Item 6: Gross Capital Formation ESTP course on National Accounts ESA 2010 Luxembourg, 15 May - 19 May 2017 Eurostat

Assets Three features: Types Classification of assets - Table 7.1 Store of value Can be owned Can report economic benefit for holding them or using them over a period of time Types Financial vs. Non-financial Classification of assets - Table 7.1

P5: Gross Capital Formation P51: Gross fixed capital formation P52: Changes in inventories P53: Acquisitions less disposals of valuables

P51: Gross fixed capital formation (GFCF) = acquisitions less disposals of fixed assets + certain additions to the value of non-produced assets fixed assets - produced assets used repeatedly or continuously in production for more than 1 year NB: Gross means gross of consumption of fixed capital (i.e. depreciation) (P.51g = P.51c + P.51n)

Gross fixed capital formation Can have positive and negative value Includes: New or existing fixed assets purchased/bartered/transferred Own account produced assets Major improvements Growth of natural assets used repeatedly in production Existing assets sold/bartered/transferred

GFCF types Dwellings Other buildings and structures, including major improvements to land Machinery and equipment Weapons systems Cultivated biological resources Transfer costs (notaries, fees, taxes) R&D Mineral exploration Computer software and databases Entertainment, literary and artistic originals

GFCF excludes transactions included in intermediate consumption Purchases of small tools for production purposes Ordinary maintenance and repair Acquisition of fixed assets to be used under an operational leasing contract transactions recorded as changes in inventories Animals raised for slaughter Trees grown for timber Machinery and equipment acquired by households for purposes of final consumption Holding gains and losses Catastrophic losses

Time of recording and valuation GFCF recorded when change of ownership takes place valued at purchasers’ prices including installation and transfer costs Own-account GFCF recorded when produced, valued at basic prices Disposals of assets valued at basic prices after deducting transfer costs

ESA 2010 Classification of GFCF P.51g Gross fixed capital formation P.511 Acquisitions less disposals of fixed assets P.5111 Acquisitions of new fixed assets P.5112 Acquisitions of existing fixed assets P.5113 Disposals of existing fixed assets P.512 Costs of ownership transfer on non-produced assets P.51c Consumption of fixed capital (-) P.51c1 Consumption of fixed capital on gross operating surplus (-) P.51c2 Consumption of fixed capital on gross mixed income (-) P.51n Net fixed capital formation

P52: Changes in inventories = entries in inventories - withdrawals from inventories recurrent losses recurrent losses occur due to: Physical deterioration Accidental damage Pilfering

Four types of inventories Materials and supplies (input in production) Work-in-progress Finished goods Goods for resale

Time of recording and valuation General rule: consistent with other transactions: Materials and supplies: same as intermediate consumption Work-in-progress: in proportion to output Finished goods: treated as ‘sold’ to inventories Goods for resale: same as in calculation of trade margin (replacement principle)

Taking account of inventories Output = Sales + Δ Inventories of finished products Intermediate consumption = Purchases - Δ Inventories of materials and supplies Take care of holding gains and losses!

P53: Acquisitions less disposals of valuables Valuables = goods that serve as stores of value, not for use in production process, do not deteriorate (physically) over time Types: Precious stones and metals Antiques and art Jewellery and collectors’ items

Valuation Production – basic prices Acquisitions - purchaser’s price, including fees, commissions and trade margins Disposals – prices received, excluding fees and commissions

Acquisitions less disposals of valuables Example transactions: Non-monetary precious metals bought/sold by central banks or financial intermediaries Acquisitions/disposals by enterprises not part of their production process Acquisitions/disposals by households Conventions: include acquisitions or disposals by jewellers, art dealers and museums