## 1.28 Work-in-progress and transfer of ownership ## Source details **Canonical URL:** [1.28 Work-in-progress and transfer of ownership](https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/proposed-recommendations-gfsm-2014-update-128-workinprogress-transfer-of-ownership-and-capital-ser.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/gfsm/global-consultations/proposed-recommendations-gfsm-2014-update-128-workinprogress-transfer-of-ownership-and-capital-ser.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/gfsm/global-consultations/proposed-recommendations-gfsm-2014-update-128-workinprogress-transfer-of-ownership-and-capital-ser.pdf.json) --- ### Summary of proposed recommendation - The proposed recommendation is to align guidance in the GFSM 2014 update on recording incomplete fixed assets as inventories of work-in-progress with the draft 2025 SNA. - Recommendation: record all incomplete fixed assets as work-in-progress. - Even when there is evidence of an effective transfer of ownership (for example, when fixed assets are produced under a contract of sale and are evidenced by an effective transfer of ownership), incomplete fixed assets are recorded as work-in-progress in the purchaser’s books. - The difference between stage payments and the estimated value of the effective transfer of ownership is to be recorded as other accounts payable and receivable. - Incomplete fixed assets produced on own account should be recorded as work-in-progress except where it is not practically possible (e.g., intellectual property). ### Background and current GFSM 2014 guidance and issues - GFSM 2014 (paras. 7.37 and 7.80) recommends recording inventories of work-in-progress for any output not complete at the end of a reporting period, including incomplete fixed assets such as construction. - Exceptions in GFSM 2014 where incomplete fixed assets are recorded as acquisition of fixed assets instead of work-in-progress occur when the ultimate owner is deemed to have taken ownership of the partially completed assets. Examples: - Fixed assets constructed on own account: GFSM 2014 (paras. 7.37 and 8.15) treats incomplete fixed assets produced on own account as acquisition of fixed assets rather than inventories of work-in-progress. - Construction under a contract of sale: incomplete fixed assets transferred to the purchaser (final owner) are recorded as acquisition of fixed assets rather than work-in-progress. Stage payments can be used as a proxy for acquisition in the purchaser’s balance sheet when estimating effective transfer of ownership is difficult. When stage payments exceed the value of the incomplete asset, the excess is recorded as a trade advance (accounts payable) and is exhausted as construction proceeds (GFSM 2014, paras. 7.37 and 8.15). - In the absence of a contract of sale, incomplete structures are recorded as work-in-progress in the producer’s balance sheet; no ownership transfers are recorded in the purchaser’s balance sheet until ownership of the completed fixed assets is effectively transferred. ### Draft 2025 SNA revisions relevant to work-in-progress (paras. 11.62 and 11.63 among others) - General treatment: incomplete fixed assets will be recorded as work-in-progress in the books of the asset producer only; no transfer of ownership is made to the purchaser until project completion (i.e., no work-in-progress in the purchaser’s balance sheet) — subject to special cases. - Contract of sale: when a contract of sale exists, the incomplete asset should be recorded as work-in-progress in the purchaser’s balance sheet only when there is an effective transfer of ownership. - Stage payments as proxy: where it is difficult to apply the effective ownership transfer criterion in practice, stage payments made by the purchaser can be used as a proxy for transfer of ownership. - Recording differences: in the case of stage payments, any difference between stage payments made on the work-in-progress related to a fixed asset and the estimated value of ownership transferred should be recorded as other accounts receivable/payable. - Own-account production: incomplete fixed assets produced on own account should be recorded as work-in-progress instead of gross fixed capital formation (acquisition of fixed assets). However, where the distinction is difficult to apply in practice, there is flexibility to record partially completed projects produced on own account as gross fixed capital formation by default. ### Rationale for alignment - The proposed recommendations aim to harmonize the updated GFSM with the 2025 SNA, which is a key objective of the GFSM 2014 update process. - The alignment specifically concerns recording of work-in-progress and transfer of ownership of incomplete fixed assets. ### Proposed changes to GFSM 2014 text and presentation - Consider revisions of GFSM 2014 in paras. 7.37, 7.62, 7.58, 7.80, 7.225, and 8.15 to be consistent with draft 2025 SNA (paras.7.119-7.123, 7.130, 11.14, 11.79, 11.62, 11.63, 11.72, 11.140-11.145, and 11.212-11.221). - Retain reference to inclusion of advances for work that is in progress (para. 7.225) in other accounts receivable/payable (GFS codes 6208, 6218, 6228, 6308, 6318, and 6328) and expand it to include the difference between the value of stage payments and the estimated value of effective ownership transfer. - Consider including a decision tree specifically developed for the GFSM update to further clarify treatment of work-in-progress (see Annex). --- _Source: https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/proposed-recommendations-gfsm-2014-update-128-workinprogress-transfer-of-ownership-and-capital-ser.pdf_