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Part D - Time of recording transactions in financial assets and liabilities

Australian System of Government Finance Statistics: Concepts, Sources and Methods
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Transactions in financial assets and liabilities are recorded when the economic ownership of the asset or liability changes. That is, when the asset is created or liquidated, or when the addition or reduction in the amount of the financial instrument is made. Paragraph 9.13 of the IMF GFSM 2014 indicates that the time of recording of financial assets or liabilities is usually clear when the transaction involves an exchange of existing financial assets, or simultaneous creation or extinction of a financial asset and a liability. In most cases, this will be when a contract is signed, or when money or some other financial asset is paid by the creditor to the debtor or repaid by the debtor to the creditor.


Paragraph 9.14 of the IMF GFSM 2014 further states that the parties to a transaction may sometimes perceive economic ownership to change on different dates because they acquire the documents evidencing the transaction at different times. This variation is usually caused by the process of clearing cheques or e-payment transactions or the length of time these are in transit. The amounts involved may be substantial in the case of transferable deposits and other accounts receivable or payable. If there is disagreement on when a transaction takes between two general government units or a government unit and a public corporation, the date on which the creditor receives the payment is taken to be the date of record because a financial claim exists up to the point that the payment is cleared and the creditor has control of the funds.


When a transaction in a financial asset or liability involves a non-financial component, paragraph 9.15 of the IMF GFSM 2014 recommends that the time of recording is determined by the non-financial component. For example, when a sale of goods or services gives rise to a trade credit, the transaction should be recorded when economic ownership of the goods is transferred, or when the service is provided. When a financial lease is created, the loan implicit in the transaction is recorded when control over the non-financial produced asset changes. A financial lease is defined as a contract under which the lessor (as the legal owner of an asset), conveys all the risks and rewards of ownership of the asset to the lessee. Under this arrangement, the lessor provides an imputed loan which allows the lessee to acquire the risks and the rewards of the asset, but the lessor retains the legal title (ownership) of the asset. The lessor will record a loan (corresponding to the market value of the leased asset) to the lessee on their balance sheet, and the lessee will record both the market value of the leased asset and an equivalent loan liability on their balance sheet when the lease is signed, or economic control of the asset changes hands.


Some transactions, such as the accrual of interest expense, take place continuously in concept. In this case, the transaction in the associated financial asset or liability also takes place continuously in concept, and a summation of these continuous amounts is recorded as transactions for the period or balance at the end of the period.