Holding gains by type of financial asset
6.49
The current values of currency and deposits denominated in national currency
remain constant over time. The 'price' of such an asset is always unity while the quantity is given by the number of
units of the currency in which they are denominated. The nominal holding gains
on such assets are always zero. For this reason, the difference between the
values of the opening and closing stocks of such assets is, with the exception of
the other changes in the volume of assets, entirely accounted for by the
values of the transactions in the assets. This being one case in which it is
normally possible to deduce the latter from the balance sheet figures.
6.50
In order to calculate the neutral and real holding gains on assets of fixed
current value, however, data on the times and values of transactions are needed
as well as the opening and closing balance sheet values. Suppose, for example, a
loan is made and repaid within the accounting period while the general price
level is rising. The neutral gain on the loan is positive and the real gain
negative from the creditor's point of view, the amount depending upon the length of time the loan is
outstanding and the rate of inflation. It is impossible to record such real losses
without data on the value of the loans made and repaid during the accounting
period and the times at which they are made and repaid. In general, it may be
inferred that if the total absolute value of the positive and negative
transactions is large in relation to the opening and closing balance sheet levels,
approximate estimates of the neutral and real holding gains on financial assets and
liabilities with fixed current values derived from balance sheet data alone may
not be very satisfactory. Even recording the values of financial transactions on
a gross basis, i.e. recording loans made and repaid separately as distinct
from the total value of loans minus repayments, may not be sufficient without
information on the timing of the loans.