Government Finance Statistics Manual 2014

274 Government Finance Statistics Manual 2014

in the statistics for that country. It is possible, how-

ever, to compile statistics for supranational authori-

ties using the GFS framework as if they constituted a

separate country and to classify relevant categories of

transactions by country.

Time of Recording Economic Events.

A1.167 Th e time at which transactions and other

economic fl ows are recorded is determined by the

principles of accrual accounting in the GFS frame-

work. Th at is, fl ows are recorded when economic

value is created, transformed, exchanged, transferred,

or extinguished. In the GFSM 1986, transactions are

recorded when cash is received or paid. In general,

fl ows are recorded at an earlier time under the accrual

basis than under the cash basis.

A1.168 Recording fl ows on the accrual basis will

automatically capture past-due obligations, such as

arrears of debt principal, interest payments, or pay-

ments for goods and services. In the GFSM 1986, use

of the cash basis means that arrears and changes in the

level of arrears are not recorded.

A1.169 Th e accrual basis of recording permits the

diff erence between the redemption value of a bond or

similar security and its issue price to be recorded as

interest as it is earned or incurred rather than when

the security matures. In the GFSM 1986, the entire

diff erence between the issue and redemption prices is

recorded as interest when the security is redeemed.

Coverage of Events

A1.170 Th e coverage of events in the GFS frame-

work is broader than in the GFSM 1986 because the

revised framework includes all economic events that

aff ect assets, liabilities, revenue, or expense, rather

than just those represented by a cash transaction. For

example, barter and grants of goods and services are

included. Th e GFSM 1986 incorporates in-kind trans-

actions only selectively and as memorandum items.

A1.171 Th e GFS framework includes other eco-

nomic fl ows, which are all fl ows other than trans-

actions that aff ect a unit’s stock position of assets,

liabilities, and net worth. Other economic fl ows must

be included to fully reconcile the balance sheet at the

beginning of an accounting period with the balance

sheet at the end of the period. Examples of other eco-

nomic fl ows are price changes and the destruction of

assets. By defi nition, other economic fl ows are non-

cash events, which means that they are not part of the

GFSM 1986.

Valuation

A1.172 Assets and liabilities are valued at current

market prices in the GFS framework, including debt

securities that may have a diff erent nominal value.

Several assets/liabilities are valued at nominal value as

proxy for market value—for example, loans generally

are not traded and therefore do not have market values.

Th ey are recorded at their nominal values. In the GFSM

1986 , debt securities are always valued at the amount

the government is obligated to pay when the debt ma-

tures, which may diff er from both the nominal value

and the current market value. Th e GFS framework in-

cludes a provision for recording the nominal value of

debt securities as a memorandum item.

Gross and Net Recording of Flows

A1.173 Th e presentation of fl ows on a gross or

net basis is, for the most part, the same in the GFS

framework and the GFSM 1986. Th e major exception

pertains to the sales and expenses of market establish-

ments. Generally speaking, a market establishment is

a part of a general government unit that is situated

in a single location and whose primary activity is to

produce and sell goods and services at economically

signifi cant prices. In concept, it is possible to compile

complete accounting records with respect to an estab-

lishment’s productive activity, including sales and the

costs of production. In the GFS framework, the sales

and costs of production of market establishments are

presented on a gross basis as revenue and expense, re-

spectively. In the GFSM 1986, the net value of sales

less the costs of production is recorded as revenue if

positive and as expenditure if negative.

Integration of Flows and Stocks

A1.174 Th e GFS framework is fully integrated—

that is, the stock position at the end of a reporting

period can be derived from the stock position at the

beginning of the reporting period and the fl ows oc-

curring during the period. As a result of this integra-

tion, all events that aff ect the fi nancial performance,

fi nancial position, or liquidity situation of the gen-

eral government sector are included. In the GFSM

1986 , the stock positions included are limited to debt