Economic Flows, Stock Positions, and Accounting Rules 41
there is collective recognition and acceptance by the
community of the obligation to pay taxes. Th us, pay-
ments of taxes are considered transactions despite
being compulsory. Similarly, the actions necessary to
comply with judicial or administrative decisions may
not be undertaken voluntarily, but they are taken with
prior knowledge and consent of the parties involved.
3.6 Th e treatment of some activities in GFS takes
a diff erent perspective from the treatment of the
same activities in the 2008 SNA. GFS is focused on
the impact of economic events on the fi nances of
government. In contrast, the 2008 SNA is focused on
measuring production, consumption, distribution of
income, and investment. Appendix 7 contains a com-
plete description of the implications of these diff erent
perspectives. Despite diff erent treatments of some ac-
tivities, both frameworks include all fl ows that change
stock positions so that all changes in the balance sheet
can be explained by the fl ows.
3.7 Transactions may take on many diff erent
forms. In GFS, all transactions are classifi ed according
to their economic nature, while transactions in expen-
diture are also classifi ed according to their functions
(see Chapters 5, 6, 8, and the annex to Chapter 6). To
give more precision to the classifi cation of transac-
tions, the characteristics of transactions have to be
systematically described.
Monetary transactions
3.8 A monetary transaction is one in which one
institutional unit makes a payment (receives a pay-
ment) or incurs a liability (acquires an asset) to (from)
another institutional unit stated in units of currency.
In GFS, all fl ows are recorded in monetary terms, but
the distinguishing characteristic of a monetary trans-
action is that the parties to the transaction express
their agreement in monetary terms. For example,
goods or services are usually purchased or sold at
a given number of units of currency per unit of the
good or service, social security benefi ts are oft en pay-
able in fi xed amounts of currency, and taxes receiv-
able are measured and payable in units of currency.
All monetary transactions are interactions between
two institutional units, recorded as either an exchange
or a transfer.
3.9 An exchange is a transaction in which one unit
provides a good, service, asset, or labor to a second
unit and receives a good, service, asset, or labor of the
same value in return.^3 Compensation of employees,
purchases of goods and services, the incurrence of in-
terest expense, and the sale of an offi ce building are all
exchanges.
3.10 A transfer is a transaction in which one insti-
tutional unit provides a good, service, or asset to an-
other unit without receiving from the latter any good,
service, or asset in return as a direct counterpart. Th is
kind of transaction is also referred to as being unre-
quited, a “something for nothing” transaction, or a
transaction without a quid pro quo. Transfers can also
arise where the value provided in return for an item
is not economically signifi cant or is much below its
value. Typically, general government units engage in a
large number of transfers, which may be compulsory
or voluntary. Taxes and most social security contri-
butions are compulsory transfers imposed by gov-
ernment units on other units. Subsidies, grants, and
social assistance benefi ts are transfers from general
government units to other units. Public corporations
are, to a lesser extent, involved in transfers—they may
receive subsidies or capital transfers from government
and may also be involved in transfers payable result-
ing from their quasi-fi scal activities.
3.11 Some transactions appear to be exchanges
but are actually combinations of an exchange and a
transfer. In such cases, the actual transaction should
be partitioned and recorded as two transactions, one
that is only an exchange and one that is only a trans-
fer. For example, a general government unit might sell
an asset at a price that is clearly less than the market
value of the asset, or may buy an asset at a price that is
clearly above the market value of the asset. Th e trans-
action should be divided into an exchange at the as-
set’s market value and a transfer equal in value to the
diff erence between the actual transaction value and
the market value (see paragraph 3.107) of the asset.^4
3.12 Exchange transactions do not include entitle-
ments to collective services or benefi ts—these are(^3) Th e term “provides a good, service, asset.. .” is meant to include
one unit allowing a second unit to use an asset owned by the fi rst
unit or a change in the ownership of an asset. Interest and other
property income transactions are exchanges because they are
receivable by a unit in return for putting assets at the disposal of
another unit.
(^4) See paragraph 3.29 for a general statement on partitioning of
transactions.