TRANSACTIONS IN EXISTING GOODS

3.147 Definition:

Existing goods are goods that already have had a user (other than inventories).

3.148 Existing goods include:

  1. existing buildings and other fixed capital goods which are sold by producer units to other units: 
    1. to be re-used as such;
    2. to be demolished or broken up; the resulting products usually become raw materials (e.g. scrap iron) used for the production of new goods (e.g. steel).
  2. valuables which are sold from one unit to another;
  3. existing consumer durables which are sold by households or military authorities to other units:
    1. to be re-used as such;
    2. to be broken up and converted into demolition materials.
    3. existing non-durable goods (e.g. waste paper, rags, old clothes, old bottles, etc.) which are sold by any unit, either to be used again or to become raw material for the manufacture of new goods (recovered goods).
3.149 The transfer of existing goods is recorded as a negative expenditure (acquisition) for the seller and a positive expenditure (acquisition) for the purchaser.

3.150 This has the following consequences:

  1. when the sale of an existing fixed asset or valuable takes place between two resident producers, the positive and negative values recorded for gross fixed capital formation cancel out for the economy as a whole except for the costs of ownership transfer;
  2. when an existing immovable fixed asset (e.g. a building) is sold to a non-resident, by convention the latter is treated as purchasing a financial asset, i.e. the equity of a notional resident unit. This notional resident unit is then deemed to purchase the fixed asset. As a consequence; the sale and purchase of the fixed asset takes place between residents;
  3. when an existing movable fixed asset, such as a ship or aircraft, is exported, no positive gross fixed capital formation is recorded elsewhere in the economy to offset the seller's negative gross fixed capital formation;
  4. some durable goods, such as vehicles, may be classified as fixed assets or as consumer durables depending upon the owner and the purpose for which they are used. If, therefore, the ownership of such a good is transferred from an enterprise to a household to be used for final consumption, negative gross fixed capital formation is recorded for the enterprise and positive consumption expenditure for the household. In the less common case where ownership of such a good is transferred from a household to an enterprise, for the household negative final consumption expenditure should be recorded and for the enterprise positive gross fixed capital formation;
  5. transactions in existing valuables are to be recorded as the acquisition of a valuable (positive gross capital formation) by the purchaser and as the disposal of a valuable (negative gross capital formation) by the seller. In case of a transaction with the Rest of the World, the import or export of a good is to be recorded (see paragraph 3.135). The sale of a valuable by a household is not to be recorded as negative final consumption expenditure;
  6. when existing military durables are sold abroad by the government, this should be recorded as an export of goods and as negative intermediate (and final) consumption by the government.
3.151 For the selling costs incurred by the former owner (costs of ownership transfer), a holding loss has to be recorded. A similar entry is to be made for the part of his original acquisition costs that has not been written down as consumption of fixed capital.

3.152 Transactions in existing goods should be recorded at the time ownership changes. The valuation principles to be applied are those appropriate to the type(s) of transactions in products involved.