Session 2:Overview of the Main Changes

in the SNA 2008

Giovanni Savio and Majed Skaini, SD, UN-ESCWA

Seminar on the implementation of SNA 2008 in ESCWA RegionMuscat, 23 – 26 May 2010

Plan of presentation

Brief overview on SNA 2008 Main changes relevant for ESCWA region:

– Goods for Processing and Merchanting

– Informal Sector

– Military Weapons and sector delineation

– Non-Life Insurance

– Statistical Units and Institutional Sectors

– Institutional Sector Accounts

– Mineral Exploration and Evaluation

– Research and Development

– Financial Intermediary Services Indirectly Measured (FISIM)

– Consumption of fixed capital formation

– Assets Classification and Asset Boundary

Overview

Adoption of Vol. 2, February 2009 Retains the basic theoretical framework of its predecessor, the

1993 SNA However, in line with the mandate of the UNSC, the 2008 SNA

… … introduces treatments for new macroeconomic aspects that

have come into prominence, … further strengthens on coherence, and … … clarifies guidance on a wide range of issues This is NOT the final step: MANY issues in the research

agenda for the coming years (i.e. human capital, market/basic prices, definitions of income, central banks, BA vs. NA, etc.)

Processing and Merchanting

Imports and exports should be treated on a strict “change of ownership” basis, NOT based on physical movement

Two similar/mirror cases: in the first case there is physical movement without change of ownership, in the second the opposite

Processing: only the value of the processing service should be recorded (different treatment in 1993 SNA): same treatment for inter-establishment transactions of same enterprise in the same economy

Merchanting: should be recorded as negative exports on acquisition and positive exports on disposal

The difference between the two appears in exports of goods (consistent with the goal of a zero global balance on goods), but appears as the production of a service in the merchant’s economy, analogous to trade margins (not treated in 1993 SNA)

•

Informal Sector

New Chapter, 25, on Informal Sector and NOE Definitions (based on ILO)

•

Informal Sector

Approaches to measuring Household surveys Establishment surveys Mixed household-enterprise surveys

Military Weapons and Sector Delineation

Military weapons: Military weapon systems (vehicles and other equipment such as warships, submarines, military aircraft, tanks, missile carriers and launchers, etc. ) should be classified as fixed assets

Sector delineation of private/public/govern. Clarified through decision tree and more guidance on distinction between general government and (public) corporations

Sector Delineation Decision Tree

Non-Life Insurance

Non-life insurance services:– Relevant for catastrophic losses– Balance between premiums and claims

extremely volatile– Approaches suggested: Expectation,

Accounting and Cost approaches– Claims for large catastrophes recorded as

capital rather than current transfer

Statistical Units and Institutional Sectors

If the activity of a unit undertaking purely ancillary activities is statistically observable, it should be recognised as a separate establishment, producing primary output, and classified according to its own principal activity

Statistically observable meaning:- separate accounts for the production it undertakes are readily available, or- it is located in a geographically different location from the est. served

The value of output should be derived on a sum of costs basis, including the costs of the capital used by the unit

The 1993 SNA treated a producer unit undertaking purely ancillary activities always as an integral part of the establishment it served

Institutional Sector Accounts

• Definition of Household sector: All unincorporated non-government resident-owned institutions, excluding (i) non-resident owned quasi-corporate institutions and (ii) NPISHs.

• All un-incorporated enterprises which are not considered quasi-corporate belong to the households sector.

• Own-account production of housing services by owner-occupiers is included in the production of the households sector.

• The income of the owners of household sector enterprises is treated as ‘mixed income’.

• All quasi-corporations are treated as corporations and allocated either to the non-financial corporations or the financial corporation sector.

Mineral Exploration (1)

The expenditure on mineral exploration is to be treated as Capital formation and not Intermediate Consumption of mineral extraction industry

Mineral exploration, whether successful or not, is classified as GFCF and is treated as ‘produced asset’, whereas minerals resources themselves are treated as ‘non-produced assets’

The value of mineral exploration is valued at market prices, if purchased; otherwise, it is evaluated ‘at cost’ plus a mark-up

• If mineral exploration is outsourced to a foreign agency, the amount paid is the value of the asset, and shall be reported as income for the foreign agency

• Extractor’s payment to the owner of mineral resources is treated as property income

• Extractor’s payment to the exploration agency is treated as payment of service charges.

Mineral Exploration (2)

Research and Development (1)

• Research and Development is defined as “creative work undertaken on a systematic basis to increase the stock of knowledge, and use this stock of knowledge for the purpose of discovering or developing new products, including improved versions or qualities of existing products, or discovering developing new or more efficient processes of production.” (FRASCATI Manual, 2002)

• In 2008 SNA the activity of research and development is not treated as ancillary activity, and thus the output of Research and development is not treated as intermediate consumption.

• A separate establishment should be distinguished for it when possible.

• Reasons for including R&D under CF

– R&D is thought to be one of the principal drivers of output growth. It is important for productivity analysis across time and across countries that R&D data be fully integrated in the national accounts.

– From an economic theory point of view, all R&D expenditure qualifies as capital formation because consumption is foregone for the sake of future benefits.

Research and Development (2)

• The output of R&D is capitalized as ‘Intellectual Property product’ (which also includes computer software and databases; entertainment, literary or artistic originals; and other intellectual property products);

• In SNA’08, output of R&D is to be treated as intangible produced assets, and hence payment for users’ rights of the IP product is to be treated as service charges.

• The 1993 SNA by convention treated the output of R&D as intermediate consumption.

Research and Development (3)

Valuation of R&D

• The 2008 SNA recommends that the output of the R&D should be valued at

• market price if purchased (outsourced) or • sum of total production costs plus an appropriate mark-

up if undertaken on own account

Research and Development (4)

Financial Services

• In SNA 2008, the definition of financial services has been enlarged to give due weight to the increase in financial services other than the financial intermediation, specifically financial risk management and liquidity transformation.

• Sub-sectoring of the financial corporation sector revised to reflect new developments in financial services, markets and instrument

i. Central Bankii. Deposit-taking corporations except the central bank, iii. Money market funds (MMFs), iv. Non-MMF investment funds, v. Other financial intermediaries except insurance

corporations and pension funds (ICPFs), vi. Financial auxiliaries, vii. Captive financial institutions and money lenders, viii. Insurance corporations (ICs) and ix. Pension funds (PFs).

• The 2008 SNA recommends that FISIM applies only to loans and deposits and only when those loans and deposits are provided by, or deposited with, financial institutions.

• The 2008 SNA calculates the output of FISIM on loans (YL) and deposits (YD) only, using a reference rate (rr). Assuming that these loans and deposits attract interest rates of rL and rD respectively.

FISIM in 2008 SNA

FISIM in 2008 SNA

• For financial intermediaries, all loans and deposits are included, not just those made from intermediated funds. The reference rate should contain no service element and reflect the risk and maturity structure of deposits and loans.

• The rate prevailing for inter-bank borrowing and lending may be a suitable choice as a reference rate. However, different reference rates may be needed for each currency in which loans and deposits are denominated, especially when a non-resident financial institution is involved.

• For banks within the same economy, there is often little if any service provided in association with banks lending to and borrowing from other banks.

1993 SNA rev. 1

DDLLLDDL

DDLLDL

YrYrYYrrff

YrrrYrrrff

)(

)()(

The 2008 SNA recommends that the consumption of FISIM should be allocated between users (lenders as well as borrowers) treating the allocated amounts either as intermediate consumption by enterprises or as final consumption or exports.

1993 SNA

FISIM in 2008 SNA

The method for calculating FISIM has been refined in 2008 SNA:• Output of FISIM is now recommended to be calculated using

‘reference rate’.• Choice of ‘reference rate’ – inter-bank transaction rate.• Allocation of FISIM between user and beneficiary is now made

essential whereas in SNA’93 the entire output of FISIM could be taken as IC of a notional industry – the practice followed in most of the member countries.

• Data are required for allocating the output of FISIM into

(i) intermediate consumption of the enterprises and (ii) final consumption or exports.

FISIM in 2008 SNA

1993 SNA

DDLLDL

DLDL

YrYrff

RRff

The 1993 SNA calculated FISIM as the difference between property income receivable and interest payable. The property income receivable excluded that part which was receivable from investment of own funds.

The 1993 SNA recognized that in practice it may be difficult to find any method of allocating FISIM among different users and, therefore, accepted that some countries may prefer to continue to use the convention whereby the whole of the services are allocated to intermediate consumption of a notional industry.

FISIM in 1993 SNA

The Central Bank

• The 2008 SNA recommends that the services produced by the central bank be identified in three broad groups:

(i) financial intermediation – market production

(ii) monetary policy services – non-market production

(iii) supervisory services overseeing financial corporations - may be treated as market or non-market services depending on whether explicit fees are charged that are sufficient to cover the costs of providing such services.

• Separate establishments should be identified for units of the CB undertaking production of these services

Consumption of fixed capital formation

Estimation of consumption of fixed capital of all fixed assets including government buildings, roads, dams etc. is recommended to be done through Perpetual Inventory Method (PIM).

NC(n) = NC(n – 1) + GFCF(n) – CFC(n)

where CFC(n) = ΣiGFCF(n – i) • Ci

نظام حسب األصول 1993تصنيفاألصول

المالية غير المالية

المنتجة األصول المنتجة غير األصول

النفائس

الثابتة األصول

المخزونات

الملموسة

الملموسة غير

الملموسة

الملموسة غير

مالية التزامات تقابلها ال احتياطية، مالية التزامات تقابلها

نظام حسب األصول 2008تصنيفاألصولاألصول

المالية المالية غير غير الماليةالمالية

المنتجة المنتجة األصول األصول المنتجة غير المنتجة األصول غير األصول

النفائس

الثابتة األصول

المخزونات

الطبيعية الموارد

والتراخيص اإليجار عقود العقود،

مالية التزامات تقابلها ال مالية احتياطية، التزامات تقابلها ال احتياطية، مالية التزامات مالية تقابلها التزامات تقابلها

التسويقية واألصول التجارية الشهرة

المنتجة - المالية غير األصول

المنتجة – غير المالية غير األصول

نظام في األساسية 2008الفروقات: المعادن عن التنقيب

بين • ) عمليةالتمييز منتجة ( أصول المعادن عن التنقيب( منتجة ( غير أصول نفسها المعدنية والموارد

تسمي • " " ةتغيير التنقيب " لتصبح المعادن عن التنقيب " بسعر التقييم يتم أن ويجب ، وتقييمها المعادن عن

التكاليف مجموع في أو مشتراة كانت اذا السوقفي بها مضطلع كان اذا مناسبة عالمة الى باالضافة

الخاصة الحساباتل • مستخرج بواسطة المعدنية مالكالمدفوعات الموارد

كضرائب وصفها كان لو حتى الملكية دخل مثل تكون

نظام في األساسية الفروقات2008) تابع ) : الكمبيوتر برامج

عام • تعديلها اسم 2008تم تحت البيانات قواعد لتشمل " قواعد" تشمل وهي البيانات وقواعد الكمبيوتر برامج

سنة من أكثر استخدامها المتوقع البيانات

عدا ما العسكرية والتجهيزات االنشاءاتاألسلحة:

عام • القومية الحسابات نظام نظم 2008يوصي بأنباعتماد ثابتة كأصول تصنف أن يجب العسكرية األسلحة

الثابتة األصول باقي معايير نفس• ... والقنابل الذخيرة مثل الفردي االستعمال ذات االدوات

عسكري كمخزون SصنRف ت

نظام في األساسية 2008الفروقات( تابع( • ” المباني “ فئة تحت األراضي على التحسينات بند إضافة تم

األصول “ على األساسية التحسينات بدل لتحل والمنشآت، ” تحويل تكاليف على ضمنها وتحتوي ، منتجة الغير مالية الغير

. األراضي ملكية

•) ” واالتصاالت “ المعلومات تكنولوجيا إضافة كفئة) ICTتم ” والمعدات “ اآلالت ضمن جديدة

حقوق “ • منتجات SسمRى ت اصبحت ملموسة الغير الثابتة األصول ” اصبحت ملموسة الغير الثابتة األصول وباقي الفكرية الملكية

” الفكرية “ الملكية حقوق منتجات باقي SسمRى ت

نظام في األساسية 2008الفروقات( تابع( : المزروعة االصول

عام • نظام في تسمى المزروعة " 2008اصبحت الموارد"Y بيولوجيا

: والتطوير البحثعام • نظام في : 2008اضيف منتجات الثابتة االصول فئة الى

الفكرية الملكية حقوق•: كالتالي اصبحت منتجة الغير لألصول بالنسبة

لتصبح " " " – الملموسة منتجة الغير االصول تسمية تغيير" الطبيعية الموارد

مثل "– االخرى الطبيعية الموارد "radio spectraاضيفت

نظام في األساسية 2008الفروقات( تابع( – " الى" قسRمت ملموسة الغير المنتجة الغير األصول

فرعيتين : فئتين• " و " والتراخيص االيجار وعقود العقودالتسويقية" • واألصول التجارية ” الشهرة

الى – قسمت والتراخيص االيجار وعقود :4العقود فئات للتسويق • التشغيلي التأجيرالطبيعية • الموارد الستخدام أذوناتمحددة • بأنشطة للقيام أذوناتأساس • على مستقبلية وخدمات سلع على الحصول في الحق

حصري

Thank you