176 Government Finance Statistics Manual 2014
to determine the global valuation of all the existing
securities of a given type. Debt securities traded (or
tradable) in organized and other fi nancial markets—
such as bills, bonds, debentures, negotiable certifi -
cates of deposits, asset-backed securities, etc.—should
be valued at market value and, in the case of liabilities,
at nominal value as well.^9 In some countries, another
example of a market in which assets may be traded
in suffi cient numbers to provide useful price informa-
tion is the market for existing dwellings.
7.28 If assets of the same kind are being produced
and sold on the market, an existing asset may be val-
ued at the current market price of a newly produced
asset adjusted for consumption of fi xed capital in the
case of fi xed assets, and any other diff erences between
the existing asset and a newly produced asset. Th is ad-
justment for consumption of fi xed capital should be
calculated on the basis of the asset prices prevailing
on the balance sheet reference date rather than the
actual amounts previously recorded as an expense.^10
7.29 In addition to providing direct observations on
the prices of assets actually traded there, information
from such markets may also be used to price similar
assets that are not traded. For example, information
from the stock exchange also may be used to price
unlisted shares by analogy with similar, listed shares,
making some allowance for the inferior marketability
of the unlisted shares. Similarly, independent apprais-
als of assets for insurance or other purposes generally
are based on observed prices for items that are close
substitutes, although not identical, and this approach
can be used for balance sheet valuation.
7.30 Debt instruments other than debt securities
(as well as the corresponding fi nancial assets in the
form of debt instruments) are normally not traded
and, therefore, lack generally observable market val-
ues. Th is means that these values have to be estimated
by using the nominal value as a proxy (see paragraph7.122).^11
- Nontraded debt instruments: Debt instruments
(as well as the corresponding fi nancial assets in
the form of debt instruments) not generally traded
(^9) Nominal and market valuation are discussed in paragraphs
3.113–3.117. For a numerical examples on the calculation of
interest and nominal value, see Boxes 2.3–2.5 in the PSDS Guide.
(^10) Amounts previously recorded as expense are based on the aver-
age prices of the asset over the reporting period.
(^11) See the PSDS Guide, Chapter 2.
(or tradable) in organized or other fi nancial
markets—namely, loans, currency and deposits,
and other accounts payable/receivable—should
be valued at nominal value. Th e nominal value of
a debt instrument could be less than the originally
advanced amount if there have been repayments
of principal, debt forgiveness, or other economic
fl ows (such as arising from indexation) that aff ect
the value of the amount outstanding. Th e nomi-
nal value of a debt instrument could be more than
originally advanced because of, for example, the
accrual of interest or other economic fl ows.
- Debt instruments that do not accrue interest: For
debt instruments (as well as the corresponding
fi nancial assets in the form of debt instruments)
that do not accrue interest—for example, most
trade credit and advances—the nominal value is
the amount owed by the debtor to the creditor
at the balance sheet date. If there is an unusually
long time before payment is due on an outstand-
ing debt liability on which no interest accrues,
the value of the principal should be reduced by
an amount that refl ects the time to maturity and
an appropriate existing contractual rate, such as
for similar debt instruments (see also paragraph
3.118). - Repayment specifi ed in terms of commodities
or other goods: For some instruments, such as a
loan, repayment may be specifi ed in a contract in
terms of commodities or other goods deliverable
in installments over a period of time. At incep-
tion, the value of the debt (as well as the cor-
responding fi nancial assets in the form of debt
instruments) is equal to the principal advanced.
When payments are made in the form of the
good or commodity, the value of the principal
outstanding will be reduced by the market value
of the good or commodity at the time the pay-
ment is made. - Extinguishing a trade credit under barter ar-
rangements: Th e value of the commodities, other
goods, or services to be provided for extinguish-
ing a trade credit liability (and the correspond-
ing fi nancial asset) under barter arrangements is
established at the creation of the debt—that is,
when the exchange of value occurred. However,
as noted earlier, if there is an unusually long time
before payment, the value of the principal should
be reduced by an amount that refl ects the time to