ESA95 Basic principles

ESA95 – Basic principles Units Flows and stocks Accounting rules

ESA95 – Basic-principles - Units Units Institutional units Local kind of activity units (establishments) Resident units and total economy

ESA95 – Basic-principles - Units Institutional units can: Make economic decisions Own goods and assets Incure liabilities Engage in economic activities Types of institutional units Non-financial corporations Financial corporations General government Households NPISH

ESA95 – Basic-principles - Units Local kind-of-activity units (Local KAU) (establishments) Institutional units in their capacity as producers broken down by activity (industry) A Local KAU belongs to one and only one institutional unit

ESA95 – Basic-principles - Units Resident units are units that have a (predominant) center of economic interest in the economic territory. Center of economic interest is a location on, or from, which it intends to engage in activities for at least one year.

ESA95 – Basic-principles - Units Resident units (Continued) In relation to production activities Part of a resident institutional unit might have center of economic interest in ROW, and this should not be included Part of a non-resident institutional unit might have center of economic interest in the economy, and this should be included

ESA95 – Basic-principles - Units Resident units (Continued) In relation to consumption activities, households are deemed to be resident. They include Border workers who work abroad Seasonal workers who work abroad Tourists etc. who travel abroad Locally recruited workers on foreign embassies Official representatives on embassies abroad Staff on international organisations

ESA95 – Basic-principles – Flows and stocks Flows Transactions Other flows –Other change in volume of assets –Revaluations Stocks Assets and Liabilities

ESA95 – Basic-principles – Flows and stocks Flows – Transactions: Transactions in products Distributive transactions –Compensation of employees –Taxes and subsidies on production –Property income –Transfers Financial transactions Other transactions –Consumption of fixed capital –Transactions in non-produced non-financial assets

ESA95 – Basic-principles – Flows and stocks Transactions in products: Transaction categories: Output P.1 Intermediate consumption P.2 Final consumption expenditureP.3 Actual final consumption P.4 Gross capital formation P.5 Exports of goods and services P.6 Imports of goods and services P.7

ESA95 – Basic-principles – Flows and stocks Output: a)The production of products that are supplied to other units; b)The own-account production of all goods that are retained by their producers for their own final use. c)The own-account production of dwelling services by owner-occupiers; d)Domestic and personal services produced by employing paid domestic staff; e)Volunteer activities that result in goods.

ESA95 – Basic-principles – Flows and stocks Output: All output are included in NA irrespective of being illegal or not- registered at tax, social security, statistical or other public authorities.

ESA95 – Basic-principles – Flows and stocks b) The own-account production of all goods that are retained by their producers for their own final use. Examples of own-account production for gross fixed capital formation are –construction, –the development of software and –mineral exploration.

ESA95 – Basic-principles – Flows and stocks b)The own-account production of all goods that are retained by their producers for their own final use. Own-account production of goods by households pertains in general to: (1)own-account construction of dwellings; (2)the production and storage of agricultural products; (3)the processing of agricultural products, like the production of flour by milling, the preservation of fruit by drying and bottling; the production of dairy products like butter and cheese and the production of beer, wine and spirits; (4)the production of other primary products, like mining salt, cutting peat and carrying water; (5)other kinds of processing, like weaving cloth, the production of pottery and making furniture.

ESA95 – Basic-principles – Flows and stocks b)The own-account production of all goods that are retained by their producers for their own final use. In the ESA, the only own-account production of goods by households generally included, is the construction of dwellings, and the production, storage and processing of agricultural products. Other own-account production of goods by households is recorded when this type of production is significant, i.e. when it is quantitatively important in relation to the total supply of that good in a country. Production excludes the production of domestic and personal services that are produced and consumed within the same household.

ESA95 – Basic-principles – Accounting rules Accounting rules Double entry/Quadruple entry Valuation

ESA95 – Basic-principles – Accounting rules Double entry/Quadruple entry For a unit or sector, national accounting is based on the principle of double entry. Each transaction shall be recorded twice, once as a resource (or a change in liabilities) and once as a use (or a change in assets). National accounts — with all units and all sectors — shall be based on a principle of quadruple entry, since most transactions involve two institutional units. Each transaction shall be recorded twice by the two transactors involved. Transactions within a single unit (such as the consumption of output by the same unit that produced it) shall require only two entries.

ESA95 – Basic-principles – Accounting rules Valuation: Flows and stocks shall be measured according to their exchange value, i.e. the value at which flows and stocks are in fact, or could be, exchanged for cash. Market prices are thus the ESA's reference for valuation.

ESA95 – Basic-principles – Accounting rules Valuation: Output is valued at basic prices The basic price is the price receivable by the producers from the purchaser for a unit of a good or service produced as output minus any tax (i.e. taxes on products) payable on that unit as a consequence of its production or sale, plus any subsidy (i.e. subsidies on products). receivable on that unit as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer. It also excludes holding gains and losses on financial and non-financial assets.

ESA95 – Basic-principles – Accounting rules Valuation: Output for own final use is valued at the basic prices of similar products sold on the market. This generates net operating surplus or mixed income for such output. An example is services of owner-occupied dwellings generating net operating surplus. If basic prices of similar products are not available output for own final use should be valued at the costs of production plus a mark-up (except for non-market producers) for net operating surplus or mixed income