Difficulty in Accounting for Service Trade or Tangible Goods in the Balance of Payments Framework - Essay Example

Services cannot be physically examined, instead, it is something that we feel or experience after the execution of a particular action. Therefore, such transactions may not be reported, recorded, or even traced. As opposed to physical goods, the valuation of services is considered to be a difficult task as there may not be a single basis for measuring them, and different companies within a single country may be using different approaches to recording financial data. It is also impossible to deliver the same service or standard of service to customers which may create an argument that services may not be recorded in a standardized manner (Arnold, 2011).

It is also understood that the valuation of financial services including derivatives can have varying effects on the balance of payments of different countries as they are based on different bases of measurement. Furthermore, there may be lacking benchmarks which can be used for recording and measuring services. Therefore, it is impossible to include all items of services in the current account.