Overview of 2008 SNA
Training Workshop on 2008 SNA for
ECO Member States
14-17 October 2012, Tehran, Islamic Republic of Iran
GULAB SINGH
United Nations Statistics Division
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Content
 Domestic Economy
•
•
•
•
Centre of predominant economic interest
Residency
Notional institutional unit
Branch and Multi-territory institutional units
 Economic ownership
 Measurement of output
• Definition
• Recording of output
• Three way distinction of Output
 Intermediate consumption
 Gross fixed capita formation
 Measurement of GDP
Domestic Economy
 All resident units constitute the domestic economy.
 Residents: Institutional units with their centre of
predominant economic interest in the economic
territory.
 In the 2008 SNA, residence is defined in the same way
as in the BPM6.
 Institutional units
• which are not residents of the domestic economy
• but has some transactions with resident units
constitute the Rest of the World (RoW).
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Domestic Economy
Centre of predominant economic interest
Centre of predominant economic interest in an
economic territory: the institutional unit should have
• some location, dwelling, premises within the
economic territory
• an intention to continue - indefinitely or over a long
period of time (operational definition - one year or
more)
for carrying out economic activities and transactions on a
significant scale.
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Residence
Institutional units
Determined by
Individuals
Residence of the household of which they form
part
Unincorporated
enterprises
If not a quasi-corporate, same residence as
their owners
Corporations and
NPIs
Normally the country of registration or where
legally constituted. Branch in a different country
→ quasi-corporate in the host economy
(i) Owners of land,
buildings &
immovable structures
(ii) extractors of subsoil resources.
Deemed always to have a centre of economic
interest in the country where they are located.
Thus, for all land & buildings are owned by nonresidents → a notional resident unit (with nonfinancial asset and direct investment liability)
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Domestic Economy
Notional Residential Unit
When the legal owner of immovable assets such
as
• land and other natural resources, and
• buildings and structures
is actually a non-resident, an artificial unit, called a
notional resident unit, is created in the SNA.
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Domestic Economy
Notional Residential Unit (contd.)
The notional resident unit in home country A
• owns the asset;
• receives the rent or rentals accruing to the asset; and
• holds the long-term lease to use natural resources
The legal owner in host country B
• owns the equity in the notional resident unit and
• receives income from the notional resident unit:
property income paid from A to B.
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Domestic Economy
Branch of non-residential unit
When a non-resident unit (of country A)
• has substantial operations
• over a significant period in country B,
• but no separate legal entity,
a branch is identified in B as an institutional unit.
 The branch is treated as a resident quasi-corporation of
B.
 It is owned by the non-resident unit (of country A), known
as the parent.
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Domestic Economy
Multi Territory unit
Multi-territory unit: Enterprises with a seamless operation
• over more than one economic territory,
• with no separate accounts or decision-making for
each territory
• Examples: airlines, shipping lines, hydroelectric
projects on border rivers, pipelines, bridges, tunnels
and undersea cables
Not possible to delineate branches.
For accounts of each national economy, it is necessary to
• split the operations between economies
• by prorating the operations, using an appropriate
indicator.
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Domestic Economy
Economic Ownership
 The principle of change of ownership is central to
recording of transactions in goods, services and financial
assets.
 From an economic view point, a change in ownership
represents transfer of all the associated risks, rewards,
rights and responsibilities.
 2008 SNA defines economic ownership as:
Economic ownership of commodities or financial assets
and liabilities lie with the institutional unit that is entitled
to
• claim the benefits and
• the associated risks
of using them
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Measurement of Output
Output - Definition
Output is defined as the goods and services produced by
an establishment, excluding the value of any goods and
services
a) used in an activity for which the establishment does
not assume the risk of using the products in
production,
b) consumed by the same establishment,
except for goods and services used for capital
formation (fixed capital or changes in inventories) or
own final consumption.
[refer to 6.89 2008 SNA]
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Measurement of Output
Principle of Recording Transactions
2008 SNA recommends that
 Transactions in services be recorded when they are
provided;
 Transactions in goods be recorded when there is a
change in economic ownership rather than the legal
ownership; and
 Assets be recorded on the balance sheets of the
economic owner rather than the legal owner.
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Measurement of Output
Treatment of within-enterprise transactions for Further
Production
Two Cases:

Not involving change in economic ownership
•
•

Receiving establishment does not take on responsibility for the
consequences of the continuation of the production process.
The 2008 SNA recommends: Output of the receiving
establishment is only the processing services.
Involving change in economic ownership
•
•
The receiving establishment sells the product in the market and
takes other production-related decisions.
The 2008 SNA recommends: output is the product (goods).
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Measurement of Output - Examples
1. A is a tea garden and B is the tea processing unit for
the garden.
Output of B: only the processing services and not the
value of the processed tea.
IC of B does not include the value of raw tea leaves.
Since the ‘economic’ ownership of tea leaves is
assumed to have been retained by A.
2. A is a coal mine and B generates electricity and sells. B
decides the amount of electricity to be generated and
thus amount of coal to be procured from A.
Output of B: Value of electricity sold in the market
IC of B includes the value of coal received from A.
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Measurement of Output
Recording of output
Output is recorded if the goods and services being
produced
 are provided (sold or given free) to other institutional
units
 are used for capital formation of the same
establishment;
 enter inventories
• even if eventually are withdrawn from inventories for
use as intermediate consumption in the same
establishment in a later period;
 by a household unincorporated enterprise (growing
maize, for example) are used for the household’s own
consumption;
 remain unfinished (work-in-progress) at the end of the
accounting period - recorded as being produced and
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entering inventories.
Measurement of Output
Disposal of output

Output of an enterprise is disposed of in the following
three ways:

Sales - Sale of goods and services for cash, credit, or
barter

Change in inventory (CII) - addition/reduction to
inventory of finished goods, goods in process, or goods
for resale (closing inventory - opening inventory)

Own final use - goods and services used for own final
consumption and own capital formation
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Three way distinction of Output
The 2008 SNA makes a three way distinction of output
 Market output: Those sold in the market at
economically significant prices.
 Non-market output: Those provided free or at prices
that are not economically significant to other institutional
units
• These are mainly services produced by the
Government and NPISHs.
 Output for own final use: Those used for own final
consumption and own capital formation.
Economically Significant Prices Prices that have a
significant effect on the amounts that producers are
willing to supply and on the amounts purchasers wish to
buy.
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Three way distinction of Output
Market output:
 Those intended for sale at economically significant prices. The
gross value of (market) output includes the value of produced
goods & services:
•
•
•

sold at economically significant prices;
bartered in exchange for other goods, services or assets;
used for payments in kind, including compensation in kind;
Market output is measured in three alternative ways:
•
Physical output - product of Quantum (unit) and price (value per unit)
•
Disposition - sum of all outflow of output , i.e.
Sales/shipment
+ Change in inventory
+ Own final use
•
Input cost - sum of all cost in production i.e.
intermediate consumption + compensation of employees + taxes net of
subsidies on production/product + consumption of fixed capital + net
operating surplus/ mixed income
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Three way distinction of Output
Non-Market output:

Consists of goods and individual or collective services
• produced by non-profit institutions serving households
(NPISHs) or government
• that are supplied free, or at prices that are not
economically significant,
to other institutional units or the community as a whole.

Non-market output is recommended to be measured on cost
basis - sum of the following items:
a)
Intermediate consumption;
b)
Compensation of employees;
c)
Consumption of fixed capital;
d)
Other taxes (less subsidies) on production.
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Three way distinction of Output
Output for own final use consists of products
retained by the producer for his own use as final
consumption or capital formation.
This consists of:
•
•
•
•
•
goods produced by an unincorporated enterprise and
consumed by the same household;
services provided to households by paid domestic staff;
imputed services of owner-occupied dwellings;
fixed assets produced by an establishment that are
retained; (own-account gross fixed capital formation);
changes in inventories of finished goods and work-inprogress intended for one or other of the above uses.
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Three way distinction of Output
Output for own final use – valuation
 Output for own final use should be valued at the basic
prices at which the goods and services could be sold if
offered for sale on the market.
 When reliable market prices cannot be obtained, the
value is deemed to be equal to the sum of their costs of
production: (2008 SNA)
a)
Intermediate consumption;
b)
Compensation of employees;
c)
A net return to fixed capital;
d)
Consumption of fixed capital;
e)
Other taxes less subsidies on production.
 By convention, no net return to capital is included when
own-account production is undertaken by non-market
producers.
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Intermediate Consumption
Coverage
 Goods and services consumed as inputs by a process
of production, excluding fixed assets whose
consumption is recorded as consumption of fixed
capital.
 The intermediate consumption (IC) of a good or service
is recorded at the time when the good or service enters
the process of production, and the time of it was
acquisition by producer.
 A good or service consumed as an intermediate input is
valued at the purchaser’s price prevailing at the time it
enters the process of production
 In general, all goods and services that are produced
and used by the same establishment are excluded from
the measure of output and intermediate consumption 22
Gross fixed capital formation
Coverage
 Gross fixed capital formation 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.
•
•


improvements to existing assets and the cost of ownership
transfer of assets
The asset boundary for fixed assets consists of goods
and services that are used in production for more than
one year.
Two exclusions from the asset boundary:
•
•
Consumer durables, and
Small tools
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Measuring GDP
Gross Value Added (GVA) at basic price
An enterprise’s earnings from production is the GVA at basic prices
= Receipts from sale of its productions
minus (all product taxes – all product subsidies)
plus Change in inventory plus output for own final use
minus payments made for purchase of inputs
= Gross value of output at basic prices (GVObp)
minus IC at purchasers prices (ICpurp)
= GVA at basic prices, GVAbp = GVObp - ICpurp
Which gets distributed as
CE + OS + MI + other production (t-s)
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Measuring GDP
GDP at market price
GDP – the measure of production – is valued at market prices.
GDP at market prices is defined as (1993 / 2008 SNA),
GDPmp= ΣGVAbp + product (t-s) + (t-s) on imports
GDPmp represents the primary income generated from the production
undertaken within the domestic economy.
In the NAS publications, when only GDP is mentioned it is for “GDP at
market prices”.
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Thank You
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