Latest release

Part R - The boundary between use of goods and services and the acquisition of non-financial assets

Australian System of Government Finance Statistics: Concepts, Sources and Methods
Reference period
2015
Released
23/12/2015
Next release Unknown
First release

13.165.

In GFS, the cost of inexpensive durable goods (such as small / hand tools), are recorded as use of goods and services (ETF 1233) when purchased regularly, and are small in value when compared with the costs incurred for the acquisition of machinery and equipment in general. Paragraph 6.43 of the IMF GFSM 2014 states that this exclusion of small / hand tools is pragmatic rather than conceptual. Some goods may be used repeatedly (or continuously), in production over many years but may nevertheless be small, inexpensive, and used to perform relatively simple operations. Hand tools such as saws, spades, knives, axes, hammers, screwdrivers, and spanners or wrenches are examples. If expense on such tools take place at a fairly steady rate and if their value is small compared with amounts payable on more complex machinery and equipment, it may be appropriate to treat the tools as materials or supplies under use of goods and services (ETF 1233). Goods acquired for use in own-account capital formation are classified as transactions in own-account capital formation (ETF 4113) as part of acquisitions of non-financial assets, with a further break down as part of supporting information (ETF 7) as own-account use of goods and services (ETF 7631). Further information on own-account capital formation can be found in Appendix 2 of this manual.

13.166.

Paragraphs 6.44 to 6.49 of the IMF GFSM 2014 list the following treatments for goods and services in GFS:

  • Goods and services acquired to increase inventories of materials and supplies, work in progress, finished goods, and goods for resale, are classified as inventories rather than use of goods and services (ETF 1233, COFOG-A, SDC). For more information on inventories, see Chapter 8 and Chapter 9 of this manual.
  • Goods and services consumed in the ordinary maintenance and repair of non-financial produced assets are classified as use of goods and services (ETF 1233, COFOG-A, SDC). However, major renovations, reconstructions, or enlargements of existing non-financial produced assets are recorded as acquisitions of non-financial produced assets in the balance sheet. For more information on distinguishing repairs from improvements, see Chapter 8 of this manual.
  • Goods and services used in research and development are recorded as transactions in non-financial assets under acquisitions of other new non-financial assets (ETF 4114, TALC 141, COFOG-A, SDC). The exception is in cases where it is clear that the research and development activity does not create any future economic benefit for its owner, in which case it is recorded as an expense under use of goods and services (ETF 1233, COFOG-A, SDC). For information on the recognition criteria for intellectual property products, see Chapter 8 and Chapter 9 of this manual.
  • Goods and services used in mineral exploration and evaluation are not recorded as use of goods and services (ETF 1233, COFOG-A, SDC). Whether successful or not, they are needed to acquire new reserves and so are all classified as transactions in non-financial assets under acquisitions of other new non-financial assets (ETF 4114, TALC 142, COFOG-A, SDC).
  • Materials to produce coins or notes of the national currency or amounts payable to contractors to produce the currency are included in use of goods and services (ETF 1233, COFOG-A, SDC). The issuance of the coins or notes is a financial transaction that does not involve revenue or expense. Commemorative coins that are not actually in circulation as legal tender are classified as transactions in inventories. For more information, on currency see Chapter 8 and Chapter 10 of this manual).
  • Expenditures on military equipment, including large military weapons systems and armoured vehicles acquired by the police and security services, are recorded as the acquisition of the respective categories of non-financial produced assets (weapons systems or machinery and equipment). Expenditure on military goods such as single-use weapons (ammunition, missiles, rockets, bombs, torpedoes) and spare parts should be recorded as inventories until used when they are recorded as use of goods and services (ETF 1233, COFOG-A, SDC) and are withdrawn from inventories. For more information, see Chapter 8 and Chapter 9 of this manual.

Other boundary cases related to use of goods and services

13.167.

Paragraph 6.50 of the IMF GFSM 2014 indicates that there is a significant conceptual difference between rentals of non-financial produced assets under an operating lease and the acquisition of an asset under a financial lease. Under an operating lease (for definition, see Chapter 8 and Chapter 9 of this manual), the lessor remains the economic owner of the non-financial produced asset and payments by the lessee are recorded as payments for a service, and therefore recorded as use of goods and services (ETF 1233, COFOG-A, SDC). Under a financial lease (for definition, see Chapter 8 and Chapter 10 of this manual), the lessee becomes the economic owner of the non-financial produced asset and payments are recorded as payments against a loan by the lessee to the lessor, and thus do not affect the use of goods and services.

13.168.

Paragraph 6.51 of the IMF GFSM 2014 notes that amounts payable for the use of non-produced naturally occurring assets (such as land) are classified as land rent and royalty expenses (ETF 1283, COFOG-A, SDC) and not as use of goods and services (ETF 1233, COFOG-A, SDC). For the definition of land rent and royalties, see Chapter 7 of this manual.

13.169.

Explicit fees for financial services are classified as use of goods and services (ETF 1233, COFOG-A, SDC) in GFS. However, paragraph 6.52 of the IMF GFSM 2014 indicates that some transactions include an implicit fee for financial services that is not recorded separately in GFS. These implicit fees can only be calculated in the context of an analysis of the whole of the economy or industry. As indicated in Chapter 7 of this manual, financial intermediation services indirectly measured (FISIM), are estimated indirectly by compilers of the national accounts.