246 Government Finance Statistics Manual 2014
increase net worth. In contrast, other economic fl ows
related to reclassifi cations do not aff ect total net
worth. Th ese reclassifi cations change the value of two
assets or two liabilities by the same amount but with
opposite signs, or they change one asset and one li-
ability by the same amount—for example, the reclas-
sifi cation of a loan when it becomes negotiable (see
paragraph 7.149).10.4 Other economic fl ows are classifi ed by the
type of asset or liability aff ected. Th e classifi cation
of assets and liabilities given in Chapter 7 is used
for this purpose. In Table 10.2, total other economic
fl ows are classifi ed as being either holding gains and
losses or other changes in the volume of assets. In ad-
dition, other economic fl ows can be classifi ed by the
type of event that caused the fl ow in as much detail
as needed for fi scal analysis. Th e types of holding
gains or specifi c types of other changes in the volume
of assets could be introduced as an expansion of the
table, if considered useful. For example, subcategories
of other changes in volume of assets could identify
whether the changes are due to the appearance, dis-
appearance, or change in classifi cation of assets and
liabilities.Holding Gains
Holding Gains in General
10.5 Holding gains result from price changes and
can accrue on almost all economic assets held for any
length of time during a reporting period. It does not
matter whether an asset is held the entire period, ac-
quired during the period and held until the end of the
period, held at the beginning of the period and dis-
posed of during the period, or acquired and disposed
of within the same period. In each case, a holding gain
is possible and must be recorded for the entire diff er-
ence between the opening balance sheet date (or at
time of acquisition) and closing balance sheet date (or
time of disposal).
10.6 Holding gains may be unrealized or realized:- An unrealized holding gain is one accruing on
an asset that is still owned or a liability that is
still outstanding at the end of the reporting pe-
riod. Th e values of the assets and liabilities in the
closing balance sheet incorporate the unrealized
holding gains or losses.- A holding gain is realized when an asset is sold,
redeemed, used or otherwise disposed of, or a
liability incorporating a holding gain or loss is
repaid. Th e value of transactions includes the
value of realized holding gains or losses. In other
words, unrealized holding gains are realized
when transactions take place.
10.7 Th e holding gain is recorded when the price
change occurs, which may be at a diff erent time from
when the holding gain is realized. Th us, to capture the
full value of the holding gains and losses that arose
during the reporting period, both realized and unre-
alized gains and losses need to be covered.
10.8 Holding gains do not include a change in the
value of an asset resulting from a change in the quan-
tity or quality of the asset (which are other changes in
the volume of assets)—in particular:
- A holding gain is realized when an asset is sold,
- Th e decline in the value of the fi xed assets due to
physical deterioration, normal rates of obsoles-
cence, and normal accidental damage should be
recorded as consumption of fi xed capital (23) and
not as a holding loss. - Debt securities issued at a discount may increase
in value progressively prior to redemption be-
cause of the accrual of interest. Th e increase in
the market value of a bill or bond due to the ac-
crual of interest should be recorded as a transac-
tion in the asset and is not a holding gain.
10.9 It is not possible to calculate total holding
gains using only balance sheet data since the stock
positions do not refl ect each of the economic events
that may have occurred during a reporting period
(see paragraphs 3.1–3.4). To measure holding gains
directly, therefore, the calculation requires records to
be maintained of all individual transactions and indi-
vidual other changes in the volume of assets plus the
price of each asset at the time of the opening and clos-
ing balance sheets. Observable market prices for non-
fi nancial assets are generally not as readily available as
for fi nancial assets and liabilities. If, in practice, not all
of the requisite data are available, alternative estima-
tion techniques must be employed to calculate hold-
ing gains.
10.10 A commonly used alternative method to
estimate holding gains and losses is based on the
identity that the ending balance sheet value for a