Economic Flows, Stock Positions, and Accounting Rules 55
pay government suppliers on behalf of government.
Government lending should be recorded when the
government makes payment, or when funds are pro-
vided to a borrower.
3.106 However, payments data must be adjusted to
an accrual basis to permit the measurement of pro-
duction, income, consumption, capital accumulation,
and fi nance in the national accounts. To reconcile data
extracted from cash-based data and data maintained
on an accrual basis, the cash fl ows must be adjusted
for accrued revenue not yet received and accrued ex-
pense not yet paid, respectively.
Valuation
General rule
3.107 All fl ows and stock positions should be mea-
sured at market prices. Market prices refer to current
exchange value—that is, the value at which goods,
services, labor, or assets are exchanged or else could
be exchanged for cash (currency or transferable de-
posits). Flows recorded in the Statement of Operations
should be valued at the market prices at which these
fl ows take place, while fl ows recorded in the State-
ment of Sources and Uses of Cash should be valued at
the monetary value of the cash fl ows. Stock positions
should be valued at the market prices prevailing on
the balance sheet date. Valuation of specifi c types of
fl ows and stock positions are discussed in further de-
tail in the remainder of this section.
Valuation of transactions
3.108 Market prices for transactions are defi ned
as amounts of money that willing buyers pay to ac-
quire something from willing sellers; the exchanges
are made between independent parties and on the
basis of commercial considerations only, sometimes
called “at arm’s length.” Th us, according to this strict
defi nition, a market price refers only to the price for
one specifi c exchange under the stated conditions. A
second exchange of an identical unit, even under cir-
cumstances that are almost exactly the same, could re-
sult in a diff erent market price. A market price defi ned
in this way is to be clearly distinguished from a price
quoted in the market, a world market price, a going
price, a fair market price, or any price that is intended
to express the generality of prices for a class of suppos-
edly identical exchanges rather than the price actually
applying to a specifi c exchange. Furthermore, a market
price should not necessarily be construed as equiva-
lent to a free market price; that is, a market transaction
should not be interpreted as occurring exclusively in
a purely competitive market situation. In fact, a mar-
ket transaction could take place in a monopolistic,
monopsonistic, or any other market structure. Indeed,
the market may be so narrow that it consists of a sole
transaction of its kind between independent parties.
3.109 When a price is agreed to by both parties in
advance of a transaction taking place, this agreed or
contractual price is the market price for that trans-
action regardless of the prices that prevail when the
transaction takes place.
3.110 Actual exchange values, expressed in mon-
etary terms, are presumed to be the market prices
in most cases. Paragraph 3.122 describes those cases
where actual exchange values do not represent market
prices. Transactions that involve dumping and dis-
counting represent market prices. Transaction prices
for goods and services are inclusive of appropriate
taxes and subsidies. A market price is the price pay-
able by the buyer aft er taking into account any rebates,
refunds, adjustments, etc., from the seller.
3.111 Transactions in fi nancial assets and liabilities
are recorded at the prices at which they are acquired
or disposed of. Transactions in fi nancial assets and li-
abilities should be recorded exclusive of any service
charges, commissions, fees, taxes, and similar pay-
ments for services that would be necessary to require
the asset or incur the liability. Th ese costs of owner-
ship transfers are excluded regardless of whether these
are charged explicitly, included in the purchaser’s
price, or deducted from the seller’s proceeds. Th is is
because both debtors and creditors should record the
same amount for the same fi nancial instrument. Th e
commissions, fees, and/or taxes should be recorded
separately from the transaction in the fi nancial asset
and liability, under appropriate categories of revenue
or expense. Th e valuation of fi nancial instruments,
which excludes commission charges, diff ers from
the valuation of nonfi nancial assets (excluding land),
which includes any costs of ownership transfer. Costs
of ownership transfer on land are included in the
value of land improvements (see paragraphs 8.6–8.8).
3.112 When market prices for transactions are
not observable, such as for some barter or transfers-
in-kind transactions, valuation according to market