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Update of the 1993 SNA: The Treatment of Units Peter van de Ven Two related problems – Units conducting ancillary activities – Holding companies, special purpose entities (SPEs), trusts, etc. – Eventually: Non-resident unincorporated enterprises Ancillary activities: definition Ancillary activity = Supporting activity undertaken within an enterprise in order to create the conditions within which the principal or secondary activities can be carried out Examples: – Purchasing of materials and equipment – Hiring, training, managing and paying employees – Storing materials or equipment – Transport – Sales promotion – Cleaning and maintenance of buildings May be done in separate establishment of corporation Ancillary activities: present treatment and related problems SNA 1993: No separate establishment (or corporation) => costs to be allocated to the establishments being served Problems related to present treatment: – Contribution and role of “ancillary activities” – Decomposition of GDP by economic activity – Compilation of regional GDP Ancillary activities: proposed treatment – No exception for ancillary activities – Units undertaking ancillary activities should be recognised as separate establishments (or corporations), if they satisfy general criteria for an establishment (or corporation) – Valuation of output: sum of costs, including costs of capital used – Use of output: according to indicators such as output, value added, or employment Holdings, SPEs, trusts, etc.: definition – Units engaged in activities serving other units within an enterprise group (or within government): – Control and direct subsidiaries – Asset management – Corporate treasury – Securitisation – Related to issue of ancillary activities – Often little or no employment, or physical presence, often non-resident units Holdings, SPEs, trusts, etc.: present treatment and related problems SNA 1993: – In most cases no explicit guidelines – Holdings: separate institutional units, to be classified according to subsidiaries – SPE’s, trusts, etc.: not always clear => ancillary corporations? => consolidation with the parent company? – What about resident units owned by nonresident units? Holdings, SPEs, trusts, etc.: proposed treatment – Holdings: separate institutional units, to be classified as other financial intermediaries (not according to subsidiaries) – SPEs: – Non-resident SPEs: always separate (notional) institutional units – Resident SPEs: not institutional unit, unless they satisfy criteria – Classification according activity of SPE – Trusts: separate institutional units, to be classified as other financial intermediaries Holdings, SPEs, trusts, etc.: proposed treatment (continued) – Non-resident SPEs controlled by government: treatment should reflect economic reality (i.c. fiscal activities of government) appropriately – Restructuring agencies of government: some specific recommendations; see relevant paper Non-resident unincorporated enterprises When notional resident unit – BPM: Significant production, long period of time, physical presence, full set of accounts, pay income tax, … – SNA 1993: Always notional resident unit – Physical presence not needed (e.g. financial intermediation) – Full set of accounts too restrictive – Subject to, not paying, income tax – Indications, not guidelines