316 Government Finance Statistics Manual 2014
(31441) for the user, distinct from the resource
itself; however, the value of the resource and the
value of the nonproduced asset in the form of
contracts, leases, and licenses are link ed. An in-
verse relationship will exist between the value of
the resource itself and the value of the intangible
asset.^5- Th e owner can extend or withhold permission to
continued use of the asset from one year to the
next. Th is option corresponds to a resource lease
on which rent is payable/receivable (see para-
graphs A4.16–A4.17).
A4.20 Th e diff erences in treatment between the
vari ous options are not clear-cut.^6 Th ere is no sin-
gle, uni versal, and clear-cut criterion to distinguish
between rent and asset sales, so a range of criteria
should be considered in making the decision (see
Box A4.1).A4.21 Th e considerations listed in Box A4.1 can
be seen as a more specifi c parallel to the distinction
of economic ownership from legal ownership used in
distinguishing between operating and fi nancial leases
described earlier. Th e conditions for treatment of the
payment as the acquisition of an asset or rent are in-
dicative rather than prescriptive. A decision on the
appropriate treatment when some of the conditions
are not met will necessitate consideration of how to
record those transactions. For example, if, on balance,
the decision is to treat the payment as rent, but a large
upfront payment was made, this should be treated as
a prepayment, recorded on an accrual basis. However,
if the recipient is not willing to consider a refund if the
contract is suspended, this is indicative of the sale of
an intangible nonproduced asset rather than the pay-
ment of rent.
A4.22 Th e application of these principles to the
main types of natural resources is described in the
following text.(^5) Th e encumbered value of the resource is based on the present
value of future rental payments taking the existence of the lease
into account. Th e value of the resource increases as the contract
winds down, while the value of the contract decreases over the
same period. Also see Box A4.3.
(^6) Also see this issue articulated in the context of the case of mobile
phone licenses in SNA News and Notes, Volume 14, United Na-
tions, 2002.
Radio spectrum
A4.23 Payment for a mobile phone license consti-
tutes the sale of an asset rather than a payment for rent
when the licensee acquires eff ective economic owner-
ship rights over the use of the spectrum.^7
A4.24 If the sale of such a license constitutes the
sale of an asset, two possible treatments may apply:
the sale of the spectrum itself or the sale of a permit to
use the spectrum.- When the life spans of the license and of the
spec trum coincide, the payment for a license is
treated as the sale of the spectrum itself (other
natural re sources: radio spectrum (314331)). Th e
latter situa tion applies always when licenses are
granted indefi nitely. - When the life span of the license is diff erent from
the life span of the spectrum, the payment for a
license is treated as the sale of an intangible non-
produced asset classifi ed as permits to use natural
resources (314412) by the legal owner (licensor)
to the economic owner (licensee).
A4.25 When the license agreement is treated as
the sale of an intangible asset, in its own right, its
value is established at the time of its sale. Th e value
of the license declines with the remaining period of
validity to a value of zero when the license expires.
Symmetri cally, the value of the spectrum to the lessor
falls when the license acquires a value and progres-
sively increases as the license expires. Th is refl ects the
potential for a further sale of the right to use the spec-
trum for another period.^8
Land
A4.26 Land may be sold outright (i.e., when the
legal ownership is transferred from one institutional
unit to another)^9 or may be subject to a resource
lease (e.g., tenant farmers usually pay regular rent
to their landlord). A resource lease on land may in-
stead be considered as a sale of the land (3141) if the(^7) To decide whether ownership is eff ectively transferred, the six
criteria presented in Box A4.1 are to be considered.
(^8) Th is recording ensures a neutral eff ect on the net worth of the
overall economy during the life of the license.
(^9) As described in paragraph 2.13, land may not be recorded as
being sold to a nonresident unit. In such cases, a notional resident
unit is created that holds title to the land; the nonresident unit
then owns the equity in the notional resident unit.