1. Production and products

• 21.8. Within the production boundary of the central framework of the SNA, producer units are establishments or, in a more refined analysis, units of homogeneous production, classified according to their principal economic activity. Both kinds of units are classified according to the International Standard Industrial Classification (ISIC).

• 21.9. When establishments, and consequently industries, are not homogeneous at a given level of the ISIC, they undertake both a principal activity and one or more secondary activities. The output of these secondary activities is identified according to its nature, following a product classification, but the inputs of secondary activities are not separated from the ones of the principal activities. Ancillary activities, on the other hand, are not analysed and classified according to their own nature, but as part of the activities of the establishment(s) they serve. This means that ancillary activities are not undertaken by distinct producer units and the related products do not appear as autonomous products.

• 21.10. When examining certain kinds of activity and products, it may be useful to separate secondary from principal activity, in order to get a full picture of the inputs (intermediate and factor inputs) corresponding to the activity being examined. This aspect is well-known in input-output analysis. In addition, it may be necessary to identify some ancillary activities and their output within the producer units.

• 21.11. Take the example of transportation. The output of transportation activities in the central framework covers only transport services rendered to third parties. Own-account transportation is treated as an ancillary activity; its inputs are unidentified components of the costs of the producing units it serves. If one wants a broader picture of transportation activity, own-account transportation of producing units has to be identified and measured. With regard to health activities, some of them also are treated as ancillary activities, such as the on-site medical facilities provided by employers to their employees. Thus the cost of many activities includes an unidentified health component.

• 21.12. More generally, inputs of producer units cover the direct cost of making the principal and secondary output and the cost of various internal functions which are, to varying degrees, indirect components of the total cost. In addition to the abovementioned activities, we could mention training, electronic data processing, accountancy and trade.

• 21.13. Thus, for complete coverage of certain activities and products within the production boundary of the central framework, we have to deal with a number of elements:

  • (a) The establishments, or the units of homogeneous production, whose principal or single activity is the one we are interested in (the choice between these two types of units depending on the objectives pursued and the structure of the economy);

  • (b) If we are dealing with establishments, the relevant secondary output of other establishments, and the intra-establishment deliveries;

  • (c) The relevant ancillary activities and their output, presumably measured by their costs in general.

• 21.14. In many cases this process is straightforward, because the specified activities and products appear as such in the classifications of the central framework, although, of course, additional data are necessary as regards (c) above. Naturally the relative magnitude of (c) may differ from one activity to another, being more crucial for transportation or data processing than for education, for instance.

• 21.15. However, in some important cases, such as tourism and environmental protection activities, the process of identification is complex, because the relevant activities and products appear only to a small extent in the central framework classifications.

• 21.16. An output is usually identified according to a list of observable products, independent of the use that is made of them. This is possible for part of tourism: the services rendered by travel agencies or hotels are typically tourism products. More generally, however, tourism activities are defined by the fact that the goods and services they produce are delivered to tourists—i.e., people who spend at least one night away from home, whatever the purpose of their travel. So, long distance transportation is clearly a tourist activity; short distance transportation may or may not be, depending on who is using it. The same is true for shops in tourist areas. Some activities, though clearly tourist in nature, are isolated only at very detailed levels of classifications, for which national accounts are not commonly available, or not identified at all. Consequently, delineating tourism activities raises a lot of difficulties. The approach in most cases is an indirect one, starting from analysing the structure of tourist expenditure by product and looking at what activities deliver these goods and services.

• 21.17. The case of environmental protection activities and products is even more complex. Some establishments specialize in the production of environmental protection services for delivery to other units (e.g., waste disposal, sewage treatment) or goods which are used for environmental protection (e.g., filters). Others direct only part of their activity to delivering such goods and services to third parties. Moreover, an important part of environmental protection activities is internal to establishments. They are ancillary activities in the central framework and have to be externalized if one wants to measure the environmental activities more broadly. Again the purpose of the expenditure has to be considered in conjunction with the kind of activities undertaken and the goods and services used.

• 21.18. The above-mentioned re-analyses take place within the limits of the central framework’s boundary of production. For certain objectives, however, the production boundary itself may be changed. This can be done in a rather global way, for example, by including services rendered by persons to other members of their household or/and voluntary work. It may also be done when trying to get a very broad picture of a given activity. For instance, to make an overall estimate of the transportation function in an economy, it might be useful to cover transport services rendered by households using their own cars and to try to value the time people spend using transport facilities. Generally speaking, the scope of non-market activities may be extended considerably.

2. Income

3. Uses of goods and services

• 21.29. The coverage of uses of goods and services, either for intermediate or final consumption or capital formation, obviously changes as a result of enlarging the concept of production. For example, if services rendered to each other by members of the same household are included in production, they are finally consumed.

• 21.30. The borderline between intermediate, final consumption and capital formation may also be modified in various ways. Two typical cases refer to human capital and consumer durables. When final consumption in education and health is, at least in part, treated as fixed capital formation, the corresponding central framework transactions are reclassified from consumption (mainly final, partly intermediate) to fixed capital formation which results in human capital assets. A less radical treatment is to capitalize only actual expenditures on education (and possibly part of expenditures on health) as intangible assets, so extending the scope of the latter. As an immediate consequence, the concept of consumption of fixed capital would be extended.

• 21.31 An alternative to the inclusion of expenditures on consumer durables such as cars and furniture in household final consumption is to treat them as fixed capital formation. Only that part of the resulting fixed asset that is estimated as consumption of fixed capital then enters final consumption. Strictly speaking, this procedure implies enlarging the concept of production to include household services.

• 21.32. As a consequence of the changes just considered, the concept of saving is extended.

4. Assets and liabilities

• 21.33. The scope of assets, either tangible or intangible, is modified as a consequence of extending the concept of production or modifying the borderline between consumption and capital formation, as indicated in the previous paragraphs.

• 21.34. The scope of financial assets and liabilities may also be broadened by including contingent assets and liabilities in the classification of financial instruments. In fact, this modification would be simply a formal one as presumably, following current corporate practice, equivalent amounts would be included in both the assets and liabilities of each sector involved, unless the present value of the net risk taken is estimated and recorded under other changes in volume of assets, for example.

• 21.35. The scope of non-produced assets recorded in the balance sheets might be extended to other naturally occurring assets. In the central framework, natural assets are included in balance sheets only to the extent that they are owned and capable of bringing economic benefits to their owners. Of course, these criteria would apply to some additional natural assets if the services they provided were to be included in an enlarged concept of production. Moreover, attempts might be made to cover natural assets more widely to account for natural assets in general. In most cases, however, measurement is then usually only feasible in non-monetary terms.

5. Purposes

• 21.36. In the central framework an analysis by purpose is applied to most transactions of general government and non-profit institutions serving households, to final consumption and some other transactions of households and to certain transactions of producers. (The classifications are described in chapter XVIII.) This approach may be extended in order to cover a broader range of transactions and transactors. Moreover, the functional approach may be more flexible than it is in the central framework.

• 21.37. In the classifications by purpose used in the central framework, headings at a given level are mutually exclusive. A transaction classified under education may not also be classified under health, for example. In some cases, the part of expenditure missing when focusing on a given purpose may be significant and, therefore, a problem. In particular cases, purposes of current interest hardly feature in the existing general classifications because, for historical or other reasons, priority is given to the analysis of other purposes. For example, besides the fact that tourism does not appear as such as a main category in the classification of household goods and services by object, it is not even possible to reassemble the necessary pieces because not all of them are shown in the classification. The case of environment is similar with respect to various classifications.

• 21.38. Consequently, when emphasis is given to a particular purpose, a reclassification of a number of transactions is often necessary. All programmes or transactions related to environmental protection, for example, may thus be identified and grouped into a specific purpose classification. Such specific classifications have to be designed to cover the various units concerned in a consistent way. Of course, once reorganized that way, transactions classified by purpose are no longer additive since some of them may appear simultaneously under education and health, defence and health, environment and agricultural or energy affairs, transport and tourism, etc.

6. Aggregates

7. Other aspects

• 21.44. This section illustrated various ways and means of extending national accounts work. The examples given do not attempt to cover systematically all kinds of complementary or alternative solutions. For instance, different methods may be used to value economic flows, as well as assets and liabilities. Some of these methods are included in the central framework; others, such as opportunity cost or the net present value may be considered more broadly in satellite analyses. The labour content of flows of goods and services may also be studied. The underlying economic significance of certain arrangements such as, for instance, advertising expenditures by businesses that provide major support to newspapers and television programmes, might be examined.

8. From analyses to accounts

• 21.45. Broadly speaking, two types of satellite analysis may be distinguished in their relationship with the central framework of the SNA. One type involves some rearrangement of central classifications and the introduction of complementary elements that differ from the conceptual central framework (such as the identification of the output of ancillary activities) without drastically diverging from the concepts on which the central framework is built. These constructs are not based on nor emphasize alternative concepts, even when they use some on a complementary basis. This first type of analysis mostly covers accounts specific to given fields such as education, tourism and environmental protection expenditures. Introducing their content into the central framework would overburden it and would not be totally possible; doing it in a specific, satellite, accounting framework allows additional margins of flexibility.

• 21.46. The second type of satellite analysis is mainly based on concepts that are alternatives to the ones of the SNA. A different production boundary or enlarged concepts of consumption and capital formation may be introduced, or the scope of assets may be extended, the borderline between economic phenomena as covered by the central framework and natural phenomena may be altered, the links between income and wealth may be put in the context of a broader concept of wealth, including natural assets, etc. Often a number of alternative concepts are used at the same time. This second type of analysis may involve, like the first, changes in definitions or classifications, but in the second type the main emphasis is on the alternative concepts. Using those alternative concepts may give rise to partial complementary aggregates the purpose of which is to supplement the central system. Various efforts are also made to include some or all of them in an alternative system of national accounts. System of National Accounts 494

• 21.47. The second type of research work is evidently more controversial than the first one, but it is important. It allows national accounts work to be extended beyond what is, or perhaps might be, included in the central system of the SNA. It provides useful results for economic analysis. It experiments with new concepts and methodologies, with of course a much wider margin of freedom than in current national accounts work. This research work may influence the development of the central national accounts themselves. The System does not make standardized recommendations as to this type of work, which by definition must remain open. Environmental accounting is considered in this context in section D. For explanatory purposes that section uses a version of an accounting framework called the system of environmental economic accounts, which should be considered work-in-progress and just one of the frameworks in which environmental account could be developed.

• 21.48. On the other hand, the work already done in functionally oriented satellite accounts—the type of research work referred to in paragraph 21.45 above—refers to a family of satellite accounts for which it is possible to propose an accounting framework which could be used as a reference by people intending to build such accounts.

1. Scope of a functionally oriented satellite account

• 21.53. To analyse a specific field in depth while preserving the possibility of calculating some significant aggregates such as national expenditure, the starting point is an analysis of the uses. This corresponds to the questions “how many resources are devoted to (education, transportation, tourism, environmental protection, data processing, etc.)?” or, identically, “how much is spent on (education, transportation, etc.)?”. In order to answer these questions, we have to decide upon:

  • (a) The goods and services that we will consider specific to this field, where national expenditure includes the uses (current or capital) of these specific products;

  • (b) The activities for which we will record capital formation;

  • (c) The transfers that we will consider specific to this field, recognizing that they will be a separate component of national expenditure only to the extent that they are not already included in the value of the uses of the specific products (otherwise, they will be analysed only in relation to financing).

• 21.54. Depending on the field, the design of a given satellite account will emphasize:

  • (a) The detailed analysis of the production and uses of the specific goods and services (e.g., R and D or transportation);

  • (b) The detailed analysis of transfers (e.g., social protection);

  • (c) Both production/uses and transfers equally (e.g., education and health);

  • (d) Uses as such (e.g., tourism, environmental protection).

• 21.55. When units which are the users, as actual consumers or investors, and units which ultimately bear the expenses coincide, figures for users tell us who finally bears the expenditure. This is the normal case for data processing and to a large extent transportation or tourism. On the other hand, ultimate users and ultimate bearers of the expenses may often differ, as is the case for education and health. In these cases, analysing the way the uses are financed is very important. When transfers represent all, or the main part of, national expenditure in a given field, this analysis is even more crucial.

• 21.56. Analysing in detail who are the users, consumers, investors, or transfer recipients is thus an important part of what can be done in a satellite account. Even if the aggregate under study is called national expenditure, the users in this context are the units which actually acquire the goods or services (for actual final consumption, intermediate consumption or capital formation) or receive specific transfers which are not intended to finance these acquisitions of goods and services.

• 21.57. Finally, as we focus attention on one field, it is useful to associate non-monetary figures to the monetary ones. Non-monetary figures relate to producing units and factors of production (labour, various kinds of assets) and users/beneficiaries.

• 21.58. In short, a satellite account in a given field covers the analysis of uses or benefits out of the national expenditure, production and its factors, transfers and other ways of financing the uses, both in value terms and, when relevant, in physical quantities.

2. Uses/national expenditure

• 21.59. The field of a given satellite account is essentially delineated by defining the content of the various types of uses to be included in the specific aggregates relevant to this field.

• 21.60. Table 21.1 shows the components of national expenditure. It is convenient in the first instance to define and measure the uses of resident units. However, uses of resident units may be financed partly by non-resident units. This part has to be deducted in order to get a total that corresponds to the effort a nation is making in a given field out of its own resources.

Table 21.1.

Components of uses/national expenditure

^*And their acquisition less disposals of non-produced non-financial assets.

Table 21.1.

Components of uses/national expenditure

Components of uses/national expenditure		Total
1. Consumption of specific goods and services
1.1 Actual final consumption
1.1.1 Market products
1.1.2 Non-market products
1.1.2.1. Individual
1.1.2.2. Collective
1.2 Intermediate consumption
1.2.1. Actual intermediate consumption
1.2.2. Internal intermediate consumption
2. Capital formation in specific goods and services
3. Fixed capital formation of characteristic activities in non-specific products(*)
4. Specific current transfers (not counterpart of item 1)
5. Specific capital transfers (not counterpart or item 2 or 3)
	Total uses of resident units
6. Current uses of resident units financed by the rest of the world (less)
7. Capital uses of resident units financed by the rest of the world (less)
	National expenditure

^*And their acquisition less disposals of non-produced non-financial assets.

View Table

Table 21.1.

Components of uses/national expenditure

Components of uses/national expenditure		Total
1. Consumption of specific goods and services
1.1 Actual final consumption
1.1.1 Market products
1.1.2 Non-market products
1.1.2.1. Individual
1.1.2.2. Collective
1.2 Intermediate consumption
1.2.1. Actual intermediate consumption
1.2.2. Internal intermediate consumption
2. Capital formation in specific goods and services
3. Fixed capital formation of characteristic activities in non-specific products(*)
4. Specific current transfers (not counterpart of item 1)
5. Specific capital transfers (not counterpart or item 2 or 3)
	Total uses of resident units
6. Current uses of resident units financed by the rest of the world (less)
7. Capital uses of resident units financed by the rest of the world (less)
	National expenditure

^*And their acquisition less disposals of non-produced non-financial assets.

3. Components of uses/national expenditure

• 21.61. The first step is to define the goods and services that are considered specific to this field. It is convenient to distinguish two types of specific goods and services in this context: characteristic goods and services and connected goods and services. The first category covers the products which are typical for the field under study. We are interested in studying the way these goods and services are produced, what kinds of producers are involved, what kinds of labour and fixed capital they use and the efficiency of the production process and, hence, of the allocation of resources. For example, for health, characteristic products are health services, public administration services, education and R and D services in health.

• 21.62. The second category, connected goods and services, includes products in whose uses we are interested because they are clearly covered by the concept of expenditure in a given field, without being typical, either by nature or because they are classified in broader categories of products. In health, for example, transportation of patients may be considered connected services; also pharmaceutical products and other medical goods, such as glasses, are very often treated as connected goods and services. For these connected goods and services, we are not primarily interested, when studying a given field, in their conditions of production. If we were, these products would have to be treated as characteristic goods and services. For example, pharmaceutical products might be considered characteristic in the account for health of a country at a first stage of developing a domestic industry. The precise borderline between characteristic and connected products depends on the economic organization in a given country and the purpose of a satellite account.

• 21.63. The economic activities providing the two types of specific products are treated differently in a satellite account, as explained below.

• 21.64. Specific goods and services generally appear at various levels and/or in various headings of the product classification used in the central framework. The headings in question are regrouped and additional details are introduced in order to build up the classification specific to a given satellite account. However, in order not to conflict with the requirements of statistical coordination, this specific classification remains strictly linked to the central classification of reference.

• 21.65. Some services may appear in the specific classifications of two or more satellite accounts. For instance, research in health services in higher education institutions is a specific product of both R and D and education and health.

• 21.66. Items 1 and 2 of the uses/expenditure table 21.1 relate to uses of the specific goods and services. In this table, and in following tables except table 21.5, characteristic products and connected products are not shown separately. This has been done only for the sake of simplification in the presentation of the tables. In actual satellite accounts it is necessary for analytical purposes to show the uses of characteristic goods and services and the uses of connected goods and services separately. Item 1 is consumption of specific goods and services. It covers actual final consumption (defined as in the central framework) and intermediate consumption. Market and non-market products are distinguished and, for the latter, individual and collective consumption. For the sake of simplicity, products for own final use and other non-market products are not shown separately in this chapter; they are both covered under non-market products. Similarly, producers for own final use and other non-market producers are both covered under non-market producers. The amounts are the same as in the central framework, unless the boundary of production is changed (for example, by including voluntary work in education and health) or a different type of valuation is adopted (see paragraph 21.75 below on consumption subsidies). Intermediate consumption generally has a broader coverage than in the central framework, as the output of the relevant ancillary activities is identified (while intra-establishment deliveries must be recorded). As a consequence, it covers (actual) intermediate consumption as defined in the central framework and internal intermediate consumption. In some cases, such as transport services, the last component may be important in size. Sometimes, it could be considered that this internal intermediate consumption is treated as final consumption and added to actual final consumption, as in the use of ancillary education and health services, thus broadening the scope of household actual final consumption. Also the scope of consumption may be narrowed, if the use of certain services is treated as fixed capital formation in a satellite account instead of intermediate or final consumption as in the central framework (see paragraph 21.67 below).

• 21.67. Item 2 of table 21.1 is capital formation in specific goods and services. In an account for housing, for example, it covers fixed capital formation in residential buildings. In R and D, education and health, item 2 is empty if the related services are all included under consumption as in the central framework. Of course, if all or part of these services were treated as capital formation in a satellite account, the corresponding uses would appear under item 2.

• 21.68. In addition to fixed capital formation, item 2 may cover changes in inventories. It may be so when specific goods are involved. As far as specific services are concerned, changes in inventories may relate to work-in-progress, for instance in software or some tourism services such as input costs already incurred in the preparation of tours not yet sold.

• 21.69. In an account for culture, acquisitions less disposals of valuables, such as paintings, may be significant. In this case it is also a component of item 2.

• 21.70. The definition of item 3, fixed capital formation of characteristic activities in non-specific products and their acquisitions less disposals of non-produced non-financial assets is a bit more complex:

  • (a) It does not cover the total fixed capital formation of these activities because that part consisting of specific products is already included in item 2;

  • (b) Only the fixed capital formation of activities whose output consists of characteristic goods and services is covered in item 3. (If the exclusion of capital formation of activities whose output consists of connected goods and services proves important, the products and activities in question may have to be redefined to be characteristic);

  • (c) An analysis based on establishments may give a broader coverage than normal because they may cover some secondary activities;

  • (d) Item 3 includes acquisitions less disposals of non-produced non-financial assets, mainly land. The acquisition of land may be important in such cases as education, health, tourism and housing.

• 21.71. The fixed capital formation in item 3 may be studied using a classification adapted to a particular satellite account. For example, if considering education or health, fixed capital formation in schools or hospitals could be further classified by various kinds of educational structures, medical equipment goods, etc.

• 21.72. The approach followed thus far when defining the content of items 1 to 3 of table 21.1 is relevant for most of the fields satellite accounts may cover. A more delicate approach is necessary, however, for environmental protection. As already stated, in this field, only some goods, services and activities in the usual sense may be considered characteristic and the relationship between products, activities and purposes is much looser than in the other fields previously referred to. Environmental protection expenditure is generally defined in terms of objectives pursued through actions or programmes related, for instance, to waste disposal, preservation of air quality, protection of other natural media, public administration in environmental affairs, etc. However, classifications currently proposed for environmental protection activities cover both economic activities in the SNA and ISIC sense and functions. In this context the definition of characteristic activities and of items 1 to 3 necessitate a specific analysis.

• 21.73. Item 4—Specific current transfers (not the counterpart of item 1) and item 5—Specific capital transfers (not the counterpart of items 2 or 3) are the most important components of national expenditure in cases such as social protection or development aid. In the examples mentioned above, items 1 and 2 refer only to the administrative costs, both current and capital, of the agencies managing social protection or international aid. The core of the expenditure consists of transfers.

• 21.74. In other fields, such as education and health, the major part of transfers (most of them in kind) are means of financing the acquisition by users of goods and services included in items 1 to 3. These transfers should not be counted twice in the expenditure. However, some transfers or parts of transfers are not used to counterbalance acquisition of products included in items 1 to 3. For example, student grants may serve to finance various outlays in addition to tuition fees or school books. This additional component of students grants is included under item 4.

• 21.75. In some situations, there may be subsidies designed to reduce the prices paid by final consumers for certain goods or services, such as food, transport services, or housing services. They are commonly called consumption subsidies. In the central framework, when these goods and services are considered market products, they are included in final consumption at purchasers’ prices. In a satellite account there are two options: either consumption (item 1) is valued differently from the central framework in order to include the value of consumption subsidies or consumption is valued as it is in the central framework and specific current transfers (item 4) must include consumption subsidies. Subsidies included in item 4 may also be directed toward reducing the prices of intermediate consumption. Item 4 may also include other subsidies on production.

• 21.76. In each field a classification of specific transfers has to be established. As it is used for analysing both uses and financing, this classification covers all specific transfers, independently of whether they are or are not counterparts of items 1 to 3.

• 21.77. The total uses of resident units are the sum of the five components above. It is convenient to distinguish between current and capital uses financed by the rest of the world, in order to facilitate later on the calculation of current and capital national expenditure which is derived from the uses of resident units by deducting that part which is financed by the rest of the world by means of transfers or lending. National expenditure is thus equal to total uses of resident units financed by resident units. Total uses of resident units or national expenditure may in most cases be calculated either gross or net or both.

• 21.78. National expenditure, as defined above, does not include transactions in financial instruments. However, for certain types of analysis, such as development aid, loans which are given or received at preferential conditions must be accounted for. Benefits or costs resulting from rates of interest lower than the market ones are clearly implicit transfers.

• 21.79. Uses/national expenditure may be shown by type of products and transfers or by type of purpose (programmes). The main emphasis may be put on one or the other of these two alternatives, or they might be used jointly, depending on the field covered or the aim of the analysis pursued. The approach by programme is particularly relevant in the case of environmental protection or social protection.

• 21.80. Table 21.2 indicates the usual coverage of national expenditure in various fields. As explained above, not all items are relevant in every case. Current uses of resident units include components 1 and 4, capital uses components 2, 3 and 5. Current national expenditure is equal to the sum of components 1 and 4, less item 6. Capital national expenditure is equal to the sum of components 2, 3 and 5, less item 7.

  Table 21.2.

  Coverage of national expenditure in various fields Research

  

  ^*And their acquisition less disposals of non-produced non-financial assets.

  Table 21.2.

  Coverage of national expenditure in various fields Research

  Components of uses/national expenditure				Culture	Education	Health	Social protection	Tourism	Environmental protection	Research and development	Aid for development	Transportation	Data processing	Housing
  1. Consumption of specific goods and services
  	1.1. Actual final consumption
  		1.1.1. Market products		X	X	X		X	X			X	X	X
  		1.1.2. Non-market products
  			1.1.2.1. Individual	X	X	X			X			X		X
  			1.1.2.2. Collective	X	X	X	X	X	X	X	X	X
  	1.2. Intermediate consumption							X	X	X		X	X
  		1.2.1. Actual intermediate consumption			X	X
  		1.2.2. Internal intermediate consumption		X	X	X			X	X		X	X
  2. Capital formation in specific goods and services									X	X			X	X
  3. Fixed capital formation of characteristic activities in non-specific products (*)				X	X	X	X	X	X	X		X	X	X
  4. Specific current transfers (not counterpart of item 1)				X	X	X	X	X	X	X	X	X		X
  5. Specific capital transfers (not counterpart of items 2 or 3)							X				X	X
  	Total uses of resident units
  6. Current uses of resident units financed by the rest of the world (less)
  7. Capital uses of resident units financed by the rest of the world (less)
  	National expenditure

  ^*And their acquisition less disposals of non-produced non-financial assets.

  View Table

  Table 21.2.

  Coverage of national expenditure in various fields Research

  Components of uses/national expenditure				Culture	Education	Health	Social protection	Tourism	Environmental protection	Research and development	Aid for development	Transportation	Data processing	Housing
  1. Consumption of specific goods and services
  	1.1. Actual final consumption
  		1.1.1. Market products		X	X	X		X	X			X	X	X
  		1.1.2. Non-market products
  			1.1.2.1. Individual	X	X	X			X			X		X
  			1.1.2.2. Collective	X	X	X	X	X	X	X	X	X
  	1.2. Intermediate consumption							X	X	X		X	X
  		1.2.1. Actual intermediate consumption			X	X
  		1.2.2. Internal intermediate consumption		X	X	X			X	X		X	X
  2. Capital formation in specific goods and services									X	X			X	X
  3. Fixed capital formation of characteristic activities in non-specific products (*)				X	X	X	X	X	X	X		X	X	X
  4. Specific current transfers (not counterpart of item 1)				X	X	X	X	X	X	X	X	X		X
  5. Specific capital transfers (not counterpart of items 2 or 3)							X				X	X
  	Total uses of resident units
  6. Current uses of resident units financed by the rest of the world (less)
  7. Capital uses of resident units financed by the rest of the world (less)
  	National expenditure

  ^*And their acquisition less disposals of non-produced non-financial assets.

• 21.81. Some explanation of the table is needed. Collective consumption for social protection and development aid refers to the current costs of managing agencies in these fields. Specific current transfers for tourism, transportation, housing and possibly education, health and culture cover subsidies on the relevant products unless they are included under item 1. In many fields they refer also to transfers to international organizations. Since financing by the rest of the world depends on specific circumstances, no crosses have been entered in table 21.2. For R and D, a satellite account allows expenditure to be treated either as consumption or capital formation or both. In certain cases, other aggregates are relevant and should be calculated. For instance, in the case of tourism, expenditure by tourists, both resident and non-resident, in the domestic market, is a significant aggregate. It is obtained, starting from item 1, by deducting expenditure abroad by resident tourists (imports) and adding expenditure by non-resident tourists in the domestic market (exports).

4. Users/beneficiaries

• 21.82. For users or beneficiaries, the terminology used may differ from one satellite account to another. "Users" is more relevant to tourism or housing for example, “beneficiaries” to social protection or development aid, etc. In both cases, the terms refer to who is using the goods and services or benefiting from the transfers involved.

• 21.83. At the most aggregated level, the classification of users/beneficiaries is simply a rearrangement of the central framework classification of institutional sectors and types of producers, in which production aspect and consumption aspect are separated. It may be as follows:

  • (a) Market producers;

  • (b) Non-market producers (producers for own final use; and other non-market producers);

  • (c) Government as a collective consumer;

  • (d) Households as consumers;

  • (e) Rest of the world.

• 21.84. Various sub-categories of producers may be distinguished under each main group, either by industry and/or by institutional sub-sector in order to show explicitly the detailed links with the central framework as well as for analytical purposes. For actual consumption, general government is supposed to be the final consumer of collective services produced by itself, on behalf of society as a whole.

• 21.85. Households, even individuals, as consumers are the most important type of users/beneficiaries in many satellite accounts. In order to be useful for social analysis and policy, a further breakdown of households is necessary. In the first instance this may be according to the various sub-sectors that are distinguished in the central framework or may use a more detailed or especially adapted socio-economic classification. Moreover, various criteria may be used according to different purposes, such as size of income, age, sex, location, etc. For analysis and policy-purposes, knowledge of the number of people concerned in each category is essential in order to calculate, for instance, the average consumption or transfer, the number of people who benefit very little or not at all from national expenditure in the field under study, etc.

• 21.86. Cross-classifying components of national expenditure and types of users/beneficiaries leads to table 21.3. Crosses indicate cells which may be filled in, if relevant in a given field.

Table 21.3.

National expenditure by components and by users/beneficiaries

^*And their acquisition less disposals of non-produced non-financial assets.

Table 21.3.

National expenditure by components and by users/beneficiaries

Components of uses/national expenditure	Users/beneficiaries
	Total	1	2	3	4	5
		Market producers	Non market producers	Government as collective consumer	Households as consumers	Rest of the world
1. Consumption of specific goods and services
1.1. Actual final consumption
1.1.1 Market products					X
1.1.2 Non-market products
1.1.2.1. Individual					X
1.1.2.2. Collective				X	X
1.2 Intermediate consumption
1.2.1. Actual intermediate consumption		X	X
1.2.2. Internal intermediate consumption		X	X
2. Capital formation in specific goods and services		X	X
3. Fixed capital formation of characteristic activities in non-specific products(*)		X	X
4. Specific current transfers (not counterpart of item 1)		X			X	X
5. Specific capital transfers (not counterpart of items 2 or 3)		X			X	X
Total uses of resident units
6. Current uses of resident units financed by the rest of the world (less)
7. Capital uses of resident units financed by the rest of the world (less)
National expenditure

^*And their acquisition less disposals of non-produced non-financial assets.

View Table

Table 21.3.

National expenditure by components and by users/beneficiaries

Components of uses/national expenditure	Users/beneficiaries
	Total	1	2	3	4	5
		Market producers	Non market producers	Government as collective consumer	Households as consumers	Rest of the world
1. Consumption of specific goods and services
1.1. Actual final consumption
1.1.1 Market products					X
1.1.2 Non-market products
1.1.2.1. Individual					X
1.1.2.2. Collective				X	X
1.2 Intermediate consumption
1.2.1. Actual intermediate consumption		X	X
1.2.2. Internal intermediate consumption		X	X
2. Capital formation in specific goods and services		X	X
3. Fixed capital formation of characteristic activities in non-specific products(*)		X	X
4. Specific current transfers (not counterpart of item 1)		X			X	X
5. Specific capital transfers (not counterpart of items 2 or 3)		X			X	X
Total uses of resident units
6. Current uses of resident units financed by the rest of the world (less)
7. Capital uses of resident units financed by the rest of the world (less)
National expenditure

^*And their acquisition less disposals of non-produced non-financial assets.

5. Financing

• 21.87. Users do not always bear the expenses themselves so that it is necessary to analyse the financing units, i.e., the units which ultimately bear the expenses. For this purpose a classification derived from the central framework classification of institutional sectors, such as the following, may be used:

  • (a) Market producers;

  • (b) NPISHs;

  • (c) General government;

  • (d) Households;

  • (e) Financial enterprises;

  • (f) Rest of the world.

• 21.88. It can be seen from this list that non-market producers are never considered ultimate financing units. All their costs, net of any secondary sales and possible transfers, are covered by their parent institutional units or by borrowed funds. Market producers refer to all institutional sectors in their capacity as producers for the market, as in the classification of users/beneficiaries. A separate category is introduced for financial enterprises covering financial corporations and, if any, unincorporated financial enterprises. It refers only to their function of providing other units with funds they gather through financial intermediation.

• 21.89. Table 21.4 cross-classifies components of national expenditure and financing units.

  Table 21.4.

  National expenditure by components and financing unit

  

  ^*And their acquisition less disposals of non-produced non-financial assets.

  Table 21.4.

  National expenditure by components and financing unit

  Components of uses/national expenditure	Financing units
  	Total	1	2	3	4	5	6
  		Market producers	NPISHs	General government	Households as consumers	financial enterprises	Rest of the world
  1. Consumption of specific goods and services
  1.1 Actual final consumption
  1.1.1 Market products		X	X	X	X	X	X
  1.1.2 Non-market products
  1.1.2.1. Individual			X	X	X		X
  1.1.2.2. Collective				X	X
  1.2 Intermediate consumption
  1.2.1. Actual inter-mediate consumption		X	X	X
  1.2.2. Internal inter-mediate consumption		X	X	X
  2. Capital formation in specific goods and services		X	X	X	X	X	X
  3. Fixed capital formation of characteristic activities in non-specific products(*)		X	X	X	X	X	X
  4. Specific current transfers (not counterpart of item 1)			X	X	X
  5. Specific capital transfers (not counterpart of items 2 or 3)			X	X
  Total uses of resident units
  6. Current uses of resident units financed by the rest of the world (less)							-X
  7. Capital uses of resident units financed by the rest of the world (less)							-X
  National expenditure

  ^*And their acquisition less disposals of non-produced non-financial assets.

  View Table

  Table 21.4.

  National expenditure by components and financing unit

  Components of uses/national expenditure	Financing units
  	Total	1	2	3	4	5	6
  		Market producers	NPISHs	General government	Households as consumers	financial enterprises	Rest of the world
  1. Consumption of specific goods and services
  1.1 Actual final consumption
  1.1.1 Market products		X	X	X	X	X	X
  1.1.2 Non-market products
  1.1.2.1. Individual			X	X	X		X
  1.1.2.2. Collective				X	X
  1.2 Intermediate consumption
  1.2.1. Actual inter-mediate consumption		X	X	X
  1.2.2. Internal inter-mediate consumption		X	X	X
  2. Capital formation in specific goods and services		X	X	X	X	X	X
  3. Fixed capital formation of characteristic activities in non-specific products(*)		X	X	X	X	X	X
  4. Specific current transfers (not counterpart of item 1)			X	X	X
  5. Specific capital transfers (not counterpart of items 2 or 3)			X	X
  Total uses of resident units
  6. Current uses of resident units financed by the rest of the world (less)							-X
  7. Capital uses of resident units financed by the rest of the world (less)							-X
  National expenditure

  ^*And their acquisition less disposals of non-produced non-financial assets.

• 21.90. The identification of the ultimate bearer of the expenses is not always obvious. As the principle of the ultimate bearer of the expense is used in the central framework when attributing consumption expenditure to institutional sectors, one might think that it is a simple matter to apply the same solution here. In fact, the problem is more complicated. First, we have to analyse the financing of capital formation and transfers, not only consumption. Secondly, we have to take into account financing through capital transfers and borrowing. Thirdly, some refinements are needed, even for expenses made out of disposable income. In table 21.4, the following treatments are used:

  • (a) Market producers finance their intermediate consumption through their sales. Self-financing of capital formation by owners of market unincorporated enterprises not classified as quasi-corporations is considered financing by the owners themselves out of their saving or sale of assets. It is recorded in columns 2,3 and 4 respectively, whenever relevant; are treated as ultimate financing units, not the households who pay contributions to them;

  • (b) Non-profit institutions serving households (NPISHs)

  • (c) In general, general government is treated as the ultimate financing unit, not the units which pay taxes to it. However, in certain cases, when specific taxes or fees treated as taxes are levied by Government in relation with special concerns, such as environmental protection, it is necessary for sake of a better analysis to consider that the units paying these taxes are the ultimate financing units, not Government. Social contributions represent means of financing by households;

  • (d) Households are considered to be the financing units for all expenses made out of their income, except for transfers in kind received from the rest of the world and non-government/ NPISHs sectors. Components in kind of compensation of employees and entrepreneurial income are thus financed by households themselves. Social contributions, as part of compensation of employees, represent means of financing by households. As indicated above (see paragraphs 21.88 and 21.90 (a) above), households are the financing units for all current costs, less any receipts, of their non-market unincorporated enterprises, as well as for the part of the capital formation of their market or non-market unincorporated enterprises that they finance through their saving or sale of assets;

  • (e) Incurrence of liabilities is treated as a source of financing expenditure. When the counterpart of this incurrence of liabilities is a direct acquisition of assets by institutional units other than financial enterprises, the corresponding financing is recorded in the relevant columns 1 to 4 or 6. Acquisition of financial assets by financial enterprises through their intermediation function is considered financing by these enterprises, not the units that own the deposits, for example;

  • (f) Transfers in kind received from the rest of the world and possibly non-government/NPISHs sectors are treated as means of financing by the rest of the world (or non-government/ NPISHs sectors).

• 21.91. In the table, actual final consumption of market products, which is always a use of households, may be financed by general government and NPISHs (transfers in kind), possibly the rest of the world and market producers (transfers in kind), financial enterprises (loans), or finally households themselves. Individual consumption of non-market products is financed by general government and NPISHs or households. Collective consumption is exceptionally financed by households (see paragraph 21.94 below).

• 21.92. The financing of capital formation is complex. First take market producers—a case such as the building of a hotel by an unincorporated enterprise. If the government tries to encourage tourism activities, there may be a capital transfer receivable by the investor, or there may be capital transfers from the rest of the world. A second part may be financed by a loan made by a bank, for example. The residual represents self-financing by the owner of the unincorporated enterprise, through saving or sale of assets. These three components will appear in row 3 and columns 3 (possibly 6), 5 and 4 respectively. The problem is simplest when market producers in a given field correspond very closely to a set of institutional units whose economic activity is essentially a characteristic activity in this field. If big corporations involved in a lot of different activities are concerned, the problem is more difficult. At the limit, loans and self-financing may in some cases have to be grouped together, the total appearing as financed by market producers, either now or in the future, when repaying the loans. Repayments of previous loans raise a general problem. It seems relevant in most cases to consider only net loans (that is, new loans less repayments of loans) linked to the financing of a given field as financing provided by financial enterprises. Consequently, self-financing covers present self-finance plus repayments of previous loans.

• 21.93. When capital formation by government units is involved, the analysis of the financing process may become even more complex, as a government may cover its overall deficit by issuing bonds, for example, which are not intended to finance specific programmes. However, especially in developing countries, loans given by the rest of the world are often specifically directed to identified investment programmes.

• 21.94. In table 21.4, households appear as financing units under item 4, that is, specific current transfers. This covers social contributions which households pay to government or other sectors out of compensation of employees. A detailed analysis of households as beneficiaries of social benefits and households as financing social protection through social contributions makes it possible to analyse the redistributional effect of social protection schemes. A part of social contributions covers current cost and possibly capital outlays of social protection institutions; it appears on rows 1.1.2.2 and 3. When tax benefits are estimated and included in social protection accounts in item 4, households are at the same time beneficiaries and financing units, as a redistribution process between various types of households is involved.

• 21.95. In table 21.4, financing units are the ultimate bearers of the expenses. In more detailed analyses, transfers between initial, intermediary (if any) and ultimate financing units have to be shown in order to build up a complete set of accounts for the relevant managing agencies (social protection schemes in the case of social protection accounts).

• 21.96. The table shows first how uses of resident units are financed. In some cases the rest of the world may be a source of finance (by means of transfers or net lending). This appears in the relevant rows and the column for the rest of the world. In order to get the financing of national expenditure, the corresponding amounts are deducted in rows 6 and 7.

• 21.97. National expenditure is thus equal to the total outlays of resident financing units in the field under study. This is identical to total uses of resident units financed by resident units. In addition, it may be useful to cross-classify the total uses of resident units by type of users/beneficiaries (table 21.3) and type of financing units (table 21.4).

6. Production and products

• 21.98. In a satellite account the main emphasis when looking at production is on the analysis of characteristic activities and producers. As explained earlier, characteristic goods and services are typical of the field under study. The activities in which they originate are called characteristic activities, and producers which carry out a characteristic activity are said to be characteristic producers.

• 21.99. The way production units may be analysed in a satellite account has been dealt with in section B and is not repeated here. In a given field a list of characteristic activities has to be established. This list may include some activities which are also considered characteristic of other fields. Characteristic producers may be defined in various ways. Ideally, they are units of homogeneous production belonging either to establishments whose principal activity is a characteristic activity or to establishments which carry out a characteristic activity only as a secondary activity or to ancillary activities. They may also refer to an extension of the production boundary. For the sake of convenience, establishments whose principal activity is a characteristic activity may be covered totally, including their non-characteristic secondary activities. Market and non-market producers are distinguished.

• 21.100. Production activity of characteristic producers is studied in detail. This covers the production and generation of income accounts, the analysis of output by kind of products and number of units produced, the destination of this output (consumption, capital formation, exports) and the labour and fixed assets used. As to labour, in addition to compensation of employees, which may be subdivided according to various criteria (such as skill and sex), the number of people employed is shown in detail, again according to various criteria. Fixed capital formation is covered. Stocks of fixed assets in monetary value and/or physical quantities (number of hospital beds, of primary schools, etc.) are essential.

• 21.101. When relevant, the analysis of supply and use of specific goods and services may be inserted in an input-output framework. In that case, classifications of characteristic producers, characteristic products and connected goods and services are detailed, while classifications of other producers and products are compacted.

• 21.102. Table 21.5, which is a re-arrangement of the supply and use table of the central framework, tentatively suggests how such a satellite analysis might be inserted in an input-output table. In principle, units of homogeneous production are considered for the characteristic activities. Characteristic producers and other producers are separated. Among characteristic producers, market producers cover units of homogeneous production belonging to principal producers (establishments whose principal activity is a characteristic activity), secondary producers (establishments whose principal activity is not a characteristic activity) and ancillary activities (whose output and input must be externalized) separately. The same distinction is made for non-market producers; in addition, a column "Others" under non-market producers refers to a possible extension of the production boundary. Other producers, from which secondary and ancillary activities characteristic of the field under study have been excluded, are grouped altogether (unless it is useful to show the main providers of intermediate inputs or fixed capital to characteristic producers, or suppliers of certain connected goods and services, separately).

  Table 21.5.

  Satellite input-output table (supply and use table)

  

  

  Table 21.5.

  Satellite input-output table (supply and use table)

  Resource		Total supply, purchasers’ prices	Trade and transport margins	Taxes on products	Subsidies on products (−)	Characteristic producers										Imports of goods and services
  							Market producers			Non-market producers
  						Total	Principal producers	Secondary producers	Ancillary activities	Principal producers	Secondary producers	Ancillary activities	Others	Other producers	Total economy
  Goods and services							Output
  	Goods and services supply:
  Characteristic products
  1.
  2.
  …
  m.
  Connected products
  1.
  2.
  …
  n.
  Other products
  Total

  Uses																					Gross capital formation
  		Total uses in purchasers’ prices				Characteristic producers										Exports of goods and services					Gross fixed capital formation	changes in inventories	Acquisition less disposals of valuables
  						Total	Market producers			Non-market producers							Final consumption expenditure
  							Principal producers	Secondary producers	Ancillary activities	Principal Government	Secondary producers	Ancillary activities	Others	Other producers	Total economy		House holds	NPIHs	Government
  																		individual	collective	individual
  Goods and services							Intermediate consumption
  	uses:
  Characteristic products
  1.
  2.
  …
  m.
  Connected products
  1.
  2.
  …
  n.
  Other products
  Total
  Total gross value added/GDP
  Compensation of employees
  Taxes on products
  Other taxes on production
  Subsidies on products (-)
  Other subsidies on production (-)
  Operating surplus, net
  Mixed income, net
  Consumption of fixed capital
  	Specific products
  	Non-specific products
  Operating surplus, gross
  Mixed income, gross
  Total
  Labour inputs
  Gross fixed capital formation
  	Specific products
  	Non-specific products
  Stock of fixed assets, net

  View Table

  Table 21.5.

  Satellite input-output table (supply and use table)

  Resource		Total supply, purchasers’ prices	Trade and transport margins	Taxes on products	Subsidies on products (−)	Characteristic producers										Imports of goods and services
  							Market producers			Non-market producers
  						Total	Principal producers	Secondary producers	Ancillary activities	Principal producers	Secondary producers	Ancillary activities	Others	Other producers	Total economy
  Goods and services							Output
  	Goods and services supply:
  Characteristic products
  1.
  2.
  …
  m.
  Connected products
  1.
  2.
  …
  n.
  Other products
  Total

  Uses																					Gross capital formation
  		Total uses in purchasers’ prices				Characteristic producers										Exports of goods and services					Gross fixed capital formation	changes in inventories	Acquisition less disposals of valuables
  						Total	Market producers			Non-market producers							Final consumption expenditure
  							Principal producers	Secondary producers	Ancillary activities	Principal Government	Secondary producers	Ancillary activities	Others	Other producers	Total economy		House holds	NPIHs	Government
  																		individual	collective	individual
  Goods and services							Intermediate consumption
  	uses:
  Characteristic products
  1.
  2.
  …
  m.
  Connected products
  1.
  2.
  …
  n.
  Other products
  Total
  Total gross value added/GDP
  Compensation of employees
  Taxes on products
  Other taxes on production
  Subsidies on products (-)
  Other subsidies on production (-)
  Operating surplus, net
  Mixed income, net
  Consumption of fixed capital
  	Specific products
  	Non-specific products
  Operating surplus, gross
  Mixed income, gross
  Total
  Labour inputs
  Gross fixed capital formation
  	Specific products
  	Non-specific products
  Stock of fixed assets, net

• 21.103. As indicated above, for convenience, the establishments whose principal activity is a characteristic activity may be included in their totality. In this case the column for principal producers would include establishments. The column for secondary producers, and of course ancillary activities, should continue to refer to units of homogeneous production in order to limit the degree of heterogeneity of the group of characteristic producers. When secondary and/or ancillary output of characteristic products is not significant in size, it could be treated as secondary output of other producers.

• 21.104. The supply of characteristic and connected products appears in the rows. The sources are imports and domestic output. The output corresponding to intra-establishment deliveries must be included. If some secondary producers are not included in the relevant column for characteristic producers, their output is shown in the column for other producers, where the output of connected goods and services also appears. Other products are grouped altogether (unless, again, it is useful to show some detail).

• 21.105. In the lower part of the table, the use part of the production account and the generation of income account of producers is shown. At the bottom, three rows show gross fixed capital formation, stocks of fixed assets and labour inputs. In certain satellite accounts, a row for acquisitions less disposals of valuables may also have to be shown (see paragraph 21.69 above). Final uses are depicted in the relevant columns without any modification of presentation. Alternatively, the columns can be re-arranged and actual final consumption presented first.

7. Full accounts for characteristic producers

• 21.106. When analysing a given field in a satellite account, it is generally worthwhile to establish complete accounts for characteristic producers. However, complete accounts may be established only for institutional units. This seeming impasse can be surmounted because in a given field many units of homogeneous production or establishments belong to institutional units whose principal productive activity is a characteristic activity in the same field. In order to extend the analysis, all these institutional units may be regrouped in a sector of characteristic producers. Their accounts may be shown using a simplified presentation, as shown in the example below (balance sheets may or may not be included):

  

  

  Production and generation of income account
  Intermediate consumption	Output
  —of characteristic activities	—characteristic output
  —of other activities	—other output
  Compensation of employees
  —of characteristic activities
  —of other activities
  Taxes on production and
  imports
  Subsidies (-)
  Consumption of fixed capital
  Operating surplus, net
  —of characteristic activities
  —of other activities
  Mixed income, net
  —of characteristic activities
  —of other activities
  Mixed income, net
  —of characteristic activities
  —of other activities
  Other current accounts
  Property income	Operating surplus
  	Mixed income
  Current taxes on income	Property income
  wealth, etc.
  Social contributions and benefits	Social contributions and benefits
  	Other current transfers
  Other current transfers
  Adjustment for the change in net equity of households in pension funds
  Collective consumption
  Saving, net
  Accumulation accounts
  Gross fixed capital formation Saving, net
  —of characteristic activities	Capital transfers receivable
  —of other activities	Capital transfers payable (-)
  Consumption of fixed capital (-)
  Changes in inventories
  Acquisition less disposals of valuables
  Acquisition less disposals of non-produced non-financial assets
  Net acquisition of financial assets	Net incurrence of liabilities—for financing
  	characteristic activities
  	—others
  Other accumulation entries	Other accumulation entries
  	Other changes in net worth

  View Table

  Production and generation of income account
  Intermediate consumption	Output
  —of characteristic activities	—characteristic output
  —of other activities	—other output
  Compensation of employees
  —of characteristic activities
  —of other activities
  Taxes on production and
  imports
  Subsidies (-)
  Consumption of fixed capital
  Operating surplus, net
  —of characteristic activities
  —of other activities
  Mixed income, net
  —of characteristic activities
  —of other activities
  Mixed income, net
  —of characteristic activities
  —of other activities
  Other current accounts
  Property income	Operating surplus
  	Mixed income
  Current taxes on income	Property income
  wealth, etc.
  Social contributions and benefits	Social contributions and benefits
  	Other current transfers
  Other current transfers
  Adjustment for the change in net equity of households in pension funds
  Collective consumption
  Saving, net
  Accumulation accounts
  Gross fixed capital formation Saving, net
  —of characteristic activities	Capital transfers receivable
  —of other activities	Capital transfers payable (-)
  Consumption of fixed capital (-)
  Changes in inventories
  Acquisition less disposals of valuables
  Acquisition less disposals of non-produced non-financial assets
  Net acquisition of financial assets	Net incurrence of liabilities—for financing
  	characteristic activities
  	—others
  Other accumulation entries	Other accumulation entries
  	Other changes in net worth

• 21.107. As satellite accounts are functionally oriented, the sector of characteristic producers may also cover units which are characteristic producers in the field under study but belong to institutional units whose principal activity is not in this field. To balance the accounts, the operating surplus or mixed income, if any, of these producing units is transferred as property income to their parent institutional units. In the accumulation accounts, the capital formation of these producing units is balanced by an equivalent capital transfer coming from their parent institutional units.

• 21.108. In fields such as social protection where distributing transfers is the main economic function involved, the production of services playing only a marginal role, the analysis of units managing the distribution and redistribution processes predominates. It is then simpler to group together all current accounts, the production part of them being simplified by showing administrative costs directly as uses and secondary sales, if any, as resources. If social protection institutions act as producers of health or welfare services and if a satellite account covers both production and redistribution functions, the above presentation of accounts remains relevant. In both cases, the analysis of transfers and their financing is given great importance.

• 21.109. Transfers are analysed according to their nature (in cash, in kind, subdivided in various ways) and the type of risks (sickness, unemployment, etc.). A detailed classification of social protection schemes is also used (basic, complementary or supplementary schemes, subdivided between national, general, special or voluntary schemes for instance).

8. Non-monetary data

• 21.110. A satellite account allows for the linkage of physical data to the monetary accounting system. In the central framework this kind of link remains generally implicit, being done only for population and labour inputs where these figures are necessary for calculating a number of per-person indicators such as income or consumption and indicators of productivity. Such physical data have been mentioned when going through the functionally oriented satellite account framework. It is worth recalling this kind of link here.

• 21.111. As output is studied in much more detail than in the central framework, even when it includes a detailed supply and use/input-output table, it is generally possible to show meaningful data on the number of units produced or used: physician consultations by kind of physician, hotel-nights of various types, student years in various levels of education, etc. The labour force may be presented in detail: number of people employed in various categories, according to skill and sex, number of hours worked or equivalent person years, number of people in training, etc. Data on existing assets in physical terms are especially interesting in such fields as education, culture, health or housing. In conjunction with labour force data, they constitute well-known social indicators such as number of teachers, of hospital beds or of physicians per ten thousand inhabitants.

• 21.112. Another important dimension of non-monetary data refers to users/beneficiaries of the goods and services and recipients of the transfers in question. Those data are especially meaningful in the fields of social concern such as education, health and social protection. They require information that is generally less developed than the ones on labour force and assets mentioned above. However, they are indispensable to assess the standard of living of various parts of the population and to look in depth at redistribution policy.

• 21.113. Physical data are not to be considered a secondary part of a satellite account. They are essential components, both for the information they provide directly and in order to make the monetary data fully meaningful.

9. Links with the central framework.

• 21.114. The tentative framework presented in this section departs little from the central framework standards. This resemblance might be more apparent than real if the amounts related to the various items are different from the ones attached to the same flows in the central framework—for example, where a satellite account is established independently from the central accounts themselves. Normally the assumption is that the same items are represented by the same figures in the central framework and in a functionally oriented satellite account.

• 21.115. Many elements shown in a satellite account are invisible in the central accounts. Either they are explicitly estimated in the making of the central accounts, but they are merged for presentation in more aggregated figures, or they are only implicit components of transactions which are estimated globally. For each of the fields mentioned in paragraph 21.51 above, only a small number of figures appear in the central accounts, even when the latter are very detailed. Consequently the first role of a functionally oriented satellite account is to make explicit the implicit figures of the central framework.

• 21.116. However, even in a satellite accounting framework as close to the central framework as the one presented above, some degrees of freedom are introduced. In a number of cases, classifications of economic activities, products and purposes have to be adapted to the field under study. This is mostly a problem of presentation. As the coverage of a given field sometimes extends beyond the corresponding aggregated positions in the central classifications (e.g, education and health, health and R and D) or is widely diffused (e.g, tourism or environmental protection), some re-arrangement of the positions of the central classifications has to be made when elaborating classifications for a given field. As a rule, all the links with the central classifications must remain visible. As explained earlier, the proposed classifications of users/beneficiaries and financing units follow this rule.

• 21.117. Other degrees of freedom are used in this framework. For instance, the output and input of the relevant ancillary activities are externalized, which is a difference with the central framework. This element is always apparent in the list of components of uses (see item 1.2.2 internal intermediate consumption) and in the satellite supply and use table, table 21.5. The concept of national expenditure is broader—it may include intermediate consumption and transfers—and narrower—financing by the rest of the world is excluded—than in the central framework.

• 21.118. In addition, the framework introduces a number of elements which are not in the central framework as such, but do not conflict with it. Above all, this refers to the introduction of the concepts of characteristic goods and services and connected goods and services, the total of which constitute the specific goods and services. The concept of characteristic producers is also introduced. Also gross fixed capital formation and consumption of fixed capital make the distinction between specific and non-specific products. Finally, physical data are introduced.

• 21.119. A satellite account may use elements which have no equivalent in the central framework. Such elements have not been shown when presenting the satellite accounting framework, because they vary according to specific requirements of the fields. Examples of such elements are classifications of diseases (for consumption of health services and connected products) and of scientific disciplines (for R and D expenditures).

• 21.120. The kind of satellite accounts studied in this section may also have recourse to alternative concepts, as was touched upon. The boundary of production could be changed in order to include housework and voluntary work (see the column "Others" in the supply and use table), which would affect, for example, education, health and social protection. All or part of R and D expenditures may be treated as gross fixed capital formation instead of current outlays. The satellite accounting framework presented in this section as a general orientation does not prevent the extension of some satellite accounts in the directions mentioned in this paragraph. On the contrary, these additional dimensions represent valuable enrichments of the analytical power of the national accounting approach.

10. Perspective on the framework

• 21.121. The framework presented in this section may cover an important number of fields, as already seen from the illustrative list in paragraph 21.51 above. This framework for functional analyses may not fit all topics which one might like to study in connection with central national accounting. However, the general approach may give valuable inputs for other types of accounts. Specific parts of the functionally oriented satellite framework may also be relevant in other cases, even in the context of the central framework itself, such as the satellite supply and use table which is used, with terminological adjustments, for key activities and products.

1. The scope of environmental accounting

• 21.122. In the previous section, environmental analysis was dealt with as one of several topics that could be pursued as a functionally oriented satellite account. In this section, environmental analysis is dealt with in the context of a broadened framework that amends several concepts of the SNA to respond to the growing concerns of incorporating environmental criteria in economic analysis.

• 21.123. This section deals with the general orientation, design, concepts and classifications of integrated economic and environmental satellite accounts. In these accounts, SNA aggregates are amended to treat natural resources as capital in the production of goods and services, to record the cost of using—i.e., depleting and degrading—those resources and to record the implicit transfers needed to account for the imputed cost and capital items. The explanations are based to a large extent on the system of environmental economic accounts (SEEA) that is presented in the handbook Integrated Environmental and Economic Accounting¹. The presentation below should be considered as a description of the present state of the art of integrated economic and environmental accounting, which may evolve over time as a result of continuing discussions.

• 21.124. The section is included to guide countries in responding effectively to the current emphases in policy-making and analysis on environmentally sound and sustainable economic growth and development and to help national accountants in elaborating environmental satellite studies which take the national accounts as a point of departure. The section shows how amended accounts could deal in a compatible manner with economic and environmental concerns and thus make operational the concepts of sustainable growth and development. The satellite studies should respond effectively to the two major drawbacks of conventional national accounting that are often mentioned: the neglect of new scarcities of natural resources which threaten the sustained productivity of the economy and the degradation of environmental quality and consequential effects on human health and welfare.

• 21.125. Insofar as consensus has been reached, relevant parts of the central framework of the SNA take into account aspects of environmental accounting. In particular, many cost and capital items of accounting for natural resources are identified separately in the classifications and accounts dealing with stocks and other volume changes of assets. These features of the SNA facilitate the use of the System as a point of departure for environmental accounting. However, several elements of the SNA, particularly those in the account for other volume changes, need to be broken down further and reclassified, and other elements have to be added for the specific purposes of environmental accounting.

• 21.126. In the SNA, only produced assets, including inventories, are explicitly taken into account in the calculation of net value added. The cost of their use is reflected in intermediate consumption and consumption of fixed capital. Non-produced natural assets—such as land, mineral resources and forests—are included in the SNA asset boundary insofar as they are under the effective control of institutional units. However, the cost of their use is not explicitly accounted for in production cost. This may either imply that the price of the products does not reflect such cost or, if it does—as may be the case for some depletion cost—such cost is not separately identified but lumped together with other unidentified elements in the residual derivation of operating surplus.

2. Alternative approaches to environmental accounting

• 21.127. Most systems of environmental accounting now under discussion broaden SNA concepts of cost, capital formation and the stock of capital by supplementing these with additional data in physical terms in order to encompass environmental cost and the use of natural assets in production, or by amending them through the incorporation of these effects in monetary terms. However, within this general orientation, the several existing approaches differ considerably in terms of methodology and environmental concerns addressed. The SEEA synthesizes as far as possible the various approaches and integrates them into one comprehensive approach.

• 21.128. There are now three main approaches to environmental accounting, and they complement and overlap each other. The first one, generally referred to as natural resource accounting, focuses on accounts in physical terms. The second approach, which is linked to national accounts and is in monetary terms, is generally called monetary satellite accounting. It identifies the actual expenditures on environmental protection and deals with the treatment of environmental cost to natural and other assets caused by production activities in the calculation of net product. Monetary satellite accounting is generally more limited in coverage of environmental concerns than physical resource accounting. The third approach is a welfare-oriented one. It deals with the environmental effects borne by individuals and by producers other than the producers causing these effects. The latter effects may often be much larger than the cost caused and do not affect net product but rather net income through transfers of environmental services.

• 21.129. Of the three approaches, physical resource accounting is the most advanced in terms of practical implementation. Experience with monetary satellite accounting is much more recent, and many controversies still surround this approach, particularly with regard to valuation. The least consensus exists with regard to the welfare approach to environmental accounting.

3. General framework of environmental accounts and the SNA

• 21.137. Table 21.6 shows SNA concepts together with the alternative concepts used in environmental accounts. For purposes of explanation, a generalized and simplified version of the SEEA is used to present environmental accounts. The use of the SEEA framework to present environmental accounting and the relationship to the SNA is convenient as the SEEA was developed in immediate relationship to the SNA so that its concepts and classifications are more closely linked to those of the SNA than is the case for any other environmental accounting system. Nevertheless, format, concepts and classifications of the SEEA should be considered as work-in-progress, as many of its elements continue to be discussed among national and environmental accountants.

  Table 21.6.

  Basic structure of the SEEA

  

  Table 21.6.

  Basic structure of the SEEA

  		Economic activities					Environment
  		Production 1	Rest of world 2	Final consumption 3	Economic assets		Other non produced natural assets 6
  					Produced asset 4	Non-produced natural assets 5
  Opening stock of assets	i				K0p.ec	K0np.ec
  Supply	ii	P	M
  Economic uses	iii	Ci	X	C	Ig
  Consumption of fixed capital	iv	CFC			-CFC
  Net domestic product	v	NDP	X-M	C	I
  Use of non-produced natural assets	vi	Usenp				-Usenp.ec	-Usenp.env
  Other accumulation of non-produced natural assets	viii					Inp.ec	-Inp.env
  Environmentally adjusted aggregates in monetary environmental accounting	viii	EDP	X-M	C	Ap.ec	Anp.ec	-Anp.env
  Holding gains/losses	ix				Revp.ec	Revnp.ec
  Other changes in volume of assets	X				Volp.ec	Volnp.ec
  Closing stock of assets	xi				K1p.ec	K1np.ec

  View Table

  Table 21.6.

  Basic structure of the SEEA

  		Economic activities					Environment
  		Production 1	Rest of world 2	Final consumption 3	Economic assets		Other non produced natural assets 6
  					Produced asset 4	Non-produced natural assets 5
  Opening stock of assets	i				K0p.ec	K0np.ec
  Supply	ii	P	M
  Economic uses	iii	Ci	X	C	Ig
  Consumption of fixed capital	iv	CFC			-CFC
  Net domestic product	v	NDP	X-M	C	I
  Use of non-produced natural assets	vi	Usenp				-Usenp.ec	-Usenp.env
  Other accumulation of non-produced natural assets	viii					Inp.ec	-Inp.env
  Environmentally adjusted aggregates in monetary environmental accounting	viii	EDP	X-M	C	Ap.ec	Anp.ec	-Anp.env
  Holding gains/losses	ix				Revp.ec	Revnp.ec
  Other changes in volume of assets	X				Volp.ec	Volnp.ec
  Closing stock of assets	xi				K1p.ec	K1np.ec

  21.138 As will be shown in the description of the SEEA framework below, environmental cost and capital elements included can be interpreted in physical terms as well as in monetary terms. However, in view of the controversial issues surrounding valuation of environmental cost and capital, much caution should be exercised in the use of these elements in monetary terms and in the corresponding derivation of environmentally adjusted aggregates. This does not reduce the usefulness of environmental accounting, however, as the approaches to environmental accounting described above have shown that analysis in physical terms is as useful as environmental accounting in monetary terms, as long as the analysis is carried out in the context of a well-defined framework of satellite accounts.

4. Details on environmental amendments to SNA framework, concepts and classifications

• 21.148. In the overview of the environmental accounting frameworks above and in the presentation of table 21.6, several new concepts were introduced. This section specifies these concepts more precisely, explains why they were introduced and presents alternatives used in the SEEA and other environmental accounting approaches. Where necessary, reference is made to the rows and columns of table 21.6.