Valuation of Valuation of certain assets and certain assets and

liabilities – the liabilities – the situation in Europesituation in Europe

John VerrinderJohn VerrinderEUROSTATEUROSTAT

BackgroundBackground OECD questionnaire in 2006 – see OECD questionnaire in 2006 – see

document at last Working Partydocument at last Working Party Focus on particular sectors and Focus on particular sectors and

instruments:instruments: General Government and HouseholdsGeneral Government and Households Securities other than shares, Equity, Securities other than shares, Equity,

Insurance reservesInsurance reserves Examine associated data – changes in Examine associated data – changes in

balance sheets, transactions and other balance sheets, transactions and other economic flowseconomic flows

General ObservationsGeneral Observations Definition of “market price”Definition of “market price”

Straightforward in some cases (e.g. quoted Straightforward in some cases (e.g. quoted shares)shares)

By derivation / model where no market existsBy derivation / model where no market exists Balance sheets and TransactionsBalance sheets and Transactions

Many countries report valuing balance sheet Many countries report valuing balance sheet data at market prices, the deriving data at market prices, the deriving transactions at market prices through transactions at market prices through adjustment for revaluationadjustment for revaluation

Counterpart informationCounterpart information Valuation approach from counterpart sourceValuation approach from counterpart source

General GovernmentGeneral Government Liabilities in securities other than sharesLiabilities in securities other than shares

Almost all countries report valuation at Almost all countries report valuation at market pricesmarket prices

Certain instruments may cause difficultiesCertain instruments may cause difficulties Maastricht debt measure = face valueMaastricht debt measure = face value

Assets in shares and other equityAssets in shares and other equity Quoted shares at market pricesQuoted shares at market prices Unquoted shares and other equity generally Unquoted shares and other equity generally

valued at (adjusted or unadjusted) book valued at (adjusted or unadjusted) book valuevalue

HouseholdsHouseholds Use of counterpart data sources very Use of counterpart data sources very

importantimportant Assets in securities other then sharesAssets in securities other then shares

Generally market pricesGenerally market prices Assets in shares and other equityAssets in shares and other equity

Quoted shares at market pricesQuoted shares at market prices Unquoted shares and other equity at (adjusted Unquoted shares and other equity at (adjusted

or unadjusted) book valueor unadjusted) book value Assets in insurance technical reservesAssets in insurance technical reserves

Generally market prices (at least for life Generally market prices (at least for life insurance)insurance)

Revaluations and Other Revaluations and Other changes in volumechanges in volume

Relatively few European countries publish Relatively few European countries publish these data; Eurostat encourages voluntary these data; Eurostat encourages voluntary transmissiontransmission

Importance of these data as a quality Importance of these data as a quality checkcheck

Implied other economic flows very diverse Implied other economic flows very diverse – either very different movements in prices – either very different movements in prices of financial instruments in European of financial instruments in European markets, or possible quality issuesmarkets, or possible quality issues

Next stepsNext steps Complete the information availableComplete the information available Add the information to Eurostat’s Manual Add the information to Eurostat’s Manual

of sources and methods on Financial of sources and methods on Financial Accounts and metadata on Eurostat and Accounts and metadata on Eurostat and OECD websitesOECD websites

Encourage countries to make further Encourage countries to make further efforts on valuation where not at market efforts on valuation where not at market pricesprices

Examine implied other economic flows for Examine implied other economic flows for possible quality issuespossible quality issues