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Definitions

Definitions

Financial assets

Financial assets are obligations over which ownership rights are enforced by institutional units, individually or collectively, and from which owners may derive economic benefits by holding them, or using them over a period of time. Financial assets differ from other assets in that there is a counterpart liability on the part of another institutional unit. The exceptions to this rule are for monetary gold and Special Drawing Rights.

Financial liabilities

Financial liabilities are obligations over which ownership rights are enforced by institutional units, individually or collectively, and which are economic costs to the units holding them. All financial liabilities have a counterpart financial asset, which is held by another institutional unit.

Financial instrument

The term financial instrument refers to both the asset or liability aspect of a category in the classification.

Instruments of a contingent nature, such as one-off loan guarantees, are not considered financial assets as the transaction will only be created if at least one particular event occurs. Should that event occur, then the transaction is recorded, though it is no longer contingent. Therefore contingent instruments are not included in this classification. Corporations may set aside provisions which are funds to cover unexpected events or cover default by their customers. Provisions are not financial liabilities as there is no exchange or contractual relationship between institutional units. Provisions remain part of the net worth of a corporation.

Operational issues

There may be some issues with measuring asset groups at the third level of the classification. This is due to respondents having difficulty classifying some financial instruments to this level of detail. Some classes of instruments may be statistically insignificant and therefore difficult to collect data for in the context of New Zealand’s economy.

Explanatory notes

Basis of ownership

The transfer of financial instruments from one institutional unit to another is recorded when the economic ownership of the instrument changes from the first unit to the second. The Statistical Classification of Financial Assets and Liabilities 2013 is consistent with the System of National Accounts 2008, in which a distinction is made between legal ownership and economic ownership.

The legal owner is the institutional unit entitled in law to the benefits embodied in the asset’s value. Every financial instrument has both a legal owner and an economic owner, though in many cases an institutional unit will have both forms of ownership over an instrument. Where they do not, the legal owner has handed responsibility for the risk involved in using the financial instrument to the economic owner, along with associated benefits.

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