Introduction 5
Coverage.
1.26 Th e coverage of the GFS framework is the
general government sector as defi ned in the 2008
SNA, which is defi ned on the basis of institutional
units. To capture the fi scal transactions and activities
taking place outside the general government sector,
the GFS framework should also be used to compile
statistics for the public sector and its subsectors. Th e
coverage of the GFSM 1986 is defi ned on a functional
basis under which general government data include
all the relevant transactions of any unit carrying out
a function of government. Th erefore, some transac-
tions of units of the broader public sector carrying out
functions of government are included in general gov-
ernment data, unlike GFSM 2014. In addition, some
transactions are excluded from general government
data in GFSM 1986 as they relate to production or
market trading activities.
Basis of Recording Economic Events
1.27 Th e GFS framework records economic fl ows
on an accrual basis, which means that fl ows are re-
corded at the time economic value is created, trans-
formed, exchanged, transferred, or extinguished.
However, the framework also encompasses the tra-
ditional cash-based reporting. In the GFSM 1986,
transactions are recorded only when cash is received
or paid.
1.28 Using the accrual basis of recording also
means that nonmonetary transactions are fully inte-
grated in the GFS framework. In the GFSM 1986, only
selected nonmonetary transactions are recorded as
memorandum items.
Valuation
1.29 Economic fl ows as well as assets, liabilities,
and net worth are valued at current market prices
in the GFS framework. While current market prices
are readily available for assets and liabilities that are
traded in active markets, valuation according to mar-
ket-value equivalents is used for valuing assets and li-
abilities that are not traded in markets, or are traded
only infrequently. In the GFSM 1986, debt securities
are valued at the amount the government is obligated
to pay when the debt matures (face value), which may
diff er from both the nominal value and the current
market value.
Balance Sheets
1.30 Complete balance sheets, which include all
stock positions of nonfi nancial and fi nancial assets,
liabilities, and net worth, are included in the GFS
framework. Th e GFSM 1986 reports only on the stock
positions of certain debt liabilities.Integration of Flows and Stock Positions
1.31 Th e comprehensive recording of transactions
and other economic fl ows permits a full integration of
economic fl ows and stock positions and the reconcili-
ation of diff erences between the opening and closing
balance sheets. In the GFSM 1986, such a reconcilia-
tion of the stock positions of the debt liabilities is not
possible without collecting additional information.Th e Analytic Framework
1.32 In the GFS framework, several balancing
items are introduced. Th e multiple balancing items
facilitate analysis of the general government sector or
the public sector based on a variety of considerations
rather than a single measure. In the GFSM 1986, the
emphasis of the analytic framework is focused on a
single balancing item, the overall defi cit/surplus.
1.33 Th e GFS framework’s use of defi nitions of
revenue and expense as transactions that bring about
changes in net worth leads to a diff erent treatment of
transactions in nonfi nancial assets. Th e GFSM 1986
treats cash transactions in nonfi nancial assets as
capital revenue and expenditure, which aff ected the
overall defi cit/surplus. In the GFS framework, the dif-
ference between revenue and expense is a balancing
item, the net operating balance, measuring the change
in net worth resulting from transactions—it is a sus-
tainability measure before considering the net invest-
ment in nonfi nancial assets.
1.34 In the GFS framework, all transactions involv-
ing the acquisition or disposal of fi nancial assets are
treated as fi nancing transactions, and net lending (+) /
net borrowing (−) is a balancing item calculated as the
net operating balance minus the net investment in non-
fi nancial assets. Net lending/net borrowing is also equal
to the net acquisition of all fi nancial assets minus the
net incurrence of all liabilities from transactions. In the
GFSM 1986, the net acquisition of fi nancial assets for
policy purposes is designated as lending minus repay-
ments and treated like expenditure in deriving the over-
all defi cit/surplus. In the GFSM 2014 framework, the