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Military weapons systems comprise of “… vehicles and other equipment such as warships, submarines, military aircraft, tanks, missile carriers and launchers, etc.” (2008 SNA, para A3.55). The relevant expenditures are considered as being “… used continuously in the production of defence services, even if their peacetime use is simply to provide deterrence” (para. A3.55). Furthermore, “single-use items, such as ammunition, missiles, rockets, bombs, etc., delivered by weapons or weapons systems are treated as military inventories. However, some single-use items, such as certain types of ballistic missiles with a highly destructive capability, may provide an ongoing service of deterrence against aggressors and therefore meet the general criteria for classification as fixed assets”. (para. A3.56).
The issue in relation to the recording of expenditures on military weapons systems concerns the delineation between other changes in volume of assets (OCVA) and consumption of fixed capital. The first question is how to account for losses due to the use of weapons systems during wartime and other military operations and the second question is what service lives and depreciation profiles should be used.
The AEG discussed the issue at its 7th meeting and below are its conclusions. The AEG:
- Emphasised that the depreciation profiles of military weapon systems should reflect the expected service lives of such assets taking into account expected losses, and noted that the relevant service lives may need to be reviewed in times of conflict.
- Agreed that the losses of military weapon systems in military operations should generally be recorded as other changes in volume of assets (OCVA).
For more information see paragraphs 26 to 28 of the conclusions of the 7th AEG meeting.
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