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Valuation issues of the balance sheet

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

General principles of valuation

17.12    Ideally, assets should be valued based on current, observable market prices as this is the basis on which decisions by producers, consumers, investors, and other economic agents are made. In the ASNA, current prices can be approximated (in the absence of observable market prices) for balance sheet purposes in two ways:

  1. In some cases, market prices may be approximated by accumulating and revaluing acquisitions less disposals of the asset in question over its lifetime. This method has been used to value estimates of produced fixed assets as well as estimates of the value of consumer durables (the latter appears as a memorandum item in the balance sheet).
  2. In other cases, market prices may be approximated by the present, or discounted, value of future economic benefits expected from any given asset; this is the method used for mineral and energy resources and native forests in the balance sheets.

Non-financial produced assets

17.13    The principles of valuing produced non-financial assets (excluding plantation standing timber) in the balance sheet are consistent with the valuations in the ASNA capital account. These are mostly consistent with the approaches as recommended by the 2008 SNA.

17.14    The value of non-financial produced fixed assets and intellectual property products are calculated using the Perpetual Inventory Method. The end-year net capital stock for each type of asset is included in the balance sheet. The value of changes in inventories by sector type is obtained from the capital account.

Plantation standing timber

17.15    Standing timber assets include plantation and native forests (see section on non-financial non-produced assets). The 2008 SNA does not specifically identify the types of standing timber to be included in the national balance sheets, other than that the forests must be owned by an institutional unit and must bring economic benefits to their owners. All publicly-owned forests outside conservation reserves and all private forests in Australia are potentially available for timber production, either now or at some time in the future, although a number of constraints reduce the area of forest available for production.

17.16    Standing timber other than that recommended for inclusion in national balance sheets may also have an economic value according to 2008 SNA. For instance, conservation forests with timber values include national parks, wilderness areas, water catchment areas and those inscribed on the World Heritage List, such as the Lord Howe Island Group. Although these forests contain commercially viable timber, logging is prohibited so the ASNA does not include this potential timber value in its balance sheet estimates.

17.17    Forests also have a range of non-timber values, such as maintaining biodiversity, acting as a carbon sink, and preventing soil erosion. However, valuing these attributes is not within the scope of the ASNA balance sheet estimates.

17.18    As with mineral and energy resources, market transactions for forests are not common. For plantations, insurance values by tree age are considered to be an appropriate proxy for market values. However, due to a lack of data, this has been modelled since 2002. Data on plantation forest area and plantings currently comes from the ABARES publications, Australian plantation statistics (published every five years) and Australian plantation statistics update (annual publication). Prior to 1975, annual planting data was not available, and so annual plantings had to be estimated based on annual increases in total plantation area in each year up to 1975.

17.19    The estimates of the value of Australia's plantation timber resources are based on the estimated net area of forest available for production in each State and Territory. The valuation method for the different types of plantation standing timber is in line with the recommendations of 2008 SNA. Harvestings are calculated as the difference between the total plantation area and the sum of the annual plantings, over the insurance schedule. The following provides the valuations used for the two types of plantation standing timber:

  • Coniferous plantations – are valued using an insurance schedule provided by the insurance industry. The schedule shows the value of each hectare from 1 to 30 years of age (35 for South Australia, Northern Territory and Australian Capital Territory).
  • Broadleaved plantations – are also valued using insurance schedules showing the insured value of each hectare of forest according to tree age (12 years for Western Australia, 14 years for South Australia, Victoria and Queensland, and 30 years for Tasmania and New South Wales).

17.20    This approach does not fully account for net depletions in plantations due to drought, disease, land use change, fire, or other natural causes. No depletion adjustment is required where a forest is harvested sustainably.