1

Valuation of Assets and Liabilities in Financial Accounts

2006 WPFSItem 1

François LequillerOECD secretariat

2

RECENT HOLDING GAINS/LOSSES

Recent period: very large movements in potential holding gains of households

2001-2006: Increase in housing prices

1995-2000: Increase then decrease of stock market prices

Example of France: the amount of holding gains is the same magnitude as Gross Household Disposable Income

3

France: Households’ Revaluations

Housing…but also Financial assets

2002 2003 2004 2005 Dwellings (including land) 323.8 447.2 670.2 706.5 Financial assets -88.7 67.2 40.9 135.1 Securities other than shares -6.2 2.6 -1.4 -2.0 Shares and other equity -60.8 55.4 34.6 114.5 Insurance technical reserves -21.6 9.2 7.7 22.5 Total revaluation 146.5 581.6 752.0 976.7 Gross Household Disposable Income 970.4 1015.5 1043.6 1086.8

4

France: Income and holding gains (changes in %)

France: Alternative Definitions of Income (changes in % )

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

1997 1998 1999 2000 2001 2002 2003 2004 2005

Gross Household Disposable Income

GHDI plus total revaluation

GHDI plus revaluation financ ial assets

5

Holding gains are extracted from financial accounts

2002 2003 2004 2005 Stocks end year Shares and other equity 623.1 705.0 746.1 881.7 Transactions Shares and other equity 26.3 26.5 6.5 21.1 Revaluation (and OVC) : obtained as difference between two end year stocks and corresponding transaction Shares and other equity -60.8 55.4 34.6 114.5

6

Valuation of financial assets and liabilities

Information on methods used essential for economists The SNA is not very prescriptive But (naive) users think that stocks are at market prices and

flows do not contain revaluations Methods can differ between countries

Essential: inform users of the exact method used for valuing financial accounts information in the OECD database

Main concern: Households and General Government

7

Survey on valuation methods

OECD has surveyed non EU OECD countries + France France has accepted to test the survey Co-organised with Eurostat, who will survey EU countries Short survey focused on:

– Households – General government

x– F3 Securities other than shares– F5 Shares and other equity– F6 Life insurance reserves

Responses will be loaded in the public OECD Metastore database

8

First results

See Tables 2 and 3 of paper Responses from France, USA, Canada, Korea, Japan Main differences

– F3 Securities: US is conceptually at nominal value while other countries have a combination of market and nominal value, essentially based on the existence of secondary markets

– F5 Shares: All quoted shares are at market value, most countries try to revalue unquoted shares (but differences exist for government enterprises)

– F6 Insurance reserves: sources are at fair value, so market price is used (some countries include revaluations in their transactions).

9

Future work

EU countries will be contacted by Eurostat

Countries are given the French response as example

Countries could be asked for some clarifications

OECD will load responses in the public OECD database for financial accounts

Hopefully, termination end 2006

THANK YOU