256 Government Finance Statistics Manual 2014
change in the volume of assets. Subsequently, it is
then exchanged as a transaction with the purchaser.
Th ereaft er, the value of the purchased goodwill and
marketing asset must be written down in the books
of the purchaser via entries under other changes in
the volume of assets. Th e rate at which it is written
down should be in accordance with internationally
accepted accounting standards. Th ese standards are
typically conservative in the amount that may appear
on the balance sheet of an enterprise and should be
subject to an “impairment test” whereby accountants
can satisfy themselves that the remaining value is
likely to be realizable in case of a further sale of the
enterprise.
10.56 Goodwill that is not evidenced by a sale or
purchase is not considered an economic asset in GFS.
In some exceptions, a marketing asset may be subject
to sale. When this is the case, entries should be made
for the buyer and the seller along the lines of those
made for purchased goodwill and marketing assets
when the entire enterprise is sold.
10.57 Financial assets and liabilities may appear on
or disappear from the balance sheet in several ways—
for example:- A creditor may determine that a fi nancial claim
can no longer be collected because of the debtor’s
bankruptcy or other factors. If so, the creditor
writes off the debt and removes the claim from
its balance sheet by means of an entry in other
changes in the volume of assets.^14 - Cancellations of employee stock options are re-
corded as other changes in the volume of assets.
10.58 Th e creation of SDRs (referred to as allocations
of SDRs) and the extinction of SDRs (cancellations of
(^14) Usually, debt is written off as uncollectible because of the bank-
ruptcy or liquidation of the debtor; however, it may sometimes be
written off for other reasons, such as a court order. Th e write-off
may be full or partial; partial write-off s may arise, for example,
under a court order, or if the liquidation of the debtor’s assets
allows some of the debt to be settled. Recognition that the debt is
uncollectible should be distinguished from internal accounting
provisions of the creditor for the possibility of default (such as
adjustments to fair value of nonperforming loans). Although such
provisions may be useful for analysis, they do not mean that the
debt should no longer be recognized as existing and should there-
fore not be considered as written off. In contrast, as described in
paragraphs 6.124 and A3.7–A3.9, a reduction in a fi nancial claim
by mutual agreement between the creditor and debtor is a trans-
action rather than an other change in the volume of assets.
SDRs) are treated as transactions, not other changes in
the volume of assets.^15
Th e Eff ect of External Events on the Value of Assets
10.59 Th ere are three principal causes of the reduc-
tion in the value of an asset, or even its disappearance,
that are not related to the nature of the asset but to
conditions prevailing in the economy that impact ei-
ther the value or ownership of assets. Th ese are cata-
strophic losses, uncompensated seizures, and other
changes in the volume of assets not elsewhere classi-
fi ed. Each is discussed in the remainder of this section.Catastrophic losses
10.60 A catastrophic loss is the partial or com-
plete destruction of a signifi cantly large number of
assets within any of the asset categories resulting
from a large-scale, discrete, and recognizable event.
Such events will generally be easy to identify. Th ey
are usually sudden or one-time events of large pro-
portions. Th ey include major earthquakes, volcanic
eruptions, tidal waves, exceptionally severe hurri-
canes, droughts, and other natural disasters; acts of
war, riots, and other political events; and technologi-
cal accidents, such as major toxic spills or release of
radioactive particles into the air. Included here are
such major losses as deterioration in the quality of
land caused by abnormal fl ooding or wind dam-
age; destruction of cultivated assets by drought or
outbreaks of disease; and destruction of buildings,
equipment, or valuables in fi res or earthquakes. An
entry in other changes in the volume of assets is re-
corded to reduce or eliminate the value of any asset
damaged or destroyed.
10.61 Although produced assets are the most
likely candidates to be damaged or destroyed by a
catastrophic loss, nonproduced assets and fi nancial
assets are also subject to damage or destruction.
For example, major decreases in the value of land
and other natural assets caused by abnormal fl ood-
ing or wind damage and the accidental destruction
of currency or bearer securities as a result of natural
catastrophes or abnormal political events would be
included.(^15) See paragraphs 7.131–7.134 and 9.31.