Overview of System of National Accounts (SNA) II. Introduction to SNA

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Overview of System of National Accounts (SNA)
II. Introduction to SNA

• UN Statistical Institute for Asia and the Pacific

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Definition of Output

• Value of goods services which are produced by
  an establishment in the economy
• Losses or wastages in production and distribution
  not counted
• For goods taking more than one year to produce,
  work-in-progress is recorded
• For trade services, it is the margin realized
  from sale of a good purchased
• For banks, it is the implicit and explicit
  service charge, which are only a small part of
  interest charges

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Definition of Output continued..

• For
• Insurance it is the service charge
• Non-market products it is the production cost
• General government
• NPIs
• Own account constructions
• Own account RD
• Own account software development

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Definition of Intermediate consumption

• Goods services which are entirely used up for
  production
• Durable goods which have low values (country
  specific)
• Excludes other costs such as labour, financial
  cost and production taxes
• these are treated as income generated
• part of value added

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Definition of Final consumption

• Goods services used by households or community.
• FCE (final con exp) of households
• FCE of general government
• FCE of NPIs serving households
• For households all durables are part of final
  consumption (except purchases , own construction
  or improvements of residential buildings, which
  are part of GCF)
• Service of owner occupied dwellings are FC
• Payment for licenses, passports, permits ..

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Definition of Imports and Exports of Gs Ss
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Residents and non-residents

• Military and civil servants, diplomats employed
  by a country are residents of the country who
  employ them
• Students are residents of country of origin
  regardless of time of study
• International org are neither in National
  economy, but workers are residents in the country
  if abode for at least one year.

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Definition of Gross fixed capital formation

• Investment in Capital goods
• Measures the additions to the capital stock of
  buildings, equipment and inventories..
• ie the addition to the capacity to produce more
  in the future
• Land, natural resources etc are not, because the
  change of ownership will not increase the
  non-produced assets (cost of transfer only
  included)
• Components
• Gross fixed capital formation
• Changes in inventories
• Acquisition less disposals of valuables
  (jewelry..)

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Gross / Net Domestic Product (GDP / NDP)

• The Capital Stock (Produced resource in the form
  of buildings, infrastructure, machinery
  equipment) attracts Consumption of Fixed Capital
  (CFC) in the process of production
• Net Domestic Product (NDP) is obtained from GDP
  by subtracting the CFC
• NDP GDP CFC
• GDP NDP CFC

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National vs. Domestic Concept

• Some productive activities of residents take
  place abroad
• Some primary income generated within country may
  go to Non-resident units
• Symmetrically some primary incomes generated in
  the rest of the world (ROW) may go the resident
  units

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GNDI
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National vs. Domestic Concept

• Gross Domestic Product
• plus primary incomes receivable from ROW
• less primary incomes payable to ROW
• Gross National Income (GNI)
• GDP / NDP Net primary income earned from abroad
• Gross / Net National Income (GNI /
  NNI)

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Gross National Disposable Income (GNDI)- Concept

• All GNI is not available for final uses
  domestically
• Some of the income is transferred to other
  countries, and vice-versa
• Gross National Disposable Income (GNDI)
• GNI current transfers from the ROW
• - current transfers to the ROW

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Gross National Disposable Income (GNDI)- Concept
(Contd.)

• Gross national disposable income is the income
  available for consumption and saving
• Gross National Disposable Income (GNDI)
• Final Consumption Expenditure
• Gross Saving

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Gross Saving, Gross Capital Formation Net
Lending

• Gross Saving GNDI - Final Consumption
• Gross saving together with
• net capital transfers from ROW provides
  resources for investment in non-financial assets
  (called Gross Capital Formation)

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Gross savings
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Gross Saving, Gross Capital Formation Net
Lending (Contd.)

• Gross Saving
• net Capital Transfers from ROW
• net borrowing / (-net lending)
• Gross Capital Formation
• Non-produced assets
• (Patented entities only)

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Gross Saving, Gross Capital Formation Net
Lending (Contd.)

• Gross Capital Formation
• Gross Fixed Capital Formation
• Change in Stocks
• (Gross saving net capital transfers) GCF
• Net lending () / Net borrowing (-)

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National Income (NI )

• Gross National Income (GNI)
• GDP
• primary incomes receivable from ROW
• - primary incomes payable to ROW
• GNI is at market / basic price depending upon the
  inclusion / exclusion of taxes on products less
  subsidies in GDP

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National Income (NI ) ...contd.

• GNI -CFC
• NNI (Net National Income)
• Per capita income
• NNI divided by mid year population

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Definition of an asset

• The assets recorded in the System are economic
  assets

• ownership rights can be enforced

• economic benefits may be derived by
• holding them, or using them, over time

• It is a store of value that depends upon the
  amounts of the economic benefits that can be
  derived from it by its owners.

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Definition of an asset (cont)
This value (discounted for inflation) does not
usually remain constant but often diminish with
the passage of time.
Different kinds of benefits may be derived such
as

• (a) Using assets such as machinery in production

(b) Property incomes for example, interest,
dividends, rents, etc., received by the owners of
financial assets and non-produced assets
(c) Some assets may be held purely as stores of
values (precious metals or stones, etc.) without
any other benefits being derived from them.
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ASSETS BOUNDARY OF 1993 SNA

• Assets as defined in the 1993 SNA are entities
  that must be owned by some institutional unit or
  unit (s)
• and from which economic benefits are derived by
  their owner (s) by holding or using them over a
  period of time

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Asset boundary

• All entities which meet the definition of an
  asset appear on the balance sheet of the economy.

• All assets can be represented by a monetary value

• Value represents the markets view of the total
  of the benefits embodied in the asset.

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Types of assets
Produced

• Enter via production or imports

• Leave via being exhausted, sold to residents for
  use other than as asset, sold to non-residents

Non-produced

• It exists, like land and sub-soil assets or
• Appears over time and is valued/recognised when
  there is an equivalent market price

• May leave via depletion or impairment

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ASSETS BROAD CLASSIFICATION
Financial
Assets
Produced
Non-Financial
Non-Produced
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Assets in the 1993 SNA
Financial assets
Non-financial assets
Produced
Non-produced
Fixed
Inventories
Valuables
Intangible
Tangible
Tangible
Intangible
- Land - Subsoil assets - Non-cult biological
resources - Water resources
- Patented entities - Leases and contracts -
Purchased goodwill
- Mineral exploration - Computer software -
Entertainment, literary or artistic
originals - Other
- Buildings - Structures - Machinery Equipment
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Assets in the SNA update
Financial assets
Non-financial assets
Non-produced
Produced
Fixed
Inventories
Valuables
Natural resources
Contracts, leases and licenses
Goodwill and marketing assets

• RD
• - Mineral exploration and evaluation
• - Computer software and databases
• - Entertainment, literary or artistic originals
  
• - Other IP products

- Natural land - Mineral dep energy reserves -
Non-cult biological resources -
Water resources - Other natural resources
Buildings Structures Machinery Equipment
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NATIONAL ACCOUNTS

• All transactions within a time period
• Between the economic agents
• Constituting the national economy

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NATIONAL ACCOUNTS (Contd.) Sequence of accounts
Production
Changes in Balance Sheet
P
Primary Distribution of Income
Financial
Capital
Secondary Distribution of Income
Use of Income
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NATIONAL ACCOUNTS

• All transactions within a time period
• Between the economic agents
• Constituting the national economy

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NATIONAL ACCOUNTS (Contd.) Economic Agents
Households
P
Non-Financial Corporations
Non-Profit Institutions Serving Households
Financial Corporations
ROW
General Government
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NATIONAL ACCOUNTS

• All transactions within a time period
• Between the economic agents
• Constituting the national economy

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Account for the rest of the world (ROW)

• Principles
• Transactions recorded from the perspective of ROW
• All transactions are recorded twice, as
  receivables in the domestic economy and as
  payable in the ROW account and vise versa. (eg
  current transfers receivable from ROW in Domestic
  economy is recorded as payable to ROW in ROW
  account)

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Goods and services account

• Characteristics
• Brings together total supply and uses of Gs Ss
• It is balanced by itself
• Resources recorded on the right side and uses on
  the left side

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• Supply and Use tables

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Supply and use

• Equations
• Supply Use by product

Total supply Output imports
Total use Intermediate consumption Final
consumption Capital formation Exports
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Supply table
Industry Industry Industry Total Imports fob Cif/ fob adj. Total product supply at basic prices Trade and transport margin Import duties Taxes less subsidies on products Total supply at purchasers prices
1 2 3
Product 1 156 24 180 15 195 33 2 11 241
Product 2 9 80 89 8 97 27 1 6 131
Trade and transport and insurance 62 62 1 -2 61 -60 0 1
Cif/fob adjustment -2 2 0
Total output at basic prices 165 104 62 330 22 0 352 3 17 373
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Use table
Intermediate consumption of industries Intermediate consumption of industries Intermediate consumption of industries Total economy Exports fob Household consumption expenditure Government final expenditure Gross capital formation Total use of products at purchasers prices
1 2 3
Product 1 25 35 13 73 28 100 40 241
Product 2 32 20 10 62 9 50 10 131
Trade and transport and insurance 0 1 1
Total use 57 55 23 135 37 151 10 40 373
Gross value added 108 49 39 196
Taxes less subsidies on production and imports 20
Output at basic prices 165 104 62 331
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Role of supply and use table

• Compilation tool
• Verification
• Reconciliation
• Balancing

• for
• Benchmark estimates
• Annual national accounts in constant prices
  extrapolated using volume indexes or deflating
  using price indexes
• Quarterly national accounts using price and
  volume indexes from short-term indicators

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Source data

• Annual establishment/enterprise surveys and
  profit and loss/balance sheets of enterprises

• Government revenue and expenditure budgets

• Household budget surveys

• Custom data on exports and imports of goods

• Balance of payments on exports and imports of
  services

• Administrative data
• Business registers, employment, production,
  volume and price information, etc.

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• Data can be derived from a variety of different
  sources, such as administrative and business
  records, as well as specially conducted censuses
  and surveys. In practise, however, macroeconomic
  accounts can seldom be built up by simply
  aggregating the relevant micro-data.
• (SNA 9312)