212 Government Finance Statistics Manual 2014
of such a one-off guarantee is treated as debt
assumption^76 and this liability is part of the public sec-
tor unit’s balance sheet.
7.259 One-off guarantees may be grouped into
loan and other debt instrument guarantees and other
one-off guarantees:- Loan and other debt instrument guarantees—
or one-off guarantees of payment—are commit-
ments by one party to bear the risk of nonpayment
by another party. Guarantors are required to
make a payment only if the debtor defaults. Loans
and other debt instrument guarantees constitute
publicly guaranteed debt that is defi ned as debt
liabilities of public and private sector units, the
servicing of which is contractually guaranteed by
public sector units. - Other one-off guarantees include credit guar-
antees (such as lines of credit and loan commit-
ments), contingent credit availability guarantees,
and contingent credit facilities. Lines of credit
and loan commitments provide a guarantee that
undrawn funds will be available in the future, but
no fi nancial liability/asset exists until such funds
are actually provided. Undrawn lines of credit and
undisbursed loan commitments are contingent
liabilities of the issuing institutions—generally,
banks. Letters of credit are promises to make
payment upon the presentation of pre-specifi ed
documents. Underwritten note issuance facilities
provide a guarantee that a borrower will be able to
issue short-term notes and that the underwriting
institution(s) will take up any unsold portion of
the notes. Only when funds are advanced by the
underwriting institution(s) will a liability/asset be
created. Th e unutilized portion is a contingent li-
ability. Other note guarantee facilities providing
contingent credit or back-up purchase facilities
are revolving underwriting facilities, multiple op-
tions facilities, and global note facilities. Bank and
nonbank fi nancial institutions provide back-up
purchase facilities. Again, the unutilized amounts
of these facilities are contingent liabilities.
7.260 Loan and other debt instrument guarantees
(publicly guaranteed debt) diff er from the other types
of one-off guarantees. Th is is because the guarantor
and this situation is expected to continue, then the debt is consid-
ered to be assumed, normally in its entirety (or for the proportion
government is expected to repay, if there is evidence of that).(^76) Debt assumption is discussed in paragraphs A3.26–A3.31.
guarantees the servicing of an existing debt of other
public and private sector units. With the other one-
off guarantees, no fi nancial liability/asset exists until
funds are provided or advanced.
Net Implicit Obligations for Future Social Security Benefi ts (6M7)
7.261 As explained in paragraphs 7.194 and A2.39,
no liability is recognized in macroeconomic statisti-
cal systems for social security benefi ts—such as re-
tirement benefi ts (other than employment-related
pensions) and health care benefi ts—payable in the fu-
ture.^77 Th ese implicit obligations to pay social security
benefi ts in the future are not contractual obligations
and are therefore not recorded on the balance sheet
(see paragraph 7.252). Th e present value of social
security benefi ts that have already been earned ac-
cording to the existing laws and regulations but are
payable in the future should be calculated in a man-
ner similar to the liabilities of an employment-related
pension scheme. Th is amount minus the present value
of social security scheme contributions provides an
indication of the net implicit obligations that a gov-
ernment unit has for social security benefi ts payable
in the future.Nonperforming Loan Assets at Fair Value (6M8)
7.262 Nonperforming loans are those for which
(i) payments of principal and/or interest are past due
by three months (90 days) or more; or (ii) interest
payments equal to three months (90 days) inter-
est or more have been capitalized (reinvested to the
principal amount) or payment has been delayed by
agreement; or (iii) evidence exists to reclassify a loan
as nonperforming even in the absence of a 90-day
past due payment, such as when the debtor fi les for
bankruptcy. Th e amount of nonperforming debt out-
standing remains a legal liability of the debtor and
interest should continue to accrue, unless the liabil-
ity has been extinguished (e.g., by repayment or as a
result of a bilateral arrangement between debtor and
creditor).(^77) In contrast, social security benefi ts due for payment but not
yet paid are included as other accounts payable in a public sector
unit’s balance sheet. Also included in the balance sheet (and thus
excluded from implicit contingent liabilities) are public sector
units’ liabilities for unfunded nonautonomous pension schemes
for their employees.