Overview of System of National Accounts

(SNA)

II. Introduction to SNA

UN Statistical Institute for Asia and the Pacific

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

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 R&D Own account software development

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

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 ..

Definition of Imports and Exports of Gs & Ss

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.

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..)

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 – CFCGDP = NDP + CFC

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

GNDI

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)

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

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

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)

Gross savings

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)

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 (-)

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

National Income (NI ) ...contd.

GNI -CFC

= NNI (Net National Income)Per capita income

= NNI divided by mid year population

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.

Definition of an asset (cont)

(a) Using assets such as machinery in production

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

(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.

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

Asset boundary

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

Value represents the market’s view of the total of the benefits embodied in the asset.

All assets can be represented by a monetary value

Types of assets

It exists, like land and sub-soil assets; or Appears over time and is valued/recognised

when there is an equivalent market price

Non-produced

Produced

Enter via production or imports Leave via being exhausted, sold to residents for

use other than as asset, sold to non-residents

May leave via depletion or impairment

ASSETS BROAD CLASSIFICATION

Assets

Financial

Non-Financial

Produced

Non-Produced

Produced

Financial assets

Fixed

Non-produced

Inventories Valuables

Intangible Tangible

- Patented entities

- Leases and contracts

- Purchased goodwill

- Mineral exploration- Computer software- Entertainment, literary or artistic originals- Other

- Buildings- Structures- Machinery

& Equipment

Tangible Intangible

Assets in the 1993 SNA

Non-financial assets

- Land- Subsoil assets- Non-cult biological

resources- Water resources

Produced

Assets in the SNA update

Financial assets

Fixed

Non-produced

Inventories ValuablesNatural

resources

Contracts, leases

and licenses

Goodwill and

marketing assets

-R&D - Mineral exploration

and evaluation - Computer software

and databases- Entertainment, literary or artistic originals - Other IP products

BuildingsStructuresMachinery & Equipment

Non-financial assets

- Natural land- Mineral dep & energy reserves- Non-cult biological resources- Water resources- Other natural resources

NATIONAL ACCOUNTS

All transactions within a time period

Between the economic agents

Constituting the national economy

NATIONAL ACCOUNTS (Contd.)

Sequence of accounts

P

Production

Primary Distribution of Income

Secondary Distribution of Income

Use of Income

Capital

Changes in Balance Sheet

Financial

NATIONAL ACCOUNTS

All transactions within a time period

Between the economic agents

Constituting the national economy

NATIONAL ACCOUNTS (Contd.)

Economic Agents

P Households

Non-Profit InstitutionsServing Households

ROW

General Government

Non-FinancialCorporations

FinancialCorporations

NATIONAL ACCOUNTS

All transactions within a time period

Between the economic agents

Constituting the national economy

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)

Goods and services account

Characteristics:Brings together total supply and uses of

Gs & SsIt is balanced by itselfResources recorded on the right side and

uses on the left side

Supply and Use tables

Supply and use

EquationsSupply = Use by product

Total use = Intermediate consumption + Final consumption +

Capital formation + Exports

Total supply

= Output + imports

Supply table

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

Use table

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

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

Source data Annual establishment/enterprise surveys and profit

and loss/balance sheets of enterprises

Administrative data

Business registers, employment, production, volume and price information, etc.

Balance of payments on exports and imports of services

Custom data on exports and imports of goods

Household budget surveys

Government revenue and expenditure budgets

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 93:12)