Overview of country consultation on recommendations of the AEG

1
Overview of country consultation on
recommendations of the AEG
UN STATISTICS DIVISION Economic Statistics
Branch National Accounts Section
2
Non-performing loans

• Loans should continue to be recorded at nominal
  value for both creditors and debtors.
• In addition, memorandum items should be shown at
  market value these should be mandatory for at
  least financial institutions and government as
  creditors.
• More clarification is required in respect of
• (i) the definition of which loans are
  non-performing (ii) the exact nature of the
  memorandum items (iii) a worked example of the
  accounts showing the memorandum items (iv)
  harmonization of terms used in various manuals
  (v) the implications for the recording of FISIM
  and (vi) whether similar treatment should be
  extended to other financial instruments (in
  particular trade credits).
• Agrees 44
• Disagrees 3
• Further clarification 1

3
Originals and copies

• (a) Copies generated for issue under licenses to
  use represent new production, (b) When they
  display the characteristics of fixed assets,
  copies issued under license to use should be
  recorded as gross fixed capital formation. (c)
  When a license to reproduce is issued under terms
  similar to an operational lease, the payments
  made are treated as payments for services, and
  (d) When the holder of an original divests itself
  of part or all of the responsibility to issue and
  service copies under licenses to use by means of
  a license to reproduce, this constitutes the sale
  of the corresponding part of the asset.
• Having two possible treatments for licenses to
  reproduce could affect the classification of
  assets and the borderline between goods and
  services in trade figures. This should be brought
  to the attention of BOPCOM, and (e) Canberra II
  Group to recommend in which cases when payments
  for a license to use are made over several years
  represent the acquisition of an asset rather than
  a series of payments for services and the
  consequence for recording other transactions.
• Agrees 36
• Disagrees 1
• Further clarification 1

4
Databases

• In the present SNA recommendation that large
  databases should be treated as fixed capital- the
  word large should be dropped. The AEG
  tentatively agreed that
• all databases were candidates for treatment as
  fixed capital but requested the Canberra II group
  (i) to provide a definition of database and a
  definition showing exactly which databases should
  be included (or excluded) in fixed capital (ii)
  to consider the distinction between creation and
  maintenance and the implication for the inclusion
  in fixed capital and (iii) to add precision to
  the nature of employees to be included in the
  recommended means of valuing own account
  databases and
• the AEG agreed to include a single category in
  the classification of assets for software and
  databases with a subsequent disaggregation into
  software and databases.
• Agrees 39
• Disagrees -
• Further clarification 1

5
Cost of ownership transfers - II

• Costs of ownership transfer on disposal of an
  asset should be written off over the period the
  asset is held.
• Installation and de-installation costs should be
  included in costs of ownership transfer if
  separately invoiced, and in the purchasers price
  of the asset otherwise.
• Terminal costs should be recorded as capital
  formation when they occur but the whole cost
  should be written off as consumption of fixed
  capital over the life of the asset, analogous to
  costs of ownership transfer on disposal.
• When this recommendation on terminal costs cannot
  be followed for lack of adequate data, these
  costs should still be recorded as GFCF but
  written off as CFC in the year of acquisition.
• Agrees 38
• Disagrees 3
• Further clarification -

6
Government owned assets

• There was strong support in principle for
  including a return to capital, viewed as an
  opportunity cost, in the measurement of
  non-market output.
• In terms of the range of assets which could be
  covered, most participants favored including
  those assets in the generation of government
  output similar to those assets used in market
  production. A smaller number favored including
  roads and other infrastructure assets.
  Progressively fewer favored including assets such
  as city parks serving the community at large and
  land.
• It was agreed that these range of positions of
  the AEG should be sent to all countries seeking
  reactions on both conceptual and practical
  grounds.
• Agrees 20
• Reservations 12
• Disagrees 14

7
Mineral exploration

• Change the item mineral exploration to mineral
  exploration and evaluation and to draw on the
  IASB coverage of this item to specify the SNA
  item,
• The description of the valuation of this item
  should be clarified to make clear that it is
  market production to be valued either at market
  prices, if purchased, or as the sum of costs plus
  mark-up, if produced on own-account,
• Maintain a distinction between mineral
  exploration and evaluation as a produced asset
  and the mineral deposit as non-produced assets,
• The preferred valuation for mineral deposits,
  market price, is seldom available. In default,
  the deposit should be valued as the present value
  of future receipts of resource rent and
• In principle, payments by the extractor to the
  owner of the deposit are property income.
  However, when the owner is government and the
  payments are described as taxes, adhering to this
  principle introduces a discrepancy between taxes
  in the SNA and in government accounts. This
  needs further consideration.
• The question of attribution of the ownership of a
  deposit extracted by a unit not the legal owner
  is deferred to a future meeting when leases and
  licenses will be discussed more generally.
• Agrees 35
• Reservations 1
• Not clear 1
• Further clarification 3

8
Land improvements

• GFCF of land improvements should be treated like
  other GFCF and result in a produced asset
  appearing separately in the balance sheet
• The non-produced component of land should be
  valued at its present unimproved value
• Here the value of land cannot be partitioned into
  an improved and unimproved part, adopt
  recommendations for land and associated
  structures as in para. 13.57 for balance sheets
  and para. 7.131 for rent and rentals
• Costs of ownership transfer on land should be
  recorded as fixed assets and included with land
  improvements
• The boundary between land improvements and
  structures should be re-examined with a view to
  moving some items such as major dykes, seawalls,
  etc. to structures and
• The terms Land Improvements and Unimproved
  Land are to be reconsidered by the Canberra
  Group-II.
• Agrees 36
• Reservations 1
• Disagrees 3

9
Holding companies, SPEs, trusts

• An SPE incorporated in an economic territory
  other than any of its owners should be treated as
  a separate institutional unit and resident in its
  country of incorporation.
• The AEG requested some indicative guidelines on
  the identification of SPEs across manuals,
  although an internationally standard definition
  of SPE is not available in light of the national
  diversity.
• This issue should be coordinated with TFHPSA.
• Agrees 36
• Not clear 2
• Further clarification 4

10
Multiterritory enterprises

• The treatment of multi-territory enterprises in
  BPM5 should be extended to all kinds of
  activities, when formal separation is not
  possible.
• Units operating in zones of joint sovereignty or
  jurisdiction should be split between these in
  ways that still need to be specified.
• The broader question of multinational enterprises
  should be addressed by a task force, taking
  account of IASB recommendations and work in hand
  for the next ISI meeting.
• Agrees 37
• Further clarification 4

11
Recognition of branches

• Physical presence is not required for a branch to
  be recognized
• Being subject to income tax laws should replace
  paying income tax as an indicator of the
  existence of a branch and
• All criteria should be considered as indicators
  for a separate branch but not all criteria have
  to be met. Even if the entity does not have a
  full set of accounts, if it engages in
  production, it should be treated as a branch.
• Agrees 36

12
Change of economic ownership as term

• The AEG agreed to the proposed change in
  terminology by inserting the word economic but
  requested detailed clarification on the meaning
  of economic ownership.
• The implications for possible shared ownership of
  assets and the time at which change in ownership
  occurs (e.g., signing a contract) still need to
  be explored.
• Agrees 28
• Further clarification 3

13
Application of accrual principlesto debt arrears

• Time of recording and treatment of arrears should
  be harmonized in the various macro-economic
  statistics.
• No transactions should be imputed when a
  liability goes into arrears (i.e., the debt
  continues to be recorded in the original
  instrument).
• If the original contract provided for a change in
  the characteristics of a financial instrument
  when it goes into arrears, this change should be
  recorded as a reclassification in the other
  change in volume of assets account.
• If the contract is renegotiated, the consequences
  are to be recorded as new transactions.
• It was suggested that consideration of these
  issues should be included in the paper concerning
  non-performing loans which the IMF has agreed to
  prepare.
• Agrees 44

14
Predominant centre of economic interest

• Harmonization of the definition of residence
  between BPM and SNA is essential harmonization
  with other statistical systems (for instance,
  demographic, immigration and tourism statistics)
  is desirable but not to the point of compromising
  the integrity of the system. Where this is not
  possible, the different definitions need to be
  documented.
• The AEG agreed to adopt predominant centre of
  economic interest as a term.
• The AEG favored the one-year criterion rather
  than discretionary criteria, with the existing
  exceptions of students and patients and with
  clarifications of the situation of ships crews.
• The AEG supported the supplementary presentation
  on non-permanent workers proposed in the BPM
  Annotated Outline.
• Agrees 47
• Disagrees 1

15

• Thank You