Valuation of certain assets and liabilities – the situation in Europe John Verrinder EUROSTAT

Background OECD questionnaire in 2006 – see document at last Working Party OECD questionnaire in 2006 – see document at last Working Party Focus on particular sectors and instruments: Focus on particular sectors and instruments: General Government and Households General Government and Households Securities other than shares, Equity, Insurance reserves Securities other than shares, Equity, Insurance reserves Examine associated data – changes in balance sheets, transactions and other economic flows Examine associated data – changes in balance sheets, transactions and other economic flows

General Observations Definition of “market price” Definition of “market price” Straightforward in some cases (e.g. quoted shares) Straightforward in some cases (e.g. quoted shares) By derivation / model where no market exists By derivation / model where no market exists Balance sheets and Transactions Balance sheets and Transactions Many countries report valuing balance sheet data at market prices, the deriving transactions at market prices through adjustment for revaluation Many countries report valuing balance sheet data at market prices, the deriving transactions at market prices through adjustment for revaluation Counterpart information Counterpart information Valuation approach from counterpart source Valuation approach from counterpart source

General Government Liabilities in securities other than shares Liabilities in securities other than shares Almost all countries report valuation at market prices Almost all countries report valuation at market prices Certain instruments may cause difficulties Certain instruments may cause difficulties Maastricht debt measure = face value Maastricht debt measure = face value Assets in shares and other equity Assets in shares and other equity Quoted shares at market prices Quoted shares at market prices Unquoted shares and other equity generally valued at (adjusted or unadjusted) book value Unquoted shares and other equity generally valued at (adjusted or unadjusted) book value

Households Use of counterpart data sources very important Use of counterpart data sources very important Assets in securities other then shares Assets in securities other then shares Generally market prices Generally market prices Assets in shares and other equity Assets in shares and other equity Quoted shares at market prices Quoted shares at market prices Unquoted shares and other equity at (adjusted or unadjusted) book value Unquoted shares and other equity at (adjusted or unadjusted) book value Assets in insurance technical reserves Assets in insurance technical reserves Generally market prices (at least for life insurance) Generally market prices (at least for life insurance)

Revaluations and Other changes in volume Relatively few European countries publish these data; Eurostat encourages voluntary transmission Relatively few European countries publish these data; Eurostat encourages voluntary transmission Importance of these data as a quality check Importance of these data as a quality check Implied other economic flows very diverse – either very different movements in prices of financial instruments in European markets, or possible quality issues Implied other economic flows very diverse – either very different movements in prices of financial instruments in European markets, or possible quality issues

Next steps Complete the information available Complete the information available Add the information to Eurostat’s Manual of sources and methods on Financial Accounts and metadata on Eurostat and OECD websites Add the information to Eurostat’s Manual of sources and methods on Financial Accounts and metadata on Eurostat and OECD websites Encourage countries to make further efforts on valuation where not at market prices Encourage countries to make further efforts on valuation where not at market prices Examine implied other economic flows for possible quality issues Examine implied other economic flows for possible quality issues