Part S - Recording the production of non-financial produced assets over two or more accounting periods
The production of some non-financial produced assets, such as buildings and structures, often spans two or more accounting periods. Paragraph 7.37 of the IMF GFSM 2014 indicates that when a contract of sale is agreed in advance for the construction of buildings or structures over a number of accounting periods, the incomplete buildings or structures are progressively acquired in each accounting period through progress payments. The buildings or structures are classified as non-financial produced assets on the purchaser's balance sheet, with the associated total value of the building or structure recorded progressively as completion takes place. In other words, the building or structure is being sold by the construction contractor to the purchaser in stages, as the latter takes legal possession of the structure.
If the progress payments exceed the value of the incomplete asset, the excess should be recorded as advances other than concessional loans (ETF 8433, SDC) that will be exhausted as work proceeds. In the absence of a contract of sale, incomplete structures are recorded as transactions in the form of inventories - work in progress (ETF 4114, TALC 212, COFOG-A, SDC), and completed structures are recorded as a transaction in the form of inventories - finished goods (ETF 4114, TALC 213, COFOG-A, SDC) in the accounts of the construction contractor until ownership of the asset changes to the public sector unit. Non-financial produced assets being constructed on own-account are treated as a transaction for the acquisition of non-financial assets in the form of own-account capital formation (ETF 4113, TALC, COFOG-A) with a further cost breakdown recorded as part of own-account capital formation (ETF 76) in the supporting information(ETF 7), rather than inventories of work in progress.