RECORDING INTEREST ON AN ACCRUAL BASIS
DRAFT as of MARCH 1999
This is a provisional version of a chapter in a manual to ESA 95 that will also deal with
the measurement of Deficit and Debt in the European Union.
The recommendations on some rather minor issues included in point 3 of Part One could
be revised. Therefore, this note does not reflect Eurostat’s final opinion. In addition, the
Member States of the European Union have still to approve the recommendations.2
Recording interest on an accrual basis is a major change in the new edition of
the European system of national accounts (ESA 95). It means that the economic nature of
transactions between units is stressed preferably to institutional and practical arrangements, as
for the effective payment of interest. Thus, the national accounts aim to measure at any point
of time the rights and commitments between economic agents, expressed through financial
assets and liabilities.
As well as a major innovation, the new system includes a complete set of
accounts, recording both flows and stocks (outstanding amount) and requiring a full
consistency between them. In the system, there is a basic distinction between financial
transactions (creation, exchange and disappearance of financial assets, by mutual agreement),
1 This note has been prepared by Unit B4, Financial Accounts and Excessive Deficits Procedure. For any
further information, please contact Denis BESNARD (352-4301 35282 or Denis.Besnard@eurostat.cec.be).
2 The English version will also be revised for academic language considerations.
and “other flows”. Only the latter has an effect on the net worth of an economic agent. As a
part, other flows include changes in value of financial instruments from opening to closing
balance sheets that are not due to financial transactions. In addition, ESA 95 asks for valuation
of financial instruments at current prices, observed on markets.
Although accrual princ