Th is chapter describes transactions in nonfi nancial as-
sets and their classifi cation.

Introduction.

8.1 Chapter  7 describes the balance sheet and the
assets and liabilities recorded on it. As an integrated
framework, GFS also includes the fl ows necessary
to explain all changes between the balance sheet at
the beginning of the period and the balance sheet
at the end of the reporting period. As described in
paragraphs  3.1–3.4, there are two types of fl ows—
transactions and other economic fl ows—both of which
can aff ect stock positions of assets and liabilities. Th is
chapter describes the transactions that aff ect stock po-
sitions of nonfi nancial assets. Chapter 9 describes the
transactions that aff ect stock positions of fi nancial as-
sets and liabilities, and Chapter 10 describes other eco-
nomic fl ows.

8.2 For each category of nonfi nancial assets, there
is an accounting identity linking successive balance
sheets.^1 Th e identity states that:

Th e value of a category of nonfi nancial assets

on the balance sheet at the beginning of the re-

porting period

plus
Th e total value of that category of nonfi nancial as-
sets acquired in transactions during the reporting
period

minus
Th e total value of that category of nonfi nancial as-
sets disposed of in transactions during the reporting

minus
Th e value of consumption of fi xed capital for that
category of nonfi nancial assets during the report-
ing period

(^1) With the exception of consumption of fi xed capital, the same
identity could be applied to fi nancial assets and liabilities.
plus
Th e net value of other economic fl ows that aff ect
that category of nonfi nancial assets during the re-
porting period
equals
Th e value of the category of nonfi nancial assets
on the balance sheet at the end of the reporting
period.
Th is identity requires that transactions, other eco-
nomic fl ows, and stock positions be recorded consis-
tently with regard to time of recording and valuation.
Th e accounting rules governing these factors are de-
scribed in Chapter 3.
8.3 Transactions can change stock positions of
nonfi nancial assets in diff erent ways and all must be
accounted for. Th e more important types of transac-
tions follow:

• Existing assets of all types can be acquired from
  or disposed to other units by purchase/sale, bar-
  ter, or transfer in kind.


• Newly produced fi xed assets, inventories, and valu-
  ables can be sold or otherwise disposed of by their
  producers in the same manner as existing assets, or
  the producers can retain them for their own use.


• A government unit may produce goods and
  services for own use as fi xed assets (i.e., own-
  account fi xed capital formation). Th ese transac-
  tions are classifi ed as acquisitions of fi xed assets
  (and shown as a memorandum item).


• Renovations, reconstructions, or enlargements
  that signifi cantly increase the productive capac-
  ity or extend the service life of an existing fi xed
  asset are classifi ed as acquisitions of fi xed assets
  even though physically they function as part of
  the existing asset. Land improvements are a sep-
  arate category of fi xed assets, distinct from the
  nonproduced land asset.

Transactions in Nonfi nancial Assets

8