Goods and services account THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

Overview Transactions in products Measurement of production and output Market and non-market activities Final consumption Gross capital formation Exports and imports

Goods and services What is a “good”? What is a “service”

What is a good? Goods are tangible produced objects, over which ownership can be exercised, which can be exchanged in the economy. Goods last beyond the moment of production. Goods can be described and measured through their physical characteristics

What is a service? A service is an action (a productive activity) carried out for the benefit of others, which alters the mental or physical state of the recipient or their possessions or facilitates the business or private activities of the recipient.

Unlike a good, A service is not tangible A service is delivered and consumed in the act of production – it does not last beyond the action (although the effects do) In order to record a service in an account, both the character of the service must be known, and the terms on which it is provided

Goods / services – special cases Intangible assets – e.g. recipe for Coca Cola Not tangible, but has more in common with goods than services – ownership, lasts beyond moment of “production” Intellectual property is considered as a good

Special cases Margin services – e.g retailing, banking Individual services – health, education Collective services – Police force, civil service

Basics of Goods and Services account The accounting balance of the Goods and Services account results from the match of selling and purchase value for each exchange See the next diagram for a simple picture of the flow of goods and services in the economy

Goods and Services diagram.pdf The Goods and Services account.docx

Main categories of transactions in products (P) P.1 Output; P.2 Intermediate consumption; P.3 Final consumption; P.5g Gross capital formation; P.6 Export of goods and services; P.7 Import of goods and services.

Goods and services account Shows the balance of supply and demand Both for single products, product groups, and the whole economy Domestic output is valued at basic prices To match demand at purchaser prices, net product taxes value must be added

RESOURCES USES P.1 Output P.2 Intermediate consumption D.21 Taxes on Products P.3 Final consumption D.31 Subsidies on products P.5g Gross Capital Formation P.7 Imports Note that the usual convention of having resources on the right, uses on the left of the account is reversed as we are emphasising the flow of goods and services rather than the corresponding monetary payments P.6 Exports

Final consumption (P.3, P.4) Two concepts of final consumption are used: (a) final consumption expenditure (P.3); (b) actual final consumption (P.4). Final consumption expenditure is expenditure on goods and services used by households, NPISHs and government to satisfy individual and collective needs. Actual final consumption refers to acquisition of consumption goods and services. The difference between these concepts lies in the treatment of certain goods and services financed by the government or NPISHs but supplied to households as social transfers in kind.

Final consumption (P.3, P.4) Time of recording and valuation (ESA 2010 3.111 pp): Expenditure on a good is recorded at the time of change of ownership; expenditure on a service is recorded when the delivery of the service is completed. Expenditure on goods acquired under a hire purchase or similar credit agreement, and also under a financial lease, is recorded at the time the goods are delivered even if there is no change of ownership at this point.

Final consumption (P.3, P.4) Time of recording and valuation (ESA 2010 3.111-3.113): Own-account consumption is recorded when the output retained for own final consumption is produced. The final consumption expenditure of households is recorded at purchasers' prices. This is the price the purchaser actually pays for the products at the time of the purchase.

Gross capital formation (P.5) Gross capital formation consists of: (a) gross fixed capital formation (P.51g): (1) consumption of fixed capital (P.51c); (2) net fixed capital formation (P.51n); (b) changes in inventories (P.52); (c) acquisitions minus disposals of valuables (P.53).

Gross fixed capital formation(P.51g) Acquisition less disposal of fixed assets Fixed assets: used repeatedly or continuously in the production process for more than one year Special attention: Delineation with intermediate consumption

Gross fixed capital formation(P.51g) Acquisition less disposals of fixed assets Included: tangible intangible Excluded: financial assets exceptional losses

Gross fixed capital formation(P.51g) Delineation with intermediate consumption purchase of small tools for production purposes; small repairs; the acquisition of fixed assets to be used under an operational leasing contract

Consumption of fixed capital Consumption of fixed capital (ESA 2010 3.139) is defined as the decline in value of fixed assets owned, as a result of normal wear and tear and obsolescence. The estimate of decline in value includes a provision for losses of fixed assets as a result of accidental damage which can be insured against. Consumption of fixed capital covers anticipated terminal costs, such as the decommissioning costs of nuclear power stations or oil rigs or the cleanup costs of landfill sites.

Exports and imports Exports of goods and services consist of transactions in goods and services (sales, barter, and gifts) from residents to non-residents (ESA 2010 3.158). Imports of goods and services consist of transactions in goods and services (purchases, barter, and gifts) from non-residents to residents (ESA 2010 3.159). Imports and exports of goods and services are distinguished into: (a) intra-EU deliveries; (b) imports and exports outside the EU.

Exports and imports Exports and imports of goods and services do not include: (a) establishment trade; (b) primary income flows to or from the rest of the world, such as compensation of employees, interest and revenues from direct investment; (c) the cross-border sale or purchase of financial assets or non-produced assets, such as land.

Thank you for your attention CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION