Overview of the 2008 SNA and the GFSM Update Workshop on the Implementation and Links between the System of National Accounts, 2008 and the Government Finance Statistics Manual November 20 – 22, 2013 in Istanbul, Turkey Gary Jones Government Finance Division Statistics Department DISCLAIMER: This presentation represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

IMF Statistics Department Definition, the System of National Accounts (SNA) is: An agreed set of international standards to measure economic activity, which implies strict accounting conventions based on economic principles. SNA comprises comprehensive, consistent, and integrated set of accounts that record economic activities within given period and the levels of an economy’s assets and liabilities at particular points of time. What is the SNA? 2

IMF Statistics Department Comprehensive - all designated activities, and their consequences for all agents in the economy, are covered; Consistent - the same values are used for recording all sides of a single action; Integrated - all the consequences of a single action are captured in the accounts and balance sheets, in such a way that together they constitute a closed system: Opening balance sheet + Transactions + Changes due to revaluation + Other changes in the volume of assets = Closing balance sheet SNA: General Principles 3

IMF Statistics Department SNA: A Coordinating Framework for Economic Statistics and Analysis Observation of Economic Phenomena Basic Economic Statistics Manufacturing, Construction, Price statistics etc. Balance of payments, Money & banking, and Government financial statistics The System of National Accounts Production, Income, Consumption, Capital formation, International trade, IO-analysis, Employment, Integrated sector accounts, ROW/BOP, Financial transactions, Balance sheets, Flow of funds Economic Model Building, Developments and Testing of Economic Theories Macro Economic Analysis Political and Private Decision Making 4

IMF Statistics Department Who ? Institutional units grouped into sectors, establishments Does what? Three economic activities (production, consumption, accumulation) Transactions/other flows (during period of time) Concerning what? Products Assets/Liabilities With whom? Counterparts For what purpose? Function/purpose When? Time of recording How to measure? Valuation, accounts in volume terms How does this affect stocks? Nonfinancial assets, financial assets/liabilities (at a point in time) Are recorded on the balance sheets Basic Information to be Addressed in Accounts 5

IMF Statistics Department Diagram: Integrated Accounts 6

IMF Statistics Department 2008 SNA: an update of the 1993 SNA No fundamental changes Same structure of accounts Same accounting rules Few changes in some concepts However, some of the changes affect the level of GDP 2008 SNA and 1993 SNA 7

IMF Statistics Department Need for closer consistency with other statistical manuals. Evolution of economic environment. Development of improved methods as result of recent research. Further elaboration on prominent issues and need of clarifications. Reasons for an Update of SNA 8

IMF Statistics Department Assets New classification Expenditures on research are now treated as capital formation and not as intermediate consumption Weapons systems are classified as capital formation The concept of capital services is introduced Refinement of the treatment of financial instruments Main Changes Introduced in 2008 Update 9

IMF Statistics Department The financial sector More detailed classification of the financial sector Measurement of non-life insurance services Calculation of Financial Intermediation Services Indirectly Measured (FISIM) Recording of pension entitlements Main Changes Introduced in 2008 Update 10

IMF Statistics Department Globalization The principle of changes in ownership is made universal: Goods sent abroad for processing Merchanting Special purpose units Main changes introduced in 2008 update Main changes introduced in 2008 update 11

IMF Statistics Department The general government and public sectors Boundary between private /public/government sectors clarified Treatment of public-private partnerships Treatment of restructuring agencies Transactions between general government and public corporations Treatment of taxes and permits Treatment of loan guarantees Main Changes Introduced in 2008 Update 12

IMF Statistics Department Boundary between private /public /government sectors clarified Powers, motivation and functions of government are different from those of other sectors Guidance for the distinction between general government, private, and public corporations (decision tree) Main Changes Introduced in 2008 Update 13 General govern- ment sector Nonfinancial corporations Financial corporations House- holds NPISHs Public Private

IMF Statistics Department 14 The Public Sector Public Sector General government Central government Central government State governments State governments Public Corporations Local governments Local governments Financial Nonfinancial Central bank Public deposit-taking corporations except the central bank Public deposit-taking corporations except the central bank Other public financial corporations Other public financial corporations

IMF Statistics Department A Decision Tree Resident entity Institutional unit? Determine institutional unit that controls it Controlled by government? Public entity No Domestic private unit No Yes

IMF Statistics Department A Decision Tree Public entity Sell all or most of its output at economically significant prices? Public corporation Can a separate market producer be identified? General government No Yes Yes – possibly a quasi-corporation No

IMF Statistics Department A Decision Tree Public corporation Financial services? Public financial corporation Public nonfinancial corporation No Yes

IMF Statistics Department Treatment of public-private partnerships (PPPs) PPPs are long-term contracts between two units A private (or public) unit acquires or builds an asset, operates it for period and then hands it over to a unit in the public sector Guidance to determine whether the private or public partner is the economic owner of the asset Main Changes Introduced in 2008 Update 18

IMF Statistics Department Transactions between general government and public corporation Exceptional payments from public corporations should be recorded as withdrawals from equity (vs. dividends) Exceptional payments from government to public quasi- corporations should be recorded as capital transfers (vs. additions to equity) Main Changes Introduced in 2008 Update 19

IMF Statistics Department Treatment of taxes Taxes are recorded on an accrual basis (confirmed) BUT: care must be taken NOT include taxes unlikely ever to be collected Tax credits are recorded on a gross basis (≠ GFSM2001 and OECD Revenue Statistics…) Taxes on holding gains = current taxes on income and wealth (even though holding gains are not an income) Main Changes Introduced in 2008 Update 20

IMF Statistics Department Treatment of permits Permits issued by governments: If does not involve an government owned asset = tax Notwithstanding, if the license is transferable to a third party = must be classified as an asset (“contracts, leases and licenses”) When the license is to make use of a natural resource = asset or rent BUT…..all updates/revisions can be reconciled within the GFS analytical framework….. Main Changes Introduced in 2008 Update 21

IMF Statistics Department 22 OPENING BALANCE SHEET NET WORTH Nonfinancial Assets Financial Assets Liabilities Changes in Net Worth F L O W S CLOSING BALANCE SHEET NET WORTH Nonfinancial Assets Financial Assets Liabilities TRANSACTIONS Revenue Expense = NET OPERATING BALANCE minus Nonfinancial Assets = NET LENDING / BORROWING minus Liabilities Financial Assets cash other financial assets minus OTHER ECONOMIC FLOWSHolding Gains and Losses Other Changes in Volume of Assets Nonfinancial Assets Financial Assets Liabilities Nonfinancial Assets Financial Assets Liabilities CHANGE IN NET WORTH (HG) CHANGE IN NET WORTH (OVC)STOCKSSTOCKS