Copyright 2010, The World Bank Group. All Rights Reserved. 1 OTHER ECONOMIC FLOWS GOVERNMENT FINANCE STATISTICS Part 2 This lecture describes flows other than transactions that are recorded as other volume changes

Copyright 2010, The World Bank Group. All Rights Reserved. 2 GOVERNMENT FINANCE STATISTICS Other changes in the volume of assets cover a wide variety of events, which may be divided into three groups: - events that involve recognition or derecognition of existing entities as economic assets, - events that consist of all other changes in the quantity or quality of existing assets, and - events that involve changes in the classification of assets. OTHER CHANGES IN THE VOLUME OF ASSETS

Copyright 2010, The World Bank Group. All Rights Reserved. 3 GOVERNMENT FINANCE STATISTICS RECOGNITION AND DERECOGNITION OF ECONOMIC ASSETS For an entity to be an economic asset, ownership rights over it must be enforced and it must be capable of providing economic benefits. Several events may require a naturally occurring nonproduced asset to be recognized: - A deposit of subsoil minerals may become economically exploitable, - Land may be transformed from a wild or waste state to land that can be put to economic use, - Improved access or changes in relative prices could make forest, fishstock, or aquifer assets economically viable.

Copyright 2010, The World Bank Group. All Rights Reserved. 4 GOVERNMENT FINANCE STATISTICS Most intangible nonproduced assets are created by legal or accounting actions, which make an existing entity an economic asset. A financial claim that can no longer be collected because of the debtor’s bankruptcy should be removed from the balance sheet. RECOGNITION AND DERECOGNITION OF ECONOMIC ASSETS (cont’d)

Copyright 2010, The World Bank Group. All Rights Reserved. 5 GOVERNMENT FINANCE STATISTICS OTHER CHANGES IN THE QUANTITY OR QUALITY OF ASSETS An other volume change should be recorded if assets are destroyed by a catastrophic event such as a hurricane or an earthquake. An other volume change should be recorded when tangible nonproduced assets, such as forests and fishstocks, increase in volume on their own accord. The amortization of intangible nonproduced assets is recorded as an other volume change.

Copyright 2010, The World Bank Group. All Rights Reserved. 6 GOVERNMENT FINANCE STATISTICS An other volume change should be recorded when a government unit creates an economic asset by exerting ownership rights over a naturally occurring asset. Reclaimed land can be an other volume change. Discovery of exploitable mineral deposits is an other volume change. OTHER CHANGES IN THE QUANTITY OR QUALITY OF ASSETS (cont’d)

Copyright 2010, The World Bank Group. All Rights Reserved. 7 Seizures of assets, whether legal or illegal, should be recorded as other volume changes. Differences in quality of assets are treated as differences in volume because different qualities reflect different use values. Degradation by economic activity is an other volume change. Obsolescence at a rate exceeding the amount allowed for in consumption of fixed capital is an other volume change. GOVERNMENT FINANCE STATISTICS OTHER CHANGES IN THE QUANTITY OR QUALITY OF ASSETS (cont’d)

Copyright 2010, The World Bank Group. All Rights Reserved. 8 GOVERNMENT FINANCE STATISTICS A reclassification rearranges assets and liabilities without changing the net worth of the unit or sector involved. A change in the structure of units is also recorded as a classification change. The change in classification from one category of asset or liability to another is recorded as an other volume change with the same value for both entries. CLASSIFICATION CHANGES