Overview of the 2008 SNA and the GFSM Update Workshop on the Implementation and Links between the System of National Accounts, 2008 and the Government

Overview of the 2008 SNA

and the GFSM UpdateWorkshop on the Implementation and Links between the System of National Accounts, 2008 and the Government Finance Statistics Manual

November 20 – 22, 2013 in Istanbul, Turkey

Gary JonesGovernment Finance Division

Statistics Department

DISCLAIMER: This presentation represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

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 Economic Analysis

Political and Private Decision Making


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?

Nonfinancial 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

• Nonfinancial 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 nonfinancial assets

• Net acquisitions of financial assets

• Net incurrence of liabilities

Accumulation

• Nonfinancial 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

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

Main Changes Introduced in 2008 Update


The financial sector

More detailed classification of the financial sector

Measurement of non-life insurance services

Calculation of Financial Intermediation Services Indirectly Measured (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


The Public Sector

Public Sector

General government

Centralgovernment

Stategovernments

Public Corporations

Localgovernments

Financial Nonfinancial

Central bank

Public deposit-takingcorporations except the

central bank

Other public financialcorporations

IMF Statistics Department

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


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


A Decision Tree

Public corporation

Financial services?

Public financial corporation

Public nonfinancial corporation

No

Yes


Treatment of public-private partnerships (PPPs)PPPs 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 OECD 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

BUT…..all updates/revisions can be reconciled within the GFS analytical framework…..


IMF Statistics Department 22

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 and the GFSM Update Workshop on the Implementation and Links between the System of National Accounts, 2008 and the Government