Revaluations and other changes in the volume of assets account

16.4    Revaluations are holding gains or losses arising from changes in the market prices of assets and liabilities during the accounting period. Holding gains and losses (also referred to as nominal holding gains and losses) are assets and liabilities that remain qualitatively and quantitatively unchanged during the accounting period. Therefore, changes in the value of physical assets attributable to some physical or economic transformation, whether improvement or deterioration, are not recorded as holding gains or losses. In particular, the decline in the value of fixed assets arising from physical deterioration, obsolescence or accidental damage is not a holding loss but is recorded in consumption of fixed capital or other changes in the volume of assets. Increases in value from growth of natural assets are recorded with other changes in the volume of assets.

16.5    Nominal holding gains and losses can be decomposed into neutral holding gains and losses, which are in line with the change in the general level of prices, and real holding gains and losses, which are changes that are above or below the change in the general level of prices.

16.6    Other changes in the volume of assets are changes in the value of assets and liabilities over the accounting period arising from events other than transactions and revaluations. One important function of the other changes in the volume of assets account is to allow certain assets to enter and leave the system other than by transactions. The acts of entering and exiting from the balance sheet are referred to as economic appearances and disappearances. Some examples of entrances and exits are:

• when naturally occurring assets, such as mineral and energy resources, gain economic value or become worthless;
• as a result of interactions between institutional units and nature (as opposed to a transaction which is the interaction between two institutional units); and
• assets created by human activity, such as valuables and purchased goodwill.

16.7    The second function is to record the effects of exceptional, unanticipated events that affect the economic benefits derivable from assets and is referred to as the effect of external events. These events include those that destroy assets such as natural disasters and war as well as when an institutional unit removes an asset from its owner without consent.

16.8    A third function is to record changes in classifications of institutional units and assets and in the structure of institutional units.