Chapter

Appendix 1. Changes from the GFSM 2001 and GFSM 1986

Author(s):
Sage De Clerck, and Tobias Wickens
Published Date:
March 2015
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This appendix describes the changes in the Government Finance Statistics Manual 2014 (GFSM 2014) from the Government Finance Statistics Manual 2001 (GFSM 2001), and describes the differences with the traditional approach to fiscal reporting as depicted in A Government Finance Statistics Manual 1986 (GFSM 1986).

Introduction

A1.1 In the GFSM 2014, the guidelines in the GFSM 2001 have been revised to harmonize with the updates in other macroeconomic statistical manuals and guides, such as the overarching System of National Accounts 2008 (2008 SNA), the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6), and the Public Sector Debt Statistics: Guide for Compilers and Users (PSDS Guide).

A1.2 The GFSM 2014 addresses important international economic developments in recent years and takes into account improved recording and methodological treatments of various events. The changes incorporated can broadly be summarized as methodological changes agreed to in the update of the 2008 SNA, clarifications on existing methodological guidelines, presentational changes, and editorial changes.

A1.3 The remainder of this appendix first describes the changes in the GFSM 2014, compared to the GFSM 2001. Since many countries are still in various stages of migrating from presenting fiscal statistics in a traditional way, based on the GFSM 1986, the second part of this appendix also provides a description of the difference between the guidelines in this Manual and the GFSM 1986.

Changes from the GFSM 2001

A1.4 The GFSM 2014 retains the basic conceptual framework of its predecessor, the GFSM 2001. However, this Manual introduces improved treatments for recent developments and specific events, elaborates on aspects of reporting that have proved to be complex, and takes into consideration new needs of compilers and users of GFS. The remainder of this section describes the main changes, grouped according to the chapters of the GFSM 2014, before describing changes in terminology introduced in this Manual. The discussion of the changes includes cross-references to the relevant paragraphs in the chapters.

Chapter 1

A1.5 A definition for fiscal policy, general government sector, and public sector is introduced in paragraph 1.2.

A1.6 A section to describe the evolution of international statistical guidelines on government finance statistics, starting in the early 1970s, is presented in paragraphs 1.6–1.9. This section also broadly outlines the reasons for the update of the GFSM 2001.

A1.7 The section on the structure and features of the GFS framework introduces two supplementary statements—namely, the Statement of Total Changes in Net Worth and the Summary Statement of Explicit Contingent Liabilities and Net Implicit Obligations for Future Social Security Benefits (see paragraphs 1.18–1.19). These supplementary statements are added to the GFS framework due to their analytical usefulness for users of fiscal data.

A1.8 The valuation principle described in paragraph 1.29 indicates that current market prices are used to value economic flows and stock positions. This principle is clarified by indicating that market-value equivalents are used for assets and liabilities that are not traded in markets, or are traded infrequently.

A1.9 The important linkages between GFS and other macroeconomic datasets are introduced in paragraph 1.35, also recognizing the close relationship with accounting standards. Paragraph 1.39 highlights the importance of good dissemination practices as spelled out in the General Data Dissemination System, Special Data Dissemination Standard, and the Special Data Dissemination Standard Plus.

Chapter 2

A1.10 The delineation of general government and public sector institutional units is clarified. The chapter is reorganized to first delineate the domestic economy, and then it describes institutional units and the types of units that exist in macroeconomic statistics, before defining institutional sectors. These principles are then applied to delineate the general government and public sectors, and the practical application of the sector classification principles to selected cases is described.

A1.11 The concept of residence is elaborated on to align with guidance of 2008 SNA and BPM6 (see paragraph 2.6). The additional guidance includes defining and describing the treatment of notional resident units (see paragraph 2.13) and nonresident special purpose entities (see paragraph 2.15). Additional guidance on identifying international and regional organizations is presented in paragraphs 2.16–2.19. The treatment of multiterritory regional enterprises (see paragraph 2.20) and currency union central banks (see paragraph 2.21) is explained.

A1.12 The rationale for working with the institutional unit in macroeconomic statistics is explained in paragraph 2.23. In addition, the concepts establishment and enterprise are defined and explained in paragraphs 2.24 and 2.25, respectively.

A1.13 The description of the types of institutional units is organized to make a distinction between persons or groups of persons in the form of households and legal or social entities (see paragraph 2.27). Households are defined and described in paragraphs 2.28–2.29, while legal or social entities are defined, and the types of legal or social entities described in more detail (see paragraphs 2.30–2.38).

A1.14 The section on applying the definition of institutional unit to government introduces a discussion on artificial subsidiaries and ancillary activities, and applies these concepts to resident SPEs and a government central borrowing authority (see paragraphs 2.42–2.45).

A1.15 The definition and identification of nonfinancial and financial corporations sectors are presented in detail (see paragraphs 2.52–2.57). The additional guidance is provided to clarify the distinction between these corporations and government units. This includes the introduction of three broad classes of financial corporations—namely, financial intermediaries, financial auxiliaries, and other financial corporations—and specifically explains financial intermediation.

A1.16 The delineation of general government and public corporations is clarified using the concept of market and nonmarket producers. The application of the concept economically significant prices to determine whether a unit is a market or nonmarket producer is elaborated on (see paragraphs 2.65–2.75).

A1.17 Guidance is provided on how to determine whether a nonprofit institution is under control of government. Indicators of control and how to apply these to establish control of government are provided in Box 2.1.

A1.18 An extensive discussion on the public corporations subsector is introduced in paragraph 2.104. The rationale for the extension of GFS to include data for public corporations is described in paragraph 2.105, and the types of public corporations are presented in paragraphs 2.113–2.121. Guidance is provided on how to determine whether a corporation is under control of government (see paragraphs 2.107–2.112). Indicators of control and how to apply them to establish control of government over corporations are provided in Box 2.2.

A1.19 Using the concepts of residence, institutional units, control, and market versus nonmarket producers, a decision tree for sector classification of the public sector is introduced in paragraph 2.124 and Figure 2.4.

A1.20 A separate section describes the practical application of the sector classification principles to selected cases—these cases are the topics of frequently asked questions. Included are: the identification of quasi-corporations (see paragraph 2.125); distinguishing head offices and holding companies (see paragraph 2.128); restructuring agencies (see paragraph 2.129); financial protection schemes (see paragraph 2.132); special purpose entities (see paragraph 2.136); joint ventures (see paragraph 2.140); sinking funds (see paragraph 2.144); pension schemes (see paragraph 2.147); provident funds (see paragraph 2.148); sovereign wealth funds (see paragraph 2.152); market regulatory agencies (see paragraph 2.156); and development funds and/or infrastructure companies or entities (see paragraph 2.160).

A1.21 The annex to Chapter 2 of the GFSM 2001, describing social protection, is subsumed in Appendix 2 of the GFSM 2014. This appendix presents guidance on the identification and sectorization of entities involved in social protection, as well as guidance on the recording of the flows and stock positions related to their economic activities.

Chapter 3

A1.22 A distinction between monetary and nonmonetary transactions is introduced in paragraphs 3.8 and 3.19, respectively. This distinction also forms the basis for the distinction between transfers (capital and current transfers), exchanges, in-kind transactions, and internal transactions.

A1.23 A definition of stock positions is provided in paragraph 3.36. The concepts economic benefits and ownership are used to define economic assets, before a distinction is drawn between legal and economic ownership in paragraphs 3.38–3.39. These concepts are used to determine the asset boundary and define assets and liabilities (see paragraphs 3.42–3.50).

A1.24 The GFSM 2014 reinstates a more balanced approach between having both accrual and cash information in an integrated statistical framework. Therefore, starting in paragraph 3.61, alternative recording bases are discussed with a reference to using the accrual basis of recording in the Statement of Operations (see paragraph 3.69) and using the cash basis of recording in the Statement of Sources and Uses of Cash (see paragraphs 3.67 and 3.103).

A1.25 Additional guidance on the application of the accrual basis of recording principles is described from paragraph 3.76 onward. Guidance on the time of recording and measurement of taxes and other compulsory transfers is presented in paragraph 3.77.

A1.26 The time of recording dividends when using an accrual basis of recording is defined as when the equity or shares go ex-dividend (see paragraphs 3.87 and 5.112).

A1.27 When using an accrual basis of recording, the time of recording transactions in goods and services, nonfinancial assets, and many financial assets and liabilities is defined as the moment when economic ownership changes. Recognition is given to cases where change of ownership is not obvious and additional guidance for those cases is provided (see paragraphs 3.88–3.97).

A1.28 Guidance on the time of recording other economic flows is described in paragraphs 3.98–3.102.

A1.29 Guidance on using the cash basis of recording in the Statement of Sources and Uses of Cash is elaborated in paragraphs 3.103–3.106.

A1.30 Guidance on valuation is elaborated on and the section is structured to present descriptions of the general valuation rule (see paragraph 3.107), valuation of transactions (see paragraphs 3.108–3.112), valuation of stock positions including alternatives valuation methods (see paragraphs 3.113–3.117), valuation adjustments in special cases (see paragraphs 3.118–3.125), and valuation of other economic flows (see paragraphs 3.126–3.129).

A1.31 The GFSM 2014 introduces a discussion on currency, starting with a discussion on the unit of account for the compilation of GFS in paragraph 3.130. Guidance is provided on currency conversions for transactions and stock positions (see paragraphs 3.132–3.133) and the distinction between domestic and foreign currency (see paragraphs 3.134–3.136) and currency of denomination and currency of settlement (see paragraphs 3.137–3.139).

A1.32 Starting in paragraph 3.152, the GFSM 2014 presents a detailed discussion of consolidation. The concept is defined (see paragraphs 3.153–3.154), a distinction is made between intrasectoral and inter-sectoral consolidation (see paragraphs 3.155–3.157), and reasons for consolidation are discussed (see paragraphs 3.158–3.160), before conceptual guidelines for the process of consolidation are presented (see paragraphs 3.161–3.164). Paragraphs 3.165–3.166 present practical guidelines on implementing consolidation, while paragraphs 3.167–3.168 describe consolidation principles used in other datasets.

Chapter 4

A1.33 The analytic objectives of the GFS framework were expanded to include the ability to assess management and policy decisions, as well as sustainability and liquidity decisions (see paragraphs 4.3–4.5).

A1.34 Paragraph 4.7 elaborates on the coverage of GFS, emphasizing that data should cover the nonmarket activities of the general government sector, as well as the market activities of the public sector.

A1.35 Two additional statements are included in the GFS framework, to further enhance the analytical usefulness of GFS (see paragraphs 4.13–4.15 and 4.46–4.49):

  • Statement of Total Changes in Net Worth

  • Summary Statement of Explicit Contingent Liabilities and Net Implicit Obligations for Future Social Security Benefits.

A1.36 The concept expenditure is reinstated as an aggregate in both the Statement of Operations and in the Statement of Sources and Uses of Cash (see paragraph 4.21, Table 4.1, and Table 4.2).

A1.37 The definition and identification of policy lending are elaborated on in Box 4.1.

A1.38 The composition of the item net change in the stock of cash, as presented in the Statement of Sources and Uses of Cash, is clarified—the item refers to the financial asset currency and deposits (3202), and should not include other financial instruments or overdrafts (see paragraph 4.33).

A1.39 The description of the Balance Sheet is expanded with a discussion on the use of the net worth concept in the case of public corporations (see paragraph 4.40).

A1.40Box 4.1 in the GFSM 2001 is replaced with an annex to Chapter 4 of the GFSM 2014, Using GFS for Fiscal Analysis. The annex offers an overview of how analysts can use the data in GFS to build well-defined and internationally comparable fiscal indicators. Some of the indicators can be observed or derived directly from the GFS framework, while others can be derived using GFS together with additional data.

Chapter 5

A1.41 The rationale for defining revenue as an increase in net worth resulting from a transaction is added in paragraph 5.1.

A1.42 The definition of grants (13) is revised to no longer refer to grants as noncompulsory transfers. The change accommodates cases where compulsory revenue sharing occurs between government units. The definition is also expanded to indicate that grants are transfers that do not meet the definition of a tax, subsidy, or social contribution (see paragraphs 5.5 and 5.101).

A1.43 Definitions of the respective categories of other revenue (14) are replaced by a definition of the main category other revenue (14), with only references to the subcategories it comprises (see paragraph 5.6).

A1.44 The section on defining revenue is enhanced with the inclusion of a discussion on the treatment of refunds and corrections, and with an explanation of the delineation between revenue and transactions in assets and liabilities (see paragraphs 5.7–5.8).

A1.45 The section on the time of recording and measurement of revenue is expanded to clearly indicate the time of recording when using the accrual basis of recording, as well as the cash basis of recording (see paragraphs 5.10–5.11). Further clarification is provided on applying an accrual basis of recording to revenue transactions (see paragraphs 5.12–5.17), as well as on the treatment of amounts assessed, but discovered to be uncollectable (see paragraph 5.20).

A1.46 The basis on which the classification of revenue should be made is presented in paragraph 5.21, while paragraph 5.22 describes the rationale for standardized summary classifications and the usefulness of adding subitems according to analytical use and need.

A1.47 Paragraphs 5.27–5.32 describe the treatment of tax refunds and tax relief. In this regard, the GFSM 2014 adopted the gross recording of payable tax credits, while nonpayable tax credits continue to be treated on a net basis.

A1.48 The tax category unallocable (1113), in the GFSM 2001, is renamed other taxes on income, profits, and capital gains (1113) in the GFSM 2014, and a breakdown of the category is introduced to separately identify these taxes receivable from general government units (11131) and unallocable taxes on income, profits, and capital gains (11132) (see paragraph 5.42 and Tables 5.1 and 5.2). This change allows the identification of those taxes receivable from other general government units that are subject to consolidation.

A1.49 The tax attribution rules are described in paragraphs 5.33–5.38. The tax attribution rules applicable to cases where the activities of the religious organizations are funded from earmarked taxes collected by general government are clarified in paragraph 5.39.

A1.50 The GFSM 2001 tax category for taxes on financial and capital transactions (1134) is moved from property taxes (113) to general taxes on goods and services (1141). In the GFSM 2014, this tax category retains its name, but with a different classification code—namely, taxes on financial and capital transactions (11414) (see paragraphs 5.52 and 5.61). This change aligns the GFSM 2014 with the 2008 SNA, which regards this tax as a tax on the sale rather than on the property itself. To maintain consistency with codes used in the GFSM 2001, the codes in taxes on property do not follow directly.

A1.51 A new definition for excises is introduced in paragraph 5.62.

A1.52 The concept profits on fiscal monopolies (1143) is clarified, and its application to public enterprises, lotteries, and other gambling activities is elaborated on (see paragraphs 5.63–5.68).

A1.53 The coverage of taxes on specific services is extended to include the implicit taxes that result from the central bank imposing a rate of interest other than the market rates (see paragraphs 5.70 and 6.89, Box 6.2).

A1.54 The coverage of taxes on use of goods and on permission to use goods or perform activities (1145) is clarified (see paragraph 5.72). Boundaries of this tax with administrative fees (paragraph 5.73), taxes on business activities (see paragraph 5.76), other tax categories (see paragraph 5.77), and the acquisition or use of an asset (see paragraph 5.78) are explained.

A1.55Taxes on use of goods and on permission to use goods or perform activities (1145) are subdivided into motor vehicle taxes (11451) and other taxes on the use of goods and on the permission to use goods or perform activities (11452). For the latter, the GFSM 2014 introduces several subcategories of taxes to clarify their classification (see paragraph 5.81 and Table 5.4). Furthermore, the accrual recording of business licenses and taxes on pollution (such as emission trading schemes) is elaborated on (see paragraph 5.81).

A1.56 The implicit taxes or subsidies created by multiple exchange rate regimes are introduced in paragraph 5.89. Furthermore, it is clarified that lumpsum payments receivable by government from monetary authorities should be disaggregated according to the economic nature of the components of the payment (see paragraph 5.90).

A1.57 The concept social contributions (12) is clarified (see paragraph 5.94), specifically making a distinction between voluntary and compulsory contributions, describing the flexibility arrangement for the recording of social contributions used in the 2008 SNA (see paragraph 5.95), and presenting the boundary between social contributions and other categories of taxes (see paragraph 5.96).

A1.58 The treatment of grants is elaborated on, specifically describing the distinction between current and capital grants, grants in kind, and the time of recording in an accrual and cash basis of recording (see paragraph 5.103–5.105).

A1.59 The time of recording dividends when using an accrual basis of recording is clarified to be when the equity or shares go ex-dividend (see paragraphs 3.87, 5.112, and 6.109). In addition, it is clarified that legally constituted corporations, reclassified to be a general government unit, could also distribute dividends (see paragraph 5.113). The treatment of disproportionately large dividends is clarified (see paragraphs 5.115–5.116).

A1.60 The coverage of property income from investment income disbursements (1414) is expanded to include distributions to holders of investment fund shares or units (see paragraph 5.120).

A1.61 The concept rent (1415) is elaborated on to explain the distinction between a resource lease, the creation of an asset, contracts, leases, and licenses (31441), or the sale of the resource. Two types of resource rent, for land and subsoil assets, are described in detail and the boundary with the rental of produced assets is explained (see paragraphs 5.124–5.133).

A1.62 The GFSM 2014 assumes the 2008 SNA and BPM6 treatment of reinvested earnings on foreign direct investment (1416) (see paragraphs 5.134–5.135 and 6.121).

A1.63 The classification of administrative fees (1422) is clarified to include fees payable for voluntary participation in deposit insurance or other guarantee schemes that do not qualify to be a standardized guarantee scheme. For it to be administrative fees, the amount payable should be in proportion to the cost of producing the service (see paragraph 5.138).

A1.64 The treatment of fines and penalties imposed for evasion of taxes and bails set by courts is clarified in fines, penalties, and forfeits (143) (see paragraph 5.143).

A1.65 The GFSM 2001 revenue categories for voluntary transfers other than grants (144) and miscellaneous and unidentified revenue (145) are subsumed in two new categories—namely, transfers not elsewhere classified (144) and premiums, fees, and claims receivable related to nonlife insurance and standardized guarantee schemes (145) (see paragraphs 5.145 and 5.149). Revenue from subsidies (14411) receivable is introduced as a separate category of transfer not elsewhere classified (see paragraph 5.146), while the other transfers are distinguished as other current transfers not elsewhere classified (14412) (see paragraph 5.147) and capital transfers not elsewhere classified (1442) (see paragraph 5.148).

A1.66 The revenue category premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes (145) (see paragraph 5.149) is introduced to allow for the appropriate recording of the revenue related to nonlife insurance and standardized guarantees. Subcategories provide for the identification of premiums receivable (14511), fees for standardized guarantees receivable (14512), current claims receivable (14513), and capital claims receivable (1452) (see paragraphs 5.150–5.151).

Chapter 6

A1.67 The rationale for defining expense as a decrease in net worth resulting from a transaction is added in paragraph 6.1.

A1.68 The distinction between economic classification of expense and functional classification of expense is clarified in paragraphs 6.2 and 6.3, respectively.

A1.69 The section on defining expense is enhanced with the inclusion of a discussion on the treatment of refunds and corrections and the delineation between expense and transactions in assets and liabilities (see paragraphs 6.4–6.5).

A1.70 The section on the time of recording expense is expanded to clearly indicate the time of recording when using the accrual basis of recording, as well as the cash basis of recording. Furthermore, the time of recording of the acquisition and use of goods and services (22) is clarified (see paragraphs 6.6–6.7).

A1.71 The definition of compensation of employees is clarified to emphasize the individual employer-employee relationship, and the exchange of manual and intellectual labor services (see paragraph 6.9). Furthermore, the nature of wages and salaries in cash (see paragraph 6.13) and in kind (see paragraph 6.17) is elaborated on.

A1.72 Guidance on estimating imputed employers’ social contributions (2122) is elaborated on. A clear distinction between nonpension and employment-related pension benefits is introduced (see paragraphs 6.23–6.26).

A1.73 The section on the use of goods and services (22) is reorganized to: define the concept (see paragraph 6.27); make a distinction between the time of recording use of goods and services when using an accrual and cash basis of recording (see paragraphs 6.28–6.31); describe the boundary between use of goods and services and compensation of employees (see paragraph 6.33); describe the boundary between use of goods and services and transfers (see paragraph 6.37); describe the boundary between use of goods and services and transactions in the acquisition of nonfinancial assets (see paragraph 6.43); and describe other boundaries related to use of goods and services (see paragraph 6.50).

A1.74 Conceptually, the coverage of use of goods and services (22) in the GFSM 2001 is changed to exclude weapons and weapons systems in the GFSM 2014 (see paragraphs 6.49). These are recognized as the acquisition of a specific category of nonfinancial assets in the GFSM 2014 (see paragraph 8.43).

A1.75 The relationship between inventory (612) and use of goods and services (22) is clarified in Table 6.3.

A1.76 The treatment in GFS of the implicit fees for financial services is explained (see paragraphs 6.52 and 6.81). These implicit fees include items such as financial intermediation services indirectly measured (FISIM), service fees implied by nonlife insurance premiums, and the implicit fees payable by governments to central banks for nonmarket services.

A1.77 The concept consumption of fixed capital (23) is elaborated on. The relation between consumption of fixed capital as recorded in the 2008 SNA and in GFS is explained (see paragraph 6.53). The relation between consumption of fixed capital and depreciation as used in government financial records is also explained (see paragraph 6.54). The calculation of consumption of fixed capital is described in Box 6.1. Furthermore, the treatment of costs of ownership transfer as a component of consumption of fixed capital is explained in paragraphs 6.60 and 8.42.

A1.78 The description of interest (24) is clarified to show the relationship between interest as recorded in the 2008 SNA and interest as recorded in the GFSM 2014. It is suggested to identify the counterpart for interest transactions to allow for consolidation (see paragraph 6.62). A discussion on recording interest, when using a cash basis of recording, is introduced in paragraph 6.65. Recording interest in the case of grace periods and step-up interest arrangements is explained in paragraphs 6.69–6.70. The recording of interest related to index-linked securities is explained in paragraphs 6.75–6.78. Furthermore, clarification is provided on the treatment of interest on debt securities with embedded derivatives, nonperforming loans, and arrears (see paragraphs 6.79–6.82).

A1.79 Recording subsidies (25) is clarified. The treatment of subsidies in cases when an institutional unit acts on behalf of another unit to redistribute the subsidies is explained in paragraph 6.84. It is also clarified that subsidies are receivable by all resident and nonresident producers, and that units such as general government units, nonprofits institutions serving households, and households can receive subsidies in their capacity as producers (see paragraph 6.86). The coverage of subsidies is extended to include the implicit subsidy that results from the central bank imposing a rate of interest other than the market rates (see paragraphs 5.70 and 6.89, Box 6.2). The discussion on subsidies also introduced the distinction between subsidies on products and subsidies on production to better align with this distinction in the 2008 SNA (see paragraphs 6.89–6.90).

A1.80 To further delineate subsidies, a list of items that do not constitute subsidies is included (see paragraph 6.91), and Box 6.3 elaborates on transactions with public corporations with specific reference to the classification of “capital injections” into public corporations.

A1.81 The definition of grants (26) is revised to no longer refer to grants as noncompulsory transfers. This change accommodates cases where compulsory revenue sharing occurs between government units. The definition is also expanded to indicate that grants are transfers that do not meet the definition of a tax, subsidy, or social contribution (see paragraph 6.92).

A1.82 The treatment of grants in kind is elaborated on, specifically describing the distinction between current and capital grants, and the time of recording in, respectively, an accrual and cash basis of recording (see paragraph 6.93–6.95).

A1.83 The circumstances under which social assistance benefits (272) become payable are clarified to include contributions payable to social insurance schemes on behalf of households who cannot otherwise afford to participate in the scheme (see paragraph 6.102).

A1.84 The distinction between imputations for employment-related nonpension social benefits and employment-related pensions and other retirement benefits is clarified in paragraph 6.105.

A1.85 The time of recording dividends (2811) when using an accrual basis of recording is clarified to be when the equity or shares go ex-dividend (see paragraphs 3.87, 5.112, and 6.109). The treatment of disproportionately large dividends is clarified (see paragraphs 5.116 and 6.110).

A1.86 The coverage of property expense for investment income disbursements (2813) is expanded to include distributions to holders of investment fund shares or units (see paragraph 6.113).

A1.87 It is clarified that rent (2814) includes amounts payable under resource leases on land, subsoil resources, and on other natural resources. The measurement of such amounts payable is clarified in the context of the corresponding revenue item (see paragraph 6.120).

A1.88 The GFSM 2014 assumes the 2008 SNA and BPM6 treatment of reinvested earnings on foreign direct investment (2815) (see paragraph 6.121).

A1.89 The GFSM 2001 expense categories for miscellaneous other expense (282) are subsumed in two new categories in the GFSM 2014—namely, transfers not elsewhere classified (282) and premiums, fees, and claims payable related to nonlife insurance and standardized guarantee schemes (283) (see paragraphs 6.122 and 6.125, respectively). The transfers are distinguished as current transfers not elsewhere classified (2821) (see paragraph 6.123) and capital transfers not elsewhere classified (2822) (see paragraph 6.124).

A1.90 The expense category premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes (283) is introduced to allow for the appropriate recording of the expense related to nonlife insurance and standardized guarantee schemes. Subcategories provide for the identification of premiums payable (28311), fees for standardized guarantees (28312), current claims payable (28313), and capital claims payable (2832) (see paragraph 6.125).

A1.91 The discussion on the Classification of Functions of Government (COFOG) in Chapter 6 of GFSM 2001 is moved to the annex to Chapter 6 in GFSM 2014.

A1.92COFOG in GFS is limited to the expenditure of government, which differs from its application to all outlays of government as used in the OECD/UN classification (see paragraph 6.127 in the annex).

A1.93 The annex is reorganized to separately present: the structure of COFOG classifications (see paragraph 6.128); uses of COFOG (see paragraph 6.130); distinction between individual and collective goods and services (see paragraph 6.133); units of classification (see paragraph 6.140); problems in identifying functions of government (see paragraph 6.143); and the cross-classification of expenditure (see paragraph 6.148). No changes occurred in the functions themselves.

Chapter 7

A1.94 The usefulness of a set of balance sheets integrated with economic flows is elaborated on in paragraph 7.2.

A1.95 A distinction is drawn between legal and economic ownership in paragraphs 3.38–3.41 and 7.5–7.13. These concepts are used to determine the asset boundary and to provide an overview of assets and liabilities (see paragraphs 7.14–7.19).

A1.96 The asset boundary is clarified to not include contingent assets and liabilities (see paragraph 7.13), and financial claims are clarified to include: debt instruments; financial derivatives and employee stock options; equity and investment fund shares; and monetary gold in the form of unallocated gold accounts (see paragraph 7.15).

A1.97 The GFSM 2001 treatment of monetary gold and SDRs (6201/6301) as financial assets without a corresponding financial claim is revised. In the GFSM 2014, only monetary gold in the form of gold bullion is regarded as a financial asset without a corresponding financial claim. Also, recognizing that transactions in SDR holdings may be entered into by two domestic units, the exclusion of SDRs from domestic financial asset flows is eliminated (see paragraphs 7.15 and 7.125–7.134, respectively).

A1.98 The concept of produced versus nonproduced nonfinancial assets is introduced in paragraph 7.17–7.19.

A1.99 The valuation of assets and liabilities is elaborated on in paragraphs 7.20–7.25. The usefulness of nominal value of financial instruments is presented in paragraph 7.21, while the treatment of cost of ownership transfer is described in paragraph 7.22. Possible methods of estimating current market prices are described in paragraphs 7.25–7.33.

A1.100 Determining the time of change in ownership of fixed assets that are produced over two or more accounting periods, and those built under a public-private partnership, is elaborated on (see paragraphs 7.37 and 7.39, respectively).

A1.101 The creation of notional units to own fixed assets in territories where they are not residents is explained in paragraphs 2.13 and 7.91.

A1.102 Identifying public monuments and guidance on their recording are clarified in paragraph 7.42.

A1.103 The definition and identification of dwellings (61111) are clarified and guidance on the valuation of dwellings is provided in paragraphs 7.44–7.45.

A1.104 Within buildings and structures, a category of fixed assets for land improvements (61114) is added. The cost of ownership transfer on all land is included with land improvements (see paragraphs 7.49–7.51).

A1.105 Subcategories are introduced for machinery and equipment other than transport equipment (61122) to separately identify information, computer, and telecommunications (ICT) equipment (see paragraphs 7.56–7.57) and machinery and equipment not elsewhere classified (see paragraph 7.57).

A1.106 The definition and identification of cultivated biological resources (61131) are clarified, and the time of recording when the production of these fixed assets takes a long time to complete is elaborated on. Subcategories are introduced to further clarify the composition of this item (see paragraphs 7.59–7.63 and Table 7.5).

A1.107 The definition and identification of intellectual property products (61132) are elaborated on. Subcategories separately identify research and development (611321), mineral exploration and evaluation (611322), computer software and databases (611323), entertainment, literary, and artistic originals (611324), and other intellectual property products (611325). The coverage of this item is expanded to include research and development products so that patented resources no longer appear as nonproduced assets. Furthermore, the coverage of computer software is expanded to include databases (see paragraphs 7.64–7.73).

A1.108Weapons systems are introduced as a separate fixed asset category (see paragraph 7.74).

A1.109 In the GFSM 2014, categories of inventory (612) are aligned with the categories used in 2008 SNA. The category strategic stocks (6121) is eliminated as a separate category of inventory and is subsumed in goods for resale (61224), and a category for military inventories is added (see paragraphs 7.75–7.86).

A1.110 The definition of land (6141) is clarified and guidance is provided on the valuation of land (see paragraphs 7.92–7.96).

A1.111 The GFSM 2001 category subsoil assets is replaced by mineral and energy resources (6142). The ownership and recording of this category of asset are elaborated on in paragraphs 7.97–7.99.

A1.112 The classification of other naturally occurring assets (6143) is elaborated on. Subcategories for specific classes of other naturally occurring assets are introduced, and their definitions are clarified (see paragraphs 7.100–7.103 and Table 7.7).

A1.113 The category intangible nonproduced assets (6144) is clarified, and subcategories are introduced for contracts, leases, and licenses (61441) and goodwill and marketing assets (61442) (see paragraphs 7.104–7.117).

A1.114 Negotiability is introduced as a distinguishable feature of securities (see paragraph 7.119).

A1.115Market value for valuing debt instruments is elaborated on by providing practical guidance on valuation (see paragraph 7.122).

A1.116Monetary gold and Special Drawing Rights (6201, 6221, 6301, 6321) as financial instruments are elaborated on (see paragraphs 7.125–7.134).

A1.117 The coverage of currency and deposits (6202/6302) is clarified and the valuation of this instrument explained (see paragraphs 7.135–7.142).

A1.118 A description of various types of debt securities (6203/6303) and their recording is introduced in paragraphs 7.143–7.156.

A1.119 The description of loans (6204/6304) is expanded to clarify financial leases (see paragraph 7.158), gold swaps (see paragraph 7.161), and off-market swaps (see paragraph 7.162). The treatment of securities repurchase agreements is clarified as a collateralized loan (see paragraph 7.159). The valuation of loans and treatment of nonperforming loans are presented in paragraph 7.163.

A1.120 The category equity and investment fund shares (6205/6305) is elaborated on to distinguish various types of financial instruments (see paragraphs 7.164–7.177). Investment fund shares (62052/63053) have a specialized role in financial intermediation and are introduced as a separate category (see paragraphs 7.174–7.177).

A1.121 The category for the reserves of insurance, pension and standardized guarantee schemes (6206/6306) is clarified by introducing subcategories for: nonlife insurance technical reserves (see paragraphs 7.183–7.186); life insurance and annuities entitlements (see paragraphs 7.187–7.188); pension entitlements (see paragraphs 7.189–7.198); claims of pension funds on pension managers (see paragraphs 7.199–7.200); and provisions for calls under standardized guarantee schemes (see paragraphs 7.201–7.202).

A1.122 The coverage of insurance, pension, and standardized guarantee schemes (6206/6306) is expanded following recognition of standardized guarantees in a way similar to nonlife insurance and the recognition of claims of pension funds on pension managers (see paragraphs 7.201–7.202 and 7.1997.200, respectively).

A1.123 The category financial derivatives and employee stock options (6207/6307) is clarified by defining the two concepts (see paragraphs 7.204 and 7.221, respectively), describing the types of financial derivatives (see paragraphs 7.209–7.218), and explaining the use of margins (see paragraphs 7.219–7.220).

A1.124 The main balancing item on the balance sheet, net worth (6), is clarified and the relationship with equity for public corporations explained (see paragraphs 7.228–7.233).

A1.125 The items recorded as memorandum items to the balance sheet are expanded to include: net financial worth (see paragraph 7.235), various valuations of gross and net debt (see paragraphs 7.236–7.245), concessional loans and the implicit transfers resulting from loans at concessional interest rates (see paragraph 7.246), arrears (see paragraphs 7.247–7.250), explicit contingent liabilities (see paragraphs 7.251–7.260), net implicit obligations for future social security benefits (see paragraph 7.261), and nonperforming loans (see paragraph 7.262).

A1.126 The classification of the counterparty of financial assets and liabilities by institutional sector is introduced in paragraphs 7.264–7.265 and Table 7.11.

A1.127 The classification of debt liabilities and their corresponding financial assets by maturity is introduced in paragraphs 7.266–7.271 and Table 7.12.

Chapter 8

A1.128 The concept of net investment in nonfinancial assets is introduced in paragraph 8.4, and a distinction drawn with gross investment in nonfinancial assets (i.e., consumption of fixed capital is not taken into account).

A1.129 The treatment of costs of ownership transfer associated with acquiring and disposing of nonfinancial assets (other than inventory) is clarified (see paragraphs 8.6–8.8).

A1.130 The valuation of transactions in nonfinancial assets is elaborated to make a clear distinction between valuation of acquisitions and disposals of: fixed assets (see paragraph 8.9); inventories (see paragraph 8.10); land (see paragraph 8.11); and nonproduced assets other than land (see paragraph 8.11).

A1.131 Time of recording transactions in nonfinancial assets is clarified to be when economic ownership changes. Guidelines for alternatives to use when change of ownership is not obvious are provided (see paragraphs 8.13–8.17).

A1.132 The classification of transactions in nonfinancial assets is identical to the classifications of the same stock positions introduced in Chapter 7 (see paragraph 8.22 and Table 8.1).

A1.33 The treatment of public monuments as buildings and structures (3111) is clarified in paragraph 8.30.

A1.134 Transactions related to land improvements (31114) are introduced as a separate category of transactions in paragraph 8.31.

A1.135 Transactions related to cultivated biological resources (31131) are clarified to include net investment in livestock that are cultivated for the products they yield, and net investment in plantations, orchards, etc. Guidance is provided on the valuation of these transactions (see paragraphs 8.34–8.36).

A1.136 Guidance on the transactions in intellectual property products (31132) is expanded to clarify the valuation of transactions related to research and development (311321) (see paragraph 8.38), mineral exploration and evaluation (311322) (see paragraph 8.39), computer software and databases (311323) (see paragraph 8.40), and entertainment, literary, and artistic originals (311324) (see paragraph 8.41).

A1.137 The treatment of costs of ownership transfer on nonproduced assets other than land (31133) is introduced in paragraph 8.42. Figure 8.1 is included to illustrate the treatment of these costs in the GFS framework.

A1.138 The recording of transactions related to the acquisition and disposals of weapons systems (3114) is introduced in paragraph 8.43.

A1.139 Transactions related to the additions and withdrawals of inventory (312) are elaborated on. A distinction is made between the owner of inventory acting as a producer of goods and services and acting as an owner of assets (see paragraphs 8.44–8.47).

A1.140 The nature and treatment of transactions in all the categories of nonproduced assets are elaborated on (see paragraphs 8.49–8.58).

Chapter 9

A1.141 An explanation of the relationship between transactions and the impact of these on financial assets/liabilities is introduced in paragraph 9.3. Similarly, the impact of net lending/net borrowing on the economy is explained in paragraph 9.5.

A1.142Concessional loans and their treatment in macroeconomic statistics are clarified in paragraph 9.12.

A1.143Arrears are defined in paragraph 9.20, and the recording of transactions related to arrears is described in paragraphs 9.21–9.23.

A1.144 The classification of transactions in financial assets and liabilities by instrument and residence of the counterparty is described in paragraphs 9.24–9.27. The classification by instrument that follows is the same as those described in the balance sheet (Chapter 7).

A1.145 Transactions related to monetary gold and special drawing rights (3201/3301) are clarified in paragraphs 9.28–9.32.

A1.146 For debt securities (3203/3303), transactions related to interest and amortization are elaborated on (see paragraphs 9.36 – 9.43).

A1.147 The impact of recording transactions between the owners of enterprises and the enterprise is clarified. Transactions such as dividends, transfers, membership dues and subscription fees payable to international organizations, and other operations, such as privatization and nationalization, are clarified in the description of transactions in equity (32051/33051) (see paragraphs 9.47–9.55).

A1.148 The recording of the change in value of investment fund shares or units, other than from holding gains and losses, is described in paragraph 9.56.

A1.149 For insurance, pension, and standardized guarantee schemes (3206/3306), the transactions influencing these reserves are elaborated on for each sub-category of the reserves (see paragraphs 9.57–9.69).

A1.150 The coverage of financial derivatives and employee stock options (3207/3307) is expanded to separately identify employee stock options. Transactions related to financial derivatives (32071/33071) are clarified. A distinction is introduced between transactions at inception, on secondary markets, with ongoing servicing, and at settlement (see paragraphs 9.71–9.76). Transactions related to employee stock options (32072/33072) are introduced in paragraph 9.77.

A1.151 The classification of transactions in financial assets and liabilities by sector and residence is introduced in paragraphs 9.85–9.87 and Table 9.2.

A1.152 The classification of transactions in debt liabilities and their corresponding financial assets by maturity is introduced in paragraph 9.88. If analytically useful, the same classification structure could be applied for transactions as what is depicted for stock positions in Table 7.12.

Chapter 10

A1.153 Other economic flows are described and the two components of other economic flows—namely, holding gains and losses and other changes in the volume of assets—are defined in paragraph 10.1.

A1.154 The section on holding gains for particular types of nonfinancial assets is elaborated on. Specific guidance is added on: the difference between unrealized and realized holding gains (see paragraph 10.6); neutral and real holding gains (see paragraph 10.11); estimating the holding gains on fixed assets (see paragraphs 10.13–10.15) and inventories (see paragraphs 10.16–10.17); valuables (see paragraph 10.18); and nonfinancial assets disposed of during the reporting period (see paragraphs 10.19–10.20).

A1.155 The impact of various events on the valuation of financial instruments is elaborated on. Specific guidance is added on: monetary gold and SDRs (see paragraphs 10.21–10.22); financial assets and liabilities with fixed monetary values (see paragraph 10.23); debt securities (paragraphs 10.24–10.29); equity and investment fund shares (see paragraphs 10.30–10.34); insurance, pension, and standardized guarantee schemes (see paragraphs 10.35–10.41); and financial derivatives and employee stock options (see paragraphs 10.42–10.43).

A1.156 Paragraph 10.44 introduces holding gains and losses related to financial instruments denominated in foreign currencies, and debt instruments that do not accrue interest over an unusually long time are discussed in paragraph 10.45.

A1.157 Paragraph 10.46 introduces three events that result in other changes in the volume of assets—namely, the appearance or disappearance of existing resources as economic assets, the effects of external events, and changes in classifications.

A1.158 The appearance or disappearance of financial assets and liabilities from the balance sheet is elaborated on with specific reference to the appearance of public monuments and valuables (see paragraph 10.50). Circumstances under which natural assets, such as subsoil assets, noncultivated biological resources, other natural resources, or land, appear on the balance sheet are explained in paragraph 10.52.

A1.159 The effects of external events on the value of assets and liabilities are described in paragraph 10.59. Details on the recording of these events are provided and include catastrophic losses (see paragraph 10.60), uncompensated seizures (see paragraph 10.62), and other volume changes not elsewhere classified (see paragraph 10.63).

A1.160 Paragraph 10.83 introduces the reclassification of costs of ownership transfer on nonproduced assets other than land, and the consumption of fixed capital relating to these costs. The reclassification is necessary to maintain the integration of stock positions and flows.

A1.161 Paragraph 10.79 elaborates on the reclassifications of negotiable securities necessary due to secondary transactions.

A1.162 The reclassification of monetary gold held in the form of gold bullion when it becomes a reserve asset is introduced as an example of changes in the classification of financial assets and liabilities (see paragraph 10.84).

Cross-Cutting Changes in Terminology

A1.163 The following changes in terminology were made to further clarify the text of the Manual.

  • References to GFS system are replaced with GFS framework—this allows a clear distinction with the 2008 SNA.

  • In the context of GFS, references to accounting principles and periods are replaced by references to statistical guidelines and reporting periods—this allows a clear distinction with the use of the term accounting in source data compilation in the context of public sector accounting.

  • References to flows are replaced by references to economic flows, while it is acknowledged that flows will often be used as a short form for economic flows.

  • References to the balances of assets and liabilities as stocks are replaced by references to stock positions—this allows a clear distinction with the use of the word “stocks” referring to a specific type of financial instrument.

  • References to net acquisition of nonfinancial assets are replaced with references to net investment in nonfinancial assets—the former term is often misinterpreted as including only the acquisition minus disposals of nonfinancial assets, while consumption of fixed capital should also be included in this concept. Similar to what is customary in the case of operating balances, references to net/ gross investment in nonfinancial assets can now be used to make a distinction for the including/ excluding of consumption of fixed capital.

  • References to net lending/borrowing are replaced with references to net lending/net borrowing, to enhance the precision in terminology.

  • References to the Statement of Government Operations are replaced with references to Statement of Operations—this allows the use of this statement for government units as well as public sector units.

  • References to other nonrecurrent taxes on property (1135) in the GFSM 2001 are replaced with references to capital levies (1135)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to property income attributed to insurance policyholders are replaced with references to property income from investment income disbursements—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to the expense for social contributions (212) are replaced by references to employers’ social contributions (212)—this clarifies the economic nature of this item. Similarly, actual social contributions (2121) and imputed social contributions (2122) are replaced with actual employers’ social contributions (2121) and imputed employers’ social contributions (2122), respectively.

  • References to the outlays of government are replaced with references to expenditure—this eliminates confusion with the use of outlays in the OECD/UN classification, which include expense, acquisition of nonfinancial assets, and transactions in financial assets and liabilities.

  • References to nonresidential buildings (61112) are replaced with references to buildings other than dwellings (61112)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to other machinery and equipment (61122) are replaced with references to machinery and equipment other than transport equipment (61122)—this allows the revised GFS category to align with historic data and to subsume the 2008 SNA categories of information, computer, and telecommunications equipment and other machinery and equipment.

  • References to cultivated assets (61131) are replaced with references to cultivated biological resources (61131)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to subsoil assets (6142) are replaced with references to mineral and energy resources (6142)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to intangible fixed assets (61132) are replaced with references to intellectual property products (61132)—this allows the terminology in GFS to align with 2008 SNA terminology. The word “products” is included to make clear that it does not include third-party rights, which are nonproduced assets.

  • References to securities other than shares (6203/6303) are replaced with debt securities (6203/6303)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to shares and other equity (6205/6305) are replaced with equity and investment fund shares (6205/6305)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to insurance technical reserves (6206/6306) are replaced with insurance, pension, and standardized guarantee schemes (6206/6306)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to financial derivatives (6207/6307) are replaced with financial derivatives and employee stock options (6207/6307)—this allows the terminology in GFS to align with 2008 SNA terminology.

  • References to entity when meaning a good, service, nonfinancial asset, etc. are replaced with references to resource—this eliminates the confusion with entities referred to in the context of institutional units.

Changes from the GFSM 1986

Introduction

A1.164 The integrated GFS framework described in the GFSM 2014 represents a substantial modernization and expansion of the framework described in A Manual on Government Finance Statistics, 1986 (GFSM 1986). Major changes have been made to definitions, classifications, balancing items, the coverage of units and economic events to be recorded in the GFS framework, and the timing at which economic events are to be recorded. The GFS framework is also more harmonized with other macroeconomic statistical frameworks than is the GFSM 1986. There are numerous detailed changes within each major topic, but an exhaustive listing of all such changes is beyond the scope of this appendix.

Coverage of Units

A1.165 The focus of the coverage of units in the GFS framework is the general government sector as defined in the 2008 SNA. Its definition is based on the concept of an institutional unit, which is described in Chapter 2. The general government sector consists of all resident government units and all resident nonprofit institutions that are controlled by government. The coverage of the GFSM 1986 is defined on a functional basis rather than a unit basis. It includes all units carrying out a function of government, but, in principle, only those transactions that are directly related to the functions of government are included. By implication, the transactions that do not represent the fulfillment of a fiscal policy are excluded. In particular, all transactions related to the functions of the monetary authority and other depository financial institutions are excluded.

A1.166 Supranational authorities are international organizations that have been endowed with the authority to raise taxes or other compulsory transfers within the territories of the countries that are members of the authority. Despite the fact that supranational authorities fulfill some of the functions of government within each member country, they are always considered nonresident institutional units. As a result, they are not included in the GFS framework for any country. In the GFSM 1986, transactions resulting from governmental functions carried out within a country by supranational organizations are included in the statistics for that country. It is possible, however, to compile statistics for supranational authorities using the GFS framework as if they constituted a separate country and to classify relevant categories of transactions by country.

Time of Recording Economic Events

A1.167 The time at which transactions and other economic flows are recorded is determined by the principles of accrual accounting in the GFS framework. That is, flows are recorded when economic value is created, transformed, exchanged, transferred, or extinguished. In the GFSM 1986, transactions are recorded when cash is received or paid. In general, flows are recorded at an earlier time under the accrual basis than under the cash basis.

A1.168 Recording flows on the accrual basis will automatically capture past-due obligations, such as arrears of debt principal, interest payments, or payments for goods and services. In the GFSM 1986, use of the cash basis means that arrears and changes in the level of arrears are not recorded.

A1.169 The accrual basis of recording permits the difference between the redemption value of a bond or similar security and its issue price to be recorded as interest as it is earned or incurred rather than when the security matures. In the GFSM 1986, the entire difference between the issue and redemption prices is recorded as interest when the security is redeemed.

Coverage of Events

A1.170 The coverage of events in the GFS framework is broader than in the GFSM 1986 because the revised framework includes all economic events that affect assets, liabilities, revenue, or expense, rather than just those represented by a cash transaction. For example, barter and grants of goods and services are included. The GFSM 1986 incorporates in-kind transactions only selectively and as memorandum items.

A1.171 The GFS framework includes other economic flows, which are all flows other than transactions that affect a unit’s stock position of assets, liabilities, and net worth. Other economic flows must be included to fully reconcile the balance sheet at the beginning of an accounting period with the balance sheet at the end of the period. Examples of other economic flows are price changes and the destruction of assets. By definition, other economic flows are noncash events, which means that they are not part of the GFSM 1986.

Valuation

A1.172 Assets and liabilities are valued at current market prices in the GFS framework, including debt securities that may have a different nominal value. Several assets/liabilities are valued at nominal value as proxy for market value—for example, loans generally are not traded and therefore do not have market values. They are recorded at their nominal values. In the GFSM 1986, debt securities are always valued at the amount the government is obligated to pay when the debt matures, which may differ from both the nominal value and the current market value. The GFS framework includes a provision for recording the nominal value of debt securities as a memorandum item.

Gross and Net Recording of Flows

A1.173 The presentation of flows on a gross or net basis is, for the most part, the same in the GFS framework and the GFSM 1986. The major exception pertains to the sales and expenses of market establishments. Generally speaking, a market establishment is a part of a general government unit that is situated in a single location and whose primary activity is to produce and sell goods and services at economically significant prices. In concept, it is possible to compile complete accounting records with respect to an establishment’s productive activity, including sales and the costs of production. In the GFS framework, the sales and costs of production of market establishments are presented on a gross basis as revenue and expense, respectively. In the GFSM 1986, the net value of sales less the costs of production is recorded as revenue if positive and as expenditure if negative.

Integration of Flows and Stocks

A1.174 The GFS framework is fully integrated—that is, the stock position at the end of a reporting period can be derived from the stock position at the beginning of the reporting period and the flows occurring during the period. As a result of this integration, all events that affect the financial performance, financial position, or liquidity situation of the general government sector are included. In the GFSM 1986, the stock positions included are limited to debt liabilities. The changes in the stock position of debt liabilities cannot be reconciled with the flows recorded. Flows in the GFSM 1986 represent only cash flows and will not account for changes in stocks related to flows other than cash, such as discounts allowed, debt assumption, debt forgiveness, etc. Supplementary tables are included that indicate the additional data that would be needed to complete the reconciliation.

Definitions and Classifications

A1.175 Revenue in the GFS framework is an increase in net worth resulting from a transaction. Thus, revenue includes grants but excludes proceeds from disposals of nonfinancial assets. In the GFSM 1986, revenue is defined as the set of all nonrepayable receipts other than grants. Thus, revenue includes proceeds from disposals of nonfinancial assets.

A1.176 Similarly, expense in the GFS framework is a decrease in net worth resulting from a transaction. Purchases of nonfinancial assets do not affect net worth and are not considered expense transactions. The term “expense” replaces “expenditure” from the GFSM 1986 because it is more closely associated with the accrual basis of recording and indicates that transactions in nonfinancial assets are excluded. Expenditure is defined in the GFSM 1986 as the set of all nonrepayable payments and includes purchases of nonfinancial assets.

A1.177 The classifications of revenue are substantially different in the two manuals. Revenue in the GFSM 1986 is classified as tax, nontax, or capital revenue. Grants form a separate, nonrevenue category of receipts. In the GFS framework, revenue is subdivided into taxes, social contributions, grants, and other revenue. In more detail:

  • Taxes exclude social contributions in the revised GFS framework, but include them in the GFSM 1986.

  • Social contributions in the GFS framework include social security contributions, which are classified as taxes in the GFSM 1986, and other social contributions to social insurance schemes operated for the benefit of government employees, which are classified as nontax revenue in the GFSM 1986.

  • Other revenue in the GFS framework includes most of the category of nontax revenue in the GFSM 1986 plus capital transfers, which are classified as capital revenue in the GFSM 1986.

  • Capital revenue in the GFSM 1986 consists of sales of nonfinancial assets and receipts of capital transfers. Sales of assets are not revenue in the GFS framework, but capital transfers are classified as revenue.

A1.178 Expense/expenditure is classified in two ways—by function and by economic type of transaction—in both the GFS framework and the GFSM 1986. The classification by function in both manuals is the Classification of Functions of Government (COFOG) published by the United Nations. The GFS framework incorporates the 2000 edition of COFOG.

A1.179 The classification of expense by economic type in the GFS framework is broadly similar to the corresponding classification in the GFSM 1986. The primary exception is that acquisitions of nonfinancial assets are not considered an expense in the GFS framework. Other changes include the following:

  • Consumption of fixed capital is an expense in the GFS framework. As a noncash expense, it is excluded from the GFSM 1986.

  • Transfer payments are classified by type of payment in the GFS framework. In the GFSM 1986, they are classified by the sector receiving the payment. The major types of transfer payments are subsidies, grants, social benefits, transfers not elsewhere classified, and premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes.

A1.180 A new classification is dedicated to net investment in nonfinancial assets resulting from transactions because they are not classified as revenue or expense in the GFS framework. The classification follows the parallel classification in the 2008 SNA, which is based on the type of asset involved in the transaction. This classification includes consumption of fixed capital because it represents a decline in the value of fixed assets.

A1.181 “Lending minus repayments” is a category of transactions in the GFSM 1986 representing the net acquisition of financial assets for policy purposes, and is classified together with expenditure for the calculation of the overall deficit/surplus. In the GFS framework, these transactions are classified together with other transactions in financial assets. However, if supplementary information is available on policy lending, both the overall balance and policy lending can be calculated from GFS source data, as a fiscal indicator (see annex to Chapter 4, Table 4A.2).

Balancing Items

A1.182 Several new balancing items are introduced in the GFS framework, a consequence of the view that fiscal analysis must include a variety of considerations and that no single measure is sufficient for all purposes. In the GFSM 1986, the analytic framework is focused on a single balancing item, the overall deficit/surplus, although provision is made for other balancing items.

A1.183 The analytic framework of the integrated GFS features several balancing items. The Statement of Operations includes the following:

  • The net operating balance, which is defined as revenue minus expense and represents the change in net worth resulting from transactions

  • Net lending/net borrowing, which is defined as the net acquisition of financial assets minus the net incurrence of liabilities, or, alternatively, as the net operating balance minus the net investment in nonfinancial assets; it is also equal to the gross operating balance minus gross investment in nonfinancial assets.

A1.184 The Statement of Sources and Uses of Cash includes the cash surplus/deficit to indicate the balance of cash flows from government operations and the gross investment in nonfinancial assets. It is similar to the overall deficit/surplus of the GFSM 1986 except that net cash outflows from policy lending (lending minus repayment of policy-related transactions in financial assets or liabilities) are not subtracted.

A1.185 Another balancing item in the GFS framework is the overall balance, defined as net lending/net borrowing adjusted through the rearrangement of transactions in assets and liabilities that are deemed to be for public policy purposes. Notably, policy lending is added to expense while privatization proceeds (including fixed asset sales) are included as transactions in financial items in calculating the overall fiscal balance. It is the equivalent of the overall deficit/surplus in the GFSM 1986, but determined using the accrual basis of recording.

A1.186 Other balancing items in the GFS framework include net worth, net financial worth, the change in net worth, the change in net financial worth (all related to the balance sheet), the change in net worth from other economic flows, the primary balance, and savings. There are no similar balancing items in the GFSM 1986.

Harmonization with Other Statistical Systems

A1.187 The GFS framework is harmonized with other international macroeconomic statistical systems. That is, the basic concepts, definitions, and conventions are the same to the extent possible, given the objective of the GFS framework to provide data that support fiscal analysis. The other statistical manuals with which the GFS framework has been harmonized are the 2008 SNA, the sixth edition of the IMF’s Balance of Payments and International Investment Position Manual, and the IMF’s Monetary and Financial Statistics Manual (in the process of being updated). In contrast, the GFSM 1986 follows the 1968 version of the SNA where possible, but the degree of harmonization is much less, primarily because of the use of the cash basis of recording in the GFSM 1986. Appendix 7 of this Manual provides additional information on linkages of the GFS framework with other macroeconomic statistics.

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