The Balance Sheet 185
some single-use items, such as certain types of bal-
listic missiles with a highly destructive capability, may
provide an ongoing service of deterrence against ag-
gressors and therefore meet the general criteria for
classifi cation as fi xed assets. Weapons systems are val-
ued at their written-down replacement cost.
Inventories (612)
7.75 Inventories (612) are produced assets consist-
ing 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 classifi ed as materials and sup-
plies (61221), work in progress (61222), fi nished goods
(61223), goods for resale (61224), and military invento-
ries (61225), as shown in Table 7.6. Each of these types
of inventories has a diff erent economic function.
7.76 Inventories consist of stocks of:- Goods that are still held by the units that pro-
duced them prior to their being further pro-
cessed, sold, delivered to other units, or used in
other ways - Products acquired from other units that are in-
tended to be used in the production of market
and nonmarket goods and services by units, or
for resale without further processing - Strategic stocks that are goods held for strategic
and emergency purposes, goods held by market
regulatory organizations, and other goods of spe-
cial importance to the nation, such as grain, mili-
tary inventories, and petroleum.
7.77 Inventories may include services consisting of
work in progress or fi nished products—for example,
architectural drawings that are in the process of com-
pletion or are completed and waiting for the building
to which they relate to be started.
7.78 Inventories should be valued at their current
market prices on the balance sheet date rather than
their acquisition prices. In principle, current market
prices should be available for most types of inven-
tories, but in practice, the values of inventories fre-
quently are estimated by adjusting book or acquisition
values of inventories with the aid of price indexes.Materials and supplies (61221)
7.79 Materials and supplies (61221) consist of all
goods held with the intention of using them as inputs
to a production process. Public sector units may hold
a variety of goods as materials and supplies, including
offi ce supplies, fuel, and foodstuff s. Every public sec-
tor unit may be expected to hold some materials and
supplies, if only offi ce supplies. Materials and supplies
oft en can be valued on the basis of the current market
prices for the same goods.Work in progress (61222)
7.80 Work in progress (61222) consists of goods
and services that are not yet suffi ciently processed to
be in a state in which it is normally supplied to other
institutional units. General government units that
primarily produce nonmarket services are likely to
have little or no work in progress, as the production of
most such services is completed in a short time span
or continuously. Work in progress must be recorded
for any output that is not complete at the end of the
reporting period, such as construction. Th e only ex-
ceptions to recording incomplete work as work in
progress are for partially completed projects for which
the ultimate owner is deemed to have taken economic
ownership in stages (see paragraph 7.37). Economic
ownership conveys in stages when the production is
for own use, the new owner assumes the risks and
benefi ts associated with the incomplete asset, or when
evidenced by specifi c clauses in a contract of sale or
purchase. In these exceptions, the partially complete
products are recorded as the acquisition of fi xed assets
rather than work in progress.
7.81 Work in progress can take a wide variety of
diff erent forms, ranging from growing crops to devel-
oping computer programs. Although work in prog-
ress is output that has not reached the state in which it
is normally supplied to others, its ownership is never-
theless transferable, if necessary.^21(^21) For example, it may be sold under exceptional circumstances,
such as the liquidation of a public sector unit.
Table 7.6 Classifi cation of Inventories
612 Inventories
61221 Materials and supplies
61222 Work in progress
61223 Finished goods
61224 Goods for resale
61225 Military inventories