Government Finance Statistics Manual 2014

320 Government Finance Statistics Manual 2014

A4.38 When licenses to use natural resources such

as radio spectrum, land, timber, and fi sh satisfy the

crite ria to be classifi ed as intangible assets under per-

mits to use natural resources (314412), they are part

of the subclass of nonfi nancial assets in the form of

con tracts, leases, and licenses (31441) and are shown

on the bal ance sheet of the licensee.

A4.39 Sharing the risks and rewards of an asset

be tween diff erent units at a point in time is unusual.

Th e most common occurrence is that a single unit

under takes the activity in which the asset is used and

that unit shares the returns among the owners in the

form of distributed property income. However, occa-

sionally it is possible that such a single unit does not

exist and it is not meaningful to try to create it statis-

tically. Th is is most common when the participating

units are resi dent in diff erent economies, as may be

the case with an airline, or in the case of some un-

incorporated joint ventures. Th e terms under which

unincorporated joint ventures are established are di-

verse, but one form allows that all members share the

assets equally. In such cases, macroeconomic statistics

record the assets shared between the owners in pro-

portion to their own ership shares.

A4.40 In some joint ventures that are recognized

as institutional units, one party may contribute an

asset as its share of the costs. If this happens, an injec-

tion of equity equal to the value of the asset should

be rec orded along with the acquisition of the asset in

ques tion by the joint venture.

Permits to Undertake a Specifi c Activity

A4.41 In addition to leases and licenses to use an

asset as described in the previous sections, permission

may be granted by government to engage in a particu-

lar activity, independently of any assets involved in

the activity. Permission to extract minerals in return

for the payment of rent, for example, is not covered by

this type of permit because the permit derives from

the government’s ownership of the assets. Th e permits

that give permission to engage in a particular activity

are designed to limit the number of individual units

entitled to engage in the activity. Such permits may

be issued by government or by private institutional

units and diff erent treatments apply to the two cases.

Th is section deals only with permits issued by govern-

ment. Permits issued by units other than government

are not discussed here because their treatment does

not aff ect the government accounts.^13

Permits issued by government

A4.42 When governments restrict, for example,

the number of cars entitled to operate as taxis or limit

the number of casinos permitted by issuing licenses,

they are, in eff ect, creating monopoly profi ts for the

ap proved operators and recovering some of these

profi ts as the “permission fee.” Such fees are recorded

as other taxes on the use of goods and on permission to

use goods or perform activities (11452). Th is principle

applies to all cases where government issues licenses

to limit the number of units operating in a particular

fi eld where the limit is fi xed arbitrarily and is not de-

pendent only on qualifying criteria.

A4.43 In principle, if the license is valid for sev-

eral reporting periods, the payment should be re-

corded on an accrual basis with an entry in other

accounts re ceivable (3208) or other accounts payable

(3308) for the amount of the license fee covering fu-

ture reporting periods. However, if government does

not recognize a liability to repay the licensee in the

case of a cancel lation, the whole of the fee payable

should be recorded as a single tax payment at the

time it is paid.

A4.44 Th e incentive to acquire such a license is the

licensees’ expectation that they acquire the right to

make monopoly profi ts at least equal to the amount

payable for the license. For the license holder, this

stream of future income is treated as an asset if the

licensee can realize this by on-selling the asset. Th e

asset fi rst appears in the accounts of the licensee as

an other change in the volume of assets. Subsequent

in creases and decreases in its value are recorded as

hold ing gains or losses. Th ese types of assets are de-

scribed as permits to undertake a specifi c activity

(614413). Th e value of the asset is determined by the

value at which it can be sold or, if no such information

is available, is estimated at the present value of the fu-

ture stream of monopoly profi ts.

A4.45 If the payment for the license is being

record ed on an accrual basis, the licensee has in the

(^13) See the 2008 SNA, paragraphs 17.360–17.362. Similarly,
contracts for time share arrangements are not discussed in this
Manual (see the 2008 SNA, paragraphs 17.344–17.348).