short overview of institutional sectors accounts

African Centre for Statistics

United Nations Economic Commission for AfricaUnited Nations Economic Commission for Africa

Short overview of institutional sectors accounts

Clementina Ivan-UngureanuExpert Group Meeting on the Use of Administrative Data in National

Accounts23-27 June 2014Kigali, Rwanda

EN/ADM/2014/Pres/09


SNA

• The SNA is a system of macroeconomic accounts based on a set of concepts, definitions, classifications and registration rules. It provides a framework within which economic data can be collected and analyzed to assist decision-makers and provide guidance on economic policies.


SNA answers

• Who takes action in the economy?

• What do they do?

• Why do they take action?

• How are the actions known?


QUESTION

EXPLANATION

THE 2008 SNA CONCEPTS

Who?

Refers to the economic agents (institutions, firms, individuals) that perform activities in the economy.

Institutional units Institutional sectors Total economy and the rest of the world

What?

Refers to the transactions and other flows and stocks, which are the objects of the economy.

Transactions and other flows Assets and liabilities Products and producing units

Why?

Refers to the reason why an economic agent takes an action

Classifications by purposes of expenditure

How?

Refers to the recording of who, what and why.

Accounting rules: – recording – time of recording – valuation – consolidation and netting


WHO? Institutional units and sectors - Classification by industry, called ‘functional

classification’ represents the production process and the flows experienced by goods and services produced in the economy.

- Classification by institutional sector where the units are defined according to their economic behavior, economic function and economic objectives.


WHO? Institutional units and sectors

Definition:

An institutional unit is an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities.


WHO? Institutional units and sectors

Characteristics- It is entitled to own goods or assets in its own right; it is therefore

able to exchange ownership of goods or assets in transactions with other institutional units;

- It is able to take economic decisions and engage in economic activities for which it is itself held directly responsible and accountable at law;

- It is able to incur liabilities on its own behalf, to take on other obligations or future commitments and to enter into contracts;

- It has a complete set of accounts, including a balance sheet of assets and liabilities, or it would be possible and meaningful, from an economic viewpoint, to compile a complete set of accounts if required


WHO? Types of institutional units

There are 2 main types of institutional units:

1. Persons or a household

A household is defined as a group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food.


WHO? Types of institutional units

2. Legal or social entitiesA legal or social entity is one whose existence is

recognized by law or society independently of the persons or other entities that may own or control it.


WHO? : Categories of units

Includes:• Corporations (financial and non-financial)= covers

legally constituted corporations and also cooperatives, limited liability partnerships, notional resident units and quasi-corporations;

• Non-profit institutions (NPIs) =legal or social entities created for the purpose of producing goods and services but whose status does not permit them to be a source of income, profit or other financial gain for the units that establish, control or finance them.



• Government units = Government units are unique kinds of legal entities established by political processes that have legislative, judicial or executive authority over other institutional units within a given area.



Classified in institutional sectors based on:- Type of producers- The principal activity and function.


Sector Type of producer Principal activity and function Non-financial corporations

Market producer

Production of market goods and non financial services

Financial corporations

Market producer Financial intermediation including insurance Auxiliary financial activities

General government

Public other non market producer

Production and supply of other non market output for collective and individual consumption and carrying out transactions intended to redistribute national income and wealth

Households — as consumers — as entrepreneurs

Market producer or private producer for own final use

Production of market output and output for own final use

Non-profit institutions serving households

Private other non market producer

Production and supply of other non market output for individual consumption


Who ?: Institutional sectors

The SNA includes five main institutional sectors:• Non-financial corporations; • Financial corporations; • General government; • Households; • Non-profit institutions serving households (NPISHs).


Who ?: Institutional sectors-cont

• Each sector can be divided in subsectors:

S11 Non-financial corporations

- Public non-financial corporations

-National private non-financial corporations

- Foreign controlled non-financial corporations



S12 Financial corporations:- Central bank – S121- Deposit-taken corporations – S122- Money market funds – S123- Non-MMF investment funds – S124- Other financial intermediaries , except insurance corporation

and pension funds- S125- Financial auxiliaries – S126- Captive financial institutions and money lenders –S127- Insurance corporations – S128- Pension funds – S129



S13 General Government

- Central government – S1311

- State government – S1312

- Local government – S1313

- General government social security –S 1314



S14 Households - Employers –S 141- Own account workers – S142- Employees – S 143- Receipts of property and transfer income- S144

S15 Non-profit institutions serving households

S2 Rest of the world


WHO? : Institutional sectors

The allocation of a unit to an institutional sector is based on the following questions:

• Is the unit resident? • Is it a household, institutional household (ex. a

hospital) or a legal unit?• Is the unit a non-market or market producer?• Is the unit controlled by the government?• Does the unit provide financial services?• Is the unit foreign-controlled?


Is the unit resident? No Yes Is the unit a household? Yes No Is the unit a non-market producer? Yes No Is the unit controlled Does the unit produce by government? financial services? No Yes No Yes Is the unit controlled Is the unit controlled by general government? by general government? Yes No Yes No

R o W

Households

NPISH

General government

Non-financial corporations Financial

corporations

Public non-financial corporations

Private non-financial corporations

Private financial corporations

Public financial corporations


Accounts

• The sequence of accounts describes how income is generated, distributed, redistributed and used for consumption or the acquisition of assets and when assets are disposed of, or a liability is incurred, in order to acquire other assets or undertake more consumption than current income permits.


Generation of income account Operating surplus/mixed income

Allocation of primary income account Balance of primary incomes

Secondary distribution of income account Disposable income

Redistribution of income in kind account Adjusted disposable income

The use of adjusted disposable income account saving

The use of disposable income account saving

Opening balance sheet Net worth

Capital account Net lending (+)/borrowing (-)

Other changes in volume account Changes in volume of assets

Re-valuation account Nominal holding gains and losses

Closing balance sheet Net worth

Financial account Net lending (+)/borrowing (-)

Production account Value added


Accounts

• Value Added = Output - Intermediate consumption

Uses Resources

P1 Output 3604

P2 Intermediate Consumption 1883

K1 Consumption of Fixed Capital 222

B1n Value added 1499

Total 3604 Total 3604


Accounts• Production account with the rest of the world

Uses Resources

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Production Account

P7

Imports of goods and services 499 499

540 540 P6Exports of goods and services

P1 Output 302 348 1000 1954 3604 3604

1883 1883 1029 500 222 132 P2Intermediate Consumption

222 222 100 69 27 26 K1Consumption of Fixed Capital

1499 1499 825 431 99 144 B1nValue added, net

-41 -41 B11

External balance of goods and

4103 499 3604 2454 500 348 302 Total 302 348 1000 1954 3604 499 4103


Accounts

• Identities:

Account totals on the uses side = Account totals on the resources side


Accounts

• Generation of income account

• After the production account, the next account in the sequence shows how gross value added is distributed to labor, capital, government and, where necessary, flows to and from ROW. This distribution process is called the primary distribution of income and includes:

- Generation of income account

- Allocation of primary income account


Generation of income account

Uses Resources

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Generation of income account

B1n Value added, net 144 99 431 825 1499 1499

1150 1150 730 300 98 22 D1Compensation of Employees

94 94 72 20 1 1 D29Other Taxes on Production

-36 -36 -35 0 0 -1 D39Other Subsidies on Production

291 291 58 111 0 122 B2n

Operating Surplus / Mixed Income, net

1499 0 1499 825 431 99 144 Total 144 99 431 825 1499 0 1499


Accounts• The allocation of primary income account shows the

remaining part of the primary distribution of income. • Contains:- Resources side: operating surplus / mixed income and other

forms of income on the resources side: compensation of employees, net taxes and incomes received from sources other than production (property income)

- Uses side: property income paid

The balance for this account is called primary income.


Allocation of primary income account

• Property income: income receivable by the owner of a financial asset or a tangible non-produced asset in return for providing funds to or putting the tangible non-produced asset at the disposal of, another institutional unit; it consists of:– Interest;– Distributed income of corporations (i.e. dividends);– Reinvested earnings on direct foreign investment;– Property income attributed to insurance policy holders;– Rent.



Uses Resources

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B11External balance of goods and services -41 -41

B2nOperating Surplus / Mixed Income, net 122 0 111 58 291 291

6 6 D1Compensation of Employees 1154 1154 2 1156

D2Taxes on production and imports 235 235 235

D21 Taxes on products 141 141 141

D29 Other Taxes on Production 94 94 94

D3 Subsidies -44 -44 -44

D31 Subsidies on products -8 -8 -8

D39 Other Subsidies on Production -36 -36 -36

435 44 391 272 30 42 47 D4 Property income 130 22 15 230 397 38 435

1642 1642 16 96 171 1359 B5n Primary income, net

-51 -51Current external balance

2032 -1 2033 288 126 213 1406 Total 1406 213 126 288 2033 -1 2032


Secondary distribution of income account

The secondary distribution of income account follows the conversion of primary income into disposable income, which is the income available for final consumption.



Includes:

-Current taxes on income, wealth;

- Net social contributions;

-Social benefits other than social transfers in kind

- Other current transfers; these consist of the following:

– Net premiums and claims for non-life insurance;

– Current transfers between different kinds of government units;

– Current transfers such as those between different households



Uses Resources

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Secondary distribution of income accountCurrent external balance -51 -51

B5n Primary income, net 1359 171 96 16 1642 1642

213 1 212 29 5 178 D5Current taxes on income, wealth, etc. 213 213 213

333 333 333 D61Net social contributions 4 50 9 270 333 333

384 384 167 100 112 5 D62

Social benefits other than social transfers in kind 384 384 384

299 16 283 69 5 136 73 D7Other current transfers 72 104 10 58 244 55 299

1604 1604 79 5 290 1230 B6nDisposable income, net

-13 -13Current external balance

2820 4 2816 344 115 538 1819 Total 1819 538 115 344 2816 4 2820


Accounts

• Use of disposable income account shows how the available disposable income is used up, mainly on final consumption expenditures.

• These include expenditures by households and by government.


Use of disposable income account

Uses Resources

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Use of disposable income accountCurrent external balance -13 -13

B6nDisposable income, net 1230 290 5 79 1604 1604

1299 1299 352 1047 P3Final consumption expenditure

11 11 9 2 D8

Adjustment for the change in pension entitlements 11 11 11

205 205 70 3 -62 194 B8n Saving, net

-13 -13 B12Current external balance

1602 -13 1615 79 5 290 1241 Total 1241 290 5 79 1615 -13 1602


Accounts

• Transactions in non-financial assets are recorded the capital account, the first accumulation account.

• The capital account records transactions linked to:

- Acquisitions of non-financial assets;

- Capital transfers involving the redistribution of wealth.


Capital transfers• Capital transfers are transactions, either in cash

or in kind, in which the ownership of an asset (other than cash and inventories) is transferred from one institutional unit to another, or in which cash is transferred to enable the recipient to acquire another asset, or in which the funds realized by the disposal of another asset are transferred. There can be capital transfers to and from ROW.


Capital transfers

• Capital transfers can be divided into:

- Capital taxes;

- Investment grants;

- Other capital transfers.


Capital account

Changes in assets Changes in liabilities and net worth

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Capital account

B12Current external balance -13 -13

B8n Saving, net 194 -62 3 70 205 205

414 414 216 100 38 60 P5gGross capital formation

-222 -222 -109 -60 -27 -26 K1Consumption fixed capital

0 0 -7 2 5 K2

Acquisitions less disposals of non-produced assets

D9Capital transfers, receivable 23 6 0 33 62 4

D9Capital transfers, payable -8 -34 0 -23 -65 -1 -66

B10.1

Changes in net worth due to saving and capital transfers 209 -90 3 80 202 -10 192

0 -10 10 -20 -37 -103 170 B9Net lending(+)/net borrowing(-)

192 -10 202 80 3 -90 209 Total


Macroeconomic Aggregates

• Gross Domestic Product (GDP)

• Gross National Income (GNI);

• Gross National Disposable Income;

• Gross Saving.


GDP- production approach

B1n Value added, net 1499

K1Consumption of Fixed Capital 222

B1g Value added, gross 1721

D21 Taxes on products 141

D31 Subsidies on products -8

Gross Domestic Product 1854


GDP- expenditure approach

P3Final consumption expenditure 1399

P5g Gross capital formation 414

P6Exports of goods and services 540

P7Imports of goods and services -499



GDP- income approach

D1 Compensation of Employees 1150

D29 Other Taxes on Production 94

D39 Other Subsidies on Production -36

B2nOperating Surplus / Mixed Income, net 291

B1n Value added, net 1499

K1 Consumption of Fixed Capital 222

B1g Value added, gross 1721

D21 Taxes on products 141

D31 Subsidies on products -8



GNI GNI includes products and services produced by

enterprises owned by a country's citizens.

• GNI adjusts GDP for two transactions with ROW, coming from the allocation of primary income account:

- Compensation of employees payable to / receivable from ROW;

- Property income payable to / receivable from ROW.


GNI


D1Compensation of Employees from ROW -2

D1Compensation of Employees to ROW 6

D4 Property income from ROW -38

D4Property income, payable to ROW 44

Gross National Income 1864


Gross National Disposable Income

• Gross National Disposable Income is based on transactions from the secondary distribution of income account. The flows with ROW are:

- Current taxes on income, wealth, etc.;

- Current transfers receivable / payable.


Gross National Disposable Income

Gross National Income 1864

D5Current taxes on income, wealth, etc. 1

D7Current transfers receivable -55

D7 Current transfers payable 16

Gross National Disposable Income 1826