## Proposed Recommendations Document: 1.1 Valuation principles and methodologies ## Source details **Canonical URL:** [Proposed Recommendations Document: 1.1 Valuation principles and methodologies](https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/group3/proposed-recommendations-gfsm-2014-update-11-valuation-principles-and-methodologies.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/gfsm/global-consultations/group3/proposed-recommendations-gfsm-2014-update-11-valuation-principles-and-methodologies.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/gfsm/global-consultations/group3/proposed-recommendations-gfsm-2014-update-11-valuation-principles-and-methodologies.pdf.json) --- ### Summary - The proposed recommendation is for the updated GFSM to adopt the terminology of “exchange values” to describe the principle for valuing transactions and stocks/positions and provide clarifications on the application of this principle in line with the 2025 SNA and BPM7. - The proposed recommendations aim to provide further clarification on the valuation of transactions and stocks/positions. - The conceptual principles of GFSM 2014 remain generally fit for purpose. - The 2025 SNA and BPM7 introduce the use of “exchange values” rather than “market prices/valuation” when valuing transactions and stocks/positions, and add new clarifications pertinent to the updated GFSM, particularly in the context of valuing nonfinancial assets, including natural resources. - A concise comparison of statistical valuation methods with those in accounting standards should be added to the updated GFSM. - Links to related guidance: GN AI.1 on Valuation Principles and Methodologies; Draft 2025 SNA and Draft BPM7. - Global Consultation(s): SNA: September 2023. - Discussions at the Advisory Expert Group on National Accounts (AEG): March 2023, October 2022. - Discussions at Balance of Payments Committee (BOPCOM): (as noted above). - Discussions at GFSAC Meeting(s): To be determined. ### Background and issues - GN AI.1 distinguishes between principles for initial recognition of transactions and subsequent valuation of stock positions; GFSM guidance could further clarify this distinction. - GFSM 2014 (paras. 3.107-3.112) refers to market prices as the basis for valuation and clarifies this is equivalent to the “current exchange value” (see GFSM 2014 para. 3.107); GN AI.1 recommends adopting the term “exchange values” as the overarching principle. - Draft 2025 SNA (paras. 4.130-4.138 and 4A.1-4A.14) and draft BPM7 (paras. 3.97-3.105 and 3.225-3.232) reflect GN AI.1 recommendations on terminology and the distinction between valuation principle and preferred valuation method. - Subsequent valuation of assets is more complicated than initial recognition because market or near-market prices may be unavailable for some assets, necessitating alternative valuation methods; examples include many nonfinancial assets (natural resources, own-account produced assets, assets used in production over long periods, infrastructure assets) and some financial assets (unlisted equity and defined benefit pension entitlements). - Draft 2025 SNA (paras. 4.153-4.166 and 4A.15-4A.40) and draft BPM7 (paras. 3.119-3.120-3.128 and 3.233-3.251) provide additional clarifications on valuation of assets and liabilities that may enhance GFSM 2014 guidance. - GN AI.1 focuses on clarifying application of the sum-of-costs method of valuation, particularly regarding the extent of capital services to include (i.e., depreciation, depletion and net return to capital) and the approach to estimating the net return to capital. - GN AI.1 addresses application of the net present value of future economic benefits method for valuing certain assets, including valuation of natural resources where exploitation rights are provided by government for a series of rent payments. - GN AI.1 explores the relationship between macroeconomic statistical valuation principles and business and public sector accounting standards; valuation principles for positions in macroeconomic statistics are very similar to the concept of “fair value” in accounting, but accounting often uses several other valuation methodologies requiring statistical compilers to adjust administrative source data. - GFSM 2014 (Appendix 6 paras. A6.25-A6.30 and Box A6.1) and draft 2025 SNA (paras. 4.167-4.168, Tables 28.1 and 30.1) touch on comparisons with accounting; the text requires review and possible expansion. ### Proposed recommendations (explicit updates) - Revise and expand GFSM 2014 guidance, in line with draft 2025 SNA and BPM7, to include further clarifications on valuation of transactions and stocks/positions. Specific updates needed: - Adopt the terminology of “exchange values” consistently to describe the principle for valuing transactions, and apply the definition of exchange values from the Glossary of Terms and Definitions in Macroeconomic Statistics. - Further clarify the different methods for valuing transactions (and their order of preference) as described in the Annex/Appendix of the common draft 2025 SNA Chapter 4 / BPM7 Chapter 3. - Explicitly reference the distinction between initial recognition and subsequent measurement of stock/positions in line with principles captured in the draft 2025 SNA / BPM7. - Further clarify the principles for valuing positions, in particular for nonfinancial assets, where the notion of capital services needs to be introduced and elaborated. - Clarify the application of the valuation principle for various assets, including for natural resources. - Include a short summary comparison of the valuation principles used in macroeconomic statistics with those used in business and public sector accounting. ### Rationale for proposed recommendations - The proposed recommendations aim to align GFSM guidance on valuation principles and methodologies for transactions and stocks/positions with those included in the 2025 SNA and BPM7. ### Proposed text for GFSM update - Introduce the draft 2025 SNA text on valuation of transactions (paras. 4.130-4.152) and valuation of stocks (paras. 4.153-4.166) into the revision of GFSM 2014 (paras. 3.107-3.129). - Revise other references to valuations in the remainder of GFSM 2014 accordingly. - Consider including the draft 2025 SNA comparison on valuation principles used in business accounting (paras. 4.167-4.168) in the GFSM discussion on valuation. ### Additional references and related GFSM Update research projects - SNA Guidance Note WS.10 on Valuation of mineral and energy resources (see GFSM Update Research Project 2.19). - SNA Action Point A.8 on Consistency in the application of the sum-of-costs approach (see GFSM Update Research Project 1.27). - The application of the sum-of-costs approach is separately dealt with in GFSM Update Research Project 1.27. - The treatment of the valuation of natural resources is separately dealt with in GFSM Update Research Project 2.19. --- _Source: https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/group3/proposed-recommendations-gfsm-2014-update-11-valuation-principles-and-methodologies.pdf_