Government Finance Statistics Manual 2014

(nextflipdebug2) #1

Expense 115


obligation to make payments or otherwise give up
resources (see paragraph 3.62). In the absence of a
complete inventory accounting system (see paragraph
8.46), complications arise with the recording of the ac-
quisition and subsequent use of goods. Conceptually,
the purchase of goods that are not immediately used
in some manner is an addition to inventories rather
than an expense. When the goods are consumed in
production or otherwise utilized, a decrease in inven-
tories should be recorded, as well as an expense or
an increase in some other category of asset, depend-
ing on the manner in which these goods are used.^2
However, in practice, as described in paragraphs
8.45–8.47, the change in inventories is oft en not re-
corded for each transaction, but rather calculated as
a residual from information on stock positions and
fl ows in inventories. Other applications of the accrual
basis to specifi c categories of expense transactions are
indicated in each section of the economic classifi ca-
tion, as relevant.


6.7 In the Statement of Sources and Uses of Cash,
expense transactions should be recorded according to
the cash basis of recording, as close to the payment
stage as possible (see paragraph 3.103).


Th e Economic Classifi cation of Expense


6.8 Table 6.1 shows the summary economic classi-
fi cation of expense, and the remainder of this chapter
describes each category in detail.^3 While the summary
GFS expense classifi cation structure provides guid-
ance on the minimum requirements for internation-
ally comparable classifi cations of expense, analytical
needs may necessitate further detailed classifi cations
to be added as subitems in national data presentations.
Th ese additional subitems may be presented either as
a comprehensive breakdown of the standard item, or
presented as “of which” lines. Th ese items usually relate
to the need for consolidation of the general govern-
ment or public sector, input into other macroeco-
nomic datasets, or items that will allow the calculation
of supplementary aggregates or balances (see para-
graph 5.22).


(^2) Where these goods are used in own-account capital formation to
create another asset, such as a fi xed asset or another category of
inventories, they would be recorded as part of the cost of the ac-
quisition of such assets. However, where the goods are consumed
during the process of providing a service, an expense is recorded.
(^3) See also Appendix 8, Table A8.2, for the detailed classifi cations.
Compensation of Employees [GFS]^4 (21)^5
6.9 Compensation of employees is the total remu-
neration, in cash or in kind, payable to an individual in
an employer-employee relationship in return for work
performed by the latter during the reporting period.
Th ese amounts are payable as an exchange for manual
and intellectual labor services of individuals used in
the production process of the institutional unit. Com-
pensation of employees [GFS] (21)^6 excludes amounts
connected with own-account capital formation (see
Table 6.2). In GFS, compensation of employees pay-
able to employees engaged in own-account capital for-
mation, which is the production of nonfi nancial assets
for own use, is directly recorded as a component of the
cost of the acquisition of nonfi nancial assets. Compen-
sation of employees [GFS] (21) also excludes amounts
payable when an employer-employee relationship does
not exist, such as for contractors and self-employed
outworkers. Such amounts payable are classifi ed as
use of goods and services (22). For a description of this
boundary between compensation of employees and
use of goods and services, see paragraph 6.33.
6.10 When using the accrual basis of record-
ing, compensation of employees is measured by the
value of the remuneration in cash and/or in kind
that an employee becomes entitled to receive from
an employer for work performed during the relevant
period, whether paid in advance, simultaneously,
or in arrears of the work itself. To the extent that
payment has not been made for work performed,
the unit should record an entry in other accounts
payable (3308) (see paragraphs 7.224–7.227 and
9.83).^7 On the other hand, to the extent that pay-
ment has been made in advance of the work itself,
an entry in other accounts receivable (3208) must be
recorded until such time as the work is completed.
When using the cash basis of recording, compensa-
tion of employees is recorded at the time the cash
(^4) [GFS] indicates that an item has the same name but diff erent
coverage in the 2008 SNA.
(^5) Th e numbers in parentheses aft er each classifi cation category are
the GFS classifi cation codes. Appendix 8 provides all classifi cation
codes used in the GFS framework.
(^6) Compensation of employees is described in the 2008 SNA,
paragraphs 7.28–7.70.
(^7) To the extent that compensation of employees is not paid on the
agreed due for payment date, these other accounts payable will be
in arrears from the date they became due (see paragraphs 9.20
and 7.226).

Free download pdf