Download Produced non-financial assets

An Introduction to System of National Accounts
– Integrated Transaction Accounts
Lesson: VII Part 1
Capital and Financial Accounts
– Main entries and Data Needs
Second Intermediate-Level e-Learning Course on
2008 System of National Accounts
October - December 2013
Contents
•
•
•
•
Capital and Financial Accounts
Asset Boundary
Asset classification
Valuation of assets
Capital and Financial Accounts
Capital and Financial Accounts
Capital and Financial Accounts
• The Production and Income accounts are the current
accounts and record transactions in income and expenses.
• The Capital and Financial accounts are the
accumulation accounts and record transactions resulting
in changes in assets and liabilities.
• All changes in non-financial assets are recorded in the
capital account,
while all changes in financial assets are recorded in the
financial account.
Capital and Financial Accounts
Capital Account – link to Income Accounts
Recall that disposable income of institutional units gets
distributed as follows by uses:
Disposable income
/ GNDI
Capital Account
B.8 Net savings
33
B.12 Current external balance
Capital transfers receivable
1
23
Gross Capital formation
Capital transfers payable
-2
- 10
CFC
Changes in net worth due to
savings & capital transfers
34
19
B.9 Net lending / borrowing
Capital and Financial Accounts
Capital & Financial Accounts and KTA
The non-financial transactions of the KTA correspond to the non-financial
transaction accounts of the SNA.
• Thus, the sub-total of uses-side minus sub-total of resources side of the
KTA gives the balance of real transactions - net lending / borrowing.
• The financial account of the SNA corresponds to the financial
transactions of the KTA.
• The KTA shows: the difference between the sub-totals of non-financial
transactions is equal to the difference between the change in financial
assets and that of liabilities.
• Thus, the balance of transactions in financial assets and liabilities is by
definition equal to the balancing item of the capital account , i.e. net
lending / borrowing.
Capital and Financial Accounts
Structure of Capital Account
• The labels of the two sides of the account are ‘changes in assets’ and
‘changes in liabilities and net worth’
• Current external balance: the opening item for the RoW, which is the
balancing item corresponding to savings for the RoW.
• Changes in net worth due to savings & capital transfers is the total of
the right-hand side of the capital account, and NOT a balancing item.
Changes in assets
Total
economy
Transaction / balancing item
Changes in liability & net worth
Transaction / balancing item / total
Total
economy
Capital Account
B.8 Net savings
33
B.12 Current external balance
Capital transfers receivable
1
23
Gross Capital formation
Capital transfers payable
-2
-10
CFC
Changes in net worth due to
savings & capital transfers
34
19
B.9 Net lending / borrowing
Capital and Financial Accounts
Structure of Financial Account
• The labels of the two sides of the account are ‘changes in assets’ and
‘changes in liabilities and net worth’
• Net incurrence of liabilities less net acquisition of financial assets is
equal in value, with the opposite sign, to net lending/borrowing, the
balancing item in the capital account.
Changes in assets
Changes in liability &
net worth
Financial Account
B.9 Net lending / borrowing
Net acquisition of financial assets
Net incurrence of liabilities
Capital and Financial Accounts
Transactional Accumulation in Main
Accounts
The balance of real transactions is reflected in the
capital accounts for total economy as follows
Savings
Change in
net worth
due to
savings and
capital
transfers
Capital
formation
Net lending
to /
borrowing
from
ROW
Assets Boundary
Asset Boundary
Assets Boundary
• Economic assets are entities functioning as a store of value
– over which ownership rights are enforced by institutional units,
individually or collectively, and
– from which economic benefits may be derived by their owners by
holding them or using them over a period of time
• Economic benefits derived from:
– Use of an asset in the production process (operating surplus)
– Generation of property income by letting others use (interest,
dividends, rent)
– Store of value (including possible holding gains/losses, that could be
realized by disposing of the asset or terminating it)
Assets Boundary
Extensions of Assets Boundary
In the 2008 SNA, the following are included in the
assets boundary:
– Intellectual property products
– Military weapon systems
– Water resources (extended) [not discussed in detail]
– Cultivated biological resources (in a different
class) [not discussed in detail]
12
Assets Boundary
Intellectual property products
These consists of :
– outcome of R&D,
– mineral exploration and evaluation,
– computer software and databases, and
– entertainment, literary or artistic originals.
These represent “gathered knowledge”.
The knowledge remains an asset as long as its use can create
some form of monopoly profits for its owner.
When it is no longer protected or becomes outdated by later
developments, it ceases to be an asset.
13
Assets Boundary
Military weapon systems
• These include vehicles and other equipment such as
–
–
warships, submarines, military aircraft, tanks,
missile carriers and launchers, etc.
are treated as fixed assets.
• Most weapons for single-use such as
–
ammunition, missiles, rockets, bombs, etc.
are treated as military inventories.
(and intermediate consumption only when used.)
• Some single-use items, such as ballistic missile are treated
as fixed assets.
14
Assets Boundary
Military weapons (Contd.)
• For those treated as fixed assets, CFC should be charged
on basis of their expected service life.
• Losses of military weapon systems in wars (or other
military operations) should generally be recorded as other
changes in volume of assets (OCVA).
• As in 1993 SNA,
– structures used by military establishments that can also be used for
civilian purposes would be treated as fixed assets. In addition,
weapons systems is also considered as fixed assets in 2008 SNA;
– weapon systems used for internal security are treated as fixed
assets in 2008 SNA.
15
Assets Classification
Assets Classification
Classification of Non-financial Assets
Broad groups:
– Produced non-financial assets
• Fixed assets
• Inventories
• Valuables
– Non-produced non-financial assets
• Natural resources
• Contracts, leases and licences
• Goodwill & marketing assets
The main changes are in the fixed assets category.
Only one sub-category “Military inventories” is introduced
under “Inventories”.
17
Assets Classification
Classification of Fixed Assets
Fixed assets by type of asset
•
•
•
•
•
Dwellings
Other buildings and structures
Machinery and equipment
Weapons systems
Cultivated biological resources
– Animal resources yielding repeat products
– Tree, crop and plant resources yielding repeat products
• Costs of ownership transfer on non-produced assets
• Intellectual property products
18
Assets Classification – Fixed Assets
Classification of Fixed Assets (contd.)
Intellectual property products
•
•
•
•
•
•
•
Research and development
Mineral exploration and evaluation
Computer software and databases
Computer software
Databases
Entertainment, literary or artistic originals
Other intellectual property products
19
Assets Classification – Fixed Assets
Cost of Ownership Transfer
This consists of:
– professional charges, commissions, trade & transport costs;
delivery and installation or de-installation costs; and
terminal costs
incurred while acquiring or disposal.
• Costs of ownership transfer are treated as gross fixed
capital formation.
• CFC is charged over a length of time the owner is expected
to hold the asset.
or
CFC on this is charged in the year the cost is incurred.
[2008 SNA,10.157]
20
Assets Classification – Fixed Assets
Mineral Exploration & Evaluation
• All related expenditures are included in gross fixed capital
formation.
• These are valued NOT on the basis of the value of new
deposits discovered,
but by the value of the resources allocated to exploration
during the accounting period (for own final use).
• If done thru’ contractors, the prices charged by these
contractors.
• CFC may be calculated for such assets by using average
service lives.
21
Assets Classification – Fixed Assets
Land Improvement
•
•
•
•
Land improvements is a category of fixed assets distinct
from the non-produced land asset as it existed before the
improvement.
If separate valuation is not possible, allocated to the major
category among the two: land asset &land improvement.
The costs of ownership transfer on all land are to be
included with land improvements.
CFC ought to be charged over a suitably long period of
time. [2008 SNA, 10.160]
22
Valuation
Valuation
• Current market value – at prices of acquiring on the date.
• If non-financial assets – in addition any associated costs of
ownership transfer
• Major methods:
• Observable prices; e.g., for dwellings, land, equipment, livestock,
marketable securities, inventories
• Current value of cumulative capital formation; e.g., for major
construction, cultivated assets, mineral exploration
• Present value of future income; e.g., for intangible assets, subsoil
assets
• Insurance value; e.g., for valuables
Valuation
Net Worth
Net worth = value of assets less the value of liabilities
-
may be either positive or negative
For quasi corporations, net worth is by definition zero
-
since their equity liability is derived as a residual
End of Part-1
Lesson VII
An Introduction to System of National Accounts
– Integrated Transaction Accounts
Lesson: VI Part 2
Capital and Financial Accounts
– Main entries and Data Needs
Second Intermediate-Level e-Learning Course on
2008 System of National Accounts
June - August 2013
Contents
• Capital Account
• Financial Account
Capital Account
Capital Account
Underlying Identity – Capital Account
Net lending / borrowing ≡
Gross Savings + (net) Capital transfer receivable
minus (GFCF + CII + acquisition less disposal of
valuables)
- acquisition less disposal of non-produced nonfinancial assets
Capital Account
Accounting Structure
Changes in assets
Changes in liabilities & net worth
Capital Account
B.8g Savings (net)
Gross Fixed capital formation
Acquisition less disposal of fixed
assets
Capital transfers receivable
Capital transfers payable
Costs of ownership transfers on
non-produced assets
Changes in Inventories
Acquisition less disposal of
valuables
CFC
Acquisition less disposal of
non-produced assets
Changes in net worth due to savings
& capital transfers
B.9 net lending/borrowing
Capital Account
Gross fixed capital formation
• Acquisitions, less disposals, of (tangible) fixed assets:
• dwellings
• other buildings and structures
• land improvement
• machinery and equipment
• information, computer and telecommunications (ICT) equipment
• cultivated assets, e.g. trees and livestock
• Weapons system
• Acquisitions, less disposals, of intellectual property products:
• mineral exploration
• computer software
• entertainment, literary or artistic originals
• other intangible fixed assets
• Costs associated with the transfers of ownership of non-produced assets
(though the acquisition of these assets themselves is not included)
31
Capital Account
Consumption of fixed capital
• Represents the amount of fixed assets used up, during the
accounting period
• Should be distinguished from the depreciation allowed for tax
purposes or the depreciation shown in business accounts
• Should be estimated on the basis of the stock of fixed assets
and the probable average economic life
• The perpetual inventory method (PIM) is recommended for
the calculation of the stock of fixed assets
• The stock of fixed assets should be valued at the purchasers’
prices of the current period
32
Capital Account
Changes in inventories
• Measured by the value of the
entries into inventories
Less value of withdrawals and the value of any recurrent losses of
goods held in inventories (normal damages)
• Types:
– materials and supplies
– work-in-progress
– finished goods
– goods for resale
33
Capital Account
CII - Valuation
• Materials and supplies: at actual /estimated purchasers’ prices
• Output of finished goods: at current basic prices
• Additions to work-in-progress: in proportion to the estimated
current basic price of the finished product
• Reductions in work-in-progress as withdrawn from inventories:
valued at current basic prices of the unfinished product
• Goods for resale: at actual /estimated purchasers’ prices
• Goods for resale withdrawn: at the purchasers’ prices at which
they can be replaced at the time they are withdrawn
34
Capital Account
Valuables
• Goods that are not used primarily for production or consumption,
• do not deteriorate (physically) over time under normal conditions
and
• that are acquired and held primarily as stores of value
Types of valuables:
– precious stones and metals such as diamonds, non-monetary
gold, platinum, silver
– antiques and other art objects, such as paintings, sculptures,
etc.
– other valuables, such as jewelry fashioned out of precious
stones and metals and collectors items
35
Capital Account
Valuables - valuation
• Acquisition - at the purchasers’ prices paid for them,
– including any agents’ fees or commissions and trade margins when bought
from dealers,
• Disposals - at the prices received by sellers,
– after deducting any fees or commissions paid to agents or other
intermediaries
36
Capital Account
Non-produced non-financial assets
• Natural resources that are used in the production of goods and services,
such as
• subsoil assets, uncultivated biological resources and water
resources
• Contracts, leases and licences:
– marketable operating leases,
– permissions to use natural resources,
– permissions to undertake specific activities,
– entitlement to future goods and services on an exclusive basis,
• Goodwill and marketing assets:
– Goodwill: The premium offered (or might be offered) above the net
value of the assets and liabilities.
– Marketing assets: Items like brand names, mastheads, trademarks,
logos and domain names
37
Capital Account
Capital Transfers
• Current vs. capital transfers
– Current transfers increase/reduce the saving
– Capital transfers do not affect the saving
• Capital taxes
– Capital levies
– Taxes on capital transfers
• Investment grants: capital transfers in cash or in kind made
by governments or by RoW for acquiring fixed assets
• Other capital transfers
38
Capital Account
Accounting Structure – a numerical example
A mobile phone service provider company makes the following
expenditures during an accounting period.
Purchase of land
of which, payment to real estate broker
5.0
1.5
Expenditure made on land improvement
0.5
Expenditure on construction of a building
33.5
payment to engineering consultant
payment to contracted builder
2.0
31.5
Expenditure on own-account R&D
1.5
Payment for license to use radio spectra
5.0
Capital transfer received
7.0
Capital transfer paid
5.0
Assuming that its CII as 8, CFC as 20 and that its net disposable income as
34, prepare the capital account for the company in the next slide.
Capital Account
Accounting Structure [First try yourself]
Changes in assets
Changes in liabilities & net worth
Capital Account
B.8g Savings (net)
?40
Gross Fixed capital formation
38.5
?
Acquisition less disposal of fixed
assets
1.5
?
Costs of ownership transfers on
non-produced assets
8.0
?
Changes in Inventories
0
-20.0
?
?
5.0
?34
Capital transfers receivable
?
7
Capital transfers payable
? -5
Acquisition less disposal of
valuables
CFC
Acquisition less disposal of
non-produced assets
Changes in net worth due to savings
& capital transfers
?
3.0
B.9 net lending/borrowing
?36
Financial Account
and
Classification of Financial Assets &
Liabilities
Financial Account
Financial Account
• Entries are changes in the financial assets and liabilities and
are made by type of financial instrument,
• The classification of assets and liabilities used in the financial
account is identical to that used in the balance sheets
• Left side of the account records acquisitions less disposals of
financial assets, while the right side records incurrence of
liabilities less their repayment
• Net incurrence of liabilities less net acquisition of financial
assets is equal in value, with the opposite sign, to net
lending/borrowing, the balancing item in the capital account.
42
Financial Account
Financial Transactions
These are exchange of financial assets and liabilities:
• recorded only in the financial account
• change the distribution of the portfolio of financial assets
and liabilities
• may change the totals of both financial assets and
liabilities,
• but they do not change the difference between total
financial assets and liabilities.
43
Financial Account
Valuation of Financial Transaction
•
The actual payment in financial transaction almost always
represent more than one transaction in the SNA.
•
For example, payments of interest on loans and deposits
involve both interest and a service fee.
•
Recording of these transaction in the SNA require
partitioning the actual payments.
•
In some cases more than one adjustment may be needed
to identify and re-route both the service charge and
interest associated with the asset.
44
Financial Account
Counterparts of financial transactions
• Most transactions involving the change of ownership of
– a good or non-financial asset, or
– provision of a service or labour,
entail a counterpart entry in the financial account.
• In the SNA, many transactions take place entirely within the
financial account. Examples: when
– one financial asset is exchanged for another or
– a liability is repaid with an asset,
existing financial assets are exchanged for other financial assets
• The net lending/net borrowing changes when the counterpart
transaction of a financial transaction is not a financial transaction.
45
Classification of Financial Assets & Liabilities
Financial Asset Classification
The broad categories are:
1. Monetary gold and SDRs
2. Currency and deposits
3. Debt securities
4. Loans
5. Equity and investment fund shares
6. Insurance, pension and standardized guarantee schemes
7. Financial derivatives and employee stock options
8. Other accounts receivable/payable.
46
Classification of Financial Assets & Liabilities
Monetary gold
Monetary gold: gold to which the monetary authorities
have title and is held as a reserve asset. It comprises
– gold bullion (included in allocated gold accounts) and
– unallocated gold accounts with non-residents that give
title to claim the delivery of gold.
Gold bullion can be a financial asset only for the central
bank or central government.
The unallocated gold accounts are treated as financial assets
and liabilities
47
Classification of Financial Assets & Liabilities
Special Drawing Rights (SDR)
Special Drawing Rights (SDRs): international reserve assets
created by the IMF
These are allocated to its members to supplement existing
reserve assets.
• Creation of SDR: allocations of SDRs
• Extinguished SDR: cancellations of SDRs
• These are recorded at the gross amount in the financial
accounts of
– the monetary authority of a member country and
– the counterpart in that of the RoW.
•
•
SDRs are held exclusively by official holders.
SDRs are assets with matching liabilities.
48
Classification of Financial Assets & Liabilities
Currency and deposits
This category consists of:
•
Currency: Currency consists of notes and coins - issued or
authorized by the central bank or government.
•
Transferable deposits: Further classified in 2008 SNA as
– Inter-bank positions: deposits and liabilities of deposittaking corporation with the Central Bank (in most cases)
– Other transferable deposits: one party or both parties to
the is not a bank.
•
Other deposits: Other than transferable deposits.
49
Classification of Financial Assets & Liabilities
Currency and deposits (Contd.)
Other deposits: This includes deposits like
•
savings deposits , fixed-term deposits and nonnegotiable
certificates of deposit.
•
shares issued by savings and loan associations, building
societies, credit unions
•
Claims (non loans) on the IMF that are components of
international reserves
•
The unallocated gold account: deposit denominated in gold
50
Classification of Financial Assets & Liabilities
Debt securities
These are negotiable instruments serving as evidence of a debt.
This category was called “Securities other than shares” in the
1993 SNA
They include:
– bills,
– bonds,
– negotiable certificates of deposit,
– commercial paper,
– debentures,
– asset backed securities, and similar instruments normally
traded in the financial markets.
51
Classification of Financial Assets & Liabilities
Loans
Loans are financial assets that are:
a. created when a creditor lends funds directly to a debtor,
and
b. evidenced by documents that are not negotiable.
52
Classification of Financial Assets & Liabilities
Equity and investment fund shares
Called “Shares & other securities” in the 1993 SNA.
Equity: claims on the residual value of a corporation or quasicorporation after the claims of all creditors have been met.
Equities are subdivided into:
a. listed shares;
b. unlisted shares; and
c. other equity.
53
Classification of Financial Assets & Liabilities
Financial derivatives
A component of the category ‘Financial derivatives &
employee stock options’ newly introduced in the 2008 SNA.
54
End of
Lesson VII
Thanks