Other Economic Flows 249
asset leads to a positive real holding gain, and a
decrease in the relative price of an asset leads to a
negative real gain.^3
10.12 In concept, holding gains and losses occur
continuously because prices change continuously. As
a practical matter, holding gains for the entire report-
ing period are normally estimated at the end of the
period.
Holding Gains for Particular Types of Assets
Fixed assets (411)^4
10.13 Estimating the holding gains on fi xed assets
is complicated by the fact that the value of a fi xed
asset changes as a result of consumption of fi xed cap-
ital as well as price changes. Consumption of fi xed
capital, however, is valued in terms of the average
prices prevailing during a reporting period. Th us,
estimating the change in the price of a given fi xed
asset of a given age and condition is critical for esti-
mating both consumption of fi xed capital and hold-
ing gains.
10.14 Holding gains may occur on existing fi xed
assets because the market price of the asset itself
changes over time. If market prices are not readily
available, market-value equivalent prices should be
used (see paragraph 7.31). When assets of the same
kind are still being produced and sold on the market,
an existing asset should be valued in the opening or
closing balance sheet at the current acquisition price
of a newly produced asset minus the accumulated
consumption of fi xed capital (i.e., at written-down re-
placement cost) up to that time.
10.15 When new assets of the same type are no
longer being produced, the valuation of existing as-
sets may pose diffi cult conceptual and practical prob-
lems. If broadly similar kinds of assets are still being
produced, it may be reasonable to assume that the
prices of the existing assets would have moved in the
same way as those of new assets if they were still being
produced. Such an assumption becomes questionable,
(^3) Information on the calculation and interpretation of neutral and
real holding gains is in the 2008 SNA, paragraphs 12.87–12.93.
(^4) Th e numbers in parentheses aft er each classifi cation category are
the GFS classifi cation codes. Appendix 8 provides all classifi cation
codes used in GFS.
however, when the characteristics of new assets are
much improved by technical progress.^5
Inventories (412)
10.16 Th e estimation of holding gains on invento-
ries is needed for the calculation of use of goods and
services (22) using the indirect method, as illustrated
in Table 6.3. However, estimation may be diffi cult be-
cause of a lack of data on transactions or other changes
in the volume of inventories:- Many transactions in inventories are internal
transactions, and the prices prevailing at the time
they occur may not be adequately recorded. - Withdrawals from inventories include an allow-
ance for recurrent losses that are part of the nor-
mal operations of a production process. - Other changes in the volume of assets are likely
to consist of goods destroyed by natural disas-
ters, major fi res, and other exceptional events.
Estimating the prices and quantities involved in
these events may be diffi cult.
10.17 Th us, holding gains on inventories exclude
both exceptional and recurrent losses on invento-
ries. Certain types of inventories (e.g., stationery)
have stable prices and are held over reasonably short
periods of time, in which case the holding gains or
losses are normally minimal. In other cases, such as
strategic stocks, more sophisticated methods have
to be applied. As records on transactions and other
changes in the volume of assets may not be available,
it becomes necessary to try to deduce the value of
changes in inventories from the value and quantities
of the opening and closing inventories using meth-
ods that attempt to partition the diff erence between
the values of the opening and closing stock positions
of assets into transactions and holding gains. Such
methods are only as good as the assumptions on
which they are based.^6 In general, if assumptions are
made, they should cover as short a period as possible.
When there are high rates of infl ation, estimating
holding gains accurately in this way becomes more
important.
(^5) See Organisation for Economic Co-operation and Development,
Measuring Capital—OECD Manual: Measurement of Capital
Stocks, Consumption of Fixed Capital and Capital Services (Paris,
2009), for more details.
(^6) Also see the 2008 SNA, paragraph 12.99.