350 Government Finance Statistics Manual 2014
revaluations and the statement in which changes in
valuations are recorded may diff er. Under IPSASs, as-
sets may be recorded at historical cost or fair value,
depending on their nature. Any gain or loss on dis-
posal is a realized holding gain or loss recorded in
revenue and expense at the time of disposal. As such,
these gains/losses are shown as part of the surplus/
defi cit that is recognized in the Statement of Finan-
cial Performance. Under GFS, assets are valued at
current market prices and any holding gains or losses
are recognized as they occur. Th ese valuation changes
are refl ected in the Statement of Other Economic
Flows. For assets disposed of at prices diff erent from
the valuation of the asset, it is deemed that such an
other economic fl ow occurred right before disposal,
so that at disposal there is no gain or loss refl ected in
the Statement of Operations. Th erefore, the amounts
of revenue/expense recognized will diff er from that
recorded under IPSASs.Consumption of fi xed capital (assets)
A6.54 In theory, the GFS concept of consump-
tion of fi xed capital diff ers from the IPSAS concept of
“depreciation.” Th e IPSAS concept of “depreciation”
involves allocating changes in an asset’s historic cost
or current value to the reporting period in which the
asset is used, as a measure of the asset’s consumption.
Th e GFS concept of consumption of fi xed capital is
based on a current value concept—described in the
2008 SNA (paragraph 6.240) as the decline, during
the course of the accounting period, in the currentvalue of the stock of fi xed assets owned and used
by a producer as a result of physical deterioration,
normal obsolescence, or normal accidental damage.
Consumption of fi xed capital is a forward-looking
measure that is determined by the benefi ts that in-
stitutional units expect to derive in the future from
using the asset in production over the remainder of
its service life. In practice, consumption of fi xed capi-
tal is usually calculated according to aggregated asset
groups using a model approach.
A6.55 In practice, depreciation would approximate
GFS consumption of fi xed capital, if similar valuation
methods and service lives are assumed for assets, and
IPSAS-based asset values are close to replacement val-
ues through revaluations. Where IPSAS asset values
are based on historic cost values, depreciation would
usually represent an underestimate of consumption of
fi xed capital. Th e diff erence will be large for govern-
ments that have a large stock of fi xed assets, as many
governments do.Operating balance
A6.56 Th e GFS net operating balance is calculated
in the same way as the IPSAS “surplus/defi cit.” Both
are calculated as revenue minus expense. However, the
value of these two balancing items is likely to diff er,
because there may be diff erences between items in-
cluded in the GFS revenue and expense and those in-
cluded in IPSAS revenue and expense. Th is diff erence
can be mainly attributed to the conceptual diff erence
in the treatment of other economic fl ows.