1. Item 6: Gross Capital Formation
ESTP course on National Accounts
ESA 2010
Luxembourg, 15 May May Eurostat

2. 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

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

4. 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)

5. 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

6. 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

7. 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

8. 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

9. 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

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

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

12. 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)

13. 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!

14. 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

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

16. 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