THE DISTINCTION AND LINKS
BETWEEN BALANCE SHEETS OF
NON-FINANCIAL CORPORATIONS
IN THE SNA AND BUSINESS
ACCOUNTING
NBS-OECD Workshop on National Accounts
Guangzhou, December 2 – 5, 2014
Peter van de Ven
Head of National Accounts, OECD
Introduction
• Main data sources for compiling institutional sector
accounts for corporations
• Business Accounting Standards
• Similarities and differences between SNA and
business/tax accounting
• Multinational enterprises
Data sources for corporations
• Data sources may of course differ across countries
• Supply and Use Tables: specific production statistics
• For institutional sector accounts, data are needed from
profit and loss accounts and balance sheets:
– Specific surveys
• General Statistics on Income and Finance
• Specific statistics or information for certain groups of
companies (e.g. hospitals, public corporations, etc.)
• FDI and FATS
– Annual reports of companies
– More and more data used from administrative sources, e.g. tax
data or registers with data from annual reports
– Often combination of various sources
Business Accounting Standards
• Sources usually based on business accounting standards
and/or tax rules
• Business Accounting Standards published by International
Accounting Standards Board (IASB) gaining growing
importance => International Financial Reporting
Standards (IFRS):
http://www.ifrs.org/IFRSs/Pages/IFRS.aspx (also available
in Chinese)
• Many countries (intend to) apply the relevant standards in
law or otherwise, especially for larger corporations
• Note: Development of International Public Sector
Accounting Standards (IPSAS), but not yet that much
applied
Similarities with SNA 2008
• Main principles the same as the SNA:
– Economic substance takes precedence over legal form
– Conceptually preferred approach versus practical
possibilities
• Both based on double entry bookkeeping: consistency
between balance of non-financial transactions and
balance of financial transactions (budget identity)
=> Jane Gleeson – White: “Double Entry”
• Both based on accrual accounting, not cash accounting
• Breakdowns of transactions and balance sheet positions
rather similar
Main differences with SNA 2008 (1)
• Definition of income: SNA 2008 excludes holding
gains/losses from income, it also excludes capital
transfers and other changes in the volume of assets
from income
• Provisions and contingent liabilities not recognised in
the SNA 2008
• Asset boundary of the SNA 2008 is larger than usual
practice in business accounting: SNA 2008 treats much
more expenditures as investments, adding to the capital
stock of non-financial assets, e.g. various intangible
assets
• Service lives of assets in business accounting usually
based on tax rules
Main differences with SNA 2008 (2)
• Valuation principles:
– Business accounting: “historic valuation” of nonfinancial assets (assets valued at the original
purchase price)
– SNA 2008: “current replacement costs” or
“opportunity costs”
– Under inflationary conditions:
• Operating surplus/ profits cf. SNA < Operating surplus cf.
business accounting: withdrawals from inventories and
depreciation in business accounting based on lower prices
(note: service lives!)
• Value of non-financial assets will also be smaller, also
because service lives according to tax rules then to be
shorter
Multinational Enterprises
• For multinational enterprises (MNEs), data according to
IFRS primarily available in a consolidated form
• For purposes of taxes and also statistics, data are needed
for the national part of the MNE => however, recording
also influenced by IFRS and other business accounting
standards
• Additional difference between SNA and business
accounting: reinvested earnings on foreign direct
investment:
– Undistributed profits of subsidiaries recorded as distributed income
– In financial accounts: the relevant income is recorded as
reinvestment in equity
– Savings and net worth of subsidiaries basically equal to zero
Multinational Enterprises: allocation
of Value Added to countries
• Allocation of Value Added and profits by MNEs mainly driven by
minimisation of global tax burden through:
– Transfer pricing
– Channelling funds through SPEs
– Optimisation of recording economic ownership and use of IPPs
– Optimisation of the organisation of global production
arrangements
•
Economic rationale, but it hampers analysis and policy from an
economic substance point of view
•
Lots of discussion, also in the area of national accounts => main
conclusion: impossible to change the recording and impute
alternative transactions
•
Note: may affect GDP, but does not have an impact on GNI (as a
consequence of treatment reinvested earnings)
Multinational Enterprises: allocation
of Value Added to countries
Example of profit shifting affecting value added (and GDP), not affecting primary income (and GNI)
Country A
Country B
Country A
Country B
Output
100
250
125
250
Intermediate consumption
-25
-100
-25
-125
75
150
100
125
-50
-100
-50
-100
25
50
50
25
Dividends
-10
+10
-10
+10
Reinvested earnings
-15
+15
-40
+40
0
75
0
75
+15
+60
+40
+35
Value Added
Compensation of employees
Operating surplus
Balance (non-financial transactions)
Cash and deposits (assets)
Equity (assets)
Equity (liabilities)
Balance (financial transactions)
+15
+15
0
+40
+40
75
0
75
Multinational Enterprises: need for
subsectoring
• Breakdown of corporations by ownership/control:
– Public corporations
– National private corporations
– Foreign controlled corporations
• Can substantially add to the understanding of the
behaviour of corporations and its impact on the
domestic economy
Multinational Enterprises: more
information
More information, also on recording of global value chains, goods for
processing, merchanting, etc., can be found at the following links:
• “The Impact of Globalization on National Accounts”:
http://www.unece.org/fileadmin/DAM/stats/publications/Guide_on_I
mpact_of_globalization_on_national_accounts__web_.pdf
• “Task Force on Global Production”:
http://www.unece.org/statistics/about-us/statstos/task-force-onglobal-production.html
Thank you for your attention!
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