Part E - The time of recording of other economic flows
Other economic flows can take place at a single point in time or continuously throughout the reporting period, and should be recorded accordingly. For example, the destruction of an asset by fire happens at a specific point in time, whereas holding gains and losses occur continuously for as long as the asset is held. Any changes in structure and classification of institutional units or assets / liabilities should be recorded at the moment the unit or asset / liability is re-classified into a different category. In practice, it may not be possible to continuously record stocks of assets or liabilities at current market values. In this case, the current market value of holding gains / losses and other changes in the volume of assets and liabilities are calculated at the end of each reporting period, or at the time an economic event (such as the sale or disposal of an asset) occurs.
The time of recording holding gains / losses
In concept, holding gains and losses occur continuously because prices change continuously. Paragraph 10.7 of the IMF GFSM 2014 recommends that holding gains or losses should be recorded whenever a price change occurs. This may be at a different time from when the holding gain is realised. The correct value of the revaluation must cover the full value of the holding gains or losses that arose during the reporting period if unrealised, or up to the point of disposal if realised. In reality, holding gains for the entire reporting period are normally estimated at the end of the reporting period, or when an asset is sold or disposed of, or a liability incorporating a holding gain or loss is repaid.
The time of recording of other volume changes
Other changes in the volume of assets and liabilities should be recorded at the time that the relevant economic event occurs. Some other volume changes occur continuously or at frequent intervals, such as the depletion of subsoil and other naturally occurring assets, or environmental damage to assets. Paragraph 10.52 of the IMF GFSM 2014 states that it may be difficult to determine the exact time that a natural asset should be added to the GFS balance sheet. Often this is the date at which the first substantial commercial exploration or the signing of a contract to permit commercial exploitation is used to establish the time of recording.
Paragraphs 10.53 and 10.54 of the IMF GFSM 2014 include the following guidance on the time of recording other volume changes on other items as appears in Table 11.1 below:
|The time of recording other volume changes on contracts, leases, and licences.|
Assets in the form of contracts, leases, and licences are recognised on the GFS balance sheet only when the value of the asset can be realised. In this case, they are first recorded as other changes in the volume of assets and liabilities, and subsequently form the basis of a transaction, or series of transactions ((for acquisitions: the appropriate category within ETF 411, and the appropriate category within TALC 32) or (for disposals: ETF 4211, the appropriate category within TALC 32,)).
The value of the contract, lease, or licence treated as an asset is equal to the present value of the excess of the prevailing price over the contract price. The value will decline as the period of the agreement declines and the difference in price is no longer evident.
Changes in the value of the contract, lease, or licence due to changes in the prevailing price are recorded as holding gains or losses (revaluations); changes due to the expiration of the time over which the contract, lease or licence is valid (that is, the amortisation of the asset) are recorded as other changes in volume of assets and liabilities. The rate at which the value is written off should be in accordance with generally accepted accounting principles.
|The time of recording other volume changes on purchased goodwill and marketing assets|
When an enterprise (whether a corporation, quasi-corporation, or unincorporated enterprise) is sold, the price paid may not equal the sum of all the assets less the liabilities of the enterprise. The difference between the price paid and the sum of all the assets less liabilities is called the purchased goodwill and marketing assets of the enterprise. The value may be positive or negative (or zero). By its calculation and designation as an asset of the enterprise, the net worth of the enterprise at the moment it is bought is exactly zero, whatever the legal status of the enterprise.
Paragraph 10.55 of the IMF GFSM 2014 states that the value of purchased goodwill and marketing assets is calculated at the time of the sale that is entered in the books of the seller as other changes in the volume of assets. Subsequently, it is then exchanged as a transaction with the purchaser (for acquisitions: select the appropriate category within ETF 411, TALC 325). Thereafter, the value of the purchased goodwill and marketing asset must be written down in the books of the purchaser via entries under other changes in the volume of assets. The rate at which it is written down should be in accordance with generally accepted accounting principles.
Goodwill that is not evidenced by a sale or purchase is not considered to be an economic asset in GFS. Paragraph 10.56 of the IMF GFSM 2014 indicates that in some exceptions, a marketing asset may be subject to sale. When this is so, entries should be made for the buyer and the seller along the lines of those made for purchased goodwill and marketing assets when the entire enterprise is sold.