Transcript SNA_BasicConcepts

System of National Accounts
Basic Concepts
National Academy of Statistical Administration
Ministry of Statistics and Programme Implementation
Central Statistics Office
System of National Accounts (SNA), 2008
System of National Accounts (SNA)
Historical Development 1953 SNA, 1968 SNA,1993 SNA,2008 SNA
SNA aims to provide a comprehensive, coherent, and
consistent picture of the economy that reflects
– all transactions
 taking place between the agents that together constitute
an economy
– and other economic flows in an accounting period
– and the opening and closing stocks of assets and
liabilities
Integrated Framework for Socio-Economic Analysis
2
SNA -Integrated Framework for Socio-Economic Analysis
Resources: Human; Natural; Produced; Financial
Economic Life: Production; Distribution
Production- Goods and Services; Income; Residuals
Distribution- Final Consumption; Accumulation; Exports
Presenting Stock and Flows - Format
Stock of resources (opening)
 Production
 Consumption
 Capital formation, net exports
 Other changes in volume / prices
 Stock of resources (closing)

3
OPENING STOCK OF RESOURCES
Human
Produced
Natural
Financial
PRODUCTION
Income
Goods & Services
Residuals
DISTRIBUTION & USE
Intermediate
consumption
Final Consumption
Other changes
(volume, price)
+
Accumulation
CHANGE:
human
Exports
CHANGE:
produced, natural, financial
CLOSING STOCK OF RESOURCES
Human
Produced
Natural
Financial
4
SNA -
Introduction
What constitutes National Accounts?
• The residents mostly earn their income from production
carried out in the economy
• Thus, income of all the residents is mainly generated from
production activity of goods and services in the economy
• Income, thus generated, is spent for purchase of goods and
services produced in the economy or imported
– either for final consumption
– or saving for accumulating wealth
• National Accounts provide a quantitative description of all
these processes and their inter-linkages
5
SNA -
Introduction
System of National Accounts (Contd.)
 SNA provides a framework for systematic presentation of
estimates of macro-economic aggregates relating to
national income and wealth
 Stocks of economic assets represent ‘wealth’
 The SNA also has provision of recording ‘other flows’
 caused by events like war, natural calamity, and
scientific discovery and changes in general price level
affecting the stock of ‘economic’ assets
6
SNA -
Introduction
Structure of SNA
Answers to the following questions
• Who?
: actors in an economy
– Institutional units and establishments
• What?
: flows and stocks
– economic activities and assets and liabilities
• How?
: macro-economic framework and accounting rules
– national accounting identities and sequence of
accounts
• Why?
: purpose
– classification by purpose of expenditure
provides an overview of the conceptual framework of SNA
7
Structure-Who?- Actors: Institutional Units/Establishments
Institutional Units-Constituents of an Economy?
• All institutional units residing in the economic territory of
a country during accounting period constitute its economy
• Institutional unit is an economic entity that is capable of
owning assets, incurring liabilities, carrying out economic
activities, taking decisions on all aspects of economic life,
engaging in transactions with other entities
• All economic transactions take place only through
institutional units
• Institutional Sectors: Corporations - Financial ,Corporations
- Non-financial, Government, Non-Profit Institutions serving
households (NPISHs), Households (includes unincorporated
enterprises)
8
Who? - Constituents of an Domestic Economy
Residence
• Definition: The economic territory in which the
institutional unit has its centre of predominant economic
interest
• The definition of Domestic Economy is based on the
concept of Residence. And not Currency or Nationality
• All resident units constitute the domestic economy
For national accounts, Rest of the World (RoW) consists of
all Institutional units
– not belonging to the domestic economy
– but have some transactions with resident units
9
What ? - SNA aims to describe economic flows and stocks
Economic Flows and Stocks
The SNA accounts consist of tables and balance sheets that
register (in monetary terms)
• the economic actions or events (flows) that take place within a
given period of time
– Flows (Transactions) are captured during a period of time
and
• the effect of these events on the stocks of (economic) assets
and liabilities at the beginning and end of that period
– Stock of resources are measured at a certain point in time
Within SNA boundaries
10
What?- Economic flows and Stocks (Contd.)
Economic Flows- reflect creation, transformation, exchange,
transfer or extinction of economic value ; reflect creation,
transformation, exchange, transfer or extinction of economic
value undertaken by institutions
Stocks of (Economic) Assets- are a position in, or holdings of
non-financial (produced or non-produced) assets , financial
assets and liabilities at a point in time
Economic asset is subject to ownership rights and used in some
kind of economic activity or as a store of value
Excluded: Consumer durables and natural resources that are not
owned (Environmental assets)
11
What?- Two Types of Economic flows
 Transactions – interaction by mutual agreement between
institutional units :
(a) With counterpart – exchange something for something
(b) Without counterpart – transfers something for nothing
 Other flows – change in value of assets and liabilities without
transaction caused by (a) volume change, (b)level and structure of price
Types of Transactions:
Transaction in goods and services: Two kinds:
(i) Produced goods and services or (ii) Non-Produced assets
Distributive transactions: Two kinds:
(i)Distribution of income generated (ii)Transfers
Transactions in Financial assets and liabilities
12
What?- Transactions in products (Goods and Services)
Supply and Use of Products
• Supply (Gross Value of Output) of goods and services produced in
the domestic economy (GVO) and imports (M) are used as
– Intermediate Consumption (IC)
– Final Consumption of the residents
• Households Final Consumption Expenditure (HFCE)
• Government Final Consumption Expenditure (GFCE)
• Final Consumption Expenditure of the NPISHs
– Gross Domestic Capital Formation (GDCF)
• Gross Fixed Capital Formation (GFCF)
• Change in Inventories (CII)
• Acquisition less disposal of valuables
• Consumption of Fixed Capital (CFC)
– and exports (X)
13
How? -
SUT
SNA Framework- Supply and Use Tables
In the SNA framework, Supply and Use Tables (SUTs) are the
first set of global tables
These are based on the commodity balance identity:
GVOmp + M = supply ≡ use = IC + PFCE + GFCE + GFCF + CIS
+ acquisition less disposal of valuables + X
… …. [1]
• As many commodity balance identities as the number of
product categories used in national accounts compilation
• SUTs are a combined presentation of all these identities that
help in
– verification and reconciliation of the estimates and
– estimating the missing values
14
What? -
Distributive Transactions
Distribution of Income from ‘Production’
• Compensation of employees
– Wages and salaries; Employers’ social contributions
• Taxes on production and imports
– Taxes on products; Other taxes on production
• Subsidies
– Subsidies on products; Other subsidies on production
• Property income
• Investment income
– Interest, Dividends, Reinvested earnings on FDI, etc.
• Rent
15
What? - Distributive Transactions
Transfers
 Current transfers (other than social transfers in kind)
–
–
–
–
Current taxes on income, wealth, etc.
Net social contributions
Social benefits other than social transfers in kind
Other current transfers
 Social transfers in kind
 Adjustment for the change in pension entitlements
 Capital transfers
Boundaries in the SNA
Production Boundary
Consumption Boundary
Asset Boundary
16
What? -
Boundaries
SNA Production Boundary
includes
 production of all goods and individual or collective services that
– are supplied to other units or
– intended to be so supplied
including the production of goods and services used up in the
process of producing such goods and services;
 own-account production of all goods that are retained by their
producers for their own
– final consumption or
– gross capital formation
– own-account production of housing services and
domestic services produced by employing paid domestic
staff
17
What?
- Boundaries
Consumption Boundary
• Consumption of goods and services is the act of completely
using them up
– in a process of production (intermediate consumption) or
– for direct satisfaction of human needs / wants (final consumption)
• The second activity represents final consumption and includes
use of goods and services for both
– individual needs - acquired by a household and used to satisfy the
needs or wants of members of that household; and
– collective human needs - service provided simultaneously to all
members of the community or a section of the community
These are provided only by the government
18
What?
- Boundaries
Assets Boundary
All that has a life of more than a year and qualifies as
• economic assets i.e. store of value
– on which ownership right can be established and
– the economic owner derives benefits by holding or using
• including
– all non-financial assets whose economic owners are
residents of the economy
– all financial claims, shares or other equity in corporations of
the residents plus gold bullion held by monetary authorities
as a reserve asset
fall in the assets boundary of the SNA
19
SNA FrameworkSNA framework
Identities, Accounts and Valuation
• SNA is founded on the macro-economic framework that
gives a set of identities forming basis of SNA sequence of
accounts measuring economic flows and stocks
• SNA framework is based on the premises that all goods and
services produced in domestic economy are put to “use”
• circular flow of income and expenditure of residents and
non-residents participating in transactions in the economy
• The framework establishes the equivalence of
– supply and use of goods and services produced
– the value of production of goods and services, income
generated in production and expenditure on final
products
20
Circular Flow of Income and Expenditure
[Showing also Leakages: Saving, Taxes, Imports; and Injections: Investment, Government Expenditure, Exports]
Exports
Rest of the World
Govt. Expenditure
Investment
Enterprises
Expenditure on
Final
intermediate &
capital g&s
Consumption
Financial
Market
Taxes
Government
Income
Saving
Households
Imports
Taxes
21
How? -
Output, Production
Output
 “Enterprises” produce goods and services (g&s), using g&s
produced by other enterprise in the domestic economy or RoW
or by themselves as intermediate consumption (IC)
 The receipts of the enterprises from sale (or value of goods and
services otherwise disposed) of the produced goods and
services represent the gross value of output (GVO)
Production
In the SNA, the measure of production (in ‘gross’ terms) is
Gross Value Added (GVA). Defined as
GVA = GVO – IC
……[2]
where GVO stands for Gross Value of Output, IC for Intermediate Consumption
22
How? - Gross Domestic Product
Gross Domestic Product (GDP)
• GDP is a measure in monetary terms of production of all goods
and services counted without duplication, as sum of GVA of all
resident producer units within the economic borders of country
during a given period of time and taxes less subsidies on
products
GDP = ΣGVA + taxes less subsidies on all products (t-s)
 GDP includes Illegal & concealed production, Production of
goods for own consumption, Production of non-market
services by government and NPISH, Services of own occupied
dwelling units of households
 GDP excludes social activities, cultural activities and unpaid
volunteers, do-it-yourself decoration, maintenance and small
repairs to durables and dwellings by households
23
How? – Gross vs Net
Gross / Net Domestic Product (GDP / NDP)
• The Capital Stock (Produced resource in the form of
buildings, infrastructure, machinery and 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
• Similarly,
NVA= GVA - CFC
24
How? -
Circular Flow
Generation of Income
• GVA resulting from the process of production is the income
generated, which in turn is distributed to
• households as
– Compensation of Employees (CE) and
– (gross) Operating Surplus (OS) (en route financial market)
– Mixed Income (MI): mix of CE and OS, and
• government as production taxes (net of subsidies), composed of
– Taxes on products and import taxes (net of subsidies) and
– Other production taxes (net of subsidies)
25
How? -
Generation of Income
Primary Income - from recipients’ perspective
• Primary incomes: incomes accruing to units for their
– involvement in or
– for ownership of assets used in
production processes
• Households receive primary income from producers of goods
and services as
– Compensation of employees (CE) and
– Property income (PI) from
• lending of financial assets
• renting of natural resources owned by them
• or mixed income (MI)
26
How?- Primary Income
Primary Income - from recipients’ perspective (Contd.)
• Government receives
– Taxes less subsidies on products and imports (duties)
– Property income
• Primary income is also received from (and paid to) RoW
• For an institutional unit, Balance of Primary Income is
– total value of the primary incomes receivable less
total of the primary incomes payable
• At total economy level, it is called Gross National Income
GNI = primary income generated in the domestic economy
(GDP) + (net) primary income receivable from RoW
• NNI = GNI – CFC
• Per capita income = NNI / Mid year population
27
How? -
Distribution of Income
Secondary Distribution of Income
 Out of the balance of primary income (gross), the
institutional units may pay and/or receive current transfers:
– transactions in which an institutional unit provides part
of primary income to another unit without receiving
from the latter any thing in return as a direct counterpart
 After making the current transfers, the institutional units are
left with Gross National Disposable Income (GNDI)
GNDI = GNI + Current Transfers receivable
- Current Transfers payable
28
How? - Circular Flow -
Use of Income
Use of Income
 The GNDI the available income is spent by the households,
government and NPISHs on final consumption
 The balance is Saving
Saving = GNDI- Final Consumption Expenditure
which then flow to the financial market
 Enterprises borrow from the financial market for acquisition
of assets (capital formation)
29
How? -
Valuation
Valuation of Goods and Services
 Taxes and subsidies on products bring about difference in
prices of products at different stages – production,
distribution and sale resulting in different perception of
prices for same transactions between users and producers
 Valuations recommended in 2008 SNA:
‘basic prices’, ‘producers prices’ and ‘purchasers prices’
Purchasers’ price
Less
trade and transport margins
Equals producer's prices
Less
taxes less subsidies on products
payable/receivable by their producers
Equals basic prices
30
How? -
Valuation
Market Prices
Prices paid by consumers are different from what the
producers perceive as their receipts, because:
• the taxes on products that are passed on to government are
not receipts of the producers
• trade and transport margins, which forms part of the traders
and transporters income
Thus, in the National Accounts:
• Use of products are recorded at purchasers’ prices
• Supply (output) of products are recorded at basic prices
31
How? -
Valuation
GVA at basic price
An enterprise’s earnings from production is the GVA at basic prices
= Receipts from sale of its products
minus (taxes on products –subsidies on products)
= Gross value of output at basic prices (GVObp)
minus Intermediate Consumtion (input) at purchasers prices (ICpurp)
= Gross Value Added at basic prices (GVAbp )
GVAbp = GVObp - ICpurp
Which gets distributed as
CE + OS + MI + other production (t-s)
Where, CE is compensation of employees, OS is gross operating surplus
and MI is mixed income - mix of CE and OS
32
How? -
Valuation
GDP - at Market Prices
GDP the measure of production is always at market prices
GDP at market prices is defined as:
GDPmp= ΣGVAbp + taxes less subsidies on all products (t-s)
GDPmp≡ GVObp – IC + (t-s)on products + (t-s)on imports … [2]
GDPmp represents the primary income generated from the
production undertaken within the domestic economy. Taxes on
products is a part of income. The above equation is in fact the
Production Account
33
How? -
Identities
Commodity Balance Identity
The equivalence of supply and use of goods and services lead to
the commodity balance identity:
Output at purchasers’ prices is
GVOpurp ≡ IC + PFCE + GFCE + GFCF + CII
+ acquisition less disposal of valuables
+X–M
…. …. …[1]
exports and imports are both valued at f.o.b., which excludes
taxes and subsidies on imports
Note that PFCE stands for Private Final Consumption
Expenditure, which includes final consumption expenditure of
Household and NPISHs
34
How? -
Identities
Expenditure-side Identity
GDPmp ≡ PFCE + GFCE + GFCF + CII
+ acquisition less disposal of valuables + X – M
This is the expenditure-side identity
GDPmp≡ Σ GVAbp + taxes less subsidies (t-s) on products
(including on imports)
= Σ GVAprodp + taxes less subsidies (t-s) on imports
Sum of GVA at producers price includes taxes less subsidies on
domestic products only. Thus taxes less subsidies on imports is
to be further added to get GDP at market price
35
How? -
Identities
Income-side Identity
On the income-side,
GDPmp ≡ (CE + OS + MI) generated in domestic economy
+ (t-s) on products + (t-s) on imports
… [3]
Income of the residents of the economy
≡ primary income generated within the economy (GDPmp) +
(net) primary income earned from abroad (RoW)
≡ CE generated in (paid by) the domestic economy
+ OS and MI generated in the domestic economy
+ (t-s) on products + (t-s) on imports
+ CE from RoW (net) + PI from RoW (net)
≡ Gross National Income (GNI)
…… …….[4]
36
How? -
Identities
Gross National Disposable Income
From the income, taxes on income and wealth are paid both to the
governments of the country and abroad. The Government
similarly earns such taxes both from the domestic economy as
well as abroad
Further, there are current transfers made both within country and
across the border. Thus,
Gross National Disposable Income (GNDI)
≡ GNI - net taxes on income and wealth payable to RoW
+ net current transfers receivable from RoW ….[5]
[Note that the transfers within the economy get cancelled out]
37
How? -
Identities
Gross Saving
(Gross) Saving of the domestic economy is defined as
Gross saving = GNDI minus (PFCE + GFCE)
.... ...... [6]
Using the expenditure- and income-side identities, this reduces to
Gross Saving = Gross Domestic Capital Formation
+ acquisition less disposal of valuables
+ acquisition less disposal of non-produced non-financial assets
- (net) Capital transfer receivable
+ net lending (to RoW)
.... ...... [7]
38
How?
- Accounts
Main SNA Indicators – A sum up
GDP
plus (net) primary income from RoW
= GNI
plus (net) current transfer from RoW
plus (net) taxes on income and wealth from RoW
= GNDI
minus final consumption expenditure
= Gross Saving
plus (net) capital transfer from RoW
minus gross capital formation
minus acquisition less disposal of valuables from RoW
minus CFC
= Net lending / borrowing from /to RoW
39
SNA Framework- Sequence of Accounts
Sequence of Accounts
SNA framework reflects economic processes in sequence of
accounts that
• core of accounting framework, provides overview of the economy
• structured by institutional sectors (incl. ROW) and three sub-sets of accounts
Three subsets of Accounts are:
I. Current accounts
Production Accounts
…
… …
Income Accounts
i. Generation of income account
… …
ii. Allocation of primary income account … …
iii. Secondary distribution of income account …
iv. Use of income account
… …
II. Accumulation accounts
III. Balance sheet
……
← identity [2]
← identity [3]
← identity [4]
← identity [5]
← identity [6]
← identity [7]
40
How?
- Accounts
Transaction accounts
Transaction accounts - All the accounts, except Balance
Sheets and the Other Changes in Assets Accounts, consist
of values of transactions and are linked to the basic
economic activities of
production
income generation and distribution
consumption and
capital formation
41
How?
- Accounts
General Features of Accounts
Like business accounts, each of these accounts of SNA are
organised as a sequence of T-accounts and thus have
two sides, called
– ‘resources’ and ‘uses’ for current accounts
– ‘changes in liability & net worth’ and ‘changes in
assets’ for accumulation accounts
– ‘liabilities & net worth’ and ‘assets’ for Balance sheet
Entries made in these accounts are based on the principle of
double accounting, thus permit checking consistency
The accounting structure - applies to all institutional units /
sub-sectors / sectors and total economy. However, all
transactions are not relevant for all sectors
42
How?
- Accounts
Links between Accounts
• Among the transaction accounts: The balancing item
(in the uses side) of one account is carried forward as
the first item (in the resources) of the next account
• The changes in assets and liabilities brought about by
transactions (and other changes) are reflected in the
Balance Sheet
• The sequence of accounts thus provides an integrated
view of the entire economy
43
How?
- Accounts
Links between the Accounts
Production Account
GDP
Income Accounts
savings
Opening
Balance
Sheet
Capital Account
(non-financial
assets)
Net lending/borrowing
Financial Account
(financial assets/
liabilities)
Other
Economic
flows
Closing
Balance
Sheet
44
Production
Account
Integrated Transaction Accounts of 2008 SNA – in Brief
Uses
Intermediate Consumption (P2)
Resources
Output (P1), of which:
Market output (P11);
Output for own final use (P12) and
Non-market output (P13)
(Taxes-subsidies) on products & imports (D21 – D31)
Financi
al
Accoun
t
Capital Account
Use of disposable
Income Account
Secondary
Distribution of
Income
Primary
Distribution of
Income
Generation
of income
Account
GVA / GDP (B1)
GVA / GDP (B1)
Compensation of employees (D1)
(Taxes – subsidies) on production & imports
Mixed income(B3) +Operating surplus (B2)
Mixed income (B3) +Operating surplus (B2)
Compensation of employees (D1)
(Taxes – subsidies) on production & imports (D2–D3)
Property Income (D4)
Gross National Income (B5)
Property Income (D4)
Taxes on income & wealth payable (D5)
Gross National Income (B5)
Taxes on income & wealth receivable (D5)
Social contributions & other social benefits payable (D6)
Social contributions & other social benefits receivable (D6)
Other current transfers payable (D7)
Gross Disposable income (B6)
Other current transfers receivable (D7)
Gross Disposable income (B6)
Final Consumption Expenditure (P3), of which:
Household FCE;
Government & NPISHs FCE
Adjustments for hhds’ pension funds (D8)
Adjustments for hhds’ pension funds (D8)
Gross Savings (B8)
changes in assets
changes in liability & net worth
Gross Fixed Capital Formation (P51g)
Change in Inventories (P52)
Acquisition less disposal of valuables (P53)
Gross Savings (B8)
Capital transfers receivable minus
capital transfers payable (D9)
Acquisition less disposal of non-produced non-financial assets (NP1, NP2 &
NP3)
Minus CFC (P51c)
Net lending / borrowing (B9)
Net acquisition of financial assets (F1 to F8)
Net lending / borrowing (B9)
Net lending / borrowing (B9)
Net incurrence of liabilities (F1 to F8)
45
Other Volume Change
Changes in Assets
Changes in Liabilities
and Net Worth
Addition/reduction of
Addition/reduction due
non financial (produced to other changes in
and non-produced)
volume of liabilities
and financial assets
Change in net worth
due to other changes
due to other changes
in volume of assets
in volume of assets
(holding gain/loss)
46
Revaluation Account
Changes in Assets
Changes in Liabilities and
Net Worth
Addition/reduction of non Addition/reduction due to
financial and financial
price change of financial
assets due to price
liabilities
change
Change in net worth due
to price change (holding
gain/loss)
47
Changes in Balance Sheet
Net Acquisition of
Assets
Change
in value of
non financial assets
Change
in value of
financial assets
Net Lending and
addition to Net
Worth
Change
in financial
liabilities
Change in net worth
Due to transaction
Volume change
Holding gain
48
How?
- Accounts
Balancing Items in Accounts
• Balancing item
 the sum of resources (right side) minus the sum of uses
(left side) in each of the current accounts
 shown on the left side (uses side) of the account
• Each account has a balancing item that is significant as a
macro-economic aggregate like
 gross / net domestic product (GDP / NDP)
 gross / net national income (GNI/ NNI)
 gross / net disposable income (GNDI/NNDI)
 saving
 net lending/borrowing
49
What is Estimates at Constant Prices
The value of a product or group of products, valued for the
current period using its own prices from an earlier period (which
At the micro level:
pi,0  qi,t
At the aggregate level:
Q0,t = i pi,0  qi,t
are kept constant)
the total value of a group of products in period t where each item is
revaluated at its own prices of period 0 (period 0 is kept constant for a period
of time)
Where:
pi , 0
q i ,t
Q0,t
is the price of item i in base period 0
is the quantity of item i in period t
is the total value in period t measured at the prices of
base period 0
50
What is Estimates at Constant Prices
Q0,t = i pi,0  qi,t
• Changes over time in a constant price time series reflects only
changes on quantities (and quality)
• Thus it is an aggregated volume measure
– expressed in money terms
– which thus is additive
• It is not value of a product or group of products adjusted for
changes in the general price level. Can be estimated by• Revaluation : Multiply the quantity or volume at time t by price at time 0
• Deflation : Divide the GO at current price by price relative or price index
with base 0
• Extrapolation : Multiply the value at time 0 with volume relative or
volume index
51
Thanks
52