Other Economic Flows 255
appearance (or enter the asset boundary) because
of activity in the vicinity—for example, land that
becomes more desirable because a new devel-
opment is established nearby or an access road
built. Any excess in the value of the land over
the value of land improvements or any increase
due to adjacent capital activity is recorded as
economic appearance. For virgin forests, gather-
ing fi rewood is not commercial exploitation, but
large-scale harvesting of a virgin forest for timber
is and brings the forest into the asset boundary.
Similarly, drawing water from a natural spring
does not bring an aquifer into the asset boundary
of GFS, but a signifi cant diversion of groundwa-
ter does. A move to charge for regular extraction
from a body of surface water may also bring a
water resource into the balance sheet.- A government unit can create an economic asset
by exerting ownership rights over a naturally oc-
curring asset that had not previously been rec-
ognized as an asset, such as the electromagnetic
spectrum or fi sh stocks in exclusive economic
zones. When this occurs, the asset enters the bal-
ance sheet through other changes in the volume
of assets. - It is possible that some natural resources cease
to be exploited because of changed technology or
reduced demand for the resulting product, or for
legislative reasons, such as the suspension of fi sh-
ing to ensure the survival of fi sh stocks. When
this change in use occurs, the asset is removed
from the balance sheet through other changes in
the volume of assets. - Quality changes in natural resources due to
changes in economic uses—In this case, the
asset is already within the asset boundary. Th e
change in quality of the asset due to changes in
its economic use is regarded as the appearance
of additional amounts of the asset. For example,
the use of bare rural land changes when it be-
comes land underlying buildings and may result
in a change in the balance sheet value that is ef-
fected through an other change in the volume of
the asset. - All degradation of land, water resources, and
other natural assets caused by economic activity
should be recorded as negative other changes in
the volume of assets. Th e degradation may be the
anticipated result from regular economic activity
or less predictable erosion and other damage to
land from deforestation or improper agricultural
practices.- Th e diff erence between a quality change and a
price change is a matter of degree, and it may
not always be clear whether other changes in
the volume of assets or a holding gain is most
appropriate. For example, activities adjacent to
land may bring land into the asset boundary
(recorded as another volume change), while the
value of land in the vicinity may also increase
due to a rise in general price levels of land (re-
corded as holding gains).
10.53 It is recommended to recognize assets in the
form of contracts, leases, and licenses in the balance
sheet of the holder only when the value of the asset
can be realized (see paragraph 7.106). In this case,
they are fi rst recorded as other changes in the vol-
ume of assets and, subsequently, form the basis of a
transaction (or series of transactions). Th e value of
the contract, lease, or license that is treated as an asset
is equal to the present value of the excess of the pre-
vailing price over the contract price. Th e value will
decline as the remaining contract period shortens.
Changes in the value of the contract, lease, or license
due to changes in the prevailing price are recorded
as holding gains or losses (revaluations); changes
due to the expiration of the time over which the con-
tract, lease, or license is valid are recorded as other
changes in volume of assets (i.e., to write off the cost
of the asset). Th e rate at which the value is written
down should be in accordance with internationally
accepted accounting standards. Th e treatment of
contracts, leases, and licenses is discussed more ex-
tensively in Appendix 4.
10.54 When an enterprise—whether a corporation,
quasi-corporation, or unincorporated enterprise—is
sold, the price payable may not equal the sum of all
the assets minus the liabilities of the enterprise. Th e
diff erence between the price payable and the sum of
all the assets minus liabilities is called the purchased
goodwill and marketing assets of the buyer. Th e value
may be positive or negative (or zero). When the buyer
includes this asset in the calculation of the net worth
of the enterprise at the moment it is bought, net worth
is exactly zero.
10.55 Th e value of purchased goodwill and mar-
keting assets is calculated at the time of the sale,
and entered in the books of the seller as an other