ETF 8424, SDC and ETF 8524, SDC) record the current market value of equity (including contributed capital) in the form of financial assets (ETF 8424, SDC) and liabilities (ETF 8524, SDC). Equity refers to claims on other entities, which entitle the holder to a share of the income of the entity and a right to a share of the residual assets of the entity, should it be wound up.

Included as part of the concept of equity including contributed capital (ETF 8424, SDC and ETF 8524, SDC) are listed and unlisted shares and stocks at current market values where they exist. Since unlisted shares may have no observed current market value, this is estimated by subtracting liabilities from the assets of the units whose shares are held.

Investment fund shares or units (ETF 8425, SDC and ETF 8525, SDC) record the current market value of investment fund shares or units in the form of financial assets (ETF 8425, SDC) and liabilities (ETF 8525, SDC)s. Paragraph 7.174 of the IMF GFSM 2014 defines investment funds as collective investment undertakings, through which investors pool funds for investment in financial or non-financial assets. Paragraph 7.176 of the IMF GFSM 2014 indicates that investment funds invest in a range of assets, such as debt securities, equity, commodity-linked investments, real estate, shares in other investment funds, and structured assets. These funds issue shares (if a corporate structure is used) or units (if a trust structure is used).

Investment funds include both money market funds (MMF) and non-MMF investment funds. Paragraph 7.175 of the IMF GFSM 2014 states that MMFs are investment funds that invest only or primarily in short-term money market securities such as treasury bills, certificates of deposit, and commercial paper. Investment fund shares include the shares issued by mutual funds and units issued by unit trusts.

Loans and placements (ETF 843, SDC and ETF 853, SDC) record the current market value of loans and placements in the form of loan and placement financial assets (ETF 843, SDC) or liabilities (ETF 853, SDC). A loan is defined as a financial instrument that is created when a creditor lends funds directly to a debtor and receives a non-negotiable document (a contract) as evidence of the asset. A loan is distinguished from a deposit on the basis of the contractual documents which establish an effective financial claim between two parties, where the debtor is obliged to repay the funds provided by the creditor and the terms of repayment are not negotiable. In GFS, loans and placements are further identified as:

• Finance leases (ETF 8431, SDC and ETF 8531, SDC);
• Advances - concessional loans (ETF 8432, SDC and ETF 8532, SDC);
• Advances other than concessional loans (ETF 8433, SDC and ETF 8533, SDC); and
• Loans and placements not elsewhere classified (ETF 8439, SDC and ETF 8539, SDC).

Finance leases (ETF 8431, SDC and ETF 8531, SDC) record the current market value of finance lease assets (ETF 8431, SDC) and liabilities (ETF 8531, SDC). A finance lease is defined as a contract under which the lessor as legal owner of an asset conveys substantially all risks and rewards of ownership of the asset to the lessee. Financial leases (and operating leases) are further discussed in Chapter 13 Part H of this manual.

Advances - concessional loans (ETF 8432, SDC and ETF 8532, SDC) record the current market value of advances in the form of concessional loan assets (ETF 8432, SDC) and liabilities (ETF 8532, SDC). Concessional loans are defined as loans which occur when public sector units lend to other units and the contractual interest rate is intentionally set below the market interest rate that would otherwise apply. Concessional loans include below-market rate loans for the purchase of homes, war service land settlement and, occasionally, for the purchase of assets sold to persons and non-profit institutions. Concessional loans can be offered by public authorities to persons, private schools, religious organisations, etc. (e.g. for housing, or school buildings). The current market value of concessional loans is recorded as a financial asset or liability in GFS.

Paragraph 7.246 of the IMF GFSM states that loans with concessional interest rates could be seen as providing a benefit to the borrower in the form of an implicit transfer equal to the difference between the actual interest payable and the amounts that would be payable if market-equivalent interest prevailed. The value of the implicit transfer (including any implicit transfers relating to interest payable on the concessional loan) is recorded as a memorandum item in GFS under implicit transfers from concessional loans (ETF 7111) and implicit transfers payable due to concessional loans (ETF 7112).

Advances other than concessional loans (ETF 8433, SDC and ETF 8533, SDC) record the current market value of advances other than concessional loans in the form of financial assets (ETF 8433, SDC) and liabilities (ETF 8533, SDC). The term 'advances' refers to loans motivated by policy considerations rather than for liquidity management purposes. As a general rule, all loans made / received by general government to other government bodies are deemed to be for policy purposes. Advances are often made by public sector units to other public sector units, for example one level of government to another and between units at the same level of government (e.g. general government to public corporations). Advances can also be made to foreign governments and organisations, such as when loans are made to the International Bank for Reconstruction and Development and the International Development Association.

Included as part of the concept of advances other than concessional loans (ETF 8433, SDC and ETF 8533, SDC) are long and short term loans; non-marketable debentures; long and short term promissory agreements (bonds and bills) issued to public sector units for the purpose of achieving government policy objectives; loans and other repayable funds received from government authorities for policy purposes rather than income generation or liquidity management purposes; and the provision of funds to public financial corporations for re-lending.

Excluded from the concept of advances other than concessional loans (ETF 8433, SDC and ETF 8533, SDC) is equity in public corporations (classified to equity including contributed capital (ETF 8424, SDC or ETF 8524, SDC)); grants and non-repayable refunds (classified to revenue from current grants and subsidies (ETF 1141, SDC) or current grant expenses (ETF 1251, COFOG-A, SDC), or revenue from capital grants (ETF 1151, SDC) or capital grant expenses (ETF 1261, COFOG-A, SDC)); concessional loans (classified to advances – concessional loans (ETF 8432, SDC or ETF 8532, SDC)). Also excluded is the value of repurchase agreements and gold swaps (classified as financial derivatives (ETF 8422, SDC or ETF 8522, SDC).

Loans and placements not elsewhere classified (ETF 8439, SDC and ETF 8539, SDC) record the current market value of loans and placements in the form of financial assets (ETF 8439, SDC) and liabilities (ETF 8539, SDC) that are not elsewhere classified. This item records the value of loans and placements other than those associated with finance leases (ETF 8431, SDC and ETF 8531, SDC); advances - concessional loans (ETF 8432, SDC and ETF 8532, SDC); and advances other than concessional loans (ETF 8433, SDC and ETF 8533, SDC).

Included as part of the concept of loans and placements not elsewhere classified (ETF 8439, SDC and ETF 8539, SDC) are overdrafts, mortgage loans; loans to finance trade credit and advances; and claims on the IMF in the form of loans.

Excluded from the concept of loans and placements not elsewhere classified (ETF 8439, SDC and ETF 8539, SDC) are concessional loans (classified to advances - concessional loans (ETF 8432, SDC and ETF 8532, SDC)); trade credit and advances (classified to accounts receivable (ETF 8452, SDC)); and accounts payable (ETF 8552, SDC)); loans that have become negotiable from one holder to another and where there is evidence of secondary market trading (classified to debt securities (ETF 8421, SDC and ETF 8521, SDC)); financial assets created by finance leases (classified to finance leases (ETF 8431, SDC and ETF 8531, SDC)); and loans acquired for policy rather than for liquidity management purposes (classified to advances other than concessional loans (ETF 8433, SDC and ETF 8533, SDC)). Also excluded are repurchase agreements, securities repurchase agreements, securities lending, gold swaps, and off-market swaps (all of which are classified as financial derivatives (ETF 8422, SDC and ETF 8522, SDC)).

Insurance, superannuation and standardised guarantee schemes (ETF 844, SDC and ETF 854, SDC) record the current market value of insurance, superannuation, and standardised guarantee scheme in the form of financial assets (ETF 844, SDC) and liabilities ETF 854, SDC). As operators of non-life insurance, superannuation and standardised guarantee schemes, public sector units hold financial assets and liabilities for reserves, entitlements, and provisions connected with these. In GFS, insurance, superannuation, and standardised guarantee schemes are further classified as:

• Non-life insurance technical reserves (ETF 8441, SDC and ETF 8541, SDC);
• Life insurance and annuities entitlements (ETF 8442, SDC and ETF 8542, SDC);
• Provisions for defined benefit superannuation (ETF 8443, SDC and ETF 8543, SDC);
• Claims of superannuation funds on superannuation managers (ETF 8444, SDC and ETF 8544, SDC); and
• Provisions for calls under standardised guarantee schemes (ETF 8445, SDC and ETF 8545, SDC).

Non-life insurance technical reserves (ETF 8441, SDC and ETF 8541, SDC) record the current market value of non-life insurance technical reserves in the form of financial assets (ETF 8441, SDC) and liabilities (ETF 8541, SDC). Paragraph 7.183 of the IMF GFSM 2014 states that non-life insurance technical reserves consist of (i) prepayments of net non-life insurance premiums; and (ii) reserves to meet outstanding nonlife insurance claims.

Included as part of the concept of non-life insurance technical reserves (ETF 8441, SDC and ETF 8541, SDC) are premiums paid but not yet earned (called unearned premiums); claims incurred but not yet settled, reserves for unexpired risks; and equalisation reserves when there is an event that gives rise to a liability.

Life insurance and annuities entitlements (ETF 8442, SDC and ETF 8542, SDC) record the current market value of life insurance and annuities entitlements in the form of financial assets (ETF 8442, SDC) and liabilities (ETF 8542, SDC).

Included as part of the concept of life insurance and annuities entitlements (ETF 8442, SDC and ETF 8542, SDC) are liabilities of life insurance companies and annuity providers for prepaid premiums and accrued liabilities to life insurance policyholders and beneficiaries of annuities.

Provisions for defined benefit superannuation (ETF 8443, SDC and ETF 8543, SDC) record the current market value of the provisions for defined benefit superannuation financial assets (ETF 8443, SDC) and liabilities (ETF 8543, SDC). This category consists of provisions for financial claims that past and current employees hold against either their employer, or a fund designated by the employer, to pay defined benefit superannuation as part of a compensation agreement between the employer and employee.

In Australian GFS, only the net liability position for provisions for defined benefit superannuation (ETF 8543, SDC) is shown as conceptually, provisions are not recorded as assets. The asset position of provisions for defined benefit superannuation (ETF 8443, SDC) is only maintained for conceptual completeness in alignment with the international standards and will report a zero balance. 

Included as part of the concept of provisions for defined benefit superannuation (ETF 8543, SDC) are the liabilities of unfunded superannuation schemes. Excluded from the concept of provisions for defined benefit superannuation are liabilities for the payment of social security benefits that were due to be paid but have not yet been paid (classified as accounts payable (ETF 8552, SDC)).

Claims of superannuation funds on superannuation managers (ETF 8444, SDC and ETF 8544, SDC) record the current market value of claims of superannuation funds on superannuation managers in the form of financial assets (ETF 8444, SDC) and liabilities (ETF 8544, SDC). Paragraph 7.196 of the IMF GFSM 2014 states that in addition to its superannuation entitlement liabilities to its beneficiaries, a superannuation fund may sometimes have a claim on the employer, as the superannuation manager of the scheme. On the other hand, the superannuation manager may have a claim on the surplus of the superannuation fund. Such claims are classified as claims of pension funds on pension manager (ETF 8444, SDC and ETF 8544, SDC).

Provisions for calls under standardised guarantee schemes (ETF 8445, SDC and ETF 8545, SDC) record the current market value of provisions for calls under standardised guarantee schemes operated by the government in the form of financial assets (ETF 8445, SDC) and liabilities (ETF 8545, SDC). This category consists of the expected calls under outstanding guarantees net of any recoveries the guarantor expects to receive from defaulting borrowers.

Included as part of the concept of provisions for calls under standardised guarantee (ETF 8445, SDC and ETF 8545, SDC) are export credit guarantees, deposit guarantees; and student loan guarantees.

Other financial assets (ETF 845, SDC) and Other liabilities (ETF 855, SDC) record the current market value of other financial assets and other liabilities held by public sector units. In GFS, other financial assets / other liabilities are further classified as:

• Provisions for employee entitlements other than superannuation (ETF 8451, SDC and ETF 8551, SDC);
• Accounts receivable / Accounts payable (ETF 8452, SDC and ETF 8552, SDC); and
• Other financial assets / Other liabilities (ETF 8459, SDC and ETF 8559, SDC).

Provisions for employee entitlements other than superannuation (ETF 8451, SDC and ETF 8551, SDC) record the current market value of assets (ETF 8451, SDC) and liabilities (ETF 8551, SDC) in the form of provisions for government employee entitlements other than superannuation, that are owed by public sector units.

In Australian GFS, only the net liability position for provisions for employee entitlements other than superannuation (ETF 8551, SDC) is shown as conceptually, provisions are not recorded as assets. The asset position of provisions for employee entitlements other than superannuation (ETF 8451, SDC) is only maintained for conceptual completeness in alignment with the international GFS standards and will report a zero balance.

Included as part of the concept of provisions for employee entitlements other than superannuation (ETF 8451, SDC and ETF 8551, SDC) are provisions for liabilities such as sick leave paid to employees on resignation or retirement; recreation leave; long service leave; and workers’ compensation (where benefits are paid by an employer and not a separate insurer).

Accounts receivable (ETF 8452, SDC) and Accounts payable (ETF 8552, SDC) record the current market value of accounts receivable (ETF 8452, SDC) and accounts payable (ETF 8552, SDC) held by public sector units.

Included as part of the concept of accounts receivable (ETF 8452, SDC) / accounts payable (ETF 8552, SDC) are short and long term trade credit extended directly to purchasers of goods and services; advances for work that is in progress or to be undertaken, prepayments made or received such as progress payments made during construction in advance for work being done or for prepayments of goods and services; accrued but unpaid taxes, dividends, rent, wages and salaries, social contributions, and social benefits; payments due under financial derivative contracts that are in arrears; payments of amounts that have not yet accrued such as prepayments of taxes; deposits payable in advance to cover breakages or non-payment for the use of goods and services; and bail deposits.

Excluded from the concept of accounts receivable (ETF 8452, SDC) / accounts payable (ETF 8552, SDC) are accrued but unpaid loans; debt securities, or other liabilities provided by third parties to finance trade; any provisions or allowances for doubtful debts, and promissory notes or another type of security issued to consolidate the payment due on several trade credits, which are classified as transactions in financial assets (net) (ETF 3111, TALC, SDC).

Other financial assets (ETF 8459, SDC) and Other liabilities (ETF 8559, SDC) record the current market value of other financial assets and liabilities, other than those classified under provisions for employee entitlements other than superannuation (ETF 8451, SDC and ETF 8551, SDC), accounts receivable (ETF 8452, SDC); and accounts payable (ETF 8552, SDC).

Net Worth (ETF 86, ETF 861, ETF 8611) is represented by the residual amount after deducting the value of liabilities from assets in GFS.