174 Government Finance Statistics Manual 2014
debt instruments (see paragraph 7.236), fi nancial de-
rivatives and employee stock options, and equity and
investment fund shares.- Debt instruments are fi nancial instruments that
typically are created when one unit provides
funds or other resources (e.g., goods in the case
of trade credit) to a second unit and the second
unit agrees to provide a return in the future. Debt
liabilities can also be created by the force of law,^5
and by events that require future transfer of pay-
ments.^6 For a liability to be considered debt it
must exist and be outstanding. - In contrast, fi nancial derivatives are fi nancial
instruments of which the underlying contracts
involve risk transfer. Th us, rather than supplying
funds or other resources, a derivative contract
shift s the exposure to the eff ect of a change in
the value of an item between the parties, with-
out a change in ownership of that item. Employee
stock options share some of the risk elements of
fi nancial derivatives, but are also designed to be a
form of remuneration. - Equity and investment fund shares issued by cor-
porations and similar legal forms of organization
are treated as liabilities of the issuing units even
though the holders of the claims do not have a
fi xed or predetermined monetary claim on the
corporation. Equity and investment fund shares
do, however, entitle their owners to benefi ts in the
form of dividends and other ownership distribu-
tions, and they oft en are held with the expectation
of receiving holding gains. In the event the issu-
ing unit is liquidated, shares and other equities be-
come claims on the residual value of the unit aft er
the claims of all creditors have been met. If a public
corporation has formally issued shares or another
form of equity, then the shares are a liability of that
corporation and an asset of the government or
other unit that owns them. If a public corporation
has not issued any type of share, then the value of
other equity is estimated (see paragraph 7.173). - Monetary gold in the form of bullion is not a fi -
nancial claim, because it is not the liability of any
(^5) Th ese liabilities could include those arising from taxes, penalties
(including penalties arising from commercial contracts), and
judicial awards at the time they are imposed.
(^6) Th ese include claims on nonlife insurance companies, claims for
damages not involving nonlife insurance companies, and claims
arising from lottery and gambling activity.
other unit. Monetary gold does, however, provide
economic benefi ts by serving as a store of value
and a means of international payment to settle
fi nancial claims and fi nance other types of trans-
actions. As a result, monetary gold in the form
of bullion is, by convention, treated as a fi nancial
asset. Monetary gold in the form of unallocated
gold accounts is a fi nancial claim and, therefore,
a liability of another unit in the form of currency
and deposits (see paragraph 7.139).
7.16 Financial assets consist of fi nancial claims
plus gold bullion held by monetary authorities^7 as a
reserve asset.
7.17 Nonfi nancial assets are economic assets other
than fi nancial assets. Th e main categories of nonfi -
nancial assets are: produced assets (such as fi xed as-
sets, inventories, and valuables) and nonproduced
assets (such as natural resources, contracts, leases,
and licenses, and goodwill and marketing assets).
Nonfi nancial assets are stores of value and provide
benefi ts either through their use in the production of
goods and services or in the form of property income.
Unlike fi nancial claims, nonfi nancial assets have no
counterpart liability—that is, the owner of the non-
fi nancial asset does not have a claim on another in-
stitutional unit. Nonfi nancial assets may come into
existence as the output from a production process, or
in other ways, such as natural occurrences.
7.18 Produced assets are classifi ed as fi xed assets,
inventories, or valuables:
- Fixed assets are produced assets that are used re-
peatedly or continuously in production processes
for more than one year. Fixed assets are discussed
in paragraphs 7.35–7.74. - Inventories are produced assets consisting of
goods and services, which came into existence
in the current period or in an earlier period, and
that are held for sale, use in production, or other
use at a later date. Inventories are discussed in
paragraphs 7.75–7.86. - Va l u a b l e s are produced assets of considerable
value that are not used primarily for purposes of
production or consumption, but are held primarily
(^7) Government units typically do not fulfi ll functions of monetary
authorities and thus would not hold fi nancial assets in the form of
gold bullion.