Balance of payments, geographical breakdown, 2015

As with the National Accounts, the balance of payments accounts are built around three basic concepts: statistical units, economic values and transactions. Briefly, the accounting systems describe transactions between statistical units in which economic values are provided or received in exchange for other economic values. Statistical units are institutional units that make economic decisions on an independent basis and can present complete accounts for their activities. The institutional unit normally coincides with a body corporate, e.g. a limited liability company or legal person. Economic items can either be real resources, i.e. goods and services, or financial items representing various claims and liabilities.

The basic criterion for entering a transaction in the balance of payments is that it involves an exchange between a domestic entity (resident) and a foreign entity (non-resident). Residents are institutional units that engage and intend to continue to engage in economic activities and transactions within a country's territory, with one year or more serving as the conventional guideline.

The Norwegian territory includes mainland Norway together with the Norwegian part of the Continental Shelf, Svalbard and Jan Mayen with Bjørnøya.

In the balance of payments, a transaction should in principle be allocated to the period in which there is a change of ownership of the economic value. Conventionally, it is often said that a change of ownership has taken place when the parties of the transaction register it in their books or accounts. In the case of exports and imports of goods, it is when the goods cross the border, as registered through customs declarations, that determines the time of recording the transaction in practice.

All transactions shall be valued at market prices. Market prices are defined as amounts of money that willing buyers pay to acquire something from willing sellers; the exchanges are made between independent parties and on the basis of commercial considerations only. Total exports and total imports shall be recorded at FOB prices ¹ . On a detailed commodity level, CIF prices (cost-insurance-freight) are used for imports, i.e. including transport and insurance costs up to the border of the importing country. The exchange rate on the transaction date or the average rate for the shortest period applicable shall be used for converting transactions in foreign currencies into the national currency. Stocks of assets and liabilities are to be valued at prices or rates in effect at the time to which the balance sheet relates.

Income and expenditure are defined in the National Accounts and balance of payments excluding gains and losses, irrespective of whether they are realised or unrealised. Such items, however, help to explain total balance sheet changes that take place in the course of a period and are registered on the account for revaluation.

Balance of payments accounts are based on the rules for double entry bookkeeping. All transactions are represented by two entries, a credit and debit entry. Most transactions are those in which economic items are provided or received in exchange for other economic items, entailing that offsetting credit and debit entries will normally be registered. For example, exports of a good will be registered in the external trade statistics and recorded as a credit entry in the balance of payments accounts, whereas the accompanying increase in foreign assets, e.g. in the form of higher foreign exchange reserves, is registered in sources covering the financial account items and recorded as a transaction on the debit side of the balance of payments accounts. In other cases, when items are given away rather than exchanged, or a recording is one-sided for other reasons, there is only one recording in the data sources. In these cases a counter entry is constructed, in this example in the form of a transfer so that the double entry requirement is satisfied.

See also Concepts and definitions in national accounts

¹ FOB = free on board, i.e. the value when passing the border of the country of exports.

² Certain types of debt forgiveness and a change in a statistical unit's sectoral classification are examples of balance sheet changes that are not based on transactions.

In addition to the classifications and categories described in the international BoP and National Accounts manuals, it should be noted that both the Norwegian BoP and National Accounts make use of the EU product classification CPA (Classification of Products by Activity).