Abstract

4.1. The 1993 SNA presents a comprehensive set of related accounts that are of considerable analytical interest and were designed with a wide range of economic analyses in mind. The accounts can also help compilers identify inconsistencies and errors in the data. Just as compilers are urged to extend their annual data to a wider range of accounts, a quarterly national accounts (QNA) system should seek to cover more than GDP and its components.

A. General Issues

4.1. The 1993 SNA presents a comprehensive set of related accounts that are of considerable analytical interest and were designed with a wide range of economic analyses in mind. The accounts can also help compilers identify inconsistencies and errors in the data. Just as compilers are urged to extend their annual data to a wider range of accounts, a quarterly national accounts (QNA) system should seek to cover more than GDP and its components.

4.2. For the convenience of countries at the first stage of development of QNA, the previous chapter presented sources organized around the three approaches to GDP measurement. The splits of GDP by expenditure and income components discussed in Chapter III, however, also provide the foundation for the wider sequence of accounts. The expenditure approach to GDP provides components of the goods and services, income, and capital accounts. The income approach to GDP provides data used in the income accounts.

4.3. The general issues associated with the identification and evaluation of sources discussed in the introduction to Chapter III also apply to the other accounts. As with data used in estimating GDP components, quarterly indicators for other national account variables often have shortcomings and need to be benchmarked.

4.4. QNA potentially can include the whole sequence of accounts, but coverage invariably is more limited. There are no recommendations on which accounts should be given priority to be produced quarterly; rather, the choice will depend on user priorities, the availability of indicators, and the stage of development of QNA in the country. The choice will also be influenced by the range of accounts published annually. Data for items beyond GDP and its components may not be included in the initial stage of QNA development and may have lower priority and accuracy than the quarterly GDP measures, but they should not be ignored, especially in the plans for future improvements. Several countries produce some of the accounts in the 1993 SNA sequence quarterly. Although the coverage differs, the most common are the transaction accounts for the total economy, general government, and financial corporations.

4.5. The sequence of accounts can be presented in gross or net terms, that is, with or without deducting consumption of fixed capital. For simplicity, the following discussion will refer to gross measures, but quarterly consumption of fixed capital can be obtained. Annual estimates of capital consumption that follow 1993 SNA concepts are usually derived by the perpetual inventory method (PIM); in the same way, quarterly estimates could be derived by enhancing the PIM calculations with a quarterly dimension. Alternatively, capital consumption is typically a relatively stable item because the stock of capital is large in relation to additions and retirements, so quarterly distribution and extrapolation of annual data would usually give acceptable estimates.1

B. Main Aggregates for the Total Economy

4.6. The main aggregates for the total economy include important balancing items such as national and disposable income, saving, and net lending/net borrowing. They can usually be compiled at an early stage in the development of QNA because the data requirements are quarterly splits of current price GDP by type of expenditure and quarterly balance of payments. Splits of GDP by expenditure can be derived either directly or, if necessary, by treating one component as a residual. In the usual pattern of statistical evolution, quarterly balance of payments data are already available in a country setting up a new QNA system. National accounting systems usually work “down” the 1993 SNA sequence of accounts—starting with GDP and subsequently deriving balancing items for income and capital accounts. It is also possible in a country where financial data are better than production data to start with the balance on the financial accounts and subsequently derive saving, income, and GDP by working “up” the sequence of accounts. An example of consolidated and simplified accounts is shown in Box 4.1.2

Main Aggregates for the Total Economy

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NPISHs = nonprofit institutions serving households

BOP = balance of payments

More detail of the financial account, including gross flows by type, may be available from the BOP.

Numbers are from the example in the 1993 SNA. Figures in italics are derived.

C. Accounts for the Total Economy

4.7. A further step in the development of a QNA would be the development of the unconsolidated accounts for the economy as they appear in Annex V to the 1993 SNA. The data required for this presentation differ from the presentation of main aggregates because income and transfer flows among residents are also shown. This presentation makes the links to the 1993 SNA formats and institutional sector accounts more obvious and facilitates observation of some relationships. The unconsolidated accounts require more data than the consolidated presentation, however, and thus tend to occur at a later stage in the development of QNA. Because many of the data sources for transactions among residents have an institutional sector perspective, compilation of unconsolidated accounts for the total economy also contributes to some institutional sector data.

1. Production Account

4.8. The production account in gross terms shows output at basic prices plus net taxes on products as resources, and intermediate consumption as a use. GDP is the balancing item. The estimation of GDP at current prices by the production approach provides these items by industry. In addition to the presentation of the whole production account and a fuller presentation of the production process, the explicit calculation of output and intermediate consumption is recommended as good compilation practice for reconciling data with other sources and manifesting the implications of assumptions.

2. Income Accounts

4.9. The four income accounts shown in the 1993 SNA are each discussed separately in this subsection. In addition to the specific issues for each account, there are some timing issues that are particularly serious in QNA and that apply to more than one of the income accounts.

4.10. Timing issues become particularly significant for some quarterly income account items. Incomes may be paid in lumps, rather than evenly through the year. Examples of paying in lumps include dividends, interest, taxes, and employee bonuses. The basic principle on the timing of recording in the 1993 SNA is the use of the time of accrual. In the case of distributive transactions, the time of accrual is when the claim arose rather than when it was paid. This issue of timing of recording also plays a role in the annual national accounts (ANA), to the extent that some payments may partly relate to another year, but the effect is more pronounced in the QNA.

4.11. In order to deal with timing issues, it is useful to identify two categories of payments based on their relationship to previous periods:

  1. Payments that have a purely ad hoc character should be recorded in the period in which they are actually made. Dividends, for example, are usually determined only after the books are closed on a fiscal year and may not even relate to the company’s profits over that year.

  2. Payments that have a fixed relation to a particular period (e.g., accrued in a previous period or accrued over a number of accounting periods) should be allocated to the periods in which they accrued. Examples are taxes on incomes and products that may be collected in a subsequent period and vacation bonuses that build up over the period of a year and on which employees have a claim if they leave the employment before payment is due. To obtain accrual-based data, the options may include surveys if businesses use accrual principles, allocating data on payments back to the relevant periods, or estimating the accrual of income from data on the underlying flow (e.g., income taxes from wages and profits, possibly subject to a lag). Once these issues are considered on a quarterly basis, it may also be realized that the annual data need to be adjusted to meet accrual principles.

4.12. The application of accrual principles to quarterly data in such cases may present such serious practical and conceptual problems that it becomes an obstacle to completion of the data. In these cases, it may be better to publish data on a cash basis while clearly stating the problems than to publish nothing or publish something that has been subject to adjustments without a firm foundation.

a. Generation of income account

4.13. The generation of income account shows the derivation of operating surplus/mixed income as GDP less the sum of compensation of employees and taxes less subsidies on production and on imports. This account shows the identity that underlies the calculation of GDP by the income approach. Accordingly, the required data have already been compiled if the income approach has been used or an income split has been compiled with operating surplus/mixed income as a residual.

b. Allocation of primary income account

4.14. The allocation of primary income account shows the derivation of national income. Primary incomes include compensation of employees and property income (interest, dividends, etc.). The distributive income transactions paid between residents cancel out for the whole economy. As a result, gross national income (GNI) can be derived simply as GDP plus primary income receivable from the rest of the world less primary income payable to the rest of the world. The external primary income items can be obtained from the balance of payments and are usually derived from surveys or banking records.

4.15. The allocation of primary income account in unconsolidated form, as recommended in the 1993 SNA, requires estimates of property income paid by residents to other residents. The interest and insurance components may be available as byproducts of the system of financial regulation or financial sector surveys. Alternatively, the flows may have to be estimated from the levels of the assets and liabilities and raised by a rate of return. Dividends could be estimated from a survey of businesses, from published statements of companies listed on the stock exchange, or from (lagged) estimates of operating surplus. Dividend behavior depends on national circumstances such as company law, business practices, and tax law. The predictability of this behavior can be assessed from past annual patterns. Seasonal patterns within the year may be unknown without extra information but present fewer serious problems for analysis (see Chapter VIII).

c. Secondary distribution of income account

4.16. The secondary distribution of income account shows the derivation of disposable income from national income by taking into account redistribution of income through taxes, social security contributions and benefits, and other transfers. Transfers paid by governments are usually available from government finance statistics. Other items include non-life insurance premiums and claims, which may be available from regulators or may be estimated based on distributed annual values if they are accrued evenly throughout the year. Note that these transactions within the country cancel out in total and so can be ignored in a consolidated presentation. International aid, social contributions and benefits to governments of other countries, and other current transfers to and from the rest of the world can be obtained from the balance of payments.

d. Use of disposable income account

4.17. The use of disposable income account shows disposable income as a resource. It shows household, nonprofit institutions serving households (NPISHs), and government consumption as uses, and saving as the balancing item. Disposable income is obtained from the secondary distribution of income account, while consumption is derived as part of the expenditure approach to measuring GDP.

3. Capital Account

4.18. The capital account shows how saving and capital transfers are available to fund capital formation and capital consumption with net lending or borrowing as the balancing item. Saving is obtained from the use of disposable income account, while capital formation is obtained as was shown under the expenditure approach to GDP. Capital transfers payable or receivable by government, if needed for an unconsolidated presentation, can be obtained from a system of government finance statistics. Capital transfers between residents and nonresidents can be obtained from the balance of payments. Following the harmonization of statistical concepts between the 1993 SNA and the fifth edition of the Balance of Payments Manual, net lending/borrowing is equivalent to the sum of the current and capital account balances in the balance of payments. The elaboration of saving and lending is important in understanding the forces behind current account imbalances.

4. Financial Accounts

4.19. The financial accounts show changes caused by transactions in financial assets and liabilities classified by type of instrument. Data on stocks of financial assets or liabilities by counterpart sectors are often readily available from the financial corporations as a byproduct of regulation or monitoring of the financial sector. Data on transactions, however, are less readily available, so there may be problems in splitting changes in stocks into transactions and other changes in volumes and values. Financial corporations tend to be relatively large and have sophisticated records, however, making collection of data on transactions and other flows practical and feasible. In contrast, the counterparts to the financial corporations in these transactions are widespread and often small, making data collection less feasible.

4.20. Other sources may be available to check or complement data from the financial corporations. Data on government financial transactions can often be obtained directly. The financial account of the balance of payments records transactions with nonresidents. It is important that consistent classifications and valuations be used in all these sources. If all are consistently defined, the government and external transactions with the financial sector can be reconciled. Also, the transactions not involving the financial sector can be obtained to complete the totals. The data will also support the simultaneous development of the accounts by institutional sector.

4.21. If transactions data are not available, the differences between opening and closing balance sheets may have to be used as a proxy. In addition to changes caused by transactions, however, the difference between opening and closing values includes revaluation and other changes in volumes of assets.

4.22. Information on financing through shares and other equities can be more difficult to obtain. This financing occurs outside the financial sector, and thus data are frequently less complete. For listed companies, data may be available from stock-exchange registers. In other cases, company registration requirements include issue of equity. In still other cases, surveys would be necessary.

4.23. The balancing item on the financial account is net lending or borrowing. Net lending or borrowing is conceptually the same as in the capital account. In practice, if the measure is derived independently, it could differ significantly because of net errors and omissions. In a country with well-developed financial statistics, the net errors and omissions may help point to problems in other accounts. Alternatively, net lending or borrowing derived from the financial account can be used to obtain a missing item in the capital account as a residual (or vice versa).

4.24. In consolidated form, the financial account of the 1993 SNA presents the same information as the financial account of the balance of payments. The total economy and balance of payments are the same because all the internal transactions net out.

5. Balance Sheets

4.25. The balance sheets show the opening and closing values of assets and liabilities. The financial assets and liabilities part of the balance sheets use similar sources as, and should be compatible with, the transactions data shown in the financial accounts. The international investment position is the balance of payments equivalent of the national accounts balance sheets for the financial assets and liabilities, and the net values for each type of instrument are the same.

4.26. Estimates for nonfinancial assets are derived by methods similar to those used annually. For inventories, the same source as for changes in inventories can provide either inventory levels or an estimate of the change in the levels since the previous estimate of the level. For land, the basic volume is fixed or changes only slowly. For fixed capital, these estimates tend to be based on calculations with the perpetual inventory method. The same issues arise as for estimates of consumption of fixed capital. The calculations could be made quarterly, or, alternatively, they could be made as interpolations from the annual values. The stability of capital is typically strongest in volume terms, while asset prices can be volatile. As a result, current price measures should preferably be derived from the volume measures for each component if there are price indices available for each of the major asset types (e.g., land, buildings, various categories of equipment).

4.27. The collection of balance sheet data is more subject to problems in valuation than transaction data. Because some stock data in business accounts are valued at historic costs rather than current values, adjustments may be needed. It is a good practice to obtain information on valuation methods at the same time the value data are collected.

4.28. Balance sheet data are useful in measuring productivity (using capital input) and analyzing spending and saving decisions (through wealth effects). As a result, interest in these items on a quarterly basis has been increasing among economists.

4.29. The difference between the opening and closing values in the balance sheets is explained by transactions, revaluations, and other changes. The transactions are shown in the capital account for nonfinancial assets and financial accounts for financial assets. The revaluations could be obtained separately or residually.

D. Institutional Sector Accounts

4.30. In addition to the sequence of accounts for the total economy, a more advanced QNA system may consider the compilation of the 1993 SNA sequence of accounts by institutional sector. The institutional sector accounts could be introduced simultaneously or, more commonly, be gradually developed in several stages. For example, central or total general government accounts may be introduced first because of availability of data and the desirability of having the data in a national accounting framework to allow them to be linked to the rest of the economy. Households and other sectors could initially be combined and calculated as a residual. For some institutional sectors, income accounts may be developed before capital accounts because of lack of data on transactions in secondhand assets. Financial accounts may be easier to implement than the nonfinancial accounts because data on transactions and stocks of financial assets or liabilities by counterpart sectors often are available readily from the financial corporations as a byproduct of regulation or monitoring of the financial sector. Data compilers often find the usefulness of institutional accounts is not appreciated until after the data become available, so statistical compilers should anticipate future uses.

4.31. In order to assist in understanding the following discussion of the institutional sector accounts, Box 4.2 shows the sequence (excluding balance sheets) in matrix form, similar to Table 2.8 in the 1993 SNA. The tabulation here emphasizes the interrelationships between sectors. It is intended for presentational purposes and should not be taken as a recommended main presentation of the data for a QNA publication; first, because it would be expected in practice that some accounts and sectors would be missing; and second, because the QNA usually emphasize time series, the main presentation should be time-series oriented.

4.32. A basic principle of compiling institutional sector accounts is making use of counterpart information; that is, in any transaction involving two parties, information can be collected from the party from which it can be most efficiently collected. For instance, interest paid by government to households can be obtained from one or a small number of government agencies, rather than a large number of households. Counterpart information is the equivalent of using commodity balances in the goods and services and production accounts to fill gaps. Counterpart information becomes particularly important in a quarterly context when there are more likely to be gaps. One issue to be taken into account is that data providers may not always be able to provide data on the institutional classification of the counterparts if they do not have sufficient information or motivation to do so.

4.33. If the production accounts are based on surveys of businesses and other units, the derivation of production by institutional sector is practical. All that is required is that the institutional sector of the unit be identified in the relevant survey. Some of the less direct methods, however, may not provide any institutional sector splits.

4.34. The income approach to GDP is a foundation for the income accounts by institutional sector. The availability of GDP by income component and institutional sector provides the primary income accounts to be completed by institutional sector. As a result, countries that use the income approach in the QNA system typically have better-developed quarterly institutional sector accounts.

4.35. Estimates of capital formation by institutional sector are practical if the data are collected from the purchaser rather than the supplier of the capital. These estimates are an important component of the capital accounts. The institutional sector capital accounts are more difficult to prepare than the accounts for the total economy. For institutional sector data, it is necessary to cover the secondhand assets (including land), while for the total economy, transactions in existing assets largely cancel out (except for transactions with nonresidents, which can be obtained from trade and balance of payments statistics, and sales of used vehicles from businesses and governments to households). The same considerations apply to the stocks of nonfinancial assets for balance sheets. Similar to the stocks for the whole economy, they are likely to be stable in aggregate, although transactions in secondhand assets may be a more significant issue. From the value of net lending or borrowing obtained in the financial accounts, it may be possible to derive a net estimate of acquisition of secondhand assets as a residual (although large errors and omissions may make this unacceptable, as they would all accumulate in this small item).

4.36. The financial accounts and the financial components of the balance sheets are usually among the more complete institutional sector data. Balance sheet or transaction data are often already collected from financial corporations. If the counterparts in each transaction, asset, or liability are classified by institutional sectors, there is a strong basis for compiling the data for all the sectors, not only the financial corporations themselves. In addition, balance of payments and international investment position data would show transactions, assets, and liabilities between nonresidents and residents that are not financial corporations. One should also pay attention to financial transactions and stocks of assets and liabilities not included in financial sector and balance of payments data, such as household equity in corporations and direct financial relationships between nonfinancial corporations.

4.37. Net lending/borrowing is the balancing item for both the capital and financial accounts. If the accounts are derived independently, they will act as checks on each other. Alternatively, if only one account is available, the balancing item can be used as a starting point for compiling the other. Of course, although the relationship between the balancing items on the two accounts is a conceptual identity, the balancing item is a small residual of a number of large items and could turn out to be of poor quality if there are problems in any of the component series.

1. General Government

4.38. Quarterly data are often readily available for general government or at least central government. The 1993 SNA. presentation may involve some reformatting or supply of more detailed data from the accounting system; however, government accounting systems have traditionally not emphasized balance sheets, so that data may be limited to the transaction accounts. In addition, issues of timing may be a problem in countries where the government accounts are on a cash basis because timing issues are more significant in quarterly data. The Government Finance Statistics Manual is used as a basis for presentation of government data in many countries and provides data that can be converted to 1993 SNA formats. With the revision of the Government Finance Statistics Manual, most conceptual differences with the 1993 SNA will be resolved, although the presentation will differ.

The Sequence of Institutional Sector Transactions Accounts

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NPISHs = nonprofit institutions serving households

4.39. Quarterly government accounting data that do not follow national accounts principles may already be available in some countries. Analysts may already use these data to meet many needs. It is worthwhile, however, to also produce the national accounts presentation of government, as it adds value by facilitating analysis of links between government and other parts of the economy and requires relatively little extra compilation cost.

4.40. In most countries, central government data can be obtained relatively easily. As with government data for measuring GDP discussed in Chapter 3, state/provincial and local data may be available only later or in less detail. Even if all data are available at the same time, it may be desirable for analytical purposes to show the accounts for each level of government separately.

2. Financial Corporations

4.41. There is often a wide range of data obtained as a byproduct of regulation of the financial corporations sector. As mentioned in the context of financial assets and liabilities, this sector is usually relatively good in terms of the availability of administrative byproduct data and ability to provide survey data. As for general government data, the 1993 SNA provides a presentation for quarterly financial data in an internationally standard manner that is designed to support general economic analysis.

3. Households

4.42. A few countries have continuous household surveys that collect revenue and expenditure that would provide a basis for some of the accounts. As mentioned in Chapter III in the discussion of sources for household consumption, household surveys may suffer from level biases; for QNA purposes, however, the data are suitable indicators of movement if the bias is consistent.

4.43. Alternatively, the specialized nature of many components of household income and expenditure means that many of the items of the accounts can be completed from income, expenditure, and counterpart accounts. Households receive almost all compensation of employees, mixed income, and social benefits, with the only adjustments for payments to and from nonresidents that can be obtained from the balance of payments. Households typically receive most of the operating surplus of dwellings. Pensions and annuities are also specific to households, and data are often available from pension providers or are likely to be relatively stable from quarter to quarter. Interest receivable and payable by households could be available separately from financial corporations, or it could be estimated from data on household deposits and loans if those assets and liabilities are identified separately by the financial corporations. The remaining major income component is dividends. The timing and data issues for dividends were discussed in the context of accounts for the total economy. Dividends received by households may be able to be estimated from lagged operating surplus of corporations and (in some cases) property income data from the balance of payments, if they show a stable relationship with the corresponding household income items in annual data.

4.44. For the uses of income, a range of indicators is usually already available. Household final consumption is derived as part of the expenditure approach to GDP and relates entirely to the household sector. Social contributions are obtainable from government accounts and are also specialized to households. Taxes have varying degrees of specificity to households. Interest and insurance premiums payable by households can be obtained or estimated in similar ways to the corresponding income items discussed in the previous paragraph. A capital formation survey covering businesses may be designed to produce gross capital formation by institutional sector by identifying the institutional sector of each business in the survey. If all the above items were obtained, it would be possible to derive income and capital accounts for households, and, hence, the analytically important household saving and net lending balancing items.

4. Nonfinancial Corporations

4.45. A direct survey of corporations would provide the necessary data, but such surveys are seldom conducted on a quarterly basis. Data may be available for nonfinancial corporations as a result of the lodgment of information under company legislation. Alternatively, companies listed on the stock exchange or foreign corporations may be required to disseminate quarterly or half-yearly data, and these companies may constitute a significant or representative proportion of the nonfinancial corporations sector. It would be necessary to investigate from annual data whether the other nonfinancial corporations behaved in the same way as the unobserved ones.

4.46. If such direct sources are unavailable, data for nonfinancial corporations may be obtained from counterpart transactions with the other sectors or as a residual. Dividends play a large part in the income accounts for nonfinancial corporations. Taxes and dividends are often not determined on a quarterly basis; for example, dividends may be payable twice a year, and profits tax four times a year on the basis of the previous year’s earnings.

5. Nonprofit Institutions Serving Households

4.47. NPISHs often receive little attention in ANA and are not always economically volatile enough to justify high priority in quarterly data. NPISHs may be quite significant in some countries, however. The NPISH sector is defined more narrowly in the 1993 SNA than the normal use of the term nonprofit may suggest, as it is confined to institutions that do not charge economically significant prices and may differ from some sources of information about nonprofit institutions. For example, private schools, private hospitals, and trade unions that charge fees that cover a substantial proportion of costs are not included in the NPISHs sector.

4.48. Government transfers or transfers from the rest of the world may be major contributions to disposable incomes of NPISHs. When that is the case, such indicators would be available from counterparts through government accounts or the balance of payments, respectively. A household expenditure survey could provide data on donations and other revenue from households. If the NPISHs sector is economically significant, as it is in some countries, surveys of the institutions themselves would be necessary. Although undesirable for analytical purposes, the NPISHs sector is sometimes combined with the household sector in quarterly data.

6. Rest of the World

4.49. Balance of payments statistics provide all the data required for the rest of the world accounts. As a result of the harmonization of balance of payments and national accounts concepts, there is simply a need for rearrangement of items to a different presentation. Because the rest of the world accounts are from the perspective of the nonresidents, the signs are reversed compared to the balance of payments, which are presented from the point of view of the country itself. A terminological difference is that the balance sheets in the balance of payments are called “international investment position.”

1

See Chapter VII for methods of distribution without use of indicators that avoid step problems.

2

The presentation in Box 4.1 is derived from the 1993 SNA sequence of accounts by consolidation, that is, removing flows between residents that appear on both sides of the same account.

Concepts, Data Sources, and Compilation
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