Part E - Consolidation of flows for transactions in financial assets and liabilities

Consolidation is a method of presenting statistics for a set of units (or entities) as if they constituted a single unit. Paragraph 9.18 of the IMF GFSM 2014 states that a consolidated set of accounts for a unit (or group of units) is produced by an aggregation of all flows and stock positions within an agreed analytical framework, followed by the elimination of all flows and stock positions that represent relationships among the units or entities being consolidated. In other words, a transaction or stock holding of one unit is paired with the corresponding transaction or stock holding recorded for the second unit, and then the paired transactions or stock holdings are eliminated from the aggregates for the group.

Transactions in financial assets are eliminated when the two parties to the transaction are units that are being consolidated. An example shown in paragraph 9.19 of the IMF GFSM 2014 notes that if a local government unit purchases a security issued by the central government, both the acquisition of the financial asset and the incurrence of the liability would disappear in a presentation of statistics for the entire general government sector but not in a presentation of either the central or the local government subsector separately.

A further example of consolidation can be shown when compiling accounts for the public sector as a whole. If a general government unit owns a bond issued by a public financial corporation, then the stocks of the bond held as assets of the general government unit and the counterpart bond liability of the public financial corporation are eliminated from the aggregates for bond assets and liabilities of the public sector. Similarly, interest revenues and interest expenses related to the bond are also eliminated from the relevant public sector aggregates.