From 1993 SNA to 1993 SNA Rev.1 – A progress report on the update of the 1993 SNA UN Statistics Division Economic Statistics

Important dates In 1993 the Statistical Commission during its 27 th session unanimously endorsed the System of National Accounts 1993 (1993 SNA). In the same year the United Nations Economic and Social Council in its resolution 1993/5 recommended that member States consider using the 1993 SNA as the international standard for compilation of their national accounts statistics and in the international reporting of comparable national accounting data.

Important dates – 1999 In 1999 the Statistical Commission during its 30 th session endorsed the proposal of an mechanism for continuous updating of the 1993 SNA in order to maintain the systems relevance in an fast evolving world economy and to resolve ambiguities that may appear during its implementation. The updating mechanism includes four types: editorial amendment, clarification beyond dispute, interpretation and change. For a detailed explanation and the procedure of their implementation refer to the following website:

Important dates In 2002 the Statistical Commission during its 33 th session endorsed the proposal of ISWGNA to create an advisory expert group (AEG). It recommended that the groups primary task should be to advise ISWGNA on methodological issues and to assist ISWGNA in achieving resolutions on outstanding issues as well as issues arising in the future.

10 year milestone After 10 years of its adoption the 1993 SNA is still: Robust framework Broadly appreciated Resilient in the changing environment Not fully implemented in all countries

…but Changes in the economic environment require constant updates to the 1993 SNA in order to maintain relevance Existing incremental updating process has several shortcomings To slow To partial Does not ensure consistency and integrity of the system as a whole

Important dates Therefore in 2003 the Statistical Commission during its 34 th session endorsed a consolidated review of the 1993 SNA emphasizing that No fundamental or comprehensive changes to the system take place as they would impede the process of its implementation Internal consistency and consistency with related handbooks, such as Balance of Payments Manual, Government Finance Statistics and Monetary and Financial Statistics Manual is ensured Update should focus on a number of specific issues, but list of issues should be open-ended to include additional items, if needed

Important dates (cont’d) Managing and coordinating role of ISWGNA should continue with assistance from the AEG Transparency of the review process must be assured to achieve broad support in the international statistical community Global participation of national statistical offices and central banks is achieved Targeted publication date for the 1993 SNA, Rev.1 is 2008

Work programme for the updating of the 1993 SNA Prepared by ISWGNA in November 2003 in response to the request of the Statistical Commission during its 34 th session Approved in 2004 by the Statistical Commission during its 35 th session Includes the list of issues under review, governance structure, timetable, resource implications, decision-making process, and the delineation of the role of the AEG Announcement of Carol Carson as Project Manager and Anne Harrison as Editor in 2005 during the 35 th session of the Statistical Commission The complete document is available on the following website: ate%2021Nov2003final.pdf ate%2021Nov2003final.pdf ate%2021Nov2003final.pdf

Governance structure (1) Statistical Commission Endorses the consolidated set of recommendations in 2007 Approves the final output – 1993 SNA, Rev.1 in 2008

Governance structure (2) Intersecretariat Working Group on National Accounts (ISWGNA) Composed of five member organizations: Eurostat, IMF, OECD, UNSD, World Bank Chairmanship rotates among the five organizations and UNSD functions as Secretariat Functions at two levels: ISWGNA: Management Group (ISWGNA:MA) and ISWGNA: National Accountants (ISWGNA:NA)

Governance structure (3) ISWGNA: Management Group (ISWGNA:MA) Composed of high-level statistical executives of the five international organizations Agrees on the projects governance arrangements Ensures appropriate input and outputs, in agreement with Project Manager Assesses the overall work plan, time table, and budget of the project and raises funds Liaises with stakeholders, manages their expectations, views and concerns and gains their support Reports to the Statistical Commission

Governance structure (4) Project Manager (Carol Carson) Agrees on desired outputs and outcomes with ISWGNA:MG Reports regularly on progress and timeliness of update process and budgetary matters Develops an overall work plan in reference to organizational matters Liaises with stakeholders, manages their expectations, views and concerns and gains their support Provides oversight to the ISWGNA:NA and guidance to the support units With the Editor, ensures overall consistency of the SNA, Rev.1 and harmony with other macroeconomic statistical standards Reports to ISWGNA: Management Group

Governance structure (5) Editor (Anne Harrison) Progressively drafts recommendations for change and clarification and prepares drafts of text of the 1993 SNA, Rev.1 Participates in technical discussion with ISWGNA: NA, AEG and other expert groups With the Project Manager, ensures overall consistency of the SNA, Rev.1 and harmony with other macroeconomic statistical standards Catalogs changes that may be needed to the various existing handbooks, compilation guides, and satellite accounts manuals that arise from the update Reports to the Project Manager

Governance structure (6) ISWGNA: National Accountants (ISWGNA:NA) Composed of senior national accountants from the five international organisations Sponsors, facilitates and participates in the technical consultations In consultation with the AEG, considers the proposals for change and decides on the scope of the updating Circulates AEG recommendations to countries and/or regional and other expert meetings for comments Consolidates obtained country comments with AEG recommendations to formulate final recommendations In liaison with Editor, AEG and the existing expert groups assesses and evaluates the internal consistency of the 1993 SNA, Rev.1 and the harmony with other macroeconomic statistical standards

Governance structure (7) Advisory Expert Group (AEG) Composed of 20 experts representing all regions of the world, bringing in expertise from various areas in national accounting Approves the list of issues for update together with ISWGNA:NA Discusses all issues considered for update through consultations, electronic discussion or in meetings in consultation with ISWGNA:NA Decides proposed changes or clarifications jointly with ISWGNA:NA, striving to reach consensus to the highest extend possible Presents a single solution to an issue to facilitate the approval and rewriting process Assesses and evaluates the internal consistency of the 1993 SNA, Rev.1 and the harmony with other macroeconomic statistical standards in liaison with Editor, ISWGNA:NA and the existing expert groups

Governance structure (8) Various expert groups Include such groups as Canberra II, EDGs, regional expert groups, BOP Statistics Committee, Task Force on the Harmonization of the Public Sector Accounting Conduct first deliberations on the issues and submit the groups proposals for treatment of issues to the AEG for discussion and decision

Governance structure – Diagram

Decision-making process Various expert groups like Canberra II, BOPCOM, TFHPSA, EDGs, regional meetings conduct first deliberations on issues and prepare proposal for treatment of issue to AEG AEG, jointly with ISWGNA:NA discusses proposal and takes decision by striving for consensus to the highest extend possible If AEG disagrees with proposal it is referred back to the responsible expert group for new or revised proposal based on discussion of the AEG If AEG agrees with proposal a recommendation for treatment of issue is formulated

Decision-making process (cont’d) ISWGNA:NA circulates recommendation to all countries (NSO and CB) and regional commissions for discussion and comments with a 60-day response period Formulates final recommendation incorporating results of country comments and refers it to the editor Editor consolidates all final recommendations, ensuring conceptual consistency and produces final text of SNA 1993, Rev.1 for submission to the Statistical Commission in 2008

Decision-making process - Diagram

Criteria for identifying issues for updating Issues emerging in the new economic environment Old issues, previously discussed and rejected, if they fulfill one of the following criteria: Warrant the need to a further look in the new economic environment due to their economic significance Advancement in methodological research justifying different treatment Recognition of user needs Feasibility of planned changes

List of issues For the complete list of issues, including descriptions, available recommendations, comments refer to the following website: Issues: 1. Repurchase agreements 2. Employer retirement pension schemes 3. Employee stock options 4.a Non-performing loans 4.b Valuation of loans and deposits; Write-off and interest accrual on impaired loans 5. Non-life insurance services 6. Financial services 6.a Financial services 6.b Allocation of the output of central banks 7. Taxes on holding gains 8. Interest under high inflation 9. Research and development 10. Patented entities

List of issues (cont’d) 11. Originals and copies 12. Databases 13. Other intangible fixed assets 14. Cost of ownership transfers 15. Cost of capital services: production account 16. Government owned assets 17. Mineral exploration 18. Right to use/exploit non-produced resources between residents and non-residents 19. Military expenditures 20. Land 21. Contracts and leases of assets 22. Goodwill and other non-produced assets 23. Obsolescence and depreciation 24. Build-Own-Operate-Transfer (BOOT) schemes 25.a Ancillary units 25.b Institutional units 25.b.i Holding companies, special purpose entities, trusts 25.b.ii Treatment of multi-territory enterprises 25.b.iii Recognition of unincorporated branches 25.c Privatization, restructuring agencies, securitization and special purpose vehicles (SPVs)

List of issues (cont’d) 26. Cultivated assets 27. Classification and terminology on assets 28. Amortization of tangible and intangible non-produced assets 29. Assets boundary for non-produced intangible assets 30. Definition of economic assets 31. Valuation of water 32. Informal sector 33. Illegal and underground activities 34. Super dividend, capital injections and reinvested earnings (government transactions with public corporations (earnings and funding)) 35. Tax revenue, uncollectible taxes, and tax credits (recording of taxes) 36. Private/public/government sectors delineation (sectorization boundaries) 37. Activation of guarantees (contingent assets) and constructive obligations 38. Transaction concept 38.a Change of economic ownership (as term) 38.b Assets, liabilities and personal effects of individuals changing residence ("migrant transfers") 38.c Application of accrual principles to the debt in arrears

List of issues (cont’d) 39. Residence 39.a Meaning of national economy 39.b Predominant center of economic interest (as term) 39.c Clarification of non-permanent workers and entities with little or no physical presence 40. Goods sent abroad for processing 41. Merchanting 42. Retained earnings of mutual funds, insurance companies, and pension funds 43. Interest and related issues 43.a Treatment of index linked debt instruments 43.b Interest at concessional rates 43.c Fees payable on securities lending and gold loans 44. Financial assets classification

List of clarifications For the complete list of clarifications, including descriptions and available recommendations refer to the following website: Clarifications: C1. Other subsidies on production to non-market producers C2. The treatment of seignorage profits from the issue of coins in the 1993 SNA and in the Manual of Government Finance Statistics (GFS) 1986 C3. Review of SNA terminology for user-friendliness C4. Volumes and prices in relation to taxes on products C5. Clarification of components of compensation of employees C6. Review of SNA codes C7. Should the first appearance of value of financial derivatives be entered as other changes in volume (OCVA)? C8. Classification of financial assets: F5 Shares and other equity/F52 Mutual Funds C9. Valuation of equity C10. Measurement of non market output

List of clarifications (cont’d) C11. Concept of jobs and concept of persons C12. Top level industry classifications C13. Clarification of Chapter XXI on satellite accounts C14. The definition of interest C15. The Public Sector C16. Measurement of labor inputs C17. Measurement of output produced for own final use C18. Inventory withdraws defined including or excluding normal losses C19. Government final consumption expenditure C20. Legal versus economic terminology C21. Definition of an establishment C22. Valuation of work-in-progress C23. Capital assets not yet ready for use C24. Changes in inventories C25. Links between business accounting and national accounting C26. Currency unions C27. SDRs C28. Direct investment

AEG meetings Four meetings between 2004 – 2006 to deliberate on the proposals of the various expert groups Some issues will be discussed through e-discussions or e-consultations and if consensus is reached recommendations will be adopted in meetings without further discussion Meeting in early 2006 is last chance to deliberate on issues – all issues need to have AEG recommendation at that time Early 2007 meeting to review mutual consistency of all final recommendations on updated issues and overall integrity of the system 2007 final meeting to adopt all proposed changes For detailed information on AEG meetings refer to the following website:

AEG meeting in February 2004 Agreement on the list of 44 issues considered for update, classified into the following categories: Issues identified by ISWGNA:NA which are part of deliberations of existing expert groups like Canberra II, EDGs, regional expert groups Issues identified by the Balance of Payments Committee (BOPCOM) Issues identified by the Task Force on Harmonization of Public Sector Accounts (TFHPSA) Identification of responsible agency or expert group for each issue Agreement on recommendations for the following issues : 3. Employer stock options 3. Employer stock options 5. Non-life insurance services 5. Non-life insurance services 6.a Financial services 6.a Financial services 6.b Output of central banks 6.b Output of central banks 7. Taxes on holding gains 7. Taxes on holding gains 14. Cost of ownership transfers 14. Cost of ownership transfers 19. Military expenditures 19. Military expenditures 26. Cultivated assets 26. Cultivated assets

AEG meeting in Feb – Overview of country comments 42 countries responded to AEG recommendations, equally from National Statistical Offices and Central Banks Majority of countries supports AEG recommendations Results of the country comments were summarized as follows:

AEG meeting in December 2004 Agreement on recommendations for the following issues: 4.a Non-performing loans 4.a Non-performing loans 11. Originals and copies 11. Originals and copies 12. Databases 12. Databases 14. Cost of ownership transfers – Part II 14. Cost of ownership transfers – Part II 16. Government owned assets – cost of capital services 16. Government owned assets – cost of capital services 17. Mineral exploration 17. Mineral exploration 20. Treatment of land improvements 20. Treatment of land improvements 25.b.i Holding companies, special purpose entities (SPEs), and trusts 25.b.i Holding companies, special purpose entities (SPEs), and trusts 25.b.ii Treatment of multi-territory enterprises 25.b.ii Treatment of multi-territory enterprises 25.b.iii Recognition of branches 25.b.iii Recognition of branches 38.a Change of economic ownership 38.a Change of economic ownership 38.c Application of accrual principles to debt in arrears 38.c Application of accrual principles to debt in arrears 39.b Residence of households 39.b Residence of households

AEG meeting in Dec – Overview of country comments 56 countries responded to AEG recommendations, equally from National Statistical Offices and Central Banks Majority of countries supports AEG recommendations, Only for issue 16 - Government owned assets a large number of reservations or disagreements were reported AEG recommendation to include a return to capital, viewed as opportunity cost in the measurement of non- market output was opposed either in principle or on the basis of feasibility AEG requested a questionnaire for global consultation on this issue to be sent to national accounts departments of all countries

AEG meeting in Dec – Overview of country comments (cont’d) Results of the country comments were summarized as follows:

AEG meeting in July 2005 Agreement on recommendations for the following issues: 1. Reverse transactions 1. Reverse transactions 4.a Non-performing loans 4.a Non-performing loans 9. Research and development 9. Research and development 11. Originals and copies 11. Originals and copies 12. Databases 12. Databases 15. Cost of capital services 15. Cost of capital services 16. Government owned assets – cost of capital services 16. Government owned assets – cost of capital services 20. Treatment of land improvements 20. Treatment of land improvements 22. Purchased goodwill and marketing assets 22. Purchased goodwill and marketing assets 23. Obsolescence and depreciation 23. Obsolescence and depreciation 25.b.ii Treatment of multi-territory enterprises 25.b.ii Treatment of multi-territory enterprises 31. Water as an asset 31. Water as an asset 35. Tax revenues, uncollectible taxes and tax credits 35. Tax revenues, uncollectible taxes and tax credits

AEG meeting in July 2005 (cont’d) Agreement on recommendations for the following issues (cont’d): 36. Public/private/government sector delineation 36. Public/private/government sector delineation 37. Granting of guarantees 37. Granting of guarantees 38.b Migrants’ transfers 38.b Migrants’ transfers 39.c Residence of households: Non-permanent workers 39.c Residence of households: Non-permanent workers 39.c Residence of households: Ships’ crew and patients 39.c Residence of households: Ships’ crew and patients 40. Goods sent abroad for processing 40. Goods sent abroad for processing 42. Retained earnings on mutual funds and other collective investment schemes 42. Retained earnings on mutual funds and other collective investment schemes 43.a Interest on index-linked debt instruments 43.a Interest on index-linked debt instruments 43.a Debt instruments linked to foreign currency 43.a Debt instruments linked to foreign currency 43.c Fees on security lending and reversible gold transactions 43.c Fees on security lending and reversible gold transactions 44. Distinction between loans and deposits 44. Distinction between loans and deposits 44. Traded loans (Borderline between Securities and Other Financial Instruments) 44. Traded loans (Borderline between Securities and Other Financial Instruments)

AEG meeting in July 2005 – Overview of country comments Country comments are currently still obtained (deadline 30 November 2005) Comments are posted against corresponding issues as soon as they are received, for reference check the following website:

AEG meeting in January/February 2006 Last meeting to discuss conceptual issues and clarifications and agree on recommendations AEG recommendations for each of the 44 issues must be formulated For provisional list of issues to be discussed refer to the following website:

Basic structure of SNA 1993, Rev.1 No change in basic structure Major new issues will go into new, separate chapters or annex New or revised text will be incorporated into existing chapters for completion Opportunities to shorten existing text will be exploited Record of changes of text will be created

Role of editor New text Drafts most of new text Adjusts text contributed by others to achieve harmonization in substance and style with rest of draft and provides authors of text with record of changes made Existing text of the SNA Makes editorial touch-ups without creating changes to the SNA and flags them for easy identification

Role of reviewers ISWGNA:NA Provides “eagle eye” review of first draft Carries out substantive review of all chaptersAEG Reviews chapters or parts of the revised SNA, probably organized in groups Mandate of review is limited to seek out inconsistencies based on agreed recommendations and clarifications

Organization of draft review Chapters will go through the following stages: 0Exiting text or contribution 1Draft from editor for “eagle eye” review by ISWGNA:NA 2Draft for review by AEG, publication on the website and distribution to NSO and CB for comments 3Redraft from editor for “eagle eye” and substantive review by ISWGNA:NA 4Final draft ready for submission to Statistical Commission

Organization of draft review (cont’d) Chapters divided into two tranches and proceeded through consecutively First tranche: Chapters that are the “heart” of the SNA Second tranche: Remaining chapters, tables, glossary Approach allows more review time for tranche 1 (“heart”) Editor will work on blocks of related chapters within tranche and upon completion of blocks releases them for review

Output dates Initial set of consolidated recommendations – Early 2006 Views on consistency – April-Sept Revised set of consolidated recommendations for Statistical Commission – Late 2006 Draft of tranche 1 for AEG meeting – Early 2007 Draft of tranche 2 for AEG and outlook towards implementation of revised SNA – Late 2007 Draft of 1993 SNA, Rev.1 for Statistical Commission – Late 2007

Monitoring progress UNSD will maintain progress database on the internet to assure transparency of process Database input provided by editor Database will exist in three levels: Summary chapter x issue matrix with color coding indicating progress – publicly available More detailed matrix for ISWGNA:NA – restricted access Project management to track tasks and assignments during review – restricted access

Useful references Projects main website containing links to all available information: List of all issues/clarifications, including descriptions, papers, recommendations, country and expert comments: List of all AEG meetings, including agenda, papers, presentations, minutes: