Unlike the current account, the capital account includes only capital transfers.
Capital transfers – transfers involving the transfer of ownership of fixed assets, related to the acquisition or use of fixed assets or providing for the cancellation of debt by the creditor.
Capital transfers are divided into public sector transfers and transfers from other sectors. The largest item in public sector transfers is debt cancellation by the creditor. If two countries – the creditor and the debtor – reach an agreement to cancel the debt in full or to write off part of it, and this is fixed in the relevant agreement, then the amount of canceled debt is shown in the balance of payments as a capital transfer from the creditor to the debtor. Among other state capital transfers, investment transfers can be distinguished – funds transferred by one state to another in order to pay for the purchase of fixed capital. For example, The transfer by Russia of buildings, structures, airfields and other military infrastructure to the countries – members of the Warsaw Pact after the withdrawal of Russian troops from their territories is a capital transfer. However, the transfer of arms and military equipment is considered a current state transfer on the balance of payments.
Capital transfers from other sectors include transfers related to migration, debt cancellation by the creditor and other transfers. Migration-related capital transfers are a simple valuation of the migrants’ assets they transport from country to country. Debt cancellation by a creditor is the write-off of all or part of the amount of debt by a bank, corporation or other non-state entity. Other transfers include private donations for investment purposes, such as the transfer from country to country of an inheritance bequeathed to finance the construction of a university library or lecture hall.
Acquisition/sale of non-produced non-financial assets includes the acquisition and sale of tangible assets that are not the result of production (land and subsoil thereof), as well as intangible assets (patents, copyrights, trademarks, etc.). It should be noted that payment for the use of intangible assets is shown in the current account under royalties and royalties, while fees for acquisition or sale are shown under this heading.