Transcript 2000 SDS Objectives

THE TREATMENT OF ORIGINALS AND COPIES
Working Party on National Accounts
12-15 October 2004
Nadim Ahmad, Statistics Directorate, OECD
The Current SNA
•Paragraphs 6.143 to 6.146 can be summarised as:
•A two stage process. First stage results in the production of an
original and the second stage results in the production of copies.
The original is an intangible fixed asset.
•The owner may use it directly in production or to produce copies,
with both uses resulting in consumption of fixed capital of the
original by the owner.
•The owner may also license other producers to make use of the
original in production. In these cases, the owner provides services
to the licensees, which are recorded as part of the intermediate
consumption of the licensees, and as consumption of fixed capital
of the original by the owner.
•Examples – books, recordings, films, software, tapes, disks etc
13 October 2004
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Background
•OECD/Eurostat Task Force on Software (established 2001)
• Investigated country practices: established that large differences
in software capitalisation reflected measurement differences.
•Not all countries capitalised software copies, some did not
capitalise originals used solely for reproduction.
•Task Force concluded that
• (nearly) all copies should be capitalised (licenses-to-use).
• all originals should be capitalised; and
• payments made to reproduce originals (licenses-toreproduce) should be treated as intermediate consumption (in
most cases).
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Background
• TF report presented at NAEM 2002.
•Some countries expressed concern at the recommendations.
•In particular – it was felt the recommendations resulted in
“double-counting” of investment (originals and copies).
• Some expressed a preference for no double-counting of
investment and gross output.
•Others expressed a preference for no double-counting of
investment (but double-counting of output).
13 October 2004
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Background
• The Taskforce recommendations were in line with SNA93.
•So concerns about software, reflected the SNA sections on
originals and copies more generally.
•Issue of originals and copies (especially software) was passed on
to the Canberra II group.
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Background
•
3 proposals presented to the Canberra Group for
consideration.
1.
Payments for licenses-to-use and licenses-to-reproduce to be
recorded as payments for part of the original
2. The Software Task Force recommendations (SNA93)
3. Payments for licenses should be treated as rental payments of
the original idea.
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A few words on double-counting
13 October 2004
•
Double-counting is a normal feature of the accounts; which is
why they refer to gross output and GDP.
•
Built into the SNA are structures that allow double counting to
be netted out. IC subtracted from gross output to obtain GVA,
and CFC subtracted from GVA to obtain NVA. Applies to
tangible and intangible production processes.
•
Most assets reflect varying degrees of double-counting assets (machines) are often used to create assets & so on.
•
TF view was that originals & copies were little different in this
respect; the original was a machine that produced the copy.
•
In addition critics viewed double-counting mainly as a problem
of investment not GDP necessarily. E.g. less concern that
HHFC of copies increased GDP (just like investment).
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A few words on double-counting
•
13 October 2004
Issue really reflected characteristics of software production,
namely that:
•
copies commonly seen as having marginal reproduction
costs – (which is not necessarily true: certainly not
applicable to all types of originals).
•
And that originals not “used up” in production – (but they
depreciate all the same, through obsolescence,
patent/copyright expiry).
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Proposal 1
13 October 2004
•
Pros: No double-counting of investment or output (or GDP).
•
Cons:
•
Implies that reproduction costs are zero (not necessarily the
case, books, marketing costs). Or that reproduction costs
could in some way be estimated separately.
•
Difficult to record “bundled” transactions, or copies embodied
in other products (would need to impute IC for ownerreproducers)
•
Value of original in year of creation will rarely reflect actual
sum of future discounted sales; implying continuous
revaluation of original in year of creation.
•
No consistency between tangible and intangible products. E.g
some original software used exclusively in conventional
production process (no copies).
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Proposal 3
13 October 2004
•
Pros: No double-counting of investment.
•
Cons:
•
Wholesale changes required, with significant measurement
problems. Most assets embody an idea, and so, in theory, the
rental payment for the idea would need to be estimated
separately. HHFC on books for example would reflect part
payment for the access device (book) and a rental payment
for the idea. Bundled software, would need to be separately
estimated and recorded as rental.
•
Software copies not regarded as investment - Only originals
are investment.
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Proposal 2
•
Pros:
•
Consistent with SNA.
•
Easy to implement
•
Treats tangible & intangible goods consistently
•
Treats bundles/embodied goods simply & consistently
•
Makes no assumptions on reproduction costs
•
Records software copies as investment
Cons:
13 October 2004
•
Perception of double-counting
•
Restrictions relating to ownership (on software copies, or
copyright of books)
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Canberra Group Recommendation
13 October 2004
•
Group strongly in favour of Proposal 2.
•
For licenses-to-use (copies).
•
Licenses-to-use (or copies) are the result of a two-stage
production process, beginning with the production of an
original. The production of a copy results in output whose value
should embody all reproduction costs, including the value of
intellectual property tied-up in the license-to-use (copy). Where
the license-to-use (copy) is expected to be used repeatedly in
production for more than one year, and where expenditure is
above the small-tools cut-off point, expenditure should be
recorded as fixed capital formation. This applies to all one-off
purchases and where the purchaser makes a series of payments
over time, if it is the intention of the purchaser to use the copy
until the end of its economic lifetime; which is usually the case.
The conditions-of-sale relating to copyright and ownership,
which are often attached to copies, should be interpreted as
restricting the right-to make further copies and the owner of the
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copy, or license-to-use, is the purchaser.
Canberra Group Recommendation
13 October 2004
•
But recommended a modification to licenses-to-use.
–
Where the license is an operational lease, the owner is treated
as providing services to the licensees that are recorded as part
of their IC. The payments made by the licenses may be
described in various ways, such as fees, commissions or
royalties, but however they are described they are treated as
payments for services rendered to the licensee by the owner.
The use of the asset is then recorded as CFC in the production
of services by the owner. These services are valued by the fees,
commissions, royalties, etc. received from the licensees.
–
Where the licence is not an operational lease, the sale of the
licence should be considered as a sale of all or part of the
original. The decline in the value of the original to the owner is
recorded as negative GFCF and not as CFC. The eventual
decline in the value of the licence in use will be recorded as CFC
in the accounts of the licensee, now recorded as the owner (and
user) of part of the asset.
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Production
Originals
Production of original that is
capitalized
Licenses-to-reproduce (copies)
No production takes place.
Production of services by the
owner of original occurs.
Original has to be depreciated.
Licenses-to-use and “licenses-touse” copies
Production of services by the
owner of original occurs.
Original has to be depreciated.
Production of copies by the
owner of original/part of
original occurs. Original has to
be depreciated.
13 October 2004
Sale
The treatment is similar to sale
of old fixed asset. Gross capital
formation of the original owner
declines, gross capital formation
of the new owner increases.
Payment is treated as sales of
part of the original. The
treatment is similar to sale of
old fixed asset. Gross capital
formation of the original owner
declines, gross capital formation
of the new owner increases.
Payment is treated as purchase
of services and hence
intermediate consumption if
conditions of a capital good are
not satisfied (payment is below
a cut-off point, and use is only
for one year or is purely an
operational lease).
Payment for license is treated as
purchase of services and hence
intermediate consumption if
conditions of a capital good are
not satisfied (payment is below
a cut-off point, and use is for
less than one year or is purely
an operational lease)
Payment for copy is treated as
gross capital formation if
conditions of a capital good are
satisfied (payment is above a
cut-off point, and the copy can
be used repeatedly for more
than one year by business).
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