Expense 121
- Goods purchased by government and distrib-
uted without transformation, which should be
recorded as some type of transfer in kind; these
transfers are classifi ed as subsidies (25), grants
(26), social benefi ts (27), or current transfers not
elsewhere classifi ed (2821).
6.28 In the Statement of Operations, the value of
use of goods or services is recorded when the goods
or services are actually used rather than when they
were acquired or paid for. In practice, these events
oft en coincide for inputs of services but not for goods,
which may be acquired some time in advance of their
use. Th e value of goods purchased and held for resale
is recorded as use of goods and services when they
are sold.
6.29 In practice, government units do not usually
record the actual use of goods in production directly.
Instead, they keep records of purchases of materi-
als and supplies intended to be used as inputs and
also of any changes in the amounts of such goods
held in inventories. An estimate of use of goods and
services during a given reporting period can be de-
rived through the indirect method by considering
the purchases of goods and services and changes in
inventories,^16 as illustrated in Table 6.3.
6.30 Use of goods and services (22) is recorded on
a gross basis. Fees and charges collected for goods
and services provided by general government units,
such as for certain types of social benefi ts or admin-
istrative services, such as the issuance of licenses and
passports, should be shown as revenue rather than de-
ducted from expense.
6.31 In the Statement of Sources and Uses of Cash,
the purchases of goods and services are recorded as
close to the payment stage as possible. Th e value of
these goods and services will include all cash pay-
ments made for goods and services during the report-
ing period, irrespective of whether the good or service
was used during the reporting period. Th is amount
will not include the value of goods paid for in prior
periods, but used in the current period.
6.32 Th e boundaries between use of goods and
services and other expenditure items, such as com-
(^16) As described in paragraph 7.75, inventories may include ma-
terials and supplies, work in progress, fi nished goods, goods for
resale, and military inventories. See paragraphs 8.44–8.47 for a
discussion on transactions in inventories.
pensation of employees, transfers, or acquisition of
nonfi nancial assets, are explained in more detail in
paragraphs 6.33–6.52.
Th e boundary between use of goods and services and compensation of employees
6.33 Compensation of employees excludes amo-
unts payable to contractors, self-employed outwork-
ers, and other workers who are not employees of
general government or public sector units. Any such
amounts should be recorded under use of goods and
services (22). An employer-employee relationship ex-
ists when there is a written or oral agreement, which
may be formal or informal, between an entity and an
individual, normally entered into voluntarily by both
parties, whereby the person works for the enterprise
in return for remuneration in cash or in kind. Th e
remuneration is normally based on either the time
spent at work or another objective indicator of the
amount of work performed. If an individual is con-
tracted to produce a single specifi c task, it suggests
that no employer-employee relationship exists, but
that a service contract relationship exists between the
entity and a self-employed individual.
6.34 An indication of whether an employer-
employee relationship exists is that of control. Th e
right to control or to direct work performed and
how it shall be performed is a strong indication of an
employer-employee relationship. Th e method of mea-
suring or arranging for the payment is not important
as long as the employer has eff ective control over both
the method and the result of the work undertaken by
the individual. However, certain control of the work
being undertaken may also exist for the purchase ofTable 6.3 Relationship between Inventories (612)
and Use of Goods and Services (22)612 t0 Opening stock position of inventories
Plus: Purchases of goods and services
Minus: Used in own-account capital
formation
Minus: Goods distributed directly as
transfers in kind
412 Plus/Minus: Holding gains/losses
512 Plus/Minus: Other volume changes
612 t1 Minus: Closing stock position of inventories
22 Equals: Use of goods and services