Government Finance Statistics Manual 2014

190 Government Finance Statistics Manual 2014

Such permits are issued mainly by government but

may also be issued by other units.

7.111 When governments restrict the number of

cars entitled to operate as taxis or limit the number

of casinos by issuing permits or licenses, they are in

eff ect creating monopoly profi ts for the approved

operators and recovering some of the profi ts as the

“fee.” For government, such proceeds are recorded as

other taxes on the use of goods and on permission to

use goods or perform activities (11452) (see paragraph

5.81). For the permit holder, the incentive to acquire

such a license is that the licensee believes that it will

thereby acquire the right to make monopoly profi ts

at least equal to the cost of the license. Th is permis-

sion to create monopoly profi ts creates an asset for the

holder if the licensee can realize these profi ts by on-

selling the asset—that is, the license is tradable. Th e

value of this asset is determined by the value at which

it can be sold or, if no such information is available, is

estimated as the present value of the future stream of

monopoly profi ts (see also paragraphs A4.42–A4.45).

Entitlement to future goods and services on an exclusive basis (614414).

7.112 Entitlement to future goods and services on

an exclusive basis (614414) relates to the case where

one party that has contracted to purchase goods or

services at a fi xed price at a time in the future is able to

transfer the obligation of the second party to the con-

tract to a third party. Th ese entitlements relate to foot-

ballers’ contracts and a publisher’s exclusive right to

publish new works by a named author or issue record-

ings by named musicians (see also paragraph A4.51).

For example, when a football player contracted his or

her services to a club, the latter has an asset with the

ability to sell this contract to another club.

Goodwill and marketing assets (61442).

7.113 Potential purchasers of an enterprise are

oft en prepared to pay a premium above the net value

of its individually identifi ed and valued assets and li-

abilities. Th is excess is described as goodwill and re-

fl ects the value of corporate structures and the value

to the business of an assembled workforce and man-

agement, corporate culture, distribution networks,

and customer base. It may not have value in isolation

from other assets, but it enhances the value of those

other assets. Looked at another way, it is the addition

to the value of individual assets because they are used

in combination with each other.

7.114 Goodwill cannot be separately identifi ed and

sold to another party. Th e value has to be derived by

deducting the value of assets and liabilities classifi ed

elsewhere within the asset boundary of GFS from the

sale value of the corporation. (In practice, since it is

estimated as a residual, an estimate of goodwill will

also refl ect errors and omissions in the valuation of

other assets and liabilities.)

7.115 As well as residual errors, the value of good-

will may include the value to the corporation of items

known as marketing assets. Marketing assets consist

of items such as brand names, mastheads, trademarks,

logos, and domain names. A brand can be interpreted

as far more than just a corporate name or logo. It is the

overall impression a customer or potential customer

gains from his or her experience with the company

and its products. Interpreted in that wider sense it can

also be seen to encompass some of the characteristics

of goodwill, such as customer loyalty.

7.116 Th e value of goodwill and marketing assets

is the diff erence between the value paid for an en-

terprise as a going concern and the sum of its assets

minus the sum of its liabilities, each item of which

has been separately identifi ed and valued. Although

goodwill is likely to be present in most corporations,

for reasons of reliability of measurement it is recorded

in GFS only when its value is evidenced by a market

transaction, usually the sale of the whole corporation.

In some exceptions, identifi ed marketing assets may

be sold individually and separately from the whole

corporation, in which case their value should also be

recorded under this item.

7.117 Th e balance sheet entry for goodwill and

marketing assets is the written-down value of the entry

that appears as a transaction in fi nancial assets and lia-

bilities when an enterprise is taken over or when a mar-

keting asset is sold.^26 Th ese entries are not revalued.

Financial Assets (62) and Liabilities (63).

7.118 Financial assets and liabilities were defi ned

in paragraphs 7.15–7.16. Th e classifi cations of fi nan-

cial assets and liabilities are based primarily on the

(^26) As explained in paragraph 10.55, the amortization of goodwill
and marketing assets over their service or legal lives is an other
economic fl ow.