## Chapter 4 (2025 SNA)/Chapter 3 (BPM7): Flows, stocks and accounting rules (revised title)

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### A. Scope, core definitions and structure
- The SNA and the BOP/IIPBPM are systems of accounts designed to measure stocks of, and changes in, economic value and to identify the person, group of persons, legal or social entity with claims on the economic value, including such claims between residents and non-residents (4.1).
- Stocks measure economic value at a point in time; flows measure changes in economic value over a period of time (4.2).
- Flow accounts:
  - SNA: current accounts (production, income, use of income) and accumulation accounts (capital account, financial account and other changes in assets and liabilities account) showing all changes between two balance sheets (4.2).
  - External accounts: current account, capital account, and accumulation accounts (financial account and other changes in financial assets and liabilities account) showing all changes between two IIP statements (4.2).
- Institutional units are parties with claims to economic value and are grouped into institutional sectors (4.1).

### B. Stocks, assets, liabilities and ownership
- Stocks (positions) are levels of financial/non-financial assets or liabilities at a point in time and are recorded in balance sheets/IIP for beginning and end of the accounting period (4.4).
- Asset definition: a store of value representing a benefit or series of benefits accruing to the economic owner by holding or using the item over time (4.5; 4.102–4.103).
- Liability definition: established when one unit (the debtor) is obliged, under specific circumstances, to provide a payment or series of payments to another unit (the creditor) (4.5; 4.104–4.106).
- Legal owner vs economic owner:
  - Legal owner: entitled in law to claim benefits (4.91; 4.98–4.101).
  - Economic owner: entitled to claim benefits by virtue of accepting associated risks; where legal and economic owners differ, “owner” generally means economic owner (4.96–4.97).

### C. Flows: transactions, other flows, and classification
- Economic flows reflect creation, transformation, exchange, transfer or extinction of economic value and consist of transactions and other flows (4.6–4.7).
- Transactions:
  - Are interactions between institutional units by mutual agreement or analytically treated intra-unit actions (4.20).
  - Most flows are transactions; transactions appear in all accounts except the other changes in the volume of assets account and the revaluation account (4.18/4.19).
  - Monetary transactions: involve payment, liability incurrence or asset receipt stated in currency; all monetary transactions are two‑party interactions (4.22–4.27).
  - Examples enumerated (preserved): Expenditure on consumptionPurchases of goods and services, Acquisition s of a securitiesy, Imports of goods and services, Wages and salaries, Interest, dividends and rent, Taxes, Social assistance benefits in cash. (4.23–4.28)
- Other flows:
  - Changes in value not resulting from transactions (e.g., natural disasters, price changes, reclassifications) and recorded in other changes in the volume of assets account and the revaluation account (4.7; 4.64–4.77).
  - Categories include appearance/disappearance of assets, effects of externalities and disasters, and changes due to reclassification (4.80–4.85).

### D. Balancing items and aggregates
- Accounts present uses/debits (left) and resources/credits (right); balancing items derive from subtracting one side from the other (4.9).
- Key balancing items in flow accounts include: Value added or domestic product, Operating surplus, Disposable income, Saving, Net lending or net borrowing, Current external balance (4.1054.124).
- Main balancing item in balance sheets is Net worth (assets minus liabilities); in external accounts it is net international investment position (net IIP) (4.1064.126–4.128).

### E. Accounting rules and quadruple accounting
- Unit of account: money; all entries measured in monetary terms (4.14/4.15).
- Valuation, timing and classification rules:
  - Valuation: entries at current market value or closest equivalent, with adjustments for taxes, subsidies, transport costs and trade margins as needed (4.16/4.17).
  - Timing: flows recorded at moment of accrual; stocks at the moment to which the account relates (typically beginning or end of period) (4.16/4.17).
  - Classification: consistent categories for transactions, other flows and assets; distinctions between revenues/expenditures and assets/liabilities (4.16/4.17).
- Quadruple-entry accounting:
  - A transaction gives rise to two entries for each party — vertical and horizontal double-entry combined — producing four entries in total to ensure symmetry (4.17/4.18; 4.1094.131–4.1134.135).

### F. Rearrangements, partitioning and reassignment of observed transactions
- Rearrangement types that change channels, number of transactions, or units involved:
  - Rerouting: record transactions as passing through different channels or impute matching transactions (examples: employers’ social contributions included in compensation; retained earnings shown as property income then reinvested) (4.29–4.38).
  - Partitioning: split a single transaction into differently classified components (examples: financial lease rental into principal and interest; purchase of a car split between GFCF and final consumption) (4.41–4.44).
  - Reassignment: record a transaction arranged by a third party as taking place directly between principals; facilitator records only its fee (4.35–4.47).
- Tax collection by one government for another: tax attributed to the government with authority to impose and vary the tax; collecting government acting as agent records collection charge as service and other retained amounts as grants or as tax if authority delegated (4.36–4.39).

### G. Valuation principles and methods (transactions and stocks)
- General principle: measure current exchange value in money terms; use market prices where available (4.1164.140–4.141).
- Valuation hierarchy and methods (order and application preserved):
  - Observed exchange values (preferred) (4.288).
  - Market-equivalent prices from similar items, adjusted for heterogeneity (4.1204.146; 4.289–4.290).
  - Sum-of-costs method (including intermediate consumption, remuneration of employees, other taxes less subsidies on production, rents, depreciation and return to capital) for non-market output and own-account production (4.292–4.298).
  - Indirect valuation and net present value of future benefits as last-resort methods for certain non-financial assets and for defined benefit pension entitlements and unlisted equity (4.291; 4.315–4.316).
  - Nominal value for deposits, loans and other accounts receivable/payable where markets are absent (4.172; 4.311; 4.313).
- Valuation specifics preserved verbatim where given:
  - For securities quoted with a buy-sell spread, use the midpoint to value the instrument (4.173).
  - Stocks of financial assets/liabilities valued as if acquired on the balance-sheet date; when markets are closed use closest preceding open market date (4.169).
  - For loans and deposits not traded, present value of future cash flows can approximate market prices if an appropriate discount rate is used; where infeasible use nominal values, and include nominal value of non-performing loans as supplementary item (4.170–4.171; 4.313).
  - Net present value/residual methods for natural resources: derive resource rent sequence and apply split-asset approach where appropriate (4.167; 4.317–4.319).
- Partitioning and valuation interactions:
  - When a single payment covers multiple transaction categories, partition so that sum of parts equals observed market value (4.179).
  - Transfer pricing and distorted observed values: assess and, where feasible, replace with market-equivalent prices, with consistent corresponding adjustments (4.157–4.160).

### H. Timing and accrual recording rules
- Recommended timing basis: accrual accounting — record flows when economic value is created, transformed, exchanged, transferred or extinguished (4.200–4.202).
- Time-of-recording rules preserved for key cases:
  - Acquisitions of goods: record at moment economic ownership changes hands; use books or physical possession as subsidiary indicators (4.165 / 4.206).
  - Services: recorded when provided; continuous services recorded continuously over contract/availability period (4.211).
  - Distributive transactions (compensation, interest, taxes, social transfers): recorded when claims arise or amounts accrue (4.212–4.216).
  - Financial transactions: recorded on economic ownership change basis; securities recorded at transaction (ownership change) date not settlement date (4.220–4.222).
  - Revaluations/holding gains: computed between opening moment and closing moment of accounting period or when ownership is acquired/relinquished (4.234–4.235).
- Special cases:
  - Activation of one-off guarantees gives rise to financial transactions and is recorded when activating events occur (4.225).
  - Employee stock options: recognized at grant date and remuneration accrued over grant-to-vesting period (4.226).

### I. Asset boundary, entry/exit, and exclusions
- First-level asset classification: produced non-financial assets (excluding produced natural capital); non-produced non-financial assets (excluding non-produced natural capital); natural capital; and financial assets (and liabilities) (4.96/4.115–4.118).
- Entry/exit mechanisms differ by asset type:
  - Produced non-financial assets arise via production or imports; exit by exhaustion, sale to residents not using asset in production, or sale to non-residents (4.974.116).
  - Non-produced non-financial assets include natural resources, contracts/leases/licenses, crypto assets without corresponding liabilities designed as a general medium of exchange, purchased goodwill and marketing assets (4.984.117).
  - Financial assets/liabilities arise when a commitment to make payment is made and cease when the commitment no longer exists (4.994.118).
- Exclusions from asset boundary: consumer durables, human capital, and natural resources that are not owned (4.1004.119–4.1034.122).

### J. External accounts, counterpart identification, and multiple exchange rates
- Compilers must identify both parties to determine whether an external transaction is between a resident and a non-resident; incomplete counterparty information can produce ambiguity and recorded external transactions may include transactions without a resident counterpart (4.25).
- Multiple exchange rate regimes:
  - Net proceeds implicitly accruing to authorities from transactions under multiple rates are calculated as implicit taxes or subsidies using the difference between actual applicable rates and a unitary weighted-average rate (4.260).
  - Parallel (unofficial) or black market rates must be handled: convert transactions effected at parallel rates using that rate and treat official and parallel rates as distinct markets unless effectively integrated (4.260).
- Currency conversion conventions:
  - Flows converted at rate prevailing when flows take place; positions converted at rate prevailing on balance-sheet date; use midpoint between buying and selling rates (4.257–4.259).

### K. Recording conventions: gross vs net, consolidation, symmetry and presentation
- Gross recording is recommended except where netting is implicit in classifications; financial account flows and other changes in financial assets and liabilities are recorded on a net basis separately for each instrument (4.260; aggregation and netting discussion).
- Consolidation: generally not applied to SNA/BPM entries; consolidation is elimination of transactions between transactors in same sector and is a special form of netting used only in specific analyses (4.260).
- Symmetry and quadruple accounting ensure counterparties record mirror entries with identical valuation, timing and classification to support bilateral comparability and global consistency (4.1094.131–4.1134.135; 4.123–4.127).

### L. Data sources, micro‑level inconsistencies and recommended supplementary information
- Micro-level source data (business accounts, tax returns, supervisory data) may not meet SNA/BPM consistency requirements for valuation, timing and classification; adjustments are required (4.285–4.286; 4.177–4.178).
- Practical recommendations reflected in methods annex:
  - Prefer observed exchange values; use market-equivalents, sum-of-costs, indirect valuation or net present value methods as applicable (4.287–4.299; 4.300–4.311).
  - Present nominal values and include memorandum items on non-performing loans where nominal valuation used (4.171; 4.313).
  - Use perpetual inventory / written-down replacement cost for many produced assets where second-hand markets are thin (4.165; 4.308–4.310).

*Source: BPM7 Chapter 3, International Monetary Fund (draft chapter excerpts).*

### Chapter 4 (2025 SNA)/Chapter 3 (BPM7): Flows, stocks and

### Chapter 4 (2025 SNA)/Chapter 3 (BPM7): Flows, stocks and accounting rules (revised title)

### A. Introduction and scope
- 4.1 The SNA and the BOP/IIPBPM are systems of accounts designed to measure stocks of, and changes in, economic value and to identify the person, group of persons, legal or social entity with claims on the economic value, including such claims between residents and non-residents.
- 4.1 The chapter discusses:
  - the concept of stocks of economic value,
  - the flows that reflect changes in economic value,
  - the accounting rules applied to the recording of stocks and flows.
- 4.1 Institutional units are identified as the parties with claims to economic value; they are grouped into institutional sectors according to economic objectives, functions and behaviour. (Units and sectors are the subject of chapter 5/4.)
- 4.2 Stocks measure economic value at a point in time; flows measure changes in economic value over a period of time.
- 4.2 Stocks appear in balance sheets / international investment position (IIP) and related tables; flows appear in all other accounts and tables of the SNA/BPM.
- 4.2 Flow accounts in the SNA for institutional sectors: current accounts (production, income, use of income) and accumulation accounts (capital account, financial account and other changes in assets and liabilities account) which show all changes between two balance sheets.
- 4.2 Flow accounts in external accounts: current account, capital account, and accumulation accounts (financial account and other changes in financial assets and liabilities account) which show all changes between two IIP statements.
- 4.3 Complete and consistent systems must capture all changes in economic value between stock measures at two points in time in flows; accounting conventions must define stocks and flows precisely and set rules to ensure consistency in value, timing, and classification.

### B. Stocks and flows — definitions and core concepts
- 4.4 Stocks:
  - refer to the levels of financial/non-financial assets or liabilities at a point in time.
  - in financial contexts, the term “positions” is usually used; for non-financial assets, the term "stocks" is often applied.
  - are recorded in balance sheets (or IIP for external accounts) for the beginning and end of the accounting period.
  - result from accumulation of prior transactions and other flows and are changed by transactions and other flows in the period.
- 4.5 Asset and liability definitions:
  - An asset is a store of value representing a benefit or series of benefits accruing to the economic owner by holding or using the entityitem over a period of time; it is a means of carrying forward value from one accounting period to another.
  - Assets may be financial in nature or not.
  - For almost all financial assets, there is a corresponding [financial] liability.
  - A liability is established when one unit (the debtor) is obliged, under specific circumstances, to provide a payment or series of payments to another unit (the creditor).
  - An elaboration and typology of assets and liabilities is given in section BC of the chapter.
- 4.6 Economic flows:
  - reflect the creation, transformation, exchange, transfer or extinction of economic value;
  - involve changes in the volume, composition, or value of an institutional unit’s assets and liabilities;
  - include diverse natures such as wages, taxes, interest, capital flows.
- 4.7 Economic flows consist of transactions and other flows:
  - A transaction is an economic flow that is an interaction between institutional units by mutual agreement or an action within an institutional unit treated like a transaction.
  - Other flows are changes in the value of assets and liabilities that do not result from transactions (examples: losses due to natural disasters; the effect of price changes on the value of assets and liabilities).
  - In external accounts, other flows occur between a resident and a non-resident institutional unit.
- 4.8 A discussion of different types of economic flows appears in section CB of the chapter.

### C. Balancing items and their significance
- 4.9 Accounts present outflows (debit entries, expendituresuses or changes in assets) on the left and inflows (credit entries, resourcesrevenues, or changes in liabilities or net worth) on the right.
- 4.9 A balancing item is obtained by subtracting total entries on one side of an account (resourcescredits, revenues or changes in liabilities) from total entries on the other side (usesdebits, expenditures or changes in assets); it is a derived entry reflecting general accounting rules.
- 4.9 There is also a balancing item for the balance sheet/IIP where the difference between assets and liabilities is known as net worth/net IIP.
- 4.10 Many key aggregates of the SNA/BPM, including GDP, emerge as balancing items. Balancing items are discussed in section D.

### D. Grouping flows and stocks into accounts and sectors
- 4.11 Accounts and tables contain information on economic actions/events within a period and the effect on stocks of (external) assets and liabilities between the beginning and end of that period.
- 4.12 Classification:
  - Flows and stocks are grouped according to the classification hierarchy of the SNA/BPM (annex 1).
  - The classification of transactions and other flows has five highest-level headings in SNA/BPM dealing with:
    - transactions in products (goods and services in balance of payments),
    - transactions showing how income is distributed and redistributed within the SNA/BOPM,
    - transactions in non-produced assets,
    - transactions in financial assets and liabilities,
    - other accumulation entries.
  - In accumulation accounts, the hierarchy may show both the transaction and the type of asset it applies to.
- 4.13/4.14 Flows and stocks are entered in accounts of the institutional units involved and thus in sector accounts; entries are generally recorded in accounts of:
  - the units that own the goods and assets involved,
  - the units that deliver or take delivery of services,
  - the units that provide labour and capital or use them in production.
- 4.13/4.14 For some purposes, a unit participating in production is viewed as one or more establishments; establishments may be grouped into industries (establishments and industries are discussed in chapter 65).
- 4.14 The flows and stocks of external assets and liabilities are entered in the accounts of the institutional units that issue liabilities or hold assets and thus in sector accounts (institutional units and sectors are the subject of chapter 4).

### E. Accounting rules — valuation, timing, classification, and quadruple accounting
- 4.14/4.15 Money is the unit of account; all entries in the accounts must be measured in terms of money, and elements are measured in monetary terms (actual payments or estimates referenced to monetary values).
- 4.15/4.16 Accounting period:
  - Any lapse of time may be chosen as the accounting period in principle.
  - Periods too short are influenced by incidental factors; long periods do not adequately portray changes going on in the economy.
  - Seasonal effects can be avoided by having the accounting period cover a whole cycle of regularly recurrent economic phenomena.
  - Most business and government accounting refers to complete years; calendar or financial years or quarters are best suited for a full set of national accounts/external accounts.
- 4.16/4.17 The SNA covers all economic activity so that accounts can be derived for individual groups or all units in the economy; the BPM covers all economic activity between residents and non-residents so that current/capital account items and financial flows/stocks can be derived by partner economy.
- 4.16/4.17 Accounting rules summarized:
  - Flows and stocks must be recorded consistently with respect to valuation: entries are at current value on the market (the amount agreed upon by two parties) or at its closest equivalent; market value may need adjustments for coverage, taxes and subsidies on products, transport costs and trade margins.
  - Flows and stocks must be recorded consistently with respect to timing: flows at the moment of accrual (the moment economic value is created, transformed, exchanged, transferred or extinguished); stocks at the moment to which the account relates (typically beginning or end of the accounting period).
  - Individual flow and stock entries must be recorded consistently with respect to classification: categories of transactions, other flows and assets and categories of transactors as (sub)sectors or industries.
  - Distinctions should be made between revenues and expenditures (credits/revenues and debits/expenditures in balance of payments), resources and uses, or between assets and liabilities; netting is implicit for several items, but consolidation is not advised.
- 4.17/4.18 The basic accounting framework of the SNA/BPM is quadruple accounting:
  - A transaction gives rise to two entries for each party to the transaction (vertical consistency within each unit and horizontal consistency between the two units).
  - Principles of quadruple accounting are explained in section E of the chapter.

### F. Flows — transactions and other flows
- 4.18/4.19 Economic flows are of two kinds: transactions and other flows.
  - Most flows are transactions.
  - Flows that do not meet the characteristics of transactions are called “other flows.”
  - Transactions appear in all accounts and tables in which flows appear except the other changes in the volume of assets account and the revaluation account.
  - Other flows appear only in the other changes in the volume of assets account and the revaluation account.
- 1. Transactions (4.20–4.24)
  - 4.20 A transaction is an economic flow that is an interaction between institutional units by mutual agreement or an action within an institutional unit that it is analytically useful to treat like a transaction.
  - 4.21 Institutional units are the fundamental economic units used in the SNA; main attributes relevant to engaging in transactions:
    - Entitled to own goods or assets in their own right and able to exchange them.
    - Able to take economic decisions and engage in economic activities for which they are directly responsible and accountable at law.
    - Typically able to incur liabilities on their own behalf, take on obligations or future commitments and enter into contracts.
  - 4.22 Mutual agreement implies prior knowledge and consent of institutional units; transactions can be compulsory (e.g., payments of taxes) yet still be transactions because of collective recognition and acceptance of the obligation.
  - 4.23 In external accounts (and institutional sector accounts for the rest of the world), transactions are recorded between two institutional units, one resident and one non-resident. Intra-unit or internal transactions are not recorded in external accounts. Branch–parent flows are shown as interactions between institutional units with a branch recognized as a separate institutional unit (a quasi-corporation). Notional enterprises (quasi-corporations) created for holding by non-resident owners produce flows treated as interactions between institutional units.
  - 4.24 Transactions between two resident institutional units in external assets are domestic transactions that affect external asset positions of the two resident units; such transactions lead to reclassification of sectors of holding and should be recorded in the external accounts as entries in the other changes in financial assets and liabilities account. If both units are in the same sector, reclassification entries cancel out and have no effect on sectoral positions. Exchanges of instruments issued by residents between non-residents result in no recorded transactions in the balance of payments and no change in overall external liabilities.

_Chapter 4 (2025 SNA)/Chapter 3 (BPM7): Flows, stocks and accounting rules (revised title), IMF draft chapter content provided._

### 4.25 To establish whether a transaction involving an external financial asset is a transaction between a resident and a 

### 4.25 To establish whether a transaction involving an external financial asset is a transaction between a resident and a non-resident, the compiler must know the identities of both parties

### Identification of counterparties and scope of recorded external transactions
- Compilers must know the identities of both parties to determine whether a transaction involving an external financial asset is between a resident and a non-resident (4.25).
- Available information on transactions in claims constituting external assets may not permit identification of both parties, producing ambiguity about whether transactions are:
  - between a resident and a non-resident,
  - between two residents (but involving external assets/liabilities), or
  - between two non-residents (4.25).
- Recorded external transactions may therefore include transactions that do not involve a resident counterpart (4.25).
- Transactions between residents in external assets and liabilities may need to be taken into account for specific purposes (see paragraph 14.21 (BPM) referenced in 4.25).

### Three‑party arrangements and guarantees
- Some mutual agreements involve three parties (guarantor, debtor, creditor); transactions between any two parties should be identified and recorded individually (4.25-1).
- For one‑off guarantees, activation of the guarantee gives rise to transactions and, in some cases, other flows between each of the three pairs of parties.
- For each pair, transactions in the external accounts are recorded if one party is a resident and the other is a non-resident (4.25-1).

### Classification of transactions: monetary vs non‑monetary; need for precision
- Transactions take many forms; precise classification requires systematic description (4.26).
- First distinction: monetary versus non-monetary transactions (4.26).
- Monetary transactions are those in which one institutional unit makes or receives a payment or incurs a liability or receives an asset stated in units of currency; parties express their agreement in monetary terms (4.22–4.27).
- All monetary transactions are interactions between institutional units (two‑party transactions) (4.23–4.28).

### Common monetary transactions (enumeration preserved)
- Expenditure on consumptionPurchases of goods and services, (4.23–4.28)
- Acquisition
s of a securitiesy, (4.23–4.28)
- Imports of goods and services (4.23–4.28)
- Wages and salaries, (4.23–4.28)
- Interest, dividends and rent, (4.23–4.28)
- Taxes, (4.23–4.28)
- Social assistance benefits in cash. (4.23–4.28)

### Transactions with and without a recompense (exchanges vs transfers)
- Exchanges: two‑party transactions with a quid pro quo where one party provides a good, service, labour or asset and receives a commensurate recompense; examples include expenditure on consumption, acquisitions of securities, imports, wages and salaries, interest, dividends, and rent (4.24–4.29).
- Transfers: two‑party transactions without a quid pro quo where one party provides a good, service or asset and does not receive a recompense; examples include taxes and social assistance benefits (4.25–4.30).
- Payments that entitle contingent or collective benefits (e.g., social insurance contributions, non‑life insurance premiums) are treated as transfers rather than exchanges because benefits are uncertain, not proportional to payments, or not quantifiable (4.26–4.31).

### Current versus capital transfers
- Capital transfers: ownership of an asset (other than cash or inventories) is transferred, or an obligation causes acquisition/disposal of such an asset, or a liability is forgiven by the creditor; capital transfers redistribute wealth but leave saving unaffected (examples: capital taxes, investment grants) (4.27–4.32).
- Current transfers: redistribute income (examples: taxes on income, social benefits) (4.27–4.32).
- Fuller descriptions: chapter 89 (SNA) / chapter 13 (BPM) referenced (4.27–4.32).

### Rearrangements of transactions for analytical purposes
- The SNA/BPM may rearrange observed monetary transactions to better reflect underlying economic relationships; three kinds of rearrangements affect channels, number of transactions, or units involved (4.28–4.33).

Rearranging type: Rerouting
- Rerouting records a transaction as taking place through different channels than actual ones or as taking place in an economic sense when not taking place in fact (4.29–4.34).
- First kind: record a direct transaction between unit A and unit C as taking place indirectly through unit B, usually with a change in transaction category (4.29–4.34).
  - Example: recording employers’ social contributions as part of employees’ compensation so that employees are recorded as paying social security funds (4.35).
  - Result: employers’ social contributions are included as part of labour cost (4.35).
- Second kind (imputation): record a transaction of one kind from unit A to B with a matching transaction of a different kind from unit B to A (4.29–4.34).
  - Example: retained earnings of foreign direct investment enterprises are rerouted by showing earnings first remitted as property income to foreign owners and then reinvested as equity (4.30–4.37).
  - Example: retained earnings of investment funds treated as if distributed and then reinvested (4.30–4.37).
  - Example: property income on reserves of certain life insurance corporations is deemed paid to policyholders and then paid back as premium supplements, affecting the distribution of saving between persons/households and insurance enterprises (4.38).
  - Example: imputation of transactions where government uses a non‑resident entity to undertake fiscal functions related to borrowing or outlays abroad; transactions are imputed in accounts of both government and the non‑resident entity to reflect fiscal activities (4.39).
  - Additional implicit taxes or subsidies associated with multiple exchange rate regimes are recorded by imputation (4.31–4.40).

Rearranging type: Partitioning
- Partitioning splits a single transaction from the perspective of parties into two or more differently classified transactions (4.41).
  - Example: rental paid under a financial lease is partitioned into repayment of principal and payment of interest, reflecting an economic view of financial leasing (4.41).
  - Example: purchase of a car partly used for production and partly for personal use is partitioned into gross fixed capital formation and final consumption expenditure (4.42).
  - Example: partitioning of interest by financial intermediaries into interest and the implicit purchase of financial intermediation services to make the service item explicit; affects intermediate and final consumption and GDP but not saving of units (4.33–4.43).
  - Example: a financial derivative settled by delivery of the underlying asset is broken down into a transaction in the financial derivative and a separate transaction in the underlying asset (4.44).

*Source: BPM7 Chapter 3, International Monetary Fund*

### 4.45 The recording in the SNA/BPM of transactions for wholesalers and retailers does not mirror the way in which those

### 4.45 The recording in the SNA/BPM of transactions for wholesalers and retailers does not mirror the way in which those involved view them

### Partitioning of transactions (traders and package tours)
- Purchases of goods for resale by wholesalers and retailers are not recorded explicitly for those units; output for traders is measured by the value of the margins realized on goods they purchase for resale (they are viewed as selling services of storing and displaying a selection of goods and making them easily available for customers).
- 4.34–4.46: Package tours offered by tour operators are recommended to be unbundled into the various service components (see paragraph 11.xx (BPM)).

### Reassigning transactions — units facilitating a transaction on behalf of other parties
- 4.35–4.47: Reassignment records a transaction arranged by a third party on behalf of others as taking place directly between the two principal parties; the facilitator records only its fee (service output) except where specific facilitation purchases are directly attributed to the principal.
- Example: purchases a commercial agent makes under the orders of, and at the expense of, another party are directly attributed to the principal; the agent’s accounts only show the fee charged for facilitation services.

- Tax collection by one government on behalf of another:
  - 4.36–4.48: The SNA/BPM follows GFSM 2001/2014 guidance: a tax is attributed to the government unit that
    - exercises the authority to impose the tax (either as a principal or through delegated authority), and
    - has final discretion to set and vary the rate of the tax.
  - 4.37–4.49: If an amount is collected by one government for and on behalf of another, and the latter has the authority to impose the tax, set and vary its rate, then the collecting government is acting as an agent and the tax is reassigned; any amount retained as a collection charge is treated as payment for a service; other amounts retained (e.g., under a tax-sharing arrangement) are treated as a current grant. If the collecting government was delegated the authority to set and vary the rate, the amount collected is treated as tax revenue of the collecting government.
  - 4.38–4.50: Where different governments jointly and equally set the rate and jointly and equally decide distribution with no individual having ultimate overriding authority, tax revenues are attributed according to each government’s respective share of the proceeds; if one government has ultimate overriding authority, all tax revenue is attributed to that unit.
  - 4.39–4.51: If a tax is imposed under the authority of one government but other governments individually set the tax rate in their jurisdictions, the proceeds generated in each jurisdiction are attributed as tax revenues of that government.
  - 4.40–4.52: Similar principles are applied for the payment of subsidies or social benefits.

### Non-monetary transactions (valuation, types, and recording)
- 4.41–4.53: Non-monetary transactions are those not initially stated in units of currency; SNA/BPM entries therefore represent values indirectly measured or otherwise estimated (e.g., barter, consumption of fixed capital/Depreciation).
  - Note: historically "imputation" was used for estimation; preferable to reserve "imputation" for situations that involve both constructing a transaction and estimating a value.
- 4.42–4.54: Amounts associated with non-monetary transactions do not represent freely disposable sums of money; valuation methods are in section E.
- 4.43–4.55: Non-monetary transactions can be two-party transactions or internal (intra-unit) actions.
- 4.44–4.56: Two-party transactions in kind are frequently recorded as monetary transactions with an associated expenditure by the recipient to ensure donor’s wealth changes and recipient acquires product without donor acquiring the product transferred.
- Barter transactions (4.45–4.57):
  - Barter involves exchange of goods, services, or assets other than cash; value must be estimated.
  - Barter of goods remains important; it can be organized on markets or occur sporadically; barter between nations occurs.
- Remuneration in kind (4.46–4.58):
  - Occurs when an employee accepts payment in goods/services instead of money; common forms include:
    - Meals and drinks,
    - Housing services or accommodation usable by household members,
    - Services of vehicles provided for personal use,
    - Goods and services produced as outputs from the employer’s own processes (examples: free transport services for employees of transport companies; coal for miners).
  - Some employees may accept part of compensation in the form of financial or other assets.
- Payments in kind other than remuneration in kind (4.47–4.59):
  - Payments in goods/services rather than money (e.g., doctor accepting wine, rent paid in crops/sharecropping, inheritance taxes paid by donation of valuables).
- Transfers in kind (4.48–4.60):
  - Normally recorded as if monetary transfer followed by expenditure by recipient; applies to government international cooperation, gifts, and charitable contributions often made in kind for convenience, efficiency, or tax reasons.
  - 4.49–4.61: Social transfers in kind are goods and services provided by general government and NPISHs delivered to individual households (prime examples: health and education services). Even if recipient is reimbursed (acting as agent of insurance scheme), transaction treated as in kind.
  - 4.50–4.62: Social transfers in kind are recorded as an implicit transfer of income from government and NPISHs to households and a transfer of consumption goods and services; income measure after the transfer is "adjusted disposable income adjusted for social transfers in kind" and consumption measure is "actual final consumption".

### Internal transactions (intra-unit actions and own-account production)
- 4.51–4.63: SNA treats certain actions within a unit as transactions to present a more analytically useful picture of final uses of output and production.
- 4.52–4.64: Households, NPISHs, general government units, and the central bank can operate as both producers and final consumers; when they consume own output, it is useful to construct a transaction and estimate its value to record output and consumption.
- 4.53–4.65: Principle for households: goods produced and subsequently used by the same persons or household members are included in output analogously to goods sold on the market; transactions are assumed where producers deliver to themselves as consumers; services for own final use by households (e.g., owner-occupied housing services) are part of the SNA production boundary.
- 4.54–4.66: Establishments owned by governments or NPISHs providing services free or at non-economically significant prices record costs as internal transactions (final expenditures by governments or NPISHs on outputs produced by their own establishments); the acquisition by households is recorded separately under social transfers in kind.
- 4.55–4.67: Other intra-enterprise transactions recognized include enterprises producing fixed assets for own use (deliveries to themselves) and charging decline in value of assets used in production as a cost (depreciation).
- 4.56–4.68: Deliveries between establishments of the same enterprise are discussed in paragraph 6.104.

### Externalities and illegal actions
- Externalities (4.57–4.70):
  - Externalities are unsolicited services or disservices delivered without agreement and thus are not market transactions; they cause changes in condition or circumstances of other units without their consent.
  - 4.59–4.71: Assigning values to externalities is problematic: economic accounts measure functions within a legal and socio-economic system where relative prices and costs are determined; assigning values to non-market externalities lacks mutual consistency and would prevent accounts representing equilibrium or economically sustainable situations.
  - 4.60–4.72: Example: pollution lowers social costs relative to private costs if allowed without charge; trying to internalize externalities in core accounts would require many complex and arguably questionable adjustments. Such analyses may be better carried out in extended satellite accounts (e.g., SEEA2003 System of Environmental-Economic Accounting).
- Illegal actions (4.74–4.76):
  - Macroeconomic statistics cover all economic phenomena irrespective of legality; illegal actions that fit characteristics of transactions (mutual agreement) are treated same as legal actions (e.g., market transactions in narcotics must be recorded).
  - Omitting illegal transactions would cause inconsistencies and distortions (e.g., overestimate household saving, misrepresent external balances); inclusion may be difficult due to data quality but should be done in principle to reduce error.
  - Many illegal actions are crimes against persons or property that are not transactions (e.g., theft is not mutual agreement and is treated conceptually as an extreme externality); thefts and acts of violence are not recorded as household expenditures.
  - 4.63–4.76: If thefts or acts of violence involve significant redistributions or destructions of assets, they are taken into account as other flows, not as transactions.

### Other flows (definition and accounts)
- 4.64–4.77: Other flows are changes in the value of assets and liabilities that do not result from transactions — because they fail one or more transaction characteristics (e.g., lack of mutual agreement, natural events, exchange-rate changes).
  - In external accounts, other flows are recorded only for financial assets and liabilities that represent claims on and liabilities to non-residents and gold bullion.
- 4.65–4.78: Entries for other flows appear in one of the two accounts comprising the other changes in assets and liabilities accounts:
  - The other changes in the volume of assets and liabilities account includes changes that lead to a change in value because of changes in quantity or physical characteristics of the asset.
  - The revaluation account includes holding gains and losses due only to changes in the level and structure of prices.
- 4.66–4.79: Other changes in the volume of assets and liabilities fall into three main categories.

*International Monetary Fund (IMF), BPM/SNA chapter excerpts*

### 4.80 The first category relates to the appearance and disappearance of assets and liabilities other than by transactions

### 4.80 The first category relates to the appearance and disappearance of assets and liabilities other than by transactions

### Other changes in the volume of assets — category definitions and examples
- Paragraphs 4.80–4.85: The first category captures appearance and disappearance of assets and liabilities other than by transactions.
  - Examples include naturally occurring assets (subsoil resources) where entrances/exits arise from interactions between institutional units and nature.
  - Valuables: acquisition recorded in the capital account as newly produced goods or imports when transacted; recognition of significant or special value for goods not already recorded in balance sheets is treated as an other change in the volume of assets. Valuables may be absent from balance sheets because they antedate the accounts or were originally recorded as consumption goods (4.80).
  - Write-offs of claims by creditors, monetization and demonetization of gold bullion typically fall in this category (4.81).
  - Debt forgiveness in non-commercial settings is recorded as transactions; in commercial settings and absent specific information, debt cancellation can be treated as other changes in the volume of assets. Assumption of debts from activation of guarantees and rescheduling of debts are typically transactions because they result from mutual agreement (4.81).
  - Creation of crypto assets without a corresponding liability designed as a general medium of exchange, or only as a medium within a platform/network, are treated as non-produced non-financial assets; their creation is recorded as an other change in the volume of assets (4.82).
- Second category (4.83): Effects of externalities and disasters
  - Events removing an asset from its owner without agreement (no mutual agreement → not a transaction).
  - Asset destruction from natural disaster or war included here; normal rates of loss (consumption of fixed capital/depreciation or change in inventories) are treated as transactions.
- Third category (4.84): Changes due to reclassification
  - Changes in sector classification of institutional units (e.g., an unincorporated enterprise becoming a quasi-corporation moves from the household sector to non-financial corporations) are recorded as other changes in the volume of assets.
- Changes in residence status (4.85):
  - Changes in status of existing financial claims and liabilities due to individuals changing residence between economies are treated as other changes in the volume of assets because they result from reclassification of the owner’s residence status.

### Revaluations (Holding gains and losses)
- Definitions and scope (4.86–4.87):
  - Positive or negative nominal holding gains accrue during the accounting period to owners of assets and liabilities due to price changes; “holding gain” preferred over “capital gain.”
  - Holding gains include gains on fixed assets, land, financial assets, and inventories (stock appreciation).
  - Holding gains may accrue on assets held for any length of time during the accounting period and may appear for assets on neither opening nor closing balance sheets.
  - In external accounts, revaluations are classified into those due to exchange rate changes and those due to other price changes (4.86).
  - Nominal holding gains can be decomposed into neutral holding gains (reflect changes in the general price level) and real holding gains (reflect changes in relative prices of assets) (4.87).

### Stocks (positions) and asset concepts
- Stocks/positions (4.72–4.73):
  - Stocks (positions) are the total level of assets or liabilities in an economy at a point in time. Discussion requires clear definitions of assets and liabilities based on benefits and ownership (4.72–4.73).
- Benefits (4.73–4.79):
  - Economic benefit: a gain or positive utility arising from an action; rewards for providing services (labour and capital) and means of acquiring goods and services for production, consumption, or accumulation.
  - Benefits may be immediate (goods and services in kind) or take the form of a medium of exchange (money); benefits can be postponed across periods via assets and liabilities. Transferring benefits across periods transfers associated risks (4.73–4.79).
- Ownership (legal and economic) (4.75–4.83 and 4.98–4.101):
  - Legal owner: institutional unit entitled in law and sustainable under the law to claim benefits associated with entities (4.91).
  - Economic owner: institutional unit entitled to claim benefits associated with the use of entities in economic activity by virtue of accepting associated risks; where legal and economic owners differ, references to “owner” generally mean economic owner (4.96–4.97).
  - Government may claim legal ownership on behalf of the community; when it does, benefits also accrue to government on behalf of the community (4.98).
  - Natural resources: government often legal owner and grants exploitation rights; benefits may be shared and economic ownership split according to shares appropriated (4.99).
  - Multinational enterprise groups: economic ownership of intellectual property products can be difficult to determine; special allocation decision trees recommended (4.100).
  - Financial intermediation: benefits inherent in financial assets and liabilities are often transformed via intermediaries that assume part of the risks and benefits (4.101).

### Asset and liability definitions
- Asset definition (4.102–4.103):
  - An asset is a store of value representing a benefit or series of benefits accruing to the economic owner by holding or using the item over time; it carries value from one accounting period to another (4.102).
  - Intangible attributes such as reputation or skills are not recognized as assets in SNA/BPM because they are not economic in the sense of ownership (4.103).
- Financial assets and liabilities (4.104–4.110):
  - Financial claims arise when one unit exchanges benefits with another via payments; liabilities are financial by nature (4.104).
  - Liability established when debtor is obliged to provide payment(s) under specific circumstances, commonly through legally binding contract; constructive liabilities arise from long-established custom but are generally not recognized in SNA/BPM (4.105–4.106).
  - Financial claims are instruments that give rise to economic assets with counterpart liabilities, including shares and equity; claims may entitle discretionary demand for payment in some cases (4.107).
  - Financial assets include all financial claims plus gold bullion held by monetary authorities as a reserve asset; shares treated as financial assets despite non-fixed monetary claim (4.108).
  - International investment position covers financial assets and liabilities with an international character when counterparties are non-residents (4.109).

### Asset boundary and first-level classification
- Asset boundary (4.91, 4.110–4.112):
  - All entities meeting the asset definition are included in the asset boundary. Non-financial assets subdivided into produced and non-produced (4.91).
  - All assets can be represented by a monetary value reflecting the market’s view of benefits embodied; where a direct market view is unavailable, approximation is required (4.111).
  - Only non-financial assets whose economic owners are resident in the economy are included in the asset boundary; exceptions for immobile resources where a notional resident unit is established if the economic owner is actually a non-resident (4.112).
  - Portable non-financial assets physically located in an economy but owned by non-residents are excluded; those physically located abroad but owned by residents are included (4.112).

### Contingent liabilities and provisions
- Contingent liabilities (4.113):
  - Liabilities specified to arise only if certain conditions prevail are called contingent liabilities; SNA/BPM generally includes legal and constructive liabilities but not contingent liabilities, with an exception for standardized guarantees where a proportion likely to be called is recognized as an actual liability (4.113).
- Provisions (4.114):
  - Funds set aside by a corporation for unexpected events or specific purposes are provisions; provisions are not treated as liabilities in SNA/BPM because they are not the subject of legal or constructive contracts establishing a liability.
  - Provisions remain part of net worth and represent designations of purpose rather than separate financial assets or liabilities (4.114).

*Source: BPM7 draft chapter — International Monetary Fund*

### 6. Entry and exit of assets from the balance sheet

### 6. Entry and exit of assets from the balance sheet

### Entry and exit of asset types (paras 4.96–4.99 / 4.964.115–4.994.118)
- All assets appear on the balance sheet of the domestic economy. The first level of classification distinguishes four types of asset: produced non-financial assets (excluding produced natural capital); non-produced non-financial assets (excluding non-produced natural capital); natural capital; and financial assets (and liabilities). (4.964.115)
- Natural capital is separately identified, grouping together both produced and non-produced natural resources, to improve accounting for the role of the environment in economic developments. (4.964.115)
- The processes by which assets enter and leave the balance sheet differ across the asset types. (4.964.115)

Produced non-financial assets and produced natural capital (4.974.116)
- Come into being via the production process or as imports. (4.974.116)
- Exceptions: historical monuments and artefacts treated as valuables may enter the asset boundary by being newly recognized as having value rather than through current production. (4.974.116)
- Leave the asset boundary by being exhausted, by being sold to resident units that will not continue to use the asset in production, or by being sold to non-resident units. (4.974.116)

Non-produced non-financial assets (4.984.117)
- Types listed: natural resources; contracts, leases and licences; crypto assets without a corresponding liability designed to act as a medium of exchange; and purchased goodwill and marketing assets. (4.984.117)
- Natural resources: the borderline determining which are assets depends on factors described in chapter 10. (4.984.117)
- Contracts, leases and licences: considered assets when agreements restrict general use or supply and thus enhance benefits to the holder; they come into existence when the agreement is made and leave the balance sheet when restrictions are lifted or benefits cease. (4.984.117)
- Crypto assets without a corresponding liability designed to act as a medium of exchange: considered non-produced assets because miners are regarded as producers of validation services, not producers of the assets themselves. (4.984.117)
- Goodwill and marketing assets: recognized as assets in the SNA only when evidenced by a sale. (4.984.117)

Financial assets and liabilities (4.994.118)
- Come into being when a commitment is made by one unit to make a payment to another unit. (4.994.118)
- Cease to exist when there is no longer a commitment to make payments, for example because the term of the agreement has expired or for other reasons. (4.994.118)

### Exclusions from the asset boundary (paras 4.100–4.103 / 4.1004.119–4.1034.122)
- Coverage is limited to assets used in economic activity and subject to ownership rights, individually or collectively. Examples excluded: consumer durables, human capital, and natural resources that are not owned. (4.1004.119)

Consumer durables (4.1014.120)
- Not regarded as assets in the SNA because the services they provide are not within the production boundary. (4.1014.120)
- Stock of durables may be presented as a memorandum item in the balance sheet but not integrated into the totals. (4.1014.120)

Human capital (4.1024.121)
- Not treated as an asset by the SNA/BPM. Extended accounts on education and training and experimental estimates of the value of human capital are encouraged (see chapter 34). (4.1024.121)
- Ownership rights and valuation issues make treatment as an asset impracticable. (4.1024.121)

Environmental resources (4.1034.122)
- Some environmental resources are excluded because they are of no economic value, even when of the same type as those included. (4.1034.122)

### Balancing items (paras 4.104–4.107 / 4.1044.123–4.1074.129)
- A balancing item is constructed by subtracting totals on one side of an account from the other; it is a derived entry and cannot be measured independently. (4.1044.123)

Balancing items in flow accounts (4.1054.124–4.125)
- Balancing items serve as key macroeconomic indicators and include (examples given):  
  - Value added or domestic product,  
  - Operating surplus,  
  - Disposable income,  
  - Saving,  
  - Net lending or net borrowing.,  
  - Current external balance. (4.1054.124)
- In the external accounts, important balance-derived measures include:  
  - Balance on trade in goods,  
  - Balance on trade in services,  
  - Balance on goods and services,  
  - Balance on goods, services, and earned income,  
  - Current account balance,  
  - Net lending /net borrowing - from current and capital accounts - from financial account,  
  - Changes in net IIP arising from other flows (in total, and for each of other changes in volume, exchange rate changes, and other price changes). (4.125)

Balancing items in balance sheets (4.1064.126–4.128)
- Net worth is the balancing item in the balance sheets: value of all non-financial and financial assets owned less outstanding liabilities. It cannot be measured independently of other entries. (4.1064.126)
- Changes in net worth can be derived by tracing transactions and other flows affecting assets and liabilities throughout the period. (4.127)
- In the external accounts, the main balancing item from stocks is the net international investment position: total external financial assets minus total external liabilities of residents vis-à-vis non-residents. (4.128)
- Other balancing items can be derived as needed for analysis (e.g., net direct investment, net portfolio investments). (4.1074.129)

### Accounting rules (paras 4.108–4.115 / 4.1084.130–4.1154.138)
- Section covers: quadruple-entry accounting principle, valuation, time of recording, classification of accounting entries, grouping of transactions. Application to individual flows and stocks is explained in later chapters. (4.1084.130)

Quadruple-entry accounting (4.1094.131–4.1134.135)
- Three bookkeeping principles distinguished:  
  1. Vertical double-entry bookkeeping (business accounting),  
  2. Horizontal double-entry bookkeeping,  
  3. Quadruple-entry bookkeeping. (4.1094.131)
- Vertical double-entry bookkeeping: each transaction leads to at least two entries (credit and debit) in the transactor’s books; ensures total assets = total liabilities + net worth. External accounts compiled on a vertical-double entry basis from the residents’ perspective. (4.1104.132–4.1114.133)
- Horizontal double-entry bookkeeping: ensures mutual economic relationships between institutional units are recorded consistently; if unit A provides something to unit B, both accounts reflect the transaction for the same amount. (4.1124.134)
- Quadruple-entry bookkeeping: simultaneous application of vertical and horizontal double-entry; a transaction between two counterparties gives rise to four entries. It ensures conceptual symmetry and identical valuation, timing, and classification of mirrored assets and liabilities and of transactions and other flows that affect balance sheets of counterparties. (4.1134.135)

Types of accounting entries — SNA and BPM conventions (4.136 / 4.1144.137–4.139)
- SNA conventions: treat rest of the world as a pseudo-sector so quadruple-entry can be applied; balance of payments/external accounts are the consolidated position of domestic sectors relative to the rest of the world and mirror the accounts for the rest of the world. (4.136)
- In national accounts, credit entries for current transactions are revenues; debit entries are expenditures. For transactions in assets and liabilities (including capital transfers), entries refer to changes in assets and changes in liabilities (and net worth). The two sides of balance sheets are assets, and liabilities and net worth. (4.1144.137)
- BPM conventions: in current and capital accounts, credit/revenue denotes entries from exports, primary income receivable, transfers receivable, and disposals of non-produced nonfinancial assets; debit/expenditure records imports, primary income payable, transfers payable, and acquisitions of non-produced nonfinancial assets. (4.1154.138)
- For financial assets and liabilities, terms used are “net acquisition of financial assets” and “net incurrence of liabilities”; financial account items are recorded on a net basis separately for each instrument and reflect all credit and debit entries during the accounting period. A positive change indicates an increase; a negative change indicates a decrease. Debit/credit interpretation depends on whether the item is an asset or liability. Accounting identities and matching of credit and debit remain important. (4.139)

### Valuation (paras 4.116–4.146 / 4.1164.140–4.1204.146)
General valuation principles (4.1164.140–4.141)
- The SNA and the BOP/IIPBPM measure the current exchange value of entries in money terms: values at which goods, services, labour or assets are in fact exchanged or could be exchanged for cash (currency or transferable deposits). (4.1164.140)
- Market prices are defined as the current exchange value at which goods, services, labour or assets are exchanged or could be exchanged; market prices are the basis for valuation of transactions. (4.141)

Valuation of transactions (4.1174.142–4.1194.145)
- Market prices for transactions: amounts of money willing buyers pay to acquire something from willing sellers; exchanges between independent parties and on commercial considerations only (“at arm’s length”). A market price refers to one specific exchange; different exchanges even of identical units can result in different market prices. (4.1174.142)
- Market price is distinct from quoted market price, world market price, going price, or any price intended to express generality across a class of exchanges. A market transaction may occur in any market structure (including monopolistic, monopsonistic). (4.1174.142)
- When a price is agreed in advance (contractual price), that agreed price is the market price for that transaction regardless of prices prevailing when the transaction takes place. (4.1184.143)
- Transaction prices for goods and services are inclusive of appropriate taxes and subsidies; a market price is the price payable by the buyer after rebates, refunds, adjustments, etc. (4.144)
- Transactions in financial assets and liabilities are recorded at the prices at which they are acquired or disposed of, exclusive of any commissions, fees, and taxes; commissions, fees, and taxes should be recorded separately under appropriate categories. Valuation of financial instruments excludes commission charges (to be recorded as transactions in services); valuation of non-financial assets includes costs of ownership transfer. (4.1194.145)

Valuation when market prices are not observable (4.1204.146)
- Use market-price-equivalents as approximations: market prices of the same or similar items where such prices exist provide the basis, using adjustments for quality and other differences when necessary. Market prices should be taken from markets where the same or similar items are traded currently in sufficient numbers and in similar circumstances. (4.1204.146)

*BPM7, chapter 3, section 6 (excerpt).*

### 4.147 If there is no appropriate market from which the value of a particular non-monetary flow or stock item can be take

### bpm7-ch3 - 4.147 If there is no appropriate market from which the value of a particular non-monetary flow or stock item can be take

### Valuation at cost and market-equivalent valuation
- If no appropriate market price can be found by analogy, valuation may be derived from prices established in less closely related markets or ultimately by the amount it would cost to produce the goods or services currently (paragraphs 4.147; 4.133).
- Market and own-account goods and services valued at cost should include a mark-up that reflects the net operating surplus or mixed income attributable to the producer; for non-market goods and services produced by government units or NPISHs, no allowance should be made for any net operating surplus (paragraphs 4.147; 4.133).
- When valuation by net present value of future benefits is used, sensitivity testing of assumptions (future earnings, asset life, discount factor) is recommended; other valuation sources should be exhausted before resorting to this method (paragraph 4.168).

### Agricultural products sold from the farm
- The farm-gate price may be significantly lower than market prices observed in the nearest market because market prices include costs of bringing goods to market and may reflect supply limitations; observed market prices are appropriate only when similar products are traded in sufficient number and in similar circumstances (paragraph 4.149).
- When those conditions do not hold, adjustments must be made to observed prices (paragraph 4.149).

### Barter
- Bartered products must be valued both when produced and when acquired for consumption or capital formation (paragraph 4.150).
- There is no automatic exclusion of bartered products from liability to taxes on products; subsidies on bartered products are conceptually possible but unlikely to be significant (paragraph 4.150).
- No wholesale or retail margins apply to bartered products by nature; barter packages may include transportation services if the providing unit also supplies transport, making the recipient’s value a purchaser’s price including transportation cost (paragraph 4.150).
- If the receiving unit must provide transport, the valuation to the recipient may be reduced (paragraph 4.150).
- Barter may involve new or existing goods; value to the receiving party is cost of acquisition for new goods or realizable value for existing goods (paragraph 4.151).
- When the two parties assign different values, a simple average of the different valuations (after allowing for taxes and transportation costs) may pragmatically be taken as the transaction value (paragraph 4.152).
- If barter transactions are not simultaneous, an account receivable/payable should be recorded even though no monetary exchange occurs (paragraph 4.153).

### Quotation prices and timing of market values
- When contracts establish a quotation period months after goods have changed hands, the exchange/market value at the time of change of ownership should be estimated and revised when the actual market value is known; the contract price gives the exchange/market value even if unknown at time of change of ownership (paragraph 4.154).

### Valuation of transfers in kind
- Non-financial resources provided without quid pro quo should be valued at the market prices that would have been received if sold in the market; when no observable market price exists, use the donor’s assigned value as a rule of thumb (paragraph 4.155).

### Acquisition of goods under financial lease
- Acquisition of goods under financial lease should be valued at market prices at the time of acquisition if such prices are available; if no price is determined, estimated written-down current acquisition values of fixed assets or the present value of expected future returns may be necessary (paragraph 4.156).

### Transfer pricing and distorted observed exchange values
- Observed exchange values may not represent market prices in cases such as transfer prices between affiliated enterprises, manipulative agreements, non-commercial transactions, and concessional interest; an assessment to estimate a market-equivalent price is needed (paragraph 4.157).
- Adjusting observed exchange values affects other accounts; corresponding adjustments should be made consistently across involved units and accounts (paragraph 4.157).
- Replace book (transfer) values with market-value equivalents when distortions are large and data availability makes it feasible; selection of market-value equivalents requires cautious and informed judgment (paragraphs 4.158; 4.158 second occurrence).
- Transactions between affiliated parties may lack independent-party equivalents, making market-comparable valuation difficult; compilers may have to accept valuations based on explicit costs incurred in production or other values assigned by the enterprise (paragraph 4.159).
- Because of complexities and data limitations, national accounts and external accounts often refrain from approximating true market prices; observed exchange values may nonetheless represent an economic reality of their own (paragraph 4.160).

### Concessional pricing and non-commercial transactions
- Some non-commercial transactions have no market price (e.g., grants in kind); other non-commercial transactions may take place at implied prices that include an element of grant or concession (paragraph 4.161).
- Examples include negotiated exchanges of goods between governments and loans bearing concessional interest; concessional lending by governments is described in chapter 2430 (SNA). Provision of adjusted information on concessional lending in a non-market context by governments, central banks and international organizations is encouraged as supplementary items (paragraph 4.161).
- Transfers involving provision of goods and services by general government bodies and NPISHs often follow non-commercial considerations; such transfers may also involve other sectors (paragraph 4.162).

### Valuation of assets and liabilities; non-financial assets
- Stocks of assets and liabilities should be valued as if acquired on the balance-sheet date, using prices current on that date when assets are exchanged on a market (paragraph 4.163).
- Distinguish initial recognition valuation (subject to transaction valuation principles) from subsequent valuation, where many exceptions apply due to lack of active markets (paragraph 4.164).
- Two basic approaches for valuing non-financial assets:
  - Market prices for similar (second-hand) assets; and
  - Contribution of capital services (including depreciation) to production over the remaining service life, approximated by estimating written-down replacement cost and using the perpetual inventory method (paragraphs 4.165; 4.165 second occurrence).
- For non-financial assets with active second-hand markets (e.g., generic transport equipment, dwellings), capital services approach will closely follow observable market prices; for specialized or thin second-hand markets, observable prices may be close to scrap value and not reflect going-concern value (paragraph 4.166).
- For natural resources not generally traded, value can be approximated by net present value of future benefits using the residual value method (output from exploitation minus costs); value may be split between legal owner and exploiting unit reflecting exploitation rights and resource rents (paragraph 4.167).
- When applying net present value methods, exhaust other valuation sources first; the method is theoretically sound and sensitivity testing of assumptions is appropriate; the perpetual inventory method is commonly used to derive depreciation/consumption of fixed capital and capital stock (paragraph 4.168 and following references).

### Valuation of stocks and financial assets and liabilities
- Sometimes stocks must be valued at estimated written-down current acquisition values or production costs, including write-downs for consumption of fixed capital, partial depletion, exhaustion, degradation, obsolescence, exceptional losses, and other unanticipated events (paragraph 4.134).
- Stocks of financial assets and liabilities should be valued as if acquired in market transactions on the balance-sheet date; when markets are closed on that date, use prices from the closest preceding open market date (paragraph 4.169).
- Debt securities have a current market value and a nominal value; compiling supplementary data on nominal values of positions of debt securities may be useful (paragraph 4.169).
- For financial assets/liabilities not traded or infrequently traded, estimate fair values approximating market prices; the present value of future cash flows can approximate market prices if an appropriate discount rate is used (paragraph 4.170).
- If no other method applies, record stocks or flows arising from assets at the discounted present value of expected future returns; for many non-tradable financial assets with face values (e.g., loans, deposits), present market value can be established as face value discounted by the market interest rate (paragraph 4.171).
- Consistency in valuation of debtor and creditor positions is important; nominal values may be pragmatically applied for non-(actively) traded instruments and are useful to show actual legal liability and creditor recovery starting points, though nominal values give an incomplete view when loans are non-performing (paragraph 4.171).
- Information on nominal value of non-performing loans should be included as a memorandum or supplementary item (paragraph 4.171).
- Loans that have become negotiable de facto should be reclassified under debt securities (paragraph 4.171).

*Source: BPM7 chapter 3.*

### 4.172 Positions on deposits and other accounts receivable/payable are also recorded at nominal value. They give rise to 

### bpm7-ch3 - 4.172 Positions on deposits and other accounts receivable/payable are also recorded at nominal value. They give rise to

### Valuation of deposits, loans, and accounts receivable/payable
- Paragraph 4.172: Positions on deposits and other accounts receivable/payable are recorded at nominal value; they raise the same nominal vs. fair value issues as loans.
- Deposits at banks and other deposit-taking corporations in liquidation are recorded at nominal value until written off.
- If significant, impaired or liquidated deposits should be shown separately as a supplementary item.
- The same nominal treatment applies to other cases of impaired deposits (i.e., where the deposit‑taking corporation is not in liquidation but faces liquidity issues).

### Market-quoted securities and foreign‑currency instruments
- Paragraph 4.173: When securities are quoted on markets with a buy-sell spread, the midpoint should be used to value the instrument; the spread is an implicit dealer service.
- Positions denominated in foreign currency should be valued using the midpoint at close of business between the buying and selling rates on the reference date.

### Instruments requiring special valuation approaches
- Paragraph 4.174: For a restricted group of financial instruments, standard valuation methods cannot be applied (examples: unlisted equity and defined benefit pension entitlements).
- For defined benefit pension entitlements, the present value of future pension benefits is the generally accepted valuation method.
- For unlisted equity, various approaches can be considered; specifics are elaborated elsewhere in the chapter annex and relevant chapters (paragraphs 4.175 and following).

### Use of net present value and sensitivity testing
- Paragraph 4.138: The net present value method depends on projections of future earnings and discount rates and is theoretically sound for many financial assets.
- When used for non‑financial assets, some sensitivity testing of assumptions may be appropriate.

### Valuation of foreign‑currency flows and exchange rates
- Paragraph 4.176: Provision of assets, services, labour or capital in exchange for foreign cash is recorded at the actual exchange value agreed by the transactors.
- Flows and stocks in foreign currency are converted to national currency at the rate prevailing when entered in the accounts (the moment the transaction/flow takes place or the balance-sheet reference moment).
- The midpoint between buying and selling rates should be used so that any service charge is excluded.

### Business accounting, tax, and administrative source data
- Paragraph 4.177: Business accounts, tax returns, supervisory data, and other administrative records are main sources for compiling macroeconomic statistics (the national accounts), but they do not necessarily satisfy SNA/BPM valuation requirements and may require adjustments.
- Business accounting often uses valuations (e.g., historical cost, depreciation methods) that differ from the SNA concept of consumption of fixed capital.
- Paragraph 4.178: Valuations reported by enterprises may be based on commercial, supervisory, tax, or other accounting standards that do not fully reflect market prices; such data should be adjusted to reflect market value except when instruments are to be recorded at nominal values.

### Valuation of partitioned flows
- Paragraph 4.179: When a single payment covers multiple transaction categories, the payment must be partitioned so that the sum of individual transaction values equals the observed market value.
- Example: commission for currency conversion included in foreign‑currency exchanges should be partitioned and recorded as transactions in services.
- The SNA/BPM recommends partitioning interest paid to financial corporations between (a) interest as defined in SNA/BPM and (b) the implicit payment for financial intermediation services.
- Paragraph 4.180: Partitioning applies to transactions and to analytical separations such as real holding gains vs. neutral holding gains.

### Treatment of long-dated trade credit and implied interest
- Paragraph 4.181: When provision of an asset and payment are separated by an unusually long time and trade credit is very large, an implicit interest fee may exist; in extreme cases, actual payments should be adjusted for accrued interest to value the asset transferred. Such adjustments are generally not recommended for normal trade credit.

### Valuation of rerouted transactions and reinvested earnings
- Paragraph 4.182: Values of rerouted transactions are derived from related observed transactions; example: transactions in reinvested earnings are derived from direct investors’ shares in the net saving of the direct investment enterprise before distribution.

### Valuation conventions for products (basic, producer, purchaser prices)
- Paragraph 4.183: Producers and users perceive product values differently because of taxes, subsidies, transport costs, and trade/distribution margins; SNA records all uses at purchasers’ prices but excludes these elements from output value.
- Paragraph 4.184: Output of products is recorded at basic prices (amount receivable by the producer minus taxes payable plus subsidies receivable, excluding transport invoiced separately). If basic prices cannot be obtained, producers’ prices may be used.
- Paragraph 4.185: Use of products is recorded at purchasers’ prices (amount payable by purchaser, excluding deductible VAT, and including transport charges paid separately by purchaser).
- Paragraph 4.186: Components of the difference between basic price and purchasers’ price may include:
  - a. Taxes less subsidies on products payable by the producer;
  - b. Trade and transport margins, including taxes less subsidies payable by wholesale and retail traders;
  - c. Transport, including taxes less subsidies, paid separately by the consumer;
  - d. Predictable quality increases producing additional output volume less current losses during storage;
  - e. Holding gains while the product is with the producer and traders.

### Border valuation of imports and exports
- Paragraph 4.187: Imports and exports of goods are recorded at border values (FOB at exporter’s customs frontier). When detailed FOB values are unavailable, import tables may show CIF values (importer’s frontier) supplemented with global adjustments to FOB.
- Paragraph 4.188: Border valuation conventions require adjusting freight and insurance service item values so that overall import/export balances conform to actual circumstances.
- Paragraph 4.189: It is generally acknowledged that valuation at observed exchange values (closely aligned to invoice values) is conceptually preferred; subject to further testing, it is intended to be introduced as the basic principle in future SNA/BPM versions.

### Other changes in the volume of assets and valuation
- Paragraph 4.190: To value other changes in the volume of assets, value the asset before and after the change and take the difference not explained by transactions.
- Paragraph 4.191: Other changes in the volume of financial assets and liabilities are recorded at observable market-equivalent prices of similar instruments.
- For write-offs of financial instruments valued at nominal values, the value recorded in other changes should correspond to their nominal value prior to write-off.
- For reclassifications, values of both new and old instruments should be the same.

### Holding gains and losses
- Paragraph 4.192: Holding gains and losses accrue continuously for non‑financial and financial assets and liabilities; generally estimated by deducting transaction values and other changes in volumes from total changes in asset values.
- Paragraph 4.193: Because most financial assets are matched by liabilities, holding gains in one should be matched by holding losses in the other.
- Paragraph 4.194: For loans, deposits, and accounts receivable/payable sold at a discount, differences between transaction values recorded in the financial account and nominal balance‑sheet values are recorded as valuation changes in the other changes in financial assets and liabilities account.

### Time of recording: stocks vs. flows and timing rules
- Paragraph 4.195: Balance sheets refer to specific points in time (stocks); flows aggregate discrete transactions/other flows over an accounting period.
- Paragraph 4.196: Precise timing rules are needed to:
  - distinguish accounting periods for discrete flows;
  - separate changes in net worth/IIP due to transactions from other changes (important in high inflation);
  - ensure balance‑sheet stocks reflect timing of flows;
  - ensure counterparties record entries at the same time for quadruple accounting consistency.
- Paragraph 4.197–4.199: Economic activities often have multiple economically relevant moments (contract signing, delivery, payment due date, final payment); recording every stage would overburden the system, so a practical choice of timing basis is required.

### Recommended timing basis: accrual accounting
- Paragraph 4.200: Cash accounting records only cash payments and is inadequate for general economic and international accounting.
- Paragraph 4.201: Due‑for‑payment recording records flows when payments first become due and actual cash payments; it still omits non‑monetary flows.
- Paragraph 4.202: Accrual accounting records flows when economic value is created, transformed, exchanged, transferred or extinguished; SNA/BPM recommends recording each transaction on an accrual basis because:
  - a. Accrual timing aligns with SNA/BPM definitions of transactions, flows, and main aggregates, allowing correct evaluation of profitability and net worth/IIP;
  - b. Accrual accounting provides the most comprehensive information, enabling consistent recording of monetary and non‑monetary transactions, imputed transactions, and other flows.

### Determining change of economic ownership under accrual
- Paragraph 4.203: The change of economic ownership for goods, non‑financial assets, and financial assets is central to accrual timing; economic ownership implies transfer of risks, rewards, rights and responsibilities.
- Paragraph 4.203 examples:
  - Repurchase agreements: legal ownership may change but economic ownership remains with original holder; transaction treated as a loan.
  - Securities lending without cash collateral: no change in ownership of securities; securities lending fees may arise.
- Paragraph 4.204: Many everyday monetary transactions show no timing differences among cash, due‑for‑payment, and accrual bases; accrual accounting is particularly relevant for internal transactions, deliveries at differing times, sales with deferred payments, and obligatory transfers (taxes, social security).

*Source: BPM7 chapter 3 (draft chapter content).*

### 4.205 Usually, accrual accounting is the norm for the institutional units involved. Numerous transactions consist of an 

### bpm7-ch3 - 4.205 Usually, accrual accounting is the norm for the institutional units involved. Numerous transactions consist of an 

### General application of the accrual basis
- 4.205: Accrual accounting is usually the norm for the institutional units involved. When parties keep accrual records, entries will show the same dates for acquisition and surrender of goods and financial assets. Where parties do not perceive the transaction as occurring at the same moment, or where units (in particular government units) do not keep accrual records, the SNA/BPM rules on consistency require efforts to correct basic statistics for major deviations and flaws.  
- The application of the general rule of recording on an accrual basis to the most common circumstances is discussed in subsequent paragraphs.

### Time of recording: acquisitions of goods
- 4.165 / 4.206: Record acquisition of goods at the moment when economic ownership changes hands.  
- Subsidiary indicators when change of ownership is not obvious:
  - the moment of entering the transaction in the books of the transaction partners;  
  - failing that, the moment when physical possession and control is acquired.  
- Applies to internal transactions and where change of ownership is taken to occur under a financial lease or hire-purchase arrangement.  
- Imports and exports are recorded when change of ownership occurs; customs-based trade statistics reflecting physical movement are often an approximation.  
- 4.208: For high-value capital goods (ships, heavy machinery, other equipment), ownership changes are recorded at the time agreed between the parties. For construction contracts agreed in advance, progressive change of ownership occurs for work-in-progress; stage payments may approximate transaction values when stage payments are specified. Differences in timing between ownership change and payments may give rise to trade credit and advances.  
- 4.209: Customs declaration lodgement is the time used in international merchandise trade statistics; customs data should ideally be adjusted for external accounts purposes.  
- 4.210:  
  - Goods on consignment are recorded only when economic ownership changes.  
  - Goods under financial lease arrangements change economic ownership at lease inception.  
  - Goods sent abroad for processing under the same owner are not treated as changing ownership.  
  - For movements between parent and branch, identify which location assumes risks and rewards of ownership.  
  - Merchanting purchases and resales are recorded when change in economic ownership occurs.

### Time of recording: transactions in services
- 4.211: Services are recorded when provided.  
- Continuous or continuously supplied services (examples): operating leasing, insurance, housing services including owner-occupied dwellings. These are recorded as provided continuously over the contract/dwelling availability period.  
- Where construction has a prior contract, ownership of the structure is transferred progressively as work proceeds.  
- Provision of services should be recorded on an accrual basis in each accounting period; advance payments or later settlements are entered in appropriate accounts when they occur.

### Time of recording: redistributive (distributive) transactions
- General rule: distributive transactions (earned income and transfers) are recorded when related claims arise; amounts are registered in the period during which they accrue.  
- Examples recorded as they accrue: compensation of employees, interest, rent on land, social contributions and benefits, taxes on products and imports (at times products are produced, imported or sold depending on tax basis).  
- 4.166 / 4.212: Remuneration of employees, interest, social contributions and benefits are recorded in the period during which amounts payable accrue. Timing for some distributive transactions depends on the unit’s decision when to distribute income or make a transfer.  
- 4.213: Interest accrues on a continuous basis; where no interim payments occur until maturity, corresponding entries to interest accruing in each period before maturity should be recorded as financial transactions representing additional acquisition of the financial asset by the creditor and equal incurrence of a liability by the debtor.  
- 4.214–4.215: Dividends:
  - three associated dates: (a) date declared; (b) ex-dividend date when recipients are determined from the register of shareholders; (c) date settled.  
  - Dividends are recorded at the moment the shares go ex-dividend. Between ex-dividend date and settlement, payable/receivable recorded as other accounts receivable/payable. Reinvested earnings are derived from retained earnings and recorded in the period in which retained earnings accrue.  
- 4.216: Taxes and other compulsory transfers recorded when the activities, transactions, or other events occur that create the government’s claim. Income taxes and social contributions based on income should be attributed to the period in which income is earned, but practical flexibility exists for taxes deducted at source and regular prepayments.  
- 4.217: Fines, penalties, and property forfeitures are recorded when the issuing unit has an unconditional claim; if subject to appeal, unconditional claim exists once appeal is resolved.  
- 4.218: Grants and voluntary transfers are recorded when all eligibility requirements and conditions are satisfied; where no legal claim exists, record at the time of settlement (e.g., cash payment). In general, record when there is a change in economic ownership of corresponding resources.

### Time of recording: transactions in non-produced non-financial assets
- 4.219: Transactions in non-produced nonfinancial assets are recorded at the time economic ownership changes. Treatment is similar to that for goods and financial assets.

### Time of recording: transactions in financial assets and liabilities
- 4.167 / 4.220: Financial transactions (including payments of cash) are recorded on an economic ownership change basis. Financial claims that are implicit results of non-financial transactions (trade credits and advances) are deemed to arise when their non-financial counterpart occurs. Same for transactions between quasi-corporation and its owner/branch and parent.  
- 4.168 / 4.221: Parties may record financial transactions on varying dates because of clearing, mail delays, etc.; consistency requires entries on the same date for both parties. If no precise date can be fixed, the date on which the transaction is fully completed (creditor receives payment) is decisive.  
- 4.222: For securities, record at transaction date (time of change in ownership), not at settlement date (delivery). Short delays may allow settlement date as acceptable proxy; longer delays require identification of accounts receivable/payable.  
- 4.223: Repayments of debts are recorded when extinguished (paid, rescheduled, or forgiven). Arrears do not generate imputed transactions; arrears remain shown in the same instrument until liability extinguished. Contractual changes on arrears that alter instrument characteristics should be recorded as reclassifications in other changes in financial assets and liabilities; renegotiations or instrument-type changes are recorded as new transactions. Overdue obligations to settle a financial derivative are not recorded as transactions but reclassified to a debt liability when nature of claim changes.  
- 4.169 / 4.224: Data on arrears are important and should be presented as supplementary items (or memorandum items in the case of Exceptional Financing, see Appendix 1) where significant. Flexibility is needed to determine which arrears are important to disseminate depending on each economy’s circumstances.

*Source: International Monetary Fund—BPM7 Chapter 3 (paragraphs 4.205–4.224).*

### 4.225 Activation of one-off (non-standardized) guarantees gives rise to financial transactions because this involves a c

### 4.225 Activation of one-off (non-standardized) guarantees gives rise to financial transactions because this involves a creation of a new liability

### Activation of one-off guarantees (4.225)
- Activation of one-off (non-standardized) guarantees gives rise to financial transactions because this involves a creation of a new liability.
- The time of recording of flows arising from activation of one-off guarantees (including capital transfers and other changes in the volume of assets, if applicable) is determined by the occurrence of the events activating the guarantee.
- The treatment of flows arising from the activation of one-off guarantees is described in more detail in paragraphs 25.xx to 25.xx (SNA) / paragraphs 8.42 to 8.45 (BPM).

### Employee stock options (ESOs) (4.226)
- Employee stock options are recognized at grant date.
- Remuneration of employees associated with employee stock options should be recorded as accruing over the period to which the option relates, which generally is the period between the granting and vesting dates.
- If options cover the period before the granting date, that period should also be taken into account when allocating the remuneration of employees.
- Recording of flows associated with ESOs is discussed in paragraphs 25.xx to 25.xx (SNA) / paragraphs 8.xx, 9.xx and 11.xx (BPM).

### Time of recording of output and intermediate consumption (4.227–4.228)
- Output is recorded over the period in which the process of production takes place (accrual basis).
- Additions to work-in-progress are recorded continuously as work proceeds; when production is terminated the accumulated work-in-progress is transformed into finished product ready for delivery or sale.
- Intermediate consumption is recorded at the time the good or service enters the process of production, distinct from the time it was acquired by the producer.

### Time of recording of changes in inventories, depreciation and depletion/consumption of fixed capital (4.229–4.230)
- Inventories (materials and supplies, output unsold, products held by traders):
  - Additions recorded when products are purchased, produced or otherwise acquired.
  - Deductions recorded when products are sold, used up as intermediate consumption or otherwise relinquished.
- Depreciation and depletion (consumption of fixed capital):
  - Consumption of fixed capital is a cost category that accrues over the whole period the fixed asset or natural resource is available for productive purposes.
  - Exact proportioning to accounting periods depends on the rate of depreciation or depletion.

### Time of recording of composite transactions and balancing items (4.231–4.232)
- Transactions measured as the balance of two or more other transactions follow the timing of the constituent basic flows.
  - Example: implicit financial intermediation services on loans and deposits (FISIM) are recorded as interest on loans and deposits accrues.
- Balancing items follow the same timing rule; interpretation requires attention because constituent transactions may have different timing (e.g., operating surplus vs dividends payable).

### Time of recording of other flows (4.233)
- Other changes in the volume of assets are usually discrete events that accrue at precise moments or within fairly short periods and should be recorded when the changes occur.

### Time of recording of holding gains and losses (4.234–4.235)
- Revaluations can occur continuously as prices and exchange rates change; nominal holding gains or losses are computed between two points in time:
  - a. The moment at which:
    - The accounting period begins; or
    - Ownership is acquired from other units (through purchase or a transaction in kind); or
    - An asset is produced.
  - b. The moment at which:
    - The accounting period ends; or
    - The ownership of an asset is relinquished (through sale or a transaction in kind); or
    - An asset is consumed in the production process.
- Commitments resulting from a contract are regarded as contingent until one party has performed its obligation; a unit can incur holding gains and losses only on assets or liabilities over which it has economic ownership.
- Between signing of a contract and delivery, the second party cannot incur price/exchange rate risks on the contract because economic ownership and financial-account claims do not yet exist.

### Changes in structure and classification, reclassifications (4.236–4.237)
- Changes in structure and classification are entered at the moment when, according to SNA/BPM rules, a unit or asset is moved to a different category.
- Integrated stock-flow systems require that all reclassifications and the entries for the reclassification are recorded at the same time.
- Stockpiling major reclassifications and entering them as a block later does not conform to SNA/BPM recommendations; keeping records of reclassifications allows reconstruction of time series for any accounting period.

### Timing adjustments for international external transactions (4.238–4.242, 4.239–4.241)
- Differences in time of recording by partner economies may arise from time zones, delays in mail deliveries, or settlement clearing processes.
- Compilers should consider using data for which correct timing is already recorded (e.g., actual drawings on loans preferred to authorization dates).
- Timing adjustments to international merchandise trade statistics may be necessary because trade statistics may not reflect changes in economic ownership or physical movements correctly; adjustments should be made when customs practices lead to distortions.
- For large individual shipments (e.g., ships or aircraft), identify timing to ensure goods flow and corresponding financing transactions are recorded in the same period.
- A change in economic ownership of goods can vary widely from the time goods are recorded in trade statistics when lengthy voyages occur; inquiries and timing adjustments should be applied to correct trade statistics where ownership changes at times other than recorded.
- Goods on consignment recorded when crossing frontier may require adjustments if no change of ownership occurs; adjustments preferably by revising original entries or, in practice, in periods when goods are returned for minor cases.

### Exchange records and accrual vs cash recording (4.243 / 4.1834.243)
- Exchange records provide data on a cash basis; for many transactions (goods, services, income) cash and accrual bases differ.
- Compilers using exchange record systems should verify or adjust selected transaction categories and check each large settlement transaction.
- Interest information from payments records or debt service schedules may not be appropriate for accrual accounting; alternatives include deriving interest accruals from positions and contractual interest rates.

### Balance sheet items (4.244)
- Stocks of assets and liabilities in balance sheets are for any point in time.
- The SNA defines balance sheets for all sectors at the moment when one accounting period ends and a new accounting period begins.
- The closing balance sheet of one period is identical to the opening balance sheet of the next period.
- The same principles apply to the net international investment position as included in the international external accounts.

### Unit of account and currency conversion — Unit of account (4.245–4.247)
- Values of non-financial and financial transactions and values of stocks or positions may be expressed in various currencies or other standards (e.g., SDRs); conversion into a reference unit of account is required for consistent accounts.
- National and external accounts can be compiled in domestic currency or another currency; domestic currency is needed because other macro and micro data are compiled in domestic currency (unless foreign currency is legal tender).
- An international unit of account may be needed for international liquidity management, high inflation, exchange-rate fluctuations, and multiple exchange rates; a standard unit is necessary for global/regional aggregation and comparisons.
- For external perspective accounts, a standard unit of account is required for global presentation and analysis; it is preferable that the unit be stable, though a perfectly stable standard does not exist.

### Domestic versus foreign currency (4.248–4.250)
- Domestic currency is legal tender in the economy and issued by the monetary authority for that economy or common currency area.
- All other currencies are foreign currencies.
- An economy using as legal tender a currency issued by another economy (e.g., U.S. dollars) or a common currency area to which it does not belong classifies that currency as foreign currency, even if domestic transactions are settled in it.
- "Currency" includes banknotes, coins, and all means of payments issued by financial institutions in an economic territory.
- Unallocated gold accounts and other unallocated accounts in precious metals giving title to claim delivery of gold or precious metal are treated as denominated in foreign currency.
- SDRs are considered foreign currency in all cases, including for economies that issue currencies in the SDR basket; other currency units issued by an international organization are considered foreign currency except in the context of a currency union.

### Currency of denomination and currency of settlement (4.251–4.256)
- Currency of denomination: currency in which the value of flows and stocks is fixed by contract; cash flows are determined using currency of denomination and converted if necessary for settlement or compilation; important for distinguishing transaction values and holding gains/losses.
- Currency of settlement: may differ from currency of denomination; different settlement currency entails currency conversion each time a settlement occurs; important for international liquidity and measurement of potential foreign exchange drains and for defining reserve assets.
- Currency of denomination of equity and investment fund shares is generally the domestic currency of the issuer's resident economy; if equity is issued in a currency other than domestic currency, that currency is the currency of denomination.
- Debt instruments indexed to a foreign currency for maturity and periodic payments are classified and treated as denominated in that foreign currency.
- Some financial assets/liabilities are denominated in more than one currency; if amounts payable are linked to one specific currency, attribute the liability to that currency; otherwise disaggregate multicurrency instruments by component currencies.
- For financial derivative contracts to purchase or sell foreign currency using domestic currency, the decisive factor for currency of denomination is exposure to currency movements; if settlement is linked to a foreign currency even though payment is required in domestic currency, classify the derivative as denominated in foreign currency.

### Currency conversion principles (4.257–4.259)
- Flows denominated in a foreign currency are converted to domestic currency at the rate prevailing when the flows take place; positions are converted at the rate prevailing on the balance sheet date.
- Use the midpoint between buying and selling rates at the time of transaction (for transactions) and at close of business on the reference date for positions; differences between buying/selling prices and midpoint prices are treated as service charges.
- Purchases or sales on credit denominated in a foreign currency should be valued at current market values as of the dates they actually occurred; holding gain or loss from exchange-rate change is recorded for the period(s) in which it occurs.
- In principle, use the actual exchange rate applicable to each transaction; daily average exchange rates are a good approximation for daily transactions; if daily rates cannot be applied, use average rates for the shortest period possible.
- For continuous flows (e.g., accrual of interest over a period), use an average exchange rate for the period in which the flows occur.
- Derived measures relating to a period (calculated by subtracting one type of flow from another) should be constructed by first converting the underlying flows into the target currency, then calculating the derived measure in that currency.
- A derived measure denominated in one currency may differ or have opposite sign from that denominated in another currency due to exchange-rate variations and timing differences of underlying flows.

*Source: BPM7, chapter 3 (SNA/BPM guidance).*

### 4.260 Under a multiple exchange rate regime, two or more exchange rates are applicable to different categories of transa

### bpm7-ch3 - 4.260 Under a multiple exchange rate regime, two or more exchange rates are applicable to different categories of transa

### Multiple exchange rate regimes and implicit taxes/subsidies
- The SNA/BPM explains that under a multiple exchange rate regime, two or more exchange rates apply to different categories of transactions and that the rates favour some categories and discourage others; such rates "incorporate elements similar to taxes or subsidies."
- The Manual prescribes that net proceeds implicitly accruing to authorities from transactions in domestic currency under multiple rates are calculated as implicit taxes or subsidies.
- The amount of the implicit tax or subsidy for each transaction is calculated as:
  - the difference between the value of the transaction in domestic currency at the actual exchange rate applicable and the value of the transaction at a unitary rate; and
  - the unitary rate is calculated as a weighted average of all official rates used for external transactions.
- For conversion of positions of external financial assets and liabilities in a multiple rate system, the actual exchange rate applicable to specific assets or liabilities at the beginning or end of the accounting period is used.

### Parallel (unofficial) or black market rates
- The SNA/BPM states that parallel (unofficial) or black market rates cannot be ignored and can be treated in different ways:
  - If there is one official rate and a parallel market rate, the two should be handled separately and transactions in parallel markets should be converted using the parallel market exchange rate.
  - If there are multiple official rates and a parallel rate, the official rates and the parallel rate should be treated as distinct markets in any calculation of a unitary rate; transactions effected at the parallel rate usually should be converted separately at that rate.
  - If parallel markets are effectively integrated with the official exchange rate regime (for example, when most or all transactions in the parallel market are sanctioned by the authorities or when authorities actively intervene to affect the parallel rate), the calculation of the unitary rate should include both the official and parallel market rates.
  - If only limited transactions in the parallel market are sanctioned by the authorities, the parallel rate should not be included in the calculation of a unitary rate.

### Aggregation: purpose and practice
- The Manual outlines the need to arrange the large number of transactions, other flows, and assets and liabilities into analytically useful groups by crossing classifications (institutional sectors or industries crossed with transactions, other accumulation entries or assets).
- Minimum classification practice in SNA:
  - distinguish resources/revenues from uses/expenditures and assets from liabilities;
  - allow further subdivision by kind of product or asset, function, and transaction partners.
- Aggregates are defined as summations of elementary items in a class (example: remuneration of employees is the sum of all flows classified as remuneration of employees).
- Aggregation is hierarchical: upper-level aggregates are derived by summing lower-level aggregates.
- Practical issues affecting aggregation:
  - information on elementary transactions, other flows and assets may be incomplete or non-existent;
  - primary sources often are not fully consistent due to variations in definitions and coverage, requiring adjustments at aggregate level.

### Netting: definitions, conventions, and recording practices
- The Manual distinguishes gross recordings (all elementary items shown at full values) from net recordings (values of some elementary items offset against items on the other side of the account).
- The SNA/BPM recommends gross recording apart from netting inherent in classifications; netting is already a feature of many recommendations.
- Examples and guidance:
  - Netting is implicit in categories like “changes in inventories.”
  - Financial account and other changes in assets accounts generally record increases in assets and in liabilities on a net basis.
  - The term “net” is used restrictively in SNA/BPM; apart from a few headings (e.g., “net premiums”, “net worth”, “net lending or net borrowing”, and in external accounts “net international investment position”), “net” indicates values after deduction of consumption of fixed capital/depreciation and depletion.
- External accounts recording conventions:
  - External accounts follow gross recording in the current and capital accounts for many items (examples: goods under merchanting, income on reverse investment where the direct investment enterprise owns less than 10 percent of voting power, acquisitions and disposals of non-produced, non-financial assets, and capital transfers receivables and payables).
  - For flows in financial assets and liabilities, the Manual adopts explicit conventions:
    - For flows: “net recording” refers to aggregations where all debit entries of a particular asset or liability are netted against all credit entries in the same asset type or liability type (example: acquisitions of foreign currency netted against sales of foreign currency; bond issues netted against redemptions).
    - When “net” is used with a category of financial instrument (e.g., “net financial derivatives”), netting of a financial asset against the same type of liability is understood.
    - Derived measures such as “net lending/borrowing” and “net international investment position” also use the term “net.”
  - The Manual uses the terms “net changes in assets” and “net changes in liabilities” to reflect financial flows recorded on a net basis separately for each financial asset and liability; for both assets and liabilities, a positive change indicates an increase in stocks and a negative change indicates a decrease in stocks.
  - The interpretation of increase or decrease under debit/credit depends on whether it refers to assets or liabilities (a debit for an asset is an increase while a debit for a liability is a decrease).
- Exceptions and special cases:
  - For some financial derivatives (e.g., forward contracts) where an instrument can switch between asset and liability, it may not be possible to apply net recording requiring separate presentation of assets and liabilities; net transactions in assets and liabilities combined may have to be recorded.
  - The external accounts follow net recording in the financial account and other changes in financial assets and liabilities account, with net recording applied at the lowest level of classification of financial instruments, taking into account functional, institutional sector, maturity, and currency classifications as applicable.
- Analytical considerations:
  - Net acquisition of external financial claims and net incurrence of external liabilities are generally of more analytical interest than gross flows.
  - Gross reporting may be relevant for analysing payments positions or financial markets; gross flows can be used in supplementary presentations when appropriate (example: for direct investment, equity increases and equity decreases may be of analytical interest and may be shown separately).

### Treatment of stocks (positions) and recording of assets versus liabilities
- The Manual requires that stocks or positions of the same type of financial instrument held as both asset and liability be recorded separately (assets under assets, liabilities under liabilities). Example: holdings of short-term debt securities as assets are presented separately from liabilities for short-term debt securities.

### Consolidation: definition, scope, and rules
- Consolidation is defined as a special kind of cancelling out of flows and stocks involving elimination of transactions or debtor/creditor relationships between two transactors belonging to the same institutional sector or subsector.
- Consolidation should be distinguished from other netting and entails specification by transaction partner rather than loss of information.
- Relevance and typical application:
  - Consolidation may be most relevant for financial corporations/institutions and general government.
  - As a rule, entries in the SNA/BPM are not consolidated.
  - Consolidation is not relevant for external accounts of an individual economy because external accounts reflect residents and non-residents and external financial assets and liabilities.
- Exceptions and special forms:
  - Output and intermediate consumption transactions are recorded at the level of establishments, implying accounts for institutional sectors and industries should not be consolidated in respect of output delivered between establishments belonging to the same institutional unit.
  - Accounts for a currency union, economic union, or other regional arrangement may be compiled by eliminating all transactions and asset-liability relationships between member economies (examples provided: matched bond holdings, interest receivable/payable within the region, sales of goods and services between consolidated economies).

### Symmetry of reporting and consistency
- The SNA/BPM emphasizes symmetry of reporting by counterparties to ensure consistency, comparability, and analytical usefulness of national and external accounts, underpinned by the quadruple-entry accounting system (paragraphs 4.123–4.127).
- Internationally agreed guidelines for definitions, classifications, time of recording and valuation principles, and the quadruple-entry system provide a basis for conceptual consistency of international reporting by both parties to a transaction.
- Correct application of these guidelines is important for bilateral comparisons, global balances, and regional and global aggregates.
- Symmetry rules apply to all financial instruments but do not fully apply to functional categories of financial positions and transactions (example: reserve assets in one economy are reflected as liabilities of counterparts in the rest of the world under portfolio and other investment functional categories).
- The Manual notes that grouping of flow and stock data into sectoral and national aggregates (and accounts for a region or the world) requires strict consistency rules; consolidation is impossible without consistency in basic data, and consistency requirements are more obvious when sectors are disaggregated.

*The SNA/BPM (BPM7 chapter excerpts).*

### 4.285 Micro-level data on the basis of which the national and external accounts are compiled do not necessarily meet the

### bpm7-ch3 - 4.285 Micro-level data on the basis of which the national and external accounts are compiled do not necessarily meet the

### 4.285–4.286: Inconsistencies in micro-level source data
- Finding (4.285): Micro-level data used for national and external accounts may not meet consistency requirements for (inter)national accounts.
  - Sources of inconsistency: differences in valuation, timing, and classification.
  - Examples:
    - Valuation differences often occur for barter transactions.
    - Creditors and debtors may use different valuation bases for some financial assets, such as non-performing loans.
    - Timing differences may arise from time-zone differences, delays in check-clearing systems, and differences in units’ perceptions of timing of ownership changes and revenue/expenditure recognition.
- Finding (4.286): Progress toward uniform business accounting standards has reduced disparities between individual micro accounts, but:
  - Business accounting standards are focused on individual accounts and do not ensure consistency across units.
  - Current business accounting standards may require that loans be treated differently depending on whether they appear as a credit or a debit, which is incompatible with a consistent horizontal double-entry bookkeeping system.
  - Tax and supervisory regulations can harmonize accounting practices but may also create discrepancies when they differentiate between specific sections of the economy.

### Annex: Methods to value transactions and stocks — overview (4.287)
- Scope (4.287): Overview of methods for valuing transactions (in order of preference, though not all applicable for every transaction) and methods to value stocks of assets and liabilities. The annex excludes initial recognition timing for stocks because valuation of flows is covered under transactions.

### Methods for valuing transactions
- Observed exchange values (observed market prices) (4.288)
  - Preferred measure: prices actually observed in exchanges of goods, services, and assets.
  - Conceptual exceptions: distorted transfer prices between affiliated enterprises and concessional pricing (see 4.147–4.152), but in practice adjustments are generally not made for feasibility and consistency reasons.
- Market-equivalent prices (4.289–4.290)
  - Applied when actual exchange values are unavailable by using prices of similar goods, services, and assets.
  - Particularly relevant for:
    - barter transactions;
    - consumption of goods produced for own final use;
    - housing services from owner-occupied dwellings;
    - exceptional own-account capital formation where assets are regularly traded (e.g., dwellings, cloud providers building own servers).
  - Prerequisites and caveats:
    - Homogeneity/comparability of goods/services/assets or adjustment via hedonic methods.
    - Comparison items should be traded under similar market conditions; subsidized rental data are not appropriate for competitive market estimates.
    - Markets used should be well-established and not too thin.
- Indirect valuation (4.291)
  - Applies in limited cases (e.g., imputation of reinvested earnings based on net saving before distribution).
  - Other examples: non-life insurance output (premiums minus claims); implicit financial services on loans and deposits (difference between bank interest and SNA interest).
- Sum-of-costs method (4.292–4.298)
  - Principle (4.292): Market prices can be approximated by summing:
    - intermediate consumption;
    - remuneration of employees;
    - other taxes less subsidies on production;
    - rents payable on the use of non-produced non-financial assets;
    - depreciation and depletion;
    - return on capital used in production.
  - Typical applications (4.293):
    - non-market output of government, NPISHs and the central bank;
    - own-account production of fixed assets;
    - other goods produced for own final use when market comparators are infeasible.
  - Labor input (4.294): For unincorporated enterprise owners and family members, impute remuneration using wage rates for similar work.
  - Capital services (4.295–4.296): Include all non-financial assets used in production (fixed assets, inventories, non-produced non-financial assets); natural resources produced on own account typically excluded. For return to capital:
    - recommended to use a rate of return from an opportunity costs perspective (e.g., mark-up for normal net operating surplus);
    - more prudent approach: use borrowing interest rate, which may differ across sectors/industries and is preferable for non-market producers.
  - Unpaid household services for own final use (4.297–4.298):
    - Conceptually prefer market prices of similar services, but data constraints make the sum-of-costs common in practice.
    - For labor input valuation, replacement costs (labour costs of similar occupations in the market) are considered the most appropriate method to approximate market prices consistent with national accounts; opportunity costs may be used when aiming for a welfare measure.

### Short summary of preferred transaction valuation methods (4.299)
- Goods, services, and assets transacted on the market via monetary settlement: use values actually exchanged.
- Barter transactions and consumption of goods produced for own final use: derive prices from market transactions of similar goods/services/assets.
- Unpaid household services for own final use:
  - Housing services from owner-occupied dwellings: prefer market-equivalent prices adjusted for heterogeneity.
  - Other unpaid household services: market-equivalent prices may be used, but default is sum-of-costs when quantity data are hard to obtain.
- Own-account capital formation of assets: default is sum-of-costs; preference for market-equivalent prices for homogeneous assets regularly traded (e.g., dwellings), adjusted for heterogeneity.
- Non-market output of government and NPISHs: value output and final consumption using sum-of-costs.

### Methods for valuing stocks of assets and liabilities (4.300–4.311)
- General (4.300): Distinguish non-financial assets and financial assets; consistency in valuing assets and liabilities is a key prerequisite for national accounts.
- Observed market prices for stocks (4.301–4.303)
  - Preferred when markets trade in considerable volumes with regular price listings; recent market transactions can approximate current market price even if trades are occasional.
  - Mainly applicable to financial assets, notably securities traded on active markets (homogeneous assets with regular price quotations).
  - For debt securities (e.g., government debt), users often request nominal value in addition to market valuation because nominal value reflects principal and accrued interest and actual future repayments.
- Market-equivalent prices for stocks (4.304–4.307)
  - Approximate current prices using observable market prices of similar assets or expert estimates based on market information.
  - Applicable to less homogenous non-financial assets regularly traded (e.g., dwellings, certain second-hand transport equipment) but must account for characteristics affecting price.
  - Market prices of dwellings combine structure and land; market prices can be used as benchmarks to estimate these separately.
  - Expert estimates may be the only viable option for valuables or real estate where markets are lacking.
  - Less appropriate for second-hand “special purpose” fixed assets or thin markets where market price may approach scrap value; written-down replacement costs may be preferred.
- Valuation based on past expenses (4.308–4.310)
  - Two basic methods (for assets subject to depreciation or not):
    - historical acquisition price;
    - written-down replacement costs.
  - Use cases: many non-financial assets; valuables; some financial instruments (with adjustments for price changes since acquisition).
  - The written-down replacement cost (perpetual inventory method) is common for fixed assets and can be superior to market prices when second-hand market prices do not reflect future capital services.
  - Data requirements for perpetual inventory method: long time series of past expenditures and price developments, service life, age-price/age-efficiency profiles, discard patterns.
- Nominal value for financial instruments (4.311)
  - Applied to instruments not traded on markets (deposits, loans, accounts receivable/payable).
  - Nominal value reflects value at creation plus subsequent economic flows (transactions, exchange rate and other valuation changes other than market price changes, and other volume changes).
  - Typically comprises outstanding principal amount including any accrued interest.

### Definitions and distinctions among valuation concepts (4.312 / 4.195–4.312 content)
- Fair value
  - Defined as a market-equivalent value: amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction; represents an estimate of what could be obtained if the creditor sold the financial claim.
- Nominal value
  - Amount the debtor owes to the creditor, comprising outstanding principal including any accrued interest.
- Amortized value
  - Amount at which a financial asset or liability was measured at initial recognition minus principal repayments; may differ from nominal value on non-scheduled dates due to accrued interest.
- Face value
  - Undiscounted amount of principal to be repaid to the holder at maturity (also called par value).
- Book value
  - Value recorded in enterprise records; influenced by timing of acquisition, takeovers, revaluations, tax and other regulations.
- Historic cost
  - Cost at time of acquisition, sometimes reflecting occasional revaluations.

*Source: BPM7, Chapter 3, International Monetary Fund*

### 4.313 The use of nominal value is partly influenced by pragmatic concerns about data availability and the need to mainta

### Valuation methods for assets and liabilities (BPM7 chapter excerpts)

### Use of nominal value for loans (paragraph 4.313)
- The use of nominal value is partly influenced by pragmatic concerns about data availability and the need to maintain symmetry between debtors and creditors.
- Loans are not intended for negotiability; without an active market, estimating a market price can be subjective.
- Nominal value shows actual legal liability and the starting point of creditor recovery behaviour.
- It is recognised that nominal value provides an incomplete view of the financial position, particularly when loans are non-performing.
- Recommendation: include, as a supplementary item, information on the nominal value of non-performing loans.
- Loans that have become negotiable de facto should be reclassified under debt securities.

### Indirect valuation (paragraph 4.314)
- Indirect valuation can approximate financial assets and related liabilities where direct market prices are unavailable.
- This method is often applied for unlisted equity; the intrinsic value of a corporation is considered a valid starting point for valuation.
- More guidance on valuation of unlisted equity, including alternative methods, is provided in chapter 14.

### Net present value of future returns (paragraphs 4.315–4.316)
- The (net) present value of future benefits is a viable alternative when other valuation methods cannot be applied.
- Typical applications:
  - defined benefit pension entitlements;
  - unlisted equity when other methods are less appropriate;
  - natural resources.
- Actuarial methods for estimating pension entitlements are not elaborated here; guidance is available elsewhere (see Technical Compilation Guide for Pension Data in National Accounts).
- For unlisted equity valuation using present value of expected future profits, refer to chapter 14.

### Valuation of natural resources using present value / residual value method (paragraphs 4.317–4.320)
- The method reduces to estimating the discounted value of future benefits, often approximated by the “residual value method” with the following calculation sequence:
  - output at basic prices (related to the extracted resources)
  - less intermediate consumption
  - less remuneration of employees
  - less other taxes less subsidies on production
  - equals gross operating surplus
  - plus specific taxes less subsidies on extraction
  - equals gross operating surplus for the derivation of resource rent
  - less depreciation
  - less return to capital used in production
  - equals resource rent (= depletion plus return to natural resource)
- Conditions and challenges:
  - The present value method can be used for non-financial assets only if there is a direct link between future benefits and the asset, i.e., no other assets generate the residual income.
  - Requires forecasting future income streams, assumptions on asset life, future extraction paths, regeneration potential (for renewable resources), and expected income flows.
  - Choosing an appropriate discount rate is an important issue.
  - Due to these issues, the method is often a last resort, applied only for certain asset classes such as natural resources.
- Ownership and split-asset approach (paragraph 4.319):
  - Governments, as legal owners of mineral and energy resources, may grant extraction rights with royalty payments and may not appropriate the full resource rent.
  - Rights often are not transferable and lack observable market prices; private extractors derive value from appropriated resource rent.
  - Recommendation: apply the split-asset approach—record assets in accounts of legal owner and extractor in proportion to the share of resource rent appropriated.
- Further guidance:
  - Detailed guidance on recording and compiling estimates for natural resources is provided in the System of Environmental-Economic Accounting (SEEA) Central Framework 2012 and forthcoming compilation guidance by the OECD Expert Group on Natural Capital.

### Other asset valuation considerations (paragraphs 4.321–4.322)
- The (net) present value method could apply to other asset types, but the written-down replacement cost method is usually preferred for produced assets.
- For assets produced in-house, the sum-of-costs (written-down acquisition costs) method often applies.
- Human capital valuation:
  - Options are (net) present value of future incomes or written-down acquisition costs.
  - Written-down acquisition costs: expenditures may be easier to collect but require assumptions on service lives and depreciation patterns; unpaid labour input measurement (e.g., studying at home) relies on income foregone.
  - Present value method: requires agreement on which incomes to use and forecasting long-term incomes.
  - No firm recommendation is made pending more practical experience; see chapter 34 for more detail.

### Short summary of methods for valuing stocks of assets and liabilities (paragraphs 4.323–4.325)
- Financial assets and liabilities:
  - Preferable valuation: market(-equivalent) prices.
  - Application is limited because most financial instruments are not traded on active markets with regular price quotations; tradable securities are the obvious exception.
  - For non-tradable financial instruments, market prices from recent transactions can be used when available.
  - When not applicable, valuation at nominal values is the most viable option.
  - Special cases:
    - Unlisted equity: various methodologies can be considered (see chapter 14 (SNA) / chapter 7 (BPM)).
    - Defined benefit pension entitlements: estimated using actuarial calculations based on the net present value of future benefits.
- Non-financial assets:
  - In absence of market(-equivalent) prices, two methods are applied most frequently:
    - written-down replacement cost method (typically for fixed assets used in production);
    - (net) present value of future earnings (often the only alternative for natural resources).
  - Expert estimates may be the only viable option for valuables.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/bpm7-ch3.pdf_