Valuation of certain assets and liabilities

1
Valuation of certain assets and liabilities the
situation in Europe

• John Verrinder
• EUROSTAT

2
Background

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

3
General Observations

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

4
General Government

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

5
Households

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

6
Revaluations and Other changes in volume

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

7
Next steps

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