1. Extensions to the core system
THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

2. Extensions to the core system
National accounts record market transactions in the economy between the various institutional units.
These transactions can be valued at market prices, reflecting the quantity and prices involved
The national accounts also includes non-market transactions – they cannot be directly observed

3. Extensions to the core system
These non-market transactions can be estimated through imputation.
There are two kinds of imputation – statistical imputation, as in a survey where missing values can be estimated through the behaviour of similar units.
In the national accounts, this kind of statistical imputation is best described as estimation for missing values

4. Extensions to the core system
An example would be employees receiving goods as reward for labour.
A transaction has taken place, but without an observable value
We can estimate the value by using information from observable market transactions in these goods

5. Extensions to the core system
Imputations in national accounts occur when transactions are invented where no exchange actually takes place
The exchange is imputed, and then a value for the exchange is estimated. If the core system of accounts is taken as consisting of exchanges observable in a market, then imputations can be seen as extensions to the core accounts where a new set of exchanges is imagined, and values ascribed to them

6. Extensions to the core system
Examples of such imputations, and so extensions to the core accounts, are as follows
1. Own account production of goods and services in households, retained for own consumption
2. Consumption of fixed capital assets
3. Individual consumption of government services
4. Financial Services indirectly measured (FISIM)

7. 1. Own account household production
The value of all goods produced by households for their own consumption is imputed and included in the production boundary
This improves comparison between developed and less developed economies where home-grown food is a large component of final consumption

8. 1. Own account household production
Own account services are excluded (e.g. window washing omitted as too hard to measure, playing the piano – self-entertainment outside the theoretical production boundary)
With one very large exception – dwelling services “produced” by owner-occupiers of dwellings. A rent transaction is imputed and values estimated to enable useful comparisons across countries with different proportions of ownership of dwellings

9. 2. Consumption of fixed capital assets
In calculating value added, we subtract intermediate purchases used up in current production, from total output, to arrive at an estimate of value added by industry
But this does not include the gradual using up of capital assets in the production process
We should show this as another cost, and if we do, we will measure value added on a net basis

10. 2. Consumption of fixed capital assets
This is a very large part of costs, and to omit it is to misleadingly exaggerate the value added in production
But imputing transactions for the ongoing use of capital assets requires estimation of the associated quantity and price of the exchange
These estimates cannot be directly observed, nor is their a sufficient market in hiring out assets to enable corresponding value estimates to be made

11. 2. Consumption of fixed capital assets
So we are reduced to “modelling” the degradation.
We assume for each category of asset
A) a length of life
B) a profile of quantity used each period
C) a profile of the price charged

12. 2. Consumption of fixed capital assets
Using this information and mathematical modelling techniques such as the “Perpetual Inventory Method (PIM)
We can estimate capital consumption in current and volume terms
So we can estimate Net Domestic Product as well as Gross Domestic Product

13. 2. Consumption of fixed capital assets
There is a conflict here between the usefulness of considering net production and consumption measures (very useful!!), and
The uncertainty due to the extent of modelling and assumptions necessary to generate estimates

14. 3. Financial intermediation services indirectly measured (FISIM)
Borrowing and lending services by banks are not explicitly charged for –different interest rates for depositors (low) and borrowers (high) cover the implicit service charges
So total FISIM is net interest receipts by banks
Current practice is usually to assume that lenders and borrowers bear the service charges equally

15. 3. Financial intermediation services indirectly measured (FISIM)
Allocation to sector (and industry) is by holdings of stocks of financial assets and liabilities
This imputation enables the estimation of operating surplus for the banking sector, and show which sectors and industries bear the service charges
This avoids the situation where banking operating surplus is calculated as a residual negative amount, only to show a surplus income once interest payments are recorded in the primary income account.

16. 4. Individual consumption of goods and services provided by government
For goods and services provided by government which can
A) be associated with individual members of society, and for which
B) the proportion of private services to public can vary enormously
it is possible to impute transactions between government and households whereby the households are given money to purchase the individual services provided by government

17. 4. Individual consumption of goods and services provided by government
These imputations allow a better comparison between countries and sometimes over time, of the amount of provision and final consumption of services such as education and human health
The imputations are not included in the conventional measures of production and consumption, but in the “adjusted” measures – see sequence of accounts diagram and measures of “actual consumption”

18. Extensions to the core system
Conclusion
National accounts have been extended through imputing transactions, in order to
A) improve comparisons across countries, surmounting different institutional arrangements
B) generate useful economic measures such as capital consumption, even although the estimates are approximate