Overview of the 2008 SNA a nd the GFSM Update

Overview of the 2008 SNA

and the GFSM UpdateIMF Statistics Department

Reproductions of this material or any parts of it should refer to the IMF Statistics Department as the source

IMF Statistics Department2

Definition, the System of National Accounts (SNA) is:

An agreed set of international standards to measure economic activity, which implies strict accounting conventions based on economic principles.

SNA comprises comprehensive, consistent, and integrated set of accounts that record economic activities within given period and the levels of an economy’s assets and liabilities at particular points of time.

What is the SNA?


Comprehensive - all designated activities, and their consequences for all agents in the economy, are covered;

Consistent - the same values are used for recording all sides of a single action;

Integrated - all the consequences of a single action are captured in the accounts and balance sheets, in such a way that together they constitute a closed system:

Opening balance sheet + Transactions +

Changes due to revaluation + Other changes in the volume of assets =

Closing balance sheet

SNA: General Principles


SNA: A Coordinating Framework for Economic Statistics and Analysis

Observation of Economic Phenomena

Basic Economic Statistics Manufacturing ,

Construction, Price statistics etc.

Balance of payments, Money & banking, and

Government financial statistics

The System of National Accounts Production, Income, Consumption, Capital formation,

International trade, IO-analysis, Employment, Integrated sector accounts, ROW/BOP, Financial transactions, Balance sheets,

Flow of funds

Economic Model Building, Developments and Testing of Economic Theories

Macro and Meso Economic Analysis

Political and Private Decision Making


An institutional unit is an economic unit that is:

Capable of owning goods and assets

Incurring liabilities

Engaging in economic activities and transactions with other units

in its own right = legal responsibility.

Institutional Unit and Sectors


Institutional units may be:

Legal entities• Corporations • Non-profit institutions• Government units

Households

Institutional unit are grouped together to form institutional sectors, on the basis of their principal functions, behaviour and/or objectives = five institutional sectors




Non-financial corporations: production of market goods and non-financial services

Financial corporations: production of financial services

General Government: economic regulation, political responsibilities, production of services for individual or collective consumption (non-market basis), redistribution of income and wealth

Households: supply of labour, final consumption, production of goods and services (unincorporated enterprises)

Non-Profit Institutions Serving Households: production of non-market services for households or the community at large


Who ?

Institutional units grouped into sectors, establishments

Does what?

Three economic activities (production, consumption, accumulation)

Transactions/other flows (during period of time)

Concerning what?

Products

Assets/Liabilities

With whom?

Counterparts

For what purpose?

Function/purpose

When?

Time of recording

How to measure?

Valuation, accounts in volume terms

How does this affect stocks?

Non-financial assets, financial assets/liabilities (at a point in time)

Are recorded on the balance sheets

Basic Information to be Addressed in Accounts


Diagram: Integrated Accounts

Closing Stock

• Non-financial Assets

• Financial assets• Liabilities• Net worth

Opening Stock

Production

Generation, allocation,

distribution, and use of income

• Other changes in volume of assets account

• Reevaluation account

• Net acquisitions of non-financial assets

• Net acquisitions of financial assets

• Net incurrence of liabilities

Accumulation

• Non-financial Assets

• Financial assets

• Liabilities• Net worth


2008 SNA: an update of the 1993 SNA

No fundamental changes• Same structure of accounts• Same accounting rules• Few changes in some concepts• However, some of the changes affect the level of GDP

2008 SNA and 1993 SNA


Need for closer consistency with other statistical manuals.

Evolution of economic environment.

Development of improved methods as result of recent research.

Further elaboration on prominent issues and need of clarifications.

Reasons for an Update of SNA


Assets

The financial sector

Globalization

General government and public sector

Informal sector

Main Changes Introduced in 2008 Update


Assets

New classification

Expenditures on research are now treated as capital formation and not as intermediate consumption

Weapons systems are classified as capital formation

The concept of capital services is introduced

Refinement of the treatment of financial instruments



The financial sector

More detailed classification of the financial sector

Measurement of non-life insurance services

Calculation of FISIM

Recording of pension entitlements



GlobalizationThe principle of changes in ownership is made universal:

• Goods sent abroad for processing• Merchanting• Special purpose units

Main changes introduced in 2008 update


The general government and public sectorsBoundary between private /public/government sectors clarified

Treatment of public-private partnerships

Treatment of restructuring agencies

Transactions between general government and public corporations

Treatment of taxes and permits

Treatment of loan guarantees



Boundary between private /public /government sectors clarified

Powers, motivation and functions of government are different from those of other sectors

Guidance for the distinction between general government, private, and public corporations (decision tree)


General govern-ment sector

Nonfinancial corporations

Financial corporations

House-holds

NPISHs

PublicPublic Public

Private Private

Private Private

IMF Statistics Department

Government Finance Division, IMF Statistics Department

18

The Public SectorPublic Sector

General government

Centralgovernment

Stategovernments

Public Corporations

Localgovernments

Financial Nonfinancial

Central bank

Public deposit-takingcorporations except the

central bank

Other public financialcorporations



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A Decision Tree

Resident entity

Institutional unit?

Determine institutional unit that controls it

Controlled by government?

Public entity

No Domestic private unit

No

Yes

Yes



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A Decision Tree

Public entity

Sell all or most of its output at economically

significant prices?

Public corporation

Can a separate market

producer be identified?

General government

No

YesYes – possibly a quasi-corporation

No



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A Decision Tree

Public corporation

Financial services?

Public financial corporation

Public nonfinancial corporation

No

Yes


Treatment of public-private partnershipsPPPs are long-term contracts between two units

A private (or public) unit acquires or builds an asset, operates it for period and then hands it over to a unit in the public sector

Guidance to determine whether the private or public partner is the economic owner of the asset



Transactions between general government and public corporation

Exceptional payments from public corporations should be recorded as withdrawals from equity (vs. dividends)

Exceptional payments from government to public quasi-corporations should be recorded as capital transfers (vs. additions to equity)



Treatment of taxesTaxes are recorded on an accrual basis (confirmed) BUT: care must be taken NOT include taxes unlikely ever to be collected

Tax credits are recorded on a gross basis (≠ GFSM2001 and Revenue Statistics…)

Taxes on holding gains = current taxes on income and wealth (even though holding gains are not an income)



Treatment of permitsPermits issued by governments:

• If does not involve an government owned asset = tax

• Notwithstanding, if the license is transferable to a third party = must be classified as an asset (“contracts, leases and licenses”)

• When the license is to make use of a natural resource = asset or rent



GDP: Production Approach vs. Expenditure Approach

GDP = ΣVA + Taxes less subsidies on products

GDP = Final consumption + Gross Capital Formation + (Exportations – Importations)

26IMF Statistics Department


GDPe: Government Final Consumption Expenditure

Consumption expenditure = Value of all types of output of general government Less the value of output for own account capital formationLess the value of sales of goods and services

At economically insignificant pricesAt economically non significant prices

Plus the value of goods and services purchased from market producers for delivery to households free or at economically insignificant prices



GDPe: Government Final Consumption Expenditure

Government consumption expenditure is classified into:

Individual consumption expenditure: expenditure whose recipient are individual persons or individual households (health services, education services, social security and welfare, sports, recreation, culture, etc.)

Collective consumption expenditure: expenditure for general population -public goods- (public administration, defence, law and order-police, statistics, economic development, R&D, etc.)



GDPe: Capital Formation

Gross fixed capital formation (GFCF)Changes in inventoriesAcquisitions less disposals of valuables

GFCF is measured by the total value of a producer’s acquisitions, less disposals, of fixed assets during the accounting period plus certain specified expenditure on services that adds to the value of non-produced assets



GDPe: Fixed Assets

Fixed assets are produced assets that are used repeatedly or continuously in production processes for more than one year

The distinguishing feature of a fixed asset is not that it is durable in some physical sense, but that it may be used repeatedly or continuously in production over a long period of time, which is taken to be more than one year.



GDPe: Fixed Assets

Fixed assets can be bought and soldWhen assets are bought and sold there are often associated costs – costs of ownership transfer

Professional chargesTrade and transport costsInstallation (and de-installation) costs TaxesTerminal costs



GDPe: Costs of Ownership Transfer

Treated as fixed assetsBenefits from using the assets have to cover this cost as well as cost of the assetAre subject to consumption of fixed capital For fixed assets, include costs in value of the asset



Fixed Assets by Type of Asset

DwellingsOther buildings and structures

Buildings other than dwellingsOther structuresLand improvements

Machinery and equipment

Transport equipmentICT equipmentOther machinery and equipment



Fixed Assets by Type of Asset (cont.)

Weapons systemsCultivated biological resources

Animal resources yielding repeat productsTree, crop and plant resources yielding repeat products

Cost of ownership transfer on non-produced assetsIntellectual property products


IMF Statistics Department 35

OPENINGBALANCE

SHEET

NET WORTH

Nonfinancial Assets

Financial Assets

Liabilities

Changes in Net Worth

F L O W S

CLOSINGBALANCE

SHEET

NET WORTH

Nonfinancial Assets

Financial Assets

Liabilities

TRANSACTIONS

Revenue

Expense

= NET OPERATING BALANCE

minus

Nonfinancial Assets

= NET LENDING / BORROWING

minus

Liabilities

FinancialAssets• cash

• other financial assets

minus

OTHER ECONOMIC FLOWS

Holding Gains and Losses

Other Changes inVolume of Assets

Nonfinancial Assets

Financial Assets

Liabilities

Nonfinancial Assets

Financial Assets

Liabilities

CHANGE IN NET WORTH (HG)

CHANGE IN NET WORTH (OVC)

STOCKS STOCKS

Documents

Overview of the 2008 SNA a nd the GFSM Update