Transactions in Financial Assets and Liabilities 231
- Financial claims are normally terminated by
transactions. In some cases, the debtor pays the
creditor the funds stipulated by the fi nancial
instrument, thereby terminating the claim. In
other cases, the debtor buys its own instrument
in the market. - Accrued interest is deemed to be reinvested in an
additional quantity of the underlying fi nancial
instrument by means of a transaction. - Th e trading and settlement of fi nancial derivative
contracts.
9.4 All transactions that increase a unit’s holdings
of assets are labeled acquisitions. All transactions that
decrease a unit’s holdings of assets are labeled dispos-
als. Transactions that increase liabilities are referred
to as the incurrence of a liability. Transactions that
decrease liabilities are variously titled repayments,
reductions, withdrawals, redemptions, liquidations,
or extinguishments. Th us, the results of transactions
in a particular category of fi nancial assets can be pre-
sented either as total acquisitions and total disposals
or as net acquisitions. Similarly, changes in liabilities
can be presented as total incurrences and total reduc-
tions or as net incurrences. Transactions that change
a category of fi nancial assets are never combined with
transactions that change the same category of liabili-
ties. Th at is, in GFS, the net acquisition of loans is not
presented as the increase in loans held as fi nancial as-
sets minus the increase of loans as liabilities (also see
paragraph 9.17).
9.5 As explained in paragraph 4.17, the net operat-
ing balance minus the net investment in nonfi nancial
assets equals net lending (+) / net borrowing (–). If the
operating balance is not exhausted by the net invest-
ment in nonfi nancial assets, the resulting surplus is
called net lending (+). Alternatively, if the net oper-
ating balance is not suffi cient to cover the net accu-
mulation of nonfi nancial assets, the resulting defi cit
is called net borrowing (–). Transactions in fi nancial
assets and liabilities explain how net lending/net bor-
rowing is fi nanced by means of changes in holdings of
fi nancial assets and liabilities—that is, total fi nancing.
In other words, the net acquisition of fi nancial assets
minus the net incurrence of liabilities is conceptually
equal to net lending/net borrowing.
9.6 Th e remainder of this chapter describes fi rst
the valuation, time of recording, netting, and con-
solidation of transactions that aff ect fi nancial assets
and liabilities. It then provides details on transactions
that aff ect specifi c categories of fi nancial assets and
liabilities. Th e classifi cation of transactions in fi nan-
cial assets and liabilities by residence and sector of the
counterparty is also discussed.Va l u a t i o n.
9.7 Th e value of an acquisition or disposal of an ex-
isting fi nancial asset or liability is its exchange value—
that is, the current market price. Th e value of a newly
created fi nancial claim is generally the amount ad-
vanced by a creditor to a debtor.
9.8 All service charges, fees, commissions, and
similar payments for services provided in carrying
out transactions and any taxes payable on transactions
are excluded from transactions in fi nancial assets and
liabilities. Th ey are expense transactions classifi ed
as use of goods and services (22). In particular, when
new securities are marketed by underwriters or other
intermediaries as agents for the unit issuing the se-
curities, the securities should be valued at the price
payable by the purchasers. Th e diff erence between
that price and the amount receivable by the issuing
unit is a payment for the services of the underwrit-
ers. When dealers have a margin between their buying
and selling prices, the buyer and seller record transac-
tions in fi nancial assets and liabilities at the same mid-
price—that is, the midpoint between the buyer’s price
and the seller’s price.
9.9 When a security is issued at a discount or pre-
mium relative to its contractual redemption value, the
transaction should be valued at the amount actually
payable for the asset and not the redemption value.
Any interest that is prepaid jointly with the acquisi-
tion of a security should be treated as accrued interest
that had been reinvested in an additional quantity of
the security. In this case, the value of the acquisition
is the sum of the amount paid for the security directly
plus the amount prepaid for accrued interest. When
issued at a premium, the diff erence between the re-
demption and issue price is amortized over the life of
the instrument and reduces (rather than increases)
the amount of interest accruing in each period.
9.10 In some cases, the value of a fi nancial asset is
determined by the value of the counterpart item to
the transaction. For example, the initial value of a loan