The Balance Sheet 173
public and assets that need to be preserved because
of their historic or cultural importance. Th us, when
the asset boundary is applied to the general govern-
ment sector, it oft en incorporates a wider range of as-
sets than is normally owned by a private organization.
Th at is, government units frequently own:
- General-purpose assets, which are assets that
other units would be likely to possess and use
in similar ways, such as schools, road-building
equipment, fi re engines, offi ce buildings, furni-
ture, and computers - Infrastructure assets, which are immovable non-
fi nancial assets that generally do not have al-
ternative uses and whose benefi ts accrue to the
community at large; examples are streets, high-
ways, lighting systems, bridges, communication
networks, canals, and dikes - Heritage assets, which are assets that a govern-
ment intends to preserve indefi nitely because
they have unique historic, cultural, educational,
artistic, or architectural signifi cance.
7.12 In some cases, governments can create eco-
nomic assets by exercising their sovereign powers or
other powers delegated to them. For example, a gov-
ernment may have the authority to assert ownership
rights over naturally occurring assets that otherwise
would not be subject to ownership, such as the elec-
tromagnetic spectrum and natural resources in inter-
national waters subject to designation as an exclusive
economic zone.^3 Th ese assets are economic assets
only if the government uses its authority to establish
and enforce ownership rights.
7.13 Only actual (outstanding) liabilities (and
their corresponding assets) are included in the bal-
ance sheet. Contingent assets and liabilities are not
recognized as fi nancial assets and liabilities prior to
the condition(s) being fulfi lled. Explicit contingent li-
abilities are discussed in paragraphs 7.251–7.260.
- Amounts set aside in business accounting as pro-
visions to provide for a unit’s future liabilities,
either certain or contingent, or for a unit’s future
expenditures, are not recognized in the macro-
economic statistical systems. However, amounts
accrued and not yet due for payment (such as
(^3) Exclusive economic zones are the area of sea and seabed extend-
ing from the shore of a country claiming exclusive rights to them.
employment-related pension “provisions”) are
liabilities.
- No liability is recognized on the balance sheet
for government’s implicit obligations to pay so-
cial security benefi ts, such as unemployment, old
age pensions, and health care, in the future (see
Appendix 2). However, it is recommended to in-
clude net implicit obligations for social security
benefi ts as a memorandum item to the balance
sheet (see paragraph 7.261). - Lines of credit, letters of credit, and loan com-
mitments assure funds will be made available in
the future, but no fi nancial asset (and liability) in
the form of a loan is created until funds are actu-
ally advanced. - Uncalled share capital is contingent until there is
an obligation to pay the amount. - Environmental liabilities, which are probable
and measurable estimates of future environmen-
tal cleanup, closure, and disposal costs other than
those included in costs of ownership transfer (see
paragraphs 8.6–8.8), are not recognized.^4
Deriving Defi nitions for Assets and Liabilities
7.14 Th is section defi nes liabilities and fi nancial
claims, from which it then derives the defi nitions of
fi nancial and nonfi nancial assets.
7.15 As defi ned in paragraph 3.45, a liability is
established when one unit (the debtor) is obliged,
under specifi c circumstances, to provide funds or
other resources to another unit (the creditor). Nor-
mally, a liability is established through a legally bind-
ing contract that specifi es the terms and conditions of
the payment(s) to be made, and payment according
to the contract is unconditional. Whenever a liabil-
ity exists, the creditor has a corresponding fi nancial
claim on the debtor. A fi nancial claim is an asset that
typically entitles the owner of the asset (the creditor)
to receive funds or other resources from another unit,
under the terms of a liability. Like liabilities, fi nancial
claims are unconditional. Financial claims consist of(^4) An example is an agreement to perform cleanup (i.e., removal,
containment, and disposal) of hazardous waste that resulted from
government operations. Where terminal costs are part of costs of
ownership transfer, these costs are written off through consump-
tion of fi xed capital over the whole life of the asset. Terminal costs
are discussed in paragraphs 6.60 and 8.6.