Expense 127
assumed.^20 Box 6.1 provides a more comprehensive
explanation of the calculation of consumption of
fi xed capital.
6.60 Conceptually, costs of ownership transfer on
the acquisition of nonfi nancial assets should be written
off as consumption of fi xed capital over the period the
asset is expected to be held by the purchaser rather than
over the whole life of the asset. Th is approach refl ects
the assumption that the benefi ts provided by the asset
must be suffi cient to cover both the cost of the asset
and the costs of ownership transfer. Cost of ownership
transfer on the disposal of an asset is recorded similarly
because it is assumed that the benefi t that the asset pro-
duced during the time the asset is used in production
should cover such costs. Cost of ownership transfer
on the disposal of a nonfi nancial asset is estimated at
the time of the acquisition of the asset and is written
off over the period that the owner expects to hold the
asset), except for the terminal costs, which should be
written off over the whole life of the asset. If an asset
is disposed of before the costs of ownership transfer
are completely written off , the remainder of these costs
should be recorded as an other change in the volume of
assets (see paragraph 10.68).
6.61 In the Statement of Sources and Uses of Cash,
expense transactions are recorded only when cash
fl ows occurred. Since no cash fl ows are associated
with consumption of fi xed capital, no entry for this
accrual concept is made in this statement (see para-
graph 3.67).
Interest [GFS] (24)
6.62 Interest is a form of investment income that is
receivable by the owners of certain kinds of fi nancial
assets (SDRs, deposits, debt securities, loans, and other
accounts receivable)^21 for putting these fi nancial and
other resources at the disposal of another institutional
unit. Interest [GFS] (24) is not adjusted for the service
charge related to FISIM (see paragraph 6.81). Th e li-
abilities giving rise to interest expense are all claims of
creditors upon debtors. Th e liabilities generating the
(^20) Organisation for Economic Co-operation and Development,
Measuring Capital—OECD Manual: Measurement of Capital
Stocks, Consumption of Fixed Capital and Capital Services (Paris,
2009) contains an extensive discussion of the methods for esti-
mating capital stock and consumption of fi xed capital.
(^21) Financial assets and their classifi cation are described in
Chapter 7.
Table 6.5 Detailed Classifi cation of Interest (24)
24 Interest [GFS]^1
Interest [SNA]
Plus: FISIM
241 To nonresidents
242 To residents other than general government^1
243 To other general government units^1
(^1) Further breakdown/“of which” lines could allow for the
identifi cation of subsectors and individual units (see Table 3.1).
interest may have arisen from the supply of fi nancial
or nonfi nancial resources (as in the case of fi nancial
leases). As indicated in Table 6.5, interest should be
recorded according to the subsector of the counter-
party to allow for consolidation of the general govern-
ment and public sectors. Th e amount of the liability
due to the creditor declines as payments are made
on the debt by the debtor and increases as interest
accrues.
6.63 Interest is payable by units that incur liabilities
by borrowing funds from another unit. Interest is the
expense that the debtor unit incurs for the use of the
principal outstanding, which represents the economic
value that has been provided by the creditor. Interest
may be payable in various ways and may not always
explicitly be described as interest (see paragraph 6.71).
On the other hand, net settlement payments under a
swap or forward rate agreement contract (possibly
described as “interest” in the contract) are not consid-
ered as interest and are to be recorded as transactions
in fi nancial derivatives (see paragraphs 6.79 and 9.71).
6.64 Interest is recorded as accruing continuously
over time to the creditor on the amount outstanding.
Depending on the contractual arrangements, the rate
at which interest accrues can be a percentage of the
amount outstanding, a predetermined sum of money,
a variable sum of money dependent on a defi ned indi-
cator, or some combination of these. Interest normally
is not payable until the expense has accrued. Th at is, if
interest on a loan is payable monthly, the amount paid
is usually the expense that has accrued during the pre-
vious month. Under the accrual basis of recording, as
interest accrues, the debtor’s total liability to the credi-
tor has increased by the amount of interest expense
accrued but not yet paid. Th at is, as interest accrues on
a government bond, the value of the bond increases.
What are commonly referred to as interest payments,