The Balance Sheet 175
as stores of value over time. Valuables are discussed
in paragraphs 7.87–7.89.
7.19 Naturally occurring assets and constructs of
society are both referred to as nonproduced assets
(see paragraph 7.90). Naturally occurring assets in-
clude land, subsoil mineral deposits, fi sh in open but
territorial waters, and the radio spectrum when own-
ership rights are enforced. Constructs of society that
are assets include some contracts, leases, and licenses,
as well as goodwill and marketing assets.
Valuation of Assets and Liabilities.
7.20 As discussed in paragraph 3.113, stock posi-
tions of assets and liabilities should be valued at mar-
ket value—that is, as if they were acquired in market
transactions on the balance sheet reporting date (refer-
ence date). Th erefore, the value of an asset at any given
time is its current market value, which is the amount
that would have to be paid to acquire the asset on the
reporting date, taking into account its age, condition,
and other relevant factors. Th is amount depends on
the economic benefi ts that the owner of the asset can
derive by holding or using it. Th e remaining benefi ts
expected to be received from most assets diminish with
the passage of time, which will reduce the value of the
asset. Th e remaining benefi ts of some assets, such as
valuables, may increase with the passage of time. Th e
value of the remaining benefi ts may also increase or
decrease because of changes in economic conditions.
7.21 In addition to current market value, the nom-
inal value (see paragraph 3.115) of fi nancial instru-
ments is also useful for some purposes. Th is value
is typically established by reference to the terms of a
contract between the debtor and creditor. Th e nomi-
nal value of a debt instrument refl ects the value of the
debt at creation plus any subsequent economic fl ows,
such as transactions (e.g., accrual of interest or repay-
ment of principal), exchange rate and other valuation
changes other than market price changes,^8 and other
volume changes.
7.22 Th e current market value for nonfi nancial
assets (except land) includes all costs of ownership
transfer and for fi nancial assets excludes these costs.
For more details, see paragraphs 8.6–8.8.
(^8) Accumulated revaluations arising from market price changes
reconcile nominal value with market value.
7.23 Th e value of fi nancial assets and liabilities
denominated in foreign currencies should be con-
verted to the domestic currency as discussed in
paragraph 3.119.
7.24 Ideally, observable market prices should be
used to value all assets and liabilities in a balance sheet.
However, in estimating the current market price for
balance sheet valuation, a price averaged over all trans-
actions in a market can be used if the market is one on
which the items in question are regularly, actively, and
freely traded. When there are no observable prices be-
cause the items in question have not been purchased or
sold on the market in the recent past, an attempt has to
be made to estimate what the prices would be were the
assets to be acquired on the market on the date to which
the balance sheet relates. Such estimates may be ob-
tained by (i) accumulating and revaluing transactions,
or (ii) estimating the present value of future returns.
Th ese two methods, together with values observed in
markets, are discussed in paragraphs 7.26–7.33.
7.25 Th e following paragraphs describe possible
methods of estimating current market prices. Addi-
tional guidance on the valuation of specifi c types of
assets and liabilities is included in the relevant parts
of the section that describes the classifi cation of assets
and liabilities. Because the valuation of liabilities is the
same as the valuation of the corresponding fi nancial
assets, in most cases, the remainder of this chapter
will refer only to fi nancial assets, but such references
should be read as including liabilities equally. GFS
compilers are typically not expected to independently
derive the market values of assets and liabilities; they
should evaluate what is available and how that infor-
mation could be used in the GFS balance sheet.Value Observed in Markets
7.26 Th e ideal source of price observations for
valuing balance sheet items is a market, like the stock
exchange, in which each asset traded is completely
homogeneous, is oft en traded in considerable volume,
and has its market price listed at regular intervals.
Such markets yield data on prices that can be multi-
plied by indicators of quantity in order to compute the
total market value of diff erent classes of assets held by
sectors and of diff erent classes of their liabilities.
7.27 For securities quoted on a stock exchange, for
example, it is feasible to gather the prices of individual
assets and of broad classes of assets and, in addition,