Abstract

The 1993 SNA represents a major advance in national accounting. While updating and clarifying the 1968 SNA, the 1993 SNA provides the basis for improving compilation of national accounts statistics, promoting integration of economic and related statistics, and enhancing analysis of economic developments. The 1993 SNA deals more clearly with relationships between economic flows (such as production, income, savings, accumulation, and financing) and links between these flows and stocks. At the same time the 1993 SNA reflects the many significant developments that have taken place in financial markets and completes the integration of balance sheets into the system. The 1993 SNA also suggests how satellite accounts (e.g. environmental accounts) and alternative classifications (e.g., through social accounting matrices) an be used to augment the central framework of the system.

Annex I Changes from the 1968 System of National Accounts

A. Introduction

  • 1. The System of National Accounts 1993 (1993 SNA), retains the basic theoretical framework of its predecessor, A System of National Accounts (1968 SNA). However, in line with the mandate of the United Nations Statistical Commission, it contains clarifications and justifications of the concepts presented, it is harmonized with other related statistical systems and it introduces a number of features that reflect new analytical and policy concerns of countries and international organizations.

  • 2. The classifications and concepts of the central framework are internally more closely linked up with each other and more fully harmonized externally with standards of related statistical systems than in the 1968 SNA. It more fully integrates production, income, capital and financial accounts and balance sheets, and in doing so, it draws upon the guidelines given in separate United Nations manuals on balance sheets and reconciliation accounts (Series M, No.60), on tangible assets (Series M, No.68), on income distribution (Series M, No.61) and on constant prices (Series M, No.64). Furthermore, the new System describes in detail the links between the SNA and the related statistical system on balance of payments prepared by the International Monetary Fund (IMF). Particular attention has been given to the delineation of the production boundary with regard to coverage of own-account production of goods and services. Also, more precise criteria have been established for the delineation and coverage of the financial sector and identification and classification of financial instruments in light of the many innovations in this field in recent years due to financial deregulation. The central framework retains input-output tables as an integral part of the System particularly as the basis for balancing supply and demand. It includes a detailed breakdown of the household sector by sub-sectors including all accounts which facilitate the links between SNA and social accounting matrices (SAMs). The System also describes and incorporates population and employment data. The System pays special attention to the conceptual implications of some of the structural features of economies in transition.

  • 3. There are two important elements of flexibility built into the System. The first concerns the flexible use of classifications, which is based on a hierarchical structure of classifications of transactors, transactions and assets that permits adaptation of data detail to data availability and other specific circumstances of different countries. This flexible use of classifications, which is further developed in one of the chapters, does not change the concepts of the central framework. The second element of flexibility, which is described in chapter XXI, extends the System to so-called satellite accounts that use product and income concepts that are alternative to those of the central framework. A description of satellite accounts relating to the environment provides a notable example of this kind of flexibility.

  • 4. These changes in the general features of the System are in addition to a number of specific changes in the 1993 SNA as compared to the 1968 SNA, which are grouped together below in nine sections (B.1 to B.9). The descriptions given only highlight the main differences between the two Systems while refraining from exhaustive comparison of definitions. The discussion of all changes contains cross-references to the corresponding chapters and tables.

B. SNA revisions

1. Revision of the accounting structure and new balancing items

Partitioning and further integration of the accounts and balance sheets, and creation of new balancing items
  • Reference: chapter II, paragraphs 2.97 to 2.151

  • 5. In the 1993 SNA the overall sequence of accounts of institutional units and sectors is now subdivided into current accounts, accumulation accounts and balance sheets. Thus, the accounting structure of the System integrates the balance sheets as an additional group. The 1968 SNA did not specify balance sheets in detail; they were developed later in a separate publication (United Nations, M/60).

  • 6. The 1993 SNA partitions the production account of the 1968 SNA into two accounts: a production account, where the balancing item is “value added” (B.1), and a generation of income account, with “operating surplus/mixed income” (B.2/B.3) as the balancing item. The generation of income account has been moved to the next group of accounts, i.e., distribution and use of income accounts.

  • 7. The group of distribution and use of income accounts of the 1993 SNA includes the income and outlay account of the 1968 SNA together with the generation of income account, which was previously included as part of the production account. This second group of accounts is divided into the following accounts: (a) generation of income account, with “operating surplus/mixed income” (B.2/B.3) as the balancing item; (b) allocation of primary income account, with “balance of primary incomes” (B.5) as the balancing item; (c) secondary distribution of income account, with “disposable income” (B.6) as the balancing item; (d) redistribution of income in kind account, with “adjusted disposable income” (B.7) as the balancing item; and (e) use of income account, with “saving” (B.8) as the balancing item.

  • 8. The 1993 SNA divides the capital finance account of the 1968 SNA in order to separate the acquisition of non-financial assets from the acquisition of financial assets and incurrence of liabilities. The two resulting accounts are (a) the capital account, with “net lending/borrowing” (B.9) as the balancing item; and (b) the financial account also with “net lending/borrowing” (B.9) as the balancing item. An additional entry called “changes in net worth due to saving and capital transfers” (B.10.1) is identified on the right-hand side of the capital account.

  • 9. In the 1993 SNA the reconciliation account of the 1968 SNA has been integrated into anew set of accumulation accounts which cover all changes between two successive balance sheets. Two new accounts are introduced: (a) the other changes in volume of assets account, with “changes in net worth due to other changes in volume of assets” (B.10.2) as the balancing item; and (b) the revaluation account, with “changes in net worth due to nominal holding gains/losses” (B.10.3) as the balancing item. The latter account is further broken down into two sub-accounts in order to separate real holding gains/losses in both financial and non-financial assets/liabilities from neutral holding gains/losses that are merely proportionate to changes in the general price level. Consequently, the 1993 SNA incorporates a new balancing item, “changes in net worth” (B.10), which includes three sub-elements: (a) changes in net worth due to saving and capital transfers (B.10.1); (b) changes in net worth due to other changes in volume of assets (B.10.2) and (c) changes in net worth due to nominal holding gains/losses (B.10.3).

    Introduction of production accounts for all sectors and cross-classification of value added by activities and institutional sectors

    Reference: chapter II, paragraph 2.210; chapter VI, paragraphs 6.1 to 6.3; chapter XV, paragraphs 15.105 to 15.109

  • 10. The 1993 SNA includes production accounts for all institutional sectors in addition to production accounts for the establishment-based industries of the 1968 SNA. In order to link these two types of production accounts, the 1993 SNA recommends a cross-classification output, intermediate consumption, gross value added and its components by type of sector and industry. It does not use the terminology “dual sectoring” sometimes used in connection with the 1968 SNA.

Introduction of a new concept called “mixed income”, for unincorporated enterprises
  • Reference: chapter VII, paragraphs 7.81 to 7.87

  • 11. The 1993 SNA introduces a distinction, not made in the 1968 SNA, between the operating surplus of certain unincorporated enterprises owned by households and the operating surplus of other enterprises. For this purpose, it introduces a new name for the net operating surplus arising from the productive activities of unincorporated enterprises owned by households (except for the surplus arising from the production of housing services for own consumption by owner occupiers). The new category is called mixed income (B.3) because it usually reflects remuneration for work done by the owner of the enterprise as well as a return to entrepreneurship.

Introduction of balance of primary incomes and gross national income (GNI) concepts
  • Reference: chapter II, paragraphs 2.116 and 2.181; chapter VII, paragraphs 7.1 and 7.2 and 7.13 to 7.16

  • 12. The 1993 SNA introduces a new concept called balance of primary incomes (B.5), which is the sector equivalent of national income and is the balancing item of the allocation of primary income account. The balance of primary incomes results from the distribution of value added to labour (compensation of employees), capital (property income) and government (taxes, less subsidies, on production and imports) and operating surplus and mixed income. The sum of the balance of primary incomes across sectors is GNI (B.5*), which is the new term for what was called gross national product (GNP) in the 1953 SNA.

2. Further specifications of statistical units, revisions in the sectoring and introduction of multiple sub-sectoring

Definitions of institutional units and establishments
  • Reference: chapter II, paragraphs 2.19 to 2.21 and 2.43 to 2.45; chapter IV, paragraphs 4.1 to 4.5; chapter V, paragraphs 5.21 to 5.24; chapter VII, paragraphs 7.118 to 7.121; chapter XV, paragraphs 15.13 to 15.19

  • 13. The 1993 SNA defines an institutional unit as an economic entity that is capable in its own right of owning assets, incurring liabilities and engaging in economic activities and in transactions with other units. Corporations providing ancillary-type services to a parent corporation are merged with the parent corporation into one single institutional unit. Also included in the corporate sectors as separate institutional units are quasi-corporations—i.e., unincorporated enterprises owned by households, government or non-resident units that behave like corporations and have complete sets of accounts, including information on withdrawals of entrepreneurial income analogous to the payments of dividends in the case of a corporation. In the 1993 SNA, the family of enterprises is not used as a statistical unit. The 1968 SNA did not include explicit definitions for institutional units but made reference to one criterion—availability of complete accounts. It did not make reference to the requirement that information on withdrawals of entrepreneurial income had to be available.

  • 14. The 1993 SNA introduces a distinction between an analytical unit and an observable unit in the production accounts in the supply and use and input-output tables. The establishment is defined by reference to one activity and one location as in the 1968 SNA, but for practical reasons and harmonization with the International Standard Industrial Classification (ISIC) Rev. 3, the 1993 SNA recognizes an observable unit version of the establishment, which, in addition to its main activity, may also have one or more secondary activities. The analytical unit (unit of homogeneous production) is used in the construction of the input-output table.

Explicit definition of statistical unit and gross output in agriculture
  • Reference: chapter VI, paragraphs 6.103 to 6.107

  • 15. The 1993 SNA recommends that in agriculture the statistical unit and the definition of output should be the same as for other market producers. The establishment in agricultural activities refers to the individual agricultural holding. As in the case of other activities, the output includes transactions between agricultural holdings but excludes products for intermediate consumption within the same agricultural holding. (Statistical information in agriculture is often not available in this form, and it may be necessary to use either the “gross-gross” measurement of output, which includes products used for intermediate consumption in the same agricultural holding, or the concept of the “national farm”, in which agricultural products used either in the same or other agricultural holdings are entirely omitted.) The 1968 SNA did not deal explicitly with the definition of statistical unit and gross output in agriculture.

Introduction of three sub-sectors for non-financial and financial corporations, i.e., public, national private, and foreign controlled
  • Reference: chapter IV, paragraphs 4.71 to 4.76 and 4.84

  • 16. The 1993 SNA recommends identifying the following sub-sectors for the non-financial and financial corporation sectors: public corporations, national private corporations and foreign controlled corporations.

  • 17. A public corporation is one controlled by the government. The government may exercise control by owning more than 50 per cent of the equity or by other means such as special legislation or decree even if it holds less than 50 per cent of the equity. An enterprise is also regarded as a public corporation if it is subject to control by another public corporation.

  • 18. Foreign-controlled enterprises are defined as enterprises subject to control by non-residents. Foreign enterprises in which non-resident investment is less than 50 per cent may be included or excluded by individual countries according to their qualitative assessment of foreign control. Foreign-controlled corporations include those direct investment enterprises that are subsidiaries and branches, as defined in the draft fifth edition of the IMF Balance of Payments Manual (BPM) and in the Organisation for Economic Cooperation and Development (OECD) Detailed Benchmark Definition of Foreign Direct Investment.

  • 19. The 1968 SNA terms “corporate enterprises” and “quasi-corporate enterprises” have been shortened to “corporations” and “quasi-corporations” in the 1993 SNA. In subsectoring non-financial and financial corporate and quasi-corporate enterprises, the 1968 SNA distinguished between public and private enterprises but did not distinguish between resident enterprises that are subject to foreign control and those that are not.

New definition of the financial sector to include financial auxiliaries and exclude holding companies that control mainly non-financial subsidiaries
  • Reference: chapter IV, paragraphs 4.79 to 4.81, 4.96, and 4.100

  • 20. The 1993 SNA has enlarged the 1968 SNA financial sector to include, in addition to financial corporations that incur financial liabilities and acquire financial assets on their own account, auxiliaries engaged primarily in activities that facilitate financial intermediation or provide financial services without placing themselves at risk.

  • 21. The 1993 SNA recommends that holding companies should be assigned to the institutional sector in which the main activity of the group of subsidiaries is concentrated. Consequently, although holding companies often play a primarily financial role, they should be classified as financial corporations only when the preponderant activity of the group of corporations they control is financial.

Revised sub-sectoring of the financial corporate sector to reflect new developments in financial corporations, markets and instruments
  • Reference: chapter IV, paragraphs 4.83 to 4.98; chapter XI, paragraphs 11.56 and 11.57

  • 22. The 1993 SNA sub-sectors financial corporations as follows: (a) central bank (S.121); (b) other depository corporations (S.122); (c) other financial intermediaries except insurance corporations and pension funds (S.123); (d) financial auxiliaries (S.124); and (e) insurance corporations and pension funds (S.125). However, due to the substantial variations among countries in defining money, the 1993 SNA does not include a definition of money but provides a classification of financial corporations and instruments compatible with national money definitions. Thus, the sub-sector “Other depository corporations” has been established to include all financial corporations except the central bank whose principal activity is financial intermediation and which have liabilities in the form of deposits or other financial instruments that are close substitutes for deposits and which are included in measures of money broadly defined. Where the distinction between narrow and broad money concepts is important, countries are encouraged to disaggregate this sub-sector between “Deposit money corporations (S.1221)”, which have any liabilities in the form of deposits (narrow money), and “Other depository corporations (S.1222)”, which have liabilities in the form of deposits that are not readily transferable or in the form of financial instruments (such as short-term certificates of deposit) which are close substitutes for deposits and which are included in measures of money broadly defined. The 1968 SNA used the concept of narrow money as the classification principle for financial sub-sectors and thus included in “other financial corporations” many financial corporations that had liabilities in the form of broad money instruments.

  • 23. Since the word “bank” has a specific legal connotation in some countries that is different from the new interpretation in the System, the 1993 SNA has changed two 1968 SNA related terms as follows: “depository corporation” is used instead of “bank” and “financial intermediation services” instead of “banking services”.

Separate identification of unincorporated financial enterprises as distinct from quasi-corporate financial enterprises
  • Reference: chapter IV, paragraph 4.82

  • 24. The 1993 SNA has eliminated the 1968 SNA convention that treated all financial unincorporated enterprises as quasi-corporations. In the 1993 SNA, financial unincorporated enterprises owned by households, such as individuals engaged in financial intermediation or in services auxiliary to financial intermediation, are classified in the households sector.

  • 25. In line with the above, the 1993 SNA treats money lenders who incur liabilities to mobilize funds as financial intermediaries included in the households sector and their output is measured the same way as that of other financial intermediaries. Money lenders who make loans from their own resources are also considered producers of financial services provided their services can be measured. Money lenders were not explicitly referred to in the 1968 SNA.

  • Classification of government employee pension schemes in the financial sector

    Reference: chapter IV, paragraph 4.98

  • 26. The 1993 SNA, like the 1968 SNA, classifies pension funds invested entirely with the employer as part of the employer’s sector, rather than placing them with insurance corporations and pension funds in the financial corporations sector. An exception has been made for government employee pension funds that are separate institutional units; they are classified in the financial corporations sector, even if most of their funds are invested in government securities for reasons of prudence, whether by legal requirement or by choice. The rationale is that investment of government employee pension funds with the employer does not indicate the degree of employer control that investment of private employee pension funds with an employer does.

Alternative methods of sub-sectoring for general government
  • Reference: chapter IV, paragraph 4.131

  • 27. The 1993 SNA recommends with equal priority two ways for sub-sectoring general government: include social security funds as part of each level of government at which they operate (central government security funds (S.13212), state government security funds (S.13222) and local government security funds (S.13232), or as a sub-sector (S.1314) separate from the operations of all levels of government. The 1968 SNA recommended only the latter classification, i.e., social security funds were shown as a separate sub-sector.

  • Inclusion of an additional sub-sector for state government

    Reference: chapter IV, paragraphs 4.123 to 4.127

  • 28. The 1993 SNA introduces state government (S.1312) as an additional level of government between central (S.1311) and local (S.1313) government. This breakdown is only to be applied in those countries where it is meaningful.

  • Presentation of consolidated public sector accounts in supplementary tables

    Reference: chapter XIX, paragraphs 19.37 to 19.42

  • 29. The 1993 SNA recommends, for supplementary analysis, consolidated presentations of the public sector, covering general government and non-financial public corporations in a manner consistent with GFS.

Revised sub-sectoring of households based on type of income and introduction of the distinction between formal and informal production activities
  • Reference: chapter IV, paragraphs 4.153 to 4.162; annex to chapter IV; chapter XIX, paragraphs 19.9 to 19.13

  • 30. The 1993 SNA recommends sub-sectoring the households sector on the basis of the nature of the household’s largest source of income (employers’ mixed incomes, own-account workers’ mixed incomes, compensation of employees, property and transfer incomes). Thus, households are allocated to sub-sectors depending on which of the four categories of income is the largest for the household as a whole, even if it does not always account for more than half of total household income. Consequently, the following sub-sectors are distinguished: (a) employers (S.141); (b) own-account workers (S.142); (c) employees (S.143); and (d) recipients of property and transfer income (S.144). The 1993 SNA also suggests sub-sectoring households on the basis of other criteria of an economic, socio-economic or geographical nature. It should be noted that since the 1993 SNA introduces the full set of accounts (including production accounts) for the household sector and its sub-sectors, it allows analysis of the distributional effects of income generation and distribution. The 1968 SNA recommended a similar socio-economic breakdown for the household sector but did not carry it through in all accounts and tables.

  • 31. Unlike the 1968 SNA, the 1993 SNA recognizes that the distinction between formal and informal sectors of the economy is particularly important for many developing countries. The International Conference of Labour Statisticians has developed criteria for the Identification of those production units of the households sector which make up the informal sector as “informal own-account enterprises” or “enterprises of informal employers”. It is recognized, however, that depending on national circumstances, certain production units of the households sector may fall outside the distinction between formal and informal sectors (i.e., units exclusively engaged in agricultural activities, the production of goods for own final use, or the production of services for own final consumption by employing paid domestic workers.

3. Further specifications of the scope of transactions including the production boundary

Further specification of the production boundary for household production activities
  • Reference: chapter VI, 6.14 to 6.29; chapter XXI, paragraphs 21.19 and 21.40

  • 32. The production boundary in the 1993 SNA is only slightly different from the one in the 1968 SNA. In defining the production boundary, the 1993 SNA draws on the distinction between goods and services. It includes the production of all goods within the production boundary, and the production of all services except personal and domestic services produced for own final consumption within households (other than the services of owner occupiers and those produced by employing paid domestic staff).

  • 33. With regard to own-account production of goods by households, the 1993 SNA has removed the 1968 SNA limitations which excluded the production of goods not made from primary products, the processing of primary products by those who do not produce them and the production of other goods by households who do not sell any part of them on the market.

  • 34. The coverage of own-account production is clarified. The storage of agricultural goods produced by households is included within the production boundary as an extension of the goods producing process, as is supply of water (water-carrying).

  • 35. The 1993 SNA, like the 1968 SNA, excludes from the production boundary the production of services by households for own final consumption. Included, however, is the production of services of owner-occupied dwellings and the production of services for own final consumption by employing paid domestic staff. The 1993 SNA explains that in the central framework no values are recorded for unpaid domestic or personal services produced within households because the production of such services within households is a self-contained activity with limited repercussions on the rest of the economy, there are typically no prices that can be satisfactorily used to value such services, and the estimated values would not be equivalent to monetary values for analytic or policy purposes. The 1993 SNA does, however, suggest that in satellite accounts an alternative concept of gross domestic product (GDP) be elaborated which is based on an extended production boundary, including estimates for household production of services for own use.

Voluntary labour inputs are valued on the basis of actual compensation paid
  • Reference: chapter VII, paragraphs 7.20 and 7.23

  • 36. In general, neither the 1993 SNA nor the 1968 SNA includes an estimate of the value of voluntary labour inputs. Labour inputs are valued at actual compensation paid even if this is very low or even zero. However, in the case of production of tangible fixed assets for own use resulting from communal household activities, an estimate of value of labour input is needed in order to calculate the total cost of the assets (if a market price is not available). This inclusion results in mixed income being generated by the production.

  • Allocation of financial intermediation services indirectly measured (FISIM)

    Reference: chapter VI, paragraphs 6.128 to 6.140

  • 37. The 1993 SNA calculates the output of financial intermediation services indirectly measured (FISIM) (this term replaces the term bank service charges used in the 1968 SNA; see paragraph 23 above) in the same way as the 1968 SNA, i.e., as the difference between property income received and interest paid. The property income received should exclude that part which is received from investment of own funds. However, contrary to the 1968 SNA, the 1993 SNA, in principle, recommends to allocate the consumption of these services between users—who could be lenders as well as borrowers—treating the allocated amounts either as intermediate consumption by enterprises or as final consumption or exports. The 1993 SNA suggests that the allocation between different uses could be made on the basis of the difference between interest paid or received by financial intermediaries and a “reference rate” that does not include the value of financial intermediation services, such as an inter-bank lending rate or a central bank loan rate, or some other appropriate method. However, the allocation could be made using different criteria or methods, when appropriate.

  • 38. Nevertheless, the 1993 SNA recognizes that, in practice, it may be difficult to find any method of allocating financial intermediation services indirectly measured among different users and, therefore, accepts that some countries may prefer to continue to use the convention proposed in the 1968 SNA whereby the whole of the services are allocated to intermediate consumption of a notional industry. But, it is recommended that these countries provide supplementary estimates, even if only approximate and very aggregative, of the allocation between intermediate consumption and the main categories of final demand and thus would make it possible to have some estimate of the effect allocation would have on GDP, GNI, and other relevant aggregates. Also, the 1993 SNA requests those countries that allocate financial intermediation services indirectly measured, to identify those allocations separately.

  • 39. The 1993 SNA uses a new term “output of financial intermediation services indirectly measured” to replace the 1968 SNA term “imputed output of bank services”.

Inclusion, in principle, of all illegal production and other transactions
  • Reference: chapter VI, paragraphs 6.30 to 6.36

  • 40. The 1993 SNA makes it clear that the illegality of a productive activity or transaction is not a reason for excluding it from the System. Comprehensive coverage of illegal activities is, in principle, essential in order not to introduce errors and imbalances in the accounts. For example, failure to record expenditures by households on illegal products will lead to over estimates of their saving and inconsistencies with the financial accounts. The 1968 SNA did not give clear guidance on the coverage of illegal activities.

  • Identification of non-monetary flows and re-routings from other transactions

    Reference: chapter III, paragraphs 3.34 to 3.49; chapter XIX, paragraphs 19.20 to 19.29

  • 41. The 1993 SNA recommends the identification of non-monetary flows and re-routings wherever possible, especially when they are large and significant. In this way, analysts interested in identifying only the monetary transactions in the economy can do so. The 1968 SNA made no such recommendation.

4. Changes in valuation and in the treatment of product taxes

Distinction between basic, producers’ and purchasers’ prices in the valuation of outputs and inputs
  • Reference: chapter VI, paragraphs 6.210 to 6.238

  • 42. The 1993 SNA clarifies the terminology used for the valuation of products. The System refers to output prices received by producers, which may be either basic prices or—if difficult to implement—producers’ prices, and to purchasers’ prices that apply to intermediate and final uses. The basic prices exclude all taxes less subsidies on products (D.21 less D.31) but the producer’s prices only exclude invoiced value added tax (VAT) (D.211). Purchasers’ prices, which are paid by intermediate or final users, include trade and transport margins.

  • 43. When using basic prices to value output and purchasers’ prices to value intermediate consumption, there are no product taxes less subsidies payable out of value added. They are treated as taxes less subsidies on uses, payable by the purchasers of the products. On the other hand, when producers’ prices are used to value output, some taxes on products have to be paid out of value added. VAT and taxes and duties on imports are treated as taxes on uses payable by the purchasers of the products and therefore are not payable out of value added.

  • 44. A consequence of the above treatment is that the sum of the values added of all enterprises in the economy is not equal to GDP. In the case of valuation of output in basic prices, all taxes less subsidies on products including import taxes need to be added to the sum in order to derive GDP; in the case of valuation of output in producers’ prices, only VAT and import taxes need to be added.

  • 45. The 1993 SNA has eliminated the 1968 SNA distinction between true and approximate basic prices since the “true price” is a hypothetical concept which is not observable. The 1968 SNA used producers’ prices as the main valuation method for output and input. Basic prices together with commodity taxes were treated as a further subdivision of producers’ prices, which was applied to both output and intermediate inputs for the purposes of input-output analysis.

Revision of the classification and terminology of taxes; explicit treatment of VAT
  • Reference: chapter VII, paragraphs 7.49 to 7.51; chapter VIII, paragraph 8.41

  • 46. The 1993 SNA replaces the 1968 SNA term “indirect taxes” by the term “taxes on production and imports” (D.2), and replaces the distinction between “commodity taxes” and “other indirect taxes and imports” by “taxes on products” (D.21) and “other taxes on production” (D.29). The taxes on products are further subdivided into: (a) VAT-type taxes (D.211); (b) taxes on imports excluding VAT (D.212); (c) export taxes (D.213); and (d) taxes on products, except VAT, import and export taxes (D.214). The 1968 SNA makes only a brief reference to VAT and gives no specific recommendation for its treatment in the accounts.

  • 47. The 1993 SNA has also replaced the 1968 SNA term “direct taxes” by the term “current taxes on income, wealth, etc.,” and the previous category of capital transfers to government, including estate and gift taxes and non-recurrent taxes on property are treated as capital taxes. Alignment of SNA and GFS/OECD tax coverage

    Reference: chapter VIII, paragraphs 8.44 and 8.45

  • 48. The 1993 SNA recommends that breakdowns of taxes beyond the main categories should be in terms of the GFS and OECD Revenue Statistics tax classifications. While no calculation of total taxes is required within the 1993 SNA accounts, compulsory social contributions are summed with taxes to reach the concept of total taxes used by the GFS and OECD Revenue Statistics. For this purpose the 1993 SNA provides a breakdown of social security contributions so that compulsory contributions can be identified separately and added to taxes to match up with the GFS/OECD concept of total taxes.

5. Distinction between market and other kinds of production and introduction of alternative concepts of consumption and disposable income

Explicit identification, valuation and treatment of market, own-account and other non-market production
  • Reference: chapter VI, paragraphs 6.44 to 6.56 and 6.88 to 6.101

  • 49. The 1993 SNA distinguishes three types of output: i.e. market output (P.11), output for own final use (P.12) and other non-market output (P.13). Market output is output that is sold at economically significant prices. Output for own final use such as subsistence output of agricultural products or own account produced capital goods, while not sold on the market, are valued at the average prices of similar products traded on the market. Other non-market output which includes goods and services produced by government and non-profit institutions serving households and provided free, or at prices that are not economically significant, to individual households or the community, is valued at cost.

  • 50. The distinction between market producers, producers for own final use and other non-market producers replaces the distinction in the 1968 SNA between “industries” and “other producers”. Producers for own final use which were included in the 1968 SNA in “industries” are now distinguished as a separate category.

  • 51. The three-way split of products and producers is complementary to the ISIC and Central Product Classification (CPC). The ISIC and CPC breakdowns would apply in principle to all three categories of producers and products respectively.

  • 52. The criterion in the 1993 SNA for making a distinction between market and other output makes it possible to include all heavily subsidized public enterprises as market producers provided their prices are considered economically significant from the point of view of cost and demand. The 1968 SNA made a distinction between government producing units that sold the kind of goods and services often produced by what is called “business establishments” (private market producers) and government departments engaged in the usual social and community activities of government. The required criterion for making the distinction in the 1968 SNA was simply the existence of a price, while in the 1993 SNA the distinction between market and non-market output depends on whether the price is economically significant from the point of view of cost and demand. Since it is very rare that the government departments of the 1968 SNA engaged in social and community activities charge significant prices in the 1993 SNA sense, they are treated generally in the same way in the 1993 SNA.

  • 53. The 1993 SNA distinction between market output, output produced for own final use and other non-market output has simplified the principles of valuation. Valuation of products of market producers is always based on the prices for which they are sold in the market. Output produced for own final use is valued on the basis of prices of similar products made by market producers where these exist. Other non-market output is valued as the sum of costs.

  • 54. The 1993 SNA, like the 1968 SNA, treats all current transfers made by government to producers as subsidies, even if they benefit specific groups of the population or all households. However, recognizing the importance of these “consumption” subsidies in some countries, the 1993 SNA recommends a supplementary presentation of subsidies by purpose where “consumption” subsidies can be identified. This presentation would make it possible to show, outside the System, actual final consumption with an alternative valuation that includes the value of consumption subsidies.

Introduction of new concepts called “actual consumption” and “adjusted disposable income” to supplement the concepts of consumption expenditure and disposable income
  • Reference: chapter IX, paragraphs 9.93 to 9.98

  • 55. The 1993 SNA introduces the concept of actual final consumption (P.4) for households and government to supplement the 1968 SNA concept of final consumption expenditure (presently P.3). Actual final consumption of households covers goods and services which are actually supplied to households, irrespective of whether the ultimate bearers of the expense are government, non-profit institutions serving households or households themselves. The actual consumption concept utilizes the distinction between individual consumption (benefiting identifiable households) and collective consumption (benefiting society as a whole) within final consumption expenditure by government. For households it is equal to the sum of household final consumption expenditure plus individual consumption items identified within consumption expenditure of government and non-profit institutions serving households. For government, actual consumption consists only of collective consumption. Non-profit institutions serving households, by convention, have no actual consumption; their final consumption expenditures are all categorized as individual consumption and, therefore, included with actual consumption of households.

  • 56. The difference between final consumption expenditure (P.3) and actual final consumption (P.4) of households is treated in the accounts of the 1993 SNA as (current) social transfers in kind (D.63) provided by government and nonprofit institutions serving households to households. For households, the imputed transfers are added to disposable income (B.6) to derive the concept of adjusted disposable income (B.7); for government and NPISHs, they are deducted.

  • 57. The 1968 SNA did not identify different concepts of final consumption and disposable income. It only included one concept of final consumption expenditure and one corresponding concept of disposable income. On the other hand, the 1968 SNA had a wider concept of final consumption expenditure of households than the 1993 SNA, as it included not only what households actually paid, but also health and other expenditures paid or reimbursed by government for services that households are free to select or not.

Treatment of pension and other social insurance contributions and benefits as current transfers affecting disposable income of households
  • Reference: chapter VIII, paragraphs 8.7 to 8.14; chapter IX, paragraphs 9.6, and 9.14 to 9.16, annex IV

  • 58. The 1993 SNA identifies some insurance and pension funds as social insurance schemes. This affects the recording of contributions and benefits of these schemes, especially pensions. The 1993 SNA treats pension contributions and benefits in the secondary distribution of income accounts as current transfers, which affect the level of disposable income of households. In order not to change the value of saving of households and maintain consistency with the item in the financial accounts called “changes in the net equity of households in life insurance reserves and in pension funds” (F.61) in line with the 1968 SNA treatment, the 1993 SNA introduces an adjustment item in the use of income accounts called “adjustment for the change in net equity of households in pension funds” (D.8), which is recorded as “resources” for households and as “uses” for financial corporations (S.12) or other sectors if the funded pension schemes are not institutional units separate from the employers. In the case of pension funds belonging to the financial corporations sector the 1968 SNA only included an entry in the financial account, where the difference between pension contributions and benefits is recorded as part of the change in the net equity of households in pension funds.

Enlargement of the concept of social insurance to include arrangements with insurance enterprises and education grants
  • Reference: chapter VIII, paragraphs 8.7 and 8.8, and 8.53 to 8.80

  • 59. In the 1993 SNA social contributions and benefits (D.6) are not restricted to transactions with government and employers as they are in the 1968 SNA. They also include arrangements with insurance schemes that satisfy the definition of “social”. Social benefits in the System are current transfers received by households intended to provide for the needs that arise from certain events or circumstances, such as sickness, unemployment, retirement, housing, education or family circumstances. To qualify as social insurance benefits, the transfers must be provided under organized social insurance schemes. Social insurance benefits may be provided under general social security schemes, under private social insurance schemes or by unfunded schemes managed by the employers for the benefit of their existing or former employees without involving other institutional units. Education grants, which in the 1968 SNA were treated as social assistance grants, are treated in the 1993 SNA as social benefits.

Channelling of social transfers in kind by enterprises to households through “quasi-NPISHs”, provisional treatment for countries in transition
  • Reference: chapter XIX, paragraphs 19.30 to 19.35

  • 60. The 1993 SNA recommends an exceptional and provisional treatment for social transfers in kind (D.63) made by state controlled enterprises in countries in transition to their employees as an extension of government policy to provide health, education and recreational services to the population. As a transitional treatment, it is recommended to create “quasi-NPISHs” which receive a transfer from the parent enterprise and pass them on to households as social transfers in kind to be included in the redistribution of income in kind account. As a consequence of this treatment, these expenditures enter only actual final consumption (P.4) of households and not their final consumption expenditure (P.3), thus affecting adjusted disposable income (B.7) and not disposable income (B.6). The 1968 SNA would have treated these expenditures as compensation in kind, entering consumption expenditure and disposable income of households.

6. Extension and further specification of the concepts of assets, capital formation and consumption of fixed capital

Explicit definition of asset and asset boundary and revised classification of assets
  • Reference: chapter X, paragraphs 10.2 to 10.12; annex to chapter XIII

  • 61. In the 1993 SNA the assets recorded in the balance sheets of the System are economic assets. These are defined as entities over which ownership rights are enforced by institutional units, individually or collectively, and from which economic benefits may be derived by their owners by holding or using them over a period of time. With regard to the classification of assets, the 1993 SNA distinguishes at the first level of the classification between non-financial assets (AN) and financial assets/liabilities (AF). Within non-financial assets, it distinguishes between produced and non-produced assets and within each of these between tangible and intangible assets.

  • 62. Produced assets (AN.1) in the 1993 SNA include not only tangible fixed assets (AN.111), but also intangible fixed assets (AN.112) such as mineral exploration (AN.1121), computer software (AN.1122), and entertainment, literary or artistic originals (AN.1123).

  • 63. Non-produced assets (AN.2) in the 1993 SNA also include tangible non-produced assets (AN.21) and intangible non-produced assets (AN.22). The tangible non-produced assets include land (AN.211), subsoil assets (AN.212), non-cultivated biological resources (AN.213) and water resources (AN.214). The intangible non-produced assets include patented entities (AN.221), leases and other transferable contracts (AN.222), purchased goodwill (AN.223) and other intangible non-produced assets (AN.229).

  • 64. In determining the economic asset coverage of the 1993 SNA in the case of natural assets such as mineral reserves, forests, orchards, plantations and so on, the economic benefit criterion is considered to manifest itself in the form of control by an institutional unit. The 1993 SNA includes specific guidelines with regard to natural assets that are economic assets in the SNA sense. Two types are distinguished: i.e., assets whose growth is the result of human cultivation and are treated as produced assets (AN.1), and all other natural assets including land (AN.211), subsoil assets (AN.212), non-cultivated biological resources (AN.213) and water resources (AN.214) that are not cultivated but are under control of institutional units and are treated as non-produced assets (AN.2). The cultivated natural assets that are treated as produced assets (AN.1) are further broken down into two groups, i.e., (a) cultivated assets which are included in the classification under tangible fixed assets (AN.1 11) and cover livestock for breeding, dairy, draught, etc. (AN.1 1141) and vineyards, orchards and other plantations of trees yielding repeat products (AN.11142); and (b) work-in-progress on natural growth products which is included in the classification under inventories (AN.12) as work-in-progress on cultivated assets (AN.1221) and includes the growth of products such as livestock for slaughter, timber, agricultural crops, and fruits that are the products of orchards and plantations.

  • 65. The 1968 SNA did not include much guidance on the balance sheets of the system and consequently provided little information on the coverage of assets. In principle, however, the 1968 SNA included produced tangible and non-produced tangible and intangible assets within its asset boundary, but did not provide for the inclusion of produced intangible assets. As regards natural assets, the 1968 SNA included in principle natural assets in its asset boundary, although in a much less systematic manner. Only livestock growth was recorded as the addition to a produced asset (see paragraph 71 below), and agricultural crops and fruits from orchards and plantations were only recorded when harvested and, therefore, not reflected in additions to produced assets.

Extension of produced assets and gross fixed capital formation to include expenditure on mineral exploration, computer software and entertainment literary or artistic originals
  • Reference: chapter X, paragraphs 10.33, and 10.96 to 10.101; chapter XXI, paragraph 21.68

  • 66. The 1993 SNA treats expenditures on mineral exploration as gross fixed capital formation resulting in the creation of an intangible fixed asset (AN.1121) under produced assets. All expenditures are included, no matter whether the exploration is successful or not. The average service lives similar to those used by mining or oil corporations in their own assets are suggested as the appropriate guide for the amortization period. The 1968 SNA treated expenditures on mineral exploration as intermediate consumption.

  • 67. The 1993 SNA treats systems and standard applications computer software that a producer expects to use in production for more than one year as an intangible fixed asset (AN.1122), no matter whether the computer software is purchased in the market—separately or together with the hardware—or developed in-house. It also includes databases which the enterprise expects to use for more than one year. The 1968 SNA was interpreted as treating expenditures on software which is bought as an integral part of a major hardware purchase as gross fixed capital formation, but software purchased or developed independently was treated as intermediate consumption.

  • 68. The 1993 SNA includes in output literary or artistic works (i.e., the writing of books, composing music, etc.) which are produced for sale whether they are produced by employees or by self-employed workers. Furthermore, it recognizes that these outputs can contribute to production in subsequent periods and, therefore, treats expenditures on these outputs as gross fixed capital formation resulting in the creation of an intangible fixed asset (AN.1123). Consequently, fees, commissions, royalties, etc. stemming from licensing others to make use of the works are treated as payments for services rendered. Accordingly, copyrights no longer appear as non-financial non-produced intangible assets giving rise to property income, as they did in the 1968 SNA.

  • 69. Like the 1968 SNA, the 1993 SNA continues to treat expenditures on research and development as intermediate consumption, not gross fixed capital formation. However, it recommends that these expenditures be identified within intermediate consumption to facilitate the development of satellite accounts for research and development. Consequently, there are no produced fixed assets in the accounts to which the legal title of a patent can be linked. Thus, purchase/sale of patents continue to be treated, as in the 1968 SNA, as net purchases of intangible non-produced assets, where the assets to be recorded under “patented entities” (AN.221) are the patented inventions, discoveries or processes that are the result of research and development activity and not the legal titles themselves. It should be noted, however, that the 1993 SNA, by convention, does include licensing related services in output and, therefore, royalty and similar payments in respect of patent licences are considered payment for services and not property income as in the 1968 SNA. The same treatment is applied to payments for services of trademarks and franchising in respect of other non-produced intangible assets.

Extension of government gross fixed capital formation to include expenditure by the military on structures and equipment except weapons
  • Reference: chapter X, paragraphs 10.71 to 10.74

  • 70. The 1993 SNA treats as gross fixed capital formation all expenditures by the military on fixed assets of a kind that could be acquired by civilian users for purposes of production and that the military use in the same way; this would include airfields, docks, roads, hospitals and other buildings or structures. On the other hand, military weapons, and vehicles and equipment whose sole purpose is to launch or deliver such weapons, are not to be treated as gross fixed capital formation but as intermediate consumption. The 1968 SNA excluded from gross fixed capital formation almost all military expenditures except those on construction or alteration of family dwellings for personnel of the armed forces.

Treatment of cultivated natural growth as output
  • Reference: chapter X, paragraphs 10.89 to 10.94, and 10.112 to 10.115

  • 71. The 1993 SNA includes in output the growth of cultivated assets including the growth of livestock and fishstock, vineyards, orchards, plantations and timber tracts, as well as the growth of agricultural crops and fruits which are products of plantations and the like. Prior to the harvest or use of the products, the growth of agricultural crops, livestock for slaughter, timber, etc., is to be recorded as work-in-progress (part of changes in inventories). Cultivated growth should be distinguished from growth of biological resources, which are not cultivated but are under human control (such as forests used in timber logging); such growth is treated as other volume changes in the 1993 SNA. Output based on controlled but not cultivated growth and also output based on non-controlled natural assets (e.g., gathering of fuel wood, fruit gathering, hunting, etc.) continues to be recorded when the products are harvested. The 1968 SNA included in output (and subsequently in gross fixed capital formation) only the natural growth of livestock and fishstock. Output of agricultural products, orchards and timber tracts was recorded only at the moment of harvest.

Treatment of assets with a long production period as changes in inventories (work-in-progress) until such time as the owner is deemed to have taken ownership
  • Reference: chapter X, paragraphs 10.79 to 10.83; and 10.87

  • 72. The 1993 SNA clarifies that fixed assets with a long period of production should be recorded as gross fixed capital formation at the time when the ownership of the output produced is transferred to the eventual user of the asset. Output that is not transferred and continues to belong to the builder or producing enterprise must be recorded as either work-in-progress or as an addition to inventories of finished goods, depending on whether the asset is finished or not. However, a user is deemed to assume ownership of buildings and other structures prior to their completion in two situations: under a contract for purchase/sale agreed in advance, and own-account construction. In the case of large equipment goods, the change of ownership does not occur until the users take delivery of the goods. The 1968 SNA recommended that fixed assets with a long production period should be recorded as gross fixed capital formation at the moment the purchaser took legal possession of the assets.

Treatment of services output as work-in-progress
  • Reference: chapter VI, paragraph 6.77; chapter X, paragraph 10.108

  • 73. The 1993 SNA recognizes that certain kinds of services take a long time to produce, e.g., architectural design, software development, project development, writing of books, etc. Work-in-progress in service industries is to be recorded as change in inventories by the producers of such services. The 1968 SNA did not include any work-in-progress on services.

Extension of government inventories to include all goods held in inventories
  • Reference: chapter VI, paragraph 6.106; annex to chapter XIII

  • 74. The 1993 SNA includes all goods held by the government in inventories. This new treatment is symmetrical with the treatment of goods stored by market producers. The 1968 SNA treated strategic materials, grains and other commodities of special importance to the nation as inventories; in general, stores of other commodities were not included in inventories.

  • Retain treatment of purchases of consumer durables as final consumption expenditure but include stocks of consumer durables as memoranda items in the balance sheets

    Reference: chapter XIII, paragraphs 13.85 and 13.86; annex to chapter XIII

  • 75. Like the 1968 SNA, the 1993 SNA treats expenditures by households (excluding expenditures by unincorporated enterprises owned by households) on consumer durable goods as final consumption. However, the 1993 SNA recognizes that information about stocks of consumer durables (defined as durable goods that are not used by households as stores of value or by unincorporated enterprises owned by households for purposes of production), with detail by type of durable is of considerable interest and therefore should be presented as memoranda items to the balance sheets.

Gross fixed capital formation not resulting in a separate identifiable produced asset is reflected as an increased value of the produced or non-produced asset embodying it
  • Reference: chapter X, paragraphs 10.45 to 10.55

  • 76. In the 1993 SNA not all gross fixed capital formation is reflected in a separate identifiable asset in the balance sheet. In some instances there is not a one-to-one correspondence between transactions in gross fixed capital formation by type and fixed assets by type. Examples of such gross fixed capital formation items include costs of ownership transfer and major improvements to existing fixed assets, such as buildings or computer software, or tangible non-produced assets such as land, that increase their productive capacity, extend their service lives or both. The relation between the classification of changes in assets and assets was not explicitly dealt with in the 1968 SNA.

  • 77. Consumption of fixed capital related to these capital formation elements is treated as an integral part of consumption of fixed capital of the produced assets to which these expenditures are applied. As in the case of other consumption of fixed capital, it is calculated over the life time of the asset to which the expenditures relate. By convention the consumption of fixed capital also includes the writing off of the elements of gross fixed capital formation that add to the value of non-produced assets.

Extension of capital formation to include expenditures on valuables
  • Reference: chapter X, paragraphs 10.7 and 10.122 and 10.123; chapter XII, paragraphs 12.22 and 12.23; annex to chapter XIII

  • 78. The 1993 SNA includes a third category of capital formation called “acquisitions less disposals of valuables” (P.53), covering expenditures on produced assets that are not used primarily for production or consumption, but acquired and held as stores of value. Examples of valuables are precious metals (non-monetary gold if used as store of value) and stones, antiques and other art objects. When a valuable which was previously not included in the balance sheet of any sector becomes an economic asset in the 1993 SNA sense (see paragraph 61 to 65 above), it enters the balance sheet of the sector in question through the account for other volume changes (economic appearance of produced assets). The 1968 SNA treated these acquisitions less disposals in various ways. In the case of households they were dealt with as final consumption expenditure.

Treatment of historical monuments as produced assets
  • Reference: chapter X, paragraph 10.85; chapter XII, paragraphs 12.22 to 12.24; chapter XIII, paragraph 13.37

  • 79. Historical monuments—which may include old as well as new historical monuments—are treated in the 1993 SNA as produced assets. They are not separately classified but included as part of the categories of produced assets that refer to dwellings (AN.1111) and other (non residential) buildings and structures (AN.1112). Sales and purchases of historical monuments are treated as positive gross fixed capital formation of the purchasing sector and as negative capital formation of the sector selling the asset. When a historical monument which was previously not included in the balance sheet of any sector becomes an economic asset in the 1993 SNA sense (see paragraphs 61 to 65 above), it enters the balance sheet of the sector in question through the other changes in the volume of assets account (economic appearance of produced assets). The 1968 SNA did not specifically deal with the treatment of historical monuments.

Treatment of fixed assets resulting from community activities as output of household production activities and as gross fixed capital formation of the sector responsible for their upkeep
  • Reference: chapter X, paragraph 10.85

  • 80. The 1993 SNA treats construction activities carried out collectively by groups of volunteers as production carried out by the households involved. The fixed assets produced in this way are recorded as output and gross fixed capital formation of households first and then they are allocated to the balance sheet of the sector responsible for their upkeep (non-profit institutions serving households or government). The allocation is accomplished by making a capital transfer which involves a negative gross fixed capital formation of households and a positive gross fixed capital formation of the sectors non-profit institutions serving households or general government. While the 1968 SNA also treated the output as gross fixed capital formation, it did not provide explicit guidance on the sector to which such gross capital formation should be allocated.

Extension of consumption of fixed capital to assets such as roads, dams and breakwaters
  • Reference: chapter X, paragraph 10.78

  • 81. The 1968 SNA suggested that consumption of fixed capital need not be calculated in respect of such assets as roads, dams and breakwaters because it was assumed that the maintenance and repair performed on these assets was sufficient to ensure that these assets had infinite service lives. In practice, most assets of this kind have finite lives even though proper repair and maintenance may result in long lifespans. For this reason, the 1993 SNA recommends that consumption of fixed capital should be calculated for assets such as roads, dams and breakwaters.

7. Further refinement of the treatment and definition of financial instruments and assets

Description of a broad range of financial assets and distinction between actual and contingent assets
  • Reference: chapter XI, paragraphs 11.16 to 11.19 and 11.25 to 11.28

  • 82. The 1993 SNA includes a more precise and elaborate description of a broad range of financial assets and distinguishes them from non-financial assets and from financial “contingent positions”. The distinction between a financial liability and a contingent liability is made on the basis of the conditionality of the relationship between the transactors. Where an unconditional relationship exists on the part of both debtor and creditor, there exists an actual financial asset and liability. Thus, bankers’ acceptances are classified as actual assets but letters of credit are not. The 1968 SNA had limited descriptions of financial assets and therefore also did not deal with contingent positions.

Distinction between monetary and non-monetary gold
  • Reference: chapter XI, paragraphs 11.63 to 11.66

  • 83. The 1968 SNA recognized two kinds of gold: (a) gold held as a financial asset, including gold owned by the monetary authorities which was not separately identified; and (b) other gold used for industrial purposes. The 1993 SNA distinguishes three types of gold: (a) monetary gold owned by the monetary authorities as a component of international reserves; (b) gold held as a store of value; and (c) other gold used for industrial purposes. The last two types of gold may be owned by any kind of institutional unit or sector. Items of gold jewellery of relatively small value purchased by households are not treated as assets, but as part of household consumption expenditure. As was noted in paragraph 78 above, gold purchased as a store of value is treated as a valuable and included in gross capital formation.

Less emphasis on the distinction between different types of deposits
  • Reference: chapter XI, paragraphs 11.69 to 11.73

  • 84. The 1968 SNA included a distinction between “currency and transferable deposits” and “other deposits”. However, in view of the emphasis placed on broad money as opposed to narrow money, the 1993 SNA includes only the total of “currency and deposits” (AF.2) in the first level of classification of financial assets while suggesting that sub-elements should be compiled only if they are analytically useful.

Less emphasis on the short- versus long-term distinction with regard to loans and other financial assets
  • Reference: chapter XI, paragraphs 11.72 to 11.84

  • 85. The 1968 SNA short-term/long-term maturity distinction has become less relevant because of the improved facilities available in financial markets to re-finance short-term financial assets. Therefore, the 1993 SNA retains this distinction but only as a secondary classification criterion.

  • Changes to the treatment of insurance

    Reference: chapter VI, paragraphs 6.135 to 6.141; chapter VIII, paragraphs 8.69, 8.70, and 8.85 to 8.89; chapter XI, paragraphs 11.89 to 11.99; annex IV

  • 86. The 1993 SNA has replaced the 1968 term “casualty insurance” by the term “non-life insurance”.

  • 87. The basis of measuring the output of insurance has been changed. Income from the investment of insurance technical reserves is now taken into account when measuring the value of the services provided to policyholders. The income is distributed to policyholders as a property income flow, “property income attributed to insurance policyholders (D.44)” and repaid to the insurance corporations as premium supplements. This treatment applies to both life and non-life insurance.

  • 88. In the 1968 SNA non-life premiums and claims were recorded when payable. In the 1993 SNA non-life premiums are recorded on the basis of premiums earned and non-life claims on a claims due basis. The differences between premiums payable and earned and claims due and payable are included in a new financial asset, “Prepayments of premiums and reserves against outstanding claims (AF.62)”.

Distinction between financial leasing and operating leasing
  • Reference: chapter VI, paragraphs 6.123 to 6.127; chapter VII, paragraph 7.109; chapter X, paragraph 10.44; chapter XI, paragraph 11.31; chapter XIII, paragraphs 13.23 and 13.24

  • 89. The 1993 SNA recognizes financial leases as financial instruments. Financial leases are distinguished from operating leases in that the former cover leases where the intention is to transfer all risks and rewards incident to ownership to the user of the asset. Assets acquired under financial leasing arrangements are to be treated as assets of the lessees, and the lessors hold a corresponding financial asset which is the equivalent of a loan. Lease payments under financial leases must be divided between interest payments recorded under current transactions and repayment of the loan recorded in the financial account. The 1968 SNA did not recognize financial leases and, as a consequence, treated them in the same manner as operating leases.

Identification of new financial instruments: repurchase agreements, derivatives and secondary instruments, deep discounted bonds
  • Reference: chapter XI, paragraphs 11.32 to 11.43

  • 90. The 1993 SNA identifies and provides descriptions of a number of new financial instruments which were not treated explicitly in the 1968 SNA, including repurchase agreements, derivatives and secondary instruments and deep discounted bonds.

  • 91. Repurchase agreements include the simultaneous sale of securities with the agreement to repurchase those same securities at a later date; they are regarded as financial instruments that are similar to loans secured by securities.

  • 92. The 1993 SNA recommends that the difference between the issue price and the value at maturity of zero-coupon and other deep-discounted bonds should be treated as interest and that this interest should be converted into a series of annual or quarterly payments over the full lifetime of the instruments. Deep discounted bonds were not dealt with explicitly in the 1968 SNA.

8. Harmonization between concepts and classifications of the 1993 SNA and the fifth edition of the Balance of Payments Manual

Centre of economic interest as basic criterion for determining residence or non-residence of entities and one-year rule as operational guideline
  • Reference: chapter XIV, paragraphs 14.12 to 14.34

  • 93. The 1993 SNA and the fifth edition of the BPM use the “centre of economic interest” as the basic criterion for determining whether or not an entity is a resident. The 1993 SNA specifies that an institutional unit be normally deemed to have a centre of economic interest if it has already engaged in economic activities and transactions in the country for one year or more or if it intends to do so for one year or more. However, the 1993 SNA emphasizes that one year is suggested only as a guideline and not an inflexible rule.

  • 94. With regard to the residence of individuals, the 1993 SNA, as well as the fifth edition of the BPM, recommends that students should be treated as residents of the country from which they originate however long they study abroad, provided they maintain an economic attachment with their country of origin. The rationale behind this change from the 1968 SNA is that most students studying abroad return to their country of origin upon completion of their studies. With regard to the residence of individuals working abroad under long-term contracts and of technical assistance personnel, the 1993 SNA recommends no changes, in principle, from the 1968 SNA, but introduces a number of clarifications. In particular, it specifies that technical assistance personnel under bilateral agreements are regarded as residents of the country where they are working if they are staying for more than one year. This treatment is consistent with the treatment of personnel operating in the commercial sector and through international organizations. The fifth edition of BPM, follows the same treatment as the 1993 SNA as concerns technical assistance personnel, constituting a change from the fourth edition.

  • 95. With regard to the residence of enterprises, the 1993 SNA recommends little change from the 1968 SNA, except in the treatment of installation services and of enterprises engaged in construction. The 1993 SNA recommends flexible application of the one-year rule as a guideline in both instances. Enterprises engaged in installing equipment abroad are considered residents of their home country even if the installation takes more than one year to complete. As for enterprises (or site offices) engaged in construction, criteria in addition to the one-year rule are introduced to help determine their residence. Included are such factors as whether or not there are separate sets of accounts maintained, payment of taxes, substantial physical presence, etc. The fifth edition of BPM follows the same treatment.

Goods exported or imported for processing and re-imported or re-exported thereafter are recorded gross
  • Reference: chapter XIV, paragraphs 14.61 to 14.64

  • 96. The fifth edition of the BPM as well as the 1993 SNA recommend that goods that are sent abroad for processing and later on re-imported should be recorded gross by the processing economy as well as by the economy that sent the goods for processing, if the processing involves a substantial physical change in the goods. The value of the good before and after processing should be shown as part of the trade in goods. This recommendation does not entail any change for the 1993 SNA from the 1968 SNA but does constitute a change between the fourth and fifth edition of the BPM. However, the BPM, while agreeing in concept, recommends on practical grounds that all processing transactions be recorded under goods on a gross basis.

Distinction between the treatment of investment goods exported/imported for repair
  • Reference: chapter XIV, paragraph 14.91

  • 97. The 1993 SNA as well as the fifth edition of the BPM make a distinction between repairs performed on investment goods and repairs performed on other goods. The value of repairs on investment goods should be shown as part of trade in goods while other repairs should be classified as service items. The 1968 SNA did not make this distinction. The BPM, on practical grounds, however, includes the value of all repairs as part of trade in goods.

Refinement of the classification of international transactions in services in order to identify separately services, income flows, transfers
  • Reference: chapter XIV, paragraphs 14.94 to 14.124

  • 98. The fifth edition of the BPM, includes an expanded classification of international transactions in services, including financial and communication services. This BPM classification of services is compatible with the distinction made in the SNA between services on the one hand and income and transfer flows on the other. The details of the expanded classification are generally consistent with the CPC, which is the product classification used in the SNA. This implies no change in the SNA, but does constitute a change between the fourth and fifth edition of the BPM.

Valuation of total imports of goods f.o.b. values and imports by product groups in c.i.f. values
  • Reference: chapter XIV, paragraphs 14.36 to 14.43

  • 99. The 1993 SNA, in conformity with the fifth edition of the BPM, values total imports of goods on an f.o.b. basis, i.e., excluding the cost of insurance and freight after the goods have left the frontier of the exporting country. Thus, the 1993 SNA includes the transport and insurance services provided by non-residents after the goods have left the frontier as imports of services. Since, as a rule, for the detailed analysis of imports of goods in supply and use and input-output tables it is not possible to obtain f.o.b. values for each category of imported goods, a global adjustment has to be made in the supply and disposition estimates in order to adjust the c.i.f. total of imports to a f.o.b. valuation. The 1968 SNA always valued imports of goods in c.i.f. values, i.e., including the cost of insurance and freight services provided by residents or non-residents. Consequently, the 1968 SNA did not record the transport and insurance services provided by non-residents on imported goods as imports of services, and imputed an export of services corresponding to transport and insurance services provided by residents on imported goods. These two distortions have disappeared in the 1993 SNA.

Sole use of the national concept of final consumption (expenditure)
  • Reference: chapter IX, paragraphs 9.70 and 9.71

  • 100. The 1993 SNA no longer makes a distinction between final consumption on a domestic and national basis. As a consequence, in principle it would no longer separately identify direct purchases in the domestic market by non-resident households which are exports of goods and services and resident households expenditures abroad which are imports of goods and services within the classification of international transactions in services as did the 1968 SNA. Nevertheless, as these direct purchases cannot readily be identified as specific types of goods and services, they remain treated as separate adjustment items in the supply and use table or input-output tables which comprise various types of goods and services that are lumped together as “travel” in the BPM. The 1968 SNA showed private final consumption expenditure as derived from final consumption of households in the domestic market first, and then adjusted it to a national basis by deducting direct purchases in the domestic market by non-resident households and adding resident household expenditures abroad.

Separate identification of direct foreign investments and the recording of reinvested earnings on directforeign investment
  • Reference: chapter VII, paragraphs 7.122 to 7.125; chapter XI, paragraph 11.101; chapter XIII, paragraph 13.87; chapter XIV, paragraphs 14.123 and 14.151 to 14.154

  • 101. The 1993 SNA recommends that the total and major subcomponents of direct investment be shown as a memorandum item to the relevant financial instruments in the financial account and in the balance sheet.

  • 102. The 1993 SNA, in conformity with the fifth edition of the Balance of Payments Manual, includes the international flows of reinvested earnings attributable to direct investors (D.43) as part of the property income flow (D.4) in the external and corresponding domestic sector accounts. A contra-entry, equal and with opposite sign, is included in the financial account, under the item called “shares and other equity” (AF.5). Direct investment is defined as in the fifth edition of the Balance of Payments Manual and in the OECD Detailed Benchmark Definition of Foreign Direct Investment.

Treatment of write-off of bad debts and expropriation of property without compensation as other changes in volume of assets
  • Reference: chapter XII, paragraphs 12.37 to 12.39; and 12.50

  • 103. The 1993 SNA, in conformity with the fifth edition of the BPM, treats the write-off of bad debt and expropriation of property without compensation as “other volume changes”. These actions affect outstanding claims in the balance sheets but they are not transactions to be included in the capital and financial accounts. In contrast, when the cancellation of a debt involves a voluntary, contractual arrangement (debt forgiveness) between the parties concerned, it is considered a financial transaction and the offsetting entry to the reduction in debt should be treated as a capital transfer. The 1968 SNA treated the write-off of bad debts, etc. as transactions recorded in the second part of the capital finance account with an offsetting entry reflected under current transfers.

Recording of reclassification of commodity gold to monetary gold and vice versa and the allocation/cancellation of SDRs as other changes in volume of assets
  • Reference: chapter XI, paragraphs 11.63 to 11.68; chapter XII, paragraph 12.59

  • 104. The 1993 SNA treats gold monetization/demonetization in the same way as the fifth edition of BPM, that is, as entries in the other changes in the Volume of Assets Account. The 1968 SNA treated these transactions as exports and imports in the merchandise trade account and did not deal with SDRs because, at that time, SDRs were not in existence. The fifth edition of the BPM incorporates the same treatment as the 1993 SNA, in contrast to the inclusion of monetization/demonetization of gold and the allocation and cancellation of SDRs among balance of payments transactions in the fourth edition.

Incorporation of explicit guidelines for exchange rate conversion
  • Reference: chapter XIV, paragraphs 14.77 to 14.84

  • 105. According to both the 1993 SNA and the fifth edition of the Balance of Payments Manual, the exchange rate to be used for conversion from one currency into another is the rate prevailing at the transaction date, or if that is not available, the average rate for the shortest period applicable. The midpoint between buying and selling rates should be used, and the difference between that rate and the buying or selling rate is to be classified as a financial auxiliary service charge. In the case of multiple exchange rates that are the result of official exchange rate policies, the net proceeds accruing to the authorities as a result of transactions involving these multiple rates should be treated as implicit taxes or subsidies. These taxes or subsidies are calculated for each transaction as the difference between the value of the transaction at the actual exchange rate and a “unitary rate” which is calculated as the weighted average of all transactions in the external account. The implicit taxes appear as global adjustments in the external accounts with counterpart items in the central bank or government accounts. The 1968 SNA did not provide any explicit guidelines for conversion of transactions and/or treatment of revenues obtained from the spread between buying and selling rates of foreign currency nor for the case of multiple exchange rates.

9. Price and volume measures and introduction of real income measures

Introduction of new concept of real national disposable income into the System
  • Reference: chapter XVI, paragraphs 16.151 to 16.161

  • 106. The 1993 SNA incorporates the calculation of trading gains and losses from changes in the terms of trade as an integral part of the System. These gains and losses are added to GDP at constant prices to derive real GDP. In the calculation of gains and losses from changes in the terms of trade, the 1993 SNA suggests that, if there is uncertainty about what numeraire index to select to deflate the current trade balance, the arithmetic average of price indexes for exports and imports should be used.

  • 107. The 1993 SNA includes net national disposable income in real terms and derives it sequentially from GDP in constant prices in two alternative ways. The recommended method is to calculate, first, real GDP as described above and then calculate real net national disposable income by using the price deflator for gross national final expenditures (final consumption expenditure plus gross capital formation) to convert net primary incomes and current transfers from abroad to real terms. However, the System recognizes that there is no unique way of defining income aggregates in real terms and, therefore, suggests an alternative method of deflation where all net current receipts from abroad including exports minus imports, primary incomes and current transfers are deflated by a single deflator, i.e., the implicit deflator for net national final expenditures.

Retain nominal interest as the SNA concept
  • Reference: chapter VII, paragraphs 7.109 to 7.111; chapter XII, paragraphs 12.77 to 12.81

  • 108. The 1993 SNA, as did the 1968 SNA, measures interest flows in the allocation of primary income account of the System in nominal terms. However, as the revaluation accounts present holding gains/losses on all assets and liabilities that are denominated in monetary terms and make a distinction between nominal, neutral and real holding gains/losses, users can adjust nominal interest flows to arrive at real interest flows. (An annex to chapter XIX includes a parallel treatment of interest under significant inflation.)

Price and volume measurements
  • Reference: chapter XVI, paragraphs 16.14 to 16.59

  • 109. The 1993 SNA is more flexible with regard to the choice of index number to calculate price and volume measures for GDP and other aggregates. The best single measure of changes in the volume of GDP is considered to be an annual volume chain index for GDP which can also be used to generate value series by extrapolating GDP in the base year. However, chain indices do not generate series for interrelated aggregates that are additively consistent, and it is, therefore, recommended that Laspeyres volume indices on a fixed base year should also be calculated so that additive time series of values at the constant prices of the base year can also be shown. Such Laspeyres volume indices have nevertheless to be rebased every five years or so, and at least every ten years. The 1968 SNA did not recommend the use of chain indices.

International comparisons of prices and volumes
  • Reference: chapter XVI, paragraphs 16.82 to 16.84

  • 110. The 1993 SNA recommends that comparisons of the volume of GDP, or GDP per capita, between countries should be based on international volume indices that use the same kinds of methodology as intertemporal price and volume measures. For this purpose, currencies have to be converted at purchasing power parities (PPPs). However, it is recognized that it is more difficult to make reliable price comparisons between countries than between time periods in the same country, and that the construction of a set of transitive multilateral volume indices for a group of countries may create further problems. The 1968 SNA did not consider the use of PPPs to make international comparisons.

The treatment of quality differences
  • Reference: chapter XVI, paragraphs 16.105 to 16.117

  • 111. The 1993 SNA recommends that most goods or services that are sold at different prices should be treated as different products or, at least, different qualities of the same product when compiling price indices. However, when purchasers are not free to choose because of rationing, lack of information or price discrimination, identical products sold at different prices must be recognized as having the same quality and their prices must be averaged to obtain a single price relative in calculating price indexes.

Use of representative structures in compiling price indices for unique products
  • Reference: chapter XVI, paragraph 16.125

  • 112. The 1993 SNA recommends that price indexes for unique structures should be based on a limited number of representative structures that should be selected and carefully defined. Experts in the field are then requested to make estimates of what it would cost to build these structures in successive years. The 1968 SNA did not include any guidance on the calculation of price indices for unique products.

Measurement of the real output of non-market services should be based whenever possible on output indicators
  • Reference: chapter XVI, paragraphs 16.133 to 16.141

  • 113. The 1993 SNA stresses that valuing the output of non-market producers as the sum of costs does not mean that their output cannot be distinguished from the inputs used to produce them. Volume movements for non-market output should therefore be based on output and not input indicators, whenever possible. Adjustments should also be made for changes in quality. The 1968 SNA gave very little guidance on the measurement of the real output of these non-market services.

Annex II Relationship of the rest of the world account to the balance of payments accounts and the international investment position

1. Introduction

  • 1. The balance of payments accounts and related data on the international investment position (stocks of external financial assets and liabilities) are closely linked to the overall System of National Accounts. This linkage is reinforced by the fact that, in most countries, data on the balance of payments and international investment position are compiled first, and subsequently incorporated in relevant external account components of the rest of the world account of the System. There is virtually complete concordance between the SNA and the Balance of Payments Manual (the Manual) with respect to such issues as the delineation of resident units (either producers or consumers), valuation of transactions and of the stock of external assets and liabilities, time of recording of transactions, conversion procedures, coverage of international transactions in goods and services, income flows, current transfers, capital transfers, foreign financial assets and liabilities, and coverage of the international investment position. There are, however, differences in classification or level of detail in the rest of the world account and the Manual. These reflect, inter alia, differences in analytical requirements and the need, in the SNA, to adopt a uniform classification scheme for all sectors of the economy. The bulk of the discussion in this annex will focus on the relationship between aggregates and details contained in the rest of the world account and corresponding items in the Manual.

2. Resident units

  • 2. The SNA and the Manual identify resident producers and consumers in an identical fashion. In the Manual, chapter IV on residence is entirely consistent with chapter XIV of the SNA. Both systems identify resident units by invoking the concept of the centre of economic interest and the definition of economic territory. (These definitions are elaborated in earlier chapters.)

3. Valuation

  • 3. The SNA and the Manual use market price as the primary basis of valuation. In transaction accounts, market price valuation refers to the actual price agreed upon by transactors (i.e., the amount that a willing buyer pays to acquire something from a willing seller when the exchange is one between independent parties and one into which nothing but commercial considerations enter). Chapter V of the Manual notes the need to apply market price proxies or equivalents in situations in which a market price in its literal sense cannot be determined (e.g., the possible case of transfer pricing that significantly distorts measurement in resource transfers between affiliated enterprises, barter transactions, grants in kind, etc.). In balance sheet accounts affecting external claims and liabilities, both systems advocate the use of end-of-period market (current) prices or proxies thereof.

4. Time of recording

  • 4. In the SNA and the balance of payments, the “time of recording” for transactions is the same as that for accrual accounting (i.e., when economic value is created, transformed, exchanged, transferred, or extinguished). Claims and liabilities are deemed to arise when there is a change in ownership. Both systems essentially adopt an identical application of the accrual basis in the case of specific categories of transactions. Thus, for example, exports and imports of goods are, in principle, recorded on a change of ownership basis, although in both systems specific exceptions are noted with regard to goods under financial lease, goods shipped between affiliated enterprises, goods for processing, and goods underlying merchanting transactions. Services are recorded when actually rendered—a time that often coincides with the time at which the service is produced. Interest is recorded on an accrual basis; dividends are recorded as of the date they are payable. Reinvested earnings on direct investment are recorded in the period in which the earnings are generated. Transfers—taxes, fines, etc.—that are imposed by one party on another are recorded as of the date of occurrence of the transaction that gives rise to the liability to pay; other transfers are recorded at the time that the resources to which they are offsets change ownership. Transactions in financial claims and liabilities are recorded on a change of ownership basis (i.e., when both the creditor and debtor enter the claim and liability, respectively, on their books). Chapter VI of the Manual provides a full discussion of the application of the accrual basis underlying the balance of payments accounts.

5. Conversion procedures

  • 5. Both systems employ consistent procedures for converting transactions denominated in a variety of currencies or units of account into the unit of account (usually the national currency) adopted for compiling the balance of payments statement or the national accounts. Under a single exchange rate system, the SNA and the Manual suggest the use of the market exchange rate prevailing at the time the transaction takes place. This rate is defined as the midpoint between buying and selling rates applicable to the transaction or, alternatively, the average rate for the shortest period applicable. When parallel markets are in existence, the appropriate conversion rate is the rate (i.e., midpoint spot rate) applying to foreign currencies purchased/sold in respective parallel markets.

  • 6. A system of multiple official exchange rates gives rise to implicit taxes and subsidies. The SNA recommends that transactions be converted at the actual (multiple) rates applicable but that global adjustments—reflecting the amount of taxes or subsidies—be shown in the rest of the world account and counterpart entries be made under capital transfers. Taxes and subsidies are calculated as the difference between the values of transactions at the actual multiple rates applicable to specific transactions and their values at a unitary rate, which is calculated as a weighted average of all official rates used for external transactions. When multiple rates exist, the Manual suggests using either a unitary rate or a principal rate, that is, the actual (multiple) exchange rate that applies to the largest part of external transactions.

  • 7. As far as balance sheet items (stocks of external financial assets and liabilities) are concerned, both systems suggest the use, for conversion, of actual market exchange rates applicable to specific assets and liabilities on the date to which the balance sheet relates.

6. Classification and linkages

  • 8. Although harmonization—in terms of the coverage of major aggregates—has been attained between both systems, differences in levels of detail reflect differences in analytical requirements, the relative quantitative significance of some items in international transactions, and constraints imposed by the internal structures of the respective systems. Nonetheless, bridges can be constructed to derive relevant national accounting flows and stocks from balance of payments accounts and the international investment position.

  • 9. In terms of transactions, the SNA distinguishes the following accounts in respect of the rest of the world account (external transactions account): V.I: External account of goods and services; V.II: External account of primary incomes and current transfers; V.III.1: Capital account, and V.III.2: Financial account, which are components of V.III: External accumulation accounts. In the Manual, the transactions reflected in Accounts V.I and V.II are contained in the current account component of the balance of payments accounts, while those reflected in Account V.III.1 are contained in the capital account component of the capital and financial account of the balance of payments. The flows reflected in V.III.2 are shown in the financial account component of the capital and financial account. Account V.III.3.1: Other changes in volume of assets, and Account V.III.3.2: Revaluation account, are contained as separate subdivisions of the international investment position statement in the Manual. Thus, account V.III.3.1 corresponds to the column for other adjustments in the international investment position, while Account V.III.3.2 corresponds to the columns for valuation changes (i.e., price changes and exchange rate changes) in the international investment position. Account V.IV: External assets and liabilities account, of the SNA is equivalent to the international investment position in the Manual, the international investment position is that part of the national wealth statement representing the stock of external financial assets and liabilities. Tables A.II.1 to A.II.6 in this annex provide a reconciliation between the categories shown in relevant external accounts of the SNA and corresponding items in balance of payments accounts and the international investment position. Tables A.II.7 to A.II.9 in this annex refer to the classification scheme underlying balance of payments accounts and the international investment position statement as they are reflected in the Manual. Items denoted with an asterisk(*) are identified as additional details needed to permit the derivation of relevant national accounting flows from balance of payments and international investment position data.

Tables. Reconciliation of the rest of the world account with the balance of payments accounts

Table A.II.1.

Account V.I External account of goods and services

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Table A.II.2.

Account V.II: External account of primary incomes and current transfers

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Item D.8 is not included in the current account in the balance of payments, nor are the receipts of pensions from, or net contributions to, (funded) pension funds.

Table A.II.3.

Account V.III.1: Capital account (of Account V.lll: External accumulation accounts)

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Table A.II.4.

Account V.III.2: Financial account (of Account V.III: External accumulation accounts)

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Table A.II.4.

Account V.III.2: Financial account (of Account V.III: External accumulation accounts)

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Table A.II.5.

Account V.III.3: Other changes in asset accounts

Account V.III.3.1: Other changes in volume of assets account

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Account V.III.3.2: Revaluation Account

Table A.II.6.

Account V.IV: External assets and liabilities

Account V.IV.1: Opening balance sheet

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Account V.IV.2: Changes in balance sheet

Account V.IV.3: Closing balance sheet

Table A.II.7.

Balance of payments: standard components and additional details

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Details needed to reconcile with the classifications used in the rest of the world account of the SNA.

See table A.II.8 for components.

Memorandum items: 5.1 Gross premiums 5.2 Gross claims.

If distributed branch profits are not identified, all branch profits are considered to be distributed.