56 Government Finance Statistics Manual 2014
price-equivalents provides an approximation to mar-
ket prices. In such cases, market prices of the same or
similar items, when such prices exist, will provide a
good basis for applying the principle of market prices.
Generally, market prices should be taken from the
markets where the same or similar items are currently
traded in suffi cient numbers and in similar circum-
stances. If there is no appropriate market in which
a particular good or service is currently traded, the
valuation of a transaction involving that good or ser-
vice may be derived from the market prices of similar
goods and services by making adjustments for quality
and other diff erences.Valuation of stock positions
3.113 Stock positions should be valued at mar-
ket value—that is, as if they were acquired in market
transactions on the balance sheet reporting date (ref-
erence date). Market prices are readily available for
assets and liabilities that are traded in active markets,
most commonly certain fi nancial assets and their cor-
responding liabilities. Market values of other assets
and liabilities need to be estimated in a manner simi-
lar to nonmonetary fl ows, as described in paragraphs
3.118–3.125 and 7.20–7.33.
3.114 Valuation according to market-value equiva-
lent is needed for valuing assets and liabilities that are
not traded in markets or are traded only infrequently.
For these assets and liabilities, it will be necessary to
estimate values that, in eff ect, approximate market
prices (see paragraph 3.125).^21
3.115 It may also be analytically useful and ap-
propriate, in some circumstances, to use alternative
valuation methods and to compare these with market
values. Market values, fair values, and nominal values
should be distinguished from such notions as am-
ortized values, face values, book values, and historic
cost.- Fair value is a market-equivalent value defi ned
as the amount for which an asset could be ex-
(^21) International statistical manuals consider that for nonnegotiable
instruments, nominal value is an appropriate proxy for market
value (see paragraph 7.30). Nonetheless, the development of
markets, such as for credit derivatives linked to the credit risk of
individual entities, is increasing the likelihood that market prices
can be estimated even for nonnegotiable instruments. As these
markets extend, consideration might be given to compiling ad-
ditional information on market values of nonnegotiable debt.
changed, or a liability settled, between knowl-
edgeable, willing parties in an arm’s-length
transaction. It thus represents an estimate of
what could be obtained if the owner sold the
asset or the debtor settled the liability.
- Nominal value at any moment in time is the
amount that the debtor owes to the creditor. It
refl ects the value of the instrument at creation
and subsequent economic fl ows, such as transac-
tions, exchange rate and other valuation changes
other than market price changes, and other vol-
ume changes. For fi nancial instruments other
than debt securities, equity, and fi nancial deriva-
tives, the lack of generally available market values
means that these values are estimated by using
the nominal value. - Th e amortized value of a loan refl ects the grad-
ual elimination of the liability by regular pay-
ments over a specifi ed period of time. On the
date of each scheduled payment, the amortized
value is the same as the nominal value, but it may
diff er from the nominal value on other dates be-
cause the nominal value includes interest that has
accrued. - Th e face value of a debt instrument is the undis-
counted amount of principal to be repaid at (or
before) maturity.^22 Th e use of face value as a proxy
for nominal value in measuring the gross debt
position can result in an inconsistent approach
across all instruments and is not recommended.
For example, the face value of deep-discounted
bonds and zero-coupon bonds includes interest
not yet accrued, which runs counter to accrual
principles. - Written-down replacement cost is the cur-
rent acquisition price of an equivalent new asset
minus the accumulated consumption of fi xed
capital, amortization, or depletion. - Book value generally refers to the value recorded
in the entities’ records. Book values may have
diff erent meanings because their values are infl u-
enced by accounting standards, rules, and poli-
cies, as well as the timing of acquisition, company
(^22) In some statistical databases, face value is also called nomi-
nal value. However, in GFS, nominal value is understood to be
diff erent from face value, except on the date of maturity of the
instrument.