Some Cross-Cutting Issues 321
balance sheet an asset under other accounts receivable
equal to the value of the license fee covering future
report ing periods and an asset recorded as permits to
under take specifi c activities (614413) for the value of
the license covering the excess of the monopoly prof-
its over the cost. If the license is on-sold, the price
paid by the new owner refl ects both the value of the
right to receive a refund from the govern ment if the
license is cancelled and the present value of the fu-
ture stream of monopoly profi ts. If the license was re-
corded as a single reporting period tax payment, the
value of the asset for the licensee is the value at which
it can be sold or, if no such information is available,
is esti mated as the present value of the future stream
of monopoly profi ts. Box A4.2 outlines the statisti-
cal treatment of permits issued by government using
four examples.
Conditions for government permits recognized as assets.
A4.46 A permit issued by government to undertake
a specifi c activity may be treated as an asset (permits
to undertake specifi c activities (614413)) only when all
the following conditions are satisfi ed:
- Th e activity concerned does not utilize an asset
be longing to government; if it does, the permis-
sion to use the asset is treated as an operating
lease, a fi nancial lease, a resource lease, or pos-
sibly the acquisition of an asset representing per-
mission to use the asset at the discretion of the
licensee over an extended period. - Th e permit holder must be legally and practically
able to sell the permit to a third party. - Th e number of permits is limited, thereby allow-
ing the holder to make monopoly profi ts when
under taking the activity concerned. - Th e permit is not issued subject to a qualify-
ing cri terion. Revenue raised from the issuance
of permits that are subject to qualifying criteria
are treated as either taxes on the use of goods and
on permission to use goods, or perform activities
(11452) or payments for services under admin-
istrative fees (1422).
A4.47 Even if all these conditions are satisfi ed, if
in practice the permits are not on-sold, it is not rel-
evant to record the permits as assets. If any of the
conditions is not satisfi ed, the payments are treated
as taxes on the use of goods and on permission to use
goods or perform activities (11452)—that is, without
the creation of an asset in the form of permits to un-
dertake specifi c activities (614413). (Th ere may be an
account payable in cases when the permit holders
make payments that will accrue over more than one
reporting period.)Permits to use natural resources as sinks.
A4.48 Governments may issue emission permits
as a means of controlling total emissions. Th ese per-
mits do not involve the use of a natural asset (there
is no eco nomic value placed on the atmosphere so it
cannot be considered an economic asset). However,
it is inherent in the concept that these permits will be
tradable and that there will be an active market for
them.A4.49 Th e payments for emission permits issued
by government are treated as taxes on the use of goods
and on permission to use goods or perform activities
(11452), at the time the emissions occur. Th e timing
diff erence between the payments received by govern-
ment for the permits and the time the emission oc-
curs gives rise to a transaction in fi nancial liabilities
classi fi ed as other accounts payable (3308) for gov-
ernment and a fi nancial asset classifi ed as other ac-
counts re ceivable (3208) for the holder. Th e diff erence
between the prepaid tax value of the permit and the
market value of the permit represents a marketable
contract (nonproduced nonfi nancial asset) for the
holder. Th e creation and disappearance of the non-
produced non fi nancial asset are recorded as an other
change in volume of assets.A4.50 Th e case of payments for discharging water
may be considered as an example of the diff erent pos-
sible ways of treating the payments:- If a payment to discharge water is a fi ne imposed
by government intended to inhibit discharge, the
fi ne should be treated as revenue for government
classifi ed as fi nes, penalties, and forfeits (143). If
such a fi ne is imposed on government or public
sector units by another institutional unit, the fi ne
is included in expense, classifi ed as current trans-
fers not elsewhere classifi ed (2821).