Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community

• 5.33. | | | | --- | --- | | Definition: | The sub-category special drawing rights (SDRs) (F.12) consists of all transactions in SDRs (AF.12) that is international reserve assets created by the International Monetary Fund (IMF) and allocated to its members to supplement existing reserve assets. |

• 5.34. SDRs are not considered liabilities of the IMF, and IMF members to whom SDRs are allocated do not have an actual (unconditional) liability to repay their SDRs allocations. SDRs are held exclusively by official holders, which are normally central banks, and are transferable among participants in the IMF's Special Drawing Rights Department and other holders designated by the IMF (other central banks and certain international agencies). SDRs represent each holder's assured and unconditional right to obtain other reserve assets, especially foreign exchange.

• 5.35. Changes in SDRs held by a monetary authority can arise through transactions in SDRs involving SDR payments to or receipts from the IMF, other participants in the IMF's Special Drawing Rights Department, or other holders. They are recorded in the financial accounts of the monetary authorities and the rest of the world, respectively. Changes in SDRs can also arise from changes in the value of SDRs to be recorded in the revaluation account, or from allocations and cancellations of SDRs to be recorded in the other changes in the volume of assets account (see paragraph 6.27. a).

CURRENCY AND DEPOSITS (F.2)

• 5.36. | | | | --- | --- | | Definition: | The category currency and deposits (F.2) consists of all transactions in currency and deposits (AF.2) that is currency in circulation and all types of deposits in national and in foreign currency. |

• 5.37. Category F.2 is divided into three sub-categories of financial transactions:

• (a) currency (F.21);

• (b) transferable deposits (F.22);

• (c) other deposits (F.29).

The distinction between transferable and non-transferable deposits may be difficult and not very useful analytically in some countries (for the distinction between deposits and loans see paragraphs 5.74 to 5.76).

Currency (F.21)

• 5.38. | | | | --- | --- | | Definition: | The sub-category currency (F.21) consists of all transactions in currency (AF.21) that is notes and coins in circulation that are commonly used to make payments. |

• 5.39. Sub-category AF.21 includes:

• (a) notes and coins in circulation issued by resident monetary authorities;

• (b) notes and coins in circulation issued by non-resident monetary authorities and held by residents.

• 5.40. Sub-category AF.21 does not include:

• (a) notes and coins that are not in circulation, for example, a central bank's stock of own notes or emergency stockpiles of notes;

• (b) commemorative coins that are not commonly used to make payment.

• 5.41. All sectors and the rest of the world may hold currency. It is issued by the central bank, central government, the rest of the world, and in exceptional cases other monetary financial institutions. Currency is deemed to be a liability of the issuing institutional unit.

Transferable deposits (F.22)

• 5.42. | | | | --- | --- | | Definition: | The sub-category transferable deposits (F.22) consists of all transactions in transferable deposits (AF.22) that is deposits (in national or in foreign currency) which are immediately convertible into currency or which are transferable by cheque, banker's order, debit entry or the like, both without any kind of significant restriction or penalty. |

• 5.43. Sub-category AF.22 includes transferable deposits with resident and non-resident monetary financial institutions. They cover transferable deposits between monetary financial institutions, such as deposits which other monetary financial institutions hold with the central bank to satisfy compulsory reserve requirements, insofar as such deposits remain transferable, or working balances and foreign exchange deposits under swap arrangements or between other monetary financial institutions.

• 5.44. All sectors and the rest of the world may hold transferable deposits. They are liabilities predominantly of monetary financial institutions and the rest of the world, and sometimes of general government.

Other deposits (F.29)

• 5.45. | | | | --- | --- | | Definition: | The sub-category other deposits (F.29) consists of all transactions in other deposits (AF.29) that is deposits (in national or in foreign currency) other than transferable deposits. Other deposits cannot be used to make payments at any time and they are not convertible into currency or transferable deposits without any kind of significant restriction or penalty. |

• 5.46. Sub-category AF.29 includes:

• (a) time deposits. These deposits are not immediately disposable because they are subject to a fixed term or a period of prior notice before withdrawal. They include, for example, deposits with the central bank as a form of compulsory reserves to the extent that the depositors cannot realize them without notice or restriction;

• (b) savings deposits, savings books, savings certificates or certificates of deposit all of which are not negotiable, or whose negotiability, while theoretically possible, is very restricted;

• (c) deposits resulting from a savings scheme or contract. These deposits often involve an obligation on the part of the depositor to make regular payments over a given period, and the capital paid and interest accrued do not become available until a fixed term has elapsed. These deposits are sometimes combined with the issue, at the end of the savings period, of loans which are proportionate to the accumulated savings, for the purpose of buying or building a dwelling;

• (d) evidence of deposit issued by savings and loan associations, building societies, credit unions, and the like, sometimes called shares, which are legally, or in practice, redeemable on demand or at relatively short notice;

• (e) repayable margin payments related to financial derivatives which are liabilities of monetary financial institutions (see paragraph 5.81. c);

• (f) short-term repurchase agreements (repos) which are liabilities of monetary financial institutions (see paragraph 5.81. d) ([^E0074]).

• 5.47. Sub-category AF.29 does not include negotiable certificates of deposit and negotiable savings certificates. They are classified in category securities other than shares, excluding financial derivatives (AF.33).

• 5.48. Sub-category AF.29 includes further:

• (a) official ecus held by the central bank. These financial assets consist of the ecus issued by the EMI against monetary reserves from the central banks of the Member States for the purpose of implementing the EMS Agreement. These ecus may be used by the EMI and the central banks of the Member States as a means of settlement and for transactions between them and the EMI. The EMI may grant to the monetary authorities of third countries and to international monetary institutions the status of Other Holders of ecus ([^E0075]);

• (b) financial claims or liabilities of the central bank arising from the very short-term financing mechanism and the short-term monetary support mechanism. They are administered by the EMI ([^E0076]);

• (c) financial claims on the IMF that are components of international reserves and that are not evidenced by loans. They consist of an IMF member's reserve tranche position which arises from the payment of part of a member's subscription in reserve assets and the Fund's net use of the member's currency;

• (d) liabilities to the IMF that are not evidenced by loans. They consist of use of Fund credit within the IMF's General Resources Account; it measures the amount of a member's currency with the IMF that the member is obligated to repurchase.

• 5.49. All sectors and the rest of the world may hold other deposits. They are liabilities predominantly of monetary financial institutions and the rest of the world, but also of other sectors, for example, general government (see paragraphs 5.74 to 5.76).

SECURITIES OTHER THAN SHARES (F.3)

• 5.50. | | | | --- | --- | | Definition: | The category securities other than shares (F.3) consists of all transactions in securities other than shares (AF.3) that is financial assets which are bearer instruments, are usually negotiable and traded on secondary markets or can be offset on the market, and do not grant the holder any ownership rights in the institutional unit issuing them. |

• 5.51. Category AF.3 covers financial assets which are typically represented by documents intended to circulate, and whose nominal value is determined on issue. It includes bills, bonds, certificates of deposit, commercial paper, debentures, financial derivatives, and similar instruments normally traded in the financial markets (for the distinction between securities other than shares and loans see paragraphs 5.77 to 5.80).

• 5.52. All sectors and the rest of the world may hold securities other than shares as financial assets. They are liabilities predominantly of financial and non-financial corporations, central, state and local government, and the rest of the world.

• 5.53. Category F.3 is divided into two sub-categories of financial transaction ([^E0077]):

• (a) securities other than shares, excluding financial derivatives (F.33);

• (b) financial derivatives (F.34).

Securities other than shares, excluding financial derivatives (F.33)

• 5.54. | | | | --- | --- | | Definition: | The sub-category securities other than shares excluding financial derivatives (F.33) consists of all transactions in securities other than shares excluding financial derivatives (AF.33), that is securities other than shares which give the holder the unconditional right to a fixed or contractually determined variable money income in the form of coupon payments (interest) and/or a stated fixed sum on a specified date or dates or startiung from a date fixed at the time of issue. |

• 5.55. Sub-category F.33 may be divided, when relevant, into two sub-positions of financial transactions:

• (a) short-term securities other than shares, excluding financial derivatives (F.331);

• (b) long-term securities other thanshares, excluding financial derivatives (F.332).

Short-term securities other than shares, excluding financial derivatives (F.331)

• 5.56. | | | | --- | --- | | Definition: | The sub-position short-term securities other than shares excluding financial derivatives (F.331) consists of all transactions in short-term securities other than shares excluding financial derivatives (AF.331) that is securities other than shares with a short-term original maturity (see paragraph 5.22) except financial derivatives. |

• 5.57. Short-term securities other than financial derivatives are generally issued at a discount.

• 5.58. Sub-position AF.331 includes:

• (a) treasury bills and other short-term paper issued by general government, including those which are taken up by other monetary financial institutions to satisfy their compulsory reserve requirements;

• (b) negotiable short-term paper issued by financial and by non-financial corporations. A variety of terms are used for such paper including: commercial paper, commercial bills, promissory notes, bills of trade, bills of exchange and certificates of deposit;

• (c) short-term securities issued under long-term underwritten note issuance facilities (NIFs);

• (d) bankers' acceptances (BAs). A BA involves the acceptance by financial corporations of drafts, commercial bills or bills of exchange issued by non-financial corporations and the unconditional promise to pay a specific amount at a specified date. The BA represents an unconditional financial claim on the part of the holder and an unconditional liability on the part of the accepting financial corporation. The financial corporation's counterpart transaction is a transaction in a short-term loan made by the financial corporation to its customer. For this reason it is recommended that BAs be treated as an actual liability of the accepting financial corporation and as a financial asset of the holder, even though no funds may have been exchanged. Flexibility in the application of this recommendation will be required to take national practices and variations in the nature of these instruments into account.

• 5.59. Sub-position AF.331 does not include securities whose negotiability, while theoretically possible, is very restricted in practice and which are therefore classified in the sub-categories other deposits (AF.29) or short-term loans (AF.41) as appropriate (see paragraphs 5.74 to 5.76).

Long-term securities other than shares, excluding financial derivatives (F.332)

• 5.60. | | | | --- | --- | | Definition: | The sub-position long-term securities other than shares excluding financial derivatives (F.332) consists of all transactions in long-term securities other than shares excluding financial derivatives (AF.332) that is securities other than shares with a long-term original maturity (see paragraph 5.22) except financial derivatives. |

• 5.61. Long-term securities are generally issued with coupons.

• 5.62. Sub-position AF.332 includes:

• (a) bearer bonds;

• (b) subordinated bonds, often referred to as subordinated debt;

• (c) bonds with optional maturity dates, the latest of which is more than one year away;

• (d) undated or perpetual bonds;

• (e) floating rate notes (FRNs);

• (f) index-linked securities, where the value of the principal is linked to a price index, the price of a commodity, or to an exchange rate index;

• (g) deep-discount bonds and zero-coupon bonds;

• (h) eurobonds. A bond issue that is placed simultaneously on the market of at least two countries and is denominated in currency which need not be that of either, usually through international syndicates of financial corporations of several countries;

• (i) privately issued bonds, that is bonds restricted by bilateral agreement to certain investors, if they are at least potentially transferable; if not, they are treated as long-term loans;

• (j) loans that have become negotiable de facto. This should be interpreted to mean only if they are traded on an organized secondary market (see paragraph 5.79.);

• (k) securities resulting from the conversion of loans. A conversion involves two financial transactions: the liquidation of the loan and the creation of the new securities;

• (l) debentures and loan stock convertible into shares, whether shares of the issuing corporation or shares of another corporation, so long as they have not yet been converted. A conversion involves two financial transactions: the liquidation of the debenture or loan stock and the share issue. Where separable from the underlying bond, the conversion option should be regarded as a separate financial asset classified in the sub-category financial derivatives (AF.34) (see paragraphs 5.67. a and 5.67. b);

• (m) shares or stocks that pay a fixed income but do not provide for participation in the distribution of the residual value of a corporation on dissolution, including non participating preference shares.

• 5.63. Sub-position AF.332 includes further financial assets issued as part of the securitization of loans, mortgages, credit card debt, accounts receivable and other assets. Sometimes the new security is issued as replacement for the original asset, which is effectively liquidated. Alternatively, the original asset is transferred to another institutional unit and the new securities replace the original asset on the original institutional unit's balance sheet. In this case the original asset should be recorded on the balance sheet of the new institutional unit that holds it.

• 5.64. Sub-position F.332 does not include:

• (a) transactions in securities as part of repurchase agreements. Repurchase agreements are classified in the sub-category other deposits (see paragraph 5.46. f) or in the category loans (see paragraph 5.81. d) depending on the institutional units involved. The stock lent or subject to repurchase does not change balance sheet and remains classified in AF.332;

• (b) transactions in non-negotiable securities. They are classified in sub-category long-term loans;

• (c) transactions in non-negotiable loans, including those which have been sold to a third party, but for which no organized secondary market exists (see paragraph 5.79).

Financial derivatives (F.34)

• 5.65. | | | | --- | --- | | Definition: | The sub-category financial derivatives (F.34) consists of all transactions in financial derivatives (AF.34) that is financial assets based on or derived from a different underlying instrument. The underlying instrument is usually another financial asset, but may also be a commodity or an index. |

• 5.66. Financial derivatives are also referred to as secondary instruments and since risk avoidance is frequently a motivation for their creation, they are also referred to as hedging instruments. Only those secondary instruments which have a market value because they are tradable or can be offset on the market are financial assets in the system and are classified in the sub-category AF.34 (see paragraph 5.05).

• 5.67. Sub-category AF.34 includes:

• (a) options, tradable and over-the-counter (OTC). Options are contingent assets which give their holders the right, but not the obligation, to purchase from (in the case of a call option) or to sell to (in the case of a put option) the issuer of the option (the option writer) financial or non-financial assets (the underlying instrument) at a predetermined price (the strike price) within a given time span (American option) or on a given date (European option). The purchaser of the option pays a premium (the option price) for the commitment of the option writer to sell or to purchase the specified amount of the underlying asset or to provide, on demand of the purchaser, appropriate remuneration. By convention, that commitment is treated as a liability of the option writer because the option price represents the current cost to the option writer of buying out his contingent liability;

• (b) warrants. They are a form of tradable options, which give their holders the right to purchase from the issuer of the warrant (usually a corporation) a certain number of shares or bonds under specified conditions for a designated period of time. There are also currency warrants, the value of which is based on the amount of one currency required to purchase another currency at or before the expiration date of the warrant and cross-currency warrants tied to third currencies. By convention, the issuer of the warrant is considered to have incurred a liability representing the current cost of buying out the issuer's contingent liability;

• (c) futures, but only if they have a market value because they are tradable or can be offset. Futures are commitments to deliver, or to take delivery of, a specified quantity of a standard grade of a commodity, foreign exchange, or a security at a fixed price and for a specified delivery date or period. Futures may also be based on an index rather than a specific financial or non-financial asset;

• (d) swaps, but only if they have a market value because they are tradable or can be offset. Swaps are contractual arrangements between two parties who agree to exchange, over time and according to predetermined rules, streams of payment of the same amount of indebtedness. The most prevalent varieties are interest rate swaps, foreign exchange swaps and currency swaps (also named cross-currency interest swaps). Interest rate swaps involve an exchange of interest payments of different character, such as fixed rate for floating rate, two different floating rates, fixed rate in one currency and floating rate in another, etc. Foreign exchange swaps (including all forward contracts) are transactions in foreign currencies at a rate of exchange stated in advance. Currency swaps involve an exchange of specified amounts of two different currencies with subsequent repayments, which include both interest and repayment flows, over time according to predetermined rules. None of the resulting payments is considered as property income in the system and all settlements are to be recorded in the financial account;

• (e) forward rate agreements (FRAs), but only if they have a market value because they are tradable or can be offset. FRAs are contractual arrangements in which two parties, in order to protect themselves against interest rate changes, agree on an interest to be paid, at a settlement date, based on a notional amount of principal that is never exchanged. The payments are related to the difference between the agreement rate and the prevailing market rate at the time of settlement. These payments are not considered as property income in the system but are to be recorded under the item financial derivatives.

• 5.68. Sub-category AF.34 does not include:

• (a) the underlying instrument upon which the financial derivative is based;

• (b) repayable margin payments related to financial derivatives. They are classified in other deposits (AF.29) (see paragraph 5.46. e) or loans (AF.4) (see paragraph 5.81. c) depending on the institutional units involved;

• (c) secondary instruments, which are not tradable and cannot be offset on the market.

LOANS (F.4)

• 5.69. | | | | --- | --- | | Definition: | The category loans (F.4) consists of all transactions in loans (AF.4) that is financial assets created when creditors lend funds to debtors, either directly or through brokers, which are either evidenced by non-negotiable documents or not evidenced by documents. |

• 5.70. Generally loans are characterized by the following features:

• (a) the conditions governing a loan are either fixed by the financial corporation granting the loan or negotiated by the lender and the borrower directly or through a broker;

• (b) the initiative concerning a loan normally lies with the borrower;

• (c) a loan is an unconditional debt to the creditor which has to be repaid at maturity and which is interest-bearing.

• 5.71. Category F.4 may be divided, when relevant, into two sub-categories of financial transactions;

• (a) short-term loans (F.41);

• (b) long-term loans (F.42).

Short-term loans (F.41)

• 5.72. | | | | --- | --- | | Definition: | The sub-category short-term loans (F.41) consists of all transactions in short-term loans (AF.41) that is loans with a short-term original maturity (see paragraph 5.22) and loans repayable on demand. |

Long-term loans (F.42)

• 5.73. | | | | --- | --- | | Definition: | The sub-category long-term loans (F.42) consists of all transactions in long-term loans (AF.42) that is loans with a long-term original maturity (see paragraph 5.22). |

• 5.74. The distinction between transactions in loans (F.4) and transactions in deposits (F.22, F.29) may often be based on the criterion who is taking the initiative for the transaction. In cases where the initiative is taken by a borrower, the transaction is to be classified in the category loans. In cases where the initiative is taken by a lender, the transaction is to be classified in one of the deposit sub-categories. However, the criterion of who is taking the initiative is often a matter of judgement.

• 5.75. By convention, short-term loans granted to monetary financial institutions, resident or non-resident, are normally classified in one of the deposit sub-categories (AF.22, AF.29), and short-term deposits accepted by institutional units other than monetary financial institutions, resident or non-resident, are normally classified in sub-category short-term loans (AF.41). Therefore, deposits are liabilities predominantly of resident and non-resident monetary financial institutions (see paragraphs 5.44 and 5.49), while monetary financial institutions normally have no short-term loan liabilities in the system.

• 5.76. It might be useful analytically to allow for exceptions to the above conventions. Examples are savings deposits with general government and non-monetary gold swaps between monetary financial institutions (see paragraph 5.81. e) ([^E0078]).

• 5.77. The distinction between transactions in loans (F.4) and transactions in securities other than shares (F.3) can be based on the degree of marketability of the financial assets and its implications.

• 5.78. Security issues consist of a large number of identical documents, each evidencing a round sum, which together form the total amount borrowed. Compared with this, loans are evidenced in most cases by a single document and transactions in loans are carried out between one creditor and one debtor. In the case of syndicated loans, however, the loan is granted by several creditors.

• 5.79. Secondary trade in loans exists. However, individual loans are only traded incidentally. In cases where a loan becomes negotiable on an organized market, it is to be classified in the category securities other than shares. An explicit conversion of the original loan is normally involved (see paragraphs 5.62. j and 5.62. k).

• 5.80. Standard loans are offered in most cases by financial corporations and they are often granted to households. The financial corporations determine the conditions and the households may only choose either to accept or not to accept. Compared with this, the conditions of non-standard loans are usually the result of negotiations between the creditor and the debtor. This is an important criterion which facilitates a distinction between non-standard loans and securities other than shares. In the case of public security issues, the issue conditions are determined by the borrower, possibly after consulting the bank/lead-manager. In the case of private security issues, however, the creditor and the debtor negotiate the issue conditions (see paragraph 5.62. i).

• 5.81. Category AF.4 includes:

• (a) balances on current accounts, for example, intra-group balances between non-financial corporations and their non-resident subsidiaries, but excluding balances which are liabilities of monetary financial institutions classified in the deposit sub-categories;

• (b) balances of employees because of participation in the corporation's profits;

• (c) repayable margin payments related to financial derivatives which are liabilities of institutional units other than monetary financial institutions (see paragraph 5.46. e);

• (d) short-term repurchase agreements (repos) which are liabilities of institutional units other than monetary financial institutions (see paragraph 5.46. f) and long-term repurchase agreements;

• (e) loans arising from non-monetary gold swaps. These are arrangements involving the temporary exchange of non-monetary gold for deposits. Their economic nature is similar to that of a collateralized loan in that the purchaser of the gold is providing to the seller advances backed by the gold for the period of the arrangement and is receiving a return from the fixed price when the gold is repurchased;

• (f) loans which are counterparts of bankers' acceptances (see paragraph 5.58. d);

• (g) financial leasing and hire-purchase agreements ([^E0079]);

• (h) loans to finance trade credits;

• (i) mortgage loans;

• (j) consumer credit;

• (k) revolving credits;

• (l) instalment loans;

• (m) loans paid as a guarantee for fulfilling certain obligations.

• 5.82. Category AF.4 includes further:

• (a) financial claims or liabilities arising from the medium-term financial assistance for Member States' balances of payments. The loans are administered by the EMI ([^E0080]);

• (b) financial claims on the IMF evidenced by loans under the General Arrangements to Borrow or under special borrowing arrangements with members;

Liabilities to the IMF evidenced by loans under the Structural Adjustment Facility, the Enhanced Structural Adjustment Facility, and the Trust Fund.

• 5.83. Category AF.4 does not include:

• (a) other accounts receivable/payable (AF.7), including trade credits and advances (AF.71);

• (b) financial assets or liabilities arising from the ownership of immovable assets, such as land and structures, by non-residents. They are classified in sub-position other equity (AF.513) (see paragraph 5.95. f).

• 5.84. Loans may be financial assets or liabilities of all sectors and the rest of the world. However, monetary financial institutions have normally no short-term loan liabilities in the system.

• 5.85. The sub-categories short-term loans and long-term loans are not divided into sub-positions in the system. Nevertheless, it may be useful analytically to divide, in particular, long-term loans into consumer credit ([^E0081]), mortgage loans ([^E0082]) and other loans.

SHARES AND OTHER EQUITY (F.5)

• 5.86. | | | | | --- | --- | --- | | Definition | : | The category shares and other equity (F.5) consists of all transactions in shares and other equity (AF.5) that is financial assets which represent property rights on corporations or quasi-corporations. These financial assets generally entitle the holders to a share in the profits of the corporations or quasi-corporations and to a share in their net assets in the event of liquidation ([^E0083]) Shares offered for sale but not taken up on issue are not recorded in the system. Shares and other equity are redeemed when purchased by the issuing corporation or when exchanged for the net assets of a corporation in the event of its liquidation. |

• 5.87. Category F.5 is divided into two sub-categories of financial transactions:

• (a) shares and other equity, excluding mutual funds shares (F.51);

• (b) mutual funds shares (F.52).

Shares and other equity, excluding mutual funds shares (F.51)

• 5.88. | | | | --- | --- | | Definition: | The sub-category shares and other equity excluding mutual funds shares (F.51) consists of all transactions in shares and other equity excluding mutual funds shares (AF.51) that is financial assets except mutual fund shares which represent property rights on corporations or quasi-corporations. These financial assets generally entitle the holders to a share in the profits of the corporations or quasi-corporations and to a share in their net assets in the event of liquidation. |

• 5.89. Sub-category F.51 may be divided, when relevant, into three sub-positions of financial transactions:

• (a) quoted shares, excluding mutual funds shares (F.511);

• (b) unquoted shares, excluding mutual funds shares (F.512);

• (c) other equity (F.513).

Quoted shares, excluding mutual funds shares (F.511), and unquoted shares, excluding mutual funds shares (F.512)

• 5.90. | | | | --- | --- | | Definition: | The sub-position quoted shares excluding mutual funds shares (F.511) consists of all transactions in quoted shares excluding mutual funds shares (AF.511) and the sub-position unquoted shares excluding mutual funds shares (F.512) consists of all transactions in unquoted shares excluding mutual funds shares (AF.512). Shares cover beneficial interest in the capital of corporations in the form of securities which in principle are negotiable. Sub-position AF.511 covers those shares with prices quoted on a recognized stock exchange or other form of secondary market, and sub-position AF.512 covers those shares that are not quoted. |

• 5.91. Sub-positions AF.511 and AF.512 include:

• (a) capital shares issued by limited liability companies: these are securities which give the holders the status of joint owners and entitle them both to a share in the total distributed profits and to a share in the net assets in the event of liquidation;

• (b) redeemed shares in limited liability companies: these are shares whose capital has been repaid but which are retained by the holders who continue to be joint owners and to be entitled to a share in the profits left after dividends have been paid on the remaining registered capital and also to a share in any surplus which may be left on liquidation, i.e. the net assets less the remaining registered capital;

• (c) dividend shares issued by limited liability companies: these are securities:
• 1. which, according to country and the circumstances in which they are created, have a variety of names such as founders' shares, profits shares, dividend shares, etc. and which are not part of the registered capital;
• 1. which do not give the holders the status of joint owners strictly speaking (the right to a share in the repayment of the registered capital, the right to a return on this capital, the right to vote at shareholders' meetings, etc.);
• 1. which entitle the holders to a proportion of any profits remaining after dividends have been paid on the registered capital and to a fraction of any surplus remaining on liquidation;

• (d) preferred (preference) stocks or shares which provide for participation in the distribution of the residual value on dissolution of a corporation. These may be quoted or unquoted on a recognized exchange.

• 5.92. Sub-positions AF.511 and AF.512 do not include:

• (a) shares offered for sale but not taken up on issue. They are not recorded in the system;

• (b) debentures and loan stock convertible into shares. They are shown in the accounts under sub-category AF.33 up to the time when they are converted (see paragraph 5.62. l);

• (c) the equity of partners with unlimited liability (unlimited partners) in incorporated partnerships. They are classified in sub-position AF.513;

• (d) government investments in the capital of international organizations which are legally constituted as corporations with share capital. They are classified in sub-position AF.513 (see paragraph 5.95. c).

• 5.93. Sub-positions F.511 and F.512 do not include issues of bonus shares that is the remittance of new shares to shareholders in proportion to their holdings. Such an issue, which changes neither the liability of the corporation vis-à-vis the shareholders nor the proportion of the assets that each shareholder holds in the corporation, does not constitute a financial transaction and is not recorded in the system (see paragraph 6.56). The same applies for share split issues.

Other equity (F.513)

• 5.94. | | | | --- | --- | | Definition: | The sub-position other equity (F.513) consists of all transactions in other equity (AF.513) that is all forms of equity other than those classified in sub-positions AF.511 and AF.512, and in sub-category AF.52. |

• 5.95. Sub-position AF.513 includes:

• (a) all forms of equity in corporations which are not shares:
• 1. the equity in incorporated partnerships subscribed by unlimited partners;
• 1. the equity in limited liability companies whose owners are partners and not shareholders;
• 1. the capital invested in ordinary or limited partnerships recognised as independent legal entities;
• 1. the capital invested in cooperative societies recognized as independent legal entities;

• (b) investments by general government in the capital of public enterprises, whose capital is not divided into shares, which by virtue of special legislation are recognized as independent legal entities (see paragraph 2.16. c);

• (c) government investments in the capital of international and supranational organizations, with the sole exception of the IMF, even if these are legally constituted as companies with share capital (e.g. the European Investment Bank);

• (d) the financial resources of the EMI provided out of contributions by the national central banks ([^E0084]);

• (e) capital invested in financial and non-financial quasi-corporations (see paragraph 2.13. f). The amount of such investments corresponds to new investments (in cash or kind) less any capital withdrawals (see paragraph 4.61);

• (f) the financial assets that non-resident units have against notional resident units (see paragraph 2.15) and vice versa.

Mutual funds shares (F.52)

• 5.96. | | | | --- | --- | | Definition: | The sub-category mutual funds shares (F.52) consists of all transactions in mutual funds shares (AF.52) that is shares issued by a specific type of financial corporation, whose exclusive purpose is to invest the funds collected on the money market, the capital market and/or in real estate. |

• 5.97. Sub-category AF.52 includes the shares issued by financial corporations called, according to country, mutual funds, unit trusts, investment trusts and other collective investment schemes, e.g. UCITS, whether they are open-ended, semi-open or closed-end funds. These shares may be quoted or unquoted. When they are unquoted, they are usually repayable on request, at a value corresponding to their share in the own funds of the financial corporation. These own funds are revalued regularly on the basis of the market prices of their various components.

INSURANCE TECHNICAL RESERVES (F.6) ([^E0085])

• 5.98. Definition : The category insurance technical reserves (F.6) consists of all transactions in insurance technical reserves (AF.6) that is the technical provisions of insurance corporations and (autonomous and non-autonomous) pension funds against policy holders or beneficiaries as laid down in Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings ([^E0086])

• 5.99. Category AF.6 covers:

• (a) net equity of households in life insurance reserves;

• (b) net equity of households in pension funds reserves;

• (c) prepayments of insurance premiums;

• (d) reserves for outstanding claims.

• 5.100. Insurance technical reserves are financial assets:

• (a) for policy holders — in respect of net equity of households in life insurance reserves and in pension funds reserves, and prepayments of insurance premiums;

• (b) for beneficiaries — in respect of reserves for outstanding claims.

• 5.101. Insurance technical reserves are liabilities:

• (a) of life or non-life insurance corporations and autonomous pension funds included in the subsector insurance corporations and pension funds (S.125);

• (b) of non-autonomous pension funds included in the sectors of the institutional units that set them up.

Provisions or similar funds constituted by employers to provide employees with pensions (non-autonomous pension funds) are only included in category AF.6 if they are calculated according to actuarial criteria similar to those used by insurance corporations and autonomous pension funds. Otherwise, these provisions are covered by the shares or other equity issued by the institutional unit that sets up the provisions.

• 5.102. Category AF.6 does not include provisions established by institutional units classified in the sub-sector social security funds (S.1314). In the system, these provisions are not liabilities of the social security funds sub-sector.

• 5.103. Category F.6 is divided into two sub-categories of financial transactions:

• (a) net equity of households in life insurance reserves and in pension funds reserves (F.611);

• (b) prepayments of insurance premiums and reserves for outstanding claims (F.62).

Net equity of households in life insurance reserves and in pension funds reserves (F.61)

• 5.104. | | | | --- | --- | | Definition: | The sub-category net equity of households in life insurance reserves and in pension funds reserves (F.61) consists of all transactions in net equity of households in life insurance reserves and in pension funds reserves (AF.61) that is technical provisions set aside in the corporations and quasi-corporations concerned for the purpose of satisfying, once the established conditions are met, the claims and benefits foreseen. |

• 5.105. Sub-category F.61 is divided into two sub-positions of financial transactions:

• (a) net equity of households in life insurance reserves (F.61);

• (b) net equity of households in pension funds reserves (F.612).

Net equity of households in life insurance reserves (F.611)

• 5.106. | | | | --- | --- | | Definition: | The sub-position net equity of households in life insurance reserves (F.611) consists of all transactions in net equity of households in life insurance reserves (AF.611) that is technical provisions against outstanding risks and technical provisions for with-profit insurance that add to the value on maturity of with-profit endowments or similar policies. |

• 5.107. Sub-position AF.611 includes life insurance provisions, provisions for bonuses and rebates and technical provisions for life insurance policies where the investment risk is borne by the policyholders as defined in Articles 27, 29 and 31 of Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings.

• 5.108. Transactions in net equity of households in life insurance reserves consist of additions less reductions, which are to be distinguished from nominal holding gains or losses on the funds invested by insurance corporations (see paragraph 6.57).

Additions consist of:

• (a) actual premiums earned during the current accounting period;

• (b) plus premium supplements corresponding to the income from the investment of the provisions, which is attributed to policy holding households;

• (c) less service charges for life insurance.

Reductions consist of:

• (a) amounts due to holders of endowment and similar insurance policies when they mature and amounts due to beneficiaries from deaths of insured persons;

• (b) plus payments due on policies that are surrendered before maturity.

• 5.109. Life insurance reserves are financial assets of resident or non-resident households and liabilities of resident or non-resident insurance corporations.

In the case of a group insurance taken out, for example, by a corporation on behalf of its employees, the employees, but not the employer, are deemed to be the creditors, since they are considered as the real policy holders.

Net equity of households in pension funds reserves (F.612)

• 5.110. | | | | --- | --- | | Definition: | The sub-position net equity of households in pension funds reserves (F.612) consists of all transactions in net equity of households in pension funds reserves (AF.612) that is technical provisions held by autonomous and non-autonomous pension funds established by employers and/or employees or groups of self-employed to provide pensions for employees or self-employed. |

• 5.111. Transaction in net equity of households in pension funds reserves consist of additions less reductions, which are to be distinguished from nominal holding gains or losses on the funds invested by pension funds (see paragraph 6.57).

Additions consist of:

• (a) actual contributions into pension funds payable by employees, employers, self-employed or other institutional units on behalf of individuals or households with claims on the funds and earned during the current accounting period;

• (b) plus contribution supplements corresponding to the income earned from the investment of the provisions of the pension funds, which are attributed to participating households;

• (c) less service charges during the period for managing the funds.

Reductions consist of:

• (a) social benefits equal to the amounts payable to retired persons or their dependants in the form of regular payments or other benefits;

• (b) plus social benefits which consist of any lump sums payable to persons when they retire.

• 5.112. Transactions in net equity of households in pension funds reserves do not include funds transferred from non-autonomous pension funds to autonomous pension funds, classified in the subsector insurance corporations and pension funds (S.125), as a result of the conversion of one fund into another. This event is to be recorded in the category changes in sector classification and structure (K.12.1) of the other changes in the volume of assets account (see paragraph 6.30).

• 5.113. Pension funds reserves are financial assets of resident or non-resident households but not financial assets of the institutional units that manage them.

Prepayments of insurance premiums and reserves for outstanding claims (F.62)

• 5.114. | | | | --- | --- | | Definition: | The sub-category prepayments of insurance premiums and reserves for outstanding claims (F.62) consists of all transactions in prepayments of insurance premiums and reserves for outstanding claims (AF.62) that is technical provisions established by insurance corporations and (autonomous and non-autonomous) pension funds for: (a) the amount representing that part of gross premiums written which is to be allocated to the following accounting period (prepayments of insurance premiums); (b) the total estimated ultimate cost of settling all claims arising from events which have occurred up to the end of the accounting period, whether reported or not, less amounts already paid in respect of such claims (provisions for outstanding claims). |

• 5.115. Prepayments of insurance premiums result from the fact that insurance premiums are, in general, due to be paid at the start of the period covered by the insurance, and this period does not normally coincide with the accounting period itself. Therefore, at the end of the accounting period when the balance sheet is drawn up, parts of the insurance premiums payable during the accounting period are intended to cover risks in the subsequent period. The prepayments of insurance premiums are determined on the basis of the proportion of the risks involved in relation to time for the period remaining to run until the contract expires.

In the financial account, the prepayments of insurance premiums recorded between policy holders and insurance corporations consist of those parts of the premiums that are payable in the current accounting period and that are intended to cover risks outstanding during the following period.

• 5.116. The prepayments of insurance premiums are financial assets of the policy holders. If these prepayments relate to life insurance, the policy holders are resident or non-resident households. If they relate to non-life insurance, the policy holders may belong to any sector of the economy or to the rest of the world. The insurance premiums or social contributions paid by the policy holders may be taken as the criterion to distribute the prepayments of insurance premiums among the sectors of the economy and the rest of the world.

• 5.117. Reserves for outstanding claims are held by insurance corporations in order to cover the amounts they expect to pay out in respect of claims that are not yet settled, for example, because they are disputed. Valid claims accepted by insurance corporations are considered due for payment when the event that gives rise to the claim occurs, however long it takes to settle disputed claims.

• 5.118. Reserves for outstanding claims are financial assets of the beneficiaries that may belong to any sector of the economy or to the rest of the world.

• 5.119. Sub-category AF.62 includes provisions for unearned premiums, other technical provisions, claims outstanding and equalization provisions as defined in Articles 25, 26, 28 and 30 of Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings.

OTHER ACCOUNTS RECEIVABLE/PAYABLE (F.7)

• 5.120. | | | | --- | --- | | Definition: | The category other accounts receivable/payable (F.7) consists of all transactions in other accounts receivable/payable (AF.7) that is financial claims which are created as a counterpart of a financial or a non-financial transaction in cases where there is a timing difference between this transaction and the corresponding payment. |

• 5.121. Category F.7 includes transactions in financial claims which stem from the early or late payment for transactions in goods or services, distributive transactions or secondary trade in financial assets. They consist of the counterpart transactions in case payment is due and not yet paid. Debts arising from income accruing over time and arrears are also classified under this category.

• 5.122. Category F.7 does not include:

• (a) statistical discrepancies other than timing differences between transactions in goods and services, distributive transactions or financial transactions and the corresponding payments;

• (b) items about which there is not enough information for them to be classified. The classification should be based on whatever information is available;

• (c) items about whose nature nothing whatsoever is known;

• (d) the miscellaneous item of the balance of payments described as net errors and omissions;

• (e) early or late payment (inclusive of arrears) in case of the creation of financial assets or the redemption of liabilities other than classified in category F.7. They remain classified in their category.

• 5.123. Category F.7 is divided into two sub-categories of financial transactions:

• (a) trade credits and advances (F.71);

• (b) other accounts receivable/payable, excluding trade credits and advances (F.79).

Trade credits and advances (F.71)

• 5.124. | | | | --- | --- | | Definition: | The sub-category trade credits and advances (F.71) consists of all transactions in trade credits and advances (AF.71) that is financial claims arising from the direct extension of credit by suppliers and buyers for goods and services transactions and advance payments for work that is in progress or to be undertaken and associated with such transactions. |

• 5.125. Sub-category AF.71 includes:

• (a) financial claims relating to the delivery of goods or services where payment has not taken place;

• (b) trade credit accepted by factoring corporations except when regarded as a loan;

• (c) rent of buildings accruing over time;

• (d) arrears concerning the payment of goods and services, when not evidenced by a loan.

• 5.126. Sub-category AF.71 does not include loans to finance trade credits. They are classified in category AF.4 (see paragraph 5.81. h).

• 5.127. Trade credits and advances may be financial assets or liabilities of all sectors and the rest of the world.

Other accounts receivable/payable, excluding trade credits and advances (F.79)

• 5.128. | | | | --- | --- | | Definition: | The sub-category other accounts receivable/payable excluding trade credits and advances (F.79) consists of all transactions in other accounts receivable/payable excluding trade credits and advances (AF.79) that is financial claims which arise from timing differences between distributive transactions or financial transactions on the secondary market and the corresponding payment. It includes also financial claims due to income accruing over time. |

• 5.129. Sub-category AF.79 includes financial claims created as a result of the timing difference between accrued transactions and payments made in respect of, for example:

• (a) taxes;

• (b) social contributions;

• (c) wages and salaries;

• (d) rents on land and subsoil assets;

• (e) dividends;

• (f) interest;

• (g) transactions in financial assets on the secondary market.

The amounts of taxes and social contributions payable to the general government to be included under AF.79 should not include the part of these taxes and social contributions which is unlikely to be collected, and which therefore represents a general government claim that has no real value.

• 5.130. Preferably, the counterpart financial transaction of interest accruing on financial assets (see paragraph 5.17) should be recorded as being reinvested in that financial asset. The recording of interest will, however, have to follow national practices. If the interest accrual is not recorded as being reinvested in the financial asset, it should be classified in sub-category F.79.

• 5.131. At the date due for payment of interest, two financial transactions are recorded (see paragraph 5.17): firstly, in the event of payment, a transaction in the financial asset used for payment, or, in the event of non-payment, an increase of interest arrears to be recorded in sub-category F.79; secondly, the counterpart financial transaction reducing the net financial claim of the creditor against the debtor.

MEMORANDUM ITEM: DIRECT FOREIGN INVESTMENT (F.m)

• 5.132. Definition : Direct foreign in vestment (F.m) consists of all transactions in direct foreign investment (AF.m) that is investment involving a long-term relationship reflecting a lasting interest of a resident institutional unit in one economy (‘direct investor’) in an institutional unit resident in an economy other than that of the investor (‘direct investment enterprise’). The direct investor's purpose is to exert a significant degree of influence on the management of the enterprise resident in the other economy. Direct investment involves both the initial transaction between the direct investor and the direct investment enterprise and all subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated ([^E0087])

• 5.133. Transactions in financial assets and liabilities that constitute direct foreign investment are to be recorded under the appropriate categories of financial transactions, i.e. loans (F.4), shares and other equity (F.5) and other accounts receivable/payable (F.7). However, the amounts of direct foreign investment included within each of those categories should also be recorded separately as a memorandum item.

ACCOUNTING RULES FOR FINANCIAL TRANSACTIONS

VALUATION

• 5.134. Financial transactions are recorded at the transaction values, that is, the values in national currency at which the financial assets and/or liabilities involved are created, liquidated, exchanged or assumed between institutional units, or between them and the rest of the world, on the basis of commercial considerations only.

• 5.135. Financial transactions and their financial or non-financial counterpart transactions are recorded at the same transaction value. Three possibilities can be envisaged:

• (a) the financial transaction is a transaction in means of payment in national currency (see paragraphs 5.04 and 5.23): the transaction value is equal to the amount of the means of payment exchanged;

• (b) the financial transaction is a transaction in means of payment in foreign currency (see paragraphs 5.04 and 5.23) and the counterpart transaction is not a transaction in means of payment in national currency: the transaction value is equal to the amount of the means of payment exchanged converted into national currency applying the market rate prevailing when the payment takes place;

• (c) neither the financial transaction nor its counterpart transaction is a transaction in means of payment (see paragraph 5.04): the transaction value is identified with the current market value of the financial assets and/or liabilities involved.

• 5.136. The transaction value refers to a specific financial transaction and its counterpart transaction. In concept, the transaction value is to be clearly distinguished from a value based on a price quoted in the market, a fair market price, or any price that is intended to express the generality of prices for a class of similar or even identical financial assets and/or liabilities. However, in cases where the counterpart transaction of a financial transaction is, for example, a transfer and therefore the financial transaction is undertaken other than for purely commercial considerations, the transaction value is identified with the current market value of the financial assets and/or liabilities involved.

• 5.137. The transaction value does not include service charges, fees, commissions, and similar payments for services provided in carrying out the transactions; these are to be recorded as payments for services. Taxes on financial transactions are also excluded and treated as taxes on services within taxes on products. When a financial transaction involves a new issue of liabilities, the transaction value is equal to the amount of the liability incurred exclusive of any prepaid interest. Similarly, when a liability is extinguished, the transaction value for both creditor and debtor must correspond to the reduction of the liability.

Special valuation criteria for some sub-categories of financial transactions

5.138.   Securities other than shares, excluding financial derivatives (F.33)

• (a) When securities are marketed by issuers through underwriters or other intermediaries and then sold at higher prices to final investors, the financial assets and liabilities are to be recorded at the values paid by the investors. The differences between the amounts paid by the investors and those received by the issuers should be treated as service payments paid by the issuers to the underwriters.

• (b) Security issues are recorded at the issue value. When securities are issued at a discount or at a premium, the proceeds to the issuer at the time of sale, and not the face value, are recorded in the accounts as the actual issue value. The difference between the issue value and the redemption value is treated as interest that is accrued over the life of the security.

• (c) Deep-discount or zero-coupon bonds should be treated as securities issued at a discount. The interest is accrued over the life of the bonds and treated as being reinvested in such bonds (see paragraph 4.46).

• (d) When long-term securities are issued at a discount, which is not significant, the difference between the issue value and the redemption value can be imputed at the date of issue.

• (e) In case of securities where the value of the principal is linked to a price index, the price of a commodity or an exchange rate index, the issue price of the security is recorded as the principal and the index payment paid periodically and/or at maturity is treated as interest that is accrued over the life of the security, and the counterpart is recorded as reinvestment in securities other than shares in the financial account.

• (f) Investment in securities in circulation on the secondary market is recorded at the stock exchange quotation or market price.

• (g) Securities which have reached maturity are recorded at redemption value, which includes redemption premiums but excludes payments by lottery and savings premiums, which are recorded as interest.

• (h) The conversion of bonds into shares should be treated as a sale of bonds and a purchase of shares (see paragraph 5.62. l). The transaction value is to be derived from the market value of the bonds disposed of, possibly implying a holding gain or loss on shares to be recorded in the revaluation account (see paragraph 6.54).

5.139.   Financial derivatives (F.34)

• (a) Secondary trade in options and closing out options prior to delivery involve financial transactions. If an option proceeds to delivery, it may be exercised or not exercised. In cases where the option is exercised, there may be a payment from the option writer to the option holder equal to the difference between the prevailing market price of the underlying asset and the strike price, or, alternatively, there may be the acquisition or sale of the underlying financial or non-financial asset recorded at the prevailing market price and a counterpart payment between the option holder and the option writer equal to the strike price. The difference between the prevailing market price of the underlying asset and the strike price is in both cases equal to the liquidation value of the option, that is the option price at delivery. In cases where the option is not exercised, no transaction takes place. However, the option writer makes a holding gain and the option holder makes a holding loss to be recorded in the revaluation account.

• (b) Financial derivatives other than options typically involve contracts where two parties agree to exchange specified assets, either real or financial, at some future point or points in time. The transactions which are to be recorded against such financial derivatives include any trading in the contracts as well as the net value of settlements made. There may also be the need to record transactions associated with the establishment of derivative contracts. However, in many cases, the two parties will enter into a derivative contract without any payment by one party to the other; in these cases the value of the transaction establishing the contract is nil and no entry is actually required in the financial account.

• (c) Any explicit commissions paid or received from brokers or intermediaries for arranging options, futures, swaps, and other derivatives contracts are treated as payments for services in the appropriate accounts. The parties to a swap are not considered to be providing a service to each other, but any payment to a third party for arranging the swap should be treated as payment for a service. Under a swap arrangement, where principal amounts are exchanged the corresponding flows are to be recorded as transactions in the underlying instrument; streams of other payments (excluding commissions) are to be recorded under the item financial derivatives (F.34). While the premium paid to the seller of an option can conceptually be considered to include a service charge, in practice it is usually not possible to distinguish the service element. Therefore, the full price is to be recorded as acquisition of a financial asset by the buyer and as incidence of a liability by the seller.

• (d) Where swap contracts involve an exchange of principal amounts, for example as occurs with currency swaps, the initial exchange is to be recorded as a transaction in the underlying instrument exchanged and not a transaction in financial derivatives (F.34). Where contracts do not involve an exchange of principal, no transaction is recorded at inception. In both cases, implicitly, a financial derivative with zero initial value is created at that point. Subsequently, the value of a swap will be equal to:
• 1. for principal amounts, the current market value of the difference between the expected future market values of the amounts to be re-exchanged and the amounts specified in the contract;
• 1. for other payments, the current market value of the future streams specified in the contract. Changes in the value of the derivative over time should be recorded in the revaluation account. Subsequent re-exchanges of principal will be governed by the terms and conditions of the swap contract and may imply financial assets being exchanged at a price different from the prevailing market price of such assets. The counterpart payment between the parties to the swap contract will be that specified within the contract. The difference between the market price and the contract price is then equal to the liquidation value of the asset/liability as it applies on the due date and should be recorded as a transaction in financial derivatives (F.34). On the contrary, other flows under a swap arrangement are recorded as a transaction in financial derivatives for the amounts effectively exchanged. All transactions in financial derivatives must match the total revaluation gain or loss throughout the duration of the swap contract. This treatment is analogous to that set out with respect to options, which proceed to delivery (see point (a)). For an institutional unit, a swap or a forward rate agreement is recorded under the item financial derivatives on the assets side where it has a net asset value, positive net payments increasing the net value (and conversely). Where the swap has a net liability value, it is recorded on the liabilities side, negative net payments increasing the net value (and conversely).

Changes in the value of the derivative over time should be recorded in the revaluation account.

Subsequent re-exchanges of principal will be governed by the terms and conditions of the swap contract and may imply financial assets being exchanged at a price different from the prevailing market price of such assets. The counterpart payment between the parties to the swap contract will be that specified within the contract. The difference between the market price and the contract price is then equal to the liquidation value of the asset/liability as it applies on the due date and should be recorded as a transaction in financial derivatives (F.34). This final derivative transaction and any final net interest flow must match the total revaluation gain or loss throughout the duration of the swap contract. This treatment is analogous to that set out with respect to options which proceed to delivery (see (a) above).

5.140.   Shares and other equity, excluding mutual funds shares (F.51)

• (a) New shares are recorded at issue value, which normally corresponds to nominal value plus the issue premium.

• (b) Transactions in shares in circulation are to be recorded at their transaction value. When it is not known, it may be approximated by the stock exchange quotation or market price for quoted shares and by the book value for unquoted shares.

• (c) Scrip dividend shares are valued at the price implied by the issuer's dividend proposal.

• (d) Issues of bonus shares are not recorded in the system (see paragraph 5.93). However, in cases where the issue of bonus shares involves changes in the total market value of the shares of a corporation, the changes are to be recorded in the revaluation account (see paragraph 6.56).

• (e) The transaction value of other equity (F.513) is the amount of funds transferred by the owners to their corporations or quasi-corporations. In some cases, funds can be transferred by assuming liabilities of the corporation or quasi-corporation.

5.141.   Mutual funds shares (F.52)

• (a) Transactions in mutual funds shares include the value of net contributions to a fund.

• (b) Property income received by mutual funds, net of a part of management costs, and assigned to shareholders, even though it is not distributed, has a counterpart entry in the financial account under mutual funds shares. The effect is that property income is reinvested.

TIME OF RECORDING

• 5.142. Financial transactions and their counterpart transactions are to be recorded at the same point in time.

• 5.143. When the counterpart of a financial transaction is a non-financial transaction, both are recorded at the time the non-financial transaction takes place. For example, when sales of goods or services give rise to a trade credit, this financial transaction is to be recorded when the entries are made in the relevant non-financial account.

• 5.144. When the counterpart of a financial transaction is also a financial transaction, three possibilities can be envisaged:

• (a) both financial transactions are transactions in means of payment (see paragraph 5.04): they are recorded at the time the first payment is made;

• (b) only one of the two financial transactions is a transaction in means of payment (see paragraph 5.04): they are recorded at the time payment is made;

• (c) neither of the two financial transactions is a transaction in means of payment (see paragraph 5.04): they are recorded at the time the first financial transaction takes place.

COMPILING FINANCIAL TRANSACTIONS FROM CHANGES IN BALANCE SHEETS

• 5.145. In cases where basic statistics on financial transactions are not available, financial transactions may be compiled based on changes in financial balance sheets, that is changes in the amount of financial assets held and liabilities outstanding between the closing balance sheet and the opening balance sheet. The difference between the amount of financial transactions and the changes in financial balance sheets consists of entries in the revaluation account and the other changes in the volume of assets account.

Annex 5.1

Link with measures of money

• 5.146. This Annex explains a method which allows measures of money to be shown in the balance sheets and the financial accounts.

• 5.147. The definitions of the measures of money applied vary among countries and over time. In addition, these definitions are not necessarily based on the classification of financial assets and the classification of sectors as defined in the system. Therefore, measures of money are not defined in the system.

• 5.148. The following problems appear in integrating measures of money in the balance sheets and the financial accounts. Firstly, the measures of money may be composed of components which do not correspond with the classes, that is to say the categories, sub-categories and sub-positions, of financial assets and liabilities as defined in the system. For example, a measure of money may include only a sub-class of the category currency and deposits (AF.2). The sub-class may be defined by a reference to maturity and/or by a reference to the institutional units holding or issuing currency and deposits. Secondly, the measures of money may imply money-creating, money-holding and money-neutral sectors which cannot be composed of the sectors and subsectors as defined in the system. Thirdly, the data sources used for compiling monetary aggregates may in practice differ from the data sources used for compiling the balance sheets and the financial accounts of the sectors and the rest of the world.

• 5.149. In order to identify a measure of money MX in the balance sheets or the financial accounts, it may be necessary to subdivide any class i of financial assets and liabilities defined in the system into two sub-classes:

• (a) MXi : sub-class of financial assets (liabilities) classified in class i and included in the measure of money MX;

• (b) MX-i : sub-class of financial assets (liabilities) classified in class i but not included in the measure of money MX.

In practice, some classes of financial assets (liabilities) do not contribute even to broad measures of money, for example, monetary gold and SDRs (AF.1) or insurance technical reserves (AF.6). Therefore, MX1 and MX6 would be zero, that is to say a breakdown of AF.1 in MX and MX-1 or of AF.6 in MX6 and MX-6 is not necessary.

• 5.150. The measure of money MX is equal to the sum of all sub-classes of financial assets MXi of the money-holding sectors and MX is equal to the sum of all sub-classes of liabilities MXi of the money-creating sectors.