European systemof accounts

ESA 2010

European systemof accounts

ESA 2010

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Luxembourg: Publications Oﬃce of the European Union, 2013
ISBN 978-92-79-31242-7
doi:10.2785/16644
Cat. No: KS-02-13-269-EN-C
Theme: Economy and FinanceCollection: Manual and guidelines© European Union, 2013
Reproduction is authorised provided the source is acknowledged.
Printed in Italy
PRINTED ON ELEMENTAL CHLORINE-FREE BLEACHED PAPER (ECF)Foreword﻿Foreword
To achieve the objectives set by the Treaty on the
Functioning of the European Union, and more specificallyon economic and monetary union, we need high-quality
statistical instruments which provide the Union institutions, governments, economic and social operators, andanalysts with a set of harmonised and reliable statistics onwhich to base their decisions and policy advice.
The new European System of National and Regional
Accounts (ESA 2010) is a major development of the previous version of 1995. Progress has been achieved in theharmonisation of methodology and in the precision andaccuracy of the concepts, definitions, classifications andaccounting rules which are needed to enable a consistent, reliable and comparable statistical description of theeconomies of the Member States and the Union itself. ESA2010 contains new chapters on important subjects such as
financial services measurement, pensions and insurance,
European accounts and government accounts. There arealso new chapters on generic issues such as the rest of theworld account, links with business accounts, and satellite
accounts, with illustrative examples.
ESA 2010 is the fruit of several years’ work. It draws
on the experience acquired by the European Statistical
System during its work on harmonising gross national
income (GNI) and on monitoring the excessive deficit
procedure (EDP) statistics. The European Commission is
deeply grateful to all those who contributed to the discussions, and in particular to the specialists from the national
statistical institutes, the national central banks and theEuropean Central Bank, for the perseverance and expertise with which they helped Eurostat to accomplish thistask.
ESA 2010 is broadly consistent with the System of National
Accounts of the United Nations (2008 SNA) with regard
to definitions, accounting rules and classifications. Itnevertheless incorporates certain differences, particularly
in its presentation, which is more in line with its specificuse within the Union. This specific use, in fact, requires
greater accuracy in the definitions and the accounting

European system of accounts — ESA 2010

rules. It is essential that the key aggregates of the national
accounts be comparable between Member States, given
the depend­ence of policy within the Union on national
accounts statistics.
To ensure that the concepts, methodologies and accounting rules set out in this volume are strictly applied, it has
been decided, following a proposal from the Commission,
to give it a solid legal basis. ESA 2010 was thus adopted in
the form of a regulation of the European Parliament andof the Council dated 21 May 2013. This regulation comprises binding methodological rules to secure comparability of national accounts aggregates, and a compulsory datatransmission programme.
This joint effort by members of the European Statistical
System will be an essential tool for formulating and implementing the entire range of Union policies, whether
economic, agricultural, regional, social, commercial orenvironmental.
ESA 2010 will be a crucial aid in the training of thoserunning, understanding and analysing the European
economy.
It is our aim to provide the statistics compiled at the levelof the Union in the form, frequency and reliability thatfully meet the requirements of the users.
In this way, Eurostat aims to give all those engaged inbuilding Europe for the future — institutions, businesses
and members of the public alike — the means to basetheir decisions on a genuine understanding of the issues
involved.
June 2013



Walter Radermacher
Director-General, Eurostat
Chief Statistician of the European Union

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Contents

Contents
Foreword...................................................................................................................................................................................................................................................................................................... iii
List of abbreviations and acronyms.....................................................................................................................................................................................xxix
CHAPTER 1
General features and basic principles................................................................................................................................................................................................................. 1
General features.............................................................................................................................................................................................................................................................................. 1
Globalisation............................................................................................................................................................................................................................................................................. 3

Uses of the ESA 2010................................................................................................................................................................................................................................................................. 4
Framework for analysis and policy....................................................................................................................................................................................................................... 4
Characteristics of the ESA 2010 concepts........................................................................................................................................................................................................ 4
Classification by sector..................................................................................................................................................................................................................................................... 7
Satellite accounts.................................................................................................................................................................................................................................................................. 8
The ESA 2010 and the 2008 SNA........................................................................................................................................................................................................................... 10
The ESA 2010 and the ESA 95................................................................................................................................................................................................................................... 10

Basic principles of the ESA 2010 as a system...........................................................................................................................................................................................11
Statistical units and their groupings..................................................................................................................................................................................................................11
Institutional units and sectors........................................................................................................................................................................................................ 12
Local KAUs and industries................................................................................................................................................................................................................ 12
Resident and non-resident units; total economy and rest of the world........................................................................................... 12
Flows and stocks................................................................................................................................................................................................................................................................. 13
Flows............................................................................................................................................................................................................................................................................ 13
Transactions............................................................................................................................................................................................................................................. 13
Properties of transactions.......................................................................................................................................................................................................... 13
Interactions versus intra-unit transactions.......................................................................................................................................................... 13
Monetary versus non-monetary transactions.................................................................................................................................................... 14
Transactions with and without counterparts..................................................................................................................................................... 14
Rearranged transactions........................................................................................................................................................................................................ 14
Rerouting.................................................................................................................................................................................................................................... 14
Partitioning.............................................................................................................................................................................................................................. 14
Recognising the principal party to a transaction..................................................................................................................................... 14
Borderline cases............................................................................................................................................................................................................................. 15
Other changes in assets................................................................................................................................................................................................................. 15
Other changes in the volume of assets and liabilities.................................................................................................................................. 15
Holding gains and losses....................................................................................................................................................................................................... 15
Stocks........................................................................................................................................................................................................................................................................... 15
The system of accounts and the aggregates............................................................................................................................................................................................ 16
Rules of accounting..................................................................................................................................................................................................................................... 16
Terminology for the two sides of the accounts..................................................................................................................................................... 16

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Double entry/quadruple entry.............................................................................................................................................................................................. 16
Valuation................................................................................................................................................................................................................................................................. 16
Special valuations concerning products..................................................................................................................................................................... 17
Valuation at constant prices................................................................................................................................................................................................... 17
Time of recording......................................................................................................................................................................................................................................... 17
Consolidation and netting.................................................................................................................................................................................................................. 18
Consolidation.......................................................................................................................................................................................................................................... 18
Netting............................................................................................................................................................................................................................................................ 18
Accounts, balancing items and aggregates...................................................................................................................................................................... 18
The sequence of accounts.......................................................................................................................................................................................................................................... 18
The goods and services account.................................................................................................................................................................................................... 19
The rest of the world account........................................................................................................................................................................................................... 19
Balancing items............................................................................................................................................................................................................................................... 19
Aggregates............................................................................................................................................................................................................................................................. 22
GDP: a key aggregate...................................................................................................................................................................................................................... 22
The input-output framework.................................................................................................................................................................................................................................. 23
Supply and use tables................................................................................................................................................................................................................................ 23
Symmetric input-output tables...................................................................................................................................................................................................... 23

CHAPTER 2
Units and groupings of units........................................................................................................................................................................................................................................... 25
The limits of the national economy................................................................................................................................................................................................................... 25
The institutional units........................................................................................................................................................................................................................................................... 27
Head offices and holding companies............................................................................................................................................................................................................. 28Groups of corporations................................................................................................................................................................................................................................................. 28
Special purpose entities................................................................................................................................................................................................................................................ 29
Captive financial institutions................................................................................................................................................................................................................................... 29
Artificial subsidiaries........................................................................................................................................................................................................................................................ 30
Special purpose units of general government......................................................................................................................................................................................... 30

The institutional sectors.................................................................................................................................................................................................................................................... 31
Non-financial corporations (S.11)........................................................................................................................................................................................................................ 34
Public non-financial corporations (S.11001).................................................................................................................................................................. 35
National private non-financial corporations (S.11002)...................................................................................................................................... 35
Foreign controlled non-financial corporations (S.11003)................................................................................................................................ 35
Financial corporations (S.12).................................................................................................................................................................................................................................... 35
Financial intermediaries....................................................................................................................................................................................................................... 36
Financial auxiliaries................................................................................................................................................................................................................................... 36
Financial corporations other than financial intermediaries and financial auxiliaries................................................. 37
Institutional units included in the financial corporations sector.......................................................................................................... 37
Subsectors of financial corporations....................................................................................................................................................................................... 37
Combining subsectors of financial corporations...................................................................................................................................................... 37vi

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Subdividing subsectors of financial corporations into public, national private and foreign
controlled financial corporations............................................................................................................................................................................................... 38
Central bank (S.121)................................................................................................................................................................................................................................... 38
Deposit-taking corporations except the central bank (S.122).................................................................................................................... 39
MMF (S.123)........................................................................................................................................................................................................................................................ 39
Non-MMF investment funds (S.124)...................................................................................................................................................................................... 40
Other financial intermediaries, except insurance corporations and pension funds (S.125).................................. 40
Financial vehicle corporations engaged in securitisation transactions (FVC)................................................................ 41
Security and derivative dealers, financial corporations engaged in lending and specialised
financial corporations.................................................................................................................................................................................................................... 41
Financial auxiliaries (S.126).............................................................................................................................................................................................................. 41
Captive financial institutions and money lenders (S.127).............................................................................................................................. 42
Insurance corporations (S.128)...................................................................................................................................................................................................... 42
Pension funds (S.129)................................................................................................................................................................................................................................ 43
General government (S.13)......................................................................................................................................................................................................................................... 44
Central government (excluding social security funds) (S.1311)............................................................................................................... 44
State government (excluding social security funds) (S.1312)...................................................................................................................... 44
Local government (excluding social security funds) (S.1313)..................................................................................................................... 45
Social security funds (S.1314).......................................................................................................................................................................................................... 45
Households (S.14)................................................................................................................................................................................................................................................................ 45
Employers and own-account workers (S.141 and S.142)................................................................................................................................... 46
Employees (S.143).......................................................................................................................................................................................................................................... 46
Recipients of property income (S.1441)................................................................................................................................................................................ 46
Recipients of pensions (S.1442)...................................................................................................................................................................................................... 46
Recipients of other transfers (S.1443)..................................................................................................................................................................................... 46
Non-profit institutions serving households (S.15)................................................................................................................................................................................. 46
Rest of the world (S.2)..................................................................................................................................................................................................................................................... 47
Sector classification of producer units for main standard legal forms of ownership.......................................................................................... 47

Local kind-of-activity units and industries................................................................................................................................................................................................ 49
The local kind-of-activity unit................................................................................................................................................................................................................................ 49
Industries.................................................................................................................................................................................................................................................................................... 50
Classification of industries.......................................................................................................................................................................................................................................... 50

Units of homogeneous production and homogeneous branches........................................................................................................................ 50
The unit of homogeneous production.......................................................................................................................................................................................................... 50
The homogeneous branch....................................................................................................................................................................................................................................... 51

CHAPTER 3
Transactions in products and non-produced assets.............................................................................................................................................................. 53
Transactions in products in general................................................................................................................................................................................................................... 53
Production and output....................................................................................................................................................................................................................................................... 54
Principal, secondary and ancillary activities............................................................................................................................................................................................. 55

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Output (P.1).............................................................................................................................................................................................................................................................................. 55
Institutional units: distinction between market, for own final use and non-market........................................................................................... 57
Time of recording and valuation of output............................................................................................................................................................................................... 60
Products of agriculture, forestry and fishing (Section A)............................................................................................................................... 61
Manufactured products (Section C); construction work (Section F)................................................................................................ 62
Wholesale and retail trade services; repair services of motor vehicles and motorcycles (Section G).......... 62
Transportation and storage (Section H)............................................................................................................................................................................. 62
Accommodation and food services (Section I)........................................................................................................................................................... 63
Financial and insurance services (Section K): output of the central bank.................................................................................. 63
Financial and insurance services (Section K): financial services in general............................................................................. 63
Financial services provided for direct payment................................................................................................................................................. 64
Financial services paid for through loading interest charges.............................................................................................................. 64
Financial services consisting of acquiring and disposing of financial assets and liabilities infinancial markets................................................................................................................................................................................................................................ 64
Financial services provided in insurance and pension schemes, where activity is financed byloading insurance contributions and from the income return on savings........................................................................... 64
Real estate services (Section L)...................................................................................................................................................................................................... 66
Professional, scientific and technical services (Section M); Administrative and support services(Section N)............................................................................................................................................................................................................................................................ 67
Public administration and defence services, compulsory social security services (Section O).......................... 68
Education services (Section P); human health and social work services (Section Q).................................................... 68
Arts, entertainment and recreation services (Section R); other services (Section S)...................................................... 68
Private households as employers (Section T)................................................................................................................................................................ 68

Intermediate consumption (P.2).............................................................................................................................................................................................................................. 68
Time of recording and valuation of intermediate consumption............................................................................................................................................ 69

Final consumption (P.3, P.4)............................................................................................................................................................................................................................................ 69
Final consumption expenditure (P.3)............................................................................................................................................................................................................... 70
Actual final consumption (P.4)............................................................................................................................................................................................................................... 71
Time of recording and valuation of final consumption expenditure................................................................................................................................. 73
Time of recording and valuation of actual final consumption............................................................................................................................................... 73

Gross capital formation (P.5)......................................................................................................................................................................................................................................... 73
Gross fixed capital formation (P.51g)................................................................................................................................................................................................................ 73
Time of recording and valuation of gross fixed capital formation....................................................................................................... 75
Consumption of fixed capital (P.51c)................................................................................................................................................................................................................ 76
Changes in inventories (P.52)................................................................................................................................................................................................................................... 77
Time of recording and valuation of changes in inventories......................................................................................................................... 77
Acquisitions less disposals of valuables (P.53)........................................................................................................................................................................................... 78

Exports and imports of goods and services (P.6 and P.7)...................................................................................................................................................... 79
Exports and imports of goods (P.61 and P.71).......................................................................................................................................................................................... 80
Exports and imports of services (P.62 and P.72)..................................................................................................................................................................................... 81

Transactions in existing goods................................................................................................................................................................................................................................. 84
Acquisitions less disposals of non-produced assets (NP)....................................................................................................................................................... 85

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CHAPTER 4
Distributive transactions......................................................................................................................................................................................................................................................... 87
Compensation of employees (D.1)....................................................................................................................................................................................................................... 87
Wages and salaries (D.11)........................................................................................................................................................................................................................................... 87
Wages and salaries in cash.................................................................................................................................................................................................................. 87
Wages and salaries in kind................................................................................................................................................................................................................. 88
Employers’ social contributions (D.12)............................................................................................................................................................................................................. 89
Employers’ actual social contributions (D.121)........................................................................................................................................................... 89
Employers’ imputed social contributions (D.122).................................................................................................................................................... 90

Taxes on production and imports (D.2)........................................................................................................................................................................................................ 92
Taxes on products (D.21)............................................................................................................................................................................................................................................. 92
Value added type taxes (VAT) (D.211).................................................................................................................................................................................. 92
Taxes and duties on imports excluding VAT (D.212).......................................................................................................................................... 92
Taxes on products, except VAT and import taxes (D.214)............................................................................................................................. 93
Other taxes on production (D.29)....................................................................................................................................................................................................................... 93
Taxes on production and imports paid to the institutions of the European Union.............................................................................................. 94
Taxes on production and imports: time of recording and amounts to be recorded........................................................................................... 94

Subsidies (D.3)................................................................................................................................................................................................................................................................................. 95
Subsidies on products (D.31).................................................................................................................................................................................................................................... 95
Import subsidies (D.311)....................................................................................................................................................................................................................... 96
Other subsidies on products (D.319)....................................................................................................................................................................................... 96
Other subsidies on production (D.39).............................................................................................................................................................................................................. 96

Property income (D.4)........................................................................................................................................................................................................................................................... 98
Interest (D.41).......................................................................................................................................................................................................................................................................... 98
Interest on deposits and loans........................................................................................................................................................................................................ 98
Interest on debt securities.................................................................................................................................................................................................................... 99
Interest on bills and similar short-term instruments.................................................................................................................................. 99
Interest on bonds and debentures..................................................................................................................................................................................... 99
Interest rate swaps and forward rate agreements..................................................................................................................................................... 99
Interest on financial leases.................................................................................................................................................................................................................. 99
Other interest................................................................................................................................................................................................................................................. 100
Time of recording..................................................................................................................................................................................................................................... 100
Distributed income of corporations (D.42).............................................................................................................................................................................................. 100
Dividends (D.421)..................................................................................................................................................................................................................................... 100
Withdrawals from the income of quasi-corporations (D.422)............................................................................................................... 101
Reinvested earnings on foreign direct investment (D.43)........................................................................................................................................................... 102
Other investment income (D.44)....................................................................................................................................................................................................................... 103
Investment income attributable to insurance policy holders (D.441)............................................................................................ 103
Investment income payable on pension entitlements (D.442)................................................................................................................ 103
Investment income attributable to collective investment fund shareholders (D.443)............................................... 104

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Rent (D.45)............................................................................................................................................................................................................................................................................. 104
Rent on land..................................................................................................................................................................................................................................................... 104
Rents on subsoil assets..........................................................................................................................................................................................................................105

Current taxes on income, wealth, etc. (D.5)...........................................................................................................................................................................................105
Taxes on income (D.51)..............................................................................................................................................................................................................................................105
Other current taxes (D.59)........................................................................................................................................................................................................................................105

Social contributions and benefits (D.6)....................................................................................................................................................................................................... 107
Net social contributions (D.61)............................................................................................................................................................................................................................109
Employers’ actual social contributions (D.611)........................................................................................................................................................109
Employers’ imputed social contributions (D.612)................................................................................................................................................. 110
Households’ actual social contributions (D.613).................................................................................................................................................... 110
Households’ social contribution supplements (D.614)..................................................................................................................................... 111
Social benefits other than social transfers in kind (D.62)............................................................................................................................................................. 111
Social security benefits in cash (D.621).............................................................................................................................................................................. 111
Other social insurance benefits (D.622)............................................................................................................................................................................ 111
Social assistance benefits in cash (D.623)....................................................................................................................................................................... 112
Social transfers in kind (D.63)............................................................................................................................................................................................................................... 112
Social transfers in kind — general government and NPISHs non-market production (D.631)............................. 112
Social transfers in kind — market production purchased by general government and NPISHs (D.632)... 113

Other current transfers (D.7)...................................................................................................................................................................................................................................... 113
Net non-life insurance premiums (D.71)..................................................................................................................................................................................................... 113
Non-life insurance claims (D.72)........................................................................................................................................................................................................................ 114
Current transfers within general government (D.73)...................................................................................................................................................................... 115
Current international cooperation (D.74).................................................................................................................................................................................................. 115
Miscellaneous current transfers (D.75)......................................................................................................................................................................................................... 116
Current transfers to NPISHs (D.751)................................................................................................................................................................................... 116
Current transfers between households (D.752)........................................................................................................................................................ 116
Other miscellaneous current transfers (D.759)........................................................................................................................................................ 117
Fines and penalties......................................................................................................................................................................................................................... 117
Lotteries and gambling.............................................................................................................................................................................................................. 117
Payments of compensation.................................................................................................................................................................................................... 117
VAT- and GNI-based EU own resources (D.76)....................................................................................................................................................................................... 118

Adjustment for the change in pension entitlements (D.8)............................................................................................................................................... 118
Capital transfers (D.9).......................................................................................................................................................................................................................................................... 119
Capital taxes (D.91)........................................................................................................................................................................................................................................................ 119
Investment grants (D.92)........................................................................................................................................................................................................................................... 120
Other capital transfers (D.99)................................................................................................................................................................................................................................ 121

Employee stock options (ESOs)............................................................................................................................................................................................................................. 122

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CHAPTER 5
Financial transactions............................................................................................................................................................................................................................................................... 125
General features of financial transactions............................................................................................................................................................................................... 125
Financial assets, financial claims, and liabilities................................................................................................................................................................................ 125
Contingent assets and contingent liabilities.......................................................................................................................................................................................... 125
Categories of financial assets and liabilities........................................................................................................................................................................................... 126
Balance sheets, financial account, and other flows........................................................................................................................................................................ 127
Valuation................................................................................................................................................................................................................................................................................ 127
Net and gross recording............................................................................................................................................................................................................................................ 128
Consolidation..................................................................................................................................................................................................................................................................... 128
Netting...................................................................................................................................................................................................................................................................................... 128
Accounting rules for financial transactions............................................................................................................................................................................................ 129
A financial transaction with a current or a capital transfer as counterpart............................................................................................................. 129
A financial transaction with property income as counterpart............................................................................................................................................. 130
Time of recording............................................................................................................................................................................................................................................................ 130
A from-whom-to-whom financial account.......................................................................................................................................................................................... 131

Classification of financial transactions by categories in detail...................................................................................................................................... 132
Monetary gold and special drawing rights (F.1).................................................................................................................................................................................. 132
Monetary gold (F.11)............................................................................................................................................................................................................................... 132
SDRs (F.12)......................................................................................................................................................................................................................................................... 134
Currency and deposits (F.2).................................................................................................................................................................................................................................... 134
Currency (F.21)............................................................................................................................................................................................................................................. 134
Deposits (F.22 and F.29)...................................................................................................................................................................................................................... 135
Transferable deposits (F.22)............................................................................................................................................................................................................ 135
Other deposits (F.29).............................................................................................................................................................................................................................. 135
Debt securities (F.3)........................................................................................................................................................................................................................................................ 136
Main features of debt securities................................................................................................................................................................................................. 136
Classification by original maturity and currency................................................................................................................................................. 137
Classification by type of interest rate................................................................................................................................................................................... 137
Fixed interest rate debt securities............................................................................................................................................................................................ 137
Variable interest rate debt securities.................................................................................................................................................................................... 137
Mixed interest rate debt securities.......................................................................................................................................................................................... 138
Private placements.................................................................................................................................................................................................................................... 138
Securitisation................................................................................................................................................................................................................................................... 138
Covered bonds............................................................................................................................................................................................................................................... 139
Loans (F.4).............................................................................................................................................................................................................................................................................. 139
Main features of loans........................................................................................................................................................................................................................... 139
Classification of loans by original maturity, currency, and purpose of lending................................................................ 139
Distinction between transactions in loans and transactions in deposits.................................................................................. 139
Distinction between transactions in loans and transactions in debt securities.................................................................140

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Distinction between transactions in loans, trade credit and trade bills.....................................................................................140
Securities lending and repurchase agreements........................................................................................................................................................140
Financial leases............................................................................................................................................................................................................................................. 141
Other types of loans................................................................................................................................................................................................................................ 141
Financial assets excluded from the category of loans....................................................................................................................................... 142
Equity and investment fund shares or units (F.5)............................................................................................................................................................................... 142
Equity (F.51)...................................................................................................................................................................................................................................................... 142
Depository receipts................................................................................................................................................................................................................................... 142
Listed shares (F.511)...................................................................................................................................................................................................................... 142
Unlisted shares (F.512)............................................................................................................................................................................................................... 142
Initial public offering, listing, de-listing, and share buy back.......................................................................................................... 143
Financial assets excluded from equity securities.......................................................................................................................................... 143
Other equity (F.519)..................................................................................................................................................................................................................... 144
Valuation of transactions in equity.......................................................................................................................................................................... 144
Investment fund shares or units (F.52)............................................................................................................................................................................. 144
MMF shares or units (F.521)............................................................................................................................................................................................... 145
Non-MMF investment fund shares/units (F.522)......................................................................................................................................... 145
Valuation of transactions in investment fund shares or units.......................................................................................................... 145
Insurance, pension and standardised guarantee schemes (F.6)........................................................................................................................................... 145
Non-life insurance technical reserves (F.61)............................................................................................................................................................... 145
Life insurance and annuity entitlements (F.62).......................................................................................................................................................146
Pension entitlements (F.63).............................................................................................................................................................................................................146
Contingent pension entitlements....................................................................................................................................................................................146
Claims of pension funds on pension managers (F.64).....................................................................................................................................146
Entitlements to non-pension benefits (F.65)................................................................................................................................................................ 147
Provisions for calls under standardised guarantees (F.66)........................................................................................................................ 147
Standardised guarantees and one-off guarantees........................................................................................................................................148
Financial derivatives and employee stock options (F.7)..............................................................................................................................................................148
Financial derivatives (F.71)..............................................................................................................................................................................................................148
Options...................................................................................................................................................................................................................................................................148
Forwards............................................................................................................................................................................................................................................................... 149
Options vis-à-vis forwards.............................................................................................................................................................................................................. 149
Swaps........................................................................................................................................................................................................................................................................ 149
Forward rate agreements (FRAs)............................................................................................................................................................................................. 150
Credit derivatives........................................................................................................................................................................................................................................ 150
Credit default swaps................................................................................................................................................................................................................................ 150
Financial instruments not included in financial derivatives.................................................................................................................... 150
Employee stock options (F.72)..................................................................................................................................................................................................... 151
Valuation of transactions in financial derivatives and employee stock options................................................................ 151
Other accounts receivable/payable (F.8)................................................................................................................................................................................................... 152
Trade credits and advances (F.81)............................................................................................................................................................................................ 152
Other accounts receivable/payable, excluding trade credits and advances (F.89)........................................................... 153

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﻿Annex 5.1........................................................................................................................................................................................................................................................................................................ 154
Classification of financial transactions.......................................................................................................................................................................................................... 154
Classification of financial transactions by category....................................................................................................................................................................... 154
Classification of financial transactions by negotiability............................................................................................................................................................. 155
Structured securities............................................................................................................................................................................................................................... 155
Classification of financial transactions by type of income....................................................................................................................................................... 155
Classification of financial transactions by type of interest rate............................................................................................................................................. 156
Classification of financial transactions by maturity....................................................................................................................................................................... 156
Short-term and long-term maturity...................................................................................................................................................................................... 156
Original maturity and remaining maturity................................................................................................................................................................. 157
Classification of financial transactions by currency........................................................................................................................................................................ 157
Measures of money................................................................................................................................................................................................................................... 157

CHAPTER 6
Other flows................................................................................................................................................................................................................................................................................................. 159
Introduction.................................................................................................................................................................................................................................................................................... 159
Other changes in assets and liabilities......................................................................................................................................................................................................... 159
Other changes in the volume of assets and liabilities (K.1 to K.6)....................................................................................................................................... 159
Economic appearance of assets (K.1)................................................................................................................................................................................... 159
Economic disappearance of non-produced assets (K.2)................................................................................................................................160
Catastrophic losses (K.3)....................................................................................................................................................................................................................160
Uncompensated seizures (K.4).................................................................................................................................................................................................... 161
Other changes in volume not elsewhere classified (K.5)............................................................................................................................... 161
Changes in classification (K.6).................................................................................................................................................................................................... 162
Changes in sector classification and institutional unit structure (K.61)............................................................................. 162
Changes in classification of assets and liabilities (K.62)....................................................................................................................... 162
Nominal holding gains and losses (K.7)..................................................................................................................................................................................................... 163
Neutral holding gains and losses (K.71).......................................................................................................................................................................... 164
Real holding gains and losses (K.72).................................................................................................................................................................................... 165
Holding gains and losses by types of financial asset and liability..................................................................................................................................... 165
Monetary gold and SDRs (AF.1)................................................................................................................................................................................................ 165
Currency and deposits (AF.2)...................................................................................................................................................................................................... 165
Debt securities (AF.3)............................................................................................................................................................................................................................166
Loans (AF.4)..................................................................................................................................................................................................................................................... 167
Equity and investment fund shares (AF.5)................................................................................................................................................................... 167
Insurance, pension and standardised guarantee schemes (AF.6)....................................................................................................... 167
Financial derivatives and employee stock options (AF.7)............................................................................................................................ 167
Other accounts receivable/payable (AF.8)...................................................................................................................................................................... 167
Assets denominated in foreign currency........................................................................................................................................................................ 167

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CHAPTER 7
Balance sheets....................................................................................................................................................................................................................................................................................... 169
Types of assets and liabilities.................................................................................................................................................................................................................................... 170
Definition of an asset................................................................................................................................................................................................................................................... 170

Exclusions from the asset and liability boundary.......................................................................................................................................................................... 170
Categories of assets and liabilities..................................................................................................................................................................................................................... 170
Produced non-financial assets (AN.1)........................................................................................................................................................................................................... 171
Non-produced non-financial assets (AN.2)............................................................................................................................................................................................ 171
Financial assets and liabilities (AF).................................................................................................................................................................................................................. 171

Valuation of entries in the balance sheets.............................................................................................................................................................................................. 174
General valuation principles................................................................................................................................................................................................................................. 174

Non-financial assets (AN)............................................................................................................................................................................................................................................... 175
Produced non-financial assets (AN.1)........................................................................................................................................................................................................... 175
Fixed assets (AN.11)................................................................................................................................................................................................................................. 175
Intellectual property products (AN.117)................................................................................................................................................................. 175
Costs of ownership transfer on non-produced assets (AN.116)..................................................................................................... 175
Inventories (AN.12).................................................................................................................................................................................................................................. 176
Valuables (AN.13)....................................................................................................................................................................................................................................... 176
Non-produced non-financial assets (AN.2)............................................................................................................................................................................................ 176
Natural resources (AN.21)............................................................................................................................................................................................................... 176
Land (AN.211)..................................................................................................................................................................................................................................... 176
Mineral and energy reserves (AN.212)..................................................................................................................................................................... 176
Other natural assets (AN.213, AN.214 and AN.215)................................................................................................................................ 176
Contracts, leases and licences (AN.22).............................................................................................................................................................................. 177
Purchases less sales of goodwill and marketing assets (AN.23)........................................................................................................... 177

Financial assets and liabilities (AF)..................................................................................................................................................................................................................... 177
Monetary gold and SDRs (AF.1).......................................................................................................................................................................................................................... 177
Currency and deposits (AF.2)................................................................................................................................................................................................................................ 177
Debt securities (AF.3)..................................................................................................................................................................................................................................................... 177
Loans (AF.4)........................................................................................................................................................................................................................................................................... 178
Equity and investment fund shares/units (AF.5)................................................................................................................................................................................. 178
Insurance, pension and standardised guarantee schemes (AF.6)....................................................................................................................................... 179
Financial derivatives and employee stock options (AF.7)........................................................................................................................................................... 179
Other accounts receivable/payable (AF.8)............................................................................................................................................................................................... 179

Financial balance sheets................................................................................................................................................................................................................................................ 179
Memorandum items...........................................................................................................................................................................................................................................................180
Consumer durables (AN.m)....................................................................................................................................................................................................................................180
Foreign direct investment (AF.m1)....................................................................................................................................................................................................................180
Non-performing loans (AF.m2)..........................................................................................................................................................................................................................180
Recording of non-performing loans............................................................................................................................................................................................................. 181

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﻿Annex 7.1......................................................................................................................................................................................................................................................................................................... 182
Summary of each asset category....................................................................................................................................................................................................................... 182

Annex 7.2........................................................................................................................................................................................................................................................................................................189
A map of entries from opening balance sheet to closing balance sheet..................................................................................................... 189

CHAPTER 8
The sequence of accounts................................................................................................................................................................................................................................................ 193
Introduction.................................................................................................................................................................................................................................................................................... 193
The sequence of accounts....................................................................................................................................................................................................................................... 193

Sequence of accounts.......................................................................................................................................................................................................................................................198
Current accounts............................................................................................................................................................................................................................................................. 198
Production account (I)......................................................................................................................................................................................................................... 198
Distribution and use of income accounts (II)........................................................................................................................................................... 200
Primary distribution of income accounts (II.1)............................................................................................................................................. 200
Generation of income account (II.1.1)................................................................................................................................................................... 200
Allocation of primary income account (II.1.2).............................................................................................................................................. 204
Entrepreneurial income account (II.1.2.1)................................................................................................................................................. 209
Allocation of other primary income account (II.1.2.2).................................................................................................................... 209
Secondary distribution of income account (II.2).......................................................................................................................................... 216
Redistribution of income in kind account (II.3)............................................................................................................................................. 216
Use of income account (II.4)............................................................................................................................................................................................... 222
Use of disposable income account (II.4.1).......................................................................................................................................................... 222
Use of adjusted disposable income account (II.4.2).................................................................................................................................. 222
Accumulation accounts (III)................................................................................................................................................................................................................................. 225
Capital account (III.1).......................................................................................................................................................................................................................... 225
Change in net worth due to saving and capital transfers account (III.1.1)...................................................................... 225
Acquisitions of non-financial assets account (III.1.2)............................................................................................................................. 225
Financial account (III.2).................................................................................................................................................................................................................... 225
Other changes in assets account (III.3)............................................................................................................................................................................ 233
Other changes in volume of assets account (III.3.1).................................................................................................................................. 233
Revaluation account (III.3.2)............................................................................................................................................................................................ 233
Neutral holding gains and losses account (III.3.2.1)................................................................................................................................ 233
Real holding gains and losses account (III.3.2.2)........................................................................................................................................ 233
Balance sheets (IV)........................................................................................................................................................................................................................................................ 244
Opening balance sheet (IV.1)....................................................................................................................................................................................................... 244
Changes in balance sheet (IV.2)................................................................................................................................................................................................ 244
Closing balance sheet (IV.3).......................................................................................................................................................................................................... 244

Rest of the world accounts (V)...............................................................................................................................................................................................................................251
Current accounts.............................................................................................................................................................................................................................................................251
External account of goods and services (V.I).............................................................................................................................................................251
External account of primary incomes and current transfers (V.II).................................................................................................251
External accumulation accounts (V.III)...........................................................................................................................................................................251

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Capital account (V.III.1)..........................................................................................................................................................................................................251
Financial account (V.III.2)................................................................................................................................................................................................... 252
Other changes in assets account (V.III.3)............................................................................................................................................................. 252
Balance sheets (V.IV)............................................................................................................................................................................................................................ 252

Goods and services account (0)...........................................................................................................................................................................................................................262
Integrated economic accounts............................................................................................................................................................................................................................ 263
Aggregates.......................................................................................................................................................................................................................................................................................273
Gross domestic product at market prices (GDP).................................................................................................................................................................................273
Operating surplus of the total economy....................................................................................................................................................................................................273
Mixed income of the total economy.............................................................................................................................................................................................................273
Entrepreneurial income of the total economy.....................................................................................................................................................................................273
National income (at market prices)................................................................................................................................................................................................................273
National disposable income.................................................................................................................................................................................................................................273
Saving........................................................................................................................................................................................................................................................................................273
Current external balance......................................................................................................................................................................................................................................... 274
Net lending (+) or borrowing (–) of the total economy................................................................................................................................................................ 274
Net worth of the total economy........................................................................................................................................................................................................................ 274
General government expenditure and revenue.................................................................................................................................................................................. 274

CHAPTER 9
Supply and use tables and the input-output framework............................................................................................................................................275
Introduction.................................................................................................................................................................................................................................................................................... 275
Description.......................................................................................................................................................................................................................................................................................278
Statistical tool................................................................................................................................................................................................................................................................................279
Tool for analysis......................................................................................................................................................................................................................................................................... 280
Supply and use tables in more detail.......................................................................................................................................................................................................... 280
Classifications.................................................................................................................................................................................................................................................................... 280
Valuation principles......................................................................................................................................................................................................................................................281
Trade and transport margins.............................................................................................................................................................................................................................. 283
Taxes less subsidies on production and imports............................................................................................................................................................................... 284
Other basic concepts.................................................................................................................................................................................................................................................. 286
Supplementary information................................................................................................................................................................................................................................ 287

Data sources and balancing..................................................................................................................................................................................................................................... 288
Tool for analysis and extensions.......................................................................................................................................................................................................................... 288

CHAPTER 10
Price and volume measures...........................................................................................................................................................................................................................................291
Scope of price and volume indices in the national accounts...................................................................................................................................... 292

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The integrated system of price and volume indices....................................................................................................................................................................... 292
Other price and volume indices........................................................................................................................................................................................................................ 293

General principles of measuring price and volume indices........................................................................................................................................... 294
Definition of prices and volumes of market products.................................................................................................................................................................. 294
Quality, price and homogeneous products.......................................................................................................................................................................................... 294
Prices and volume......................................................................................................................................................................................................................................................... 295
New products.................................................................................................................................................................................................................................................................... 297
Principles for non-market services.................................................................................................................................................................................................................. 297
Principles for value added and GDP............................................................................................................................................................................................................. 299

Specific problems in the application of the principles......................................................................................................................................................... 299
Taxes and subsidies on products and imports.................................................................................................................................................................................... 300
Other taxes and subsidies on production.................................................................................................................................................................................................301
Consumption of fixed capital...............................................................................................................................................................................................................................301
Compensation of employees...............................................................................................................................................................................................................................301
Stocks of produced fixed assets and inventories................................................................................................................................................................................301

Measures of real income for the total economy............................................................................................................................................................................ 302
Interspatial price and volume indices.......................................................................................................................................................................................................... 303

CHAPTER 11
Population and labour inputs.................................................................................................................................................................................................................................... 305
Total population....................................................................................................................................................................................................................................................................... 305
Economically active population......................................................................................................................................................................................................................... 306
Employment................................................................................................................................................................................................................................................................................. 307
Employees............................................................................................................................................................................................................................................................................. 307
Self-employed persons.............................................................................................................................................................................................................................................. 307
Employment and residence.................................................................................................................................................................................................................................. 308

Unemployment........................................................................................................................................................................................................................................................................ 309
Jobs........................................................................................................................................................................................................................................................................................................... 309
Jobs and residence......................................................................................................................................................................................................................................................... 310

The non-observed economy................................................................................................................................................................................................................................... 310
Total hours worked................................................................................................................................................................................................................................................................ 310
Specifying hours actually worked................................................................................................................................................................................................................... 310

Full-time equivalence......................................................................................................................................................................................................................................................... 311
Employee labour input at constant compensation................................................................................................................................................................... 312
Productivity measures....................................................................................................................................................................................................................................................... 312

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CHAPTER 12
Quarterly national accounts.......................................................................................................................................................................................................................................... 313
Introduction.................................................................................................................................................................................................................................................................................... 313
Specific features of quarterly national accounts............................................................................................................................................................................. 314
Time of recording............................................................................................................................................................................................................................................................ 314
Work-in-progress........................................................................................................................................................................................................................................ 314
Activities concentrated in specific periods within a year............................................................................................................................ 315
Low-frequency payments.................................................................................................................................................................................................................. 315
Flash estimates.................................................................................................................................................................................................................................................................. 315
Balancing and benchmarking of quarterly national accounts........................................................................................................................................... 316
Balancing............................................................................................................................................................................................................................................................. 316
Consistency between quarterly and annual accounts — benchmarking................................................................................... 316
Chain-linked measures of price and volume changes................................................................................................................................................................. 317
Seasonal and calendar adjustments............................................................................................................................................................................................................ 318
Sequence of compilation of seasonally adjusted chain-linked volume measures............................................................. 318

CHAPTER 13
Regional accounts.......................................................................................................................................................................................................................................................................... 321
Introduction.................................................................................................................................................................................................................................................................................... 321
Regional territory.................................................................................................................................................................................................................................................................... 322
Units and regional accounts.................................................................................................................................................................................................................................... 322
Institutional units........................................................................................................................................................................................................................................................... 322
Local kind-of-activity units and regional production activities by industry............................................................................................................ 322

Methods of regionalisation........................................................................................................................................................................................................................................ 323
Aggregates for production activities.............................................................................................................................................................................................................324
Gross value added and gross domestic product by region...................................................................................................................................................... 324
The allocation of FISIM to user industries................................................................................................................................................................................................. 325
Employment....................................................................................................................................................................................................................................................................... 325
Compensation of employees.............................................................................................................................................................................................................................. 325
Transition from regional GVA to regional GDP.................................................................................................................................................................................... 325
Volume growth rates of regional GVA..........................................................................................................................................................................................................326

Regional household income accounts.......................................................................................................................................................................................................326

CHAPTER 14
Financial intermediation services indirectly measured (FISIM)..........................................................................................................................329
The concept of FISIM and the impact of their user allocation on main aggregates......................................................................329
Calculation of FISIM output by sectors S.122 and S.125......................................................................................................................................................... 331

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Statistical data required............................................................................................................................................................................................................................................. 331
Reference rates................................................................................................................................................................................................................................................................... 331
Internal reference rate........................................................................................................................................................................................................................... 331
External reference rates.......................................................................................................................................................................................................................332
Detailed breakdown of FISIM by institutional sector......................................................................................................................................................................332
Breakdown into intermediate and final consumption of FISIM allocated to households............................................................................333

Calculation of imports of FISIM.............................................................................................................................................................................................................................333
FISIM in volume terms...................................................................................................................................................................................................................................................... 334
Calculation of FISIM by industry.......................................................................................................................................................................................................................... 334
The output of the central bank............................................................................................................................................................................................................................ 334

CHAPTER 15
Contracts, leases and licences....................................................................................................................................................................................................................................337
Introduction.................................................................................................................................................................................................................................................................................... 337
The distinction between operating leases, resource leases and financial leases............................................................................... 337
Operating leases............................................................................................................................................................................................................................................................. 338
Financial leases.................................................................................................................................................................................................................................................................339
Resource leases.................................................................................................................................................................................................................................................................. 341
Permits to use a natural resource..................................................................................................................................................................................................................... 341
Permits to undertake specific activities...................................................................................................................................................................................................... 342
Public-private partnerships (PPPS).................................................................................................................................................................................................................. 344
Service concession contracts............................................................................................................................................................................................................................... 344
Marketable operating leases (AN.221)......................................................................................................................................................................................................... 344
Entitlements to future goods and services on an exclusive basis (AN.224)................................................................................................................ 344

CHAPTER 16
Insurance....................................................................................................................................................................................................................................................................................................... 347
Introduction................................................................................................................................................................................................................................................................................... 347
Direct insurance............................................................................................................................................................................................................................................................... 347
Reinsurance......................................................................................................................................................................................................................................................................... 348
The units involved.......................................................................................................................................................................................................................................................... 349

Output of direct insurance......................................................................................................................................................................................................................................... 349
Premiums earned........................................................................................................................................................................................................................................................... 349
Premium supplements.............................................................................................................................................................................................................................................. 350
Adjusted claims incurred and benefits due............................................................................................................................................................................................. 351
Non-life insurance adjusted claims incurred............................................................................................................................................................. 351
Life insurance benefits due..............................................................................................................................................................................................................352
Insurance technical reserves..................................................................................................................................................................................................................................352

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Defining insurance output.....................................................................................................................................................................................................................................353
Non-life insurance....................................................................................................................................................................................................................................353
Life insurance.................................................................................................................................................................................................................................................353
Reinsurance......................................................................................................................................................................................................................................................353

Transactions associated with non-life insurance........................................................................................................................................................................... 354
Allocation of insurance output among users....................................................................................................................................................................................... 354
Insurance services provided to and from the rest of the world............................................................................................................................................. 354
The accounting entries............................................................................................................................................................................................................................................. 354

Transactions of life insurance...................................................................................................................................................................................................................................357
Transactions associated with reinsurance...............................................................................................................................................................................................359
Transactions associated with insurance auxiliaries..................................................................................................................................................................... 360
Annuities............................................................................................................................................................................................................................................................................................ 360
Recording non-life insurance claims.............................................................................................................................................................................................................. 361
Treatment of adjusted claims.............................................................................................................................................................................................................................. 361
Treatment of catastrophic losses...................................................................................................................................................................................................................... 361

CHAPTER 17
Social insurance including pensions.............................................................................................................................................................................................................. 363
Introduction................................................................................................................................................................................................................................................................................... 363
Social insurance schemes, social assistance and individual insurance policies................................................................................................... 364
Social benefits................................................................................................................................................................................................................................................................... 364
Social benefits provided by general government................................................................................................................................................... 365
Social benefits provided by other institutional units....................................................................................................................................... 365
Pensions and other forms of benefit..................................................................................................................................................................................... 365

Social insurance benefits other than pensions............................................................................................................................................................................... 365
Social security schemes other than pension schemes................................................................................................................................................................. 366
Other employment-related social insurance schemes................................................................................................................................................................ 366
Recording of stocks and flows by type of non-pension social insurance scheme.............................................................................................. 366
Social security schemes...................................................................................................................................................................................................................... 366
Other employment-related non-pension social insurance schemes................................................................................................367

Pensions.............................................................................................................................................................................................................................................................................................. 368
Types of pension schemes...................................................................................................................................................................................................................................... 368
Social security pension schemes.............................................................................................................................................................................................. 368
Other employment-related pension schemes............................................................................................................................................................ 369
Defined contribution schemes.................................................................................................................................................................................................... 369
Defined benefit schemes.................................................................................................................................................................................................................... 369
Notional defined contribution schemes and hybrid schemes................................................................................................................. 370
Defined benefit schemes as compared to defined contribution schemes................................................................................... 370
Pension administrator, pension manager, pension fund and multi-employer pension scheme.......................................................... 371

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Recording of stocks and flows by type of pension scheme in social insurance.....................................................................................................372
Transactions for social security pension schemes................................................................................................................................................372
Transactions for other employment-related pension schemes...............................................................................................................373
Transactions for defined contribution pension schemes..............................................................................................................................373
Other flows related to defined contribution pension schemes............................................................................................................... 375
Transactions for defined benefit pension schemes............................................................................................................................................... 376

Supplementary table for accrued-to-date pension entitlements in social insurance..................................................................379
Design of the supplementary table................................................................................................................................................................................................................379
The columns of the table................................................................................................................................................................................................................... 382
The rows of the table.............................................................................................................................................................................................................................. 382
Opening and closing balance sheets.................................................................................................................................................................................... 383
Changes in pension entitlements due to transactions..................................................................................................................................... 383
Changes to pension entitlements due to other economic flows........................................................................................................... 385
Related indicators...................................................................................................................................................................................................................................... 386
Actuarial assumptions.............................................................................................................................................................................................................................................. 387
Accrued-to-date entitlements..................................................................................................................................................................................................... 387
Discount rate.................................................................................................................................................................................................................................................. 387
Wage growth................................................................................................................................................................................................................................................... 387
Demographic assumptions............................................................................................................................................................................................................. 388

CHAPTER 18
Rest of the world accounts..............................................................................................................................................................................................................................................391
Introduction.................................................................................................................................................................................................................................................................................... 391
Economic territory..................................................................................................................................................................................................................................................................392
Residence................................................................................................................................................................................................................................................................................392

Institutional units.....................................................................................................................................................................................................................................................................392
Branches as a term used in the international accounts of the balance of payments...................................................................392
Notional resident units.....................................................................................................................................................................................................................................................393
Multi-territory enterprises.............................................................................................................................................................................................................................................393
Geographical breakdown............................................................................................................................................................................................................................................ 394
The international accounts of the balance of payments.................................................................................................................................................... 394
Balancing items in the current accounts of the international accounts......................................................................................................... 394
The accounts for the rest of the world sector and their relationship with the international accountsof the balance of payments...................................................................................................................................................................................................................................... 396
The external account of goods and services......................................................................................................................................................................................... 396
Valuation............................................................................................................................................................................................................................................................. 398
Goods for processing............................................................................................................................................................................................................................. 398
Merchanting.................................................................................................................................................................................................................................................... 400
Goods under merchanting.................................................................................................................................................................................................... 400

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Imports and exports of FISIM.................................................................................................................................................................................................... 401
The external account of primary and secondary income........................................................................................................................................................ 401
The primary income account....................................................................................................................................................................................................... 402
Direct investment income............................................................................................................................................................................................................... 402
The secondary income (current transfers) account of the BPM6....................................................................................................... 403
The external capital account............................................................................................................................................................................................................................... 403
The external financial account and international investment position (IIP)........................................................................................................... 404

Balance sheets for the rest of the world sector.............................................................................................................................................................................. 407

CHAPTER 19
European accounts....................................................................................................................................................................................................................................................................... 409
Introduction................................................................................................................................................................................................................................................................................... 409
From national to european accounts........................................................................................................................................................................................................... 409
Conversion of data in different currencies................................................................................................................................................................................................ 410
European institutions.................................................................................................................................................................................................................................................. 410
The rest of the world account.............................................................................................................................................................................................................................. 411
Balancing of transactions....................................................................................................................................................................................................................................... 412
Price and volume measures.................................................................................................................................................................................................................................. 412
Balance sheets................................................................................................................................................................................................................................................................... 412‘From whom-to-whom’ matrices.................................................................................................................................................................................................................... 413

Annex 19.1.................................................................................................................................................................................................................................................................................................... 413
The accounts of european institutions....................................................................................................................................................................................................... 413
Resources................................................................................................................................................................................................................................................................................ 413
Uses.............................................................................................................................................................................................................................................................................................. 414
Consolidation..................................................................................................................................................................................................................................................................... 415

CHAPTER 20
The government accounts............................................................................................................................................................................................................................................... 417
Introduction.................................................................................................................................................................................................................................................................................... 417
Defining the general government sector............................................................................................................................................................................................... 417
Identification of units in the government................................................................................................................................................................................................. 418
Government units...................................................................................................................................................................................................................................... 418
NPIs classified to the general government sector.................................................................................................................................................. 418
Other units of general government........................................................................................................................................................................................ 419
Public control...................................................................................................................................................................................................................................................................... 419
Market/non-market delineation.......................................................................................................................................................................................................................420
Notion of economically significant prices.....................................................................................................................................................................420
Criteria of the purchaser of the output of a public producer....................................................................................................................420

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The output is sold primarily to corporations and households.......................................................................................................420
The output is sold only to government.....................................................................................................................................................................420
The output is sold to government and others....................................................................................................................................................420
The market/non-market test................................................................................................................................................................................................................................ 421
Financial intermediation and the government boundary........................................................................................................................... 421
Borderline cases................................................................................................................................................................................................................................................................ 421
Public head offices..................................................................................................................................................................................................................................... 421
Pension funds..................................................................................................................................................................................................................................................422
Quasi-corporations..................................................................................................................................................................................................................................422
Restructuring agencies.........................................................................................................................................................................................................................423
Privatisation agencies............................................................................................................................................................................................................................423
Defeasances structures.........................................................................................................................................................................................................................423
Special purpose entities.......................................................................................................................................................................................................................423
Joint ventures..................................................................................................................................................................................................................................................423
Market regulatory agencies............................................................................................................................................................................................................. 424
Supranational authorities.................................................................................................................................................................................................................. 424
The subsectors of general government....................................................................................................................................................................................................... 424
Central government................................................................................................................................................................................................................................. 424
State government........................................................................................................................................................................................................................................425
Local government......................................................................................................................................................................................................................................426
Social security funds...............................................................................................................................................................................................................................426

The government finance presentation of statistics....................................................................................................................................................................426
Framework............................................................................................................................................................................................................................................................................426
Revenue....................................................................................................................................................................................................................................................................................428
Taxes and social contributions....................................................................................................................................................................................................428
Sales............................................................................................................................................................................................................................................................................428
Other revenue................................................................................................................................................................................................................................................. 431
Expenditure.......................................................................................................................................................................................................................................................................... 431
Compensation of employees and intermediate consumption................................................................................................................. 431
Social benefits expenditure.............................................................................................................................................................................................................432
Interest....................................................................................................................................................................................................................................................................432
Other current expenditure..............................................................................................................................................................................................................432
Capital expenditure.................................................................................................................................................................................................................................433
Link with government final consumption expenditure (P.3)..................................................................................................................433
Government expenditure by function (COFOG)..................................................................................................................................................433
Balancing items............................................................................................................................................................................................................................................................... 434
The net lending/net borrowing (B.9)................................................................................................................................................................................... 434
Changes in net worth due to saving and capital transfers (B.101).................................................................................................... 434
Financing...............................................................................................................................................................................................................................................................................435
Transactions in assets............................................................................................................................................................................................................................435
Transactions in liabilities................................................................................................................................................................................................................. 436
Other economic flows................................................................................................................................................................................................................................................437

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Revaluation account................................................................................................................................................................................................................................ 437
Other changes in volume of assets account.................................................................................................................................................................. 437
Balance sheets...................................................................................................................................................................................................................................................................437
Consolidation.................................................................................................................................................................................................................................................................... 438

Accounting issues relating to general government.................................................................................................................................................................. 440
Tax revenue.......................................................................................................................................................................................................................................................................... 440
Character of tax revenue................................................................................................................................................................................................................... 440
Tax credits.......................................................................................................................................................................................................................................................... 440
Amounts to record....................................................................................................................................................................................................................................441
Amounts uncollectible.........................................................................................................................................................................................................................441
Time of recording............................................................................................................................................................................................................................................................441
Accrual recording......................................................................................................................................................................................................................................441
Accrual recording of taxes...............................................................................................................................................................................................................441
Interest................................................................................................................................................................................................................................................................... 442
Discounted and zero-coupon bonds........................................................................................................................................................................... 443
Index-linked securities.............................................................................................................................................................................................................. 443
Financial derivatives................................................................................................................................................................................................................... 443
Court decisions............................................................................................................................................................................................................................................ 443
Military expenditure............................................................................................................................................................................................................................. 443
Relations of general government with public corporations................................................................................................................................................... 444
Equity investment in public corporations and distribution of earnings................................................................................... 444
Equity investment..................................................................................................................................................................................................................................... 444
Capital injections....................................................................................................................................................................................................................................... 444
Subsidies and capital injections...................................................................................................................................................................................... 444
Rules applicable to particular circumstances.................................................................................................................................................. 445
Fiscal operations.............................................................................................................................................................................................................................. 445
Public corporations distributions........................................................................................................................................................................................... 445
Dividends versus withdrawal of equity................................................................................................................................................................... 445
Taxes versus withdrawal of equity............................................................................................................................................................................... 446
Privatisation and nationalisation............................................................................................................................................................................................ 446
Privatisation......................................................................................................................................................................................................................................... 446
Indirect privatisations............................................................................................................................................................................................................... 446
Nationalisation................................................................................................................................................................................................................................. 447
Transactions with the central bank............................................................................................................................................................................. 447
Restructures, mergers, and reclassifications..................................................................................................................................................... 447
Debt operations............................................................................................................................................................................................................................................................... 447
Debt assumptions, debt cancellation and debt write-offs........................................................................................................................... 448
Debt assumption and cancellation.............................................................................................................................................................................. 448
Debt assumption involving a transfer of non-financial assets...................................................................................................... 449
Debt write-offs or write-downs................................................................................................................................................................................................. 449
Other debt restructuring.................................................................................................................................................................................................................. 449
Purchase of debt above the market value....................................................................................................................................................................... 450
Defeasances and bailouts.................................................................................................................................................................................................................. 450
Debt guarantees........................................................................................................................................................................................................................................... 451

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Derivatives-type guarantees.......................................................................................................................................................................................................... 451
Standardised guarantees.................................................................................................................................................................................................................... 451
One-off guarantees................................................................................................................................................................................................................................... 451
Securitisation...................................................................................................................................................................................................................................................452
Definition..................................................................................................................................................................................................................................................452
Criteria for sale recognition.................................................................................................................................................................................................452
Recording of flows............................................................................................................................................................................................................................453
Other issues...........................................................................................................................................................................................................................................................................453
Pension obligations...................................................................................................................................................................................................................................453
Lump sum payments..............................................................................................................................................................................................................................453
Public-private partnerships....................................................................................................................................................................................................................................453
Scope of PPP.....................................................................................................................................................................................................................................................453
Economic ownership and allocation of the asset.................................................................................................................................................. 454
Accounting issues......................................................................................................................................................................................................................................455
Transactions with international and supranational organisations.................................................................................................. 456
Development assistance......................................................................................................................................................................................................................457

The public sector.................................................................................................................................................................................................................................................................... 458
Public sector control.................................................................................................................................................................................................................................................... 458
Central banks..................................................................................................................................................................................................................................................................... 460
Public quasi-corporations...................................................................................................................................................................................................................................... 460
Special purpose entities and non-residents........................................................................................................................................................................................... 460
Joint ventures..................................................................................................................................................................................................................................................................... 460

CHAPTER 21
Links between business accounts and national accounts and the measurement of corporate
activity................................................................................................................................................................................................................................................................................................................461
Some specific rules and methods of business accounting..............................................................................................................................................461
Time of recording............................................................................................................................................................................................................................................................461
Double entry and quadruple entry accounting................................................................................................................................................................................ 462
Valuation............................................................................................................................................................................................................................................................................... 462
Income statement and balance sheet........................................................................................................................................................................................................ 462

National accounts and business accounts: practical issues............................................................................................................................................ 462
The transition from business accounts to national accounts: the example of non-financial enterprises.......... 463
Conceptual adjustments......................................................................................................................................................................................................................................... 463
Adjustments to achieve consistency with the accounts of other sectors.................................................................................................................... 463
Examples of adjustments for exhaustiveness...................................................................................................................................................................................... 464

Specific issues.............................................................................................................................................................................................................................................................................. 464
Holding gains/losses................................................................................................................................................................................................................................................... 464
Globalisation...................................................................................................................................................................................................................................................................... 464
Mergers and acquisitions........................................................................................................................................................................................................................................ 465

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CHAPTER 22
Satellite accounts............................................................................................................................................................................................................................................................................ 467
Introduction................................................................................................................................................................................................................................................................................... 467
Functional classifications........................................................................................................................................................................................................................................ 470

Major characteristics of satellite accounts...............................................................................................................................................................................................472
Functional satellite accounts...............................................................................................................................................................................................................................472
Special sector accounts............................................................................................................................................................................................................................................. 476
Inclusion of non-monetary data...................................................................................................................................................................................................................... 479
Extra detail and supplementary concepts............................................................................................................................................................................................... 479
Different basic concepts........................................................................................................................................................................................................................................... 480
Use of modelling and inclusion of experimental results............................................................................................................................................................ 480
Designing and compiling satellite accounts........................................................................................................................................................................................ 481

Nine specific satellite accounts............................................................................................................................................................................................................................ 482
Agricultural accounts................................................................................................................................................................................................................................................. 482
Environmental accounts......................................................................................................................................................................................................................................... 483
Health accounts...............................................................................................................................................................................................................................................................493
Household production accounts..................................................................................................................................................................................................................... 495
Labour accounts and SAM.................................................................................................................................................................................................................................... 499
Productivity and growth accounts.................................................................................................................................................................................................................501
Research and development accounts........................................................................................................................................................................................................ 502
Social protection accounts................................................................................................................................................................................................................................... 506
Tourism satellite accounts...................................................................................................................................................................................................................................... 509

CHAPTER 23
Classifications.......................................................................................................................................................................................................................................................................................... 511
Introduction.................................................................................................................................................................................................................................................................................... 511
Classification of institutional sectors (S)..................................................................................................................................................................................................... 511
Classification of transactions and other flows................................................................................................................................................................................... 513
Transactions in products (P).................................................................................................................................................................................................................................. 513
Transactions in non-produced non-financial assets (NP codes)......................................................................................................................................... 514
Distributive transactions (D).................................................................................................................................................................................................................................. 514
Current transfers in cash and kind (D.5-D.8)........................................................................................................................................................................................... 515
Transactions in financial assets and liabilities (F).............................................................................................................................................................................. 517
Other changes in assets (K).................................................................................................................................................................................................................................... 518

Classification of balancing items and net worth (B)1................................................................................................................................................................. 518
Classification of balance sheet entries (L)................................................................................................................................................................................................ 519
Classification of assets (A)............................................................................................................................................................................................................................................. 519
Non-financial assets (AN)........................................................................................................................................................................................................................................ 519

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﻿Financial assets (AF)..................................................................................................................................................................................................................................................... 521

Classification of supplementary items........................................................................................................................................................................................................ 522
Non-performing loans.............................................................................................................................................................................................................................................. 522
Capital services................................................................................................................................................................................................................................................................. 523
Pensions table.................................................................................................................................................................................................................................................................... 523
Consumer durables.......................................................................................................................................................................................................................................................524
Foreign direct investment....................................................................................................................................................................................................................................... 525
Contingent positions................................................................................................................................................................................................................................................... 525
Currency and deposits............................................................................................................................................................................................................................................... 525
Classification of debt securities according to outstanding maturity...............................................................................................................................526
Listed and unlisted debt securities...................................................................................................................................................................................................................526
Long-term loans with outstanding maturity of less than one year and long-term loans secured by mortgage..................526
Listed and unlisted investment shares.........................................................................................................................................................................................................526
Arrears in interest and repayments.................................................................................................................................................................................................................527
Personal and total remittances..........................................................................................................................................................................................................................527

Regrouping and coding of industries (A) and products (P)............................................................................................................................................527
Classification of the functions of the government (COFOG).......................................................................................................................................... 541
Classification of individual consumption by purpose (Coicop).................................................................................................................................. 543
Classification of the purposes of non-profit institutions serving households (COPNI)............................................................... 545
Classification of outlays of producers by purpose (COPP)................................................................................................................................................ 546

CHAPTER 24
The accounts............................................................................................................................................................................................................................................................................................547
Table 24.1 — Account 0: Goods and services account..........................................................................................................................................................547
Table 24.2 — Full sequence of accounts for the total economy.............................................................................................................................. 548
Table 24.3 — Full sequence of accounts for non-financial corporations...................................................................................................... 565
Table 24.4 — Full sequence of accounts for financial corporations..................................................................................................................... 577
Table 24.5 — Full sequence of accounts for general government....................................................................................................................... 590
Table 24.6 — Full sequence of accounts for households.................................................................................................................................................. 603
Table 24.7 — Full sequence of accounts for non-profit institutions serving households....................................................... 616

Index................................................................................................................................................................................................................................................................................................................. 629

European system of accounts — ESA 2010

xxvii

List of abbreviations and acronyms

﻿

List of abbreviations and acronyms
ABO

accrued benefit obligationABS

asset-backed security

BPM6

Balance of payments manual, sixth edition

CCP

central counterparty clearing house

CDS

credit default swap

cifcost, insurance and freight

COFOG

Classification of the Functions of Government

CoicopClassification of Individual Consumption by Purpose

COPNIClassification of the Purposes of Non-Profit Institutions Serving Households

COPP

Classification of Outlays of Producers by Purpose

CPA

Classification of Products by Activity

EAA

economic accounts for agriculture

EAFRD

European Agricultural Fund for Rural Development

EAGF

European Agricultural Guarantee FundEC

European Commission

ECB

European Central Bank

EMU

economic and monetary union

ESA

European System of Accounts

ESO

employee stock option

Esspros

European System of Integrated Social Protection Statistics

EU

European Union

EuriborEuropean interbank offered rate

Eurostatthe statistical office of the European Union

FDI

foreign direct investment

FISIM

financial intermediation services indirectly measured

fob

free on board

FRA

forward rate agreement

FVC

financial vehicle corporation

GAB

general arrangements to borrowGDPgross domestic product

GFS

government finance statistics

GNI

gross national income

GVA

gross value added

IAS

international accounting standards

IASB

International Accounting Standards Board

IASC

International Accounting Standards CommitteeIC

insurance corporations

ICLS

International Conference of Labour Statisticians

ICPF

insurance corporations and pension funds

ICT

information, communications and telecommunications

IFRS

International Financial Reporting Standards

IIP

international investment position

ILO

International Labour Organisation

IMF

International Monetary Fund

European system of accounts — ESA 2010

xxix

﻿

xxx

List of abbreviations and acronyms

IMTS

international merchandise trade statistics

Intrastat

statistical collection system

I-O

input-output

IPO

initial public offering

IPSASB

International Public Sector Accounting Standards Board

ISIC

International Standard Industrial Classification of all Economic Activities

ISIN

international securities identification number

KAU

kind-of-activity unit

KLEMS

capital, labour, energy, materials and services

LIBOR

London interbank offered rate

MFI

monetary financial institution

MMF

money market fund

MSITS

Manual on statistics of international trade in services

n.e.c.

not elsewhere classified

NAB

new arrangements to borrow

NACE

general industrial classification of economic activities within the European Union

NDP

net domestic productNOS

net operating surplus

NPI

non-profit institution

NPISH

non-profit institution serving households

NUTS

nomenclature of territorial units for statistics

OECD

Organisation for Economic Cooperation and Development

oMFI

other monetary financial institution

OTC

over the counter

PAYE

pay as you earn

PBO

projected benefit obligationPF

pension funds

PIM

perpetual inventory method

PPPpurchasing power parity

PPP

public–private partnership

PPS

purchasing power standard

PRGF

Poverty Reduction and Growth Facility

R&D

research and development

ROW

rest of the worldSAM

social accounting matrix

SDR

special drawing right

SEEA

System of Environmental-Economic Accounts

SNA

System of National Accounts

SOCX

Social Expenditure DatabaseSPE

special-purpose entity

SPV

special-purpose vehicle

StripsSeparate Trading of Registered Interest and Principal Securities

UCITS

undertakings for collective investment in transferable securities

UN

United Nations

VAT

value added tax

European system of accounts — ESA 2010

General features and basic principles

1

CHAPTER 1
General features and basic principles
describes balance sheets, and the asset and liability classification scheme. Chapter 8 sets out thesequence of accounts, and the balancing items
associated with each account. Chapter 9 describes
supply and use tables, and their role in reconciling the measures of income, output and expenditure in the economy. It also describes the inputoutput tables that can be derived from the supply
and use tables. Chapter 10 describes the conceptualbasis for the price and volume measures associatedwith the nominal values found in the accounts.
Chapter 11 describes the population and labour
market measures which can be used with measures of the national accounts in economic analysis. Chapter 12 gives a brief description of quarterly
national accounts, and how they differ in emphasis
from the annual accounts.

General features
1.01

The European System of Accounts (herein­
after
referred to as ‘the ESA 2010’ or ‘the ESA’) is aninternationally compatible accounting framework
for a systematic and detailed description of a total
economy (that is, a region, country or group ofcountries), its components and its relations withother total economies.

1.02

The predecessor of the ESA 2010, the European
System of Accounts 1995 (the ESA 95), was published in 19961. The ESA 2010 methodology as set
out in this Annex has the same structure as the
ESA 95 publication for the first 13 chapters, butthen has 11 new chapters elaborating aspects of thesystem which reflect developments in measuring
modern economies, or in the use of the ESA 95 in
the European Union (the EU).

1.03

1

The structure of this manual is as follows.
Chapter 1 covers the basic features of the systemin terms of concepts, and sets out the principles of
the ESA and describes the fundamental statisticalunits and their groupings. It gives an overview ofthe sequence of accounts, and a brief descriptionof key aggregates and the role of supply and use
tables and the input-output framework. Chapter 2
describes the institutional units used in measuring the economy, and how these units are classified into sectors and other groups to allow analysis.
Chapter 3 describes all transactions with regard to
products (goods and services), as well as non-produced assets, in the system. Chapter 4 describes all
the transactions in the economy which distributeand re-distribute income and wealth in the economy. Chapter 5 describes the financial transactionsin the economy. Chapter 6 describes the changes
that can occur to the value of assets through noneconomic events or price changes. Chapter 7

Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system ofnational and regional accounts in the Community (OJ L 310, 30.11.1996, p. 1).

European system of accounts — ESA 2010

1.04

Chapter 13 describes the purposes, concepts andcompilation issues in drawing up a set of regional
accounts. Chapter 14 covers the measurement offinancial services provided by financial intermedi­aries and funded through net interest receipts,
and reflects years of research and development by
Member States in order to have a measure which
is robust and harmonised across Member States.
Chapter 15 on contracts, leases and licences isne­cessary to describe an area of increasing importance in the national accounts. Chapters 16 and17 on insurance, social insurance and pensions
describe how these arrangements are handled in
the national accounts, as questions of redistribution
become of increasing interest as populations age.
Chapter 18 covers the rest of the world accounts,
which are the national accounts equivalent to theaccounts of the balance of payments measuring system. Chapter 19 on European Accounts is also new,covering aspects of the national accounts where
European institutional and trading arrangements
raise issues which require a harmonised approach.
Chapter 20 describes the accounts for the government sector — an area of special interest as issues

11

General features and basic principles

of fiscal prudence by Member States continue to be
critical in the conduct of economic policy in the EU.
Chapter 21 describes the links between businessaccounts and national accounts, an area of growing interest as multinational corpor­ations become
responsible for an increasing share in gross domestic product (GDP) for all countries. Chapter 22
describes the relationship of satellite accounts withthe main national accounts. Chapters 23 and 24
are for reference purposes; Chapter 23 sets out theclassifications used for sectors, activities and products in the ESA 2010, and Chapter 24 sets out thecomplete sequence of accounts for every sector.
1.05

1.06

The structure of the ESA 2010 is consistent withthe worldwide guidelines on national accounting
set out in the System of National Accounts 2008
(2008 SNA), apart from certain differences in presentation and the higher degree of precision of someof the ESA 2010 concepts which are used for specific EU purposes. Those guidelines were produced
under the joint responsibility of the United Nations(UN), the International Monetary Fund (IMF), theStatistical Office of the European Union (Eurostat),
the Organisation for Economic Cooperation andDevelopment (OECD) and the World Bank. The
ESA 2010 is focused on the circumstances and dataneeds in the EU. Like the 2008 SNA, the ESA 2010is harmonised with the concepts and classifications
used in many other social and economic statistics(for example, statistics on employment, statistics
on manufacturing and statistics on external trade).
The ESA 2010 therefore serves as the central framework of reference for the social and economic stat­
istics of the EU and its Member States.

assets, liabilities and net worth at the beginningand the end of the accounting period.
1.08

The input-output framework, through the supply and use tables, sets out in more detail the production process (cost structure, income generated
and employment) and the flows of goods and services (output, imports, exports, final consumption, intermediate consumption and capital formation by product group). Two important accounting identities are reflected in this framework: thesum of incomes generated in an industry is equal
to the value added produced by that industry; and,for any product or grouping of products, supply isequal to demand.

1.09

The ESA 2010 encompasses concepts of populationand employment. Such concepts are relevant forthe sector accounts, the accounts by industry andthe supply and use framework.

1.10

The ESA 2010 is not restricted to annual national
accounting, but applies also to quarterly andshorter or longer period accounts. It also applies toregional accounts.

1.11

The ESA 2010 exists alongside the 2008 SNA
because of the uses of national accounts measures in the EU. The Member States are responsible for the collection and presentation of their own
national accounts to describe the economic situ­
ation of their countries. Member States also compile a set of accounts which are submitted to theCommission (Eurostat) as part of a regulatory
data transmission programme, for key social, economic and fiscal policy uses in the Union. Those
uses include determination of Member State
monetary contributions to the EU budget via the‘fourth resource’, aid to regions of the EU throughthe structural funds programme and surveillanceof Member States’ economic performance in theframework of the excessive deficit procedure andof the Stability and Growth Pact.

1.12

In order that levies and benefits are distributed
according to measures compiled and presented in astrictly consistent manner, the economic statistics
used for those purposes shall be compiled according to the same concepts and rules. The ESA 2010is a regulation setting forth the rules, conventions,definitions and classifications to be applied in producing the national accounts in Member States

The ESA framework consists of two main sets oftables:(a) the institutional sector accounts;(b) the input-output framework, and the accounts
by industry.

1.07

2

The sector accounts provide, by institutional sector, a systematic description of the different stagesof the economic process: production, generationof income, distribution of income, redistributionof income, use of income and financial and nonfinancial accumulation. The sector accounts also
include balance sheets to describe the stocks ofEuropean system of accounts — ESA 2010

General features and basic principles

1.13

1.14

1.15

which are to be part of the data transmission programme as set out in Annex B to this Regulation.

challenges exist, and a more exhaustive list of data
issues is as follows:

Given the very large sums of money involved in
the contributions and benefits system operated in
the EU, it is essential that the measurement system be applied consistently in each Member State.
In such circumstances, it is important to adopt acautious approach to estimates which cannot be
observed directly in the market place, avoiding theuse of model-based procedures for the estimationof measures in the national accounts.

(1) transfer pricing between affiliated corporations(valuation of imports and exports);(2) the increase in toll processing, where goods aretraded across international borders with nochange in ownership (goods for processing),
and merchanting;(3) international trading via the internet, both forcorporations and households;

The ESA 2010 concepts are in several instances more
specific and precise than those of the 2008 SNA in
order to ensure as much consistency as possible
between Member States measures derived from thenational accounts. This over-riding requirement
for robust consistent estimates has resulted in theidentification of a core set of national accounts inthe EU. Where the level of consistency of measurement across Member States is insufficient, the latter
estimates are generally included in so-called ‘noncore-accounts’ covering supplementary tables andsatellite accounts.

(4) the trade and use of intellectual property assets
across the world;(5) workers working abroad, and remitting significant amounts to the family in the domestic territory (workers’ remittances, as part of personaltransfers);(6) multinational corporations organising theirbusiness across national boundaries, to maxi­
mise production efficiency and minimise theglobal tax burden. This can give rise to artificial
corporation structures which may not reflect
the economic reality;

An example of where it has been considered neces­sary to be cautious in the design of the ESA 2010lies in the field of pension liabilities. The case formeasuring these to assist in economic analyses is astrong one, but the critical requirement in the EU
to produce accounts which are consistent acrosstime and space has obliged a cautious approach.

(7) the use of off-shore financing vehicles (special
purpose entities and other forms) to arrange
finance for global activities;(8) re-exports of goods, and in the EU the transport of goods between Member States after
entry into the Union (quasi transport);

Globalisation
1.16

The increasingly global nature of economic activity
has increased international trade in all its forms, andincreased the challenges to countries of recording
their domestic economies in the national accounts.
Globalisation is the dynamic and multidimensional process whereby national resources become
more internationally mobile, while national econ­omies become increasingly interdependent. The
feature of globalisation which potentially causes
most measurement problems for national accounts
is the increasing share of international transactions
undertaken by multinational companies, where
the transactions across borders are between parents, subsidiaries and affiliates. However other

European system of accounts — ESA 20101(9) increase in foreign direct investment relationships, and the need to identify and allocate
direct investment flows.
1.17

All of these increasingly common aspects of globalisation make the capture and accurate measurement of cross-border flows a growing challenge fornational statisticians. Even with a comprehensive
and robust collection and measurement system forthe entries in the rest of the world sector (and thus
also in the international accounts found in the balance of payments), globalisation will increase theneed for extra efforts to maintain the quality ofnational accounts for all economies and groupingsof economies.

3

1

General features and basic principles

Uses of the ESA 2010
Framework for analysis and policy
1.18(4) the comparison of GDP growth rates or disposable
income per capita in the EU and other developed
economies.

The ESA framework can be used to analyse andevaluate:

For the EU and its Member States, the figures fromthe ESA framework play a major role in formulating and monitoring their social and economic
policies.

(a) the structure of a total economy. Examples oftypes of measurement used are:

The following examples demonstrate uses of the
ESA framework:

1.19(1) value added and employment by industry;(a) monitoring and guiding the euro area macroeconomic and monetary policymaking, anddefining criteria of convergence for the economic and monetary union (EMU) in termsof national accounts figures (e.g. GDP growth
rates);(2) value added and employment by region;(3) income distributed by sector;(4) imports and exports by product group;(5) final consumption expenditure by functional
heading and product group;(6) fixed capital formation and fixed capital stock byindustry;(b) defining criteria for the excessive deficit proced­
ure: measures of government deficit and debt;(7) the composition of the stocks and flows of financial assets by type of asset and by sector;(c) granting financial support to regions in the EU:
the allocation of expenditure funds to regions
uses regional accounts statistics;(b) specific parts or aspects of an economy.
Examples are:(d) determining the own resources of the EU
budget. The latter depend on national accounts
figures in three ways:(1) banking and finance in the national economy;(2) the role of government and its financial position;(3) the economy of a specific region (in comparison tothat of the nation as a whole);(1) the total resources for the EU are determined asa percentage of the sum of Member States’ grossnational incomes (GNI);(4) household saving and debt levels;(c) the development of an economy over time.
Examples are:(2) the third own resource of the EU is the VAT own
resource. The contributions by the Member States
for this resource are largely determined by national
accounts figures, because these figures are used to
calculate the average VAT rate;(1) the analysis of GDP growth rates;(2) the analysis of inflation;(3) the analysis of seasonal patterns in household
expenditure on the basis of quarterly accounts;(3) the relative sizes of the contributions by theMember States for the fourth own resource of the
EU are based on their gross national income estimates. These estimates are the basis for the majority of Member States’ payments.

(4) the analysis of the changing importance of particular types of financial instruments over time, e.g. theincreased importance of financial derivatives;(5) the comparison of the industrial structures of thenational economy over the long term;(d) a total economy in relation to other economies.
Examples are:(1) the comparison of the roles and size of government in the Member States of the EU;(2) the analysis of the interdependencies between theeconomies of the EU, taking into account Member
States and their regions;(3) the analysis of the composition and destination of
the exports of the EU;

4

Characteristics of the ESA 2010 concepts
1.20

In order to establish a balance between data needs
and data possibilities, the concepts in the ESA 2010
have several important characteristics. The characteristics are that the accounts are:(a) internationally compatible;(b) harmonised with other social and economic
statistical systems;

European system of accounts — ESA 2010

General features and basic principles(c) consistent;

1.23(d) operational, meaning that they can be measured in practice;(e) different from most administrative concepts;(g) focused on describing the economic process inmonetary and readily observable terms;(b) national disposable income per capita (thisratio requires consistency between the conceptsof national disposable income and measures of
population);(h) capable of applying in different situations andfor different purposes.
The concepts in the ESA 2010 are internationallycompatible because:(c) fixed capital formation as a percentage of
fixed capital stock (this ratio requires consistency between the definitions of these flows andstocks);(a) the concepts in the ESA 2010 are consistent with those in the worldwide guidelines onnational accounting, i.e. the 2008 SNA;(d) government deficit and government debt aspercentages of gross domestic product (thesefigures require consistency between the concepts of government deficit, government debt
and gross domestic product).

(b) for the Member States, the ESA 2010 is thestandard for submitting national accounts datato all international organisations;(c) international compatibility of concepts isessential when comparing statistics for different countries.
1.22

The concepts in the ESA 2010 are harmonisedwith those in other social and economic statistics
because the ESA 2010 employs concepts and classifications (e.g. Statistical classification of economic
activities in the European Union ‘NACE rev. 2’2)that are used for other social and economic statistics of Member States, e.g. in statistics on manufacturing, statistics on external trade and statistics
on employment; conceptual differences have been
kept to a minimum. Furthermore, the concepts
and classifications in the ESA 2010 are harmonisedwith those of the United Nations.
This harmonisation with social and economic stat­
istics helps the linkage to and comparison withthese figures, so that the quality of the national
accounts figures can be assured. Furthermore, theinformation contained in these specific statistics
can be better related to the general statistics on thenational economy.

2

Regulation (EC) No 1893/2006 of the European Parliament and of the Council of
20 December 2006 establishing the statistical classification of economic activities
NACE Revision 2 (OJ L 393, 30.12.2006, p. 1).

European system of accounts — ESA 2010

The shared concepts used throughout the national
accounting framework and the other social andeconomic statistical systems enable consistentmeasures to be derived. For example, the following
ratios can be calculated:(a) productivity figures, such as value added perhour worked (these figures require consistency
between the concepts of value added and hours
worked);(f) well-established and fixed over a long period;

1.21

1

The internal consistency of concepts allows estimates to be derived by residual, e.g. saving canbe estimated as the difference between disposable
income and final consumption expenditure.
1.24

The concepts in the ESA 2010 are applied with datacollection and measurement in mind. The oper­
ational character is revealed in several ways in theguidance for drawing up the accounts.
(a) Activities or items are only described when significant in size. For example: own-account production of goods by households such as weaving cloth and the production of pottery shallnot be recorded as production, because these
are insignificant for EU countries.
(b) Some concepts are accompanied by guidance on how to estimate them. For example,
in defining consumption of fixed capital, reference is made to linear depreciation. For
estimating fixed capital stock, the Perpetual
Inventory Method is to be applied where direct
information on the stock of fixed assets is missing. Another example is the valuation of ownaccount production: in principle, it is valued5

1

General features and basic principles

at basic prices, but if necessary the basic pricevalu­ation may be approximated by adding up
the various costs involved.
(c) Some conventions have been adopted. For
example the collective services provided bygovernment are all classified as final consumption expenditure.
1.25(b) administrative data sources explicitly takeaccount of the (separate) data needs of statistics; this applies, for example, to the Intrastat
system for providing information about deliveries of goods between Member States.
1.27

However, the data needed for national accounts
statistics may not be easy to collect directly, as
the underlying concepts usually diverge from theconcepts underlying administrative data sources.
Examples of the administrative sources are business accounts, records for various types of taxes(VAT, personal income tax, import levies, etc.),
social security data and data from supervisoryboards on banking and insurance. These administrative data serve as inputs for compiling thenational accounts. In general, they are transformed
in order to comply with the ESA.

(a) they have been approved as the international
standard for many years;(b) in the successive international guidelines onnational accounting, very few of the underlying
concepts change.
This conceptual continuity reduces the need torecalculate time series. Furthermore, it limits thevulnerability of the concepts to national and international political pressure. For these reasons, thenational accounts figures have been able to serveas an objective database for economic policy andanalysis.

The concepts in the ESA usually differ from theiradministrative counterparts in that:(a) administrative concepts differ between countries. As a consequence, international compatibility is not possible using administrative
concepts;

1.28(b) administrative concepts change over time. As
a consequence, comparisons over time are notpossible through administrative concepts;(d) the administrative concepts are generally not
optimal for economic analysis and the evalu­
ation of economic policy.
Nevertheless, administrative data sources meet thedata needs of national accounts and other statistics
very well, because:(a) concepts and classifications originally devisedfor statistical purposes are also adopted foradministrative purposes, e.g. the classificationof government expenditure by type;6

The concepts in the ESA 2010 are focused on
describing the economic process in monetary andreadily observable terms. Stocks and flows that are
not readily observable in monetary terms, or that
do not have a clear monetary counterpart, are notrecorded in the ESA.
This principle has not been applied strictly, because
account should also be taken of the requirementof consistency and the needs of users. For example, consistency requires that the value of collect­ive services produced by government is recorded
as output, because the payment of compensationof employees and the purchase of all kinds of goods
and services by government are readily observ­able
in monetary terms. Furthermore, for the purposesof economic analysis and policy, describing thecollective services of government in relation to therest of the national economy increases the usefulness of the national accounts as a whole.

(c) the concepts underlying administrative data
sources are usually not consistent among different administrative systems. However, linking and comparing data, which is crucial forcompiling national accounts figures, is only
possible with a consistent set of concepts;

1.26

The main concepts in the ESA are well establishedand fixed over a long period, because:

1.29

The scope of the concepts in the ESA can be illustrated by considering some important borderline
issues.
The following shall be recorded within the production boundary of the ESA (see paragraphs 3.07 to3.09):

European system of accounts — ESA 2010

General features and basic principles(a) production of individual and collective services
by government;

1.32

If activities are regarded as production and their
output is recorded, then the concomitant income,
employment, final consumption, etc. are also
recorded. For example, as the own-account production of housing services by owner-occupiersis recorded as production, so the income and final
consumption expenditure it generates for theseowner-occupiers are also recorded. As there is, bydefinition, no labour input to the production of theservices of owner-occupied dwellings, no employment is recorded. This maintains consistency withthe system of labour statistics, where no employment is recorded for ownership of dwellings. The
reverse holds when activities are not recorded as
production: domestic services produced and consumed within the same household do not generate
income and final consumption expenditure and no
employment is involved.

1.33

The ESA also lays down conventions, concerning:(b) own-account production of housing services byowner-occupiers;(c) production of goods for own final consumption, e.g. of agricultural products;(d) own-account construction, including that byhouseholds;(e) production of services by paid domestic staff;(f) breeding of fish in fish farms;(g) production forbidden by law, as long as allunits involved in the transaction enter into it
voluntarily;(h) production from which the revenues are notdeclared in full to the fiscal authorities, e.g.
clandestine production of textiles.
1.30(a) valuation of government output;

The following fall outside the production boundary, and shall not be recorded in the ESA:(b) valuation of the output of insurance services
and financial intermediation services indirectly
measured;(a) domestic and personal services produced andconsumed within the same household, e.g.
cleaning, the preparation of meals or the care ofsick or elderly people;(b) volunteer services that do not lead to the production of goods, e.g. care-taking and cleaning
without payment;(c) natural breeding of fish in open seas.
1.31

The ESA records all outputs that result fromproduction within the production boundary.
However, the outputs of ancillary activities shallnot be recorded. All inputs consumed by an ancillary activity shall be treated as inputs to the activity
it supports. If an establishment undertaking only
ancillary activities is statistically observable, in that
separate accounts for the production it undertakes
are readily available, or if it is in a geographicallydifferent location from the establishments it serves,it has to be recorded as a separate unit and allocated to the industrial classification corresponding to its principal activity, in both national andregional accounts. In the absence of suitable basic
data being available, the output of the ancillary
activity may be estimated by summing costs.

European system of accounts — ESA 20101(c) recording of the collective services provided bygovernment as final consumption expenditureand not as intermediate consumption;

Classification by sector
1.34

Sector accounts are created by allocating units tosectors and this enables transactions and balancing
items of the accounts to be presented by sector. The
presentation by sector reveals many key measuresfor economic and fiscal policy purposes. The main
sectors are households, government, corporations(financial and non-financial), non-profit institutions serving households (NPISHs) and the rest of
the world.
The distinction between market and non-market
activity is an important one. An entity controlled
by government, which is shown to be a market corporation, is classified in the corporation sector,
outside the general government sector. Thus, thedeficit and debt levels of the corporation will not
be part of the general government deficit and debt.

7

1

General features and basic principles

1.35

It is important that clear and robust criteria forallocating entities to sectors are set out.

Table 1.1 sets out the criteria used to distinguishbetween public and private sector, and in the public sector between the government sector and public corporations sector, and in the private sector
between the NPISH sector and the private corpor­
ations sector.

The public sector consists of all institutional units
resident in the economy that are controlled by government. The private sector consists of all otherresident units.
Table 1.1
Criteria

Controlled by government(public sector)

Non-market output

General government

NPISH

Market output

Public corporations

Private corporations

1.36

Control is defined as the ability to determine thegeneral policy or programme of an institutional
unit. Further details in relation to the definition ofcontrol are given in paragraphs 2.35 to 2.39.

1.37

Differentiating between market and non-market,
and so, for public sector entities, classifying theminto the general government sector or the corpor­
ations sector, is decided by the following rule:
An activity shall be considered as a market activity when the corresponding goods and services aretraded under the following conditions:(1) sellers act to maximise their profits in the longterm, and do so by selling goods and services
freely on the market to whoever is prepared to
pay the asking price;(2) buyers act to maximise their utility given theirlimited resources, by buying according towhich products best meet their needs at theoffered price;(3) effective markets exist where sellers and buyers
have access to, and information on, the market.
An effective market can operate even if these
conditions are not met perfectly.

1.38

1.39

8

Privately controlled(private sector)

The detail in the conceptual framework of the ESA
offers the opportunity for flexibility: some concepts
are not explicitly present in the ESA but can nevertheless easily be derived from it. An example is thecreation of new sectors by rearranging the subsectors defined in the ESA.
Flexibility exists also through the possibility tointroduce additional criteria that do not conflictwith the logic of the system. For example, thesecriteria can allow subsector accounts to be drawn
up by the scale of employment for producer units
or the size of income for households. For employment, subclassification by level of education, age
and gender can be introduced.

Satellite accounts
1.40

For some data needs, separate satellite accounts
should be drawn up.
Examples are:(a) social accounting matrices (SAMs);(b) the role of tourism in the national economy;(c) the analysis of the costs and financing of healthcare;(d) research and development recognised as capitalformation of intellectual property;(e) recognition of human capital as assets in thenational economy;(f) the analysis of the income and expenditure ofhouseholds on the basis of micro-oriented concepts of income and expenditure;(g) the interaction between the environment andthe economy;(h) production within households;(i) analysis of changes in welfare;(j) analysis of the differences between national
accounts and business accounts figures andtheir influence on stock and exchange markets;

European system of accounts — ESA 2010

General features and basic principles(k) estimation of tax revenues.
1.41(b) education can be described in terms of type of
education, the number of pupils, the average
number of years of education before obtaining
a diploma, etc.;

Satellite accounts serve such data needs by:(a) showing more detail where necessary and leaving out superfluous detail;(c) the effects of pollution can be described in termsof changes in the number of living species, thehealth of the trees in the forest, the volume ofrefuse, the amounts of carbon-monoxide andradiation, etc.

(b) enlarging the scope of the accounting framework by adding non-monetary information,e.g. on pollution and environmental assets;(c) changing some basic concepts, e.g. by enlar­ging
the concept of capital formation by including
expenditure on education.
1.42

1.43

1.44

A social accounting matrix (SAM) is a matrix presentation that elaborates the linkages between supply and use tables and the sector accounts. A SAM
provides additional information on the level andcomposition of employment, via a subdivisionof compensation of employees by type of person
employed. This subdivision applies to both the useof labour by industry, as shown in the use tables,
and the supply of labour by socio-economic subgroup, as shown in the allocation of primary
income account for subsectors of the sector households. In this way, the supply and use of various
categories of labour is shown systematically.
In satellite accounts, all basic concepts and classifications of the central framework of the ESA 2010
shall be retained. Changes in the concepts shall
only be introduced when this is the purpose of
the satellite account. In such instances, the satellite account shall also contain a table showing thelink between the major aggregates in the satellite
account and those in the central framework. In
this way, the central framework retains its role as aframework of reference and at the same time more
specific needs are addressed.
In general terms, the central framework does notinclude measures of stocks and flows that are notreadily observable in monetary terms (or withouta clear monetary counterpart). By their nature, theanalysis of such stocks and flows is usually also wellserved by compiling statistics in non-monetary
terms, e.g.:(a) production within households can be describedin terms of hours allocated to the alternative
uses;

European system of accounts — ESA 2010

1

1.45

Satellite accounts enable such statistics in nonmonetary units to be linked to the national
accounts in the central framework. Using the classifications employed in the central framework forsuch non-monetary statistics enables the link to be
made, e.g. the classification by type of household or
the classification by industry. In this way, a consistent extended framework is drawn up. This framework can then serve as a database for the analysis
and evaluation of interactions between the vari­ables in the central framework and those in theextended part.

1.46

The central framework and its major aggregates do
not describe changes in welfare. Extended accounts
can be drawn up which include also the imputed
monetary values of, for example:(a) domestic and personal services produced andconsumed within the same household;(b) changes in leisure time;(c) amenities and disadvantages of urban life;(d) inequalities in the distribution of income overpersons.

1.47

The extended accounts can also reclassify the
final expenditure on regrettable necessities (e.g.
defence) as intermediate consumption, i.e. as notcontributing to welfare. Similarly, the damage due
to floods and other natural disasters may be classified as intermediate consumption, i.e. as a reduction in (absolute) welfare. In this way, one could
try to construct a very rough and very imperfectindicator of changes in welfare. However, welfare
has many dimensions, most of which are not best
expressed in monetary terms. A better solution
for measuring welfare is therefore to use, for eachdimension, separate indicators and units of measurement. The indicators could be, for example,

9

1

General features and basic principles

infant mortality, life expectancy, adult literacy andnational income per capita. These indicators could
be incorporated into a satellite account.
1.48

1.49

account, the capital account and the rest of theworld account.
(2) The ESA 2010 describes a concept by providing
a definition and a listing of what is included andwhat is excluded. The 2008 SNA describes concepts usually in more general terms and explains
the rationale behind the conventions adopted.

In order to attain a consistent, internationally compatible framework, administrative concepts are
not employed in the ESA. However, for all kindsof national purposes, obtaining figures based on
administrative concepts can be very useful. For
example, for estimating tax revenues, statistics oftaxable income are required. Such statistics canbe provided by making some modifications to thenational accounts statistics.

(b) The ESA 2010 concepts are in several instances
more specific and precise than those of the 2008
SNA:
(1) The 2008 SNA does not contain specific criteria on
the distinction between market, for own final use
and non-market categorisation of output. The ESA
has therefore introduced more detailed guidance
to ensure a uniform approach.

A similar approach could be taken for concepts
used in national economic policy, e.g. for:(2) The ESA 2010 assumes that several types of household production of goods, such as the weaving ofcloth and the making of furniture, are not significant in Member States and therefore need not berecorded.

(a) the concept of inflation used for increasing
pensions, unemployment benefits or compensation of employees for civil servants;(b) the concepts of taxes, social contributions, government and the collective sector used in discussing the optimal size of the collective sector;(3) The ESA 2010 makes reference to institutionalarrangements in the EU, such as the Intrastat system for recording intra-EU flows of goods and thecontributions by the Member States to the EU.

(c) the concept of ‘strategic’ sectors/industries
used in national economic policy or the economic policy of the EU;(4) The ESA 2010 contains EU-specific classifications,e.g. Classification of products by activity (CPA)3for products and NACE Rev. 2 for industries(both are harmonised with the corresponding UNclassifications).

(d) the concept of ‘business investments’ used innational economic policy;(5) The ESA 2010 contains an additional classification
for all external transactions: they are divided into
those between residents of the EU and those withresidents from outside the EU.

(e) a table showing a complete recording ofpensions.
Satellite accounts or supplementary tables canmeet such data needs.

(6) The ESA 2010 contains a rearrangement of the2008 SNA subsectors for the financial corporations sector, to meet the needs of the European
Monetary Union. The ESA 2010 can be more specific than the 2008 SNA, because the ESA 2010 primarily applies to the Member States. For the dataneeds in the Union, the ESA should also be more
specific.

The ESA 2010 and the 2008 SNA
1.50

The ESA 2010 is based on the concepts of the2008 SNA, which provides guidelines on national
accounting for all countries throughout the world.
Nevertheless, there are several differences between
the ESA 2010 and the 2008 SNA:(a) Differences in presentation:(1) In the ESA 2010 there are separate chapters ontransactions in products, distributive transactions
and financial transactions. In contrast, in the 2008
SNA these transactions are explained in chaptersarranged by account, e.g. chapters on the production account, the primary distribution of income

10

The ESA 2010 and the ESA 95
1.51

3

The ESA 2010 differs in scope as well as in concepts from the ESA 95. Most of the differences correspond to differences between the 1993 SNA andthe 2008 SNA. The major differences are:Regulation (EC) No 451/2008 of the European Parliament and of the Council of 23
April 2008 establishing a new statistical classification of products by activity (CPA)(OJ L 145, 4.6.2008, p. 65).

European system of accounts — ESA 2010

General features and basic principles(a) the recognition of research and development
as capital formation leading to assets of intellectual property. This change shall be recorded
in a satellite account, and included in the coreaccounts when sufficient robustness and harmonisation of measures is observable amongst
Member States;(h) the treatment of super dividends paid by public corporations has been clarified, i.e. they are
to be treated as exceptional payments and withdrawals from equity;(i) the principles for the treatment of public-private partnerships have been set out, and thetreatment of restructuring agencies expanded;(b) expenditures on weapon systems that meet thegeneral definition of assets have been classified
as fixed capital formation, rather than intermediate expenditure;(j) transactions between government and public
corporations, and with securitisation vehicles,
have been clarified to improve the recording ofitems that could significantly affect government
debt;(c) the analytical concept of capital services has
been introduced for market production, so thata supplementary table may be produced showing them as a component of value added;(k) the treatment of loan guarantees has been clarified, and a new treatment introduced for standardised loan guarantees, such as export credit
guarantees and student loans guarantees. The
new treatment is that, to the extent of the likely
call on the guarantees, a financial asset and liability are to be recognised in the accounts.

(d) the financial assets boundary has been expanded
to include a wider coverage of financial derivative contracts;(e) new rules for recording pension entitlements. A
supplementary table has been introduced into
the accounts, to allow estimates to be recorded
for all entitlements in social insurance, whether
funded or unfunded. The full range of information required for a comprehensive analysis
is provided in this table that shows the entitlements and associated flows for all private andpublic pension schemes, whether funded or
unfunded, and including social security pension schemes;(f) the application of the rules on change of ownership of goods has been made universal, resulting in changes to the recording of merchanting,and goods sent for processing, both abroad andin the domestic economy. This results in goods
sent for processing abroad being recorded ona net basis, as opposed to a gross basis in the1993 SNA and the ESA 95. This change has significant implications for the recording of suchactivities in the supply and use framework;(g) more guidance is given on financial corporations in general, and special purpose entities(SPEs) in particular. The treatment of government controlled SPEs abroad has been changed
to ensure that liabilities incurred by the SPEs
are shown in the government accounts;

European system of accounts — ESA 2010

1

1.52

The changes in the ESA 2010 in comparison
with the ESA 95 are not restricted to conceptualchanges. There are major differences in scope, withnew chapters on satellite accounts, government
accounts and the rest of the world accounts. There
are also significant extensions to the chapters onquarterly accounts and regional accounts.

Basic principles of the ESA 2010 as asystem
1.53

The main characteristics of the system are:(a) statistical units and their groupings;(b) flows and stocks;(c) the system of accounts and the aggregates;(d) the input-output framework.

Statistical units and their groupings
1.54

The ESA 2010 system uses two types of unit andtwo corresponding ways of subdividing the economy, which are quite different and serve separate
analytical purposes.

111

General features and basic principles

1.55

1.56

The first purpose of describing income, expenditure and financial flows, and balance sheets, is met
by grouping institutional units into sectors on thebasis of their principal functions, behaviour andobjectives.

in a single site or in closely located sites, and which
contribute to the performance of an activity at theclass level (four digits) of the NACE Rev. 2.
1.59

The second purpose of describing processes of production and for input-output analysis is met by thesystem grouping local kind-of-activity units (local
KAUs) into industries on the basis of their type ofactivity. An activity is characterised by an input of
products, a production process and an output of
products.

An institutional unit comprises one or more local
KAUs; a local KAU belongs to one and only one
institutional unit.

Institutional units and sectors
1.57

Institutional units are economic entities that arecapable of owning goods and assets, of incurring liabilities and of engaging in economic activities and transactions with other units in their own
right. For the purposes of the ESA 2010 system, theinstitutional units are grouped together into fivemutually exclusive domestic institutional sectors:(a) non-financial corporations;

1.60(b) financial corporations;(c) general government;

1.61

The total economy is defined in terms of resident
units. A unit is a resident unit of a country when it
has a centre of predominant economic interest on
the economic territory of that country — that is,when it engages for an extended period (one year
or more) in economic activities on this territory.
The institutional sectors referred to in paragraph1.57 are groups of resident institutional units.

1.62

Resident units engage in transactions with nonresident units (that is, units which are resident inother economies). These transactions are the external transactions of the economy and are groupedin the rest of the world account. So the rest of theworld plays a role similar to that of an institutional
sector, although non-resident units are included
only in so far as they are engaged in transactions
with resident institutional units.

1.63

Notional resident units, treated in the ESA 2010
system as institutional units, are defined as:(e) non-profit institutions serving households.
The five sectors together make up the total domestic economy. Each sector is also divided into subsectors. The ESA 2010 system enables a complete
set of flow accounts and balance sheets to be compiled for each sector, and subsector, as well as forthe total economy. Non-resident units can interact with these five domestic sectors, and the interactions are shown between the five domestic sectors and a sixth institutional sector: the rest of theworld sector.

Local KAUs and industries
When institutional units carry out more than one
activity, they shall be partitioned with regard to thetype of activity. Local KAUs enable this presentation to be made.
A local KAU groups all the parts of an institutional
unit in its capacity as producer which are located12

For analysis of the production process, use is madeof an analytical unit of production. This unit is only
observable when a local KAU produces one typeof product, with no secondary activities. This unit
is known as a unit of homogeneous production.
Groupings of such units constitute homogeneous
branches.

Resident and non-resident units; total economy andrest of the world(d) households;

1.58

Local KAUs are registered for each secondary activity; however, if the accounting documents necessary to separately describe such activities are notavailable, a local KAU will combine several secondary activities. The group of all local KAUs engaged
on the same, or similar, kind-of-activity constitutes
an industry.

(a) those parts of non-resident units which have acentre of predominant economic interest (usually which engage in economic transactions for

European system of accounts — ESA 2010

General features and basic principles

a year or more) on the economic territory of thecountry;(b) distributive transactions: which describe how
value added generated by production is distributed to labour, capital and government, and theredistribution of income and wealth (taxes on
income and wealth and other transfers);(b) non-resident units in their capacity as ownersof land or buildings on the economic territoryof the country, but only in respect of transactions affecting such land or buildings.

(c) financial transactions: which describe the net
acquisition of financial assets or the net incurrence of liabilities for each type of financial
instrument. Such transactions occur both ascounterparts of non-financial transactions,and as transactions involving only financial
instruments;

Flows and stocks
1.64

1

Two basic kinds of information are recorded: flows
and stocks.
Flows refer to actions and effects of events that takeplace within a given period of time, while stocks
refer to positions at a point of time.

(d) transactions not included in the three groups
above: acquisitions less disposals of non-produced non-financial assets.

Flows
Properties of transactions
1.65

Flows reflect the creation, transformation,exchange, transfer or extinction of economic value.
They involve changes in the value of an institutional unit’s assets or liabilities. Economic flows
are of two kinds: transactions, and other changes
in assets.

Interactions versus intra-unit transactions
1.67

Most transactions are interactions between two
or more institutional units. However, the ESA2010 system records some actions within institutional units as transactions. The purpose of recording these intra-unit transactions is to give a more
analytically useful picture of output, final uses andcosts.

1.68

Consumption of fixed capital, which is recorded
as a cost by the ESA 2010 system, is an intra-unit
transaction. Most of the other intra-unit transactions are transactions in products, typicallyrecorded when institutional units operating as
both producers and final consumers, choose to
consume some of the output they have produced.
This is often the case for households and general
government.

1.69

All own-produced output used for final uses within
the same institutional unit shall be recorded. Ownproduced output used for intermediate consumption within the same institutional unit shall berecorded only when production and intermediate consumption take place in different local
KAUs within the same institutional unit. Output
produced and used as intermediate consumption
within the same local KAU shall not be recorded.

Transactions appear in all accounts and tables
where flows appear, except the other changes
in volume of assets account and the revaluationaccount. Other changes in assets are recorded onlyin those two accounts.
Elementary transactions and other flows aregrouped into a relatively small number of types
according to their nature.

Transactions
1.66

A transaction is an economic flow that is an interaction between institutional units by mutual agreement or an action within an institutional unit that it
is useful to treat as a transaction, because the unit isoperating in two different capacities. Transactions
are split into four main groups:(a) transactions in products: which describe theorigin (domestic output or imports) and use(intermediate consumption, final consumption, capital formation — covering consumption of fixed capital — or exports) of products;

European system of accounts — ESA 201013

1

General features and basic principles

through a third unit B. Thus, the single transaction
between A and C is recorded as two transactions:
one between A and B, and one between B and C. In
this case the transaction is rerouted.

Monetary versus non-monetary transactions
1.70

Transactions are monetary transactions when theunits involved make or receive payments, or incur
liabilities or receive assets denominated in units ofcurrency.
Transactions that do not involve the exchange ofcash, or assets or liabilities denominated in unitsof currency, are non-monetary transactions. Intraunit transactions are non-monetary transactions.
Non-monetary transactions involving more than
one institutional unit occur among transactions in
products (barter of products), distributive transactions (remuneration in kind, transfers in kind,etc.) and other transactions (barter of non-produced non-financial assets). The ESA 2010 system
records all transactions in monetary terms. The
values to be recorded for non-monetary transactions must therefore be measured indirectly or otherwise estimated.

1.74

An example of rerouting is the way in which
employers’ social contributions paid directly by
employers to social insurance funds are recordedin the accounts. The system records these payments as two transactions: employers pay employers’ social contributions to their employees, andemployees pay the same contributions to social
insurance funds. As with all rerouting, the purpose
is to bring out the economic substance behind thetransaction, which in this case is to show employers’ social contributions as contributions paid forthe benefit of employees.

1.75

Another type of rerouting is that of transactions recorded as taking place between two or
more institutional units, even though, according to the parties involved, no transaction takes
place at all. An example is the treatment of property income earned on certain insurance funds,
which is retained by insurance enterprises. The system records this property income as being paid by
insurance enterprises to policyholders, who thenpay the same amount back to the insurance enterprises as premium supplements.

Transactions with and without counterparts
1.71

Transactions involving more than one unit are of
two kinds. They can be ‘something for something’,
i.e. requited transactions, or they can be ‘somethingfor nothing’, i.e. unrequited transactions. Requitedtransactions are exchanges between institutional
units, i.e. provision of goods, services or assets inreturn for a counterpart, e.g. money. Unrequitedtransactions are payments in cash or in kind from
one institutional unit to another without counterpart. Requited transactions occur in all fourtransaction groups, while unrequited transactions
are mainly distributive transactions, for example,
taxes, social assistance benefits or gifts. Such unrequited transactions are called transfers.

Rearranged transactions
1.72

Partitioning
1.76

When a transaction appearing to the parties
involved as a single transaction is recorded as two or
more differently classified transactions, the transaction is partitioned. Partitioning does not imply
including additional units in the transactions.

1.77

The payment of non-life insurance premiums isa typical partitioned transaction. Although policyholders and insurers regard these payments as
one transaction, the ESA 2010 system divides theminto two quite different transactions: payments inreturn for non-life insurance services provided,and net non-life insurance premiums. Recording
the sale of a product as the sale of the product andthe sale of a trade margin is another example ofpartitioning.

The transactions are recorded in the same way as
they appear to the institutional units involved.
However, some transactions are rearranged inorder to bring out the underlying economic relationships more clearly. Transactions can be rearranged in three ways: rerouting, partitioning andrecognising the principal party to a transaction.

Rerouting
1.73

14

A transaction that appears to the units involved as
taking place directly between units A and C may berecorded in the accounts as taking place indirectly

Recognising the principal party to a transaction
1.78

When a unit carries out a transaction on behalf ofanother unit (the principal) and is funded by that

European system of accounts — ESA 2010

General features and basic principles

unit, the transaction is recorded exclusively in theaccounts of the principal. As a rule, one should not
go beyond this principle by trying, for instance,
to allocate taxes or subsidies to ultimate payers
or ultimate beneficiaries under the adoption ofassumptions.

(b) changes in assets and liabilities due to exceptional, unanticipated events which are not economic in nature;(c) changes in classification and structure.
1.82

An example is the collection of taxes by one government unit on behalf of another. A tax is attributed to the government unit that exercises theauthority to impose the tax (either as a principal
or through the delegated authority of the principal) and has final discretion to set and vary the rateof the tax.

Borderline cases
1.79

The definition of a transaction implies that an interaction between institutional units be by mutual
agreement. When a transaction is undertaken bymutual agreement, the prior knowledge and consent of the institutional units is implied. The payments of taxes, fines and penalties are by mutual
agreement, in that the payer is a citizen subject tothe law of the land. However, uncompensated seizure of assets is not regarded as a transaction, evenwhen imposed by law.
Illegal economic actions shall be considered astransactions when all units involved enter theactions by mutual agreement. Thus, purchases,
sales or barters of illegal drugs or stolen property
are transactions, while theft is not.

Other changes in assets record changes that are not
the result of transactions. They are either:

1.83

Holding gains and losses occur when there arechanges in the prices of assets. They occur on all
kinds of financial and non-financial assets, and on
liabilities. Holding gains and losses accrue to theowners of assets and liabilities purely as a result ofholding the assets or liabilities over time, withouttransforming them in any way.

1.84

Holding gains and losses measured on the basis ofcurrent market prices are called nominal holding
gains and losses. These may be decomposed into
neutral holding gains and losses, reflecting changes
in the general price level, and real holding gains
and losses, reflecting changes in the prices of assets
beyond that of the general price change.

Stocks1.85

Stocks are the holdings of assets and liabilities at apoint in time. Stocks are recorded at the beginningand end of each accounting period. The accounts
that show stocks are called balance sheets.

1.86

Stocks are also recorded for population andemployment. However, such stocks are recorded asmean values over the accounting period. Stocks arerecorded for all assets within the system’s boundaries; that is, for financial assets and liabilities andfor non-financial assets, both produced and nonproduced. However, the coverage is limited tothose assets that are used in economic activity andthat are subject to ownership rights.

(a) other changes in the volume of assets and liabilities; or(b) holding gains and losses.

Other changes in the volume of assets and liabilities
1.81

Other changes in the volume of assets and liabilities records changes divided into three maincategories:(a) normal appearance and disappearance of assets
other than by transactions;

European system of accounts — ESA 2010

Examples of changes within the category referred
to in point (a) of paragraph 1.81 are discovery or
depletion of subsoil assets, and natural growth of
non-cultivated biological resources. Examples ofchanges within the category referred to in point (b)of paragraph 1.81 are losses in assets due to natural disasters, war or severe acts of crime. Unilateralcancellation of debt and uncompensated seizure ofassets also belong to category (b). An example of achange within the category referred to in point (c)of paragraph 1.81 is the reclassification of an institutional unit from one sector to another.

Holding gains and losses

Other changes in assets
1.80

1

15

1

General features and basic principles

1.87

Thus, stocks are not recorded for assets such as
human capital and natural resources that are notowned.

provider. For example, when a bank legally owns
a plane, but enters into a financial lease arrangement with an airline to operate the plane, then theairline is held to be the owner of the plane as far astransactions in the accounts are concerned. At thesame time as the airline is shown as purchasing theplane, a loan is imputed from the bank to the airline reflecting the amounts due in the future for useof the plane.

Within its boundaries, the ESA 2010 system is
exhaustive in respect of both flows and stocks.
This implies that all changes in stocks can be fully
explained by recorded flows.

The system of accounts and the aggregates
Double entry/quadruple entry
Rules of accounting
1.88

An account records changes in value accruing to aunit or sector according to the nature of the economic flows shown in the account. It is a tablewith two columns. The current accounts are thosewhich show production, generation and allocation of income, distribution and redistribution ofincome, and its use. The accumulation accounts
are the capital and financial accounts, and the otherchanges in volume accounts.

1.91

For a unit or sector, national accounting is basedon the principle of double entry. Each transaction
shall be recorded twice, once as a resource (or achange in liabilities) and once as a use (or a change
in assets). The total of transactions recorded asresources or changes in liabilities and the total oftransactions recorded as uses or changes in assets
must be equal, thus permitting a check on the consistency of the accounts.

1.92

National accounts — with all units and all sectors— shall be based on a principle of quadruple entry,
since most transactions involve two institutional
units. Each transaction shall be recorded twice by
the two transactors involved. For example, a social
benefit in cash paid by a government unit to ahousehold is recorded in the accounts of government as a use under transfers and a negative acquisition of assets under currency and deposits; in theaccounts of the households sector it is recorded asa resource under transfers and an acquisition ofassets under currency and deposits.

1.93

Transactions within a single unit (such as the consumption of output by the same unit that producedit) shall require only two entries, whose values haveto be estimated.

Terminology for the two sides of the accounts
1.89

1.90

16

The ESA 2010 system shows ‘resources’ on theright side of the current accounts where transactions appear which add to the economic value of aunit or a sector. The left side of the accounts shows‘uses’ — transactions that reduce the economic
value. The right side of the accumulation accounts
show ‘changes in liabilities and net worth’ and theleft side shows ‘changes in assets’. Balance sheets
are presented with ‘liabilities and net worth’ (thedifference between assets and liabilities) on theright side and ‘assets’ on the left. Comparison of
two successive balance sheets shows changes in liabilities and net worth and changes in assets.
A distinction is made in the ESA between legal
ownership and economic ownership. The criterion
for recording the transfer of goods from one unit toanother is that the economic ownership passes from
one to the other. The legal owner is the unit entitled in law to the benefits of possession. However, alegal owner can contract with another unit for thelatter to accept the risks and rewards of using thegoods in production, in return for an agreed payment. The nature of the agreement is a financial
lease, where the payments reflect only the placingof the asset at the disposal of the borrower by the

Valuation
1.94

With the exception of some variables concerning population and labour, the ESA 2010 systemshows all flows and stocks in monetary terms.
Flows and stocks shall be measured according totheir exchange value, i.e. the value at which flows
and stocks are in fact, or could be, exchanged forcash. Market prices are, thus, the ESA’s reference
for valuation.

European system of accounts — ESA 2010

General features and basic principles

1.95

1.96

In the case of monetary transactions and cash holdings and liabilities, the values required are directly
available. In most other cases, the best method ofvaluation is by reference to market prices for analogous goods, services or assets. This method isused for e.g. barter and the services of owner-occupied dwellings. When no market prices for analogous products are available, for instance in the caseof non-market services produced by government,
valuation is made by summing production costs.
If there is no market price to refer to, and costs are
not available, then flows and stocks may be valued
at the discounted present value of expected future
returns. This last method is only to be used as a lastresort.
Stocks are valued at current prices at the time towhich the balance sheet relates, not at the time of
production or acquisition of the goods or assetsthat form the stocks. It is necessary to value stocks
at their estimated written-down current acquisition values or production costs.

Special valuations concerning products
1.97

1.98

As a result of transport costs, trade margins andtaxes less subsidies on products, the producer andthe user of a given product usually perceive its value
differently. In order to keep as close as possible tothe views of the transactors, the ESA 2010 system
records all uses at purchaser’s prices, which include
transport costs, trade margins and taxes less subsidies on products, while output is recorded at basic
prices, which exclude those elements.
Imports and exports of products shall be recorded
at border values. Total imports and exports are valued at the exporter’s customs frontier, or free on
board (FOB). Foreign transport and insurance services between the importer’s and the exporter’s
frontiers are not included in the value of goods
but are recorded under services. As it may not be
possible to obtain FOB values for detailed product breakdowns, the tables containing details on
foreign trade show imports valued at the importer’s customs frontier (CIF value). All transport andinsurance services to the importer’s frontier are
included in the value of imported goods. As far asthese services concern domestic services, a global
FOB/CIF adjustment is made in this presentation.

European system of accounts — ESA 2010

1

Valuation at constant prices
1.99

Valuation at constant prices means valuing theflows and stocks in an accounting period at theprices of a previous period. The purpose of valuation at constant prices is to decompose changes
over time in the values of flows and stocks intochanges in price and changes in volume. Flows andstocks at constant prices are described as being involume terms.

1.100 Many flows and stocks, e.g. income, do not haveprice and quantity dimensions of their own.
However, the purchasing power of such variables
can be obtained by deflating the current values
with a suitable price index, e.g. the price index for
final national uses, excluding changes in inventories. Deflated flows and stocks are also described as
being in real terms. An example is real disposable
income.

Time of recording
1.101 Flows shall be recorded on an accrual basis; thatis, when economic value is created, transformed or
extinguished, or when claims and obligations arise,
are transformed or are cancelled.

1.102 Output is recorded when produced and not when

paid for by a purchaser. The sale of an asset isrecorded when the asset changes hands, not when
the corresponding payment is made. Interest isrecorded in the accounting period when it accrues,
regardless of whether or not it is paid in that period.
Recording on an accrual basis applies to all flows,
monetary as well as non-monetary and intra-unit
as well as flows between units.

1.103 It may be necessary to relax this approach for taxes

and other flows concerning general government,
which are often recorded on a cash basis in government accounts. It may be difficult to carry out anexact transformation of such flows from cash basis
to accrual basis, and so an approximate method
may be used.

1.104 As an exception to the general rules governing therecording of taxes and social contributions payable to the general government, they can either berecorded net of the part unlikely to be collected or,if this part is included, it is neutralised in the same17

1

General features and basic principles

accounting period by a capital transfer from thegeneral government to the relevant sectors.
1.105 Flows shall be recorded at the same point of time forall institutional units involved and in all accounts.
Institutional units do not always apply the sameaccounting rules. Even when they do, differencesin actual recording may occur for practical reasons
such as delays in communication. Consequently,
transactions may be recorded at different times by
the transactors involved. Such discrepancies shallbe eliminated by adjustments.

Consolidation and netting
Consolidation
1.106 Consolidation refers to the elimination, from bothuses and resources, of transactions that occur
between units when units are grouped, and to theelimination of reciprocal financial assets and liabilities. This occurs commonly when the accounts ofsubsectors of general government are combined.

1.107 As a matter of principle, flows and stocks between

constituent units within subsectors or sectors mustnot be consolidated.

1.108 However, consolidated accounts may be built

up for complementary presentations and analyses. Information on the transactions of such (sub)sectors with other sectors and the corresponding‘external’ financial position may be more significant than overall gross figures.

1.109 Moreover, the accounts and tables showing thecreditor/debtor relationship provide a detailed picture of financing of the economy and are considered very useful for understanding the channels
through which the financing surpluses move fromfinal lenders to final borrowers.

Netting
1.110 Individual units or sectors may have the same kindof transaction both as a use and as a resource (e.g.
they both pay and receive interest) and the samekind of financial instrument both as an asset andas a liability. The approach in the ESA is grossrecording, apart from the degree of netting whichis inherent in the classifications themselves.

18

1.111 Netting is implicit in various transaction catego-ries, the most outstanding example being ‘changes
in inventories’, which underlines the analytically significant aspect of overall capital formation rather than tracking daily additions and withdrawals. Similarly, with few exceptions, the financial account and other changes in assets accounts
record increases in assets and in liabilities on a net
basis, bringing out the final consequences of those
types of flows at the end of the accounting period.

Accounts, balancing items and aggregates
1.112 For units or groups of units, different accounts

record transactions which are connected to an
aspect of economic life (for instance, production). For the production account, the transactions will not show a balance between uses andresources without the introduction of a balancing
item. Similarly, a balancing item (net worth) must
be introduced between the total of assets and thetotal of liabilities of an institutional unit or sector. Balancing items are meaningful measuresof economic performance in themselves. Whensummed for the whole economy, they are significant aggregates.

The sequence of accounts
1.113 The ESA 2010 system is built around a sequenceof interconnected accounts. The full sequence ofaccounts for the institutional units and sectors
is composed of current accounts, accumulationaccounts and balance sheets.

1.114 Current accounts deal with the production, gen-eration, distribution and redistribution of income
and the use of such income in the form of final consumption. Accumulation accounts cover changes
in assets and liabilities and changes in net worth(the difference for any institutional unit or groupof units between its assets and liabilities). Balance
sheets present stocks of assets and liabilities andnet worth.

1.115 The sequence of accounts for local KAUs andindustries is shortened to the first current accounts:
production account and generation of income
account, the balancing item of which is the operating surplus.

European system of accounts — ESA 2010

General features and basic principles

The goods and services account1.116 The goods and services account shows, for the

economy as a whole or for groups of products,
the total resources (output and imports) and usesof goods and services (intermediate consumption, final consumption, changes in inventories,
gross fixed capital formation, acquisitions less disposals of valuables, and exports). This account is
not an account in the same sense as the others inthe sequence, and does not generate a balancing
item which is passed on to the next account in thesequence. It is rather the presentation in table formof an accounting identity, according to which supply is equal to demand for all products and groups
of products in the economy.

The rest of the world account
1.117 The rest of the world account covers transactions

between resident and non-resident institutional
units and the related stocks of assets and liabilities.
As the rest of the world plays a role in the accounting structure similar to that of an institutional sector, the rest of the world account is establishedfrom the point of view of the rest of the world. A

European system of accounts — ESA 2010

1

resource for the rest of the world is a use for the
total economy and vice versa. If a balancing item ispositive, it means a surplus of the rest of the world
and a deficit of the total economy, and vice versa if
the balancing item is negative.
The rest of the world account is unlike the othersector accounts in that it does not show all theaccounting transactions in the rest of the world,but only those which have a counterparty in thedomestic economy being measured.

Balancing items
1.118 A balancing item is obtained by subtracting thetotal value of the entries on one side of an accountfrom the total value on the other side.
Balancing items embody a great deal of information and include some of the most important
entries in the accounts, as can be seen from the following examples of balancing items: value added,
operating surplus, disposable income, saving, net
lending/net borrowing.
The following diagram shows the sequence ofaccounts in flow form — each balancing item isshown in bold.

19

1

General features and basic principles

A diagram of the sequence of accounts
Production accountValue added

Generation of income accountOperating surplus/mixed
incomeAllocation of primary income accountBalance of primary incomes

Secondary distribution of income
account
Disposable income

Openingbalance
sheet

Net
worth

20

Redistribution of income in kind account
Adjusted disposable income

The use of disposable income
account

The use of adjusted disposable income
account

SavingSavingCapital accountOtherchangesinvolumeaccount

Net lending (+)/borrowing (–)

Financial accountNet lending (+)/borrowing(–)

Changesinvolumeof assets

Revaluationaccount

Closingbalancesheet

Nominalholding
gains
andlossesNet
worth

European system of accounts — ESA 2010

General features and basic principles

1.119 The first account in the sequence is the production

account, which records the output and inputs ofthe production process, leaving value added as thebalancing item.

1.120 The value added is taken forward to the next

account which is the generation of income account.
Here the compensation of employees in the production process is recorded, as well as taxes dueto government because of the production, so thatthe operating surplus (or mixed income from theself-employed of the households sector) can bederived as the balancing item for each sector. This
step is necessary so that the amount of value added
retained in the producing sector as operating surplus or mixed income can be measured.

1.121 Then the value added, broken down between com-pensation of employees, taxes and operating surplus/mixed income, is taken forward with thisbreakdown to the allocation of primary income
account. The breakdown allows the allocationof each factor income to the receiving sector, as
opposed to the producing sector. For example, allcompensation of employees is allocated between
the households sector and the rest of the world
sector, whereas operating surplus remains in thecorporations sector where it was generated. Also
recorded in this account are the property income
flows into the sector, and those out of the sector,
so that the balancing item is the balance of primary
incomes flowing into the sector.

1.122 The next account records redistribution of theseincomes through transfers — the secondary distribution of income account. The major instrumentsof redistribution are government taxes on, andsocial benefits for, the households sector. The balancing item is disposable income.

1.123 The main sequence of core accounts carries on to

the use of disposable income account; an accountrelevant to the households sector, as it is here thathousehold final expenditure is recorded, leaving
household saving as the balancing item.

1.124 At the same time a parallel account is created, theredistribution of income in kind account. Thisaccount has the specific purpose of showing socialtransfers in kind as an imputed transfer from government to the households sector, so that household income can rise by the value of individual

European system of accounts — ESA 20101

government services. In the next account (use ofadjusted disposable income account), the household use of disposable income is increased by thesame amount, as if the households sector werebuying the individual services provided by government. Those two imputations cancel out, so thatthe balancing item is saving, identical to saving in
the main sequence of accounts.
1.125 Saving is taken on to the capital account where it isused to fund capital formation, allowing for capitaltransfers in and out of the sectors. Underspend or
overspend on the acquisition of real assets resultsin the balancing item net lending or borrowing.
Net lending is a surplus loaned out, and net borrowing is the financing of a deficit.

1.126 Finally, the financial accounts are met, where thedetailed lending and borrowing of each sector islaid out so that a balancing item of net lending or
borrowing is observed. This should exactly matchthe net lending/borrowing balancing item of thecapital account, and any difference must be a measurement discrepancy between the real and financial recordings of economic activity.

1.127 Considering the bottom row of the diagram, theleft-hand account is the opening balance sheet,showing the level of all assets and liabilities, both
real and financial, at the start of a specified period.
The wealth of an economy is measured by its net
worth (assets less liabilities) and this is shown at
the bottom of the balance sheet.

1.128 Moving from left to right from the opening bal-ances, the various changes to assets and liabilities
that occur in the period of account are recorded.
The capital account and financial account show
the changes due to transactions in real assets andfinancial assets and liabilities respectively. In theabsence of other effects, this would enable theimmediate calculation of the closing position, byadding the changes to the opening position.

1.129 However, changes can occur outside the economic

cycle of production and consumption, and suchchanges will affect the values of assets and liabilities
at the closing period. One type of change is a change
in volume of assets — real changes to fixed capitalbrought about by events which are not part of theeconomy. An example would be a catastrophic loss
— a large earthquake, when a significant amount21

1

General features and basic principles

of assets were destroyed not through an economic transaction of exchange or transfer. This
loss must be recorded in the other changes in volume account, to account for the lower level ofassets than expected purely by looking at economic
events. A second way in which assets (and liabilities) can change in value, other than as the resultof an economic transaction, is through a change inprice resulting in holding gains and losses in thestock of assets held. This change is recorded in therevaluation accounts. Allowing for these two extra
effects on the values of the stock of assets and liabilities enables the closing balance sheet values to be
estimated as the opening position adjusted for thechanges in the flow accounts of the bottom row of
the figure.

Aggregates
1.130 The aggregates are composite values which meas-

ure the result of the activity of the total economy; for example, output, value added, disposable
income, final consumption, saving, capital formation, etc. Although the calculation of the aggregatesis not the sole purpose of the ESA, they are important as summary indicators for purposes of macroeconomic analysis and comparisons over time andspace.

1.131 Two types of aggregates are distinguished:(a) aggregates which refer directly to transactions in the ESA 2010 system, such as the output of goods and services, final consumption,
gross fixed capital formation, compensation of
employees, etc.;(b) aggregates which represent balancing items in
the accounts, such as GDP at market prices,
operating surplus of the total economy, GNI,
national disposable income, saving, current
external balance, and net worth of the total
economy (national wealth).
1.132 There are important uses for national accounts

measures per head of population. For broad aggregates such as GDP or national income or household final consumption, the denominator commonly used is the total (resident) population.
When subsectoring the accounts or part of theaccounts of the households sector, data on the

22

number of households and the number of persons
belonging to each subsector are used.

GDP: a key aggregate
1.133 GDP is one of the key aggregates in the ESA. GDP

is a measure of the total economic activity taking
place on an economic territory which leads to output meeting the final demands of the economy.
There are three ways of measuring GDP at market
prices:(1) the production approach, as the sum of thevalues added by all activities which produce
goods and services, plus taxes less subsidies on
products;(2) the expenditure approach, as the total of all
final expenditures made in either consuming
the final output of the economy, or in adding to
wealth, plus exports less imports of goods andservices;(3) the income approach, as the total of all incomes
earned in the process of producing goods andservices plus taxes on production and imports
less subsidies.

1.134 These three approaches to measuring GDP also

reflect the different ways in which GDP can be considered in terms of components. Value added canbe broken down by institutional sector, and by thetype of activity or industry which is contributing to
the total, e.g. agriculture, manufacturing, construction, services, etc.
Final expenditures can be broken down by type:
household expenditure, NPISH final expenditure,
government final expenditure, change in inventories, fixed capital formation and exports, less thecost of imports.
Total incomes earned can be broken down by typeof income — compensation of employment, andoperating surplus.

1.135 In order to achieve the best estimate of GDP,

it is good practice to feed the elements of thesethree approaches into a supply and use framework. This enables value added and income estimates by industry to be reconciled, and supply
and demand for products to be balanced. This
integrated approach ensures consistency between

European system of accounts — ESA 2010

General features and basic principles

the components of GDP, and a better estimate of
the level of GDP than from only one of the three
approaches. By deducting consumption of fixed
capital from GDP, net domestic product at market
prices (NDP) is obtained.

The input-output framework
1.136 The input-output (I-O) framework brings together

components of Gross Value Added (GVA), industry inputs and outputs, product supply and demand,and the composition of uses and resources acrossinstitutional sectors for the economy. This framework breaks the economy down to display transactions of all goods and services between industries
and final consumers for a single period (for example, a quarter or a year). Information may be presented in two ways:(a) supply and use tables;(b) symmetric input-output tables.

Supply and use tables
1.137 Supply and use tables show the whole economy byindustry (e.g. motor vehicles industry) and products (e.g. sports goods). The tables show links
between components of GVA, industry inputs andoutputs, and product supply and demand. Supply
and use tables link different institutional sectors of
the economy (e.g. public corporations) together
with detail of imports and exports of goods andservices, government expenditure, household and
NPISHs expenditure and capital formation.

European system of accounts — ESA 2010

1

1.138 Producing supply and use tables allows an exam-

ination of consistency and coherence of national
accounts components within a single detailed
framework and, by incorporating the componentsof the three approaches to measuring GDP (i.e.
production, income and expenditure), enables asingle estimate of GDP to be determined.

1.139 When balanced in an integrated manner, supply

and use tables also provide coherence and consistency in linking the components of the following
three accounts:(1) goods and services account;(2) production account (by industry and by institutional sector); and(3) generation of income account (by industry and
by institutional sector).

Symmetric input-output tables
1.140 Symmetric input-output tables are derived fromthe data in supply and use tables and other additional sources to form the theoretical basis for subsequent analyses.

1.141 These tables contain symmetric (product by prod-

uct or industry by industry) tables, the Leontief
Inverse and other diagnostic analyses such as
output multipliers. These tables show separately
the consumption of domestically produced andimported goods and services, providing a theoretical framework for further structural analysis of theeconomy, including the composition as well as theeffect of changes in final demand on the economy.

23

Units and groupings of units

2

CHAPTER 2
Units and groupings of units
2.01

The economy of a country is a system whereby
institutions and people interact through exchanges
and transfers of goods, services and means of payment (e.g. money) for the production and consumption of goods and services.

2.03((1) to analyse flows and positions, it is essential
to select units which make it possible to study
behavioural relationships among economic
agents;In the economy, the units interacting are economic
entities that are capable of owning assets, incurring
liabilities and engaging in economic activities andin transactions with other entities. They are known
as institutional units.

((2) to analyse the process of production, it is essential to select units that bring out relationships
of a technico-economic nature, or that reflect
local activities;

Defining the units used in national accounts serves
various purposes. First, units are the essential building blocks in defining economies in geographicalterms, e.g. nations, regions, and nation groupings
such as monetary or political unions. Second, they
are the essential building blocks for grouping units
into institutional sectors. Third, they are essential
for defining which flows and stocks are recorded.
Transactions between various parts of the same
institutional unit are, in principle, not recorded in
the national accounts.
2.02

The units and groupings of units used in national
accounts shall be defined with reference to thekind of economic analysis for which they areintended, and not in terms of the types of unit usually employed in statistical inquiries. The latter
units (e.g. enterprises, holding companies, kindof-activity units, local units, government departments, non-profit institutions, households, etc.)
may not be satisfactory for the purposes of national
accounts, since they are based on criteria of a legal,
administrative or accounting nature.
Statisticians shall take into account the definitionsof units of analysis as laid down in the ESA 2010,
in order to ensure that, in the surveys in whichdata are collected, all the elements of informationneeded to compile data based on the units of analysis used in the ESA 2010 are gradually introduced.

European system of accounts — ESA 2010

A feature of the ESA 2010 system is the use of typesof unit corresponding to three ways of subdividing
the economy:((3) to allow regional analyses, units that reflect
local kinds of activity are needed.
Institutional units are defined to meet the firstof these objectives. Behavioural relationships, as
described in point (1), require units reflecting all of
their institutional economic activity.
The production processes, technico-economic
relationships and regional analyses referred to inpoints (2) and (3) require units such as local KAUs.
These units are described later in this chapter.
Before giving definitions of the units used in the
ESA 2010, it is necessary to define the limits of thenational economy.

The limits of the national economy
2.04

The units which constitute the economy of a country and whose flows and stocks are recorded in the
ESA 2010 are those which are resident. An institutional unit is resident in a country when it has
its centre of predominant economic interest in theeconomic territory of that country. Such units are
known as resident units, irrespective of nationality,
legal form or presence on the economic territory at
the time they carry out a transaction.

2.05

Economic territory consists of the following:25

2Units and groupings of units(a) the area (geographic territory) under the effective administration and economic control of asingle government;(c) international organisations under international
treaties between states.
The territories used by the institutions and bodiesof the European Union and international organisations are separate economic territories. A featureof such territories is that the only residents are theinstitutions.

(b) any free zones, including bonded warehouses
and factories under customs control;(c) the national air-space, territorial waters and thecontinental shelf lying in international waters,
over which the country enjoys exclusive rights;

2.07(d) territorial enclaves, these being geographic territories situated in the rest of the world andused, under international treaties or agreements between states, by general government
agencies of the country (such as embassies,
consulates, military bases, scientific bases, etc.);(e) deposits of oil, natural gas, etc. in international
waters outside the continental shelf of thecountry, worked by units resident in the territory as defined in points (a) to (d).

Enterprises are almost always connected to only asingle economy. Taxation and other legal requirements tend to result in the use of a separate legal
entity for operations in each legal jurisdiction. In
addition, a separate institutional unit is identified
for statistical purposes where a single legal entity
has substantial operations in two or more territories (e.g. for branches, land ownership, and multiterritory enterprises). As a result of splitting such
legal entities, the residence of each of the subsequently identified enterprises is clear. Centre of
predominant economic interest does not meanthat entities with substantial operations in two or
more territories should not be split.

Fishing boats, other ships, floating platforms andaircraft are treated in the ESA as mobile equipment,
whether owned and/or operated by units resident
in the country, or owned by non-residents andoperated by resident units. Transactions involving the ownership (gross fixed capital formation)and use (renting, insurance, etc.) of mobile equipment are attributed to the economy of the countryof which the owner and/or operator respectively
are residents. In cases of financial leasing, a changeof ownership is assumed.
Economic territory may be an area larger or smaller
than that defined above. An example of a larger
area is a currency union such as the European
Monetary Union; an example of a smaller area is apart of a country such as a region.
2.06

In the absence of any physical dimension to an
enterprise, its residence is determined according to
the economic territory under whose laws the enterprise is incorporated or registered.

extraterritorial

Units deemed to be residents of a country can be
subdivided into:

Also excluded are the parts of the country’s
own geographic territory used by the following
organisations:(a) units that are engaged in production, finance,
insurance or redistribution, in respect of all
their transactions except those relating to ownership of land and buildings;

Economic
enclaves.

territory

excludes(a) general government agencies of other countries;(b) institutions and bodies of the European Union;
and26

Centre of predominant economic interest indicates that a location exists within the economic territory of a country where a unit engages in economic activities and transactions on a significant
scale, either indefinitely or over a finite but long
period of time (a year or more). The ownership ofland and buildings within the economic territory isdeemed to be sufficient for the owner to have a centre of predominant economic interest there.

2.08(b) units which are principally engaged in consumption, in respect of all their transactions
except those relating to ownership of land andbuildings;

European system of accounts — ESA 2010

Units and groupings of units(c) all units in their capacity as owners of land andbuildings with the exception of owners of extraterritorial enclaves which are part of the economic territory of other countries or are independent states.
2.09

2.10

(c) tourists, patients, students, visiting officials,
businessmen, salesmen, artists and crew members who travel abroad;(d) locally recruited staff working in the extraterritorial enclaves of foreign governments;

For units other than households, in respect of all
their transactions except those relating to ownership of land and buildings, the following two cases
may be distinguished:(e) the staff of the institutions of the European
Union and of civilian or military internationalorganisations which have their headquarters in
extraterritorial enclaves;(a) activity is conducted exclusively on the economic territory of the country: units whichcarry out such activity are resident units of thecountry;(f) the official, civilian or military representatives of the government of the country (including their households) established in territorial
enclaves.

(b) activity is conducted for a year or more on theeconomic territories of several countries: onlythat part of the unit that has a centre of predominant economic interest in the economic
territory of the country is deemed to be a resident unit of that country.

Students are always treated as residents, irrespective of the length of their studies abroad.

A resident institutional unit may be a notional resident unit, in respect of the activity conducted in the
country for a year or more by a unit which is resident in another country. When the activity is carried on for less than a year, the activity remains partof the activities of the producer institutional unit
and no separate institutional unit is recognised.
When the activity is insignificant, even though lasting longer than a year, and for the installation ofequipment abroad, no separate unit is recognised
and the activities are recorded as that of the producing institutional unit.
Households, except in their capacity as owners ofland and buildings, are resident units of the economic territory where they have a centre of predominant economic interest. They are resident
irrespective of periods spent abroad of less than
one year. They shall include, in particular, thefollowing:(a) border workers, defined as people who crossthe frontier daily to work in a neighbouring
country;(b) seasonal workers, defined as people who leave
the country for several months according toseason, but less than a year, to work in anothercountry;

European system of accounts — ESA 2010

2

2.11

All units, in their capacity as owners of land and/or
buildings forming part of the economic territory,
are resident units or notional resident units of thecountry in which that land or those buildings inquestion are located.

The institutional units
2.12

Definition: an institutional unit is an economic
entity characterised by decision-making autonomy
in the exercise of its principal function. A resident
unit is regarded as constituting an institutional
unit in the economic territory where it has its centre of predominant economic interest if it has decision-making autonomy and either keeps a complete set of accounts, or is able to compile a complete set of accounts.
To have autonomy of decision in respect of its
principal function, an entity must be:(a) entitled to own goods and assets in its own
right; it will be able to exchange the ownershipof goods and assets in transactions with otherinstitutional units;(b) able to take economic decisions and engage ineconomic activities for which it is responsible
and accountable at law;(c) able to incur liabilities on its own behalf, to takeon other obligations or further commitments
and to enter into contracts; and27

2Units and groupings of units(d) able to draw up a complete set of accounts,
comprised of accounting records covering all
its transactions carried out during the accounting period, as well as a balance sheet of assets
and liabilities.
2.13(a) A head office is a unit that exercises managerial
control over its subsidiaries. Head offices areallocated to the dominant non-financial corporations sector of their subsidiaries, unless all ormost of their subsidiaries are financial corporations, in which case they are treated as financial
auxiliaries (S.126) in the financial corporations
sector.

The following principles apply whenever an entity
does not possess the characteristics of an institutional unit:

Where there is a mixture of non-financial andfinancial subsidiaries, then the predominant
share-by-value-added determines the sector
classification.

(a) households are deemed to enjoy autonomy ofdecision in respect of their principal function
and are, therefore, institutional units nonetheless, even though they do not keep a complete
set of accounts;

Head offices are described under international
standard industrial classification of all economic activities revision (ISIC Rev. 4), Section
M, class 7010 (NACE Rev. 2, M 70.10) as
follows:(b) entities which do not keep a complete set ofaccounts, and are not able to compile a complete set of accounts if required to do so, are notinstitutional units;

This class includes the overseeing and managing of other units of the company or enterprise; undertaking strategic or organisational
planning and decision-making role of the company or enterprise; exercising operational control and managing the day-to-day operation of
their related units.

(c) entities which, while keeping a complete set ofaccounts, have no autonomy of decision, arepart of the units which control them;(d) entities do not need to publish accounts to be
an institutional unit;(b) A holding company that holds the assets of subsidiary corporations but does not undertake
any management activities is a captive financial
institution (S.127) and classified as a financial
corporation.

(e) entities forming part of a group of units
engaged in production and keeping a complete set of accounts are deemed to be institutional units even if they have partially surrendered their autonomy of decision to the central
body (the head office) responsible for the general direction of the group; the head office itself
is deemed to be an institutional unit distinct
from the units which it controls;

Holding companies are described under ISIC
Rev.4, Section K, class 6420 (NACE Rev. 2, K
64.20) as follows:This class includes the activities of holding companies, i.e. units that hold the assets (owning
controlling-levels of equity) of a group of subsidiary corporations and whose principal activity is owning the group. The holding companies
in this class do not provide any other service tothe businesses in which the equity is held, i.e.
they do not administer or manage other units.

(f) quasi-corporations are entities which keep acomplete set of accounts and have no legal
status. They have an economic and financial
behaviour that is different from that of theirowners and similar to that of corporations.
They are deemed to have autonomy of decision and are considered as distinct institutional
units.

Head offices and holding companies

Groups of corporations
2.15

2.14

28

Head offices and holding companies are institutional units. The two types are:

Large groups of corporations are created when aparent controls several subsidiaries, which may
in turn control their own subsidiaries, and so on.

European system of accounts — ESA 2010

Units and groupings of units

Each member of the group is treated as a separate
institutional unit if it satisfies the definition of an
institutional unit.
2.16

An advantage of not treating groups of corporations as single institutional units is that groups are
not always stable over time, nor easily identifiable in practice. It can be difficult to obtain data ongroups whose activities are not closely integrated.
Many groups are too large and heterogeneous tobe treated as single units, and their size and composition can change over time as a result of mergers and takeovers.

2.19

Whether a unit has all or none of these characteristics, and whether it is described as an SPE or somesimilar designation or not, it shall be treated in thesame way as any other institutional unit by being
allocated to sector and industry according to its
principal activity unless the SPE has no independent rights of action.

2.20

So captive financial institutions, artificial subsidiaries and special purpose units of general government with no independence of action are allocatedto the sector of their controlling body. The exception occurs when they are non-resident, in whichcase they are recognised separately from their controlling body. But in the case of government, theactivities of the subsidiary shall be reflected in thegovernment accounts.

Special purpose entities
2.17

2.18

A special purpose entity (SPE) or special purpose
vehicle (SPV) is usually a limited company or alimited partnership, created to fulfil narrow, specific or temporary objectives and to isolate a financial risk, a specific taxation or a regulatory risk.
There is no common definition of an SPE, but thefollowing characteristics are typical:

Captive financial institutions
2.21

A holding company that simply owns the assets ofsubsidiaries is one example of a captive financial
institution. Examples of other units that are also
treated as captive financial institutions are units
with the characteristics of SPEs as described above,
including investment and pension funds and units
used for holding and managing wealth for individuals or families, issuing debt securities on behalfof related companies (such a company may becalled a conduit), and carrying out other financial
functions.

2.22

The degree of independence from its parent may
be demonstrated by exercising some substantive
control over its assets and liabilities to the extent
of carrying the risks and reaping the rewards associated with the assets and liabilities. Such units areclassified in the financial corporations sector.

2.23

An entity of this type that cannot act independently of its parent and is simply a passive holder ofassets and liabilities (sometimes described as being
on autopilot) is not treated as a separate institutional unit unless it is resident in an economy different from that of its parent. If it is resident in thesame economy as its parent, it is treated as an ‘artificial subsidiary’ as described below.

(a) they have no employees and no non-financial
assets;(b) they have little physical presence beyond a‘brass plate’ or sign confirming their place ofregistration;(c) they are always related to another corporation,
often as a subsidiary;(d) they are resident in a different territory fromthe territory of residence of the related corporations. In the absence of any physical presence
an enterprise’s residence is determined according to the economic territory under whose laws
the enterprise is incorporated or registered;(e) they are managed by employees of another corporation which may or may not be a related
one. The SPE pays fees for services provided toit and in turn charges its parent or other related
corporation a fee to cover those costs. This is
the only production the SPE is involved in,although it will often incur liabilities on behalfof its owner and will usually receive investment
income and holding gains on the assets it holds.

European system of accounts — ESA 2010

2

29

2

Units and groupings of units

Artificial subsidiaries
2.24

2.25

2.26

A subsidiary, wholly owned by a parent corporation, may be created to provide services to the parent corporation, or other corporations in the samegroup, in order to avoid taxes, to minimise liabilities in the event of bankruptcy, or to secure othertechnical advantages under the tax or corporation
legislation in force in a particular country.
In general, such types of entities do not satisfy thedefinition of an institutional unit because they lackthe ability to act independently from their parent corporation and may be subject to restrictions
on their ability to hold or transact assets held on
their balance sheets. Their level of output and theprice they receive for it are determined by the parent that (possibly with other corporations in thesame group) is their sole client. They are, thus,
not treated as separate institutional units, but aretreated as an integral part of the parent, and theiraccounts are consolidated with those of the parent,
unless they are resident in an economic territory
different from that where the parent is resident.
A distinction must be made between artificial subsidiaries as just described and a unit undertaking
only ancillary activities. Ancillary activities are limited in scope to the type of service functions that
virtually all enterprises need to some extent or
another such as cleaning premises, running thestaff payroll or providing the information technology infrastructure for the enterprise (see Chapter 1,paragraph 1.31).

Special purpose units of general
government
2.27

30

General government may also set up special purpose units, with characteristics and functions similar to the captive financial institutions and artificial
subsidiaries. Such units do not have the power toact independently and are restricted in the range oftransactions they can engage in. They do not carry
the risks and rewards associated with the assets andliabilities they hold. Such units, if they are resident,
shall be treated as an integral part of general government and not as separate units. If they are nonresident, they shall be treated as separate units.
Any transactions carried out by them abroad shallbe reflected in corresponding transactions withgovernment. Thus, a unit that borrows abroad isthen regarded as lending the same amount to general government, and on the same terms, as theoriginal borrowing.
2.28

In summary, the accounts of SPEs with no independent rights of action are consolidated with theparent corporation, unless they are resident in adifferent economy from that of the parent. There isone exception to this general rule, and that is whena non-resident SPE is set up by government.

2.29

Notional resident units shall be defined as:(a) those parts of non-resident units which havea centre of predominant economic interest(being, in most cases, units which engage ineconomic production for a year or more) on
the economic territory of the country;(b) non-resident units in their capacity as ownersof land and/or buildings on the economic territory of the country, but only in respect of transactions affecting such land or buildings.
Notional resident units, irrespective of only keeping partial accounts and irrespective of autonomy
of decision, shall be treated as institutional units.

2.30

The following shall be considered as institutional
units:(a) units that have autonomy of decision and acomplete set of accounts such as:(1) private and public corporations;(2) cooperatives or partnerships recognised as independent legal entities;(3) public producers which by virtue of special legislation are recognised as independent legal entities;(4) non-profit institutions recognised as independent
legal entities; and(5) agencies of general government;(b) units which have a complete set of accounts
and which are deemed to have autonomy ofdecision despite not having separate incorporation from their parent: quasi-corporations;(c) units which do not necessarily keep a complete
set of accounts, but which are deemed to haveautonomy of decision, namely:(1) households;(2) notional resident units.

European system of accounts — ESA 2010

Units and groupings of units

The institutional sectors
2.31

Macroeconomic analysis does not consider theactions of each institutional unit separately — itconsiders the aggregate activities of similar institutions. So units are combined into groups called2

institutional sectors, some of which are divided
into subsectors.

2.32

Each sector and subsector groups together the
institutional units which have a similar type of economic behaviour.

Table 2.1 — Sectors and subsectors
Sectors and subsectors

PublicNon-financial corporations

S.11

Financial corporations

S.12

Central bankMonetary
Other monetary Deposit-taking corporations
financialfinancial
except the central bankinstitutions (MFIs) institutions
Money market funds (MMFs)(OMFI)

S.121

Financialcorporations
except MFIs
and Insurance
corporations andpension funds(ICPFs)ICPFs

National
privateForeigncontrolled

S.11001

S.11002S.11003

S.122

S.12201

S.12202

S.12203

S.123

S.12301

S.12302

S.12303

S.124

S.12401

S.12402

S.12403

Other financial intermediaries, except insurance
S.125
corporations and pension funds

S.12501

S.12502S.12503

Financial auxiliaries

S.126

S.12601

S.12602

S.12603

Captive financial institutions and money lenders S.127

S.12701

S.12702

S.12703

Insurance corporations (IC)S.128

S.12801

S.12802

S.12803

Pension funds (PF)

S.129

S.12901

S.12902

S.12903

Non-MMF investment funds

General government

S.13

Central government (excluding social security funds)

S.1311

State government (excluding social security funds)

S.1312

Local government (excluding social security funds)

S.1313Social security funds

S.1314

Households

S.14

Employers and own-account workers

S.141+S.142

Employees

S.143

Recipients of property and transfer income

S.144

Recipients of property income

S.1441

Recipients of pensions

S.1442

Recipients of other transfers

S.1443

Non-profit institutions serving households

S.15

Rest of the world

S.2

Member States and institutions and bodies of the European Union

S.21

Member States of the European Union

S.211

Institutions and bodies of the European Union

S.212

Non-member countries and international organisations nonresident in the European Union

S.22

European system of accounts — ESA 201031

2Units and groupings of units

Diagram 2.1 — Allocation of units to sectors
Is the unit resident?

No

RoW

Yes

Households

Yes

Is the unit a household?

No

Is the unit a non-market producer?
Yes

No

Is the unit controlled bygovernment?

32

Does the unit produce financial services?

No

Yes

No

Yes

NPISH

GeneralgovernmentNon-financial
corporations

Financial corporations

Is the unit controlled bygeneral government?

Is the unit controlled bygeneral government?

Yes

No

No

Yes

Public nonfinancial
corporations

Private nonfinancial
corporations

Privatefinancialcorporations

Publicfinancialcorporations

European system of accounts — ESA 2010

Units and groupings of units

2.33

2.34

The institutional units are grouped into sectors
on the basis of the type of producer they are anddepending on their principal activity and function,
which are considered to be indicative of their economic behaviour.

Control over a financial or non-financial corporation shall be defined as the ability to determine
general corporate policy, for example by choosing
appropriate directors if necessary.

2.36

A single institutional unit (another corporation,a household, a non-profit institution or a government unit) secures control over a corporation or
quasi-corporation by owning more than half thevoting shares or otherwise controlling more thanhalf the shareholders’ voting power.

2.38

In order to control more than half the shareholders’voting power, an institutional unit need not own
any of the voting shares itself. A given corporation,
corporation C, could be a subsidiary of anothercorporation B in which a third corporation A owns
a majority of the voting shares. Corporation C issaid to be subsidiary of corporation B when either
corporation B controls more than half of the shareholders’ voting power in corporation C or corporation B is a shareholder in C with the right toappoint or remove a majority of the directors of C.
General government secures control over a corporation as a result of special legislation, decree or regulation which empowers the government to determine corporate policy. The following indicators are
the main factors to consider in deciding whether a
corporation is controlled by government:(a) government ownership of the majority of thevoting interest;

government control of key committees in theentity;(e) government possession of a golden share;(f) special regulations;

Diagram 2.1 shows how units are allocated to themain sectors. In order to determine the sector of aunit which is resident and not a household, according to the diagram, it is necessary to determine
whether it is controlled by general government or
not, and whether it is a market or a non-market
producer.

2.35

2.37

(d)

(g) government as a dominant customer;(h) borrowing from government.
A single indicator may be sufficient to establish
control, but, in other cases, a number of separate
indicators may collectively indicate control.
2.39

For non-profit institutions recognised as independent legal entities, the five indicators of control
to be considered are:(a) the appointment of officers;(b) the provisions of enabling instruments;(c) contractual agreements;(d) the degree of financing;(e) the degree of government risk exposure.
As with corporations, a single indicator may besufficient to establish control in some cases, but, inother cases, a number of separate indicators maycollectively indicate control.

2.40

Differentiating between market and non-market, and so for public sector entities classification
between the general government sector and thecorporations sector, depends on the criteria set out
in paragraph 1.37.

2.41

A sector shall be divided into subsectors according
to the criteria relevant to that sector; for example
government can be split into central, state and local
government and social security funds. This permits
a more precise description of the economic behaviour of the units.

(b) government control of the board or governingbody;

The accounts for sectors and subsectors record all
the activities, whether principal or secondary, ofthe institutional units covered by the appropriate
sector.

(c) government control of the appointment andremoval of key personnel;

Each institutional unit belongs to only one sector
or subsector.

European system of accounts — ESA 2010

2

33

2

Units and groupings of units

2.42

When the principal function of the institutional
unit is to produce goods and services, the type of
producer must be decided first, in order to allocate
it to a sector.

2.43

Table 2.2 shows the type of producer and the principal activities and functions that are characteristicof each sector:

Table 2.2 — Type of producer and principal activities and functions classified by sector
Type of producer

Principal activity and function

Market producer

Production of market goods and non-financial services

Non-financial corporations(S.11)

Market producer

Financial intermediation including insurance
Auxiliary financial activities

Financial corporations (S.12)

Public non-market producer

Production and supply of non-market output for collective andindividual consumption, and carrying out transactions intended toredistribute national income and wealthGeneral government (S.13)

Market producer or private
producer for own final use

Consumption
Production of market output and output for own final use

Households (S.14)
As consumers
As entrepreneurs

Private non-market producer

Production and supply of non-market output for individual
consumption

Non-profit institutions
serving households (S.15)

2.44

The rest of the world (S.2) sector refers to flows andpositions between resident units and non-resident
units — the non-resident units are not characterised by similar objectives and types of behaviour,
but are only recognised through their flows andpositions with resident units.

producers principally engaged in the production of goods and non-financial services;(d) non-profit institutions or associations serving
non-financial corporations, which are recognised as independent legal entities and which
are market producers principally engaged in
the production of goods and non-financial
services;

Non-financial corporations (S.11)
2.45

2.46

(e) head offices controlling a group of corporations
which are market producers, where the preponderant type of activity of the group of corporations as a whole - measured on the basis ofvalue added — is the production of goods andnon-financial services;

Definition: the non-financial corporations sector (S.11) consists of institutional units which are
independent legal entities and market producers,
and whose principal activity is the production of
goods and non-financial services. The non-financial corporations sector also includes non-financial
quasi-corporations (see paragraph 2.13(f)).

(f) SPEs whose principal activity is the provision of
goods or non-financial services;

The institutional units covered are the following:(g) private and public quasi-corporations which
are market producers principally engaged in
the production of goods and non-financial
services.

(a) private and public corporations which are market producers principally engaged in the production of goods and non-financial services;(b) cooperatives and partnerships recognised as
independent legal entities which are market
producers principally engaged in the production of goods and non-financial services;(c) public producers which are recognised as independent legal entities and which are market

34

Sector2.47

Non-financial quasi-corporations are all entities
which are market producers principally engaged in
the production of goods and non-financial services
and which meet the conditions qualifying themas quasi-corporations (see point (f) of paragraph2.13).

European system of accounts — ESA 2010

Units and groupings of units

Non-financial quasi-corporations must keep
enough information to enable a complete set ofaccounts to be drawn up, and are operated as if
they were corporations. The de facto relationship to their owner is that of a corporation to its
shareholders.

National private non-financial corporations(S.11002)
2.53

Non-financial quasi-corporations owned by households, government units or non-profit institutions
are grouped with non-financial corporations in the
non-financial corporations sector, and not in the
sector of their owner.
2.48

2.49

2.50

The existence of a complete set of accounts, including balance sheets, is not a sufficient condition formarket producers to be treated as institutional
units such as quasi-corporations. Partnerships andpublic producers, other than those included underpoints (a), (b), (c) and (f) of paragraph 2.46 and sole
proprietorships — even if they keep a complete setof accounts — are in general not distinct institutional units because they do not enjoy autonomy ofdecision, their management being under the control of the households, non-profit institutions or
governments which own them.

Foreign controlled non-financial corporations(S.11003)
2.54(a) all subsidiaries of non-resident corporations;(b) all corporations controlled by a non-resident
institutional unit that is not itself a corporation;for example, a corporation which is controlled
by a foreign government. It includes corporations controlled by a group of non-resident
units acting in concert;(a) public non-financial corporations (S.11001);(c) all branches or other unincorporated agencies of non-resident corporations or unincorporated producers which are notional resident
units.

(b) national private non-financial corporations(S.11002);(c) foreign controlled non-financial corporations(S.11003).

Definition: the public non-financial corporations
subsector consists of all non-financial corporations, quasi-corporations and non-profit institutions, recognised as independent legal entities, thatare market producers and are subject to control bygovernment units.

2.52

Public quasi-corporations are quasi-corporations
owned directly by government units.

European system of accounts — ESA 2010

Definition: the foreign controlled non-financial
corporations subsector consists of all non-financial
corporations and quasi-corporations that are controlled by non-resident institutional units.
This subsector includes:

The non-financial corporations sector is divided
into three subsectors:

2.51

Definition: the national private non-financial corporations subsector consists of all non-financial
corporations, quasi-corporations and non-profit
institutions which are recognised as independent
legal entities and which are market producers, thatare not controlled by government or by non-resident institutional units.
This subsector includes corporate and quasi-corporate direct foreign investment units not classified in the foreign controlled non-financial corporations subsector (S.11003).

Non-financial corporations include notional resident units which are treated as quasi-corporations.

Public non-financial corporations (S.11001)

2

Financial corporations (S.12)
2.55

Definition: the financial corporations sector (S.12)
consists of institutional units which are independent legal entities and market producers, and whose
principal activity is the production of financial services. Such institutional units comprise all corporations and quasi-corporations which are principally engaged in:(a) financial intermediation (financial intermediaries); and/or35

2

Units and groupings of units(b) auxiliary
financial
auxiliaries).

activities(financial

2.60

Investment funds, hereinafter referred to as money
market funds (MMFs) and non-money market funds (non-MMFs), primarily incur liabilities through the issue of investment fund sharesor units (AF.52). They transform such funds
by acquiring financial assets and/or real estate.
Investment funds are classified as financial intermediaries. Any change in the value of their assets
and liabilities other than their own shares isreflected in their own funds (see paragraph 7.07).
Given that the amount of own funds equals thevalue of the investment fund’s shares or units, anychange in the value of the fund’s assets and liabilities will be reflected in the market value of suchshares or units. Investment funds investing in realestate are financial intermediaries.

2.61

Financial intermediation is limited to acquiring
assets and incurring liabilities with the generalpublic or specified and relatively large sub-groups
thereof. Where the activity is limited to small
groups of persons or families, no financial intermediation takes place.

2.62

Exceptions to the general limitation of financial
intermediation to financial transactions on themarket may exist. Examples are municipal credit
and savings banks which rely on the municipality involved, or financial lease corporations
that depend on a parent group of companies foracquiring funds or investing funds. Their lending or their acceptance of savings shall be independent of the municipality involved or the parent
group, respectively, in classifying them as financial
intermediaries.

Also included are institutional units providing financial services, where most of either theirassets or their liabilities are not transacted on open
markets.
2.56

Financial intermediation is the activity in which
an institutional unit acquires financial assets andincurs liabilities on its own account by engaging
in financial transactions on the market. The assets
and liabilities of financial intermediaries are transformed or repackaged in relation to, for example,
maturity, scale, risk, etc. in the financial intermediation process.
Auxiliary financial activities are activities related tofinancial intermediation but which do not involve
financial intermediation themselves.

Financial intermediaries
2.57

2.58

2.59

36

The financial intermediation process channels
funds between third parties with a surplus andthose with a lack of funds. A financial intermediary
does not only act as an agent for other institutional
units, but places itself at risk by acquiring financial
assets and incurring liabilities on its own account.
In the financial intermediation process, all categories of liabilities may be involved with the exception of the liability category of other accounts payable (AF.8). The financial assets involved in thefinancial intermediation process may be classified
in any category with the exception of the categoryof insurance, pension and standardised guarantee
schemes (AF.6) but including the other accounts
receivable category. Financial intermediaries may
invest their funds in non-financial assets including real estate. In order to be considered a financial
intermediary, a corporation should incur liabilities on the market and transform funds. Real estate
corporations are not financial intermediaries.
The function of insurance corporations and pension funds consists of the pooling of risks. The liabilities of such institutions are insurance, pension
and standardised guarantee schemes (AF.6). The
counterparts of liabilities are investments by the
insurance corporations and pension funds, acting
as financial intermediaries.

Financial auxiliaries

2.63

Auxiliary financial activities comprise auxiliary activities for realising transactions in financial assets and liabilities or the transformation
or repackaging of funds. Financial auxiliaries do
not put themselves at risk by acquiring financial
assets or incurring liabilities. They facilitate financial intermediation. Head offices, all or most of thesubsidiaries of which are financial corporations,are financial auxiliaries.

European system of accounts — ESA 2010

Units and groupings of units

undertaken, in general, by other financial
corporations. Such funds are institutional
units, separate from the managing financial
corporation;

Financial corporations other than financial
intermediaries and financial auxiliaries
2.64

Other financial corporations other than financial
intermediaries and financial auxiliaries are institutional units providing financial services, wheremost of either their assets or their liabilities are nottransacted on open markets.

(i) unincorporated units principally engaged infinancial intermediation and subject to regulation and supervision (in most cases classified as
deposit-taking corporations except the central
bank, insurance corporations or pension funds)
are deemed to enjoy autonomy of decision andto have autonomous management independent of their owners; their economic and financial behaviour is similar to that of financial corporations. In this case they are treated as separate institutional units. Examples are branchesof non-resident financial corporations.

Institutional units included in the financial
corporations sector
2.65

The institutional units included in the financial
corporations sector (S.12) are the following:(a) private or public corporations which are principally engaged in financial intermediation
and/or in auxiliary financial activities;(b) cooperatives and partnerships recognised as
independent legal entities which are principally
engaged in financial intermediation and/or in
auxiliary financial activities;

Subsectors of financial corporations(c) public producers recognised as legal entities, which are principally engaged in financial intermediation and/or in auxiliary financial activities;(a) central bank (S.121);

2.66(c) money market funds (MMFs) (S.123);(d) non-MMF investment funds (S.124);(e) other financial intermediaries, except insurance corporations and pension funds (S.125);(e) head offices when all or most of their subsidiaries are, as financial corporations, principally
engaged in financial intermediation and/or
financial auxiliary activities. These head offices
are classified as financial auxiliaries (S.126);(f) financial auxiliaries (S.126);(g) captive financial institutions and money lenders (S.127);(h) insurance corporations (S.128); and(i) pension funds (S.129).

Combining subsectors of financial corporations
2.67

Monetary financial institutions (MFIs) as definedby the ECB consist of all institutional units includedin the central bank (S.121), deposit-taking corporations except the central bank (S.122) and MMF(S.123) subsectors.

2.68

Other monetary financial institutions consist of
those financial intermediaries through which the(g) SPEs whose principal activity is the provision offinancial services;(h) unincorporated investment funds comprising investment portfolios owned by the groupof participants, and whose management is

European system of accounts — ESA 2010

The financial corporations sector is subdivided into
the following subsectors:(b) deposit-taking corporations except the central
bank (S.122);(d) non-profit institutions recognised as legal entities which are principally engaged in financial intermediation and/or in auxiliary financial activities, or which are serving financial
corporations;(f) holding companies, where the main role is theholding of assets of a group of subsidiary corporations. The make-up of the group can befinancial or non-financial — this does not affectthe classification of holding companies as captive financial institutions (S.127);

2

37

2

Units and groupings of units

effects of the monetary policy of the central bank(S.121) are transmitted to the other entities of theeconomy. They are deposit-taking corporations
except the central bank (S.122) and MMF (S.123).
2.69

2.70

Financial intermediaries dealing with the pooling of risks are insurance corporations and pensions funds (ICPF). They consist of the insurance
corporations (S.128) and pension funds (S.129)
subsectors.

Subdividing subsectors of financial corporations
into public, national private and foreign controlled
financial corporations
2.71

With the exception of subsector S.121, each subsector is further subdivided into:(a) public financial corporations;(b) national private financial corporations; andFinancial corporations except MFI and ICPF consist of the non-MMF investment funds (S.124),
other financial intermediaries, except insurance
corporations and pension funds (S.125), financial
auxiliaries (S.126) and captive financial institutions
and money lenders (S.127) subsectors.

(c) foreign controlled financial corporations.
The criteria for this subdivision are the same as for
non-financial corporations (see paragraphs 2.51 to2.54).

Table 2.3 — Financial corporations sector and its subsectors
Sectors and subsectors
Financial corporations

Financial corporations
except MFI and ICPF

Foreigncontrolled

S.121
Deposit-taking
corporations except thecentral bankS.122

S.12201

S.12202

S.12203

MMF

S.123

S.12301

S.12302

S.12303

Non-MMF investment funds

S.124

S.12401

S.12402

S.12403

Other financial intermediaries, except insurance
corporations and pension funds

S.125

S.12501

S.12502S.12503

Financial auxiliaries

S.126

S.12601

S.12602

S.12603

Captive financial institutions and money lenders

S.127

S.12701

S.12702

S.12703

S.128

S.12801

S.12802

S.12803

S.129

S.12901

S.12902

S.12903

Other monetary financial
institutions (OMFI)Insurance corporations (IC)Insurance corporations
and pension funds (ICPFs) Pension funds (PF)Central bank (S.121)
2.72

Definition: the central bank subsector (S.121) consists of all financial corporations and quasi-corporations whose principal function is to issue currency, to maintain the internal and external valueof the currency and to hold all or part of the international reserves of the country.

2.73

The following financial intermediaries are classified in subsector S.121:(a) the national central bank, including when it ispart of a European system of central banks;

38

National
privateS.12
Central bankMonetary financial
institutions (MFI)

Public(b) central monetary agencies of essentially public origin (e.g. agencies managing foreignexchange or issuing currency) which keep acomplete set of accounts and enjoy autonomy
of decision in relation to central government.
When these activities are performed either
within central government or within the central bank, no separate institutional units exist.
2.74

Subsector S.121 does not include agencies and bodies, other than the central bank, which regulate or
supervise financial corporations or financial markets. They are classified in subsector S.126.

European system of accounts — ESA 2010

Units and groupings of units(b) municipal credit institutions.

Deposit-taking corporations except the central bank(S.122)
2.75

2.76

Definition: the deposit-taking corporations except
the central bank subsector (S.122) includes all
financial corporations and quasi-corporations,
except those classified in the central bank and in the
MMF subsectors, which are principally engaged infinancial intermediation and whose business is toreceive deposits and/or close substitutes for deposits
from institutional units, hence not only from MFIs,
and, for their own account, to grant loans and/or to
make investments in securities.
Deposit-taking corporations except the central bank cannot be described simply as ‘banks’,because they may include some financial corporations which do not call themselves banks, or somefinancial corporations which are not permitted to
do so in some countries, while some other financial corporations describing themselves as banks
may not in fact be deposit-taking corporations. The
following financial intermediaries are classified in
sub-sector S.122:(a) commercial banks, ‘universal’ banks, ‘all-purpose’ banks;

Otherwise, financial intermediaries are classified insubsector S.124.
2.78(b) non-profit institutions recognised as independent legal entities serving deposit-taking corporations, but not engaged in financial intermediation. They are classified in subsector S.126;
and(c) electronic money institutions not principally
engaged in financial intermediation.

MMF (S.123)
2.79

Definition: the MMF subsector (S.123) consists ofall financial corporations and quasi-corporations,
except those classified in the central bank and in
the credit institutions subsectors, which are principally engaged in financial intermediation. Theirbusiness is to issue investment fund shares or units
as close substitutes for deposits from institutional
units, and, for their own account, to make investments primarily in money market fund shares/
units, short-term debt securities, and/or deposits.

2.80

The following financial intermediaries are classified in subsector S.123: investment funds including investment trusts, unit trusts and other collective investment schemes whose shares or units areclose substitutes for deposits.

2.81

Subsector S.123 does not include:(c) post office giro institutions, post banks, girobanks;(d) rural credit banks, agricultural credit banks;(f) specialised banks (e.g. merchant banks, issuinghouses, private banks); and(g) electronic money institutions principally
engaged in financial intermediation.
2.77

The following financial intermediaries are classified in subsector S.122 where it is their business toreceive repayable funds from the public, whether
in the form of deposits or in other forms such as
the continuing issue of long-term debt securities:(a) corporations engaged in granting mortgages(including building societies, mortgage banks
and mortgage credit institutions);

European system of accounts — ESA 2010

Subsector S.122 does not include:(a) head offices which oversee and manage otherunits of a group consisting predominantly of
deposit-taking corporations except the central
bank, but which are not deposit-taking corporations. Such head offices are classified in subsector S.126;(b) savings banks (including trustee savings banks
and savings banks and loan associations);(e) cooperative credit banks, credit unions;

2(a) head offices which oversee and manage a groupconsisting predominantly of MMFs, but which
are not MMFs themselves. They are classified insubsector S.126;(b) non-profit institutions recognised as independent legal entities serving MMFs, but notengaged in financial intermediation. They areclassified in subsector S.126.

39

2Units and groupings of units

concerning special purpose units of general
government set out in paragraph 2.27;

Non-MMF investment funds (S.124)
2.82

2.83

2.84

Definition: the non-MMF investment funds subsector (S.124) consists of all collective investment
schemes, except those classified in the MMF subsector, which are principally engaged in financial
intermediation. Their business is to issue investment fund shares or units which are not close substitutes for deposits, and, on their own account,to make investments primarily in financial assets
other than short-term financial assets and in nonfinancial assets (usually real estate).
Non-MMF investment funds cover investment
trusts, unit trusts and other collective investment
schemes whose investment fund shares or units are
not seen as close substitutes for deposits.
The following financial intermediaries are classified in subsector S.124:(c) head offices which oversee and manage a groupconsisting predominantly of non-MMF investment funds, but which are not investment
funds themselves. They are classified in subsector S.126;(d) non-profit institutions recognised as independent legal entities serving non-MMF investment
funds, but not engaged in financial intermediation. They are classified in subsector S.126.

Other financial intermediaries, except insurance
corporations and pension funds (S.125)
2.86

Definition: the other financial intermediaries,
except insurance corporations and pension funds
subsector (S.125) consists of all financial corporations and quasi-corporations which are principally
engaged in financial intermediation by incurring
liabilities in forms other than currency, deposits,
or investment fund shares, or in relation to insurance, pension and standardised guarantee schemes
from institutional units.

2.87

Subsector S.125 includes financial intermediaries predominantly engaged in long-term financing. In most cases, this predominant maturity distinguishes that subsector from the OMFI subsectors (S.122 and S.123). Based on the non-existenceof liabilities in the form of investment fund shares
which are not seen as close substitutes for deposits or insurance, pension and standardised guarantee schemes, the borderline with the non-MMF
investment funds (S.124), the insurance corporations (S.128), and the pension funds (S.129) subsectors can be determined.

2.88

The other financial intermediaries, except insurance corporations and pension funds subsector(S.125) is further subdivided into subsectors consisting of financial vehicle corporations engaged
in securitisation transactions (FVC), security andderivative dealers, financial corporations engaged
in lending, and specialised financial corporations.
This is shown in Table 2.4.

(a) open-ended investment funds whose investment fund shares or units are, at the request of
the holders, repurchased or redeemed directly
or indirectly out of the undertaking’s assets;(b) closed-ended investment funds with a fixedshare capital, where investors entering or leaving the fund must buy or sell existing shares;(c) real estate investment funds;(d) investment funds investing in other funds(‘funds of funds’);(e) hedge funds covering a range of collective
investment schemes, involving high minimum
investments, light regulation, and a range ofinvestment strategies.
2.85

Subsector S.124 does not include:(a) pension funds which are part of the pension
funds subsector;(b) special purpose government funds, called sovereign wealth funds. A special purpose government fund is classified as captive financial
institution if it is a financial corporation. The
classification of a ‘special purpose government
fund’ either as part of general government sector or as part of the financial corporation sector shall be determined according to the criteria

40

European system of accounts — ESA 2010

Units and groupings of units(c) financial intermediaries which acquire deposits
and/or close substitutes for deposits, or incurloans vis-à-vis monetary financial institutions
only; these financial intermediaries cover also
central counterparty clearing houses (CCPs)
carrying out inter-MFI repurchase agreementtransactions.

Table 2.4 —Other financial intermediaries, except

insurance corporations and pension funds
subsector (S.125) and its subdivisions
Other financial intermediaries, except insurance
corporations and pension funds

Financial vehicle corporations engaged in securitisationtransactions (FVC);

2.94

Security and derivative dealers;
Financial corporations engaged in lending; andSpecialised financial corporations

2.89

Subsector S.125 does not include non-profit institutions recognised as independent legal entities
serving other financial intermediaries, but notengaged in financial intermediation. They are classified in subsector S.126.

Definition: financial vehicle corporations engaged
in securitisation transactions (FVC) are undertakings carrying out securitisation transactions. FVC
that satisfy the criteria of an institutional unit areclassified in S.125, otherwise they are treated as anintegral part of the parent.

Security and derivative dealers, financial
corporations engaged in lending and specialised
financial corporations
2.91

Security and derivative dealers (on own account)
are financial intermediaries on own account.

2.92

Financial corporations engaged in lending include
for example financial intermediaries engaged in:

2.93

Head offices which oversee and manage a group of
subsidiaries principally engaged in financial intermediation and/or in auxiliary financial activities
are classified in subsector S.126.

Financial auxiliaries (S.126)
2.95

Definition: the financial auxiliaries subsector(S.126) consists of all financial corporations andquasi-corporations which are principally engagedin activities closely related to financial intermediation but which are not financial intermediaries
themselves.

2.96

The following financial corporations and quasicorporations are classified in subsector S.126:

Financial vehicle corporations engaged insecuritisation transactions (FVC)2.90(a) insurance brokers, salvage and average administrators, insurance and pension consultants,
etc.;(b) loan brokers, securities brokers, investment
advisers, etc.;(c) flotation corporations that manage the issue of
securities;(d) corporations whose principal function is toguarantee, by endorsement, bills and similar
instruments;(a) financial leasing;(e) corporations which arrange derivative andhedging instruments, such as swaps, options
and futures (without issuing them);(b) hire purchase and the provision of personal orcommercial finance; or(f) corporations providing
financial markets;(c) factoring.

(g) central supervisory authorities of financial
intermediaries and financial markets when they
are separate institutional units;

Specialised financial corporations are financial
intermediaries, for example:(a) venture and development capital companies;(b) export/import financing companies; orEuropean system of accounts — ESA 2010

2

infrastructurefor(h) managers of pension funds, mutual funds, etc.;(i) corporations providing stock exchange andinsurance exchange;41

2Units and groupings of units(j) non-profit institutions recognised as independent legal entities serving financial corporations,but not engaged in financial intermediation(see point (d) of paragraph 2.46);(k) payment institutions (facilitating payments
between buyer and seller).
2.97

Subsector S.126 also includes head offices whosesubsidiaries are all or mostly financial corporations.

Captive financial institutions and money lenders(S.127)
2.98

2.99

Definition: the captive financial institutions andmoney lenders subsector (S.127) consists of all
financial corporations and quasi-corporations
which are neither engaged in financial intermediation nor in providing financial auxiliary services,and where most of either their assets or their liabilities are not transacted on open markets.
In particular, the following financial corporations
and quasi-corporations are classified in subsector
S.127:(a) units as legal entities such as trusts, estates,
agencies accounts or ‘brass plate’ companies;(b) holding companies that hold controlling-levels of equity of a group of subsidiary corporations and whose principal activity is owning
the group without providing any other service
to the businesses in which the equity is held,that is, they do not administer or manage otherunits;(c) SPEs that qualify as institutional units and raise
funds in open markets to be used by their parent corporation;(d) units which provide financial services exclusively with own funds, or funds provided by asponsor, to a range of clients and incur the financial risk of the debtor defaulting. Examples aremoney lenders, corporations engaged in lending to students or for foreign trade from funds
received from a sponsor such as a government
unit or a non-profit institution, and pawnshopsthat predominantly engage in lending;42(e) special purpose government funds, usuallycalled sovereign wealth funds, if classified as
financial corporations.

Insurance corporations (S.128)
2.100 Definition: the insurance corporations subsector(S.128) consists of all financial corporations andquasi-corporations which are principally engaged
in financial intermediation as a consequence of thepooling of risks mainly in the form of direct insurance or reinsurance (see paragraph 2.59).

2.101 Insurance corporations provide services of:(a) life and non-life insurance to individual units
or groups of units;(b) reinsurance to other insurance corporations.
2.102 Services of non-life insurance corporations may

be provided in the form of insurance against thefollowing:(a) fire (e.g. commercial and private property);(b) liability (casualty);(c) motor (own damage and third party liability);(d) marine, aviation and transport (including
energy risks);(e) accident and health; or(f) financial insurance (provision of guarantees orsurety bonds).
Financial insurance or credit insurance corporations, also called guarantee banks, provide guarantees or surety bonds to back securitisation andother credit products.

2.103 Insurance corporations are mainly incorporated

or mutual entities. Incorporated entities are owned
by shareholders and many are listed on stock
exchanges. Mutuals are owned by their policyholders and return their profits to the ‘with profits’ or‘participating’ policyholders through dividends orbonuses. ‘Captive’ insurers are normally owned bya non-financial corporation and mostly insure therisks of their shareholders.

European system of accounts — ESA 2010

Units and groupings of units2

Box 2.1 — Types of insurance
Type of insurance

Direct insurance

ReinsuranceSocial insurance

Sector/subsector

Life insurance
Policyholder makes regular or one-off payments to an insurer in return for which
the insurer guarantees to provide the policyholder with an agreed sum, or anannuity, at a given date or earlier.

Insurance corporations

Non-life insurance
Insurance to cover risks like accidents, sickness, fire, credit, etc.

Insurance corporations

Insurance bought by an insurer to protect himself against an unexpectedly large
number of claims or exceptionally heavy claims.

Insurance corporations

Social security
The participants are obliged by general
government to insure against certain social
risks.

Social security pensions
Social security funds

Employment related social insurance otherthan social security
Employers can make it a condition of
employment that employees insure against
certain social risks.

Employment related pensions

2.104 Subsector S.128 does not include:(a) institutional units which fulfil each of the two
criteria listed in paragraph 2.117. They are classified in sub-sector S.1314;(b) head offices which oversee and manage a groupconsisting predominantly of insurance corporations, but which are not insurance corporations themselves. They are classified in sub-sector S.126;(c) non-profit institutions recognised as independent legal entities serving insurance corporations, but not engaged in financial intermediation. They are classified in subsector S.126.

Pension funds (S.129)
2.105 Definition: the pension funds subsector (S.129)

consists of all financial corporations and quasi-corporations which are principally engaged in financial intermediation as the consequence of the pooling of social risks and needs of the insured persons(social insurance). Pension funds as social insurance schemes provide income in retirement, andoften benefits for death and disability.

2.106 Subsector S.129 consists of only those social insur-

ance pension funds that are institutional units separate from the units that create them. Such autonomous funds have autonomy of decision and keep

European system of accounts — ESA 2010

Other social security

Sector of employer, insurance
corporations and pension
Other employment related social funds or non-profit institutions
insuranceserving households

a complete set of accounts. Non-autonomous pension funds are not institutional units and remainpart of the institutional unit that sets them up.
2.107 Examples of participants in pension fund schemes

include employees of a single enterprise or a groupof enterprises, employees of a branch or industry,and persons having the same profession. The benefits included in the insurance contract can be:(a) paid after the death of the insured to thewidow(er) and children;(b) paid after retirement; or(c) paid after the insured becomes disabled.

2.108 In some countries, all those types of risks can be

insured by life insurance corporations as well as
through pension funds. In other countries, it isrequired that some of those classes of risks are
insured through life insurance corporations. In
contrast to life insurance corporations, pension
funds are restricted by law to specified groups of
employees and self-employed.

2.109 Pension fund schemes may be organised by

employers or by general government. They may
also be organised by insurance corporations onbehalf of employees; or separate institutional units
may be established to hold and manage the assets
to be used to meet the pension entitlements and to
distribute the pensions.

43

2Units and groupings of units

2.110 Subsector S.129 does not include:(a) institutional units which fulfil each of the two
criteria listed in paragraph 2.117. They are classified in subsector S.1314;(b) head offices which oversee and manage a groupconsisting predominantly of pension funds, butwhich are not pension funds themselves. They
are classified in subsector S.126;(c) non-profit institutions recognised as independent legal entities serving pension funds, but notengaged in financial intermediation. They areclassified in subsector S.126.

General government (S.13)
2.111 Definition: the general government sector (S.13)

consists of institutional units which are non-market producers whose output is intended for individual and collective consumption, and are financed
by compulsory payments made by units belonging
to other sectors, and institutional units principally
engaged in the redistribution of national income
and wealth.

2.112 The institutional units included in sector S.13 arefor example the following:(a) general government units which exist througha legal process to have judicial authority overother units in the economic territory, andadminister and finance a group of activities, principally providing non-market goods
and services, intended for the benefit of thecommunity;(b) a corporation or quasi-corporation which is agovernment unit, if its output is mainly nonmarket and a government unit controls it;(c) non-profit institutions recognised as independent legal entities which are non-market
producers and which are controlled by general
government;(d) autonomous pension funds, where there is alegal obligation to contribute, and where general government manages the funds withrespect to the settlement and approval of contributions and benefits.

44

2.113 The general government sector is divided into four

subsectors:(a) central government (excluding social security
funds) (S.1311);(b) state government (excluding social security
funds) (S.1312);(c) local government (excluding social security
funds) (S.1313);(d) social security funds (S.1314).

Central government (excluding social security funds)(S.1311)
2.114 Definition: this subsector includes all adminis-

trative departments of the state and other central agencies whose competence extends normallyover the whole economic territory, except for theadministration of social security funds.
Included in subsector S.1311 are those non-profit
institutions which are controlled by central government and whose competence extends over thewhole economic territory.
Market regulatory organisations which are either
exclusively or principally distributors of subsidies
are classified in S.1311. Those organisations which
are exclusively or principally engaged in buying,holding and selling agricultural or food products
are classified in S.11.

State government (excluding social security funds)(S.1312)2.115 Definition: this subsector consists of those typesof public administration which are separate institutional units exercising some of the functions ofgovernment, except for the administration of social
security funds, at a level below that of central government and above that of the governmental institutional units existing at local level.
Included in subsector S.1312 are those non-profit
institutions which are controlled by state governments and whose competence is restricted to theeconomic territories of the states.

European system of accounts — ESA 2010

Units and groupings of units

Local government (excluding social security funds)(S.1313)

The principal resources of households are thefollowing:

2.116 Definition: this subsector includes those types of(a) the compensation of employees;

public administration whose competence extends
to only a local part of the economic territory, apartfrom local agencies of social security funds.
Included in subsector S.1313 are those non-profit
institutions which are controlled by local governments and whose competence is restricted to theeconomic territories of the local governments.

Social security funds (S.1314)
2.117 Definition: the social security funds subsector

includes central, state and local institutional units
whose principal activity is to provide social benefits
and which fulfil each of the following two criteria:(a) by law or by regulation certain groups of the
population are obliged to participate in thescheme or to pay contributions; and(b) general government is responsible for the management of the institution in respect of the settlement or approval of the contributions andbenefits independently from its role as supervisory body or employer.
There is usually no direct link between the amountof the contribution paid by an individual and therisk to which that individual is exposed.

Households (S.14)
2.118 Definition: the households sector (S.14) consists ofindividuals or groups of individuals as consumers
and as entrepreneurs producing market goods andnon-financial and financial services (market producers) provided that the production of goods andservices is not by separate entities treated as quasicorporations. It also includes individuals or groups
of individuals as producers of goods and nonfinancial services for exclusively own final use.
Households as consumers may be defined as
small groups of persons who share the same living accommodation, who pool their income andwealth and who consume certain types of goods
and services collectively, mainly housing and food.

European system of accounts — ESA 20102(b) property income;(c) transfers from other sectors;(d) receipts from the disposal of market products;and(e) imputed receipts from the output of products
for own final consumption.
2.119 The households sector includes:(a) individuals or groups of individuals whose
principal function is consumption;(b) persons living permanently in institutions who
have little or no autonomy of action or decision in economic matters (e.g. members of religious orders living in monasteries, long-term
patients in hospitals, prisoners serving longsentences, old persons living permanently inretirement homes). Such people are treated asa single institutional unit: a single household;(c) individuals or groups of individuals whose
principal function is consumption and that
produce goods and non-financial services for
exclusively own final use; only two categories
of services produced for own final consumption are included within the system: services ofowner-occupied dwellings and domestic services produced by paid employees;(d) sole proprietorships and partnerships without
legal status, other than those treated as quasicorporations, and which are market producers;and(e) non-profit institutions serving households,
which do not have independent legal status,or those which do but which are of only minor
importance.
2.120 In the ESA 2010, the households sector is subdi-

vided into the following subsectors:(a) employers (S.141) and own-account workers(S.142);(b) employees (S.143);

45

2Units and groupings of units(c) recipients of property income (S.1441);(d) recipients of pensions (S.1442);(e) recipients of other transfers (S.1443).
2.121 Households are allocated to subsectors according

to the largest income category (employers’ income,compensation of employees, etc.) of the household as a whole. When more than one income of agiven category is received within the same household, the classification is based on the total household income within each category.

Employers and own-account workers (S.141 and
S.142)
2.122 Definition: the employers and own-account work-ers subsector consists of the group of households
for which the (mixed) incomes (B.3) accruing tothe owners of household unincorporated enterprises from their activity as producers of market
goods and services with or without paid employees
are the largest source of income for the household
as a whole, even if it does not account for morethan half of total household income.

Employees (S.143)
2.123 Definition: the employees subsector consists of thegroup of households for which the income accruing from compensation of employees (D.1) is thelargest source of income for the household as awhole.

Recipients of property income (S.1441)
2.124 Definition: the recipients of property income sub-sector consists of the group of households forwhich property income (D.4) is the largest sourceof income for the household as a whole.

Recipients of pensions (S.1442)
2.125 Definition: the recipients of pensions subsec-

tor consists of the group of households for which
the income accruing from pensions is the largest
source of income for the household as a whole.
Pension households are households whose largest source of income consists of retirement or

46

other pensions, including pensions from previous
employers.

Recipients of other transfers (S.1443)
2.126 Definition: the recipients of other transfers subsec-

tor consists of the group of households for which
the income accruing from other current transfers
is the largest source of income for the household asa whole.
Other current transfers are all current transfers
other than property income, pensions and incomeof persons living permanently in institutions.

2.127 If information on the relative contributions of thesources of income of the household as a whole is
not available for sectoring purposes, the incomeof the reference person is used for classifying purposes. The reference person of a household is the
person with the largest income. If the latter information is not available, the income of the person
who states that he/she is the reference person isused for subsectoring households.

2.128 Other criteria for subsectoring households can beused, e.g. breakdown of households as entrepreneurs by activity: agricultural households and nonagricultural households.

Non-profit institutions serving households(S.15)
2.129 Definition: the non-profit institutions serving

households (NPISHs) sector (S.15) consists of nonprofit institutions which are separate legal entities, which serve households and which are private
non-market producers. Their principal resources
are voluntary contributions in cash or in kind fromhouseholds in their capacity as consumers, frompayments made by general government and fromproperty income.

2.130 Where such institutions are not very important,they are not included in the NPISH sector, but inthe households sector (S.14), as their transactions
are indistinguishable from units in that sector.
Non-market NPISHs controlled by general government are classified in the general government
sector (S.13).

European system of accounts — ESA 2010

Units and groupings of units

The NPISHs sector includes the following main
kinds of NPISHs that provide non-market goods
and services to households:(a) trade unions, professional or learned societies, consumers’ associations, political parties,
churches or religious societies (including thosefinanced but not controlled by governments),
and social, cultural, recreational and sports
clubs; and(b) charities, relief and aid organisations financed
by voluntary transfers in cash or in kind fromother institutional units.
Sector S.15 includes charities, relief or aid agencies serving non-resident units and excludes entities where membership gives a right to a predetermined set of goods and services.

Rest of the world (S.2)
2.131 Definition: the rest of the world sector (S.2) is agrouping of units without any characteristic functions and resources; it consists of non-resident
units insofar as they are engaged in transactions
with resident institutional units, or have other economic links with resident units. Its accounts provide an overall view of the economic relationships
linking the national economy with the rest of theworld. The institutions of the EU and internationalorganisations are included.

2.132 The rest of the world is not a sector for which com-plete sets of accounts have to be kept, but it is convenient to treat the rest of the world as a sector.
Sectors are obtained by disaggregating the total
economy to obtain more homogeneous groups ofresident institutional units, which are similar inrespect to their economic behaviour, objectives
and functions. This is not the case for the rest of
the world sector: for this sector, there are recorded
the transactions and other flows of non-financial
and financial corporations, non-profit institutions,households and general government with non-resident institutional units and other economic relationships between residents and non-residents, e.g.
claims by residents on non-residents.

2.133 The accounts for the rest of the world include

only transactions carried out between resident

European system of accounts — ESA 2010

2

institutional units and non-resident units, subject
to the following exceptions:(a) the services of transport (up to the border of theexporting country) provided by resident units
in respect of imported goods are shown in therest of the world accounts with FOB imports,
even though they are produced by resident
units;(b) transactions in foreign assets between residents
belonging to different sectors in the domestic economy are shown in the detailed financial accounts for the rest of the world. Thesetransactions do not affect the country’s financial position vis-à-vis the rest of the world; theyaffect the financial relationships of individual
sectors with the rest of the world;(c) transactions in the country’s liabilities between
non-residents belonging to different geographical zones are shown in the geographicalbreakdown of the rest of the world accounts.
Although these transactions do not affect thecountry’s overall liability to the rest of theworld, they affect its liabilities to different partsof the world.
2.134 The rest of the world sector (S.2) is subdivided into:(a) Member States and institutions and bodies of
the European Union (S.21):(1) Member States of the European Union (S.211);(2) Institutions and bodies of the European Union(S.212);(b) non-member countries and internationalorganisations non-resident of EU (S.22).

Sector classification of producer units formain standard legal forms of ownership2.135 The following overview and paragraphs 2.31 to 2.44

summarise the principles underlying the classification of producer units into sectors, using the standard terminology for describing the main types of
institutions.

2.136 Private and public corporations which are market

producers are classified as follows:47

2

Units and groupings of units(a) those principally engaged in the production of
goods and non-financial services: in sector S.11
(non-financial corporations);(b) those principally engaged in financial intermediation and auxiliary financial activities: in sector S.12 (financial corporations).
2.137 Cooperatives and partnerships which are recog-(b) those principally engaged in financial intermediation and auxiliary financial activities: in sector S.12 (financial corporations);(c) those which are non-market producers:

nised as independent legal entities and are market
producers are classified as follows:(1) in sector S.13 (general government), if they are public producers controlled by general government;(a) those principally engaged in the production of
goods and non-financial services: in sector S.11
(non-financial corporations);(2) in sector S.15 (non-profit institutions serving
households), if they are private producers.

(b) those principally engaged in financial intermediation and auxiliary financial activities: in sector S.12 (financial corporations).
2.138 Public producers which by virtue of special legis-

lation are recognised as independent legal entities
and which are market producers are classified asfollows:(a) those principally engaged in the production of
goods and non-financial services: in sector S.11
(non-financial corporations);(b) those principally engaged in financial intermediation and auxiliary financial activities: in sector S.12 (financial corporations).

2.139 Public producers which are not recognised as inde-

pendent legal entities and are market producers areclassified as follows:(a) If they are quasi-corporations:(1) those principally engaged in the production of
goods and non-financial services: in sector S.11
(non-financial corporations);(2) those principally engaged in financial intermediation and financial auxiliary activities: in sector S.12
(financial corporations).

(b) If they are not quasi-corporations: in sector
S.13 (general government), as they remain an
integral part of the units which control them.
2.140 Non-profit institutions (associations and founda-

tions) recognised as independent legal entities areclassified as follows:(a) those which are market producers and principally engaged in the production of goods and48

non-financial services: in sector S.11 (nonfinancial corporations);

2.141 Sole proprietorships and partnerships which are

not recognised as independent legal entities andare market producers are classified as follows:(a) If they are quasi-corporations:(1) those principally engaged in the production of
goods and non-financial services: in sector S.11
(non-financial corporations);(2) those principally engaged in financial intermediation and financial auxiliary activities: in sector S.12
(financial corporations).

(b) If they are not quasi-corporations, they areclassified in sector S.14 (households).
2.142 Head offices are classified as follows:(a) in sector S.11 (non-financial corporations), if
the preponderant type of activity of the groupof corporations which are market producers asa whole is the production of goods and nonfinancial services (see point (e) of paragraph2.46);(b) in sector S.12 (financial corporations), if the
preponderant type of activity of the group of
corporations as a whole is financial intermediation (see point (e) of paragraph 2.65).
Holding companies which are holders of assets
of a group of subsidiary corporations are always
treated as financial corporations. Holding companies hold the assets of a group of companies, but
do not undertake any management activities withrespect to the group.
2.143 Table 2.5 shows in schematic form the various

cases enumerated above.

European system of accounts — ESA 2010

Units and groupings of units

2

Table 2.5 — Sector classification of producer units for main standard legal forms of ownership
Type of producer
Standard legal description

Market producers Market producers(goods and non(financial
financial services) intermediation)

Private and public corporations

S.11 non-financial
corporations

S.12 financial
corporations

Cooperatives and partnerships recognised as
independent legal entities

S.11 non-financial
corporations

S.12 financial
corporations

Public producers which by virtue of special
legislation are recognised as independent legal
entities

S.11 non-financial
corporations

S.12 financial
corporations

Those with theS.11 non-financial
characteristics ofcorporations
quasi-corporations

S.12 financial
corporations

Public producers notrecognised as independent
legal entities

Publicproducers

Privateproducers

S.13 general
government

The rest

Non-profit institutions recognised as
independent legal entities

Non-market producers

S.11 non-financial
corporations

S.12 financial
corporations

Partnerships not recognised
as independent legal
entities
Sole proprietorships

Those with theS.11 non-financial
characteristics ofcorporations
quasi-corporations

S.12 financial
corporations

The rest

S.14 households

S.14 households

Head offices whose
preponderant type ofactivity of the group of
corporations controlled bythem is the production of:goods and nonfinancial services

S.11 non-financial
corporations

financial services

Local kind-of-activity units andindustries
2.144 Most institutional units producing goods and ser-vices are engaged in a combination of activities atthe same time. They may be engaged in a principal
activity, some secondary activities and some ancillary activities.

2.145 An activity occurs when resources such as equip-

ment, labour, manufacturing techniques, information networks or products are combined, leading to the creation of specific goods or services. An
activity is characterised by an input of products, aproduction process and an output of products.
Activities can be determined by reference to a specific level of NACE Rev. 2.

2.146 If a unit carries out more than one activity, all theactivities which are not ancillary activities (seeEuropean system of accounts — ESA 2010

S.13 general
government

S.15 non-profit
institutions serving
households

S.12 financial
corporations

Chapter 3, paragraph 3.12) are ranked according
to the gross value added. On the basis of the preponderant gross value added generated, a distinction can then be made between principal activity
and secondary activities.
2.147 In order to analyse flows occurring in the processof production and in the use of goods and services,
it is necessary to choose units which emphasise
relationships of a technico-economic kind. Thisrequirement means that institutional units mustbe partitioned into smaller and more homogeneous units with regard to the kind of production.
Local kind-of-activity units are intended to meetthis requirement as an operational approach.

The local kind-of-activity unit
2.148 Definition: the local kind-of-activity unit (local

KAU) is the part of a kind-of-activity unit (KAU)49

2Units and groupings of units

which corresponds to a local unit. The local KAU
is called establishment in the 2008 SNA and ISIC
Rev. 4. A KAU groups all the parts of an institutional unit in its capacity as producer contributing
to the performance of an activity at class level (fourdigits) of the NACE Rev. 2 and corresponds toone or more operational subdivisions of the institutional unit. The institutional unit’s information
system must be capable of indicating or calculating for each local KAU at least the value of production, intermediate consumption, compensation of
employees, the operating surplus and employment
and gross fixed capital formation.
The local unit is an institutional unit, or part of an
institutional unit, producing goods or services situated in a geographically identified place.
A local KAU may correspond to an institutional
unit as producer; on the other hand, it can neverbelong to two different institutional units.
2.149 If an institutional unit producing goods or services

contains a principal activity and also one or several secondary activities, it is subdivided into thesame number of KAUs, and the secondary activities are classified under different headings from theprincipal activity. The ancillary activities are notseparated from the principal or secondary activities. But KAUs falling within a particular headingof the classification system can produce products
outside the homogeneous group on account of secondary activities connected with them which cannot be separately identified from available accounting documents. Thus a KAU may carry out one ormore secondary activities.

irrespective of whether or not the institutional
units to which they belong produce market or nonmarket output.
2.151 Industries are classified in three categories:(a) industries producing market goods and services (market industries) and goods and services for own final use. Services for own final
use are housing services produced by owneroccupiers, and domestic services produced by
employing paid staff;(b) industries producing non-market goods andservices of general government: non-market
industries of general government;(c) industries producing non-market goods andservices of non-profit institutions serving
households: non-market industries of nonprofit institutions serving households.

Classification of industries
2.152 The classification used for grouping local KAUs

into industries is the NACE Rev. 2.

Units of homogeneous production andhomogeneous branches
2.153 For analysis of the production process, the unit

best suited to this analysis is the unit of homogeneous production. This unit has a unique activity
defined by its inputs, process of production, andoutputs.

Industries
2.150 Definition: an industry consists of a group of local

KAUs engaged in the same, or similar, kind-ofactivity. At the most detailed level of classification,
an industry consists of all the local KAUs fallingwithin a single class (four digits) of NACE Rev. 2
and which are therefore engaged in the same activity as defined in the NACE Rev. 2.
Industries comprise both local KAUs producing
market goods and services and local KAUs producing non-market goods and services. An industry by definition consists of a group of local KAUs
engaged in the same type of productive activity,50

The unit of homogeneous production
2.154 Definition: a unit of homogeneous production car-ries out a unique activity which is identified by
its inputs, process of production, and its outputs.
The products which constitute the inputs and outputs are themselves distinguished by their physical characteristics, the extent to which they areprocessed and the technique of production used.
They can be identified by a classification of products (classification of products by activity — CPA).
The CPA is a product classification the elements ofwhich are structured according to the industrial

European system of accounts — ESA 2010

Units and groupings of units

origin criterion, industrial origin being defined by
NACE Rev. 2.

The homogeneous branch
2.155 Definition: the homogeneous branch consistsof a grouping of units of homogeneous production. The set of activities covered by a homogeneous branch is identified by reference to a product

European system of accounts — ESA 2010

2

classification. The homogeneous branch produces
those goods or services specified in the classification and only those products.
2.156 Homogeneous branches are units designed for eco-nomic analysis. Units of homogeneous production
cannot usually be observed directly; data collectedfrom the units used in statistical enquiries have tobe re-arranged to form homogeneous branches.

51

Transactions in products and non-produced assets

3

CHAPTER 3
Transactions in products and non-produced assets(f) in the external account of goods and services,
imports of goods and services are recorded as aresource, and exports of goods and services areregistered as uses.

Transactions in products in general
3.01

3.02

3.03

Definition: products are all goods and services
that are created within the production boundary.
Production is defined in paragraph 3.07.

Many major balancing items in the accounts, likevalue added, gross domestic product, national
income and disposable income, are defined interms of transactions in products. The definitionof transactions in products defines those balancing items.

The following main categories of transactions in
products are distinguished in the ESA:
Transaction categories

Code

OutputP.1

Intermediate consumption

P.2

Final consumption expenditure

P.3

Actual final consumption

P.4

Gross capital formation

P.5

Exports of goods and services

P.6

Imports of goods and services

P.7

3.04

In the supply table (see paragraph 1.136), output
and imports are recorded as supplies. In the use
table, intermediate consumption, gross capital formation, final consumption expenditure and exports
are registered as uses. In the symmetric input-output table, output and imports are recorded as supplies and the other transactions in products as uses.

3.05

Supplies of products are valued at basic prices (seeparagraph 3.44). Uses of products are valued atpurchasers’ prices (see paragraph 3.06). For some
types of supplies and uses, e.g. for imports andexports of goods, more specific valuation principles are used.

3.06

Definition:

Transactions in products are recorded as follows:(a) in the goods and services account, output andimports are recorded as resources and the othertransactions in products are recorded as uses;(b) in the production account, output is recorded
as a resource and intermediate consumption
is recorded as a use; gross value added is thebalancing item of these two transactions in
products;(c) in the use of disposable income account, final
consumption expenditure is recorded as a use;(d) in the use of adjusted disposable income
account, actual final consumption is recorded
as a use;(e) in the capital account, gross capital formationis recorded as a use (a change in non-financial
assets);European system of accounts — ESA 2010

The purchaser’s price is the price the purchaser pays
for the products. The purchaser’s price includes thefollowing:(a) taxes less subsidies on the products (but excluding deductible taxes like VAT on the products);(b) transport charges paid separately by the purchaser to take delivery at the required time andplace;(c) deductions for any discounts for bulk or
off-peak-purchases from standard prices or
charges.
The purchaser’s price excludes the following:53

3Transactions in products and non-produced assets(a) interest or services charges added under credit
arrangements;(2) the production and storage of agricultural
products;(b) extra charges incurred as a result of late payment, where late payment means failing to pay
within the period stated at the time the purchases were made.

(3) the processing of agricultural products, like theproduction of flour by milling, the preservationof fruit by drying and bottling, the production of
dairy products like butter and cheese and the production of beer, wine and spirits;(4) the production of other primary products, likemining salt, cutting peat and carrying water;

If the time of use does not coincide with the timeof purchase, adjustments are made to the value totake account of the changes in price due to the lapsing of time (in a manner symmetrical with changes
in the prices of the inventories). Such modifications are important if the prices of the products
involved change significantly within a year.

(5) other kinds of processing, like weaving cloth, theproduction of pottery and making furniture;(c) the own-account production of dwelling services by owner-occupiers;(d) domestic and personal services produced by
employing paid domestic staff;

Production and output
3.07(e) volunteer activities that result in goods.
Examples of such activities are the construction of a dwelling, church or other building.
Volunteer activities that do not result in goods,
e.g. care-taking and cleaning without payment,
are excluded.

Definition: production is an activity carried out
under the control, responsibility and managementof an institutional unit that uses inputs of labour,
capital and goods and services to produce outputsof goods and services.

The activities listed above in points (a) to (e) are
included as production irrespective of being illegal
or not-registered at tax, social security, statisticaland other public authorities.

Production does not cover natural processes whichhave no human involvement or direction, suchas the unmanaged growth of fish stocks in international waters, but production does include fish
farming.
3.08

Own-account production of goods by households
is recorded when this type of production is significant, i.e. when it is quantitatively important in relation to the total supply of that good in a country.

Production includes:(a) the production of all individual or collective
goods and services that are supplied to units
other than their producers;(b) the own-account production of all goods
that are retained by their producers for theirown final consumption or gross fixed capitalformation.
Examples of own-account production for grossfixed capital formation are the production of
fixed assets such as construction, the development of software and mineral exploration forown gross fixed capital formation. The conceptof gross fixed capital formation is described inparagraphs 3.124-3.138.
Own-account production of goods by households pertains in general to:(1) own-account construction of dwellings;

54

The only own-account production of goods byhouseholds included is the construction of dwellings, and the production, storage and processing ofagricultural products.
3.09

Production excludes the production of domestic
and personal services that are produced and consumed within the same household. Examples ofdomestic services produced by households themselves that are excluded are:(a) cleaning, decoration and maintenance of thedwelling as far as these activities are also common for tenants;(b) cleaning, servicing and repair of household
durables;(c) preparation and serving of meals;

European system of accounts — ESA 2010

Transactions in products and non-produced assets(d) care, training and instruction of children;(i) cleaning; and(e) care of sick, infirm or old people; and(j) security services.

(f) transportation of members of the household ortheir goods.

Enterprises have a choice between engaging in
ancillary activities and purchasing such services on
the market from specialist service producers.

Domestic and personal services produced by
employing paid domestic staff and the servicesof owner-occupied dwellings are included in
production.

Own-account capital formation is not an ancillary
activity.
3.13

Principal, secondary and ancillary activities
3.10

Definition: the principal activity of a local KAU is
the activity where the value added of such activity exceeds that of any other activity carried out
within the same unit. The classification of the principal activity is determined by reference to NACE
rev. 2, first at the highest level of the classificationand then at more detailed levels.

3.11

Definition: a secondary activity is an activity carried out within a single local KAU in addition to
the principal activity. The output of the secondary
activity is a secondary product.

3.12

Definition: an ancillary activity is an activity whose
output is intended for use within an enterprise.
An ancillary activity is a supporting activity undertaken within an enterprise in order to enable theprincipal or secondary activities of local KAUs to
be carried out. All inputs consumed by an ancillary
activity — materials, labour, consumption of fixed
capital, etc. — are treated as inputs into the principal or secondary activity which it supports.

Output (P.1)
3.14(a) the goods and services which one local KAU
provides to a different local KAU belonging to
the same institutional unit;(b) the goods produced by a local KAU that remain
in inventories at the end of the period in which
they are produced, whatever their subsequentuse. Goods and services produced and consumed within the same accounting period andwithin the same local KAU are not separately
identified. They are not recorded as part of theoutput or intermediate consumption of that
local KAU.

(b) sales;(c) marketing;(d) accounting;(e) data processing;(f) transportation;

European system of accounts — ESA 2010

Definition: output is the total of products createdduring the accounting period.
Examples of output include the following:(a) purchasing;(h) maintenance;

Ancillary activities are not isolated to form distinct
entities or separated from the principal or secondary activities or entities they serve. Accordingly,
ancillary activities must be integrated with the local
KAU they serve.
Ancillary activities may be carried out in separate
locations, located in a region other than the local
KAU they serve. The strict application of the rulereferred to in the first subparagraph for the geographical allocation of the ancillary activities would
result in the underestimation of the aggregates in
the regions where ancillary activities are concentrated. In accordance, therefore, with the principleof residence, ancillary activities have to be allocatedto the region where they are situated; they remainin the same industry as the local KAU they serve.

Examples of ancillary activities are:(g) storage;

3

3.15

When an institutional unit contains more than
one local KAU, the output of the institutional unit
is the sum of the outputs of its component local

55

3Transactions in products and non-produced assets

KAUs, including outputs delivered between thecomponent local KAUs.
3.16

Three types of output are distinguished in the ESA
2010:

institutional unit and the local KAU that producethat output.
3.17

Definition: market output consists of output that is
disposed of on the market or intended to be disposed of on the market.

3.18

Market output includes:(a) market output (P.11);(b) output produced for own final use (P.12);(a) products sold at economically significant
prices;(c) non-market output (P.13).
This distinction is also applied to local KAUs andinstitutional units:(b) products bartered;(c) products used for payments in kind (including
compensation of employees in kind and mixed
income in kind);(a) market producers;(b) producers for own final use;(d) products supplied by one local KAU to anotherwithin the same institutional unit to be used asintermediate inputs or for final uses;(c) non-market producers.
The distinction between market, for own final use
and non-market is fundamental in view of thefollowing:(e) products added to the inventories of finishedgoods and work-in-progress intended for one
or other of the above uses (including natural
growth of animal and vegetable products anduncompleted structures for which the buyer is
unknown).

(a) it affects the valuation of output and related
concepts, such as value added, gross domestic
product and final consumption expenditure by
the government and NPISH;(b) it affects the classification of institutional units
by sector, e.g. which units are included in the
sector general government and which are not.
The distinction determines the valuation principles
to be applied to output. Market output and output produced for own final use are valued at basic
prices. The total output of non-market producers
is valued by summing the costs of production. The
output of an institutional unit is valued as the sumof the outputs of its local KAUs and depends thus
also on the distinction between market, for own
final use and non-market.
The distinction is also used to classify institutional
units by sector. Non-market producers are classified in the general government sector or the nonprofit institutions serving households sector.
The distinctions are defined in a top-down way, i.e.
the distinction is first defined for institutional units,then for local KAUs and then for their output.
At the product level output is classified as market output, output for own final use and non-market output according to the characteristics of the

56

3.19

Definition: economically significant prices are
prices that have a substantial effect on the amounts
of products that producers are willing to supply
and on the amounts of products that purchasers
wish to acquire. Such prices arise when both of thefollowing conditions apply:(a) the producer has an incentive to adjust supply either with the goal of making a profit in
the long run or, at a minimum, covering capitaland other costs; and(b) consumers have the freedom to purchase or notpurchase and make the choice on the basis of
the prices charged.
Not economically significant prices are likely to be
charged in order to raise some revenue or achievesome reduction in the excess demand that may
occur when services are provided completely free.
The economically significant price of a productis defined in relation to the institutional unit andlocal KAU that has produced the output. For example, all the output of unincorporated enterprises
owned by households sold to other institutional

European system of accounts — ESA 2010

Transactions in products and non-produced assets

units is sold at economically significant prices; it isthus to be regarded as market output. For the output of other institutional units, the ability to undertake a market activity at economically significant
prices will be checked notably through a quantitative criterion (the 50 % criterion), using the ratio ofsales to production costs. To be a market producer,
the unit shall cover at least 50 % of its costs by its
sales over a sustained multi-year period.
3.20

Definition: output produced for own final use consists of goods or services that are retained either for
own final consumption or for capital formation by
the same institutional unit.

3.21

Products retained for own final consumption
can only be produced by the households sector.
Examples of products retained for own final consumption include:

which consists of various fees and charges, and‘Non-market output, other’ (P.132), which is output provided for free.
Non-market output is produced for the following
reasons.
(a) It may be technically impossible to make individuals pay for collective services because theirconsumption of such services cannot be monitored and controlled. The production of collective services is organised by government units
and financed out of funds other than receipts
from sales, namely taxation or other government incomes.
(b) Government units and NPISHs may also produce and supply goods or services to individual households for which they could charge butchoose not to do so as a matter of social or economic policy. Examples are the provision of
education or health services, for free or at pricesthat are not economically significant.

(a) agricultural products retained by farmers;(b) dwelling services produced by owner-occupiers;(c) household services produced by employing
paid staff.
3.22

3.24

Products used for own capital formation can beproduced by any sector. Examples of such products are:(b) dwellings, or extensions to dwellings, producedby households;(d) own-account software;(e) own-account research and development.
Expenditure on research and development
is only to be recorded as fixed capital formation when a sufficiently high level of reliability
and comparability of the estimates across theMember States has been achieved.
3.23

Definition: non-market output is output that isprovided to other units for free, or at prices that are
not economically significant.
Non-market output (P.13) is subdivided into two
items: ‘Payments for non-market output’ (P.131),

European system of accounts — ESA 2010

Definition: market producers are local KAUs or
institutional units the majority of output of which
is market output.
If a local KAU or institutional unit is a market producer, its main output is by definition market output, as the concept of market output is defined after
having applied the distinction market, for own final
use and non-market output, to the local KAU andinstitutional unit that have produced that output.

(a) machine tools produced by engineering
enterprises;(c) own-account construction, including communal construction undertaken by groups ofhouseholds;

3

3.25

Definition: producers for own final use are local
KAUs or institutional units the major part of theoutput of which is for own final use within thesame institutional unit.

3.26

Definition: non-market producers are local KAUs
or institutional units the major part of the output
of which is provided for free or at not economicallysignificant prices.

Institutional units: distinction between
market, for own final use and non-market
3.27

For institutional units as producers, the distinction
between market, for own final use and non-market is summarised in Table 3.1. The classification
by sectors is also shown.

57

3

Transactions in products and non-produced assets

Table 3.1 — The distinction between market producers, producers for own final use and non-market

producers for institutional units

Type of institutional unit
Private or
public?
1. Private
producers

NPI or not?

Classification
Marketproducer?

1.1 Unincorporated
enterprises owned byhouseholds (excluding
quasi-corporate enterprises
owned by households)
1.2 Other private producers(including quasi-corporate
enterprises owned byhouseholds)

1.2.1 Private NPIs

3.28

3.29

3.30

58

Table 3.1 shows that, in order to determine
whether an institutional unit should be classified
as a market producer, a producer for own-final use
or a non-market producer, several distinctions are
made sequentially. The first distinction is between
private and public producers. A public producer is
a producer that is controlled by the general government, where control is as defined in paragraph
2.38.

Households

1.2.1.1 Yes

1.2.1.1 = Market

Corporations

1.2.1.2 No

1.2.1.2 = Non-market NPISH
1.2.2 = Market

Corporations

2.1 Yes

2.1 = Market

Corporations

2.2 No2.2 = Non-market

General government

3.31

For other private producers, a distinction is madebetween private non-profit institutions and otherprivate producers.
Definition: a private non-profit institution (NPI) is
defined as a legal or social entity acting for the purpose of producing goods and services whose status does not permit them to be a source of income,profit or other financial gains for the units that
establish, control or finance them. Where theirproductive activities generate surpluses, such surpluses cannot be appropriated by other institutional units.

As Table 3.1 shows, private producers are found inall sectors except general government. In contrast,
public producers are only found in the non-financial corporations sector, the financial corporations
sector, and the general government sector.
A specific category of private producers is that ofunincorporated enterprises owned by households.
These are market producers or producers for own
final use. The latter occurs in case of the productionof services of owner-occupied dwellings and theown-account production of goods. All unincorporated enterprises owned by households are classified to the households sector apart from quasi-corporate enterprises owned by households. These
are market producers and classified in the nonfinancial corporations and financial corporations
sectors.

Sector(s)1.1 = Market or for
own final use

1.2.2 Other private
producers not NPI
2. Public
producers

Type of producer

A private NPI is classified to the non-financial corporations and financial corporations sectors, if it isa market producer.
A private NPI is classified to the NPISH sector if it
is a non-market producer, except when it is under
the control of government. When a private NPI iscontrolled by government, then it is classified in
the general government sector.
All other private producers that are not NPIs aremarket producers. They are classified in the nonfinancial corporations and financial corporations
sectors.
3.32

In distinguishing between market and non-market output and between market and non-market

European system of accounts — ESA 2010

Transactions in products and non-produced assets

producers, several criteria are to be used. The market-non-market criteria in question (see paragraph3.19 on the definition of economically significant
prices) seek to assess the existence of market circumstances and sufficient market behaviour by
the producer. According to the quantitative market-non-market criterion, products sold at economically significant prices should cover at least amajority of the production costs by sales.
3.33

capital formation. For the sake of simplicity,
the costs of capital may in general be approximated by the net actual interest payments.
However, for producers of financial services,
the interest charge is taken, i.e. a correction ismade for financial intermediation services indirectly measured (FISIM).
The quantitative market-non-market criterion isapplied by looking over a range of years. Minor
fluctuations in the size of sales from one year toanother do not require a reclassification of institutional units (and their local KAUs and output).

In applying this quantitative market-non-market
criterion, sales and production costs are defined asfollows.
(a) Sales shall mean the sales excluding taxes on
products but including all payments made bygeneral government or the institutions of theUnion and granted to any kind of producer inthis type of activity, i.e. all payments linked to
the volume or value of output are included, but
payments to cover an overall deficit or settle
debts are excluded.

3.34(b) purchases by private insurance companies;(c) purchases by social security funds and general
government to be classified as social benefits inkind;(1) output at basic prices is only defined after it has
been decided on whether the output is market or
non-market: sales are only used in valuing market
output; non-market output is valued at costs;(d) purchases by households without reimbursement (final consumption expenditure).

(2) the payments made by general government tocover an overall deficit of public corporations andquasi-corporations constitute part of other subsidies on products as defined in point (c) of paragraph 4.35. As a consequence, market output atbasic prices includes the payments made by general government to cover an overall deficit.

(c) For the purpose of this criterion, production
costs are equal to the sum of intermediate consumption, compensation of employees, consumption of fixed capital, other taxes on production plus costs of capital. Other subsidies on
production are not deducted. To ensure consistency of the concepts ‘sales’ and ‘production
costs’ when applying the quantitative marketnon-market criterion, ‘production costs’ shallexclude all costs incurred for own-accountEuropean system of accounts — ESA 2010

Sales may consist of various elements. For example, in the case of health care services provided by ahospital, sales may correspond to:(a) purchases by employers to be recorded asincome in kind paid to their employees and final
consumption expenditure by these employees;

This definition of sales corresponds to that of
output at basic prices except that:(b) Sales exclude other sources of revenue likeholding gains (though they could be a normal
and expected part of business revenue), investment grants, other capital transfers (e.g. debt
redemption) and the purchase of equity.

3

Only other subsidies on production and gifts (e.g.
from charities) received are not treated as sales.
Similarly, as an illustrative example, the sale oftransport services by an enterprise may correspond to intermediate consumption by producers,
income in kind provided by employers, social benefits in kind provided by the government and purchases by households without reimbursement.
3.35

Private non-profit institutions serving businesses
are a special case. They are usually financed by contributions or subscriptions from the group of businesses concerned. The subscriptions are treated not
as transfers but as payments for services rendered,i.e. as sales. These NPIs are therefore market producers and are classified in the non-financial corporations or the financial corporations sector.

3.36

In applying the criterion of comparing sales andproduction costs of private or public NPIs, including in sales, all the payments linked to volume of
output may be misleading in some specific cases.

59

3Transactions in products and non-produced assets

This can be the case, for example, in relation to thefinancing of private and public schools. Payments
by general government can be linked to the number of pupils but be the subject of negotiation withgeneral government. In such a case, those payments are not recorded as sales, although they may
have an explicit link with a measure of the volume of output, such as the number of pupils. Thisimplies that a school mainly financed by such payments is a non-market producer.
3.37

3.38

3.39

60

(from tickets versus those from the sale of posters
and cards).

Time of recording and valuation of output
3.42

Output is to be recorded and valued when it is generated by the production process.

3.43

All output is to be valued at basic prices, but specific conventions hold for:Public producers can be market producers or nonmarket producers. Market producers are classified
in the non-financial and financial corporations sectors. If the institutional unit is a non-market producer, it is classified in the general government
sector.
Local KAUs as market producers and as producers for own final use cannot supply non-market
output. Their output can thus only be recorded as
market output or output for own final use and valued correspondingly (see paragraphs 3.42 to 3.53).
Local KAUs as non-market producers can supply
as secondary output market outputs and output for
own final use. The output for own final use consistsof own-account capital formation. The occurrenceof market output should in principle be determined by applying the qualitative and quantitative
market-non-market criteria to individual products. Such secondary market output by non-market producers might be the case for instance when
government hospitals charge economically significant prices for some of their services.

3.40

Other examples are sales of reproductions by government museums and sales of weather forecasts
by meteorological institutes.

3.41

Non-market producers may also have revenues
from the sale of their non-market output at noteconomically significant prices, e.g. the museum’s
revenues from tickets for entrance. These revenues
pertain to non-market output. However, if bothtypes of revenues (revenues from tickets and thosefrom the sale of posters and cards) are difficult todistinguish, they can all be treated as either revenues for market output or revenues from non-market output. The choice between these two alternative registrations should depend on the assumed
relative importance of both types of revenues(a) the valuation of non-market output;(b) the valuation of total output of a non-market
producer (local KAU);(c) the valuation of the total output of an institutional unit of which a local KAU is a non-market producer.
3.44

Definition: the basic price is the price receivable by
the producers from the purchaser for a unit of agood or service produced as output minus any tax(i.e. taxes on products) payable on that unit as aconsequence of its production or sale, plus any subsidy (i.e. subsidies on products) receivable on that
unit as a consequence of its production or sale. It
excludes any transport charges invoiced separatelyby the producer. It also excludes holding gains andlosses on financial and non-financial assets.

3.45

Output for own final use (P.12) is valued at thebasic prices of similar products sold on the market. This generates net operating surplus or mixed
income for such output. An example is services ofowner-occupied dwellings generating net operating surplus. If basic prices of similar products are
not available, output for own final use should bevalued at the costs of production plus a mark-up(except for non-market producers) for net operating surplus or mixed income.

3.46

Additions to work-in-progress are valued at thecurrent basic price of the finished product.

3.47

In order to estimate in advance the value of output
treated as work-in-progress, the value is based on
the actual costs incurred, plus a mark-up (except
for non-market producers) for the estimated operating surplus or mixed income. The provisional
estimates are subsequently replaced by thoseobtained by distributing the actual value (onceEuropean system of accounts — ESA 2010

Transactions in products and non-produced assets

known) of the finished products, over the period ofwork-in-progress.

(d) other taxes on production (D.29) less othersubsidies on production (D.39).

The value of the output of finished products is thesum of the values of:Interest payments (excluding FISIM) are notincluded as costs of non-market production.
The costs of non-market production also do notinclude an imputation for a net return on capital,
nor an imputation for the rental value of the nonresidential buildings owned and used in non-market production.

(a) finished products sold or bartered;(b) entries of finished products into inventories,
less withdrawals;(c) finished products for own final use.
3.48

For buildings and structures acquired in an incomplete state, a value is estimated based on costs todate, including a mark-up for operating surplus
or mixed income. This mark-up results when thevalue can be estimated on the basis of the prices
of similar buildings and structures. The amountsof stage payments may be used to approximate
the values of gross fixed capital formation undertaken by the purchaser at each stage, assuming noadvance payments or arrears.
Where the own-account construction of a structure is not completed within a single accounting
period, the value of the output is estimated by thefollowing method. The ratio of the costs incurredin the current period to the total costs over thewhole time of construction is calculated. This ratio
is applied to the estimate of total output at the current basic price. If it is not possible to estimate
the value of the finished structure at current basic
price, it is valued by its total costs of production
plus a mark-up (except for non-market producers)
for net operating surplus or mixed income. If someor all of the labour is provided free, as may happen with communal construction by households,
an estimate of what the cost of paid labour would
have been is included in the estimated total production costs using wage rates for similar labour
inputs.

3.49

The total output of a non-market producer (a local
KAU) is valued at the total costs of production, i.e.
the sum of:(a) intermediate consumption (P.2);(b) compensation of employees (D.1);(c) consumption of fixed capital (P.51c);

European system of accounts — ESA 2010

3.50

The total output of an institutional unit is the sumof the total output of its constituent local KAUs.
This applies also to institutional units that are nonmarket producers.

3.51

In the absence of secondary market output by nonmarket producers, non-market output is valued
at the costs of production. In the case of secondary market output by non-market producers, nonmarket output is valued as a residual item, i.e. as
the total costs of production minus their revenues
from market output.

3.52

Market output by non-market producers is valued at basic prices. Total output of a non-market
local KAU covering market, non-market and own
final use output is valued by the sum of production
costs. The value of its market output is given by its
receipts from sales of market products, the valueof its non-market output being obtained residuallyas the difference between the value of its total output and the sum of its market output and output
for own final use. The value of its receipts from thesale of non-market goods or services at prices thatare not economically significant does not figure inthese calculations — they are part of the value of its
non-market output.

3.53

A list of exceptions and clarifications to the timesof recording and the valuation of output follows, inthe order of CPA sections.

3

Products of agriculture, forestry and fishing (Section
A)
3.54

The output of agricultural products is recorded
as being produced continuously over the entire
period of production (and not only when the crops
are harvested or animals slaughtered).
Growing crops, standing timber and stocks of fishor animals reared for purposes of food are treated613Transactions in products and non-produced assets

as inventories of work-in-progress during the process, and transformed into inventories of finishedproducts when the process is completed.

the value of output =the value of sales
plus the value of goods purchased for resale andused for intermediate consumption, compensationof employees in kind or mixed income in kind,

Output excludes any changes in uncultivated biological resources, e.g. growth of animals, birds, fishliving in the wild or uncultivated growth of forests.

minus the value of goods purchased for resale,

Manufactured products (Section C); construction
work (Section F)
3.55

In the case of the construction of a building orother structure extending over several accounting periods, the output produced each period istreated as being sold to the purchaser at the endof the period, i.e. recorded as fixed capital formation by the purchaser rather than work-in-progressin the construction industry. The output is treatedas being sold to the purchaser in stages. When thecontract calls for stage payments, the value of theoutput may be approximated by the value of stage
payments made each period. Where there is nocertainty as to the ultimate purchaser, the incomplete output produced each period is recorded as
work-in-progress.

Wholesale and retail trade services; repair services ofmotor vehicles and motorcycles (Section G)
3.56

The output of wholesale and retail services is measured by the trade margins realised on the goods
they purchase for resale.
Definition: a trade margin is the difference between
the actual or imputed sale price realised on a goodpurchased for resale, and the price that would haveto be paid by the distributor to replace the good at
the time it is sold or otherwise disposed of.
Trade margins realised on some goods can be negative if their sale prices are marked down. Trade
margins are negative on goods that are not sold,but instead go to waste or are stolen. Trade margins on goods given to employees as compensation in kind, or withdrawn for final consumption
by owners, are equal to zero.
Holding gains and losses are not included in the
trade margin.
The output of a wholesaler or retailer is given by
the following identity:

62

plus the value of additions to inventories of goods
for resale,minus the value of goods withdrawn from inventories of goods for resale,minus the value of recurrent losses due to normal
rates of wastage, theft or accidental damage.

Transportation and storage (Section H)
3.57

The output of transport services is measured by
the value of the amounts receivable for transporting goods or persons. Transportation for own use
within the local KAU is considered ancillary activity and is not separately identified and recorded.

3.58

The output of storage services is measured as thevalue of an addition to work-in-progress. Increases
in the price of goods while in inventories should
not be regarded as work-in-progress and production, but be treated as holding gains. If the increasein value reflects a rise in price with no change inquality, then there is no further production during
the period in addition to the costs of storage or the
explicit purchase for a storage service. However,in three cases the increase in value is regarded as
production:(a) the quality of the good may improve with thepassage of time, e.g. in case of wine; only incases where maturing is part of the regular production process, the increase of the quality of
the good is regarded as production;(b) seasonal factors affecting the supply or demand
for a specific good that lead to regular, predictable variations in price over the year, eventhough its physical qualities may not havechanged;(c) the production process is sufficiently long that
discounting factors are applied to work carriedout significantly long before delivery.

European system of accounts — ESA 2010

Transactions in products and non-produced assets

3.59

Most changes in prices of goods while in inventories are not additions to work-in-progress. In orderto estimate the increase in the value of goods stored
over and above the storage costs, use may be madeof the expected increase in value over and above
the general rate of inflation over a predetermined
period. Any gain that occurs outside the predetermined period continues to be recorded as a holding gain or loss.
Storage services do not include any change in pricedue to holding financial assets, valuables or othernon-financial assets like land and buildings.

3.60

The output of travel agency services is measured
as the value of service charges of agencies (fees orcommission charges) and not by the full expenditures made by travellers to the travel agency,
including charges for transport by third parties.

3.61

The output of tour operator services is measured by
the full expenditure made by travellers to the tour
operator.

3.62

Travel agency services and tour operator services
are distinguished by the fact that travel agency services amount only to intermediation on behalfof the traveller, while tour operator services create a new product called a tour, which has various components of travel, accommodation andentertainment.

Financial and insurance services (Section K):
financial services in general
Financial services consist of the following services:(a) financial intermediation (including insurance
and pension services);(b) services of financial auxiliaries; and(c) other financial services.
3.64

Financial intermediation is financial risk management and liquidity transformation. Corporations
engaged in these activities obtain funds for example by taking deposits, and issuing bills, bonds andother securities. The corporations use these funds
as well as own funds to acquire financial assets bymaking loans to others and by purchasing bills,
bonds or other securities. Financial intermediation
includes insurance and pension services.

3.65

Auxiliary financial activities facilitate risk management and liquidity transformation. Financial auxiliaries act on behalf of other units and do not put
themselves at risk by incurring financial liabilities
or by acquiring financial assets as part of an intermediation service.

3.66

Other financial services include monitoring services such as monitoring the stock and bond market, security services such as safeguarding expensive jewellery and important documents, and trading services such as foreign exchange dealing anddealing in securities.

3.67

Financial services are produced almost exclusively by financial institutions because of the stringent supervision of those services. For example, if
a retailer wishes to offer credit facilities to its customers, the credit facilities are usually offered by afinancial corporation subsidiary of the retailer orby another specialised financial institution.

3.68

Financial services may be paid for directly or indirectly. Some transactions in financial assets may
involve both direct charges and indirect charges.
Financial services are provided and charged for infour main ways:

Accommodation and food services (Section I)
3.63

The value of the output of the services of hotels,
restaurants and cafes includes the value of the food,beverages, etc. consumed.

Financial and insurance services (Section K): outputof the central bank
The central bank delivers the following services:(a) monetary policy services;(b) financial intermediation services;(c) supervisory services
corporations.

overseeing

financial

The output of the central bank is measured as thesum of its costs.

European system of accounts — ESA 20103(a) financial services provided for direct payment;(b) financial services paid for through loadinginterest charges;

63

3

Transactions in products and non-produced assets(c) financial services in acquiring and disposingof financial assets and liabilities in financial
markets;

3.71

It is seldom the case that the amount of funds
lent by a financial institution exactly matches theamount deposited with them. Some money may
have been deposited but not yet loaned. Some loans
may be financed by the bank’s own funds and notfrom borrowed funds. Irrespective of the sourceof finance, a service is provided for the loans anddeposits offered. FISIM are imputed for all loans
and deposits. These indirect charges apply only toloans and deposits provided by, or deposited with,financial institutions.

3.72

The reference rate lies between bank interest rates
on deposits and loans. It does not correspond to anarithmetic average of the rates on loans or deposits. The rate prevailing for inter-bank borrowing
and lending is a suitable choice. However, different reference rates are needed for each currency inwhich loans and deposits are denominated, especially when a non-resident financial institution is
involved.

(d) financial services provided in insurance andpension schemes, where the activity is financed
by loading insurance contributions and fromthe income return on savings.

Financial services provided for direct payment
3.69

These financial services are provided for explicit
charges, covering a wide range of services that may
be provided by different types of financial institutions. The following examples illustrate the natureof the services charged for directly:(a) banks charge households to arrange a mortgage, manage an investment portfolio, andadminister an estate;(b) specialised institutions charge non-financial
corporations for organising a takeover or foradministering a restructuring of a group of
corporations;(c) credit card companies charge units that accept
credit cards usually a percentage of each sale;

FISIM are described in detail in Chapter 14.

Financial services consisting of acquiring anddisposing of financial assets and liabilities infinancial markets
3.73(d) a card holder is charged an explicit fee, usually
each year, for holding the card.

Financial services paid for through loading interest
charges
3.70

64

For example, in financial intermediation, a financial institution like a bank accepts deposits fromunits wishing to receive interest on funds for which
the unit has no immediate use and lends them toother units whose funds are insufficient to meettheir needs. The bank thus provides a mechanism
to allow the first unit to lend to the second. Each of
the two parties pays a fee to the bank for the service
provided: the unit lending funds pays by accepting a rate of interest lower than the ‘reference’ rateof interest, while the unit borrowing funds pays by
accepting a rate of interest higher than the ‘reference’ rate of interest. The difference between theinterest rate paid to banks by borrowers and theinterest rate actually paid to depositors is a charge
for FISIM.

When a financial institution offers a security (e.g.
bill or bond) for sale, a service charge is levied. The
purchase price (the ask price) is equal to the estimated market value of the security plus a margin. Another charge is levied when a security issold, the price offered to the seller (the bid price)
being equal to the market value minus a margin.
Margins between buying and selling prices apply
also to equities, investment fund shares and foreign
currencies. These margins are for the provision offinancial services.

Financial services provided in insurance andpension schemes, where activity is financed byloading insurance contributions and from theincome return on savings
3.74

The following financial services fall under thisheading. Each of them results in a redistribution offunds.
(a) Non-life insurance. Under a non-life insurance
policy, the insurance company accepts a premium from a client and holds it until a claim

European system of accounts — ESA 2010

Transactions in products and non-produced assets

is made or the period of the insurance expires.
The insurance company invests the premiumand the resulting property income is an extra
source of funds. The property income represents income foregone by the client and istreated as an implicit supplement to the actual
premium. The insurance company sets the levelof the actual premiums to be such that the sumof the premiums plus the property income
earned on them less the expected claims will
leave a margin that the insurance company willretain as the output of the insurance company.
Non-life insurance output is calculated as:
total premiums earned
plus implicit premium supplements (equal
to the property income earned on technicalreserves)
less adjusted claims incurred.
The insurance corporation has at its disposal
reserves consisting of unearned premiums(actual premiums relating to the next accounting period) and claims outstanding. Claims
outstanding cover claims that have not yet beenreported, have been reported but are not yet
settled or have been reported and settled but
are not yet paid. These reserves are called technical reserves and are used to generate investment income. Holding gains and losses are notincome from investment of the insurance technical reserves. Insurance technical reserves may
be invested in secondary activities of the insurance company, e.g. the letting of dwellings oroffices. The net operating surplus on these secondary activities is income from the investment
of insurance technical reserves.
The appropriate level of claims used in calculating output is called ‘adjusted claims’ and thesecan be determined in two ways. The expectation
method estimates the level of adjusted claims
from a model based on the past pattern ofclaims payable by the corporation. The second
method uses accounting information: adjusted
claims are derived ex post as actual claims
incurred plus the change in equalisation provisions, i.e. the funds set aside to meet unexpectedly large claims. Where the equalisation provisions are insufficient to bring adjusted claims

European system of accounts — ESA 2010

3

back to a normal level, contributions from own
funds are added to the measure of adjusted
claims. A major feature of both methods is that
unexpectedly large claims do not lead to volatile and negative estimates of output.
Changes in technical reserves and equalisation
provisions in response to changes in financial
regulation are recorded as other changes in thevolume of assets; they are irrelevant for calculating output. If, due to lack of information,
both methods for estimating adjusted claims
are not possible, it may be necessary to estimate
output instead by the sum of costs including anallowance for normal profits.
In case of with-profits insurance, the change
in the reserves for with-profits insurance isdeducted to obtain output.
(b) A life insurance policy is a type of saving
scheme. For a number of years, the policyholder pays premiums to the insurance corporation against a promise of benefits at somefuture date. These benefits may be expressedin terms of a formula related to the premiums
paid or may be dependent on the level of success the insurance corporation has in investing the funds. The method of calculating output for life insurance follows the same generalprinciples as for non-life insurance. However,
because of the time intervals between the time
when premiums are received and when benefits are paid, special allowances must be madefor changes in the technical reserves. The output of life insurance is derived as:
premiums earned
plus premium supplements, less benefits dueless increases (plus decreases) in life insurance
technical reserves.
Premiums are defined in exactly the same way
for life insurance as for non-life insurance.
Premium supplements are more significant
for life insurance than for non-life insurance.
Benefits are recorded as they are awarded or
paid. There is no need under life insurance toderive an adjusted estimate of benefits since
there is not the same unexpected volatility inthe payment under a life policy. Life insurance

65

3Transactions in products and non-produced assets

technical reserves increase each year becauseof new premiums paid and new investment
income allocated to the policyholders (but notwithdrawn by them) and decrease because of
benefits paid. It is thus possible to express thelevel of output of life insurance as the difference
between the total investment income earned on
the life insurance technical reserves less the partof this investment income actually allocated tothe policy holders and added to the insurance
technical reserves.
When this method is not feasible for data reasons or does not yield meaningful results, output of life insurance shall also be calculated as
the sum of production costs plus an allowancefor ‘normal profit’.

investment income received by the schemes lessthe amount added to reserves.

(e) Measuring the output of standardised loan
guarantee schemes depends on the type of producer involved. If a standardised loan guarantee scheme operates as a market producer, thevalue of output is calculated in the same way
as non-life insurance. If the scheme operates asa non-market producer, the value of output iscalculated as the sum of costs.

Real estate services (Section L)
3.75

The output of services of owner-occupied dwellings is valued at the estimated value of rental thata tenant would pay for the same accommodation,
taking into account factors such as location, neighbourhood amenities, etc., as well as the size andquality of the dwelling itself. For garages locatedseparately from dwellings, which are used by theowner for final consumption purposes in connection with using the dwelling, a similar imputation
is to be made. The rental value of owner-occupied
dwellings abroad, e.g. holiday homes, should not
be recorded as part of domestic production, but
as imports of services and the corresponding net
operating surplus as primary income received fromthe rest of the world. For owner-occupied dwellings owned by non-residents, analogous entries are
made. In case of time-sharing apartments, a proportion of the service charge is recorded.

3.76

To estimate the value of owner-occupied dwelling services, the stratification method is used. The
stock of dwellings is stratified by location, natureof dwelling and other factors that affect the rental.
Information about actual rentals from rented
dwellings is used to obtain an estimate of the rental
value of the total stock of dwellings. The average
actual rental per stratum is applied to all dwellingsin that particular stratum. If the information onrentals is derived from sample surveys, the grossing-up to total stock rentals relates to both a partof the rented and all owner-occupied dwellings.
The detailed procedure to determine a rental per
stratum is carried out for a base year and is thenextrapolated to the later periods.

3.77

The rental to be applied to owner-occupied dwellings in the stratification method is defined as theprivate market rental due for the right to use an(c) The output of reinsurance is to be determinedin exactly the same way as for non-life insurance, whether it is life or non-life policies thatare being reinsured.
(d) The output of running a social insurance
scheme depends on the way in which it isorganised. The following are examples of how
such schemes are organised.
(1) Social security schemes are social insurance
schemes that cover the community at large, andare imposed and controlled by government. Their
purpose is to provide benefits for citizens to meetthe demands of old age, invalidity or death, sickness, work injury, unemployment, family andhealth care, etc. If separate units are distinguished,
their output is determined in the same way as all
non-market output as the sum of costs. If separate
units are not distinguished, the output of social
security is included with the output of the level ofgovernment at which it operates.
(2) When an employer operates his own social insurance scheme, the value of the output is determinedas the sum of costs including an estimate for a
return to any fixed capital used in the operation of
the scheme. The value of output is measured in thesame way where the employer establishes a separate pension fund to manage the scheme.
(3) Where an employer uses an insurance corporation to manage the scheme on his behalf, the valueof the output is the fee charged by the insurance
corporation.
(4) For a multi-employer scheme, the value of output is measured as for life insurance policies: it is66

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Transactions in products and non-produced assets

unfurnished dwelling. The rentals for unfurnisheddwellings from all private market contracts are used
to determine imputed rentals. Private market rentals that are at a low level due to government regulation are included. If the information source is thetenant, the observed rental is corrected by adding
any specific rental allowance, which is paid directly
to the landlord. If the sample size for the observed
rentals as defined above is not large enough,observed rentals for furnished dwellings may be
used for imputation purposes, provided they are
adjusted for the furniture element. Exceptionally,
also increased rentals for public-owned dwellings
may be used. Low rentals for dwellings let to relatives or to employees should not be used.
3.78

3.79

The stratification method is used for grossing up to
all rented dwellings. The average rental for imputation as described above may not be suitable forsome segments of the rental market. For example, scaled-down rentals for furnished dwellings orincreased public rentals are not appropriate for therespective actually rented dwellings. In this case,separate strata for actually rented furnished orsocial dwellings combined with appropriate average rentals are required.
In the absence of a sufficiently large rental market, where accommodation is characteristic ofowner-occupied dwellings, the user-cost method isapplied for owner-occupied dwellings.
Under the user-cost method, the output of dwelling services is the sum of intermediate consumption, consumption of fixed capital, other taxes lesssubsidies on production and net operating surplus(NOS).
The NOS is measured by applying a constant realannual rate of return to the net value of the stockof owner-occupied dwellings at current prices(replacement costs).

3.80

The output of real estate services of non-residential buildings is measured by the value of the rentals due.

Professional, scientific and technical services (SectionM); Administrative and support services (Section N)
3.81

The output of operating leasing services, such as
renting out machinery or equipments, is measured

European system of accounts — ESA 2010

3by the value of the rental paid. Operating leasing isdifferent from financial leasing: financial leasing isfinancing the acquisition of fixed assets, by making a loan from the lessor to the lessee. Financial
leasing payments consist of repayments of principal and interest payments, with a small charge fordirect services provided (see Chapter 15: Contracts,
leases and licences).
3.82

Research and development (R&D) is creative work
undertaken on a systematic basis to increase thestock of knowledge, and use of this stock of knowledge for the purpose of discovering or developing new products, including improved versions or
qualities of -existing products, or discovering ordeveloping new or more efficient processes of production. R&D of a significant size relative to theprincipal activity is recorded as a secondary activity of the local KAU. A separate local KAU is distinguished for R&D where possible.

3.83

The output of R&D services is measured as follows:(a) R&D by specialised commercial research laboratories or institutes is valued at the revenues
from sales, contracts, commissions, fees, etc. in
the usual way;(b) the output of R&D for use within the same
enterprise is valued on the basis of the estimated basic prices that would be paid if theresearch were subcontracted. In the absenceof a market for subcontracting R&D of a similar nature, it is valued as the sum of production costs plus a mark-up (except for non-market producers) for NOS or mixed income;(c) R&D by government units, universities andnon-profit research institutes is valued as thesum of the costs of production. Revenues fromthe sale of R&D by non-market producers of
R&D are to be recorded as revenues from secondary market output.
Expenditure on R&D is distinguished from that on
education and training. Expenditure on R&D does
not include the costs of developing software as aprincipal or secondary activity.

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3Transactions in products and non-produced assets

Public administration and defence services,compulsory social security services (Section O)

Private households as employers (Section T)
3.87

3.84

Public administration, defence services and compulsory social security services are provided as
non-market services and valued accordingly.

Education services (Section P); human health andsocial work services (Section Q)
3.85

For education services and health services, a precise distinction is drawn between market and nonmarket producers and between their market andnon-market output. For example, for some types of
education and medical treatment, nominal fees canbe levied by government institutions (or by otherinstitutions due to specific subsidies), but for othereducation and special medical treatments they may
charge commercial tariffs. Another example is thatthe same type of service (e.g. higher education) is
provided by, on the one hand, the government and,on the other hand, commercial institutes.

Intermediate consumption (P.2)
3.88

Definition: intermediate consumption consists ofgoods and services consumed as inputs by a process of production, excluding fixed assets whose
consumption is recorded as consumption of fixed
capital. The goods and services are either transformed or used up by the production process.

3.89

Intermediate consumption includes the following
cases:

Education and health services exclude R&D activities; health services exclude education in healthcare, e.g. by academic hospitals.

(a) goods and services used as inputs into ancillary
activities. Common examples are purchasing,sales, marketing, accounting, data processing,transportation, storage, maintenance, security,
etc. These goods and services are not distinguished from those consumed by the principal(or secondary) activities of a local KAU;

Arts, entertainment and recreation services (SectionR); other services (Section S)(b) goods and services which are received fromanother local KAU of the same institutional
unit;

3.86

The production of books, recordings, films, software, tapes, disks, etc. is a two-stage process and ismeasured accordingly:(1) the output from the production of originals —an intellectual property product — is measured
by the price paid if sold, or, if not sold, by thebasic price paid for similar originals, its production costs (including a mark-up for NOS)or the discounted value of the future receipts
expected from using it in production;(2) the owner of this asset may use it directly or to
produce copies in subsequent periods. If theowner has licensed other producers to make useof the original in production, the fees, commissions, royalties, etc. received from the licenses
are the output of services. However, the sale ofthe original is negative fixed capital formation.

68

The output of household services produced by
employing paid staff is valued by the compensationof employees paid; this includes any compensationin kind such as food or accommodation.

(c) rental of fixed assets, e.g. the operational leasing of machines, cars, software and entertainment originals;(d) fees for short-term contracts, leases and licences
recorded as non-produced assets; this excludes
the outright purchase of such non-produced
assets;(e) the subscriptions, contributions or dues paid to
non-profit business associations (see paragraph3.35);(f) items not treated as gross capital formation,such as:(1) inexpensive tools used for common operations,such as saws, spades, knives, axes, hammers,
screwdrivers, spanners, wrenches and other handtools; small devices such as pocket calculators. All
expenditure on such durables is recorded as intermediate consumption;

European system of accounts — ESA 2010

Transactions in products and non-produced assets(2) the regular maintenance and repair of fixed assets
used in production;

Examples are renovation, reconstruction or
enlargement;(3) services of staff training, market research and similar activities, purchased from an outside agency orprovided by a separate local KAU of the same institutional unit;(4) software purchased outright or produced on
own-account;(5) military weapons and the equipment to deliverthem;(4) expenditure on R&D will be treated as fixed capital formation when a sufficiently high level of reliability and comparability of the estimates by theMember States has been achieved;(b) expenditure treated as the purchase of nonproduced assets. Examples are long-term contracts, leases and licences (see Chapter 15);(g) expenditure by employees, reimbursed by theemployer, on items necessary for the employers’ production, like contractual obligations topurchase on own-account tools or safety-wear;(c) expenditure by employers treated as wages andsalaries in kind;(d) use by market or own-account producer unitsof collective services provided by government units (treated as collective consumption
expenditure by government);(h) expenditure by employers which is to theirown benefit as well as to that of their employees, because it is necessary for production.
Examples are:(e) goods and services produced and consumed
within the same accounting period and within
the same local KAU (they are also not recorded
as output);(1) reimbursement of employees for travelling, separation, removal and entertainment expenses
incurred in the course of their duties;(2) providing amenities at the place of work.

(f) payments for government licenses and fees thatare treated as other taxes on production;

A list of relevant expenditure is presented in
the paragraphs on compensation of employees(D.1) (see paragraph 4.07);(i) non-life insurance service charges paid by local
KAUs (see Chapter 16: Insurance). To record
only the service charge as intermediate consumption, the premiums paid are discounted
for, e.g. claims paid out and the net change inactuarial reserves. The net change in actuarial
reserves shall be allocated to the local KAUs asa proportion of the premiums paid;(g) payments for licences for using natural
resources (e.g. land) that are treated as rents,
i.e. as a payment of property income.

Time of recording and valuation ofintermediate consumption
3.91

Products used for intermediate consumption arerecorded and valued at the time they enter the process of production. They are valued at the purchasers’ prices for similar goods or services at the timeof use.

3.92

Producer units do not record the use of goods inproduction directly. They record the purchases
intended to be used as inputs less the increase in
the amounts of such goods held in inventory.

(j) FISIM purchased by resident producers;(k) the non-market output of the central bankoutput should be entirely allocated to theintermediate consumption of other financial
intermediaries.
3.90

3Intermediate consumption excludes:(a) items treated as gross capital formation, examples being:(1) valuables;(2) mineral exploration;(3) major improvements beyond those required
to keep the fixed assets in good working order.

European system of accounts — ESA 2010

Final consumption (P.3, P.4)
3.93

Two concepts of final consumption are used:(a) final consumption expenditure (P.3);(b) actual final consumption (P.4).

69

3

Transactions in products and non-produced assets

Final consumption expenditure is expenditure on
goods and services used by households, NPISHs
and government to satisfy individual and collective needs. In contrast, actual final consumption
refers to its acquisition of consumption goods andservices. The difference between these concepts
lies in the treatment of certain goods and services
financed by the government or NPISHs but supplied to households as social transfers in kind.

Final consumption expenditure (P.3)
3.94

3.95

Definition: final consumption expenditure consistsof expenditure incurred by resident institutional
units on goods or services that are used for the
direct satisfaction of individual needs or wants orthe collective needs of members of the community.
Household final consumption
includes the following examples:

expenditure(a) services of owner-occupied dwellings;(b) income in kind, such as:(1) goods and services received as income in kind by
employees;(2) goods or services produced as outputs of unincorporated enterprises owned by households thatare retained for consumption by members of thehousehold. Examples are food and other agricultural goods, housing services by owner-occupiersand household services produced by employing
paid staff (servants, cooks, gardeners, chauffeurs,etc.);(g) pension funding services by the amount of theimplicit service charge;(h) payments by households for licences, permits,
etc. which are regarded as purchases of services(see paragraphs 4.79 and 4.80);(i) the purchase of output at not economically significant prices, e.g. entrance fees for a museum.
3.96

Household final consumption
excludes the following:

expenditure(a) social transfers in kind, such as expenditures
initially incurred by households but subsequently reimbursed by social security, e.g. somemedical expenses;(b) items treated as intermediate consumption or
gross capital formation, such as:(1) expenditures by households owning unincorporated enterprises when incurred for business purposes — e.g. on durable goods such as vehicles,
furniture or electrical equipment (gross fixed capital formation), and also on non-durables such asfuel (treated as intermediate consumption);(2) expenditure that an owner-occupier incurs on thedecoration, maintenance and repair of the dwelling not typically carried out by tenants (treated asintermediate consumption in producing housing
services);(3) the purchase of dwellings (treated as gross fixed
capital formation);(c) items not treated as intermediate consumption,such as:(4) expenditure on valuables (treated as gross capitalformation);(1) materials for small repairs to and interior decoration of dwellings of a kind carried out by tenants aswell as owners;(c) items treated as acquisitions of non-produced
assets, in particular the purchase of land;(2) materials for repairs and maintenance to consumer durables, including vehicles;(d) items not treated as capital formation, in particular consumer durables, that continue toperform their function in several accounting
periods; this includes the transfer of ownership of some durables from an enterprise to ahousehold;(e) financial services directly charged and the partof FISIM used for final consumption purposesby households;

70(f) insurance services by the amount of the implicit
service charge;(d) all those payments by households which are to
be regarded as taxes (see paragraphs 4.79 and4.80);(e) subscriptions, contributions and dues paid byhouseholds to NPISHs, such as trade unions,professional societies, consumers’ associations,churches and social, cultural, recreational andsports clubs;(f) voluntary transfers in cash or in kind byhouseholds to charities and relief and aidorganisations.

European system of accounts — ESA 2010

Transactions in products and non-produced assets

3.97

Final consumption expenditure
includes two separate categories:

of

NPISHs(a) the value of the goods and services produced
by NPISHs other than own-account capital formation and other than expenditure made byhouseholds and other units;(b) expenditures by NPISHs on goods or services
produced by market producers that are supplied — without any transformation — tohouseholds for their consumption as socialtransfers in kind.
3.98

Final consumption expenditure (P.3) by government includes two categories of expenditures, similar to those by NPISHs:(a) the value of the goods and services produced bygeneral government itself (P.1) other than ownaccount capital formation (corresponding toP.12), market output (P.11) and payments fornon-market output (P.131);(b) purchases by general government of goods andservices produced by market producers thatare supplied to households, without any transformation, as social transfers in kind (D.632).
General government pays for these goods andservices that the sellers provide to households.

3.99

Corporations do not make final consumption
expenditures. Their purchases of goods and services as used by households for final consumption are either used for intermediate consumption or provided to employees as compensationof employees in kind, i.e. imputed household final
consumption expenditure.

Actual final consumption (P.4)
3.100 Definition: actual final consumption consists ofthe goods or services that are acquired by resident institutional units for the direct satisfaction ofhuman needs, whether individual or collective.

3.101 Definition: goods and services for individual con-sumption (‘individual goods and services’) are
goods and services acquired by a household andused to satisfy the needs and wants of members ofthat household. Individual goods and services havethe following characteristics:

European system of accounts — ESA 20103(a) it is possible to observe and record the acquisition of the goods and services by an individual
household or member thereof and also the timeat which the acquisition took place;(b) the household has agreed to the provision of
the goods and services and takes the action necessary to consume the goods and services, forexample by attending a school or clinic;(c) the goods and services are such that their acquisition by one household or person, or by agroup of persons, precludes its acquisition byother households or persons.
3.102 Definition: collective services are services for collec-

tive consumption that are provided simultaneously
to all members of the community or all members ofa particular section of the community, such as all
households living in a particular region. Collective
services have the following characteristics:(a) they can be delivered simultaneously to every
member of the community or to particular sections of the community, such as those in a particular region or locality;(b) the use of such services is usually passive anddoes not require the agreement or active participation of all the individuals concerned;(c) the provision of a collective service to one individual does not reduce the amount available toother in the same community or section of thecommunity.

3.103 All household final consumption expenditureis individual. All goods and services provided by
NPISHs are treated as individual.

3.104 For the goods and services provided by govern-

ment units, the borderline between individual andcollective goods and services is drawn on the basisof the classification of the functions of government(COFOG).
All government final consumption expenditure
under each of the following headings is treated as
expenditure on individual consumption:(a) 7.1 Medical products, appliances and equipment
7.2 Outpatient services
7.3 Hospital services
7.4 Public health services;71

3Transactions in products and non-produced assets

14.3	Recreation and culture (equivalent to
COFOG groups 8.1 and 8.2)(b) 8.1 Recreational and sporting services
8.2 Cultural services;

14.4	
Education (equivalentgroups 9.1 to 9.6)(c) 9.1 Pre-primary and primary education
9.2 Secondary education

to

COFOG

14.5	Social protection (equivalent to COFOG
groups 10.1 to 10.5 and group 10.7).

9.3 Post-secondary non-tertiary education
9.4 Tertiary education

3.106 Collective

consumption expenditure is theremainder of the government final consumption
expenditure.

9.5 Education not definable by level
9.6 Subsidiary services to education;(d) 10.1 Sickness and disability

It consists of the following COFOG groups:

10.2 Old age
10.3 Survivors(a) general public services (division 1);

10.4 Family and children(b) defence (division 2);

10.5 Unemployment(c) public order and safety (division 3);

10.6 Housing(d) economic affairs (division 4);

10.7 Social exclusion not elsewhere included.

(e) environmental protection (division 5);

3.105 Alternatively individual consumption expenditureof general government corresponds to division 14of the classification of individual consumption bypurpose (Coicop), which includes the following
groups:(f) housing and community amenities (division 6);(g) general administration, regulation, dissemination of general information and statistics (alldivisions);

14.1	Housing (equivalent to COFOG group
10.6)(h) research and development (all divisions).
3.107 The relationships between the various consump-

14.2	Health (equivalent to COFOG groups
7.1 to 7.4)

tion concepts employed can be shown in Table 3.2.

Table 3.2 — Sector making expenditure
Government

NPISHsHouseholds

Total acquisitions

Individual consumption

X (= Socialtransfers in kind

X (= Socialtransfers in kind)

X

Households actual individual final
consumption

Collective consumption

X

0

0

Government’s actual collective final
consumption

Total

Government’s
NPISHs final
final consumption consumption
expenditure
expenditure

Households’ final
consumption
expenditure

Actual final consumption = Total final
consumption expenditure

X: applicable
0: not applicable

3.108 Final consumption expenditure of NPISHs is

all individual. Total actual final consumption isequal to the sum of households’ actual final consumption and actual final consumption of general
government.

72

3.109 There are no social transfers in kind with the restof the world (though there are such transfers inmonetary terms). Total actual final consumption isequal to total final consumption expenditure.

European system of accounts — ESA 2010

Transactions in products and non-produced assets

Time of recording and valuation of final
consumption expenditure
3.110 Expenditure on a good is recorded at the timeof change of ownership; expenditure on a service is recorded when the delivery of the service iscompleted.

3.111 Expenditure on goods acquired under a hire pur-chase or similar credit agreement, and also under afinancial lease, is recorded at the time the goods aredelivered even if there is no change of ownership at
this point.

3.112 Own-account consumption is recorded when

the output retained for own final consumption is
produced.

3Time of recording and valuation of actual
final consumption
3.118 Goods and services are acquired by institutional

units when they become the new owners of thegoods and when the delivery of services to them iscompleted.

3.119 Acquisitions (actual final consumption) are valued

at the purchasers’ prices for the units that incur the
expenditures.

3.120 Transfers in kind other than social transfers inkind from government and NPISHs are treated asif they were transfers in cash. Accordingly, the values of the goods or services are recorded as expenditures by the institutional units or sectors that
acquire them.

3.121 The values of the two aggregates of final consump3.113 The final consumption expenditure of households

is recorded at purchasers’ prices. This is the pricethe purchaser actually pays for the products at thetime of the purchase. A more detailed definition isin paragraph 3.06.

3.114 Goods and services supplied as employee compen-

sation in kind are valued at basic prices when produced by the employer and at the purchasers’ pricesof the employer when bought in by the employer.

3.115 Retained goods or services for own consumption

are valued at basic prices.

tion expenditure and actual final consumption are
the same. The goods and services acquired by resident households through social transfers in kindare valued at the same prices as those at which they
are valued in the expenditure aggregates.

Gross capital formation (P.5)
3.122 Gross capital formation consists of:(a) gross fixed capital formation (P.51g):(1) consumption of fixed capital (P.51c);(2) net fixed capital formation (P.51n);

3.116 Final consumption expenditures by general gov-

ernment or NPISHs on products produced bythemselves are recorded at the time they are produced, which is also the time of delivery of suchservices by government or NPISHs. For the final
consumption expenditure on goods and services
supplied via market producers, the time of delivery
is the time of recording.

3.117 Final consumption expenditure (P.3) by gen-eral government or NPISHs is equal to the sum of
their output (P.1), plus the expenditure on products supplied to households via market producers,part of social transfers in kind (D.632), minus thepayments by other units, market output (P.11) andpayments for non-market output (P.131), minus
own-account capital formation (P.12).

European system of accounts — ESA 2010(b) changes in inventories (P.52);(c) acquisitions less disposals of valuables (P.53).
3.123 Gross capital formation is measured gross of con-sumption of fixed capital. Net capital formation is
calculated by deducting consumption of fixed capital from gross capital formation.

Gross fixed capital formation (P.51g)
3.124 Definition: gross fixed capital formation (P.51)

consists of resident producers’ acquisitions, lessdisposals, of fixed assets during a given period
plus certain additions to the value of non-produced assets realised by the productive activity of
producer or institutional units. Fixed assets are73

3Transactions in products and non-produced assets

produced assets used in production for more than
one year.

(6) costs of ownership transfer on non-produced
assets, like land, contracts, leases and licences;

3.125 Gross fixed capital formation consists of both pos-

(7) R&D, including the production of freely available R&D. Expenditure on R&D will only betreated as fixed capital formation when a highlevel of reliability and comparability of the estimates by the Member States has been achieved;

itive and negative values:(a) positive values:(1) new or existing fixed assets purchased;(2) fixed assets produced and retained for producers’
own use (including own account production of
fixed assets not yet completed or fully mature);(3) new or existing fixed assets acquired throughbarter;(9) computer software and databases;(10) entertainment, literary or artistic originals;(4) new or existing fixed assets received as capitaltransfers in kind;(11) other intellectual property rights.

(5) new or existing fixed assets acquired by the user
under a financial lease;

3.128 Major improvements to land include:(6) major improvements to fixed assets and existing
historic monuments;(7) natural growth of those natural assets that yield
repeat products;(b) negative values, i.e. disposals of fixed assets
recorded as negative acquisitions:(1) existing fixed assets sold;(2) existing fixed assets surrendered in barter;(3) existing fixed assets surrendered as capital transfers in kind.

3.126 The disposals components of fixed assets exclude:(a) consumption of fixed capital (which includes
anticipated normal accidental damage);(b) exceptional losses, such as those due to drought
or other natural disasters, which are recorded
as other change in the volume of assets.
3.127 The following types of gross fixed capital formation

are distinguished:(1) dwellings;(2) other buildings and structures; this includes
major improvements to land;

74(8) mineral exploration and evaluation;(a) reclamation of land from sea by the construction of dikes, sea walls or dams for this purpose;(b) clearance of forests, rocks, etc. to enable land to
be used in production for the first time;(c) draining of marshes or the irrigation of deserts
by the construction of dikes, ditches and irrigation channels; prevention of flooding or erosion by the sea or rivers by the construction of
breakwaters, sea walls or flood barriers.
These activities may lead to the creation of substantial new structures such as sea walls, flood barriers and dams, but these structures are not used to
produce other goods and services, but obtain moreor better land, and it is the land, a non-produced
asset, that is used in production. For example, adam built to produce electricity serves a different
purpose from a dam built to keep out the sea. Only
the latter type of dam is classified as an improvement to land.
3.129 Gross fixed capital formation includes the follow-

ing borderline cases:(3) machinery and equipment, such as ships, carsand computers;(a) acquisitions of houseboats, barges, mobile
homes and caravans used as residences ofhouseholds and any associated structures suchas garages;(4) weapons systems;(b) structures and equipment used by the military;(5) cultivated biological resources, e.g. trees andlivestock;(c) light weapons and armoured vehicles used bynon-military units;

European system of accounts — ESA 2010

Transactions in products and non-produced assets(d) changes in livestock used in production year
after year, such as breeding stock, dairy cattle,
sheep reared for wool and draught animals;(e) changes in trees that are cultivated year afteryear, such as fruit trees, vines, rubber trees,
palm trees, etc.;(f) improvements to existing fixed assets beyond
ordinary maintenance and repairs;(g) the acquisition of fixed assets by financial
leasing;(h) terminal costs, i.e. large costs associated withdisposal, e.g. decommissioning costs of nuclear
power stations or clean up costs of landfill sites.
3.130 Gross fixed capital formation excludes:(a) transactions included in intermediate consumption, like:(1) purchase of small tools for production purposes;(2) ordinary maintenance and repairs;(3) the acquisition of fixed assets to be used under anoperational leasing contract (see also Chapter 15:
Contracts, leases and licences). For the enterprisethat is using the fixed asset, rentals are treated asintermediate consumption. For the owner of theasset, the cost of acquisition is recorded as grossfixed capital formation;(b) transactions recorded as changes in inventories:(1) animals raised for slaughter, including poultry;(2) trees grown for timber (work-in-progress);(c) machinery and equipment acquired by households for purposes of final consumption;(d) holding gains and losses on fixed assets;(e) catastrophic losses on fixed assets, e.g. destruction of cultivated assets and livestock by outbreaks of disease which is not normally covered by insurance, or damage due to abnormal
flooding, wind damage or forest fires;(f) funds set aside or put in reserve without any
commitment for the actual purchase or construction of a specific capital good, e.g. a government fund for infrastructure.
3.131 Gross fixed capital formation in the form of

improvements to existing fixed assets is recorded
as acquisitions of new fixed assets of the same kind.

European system of accounts — ESA 20103

3.132 Intellectual property products are the result ofresearch and development, investigation or innovation leading to knowledge, use of which is
restricted by law or other means of protection.
Examples of intellectual property assets are:(a) results of R&D;(b) results of mineral exploration, measured as thecosts of actual test drilling, aerial or other surveys, transportation, etc.;(c) computer software and large databases to be
used in production for more than one year;(d) entertainment, literary or artistic originals ofmanuscripts, models, films, sound recordings,
etc.

3.133 For both fixed assets and non-produced non-finan-cial assets, the costs of ownership transfer incurredby their new owner consist of:(a) charges incurred in taking delivery of the asset(new or existing asset) at the required locationand time, such as transport charges, installation
charges, erection charges, etc.;(b) professional charges or commissions incurred,
such as fees paid to surveyors, engineers, lawyers, valuers, etc., and commissions paid toestate agents, auctioneers, etc.;(c) taxes payable by the new owner on the transferof ownership of the asset. These taxes are taxes
on the services of intermediaries and any tax on
the transfer of ownership but not taxes on theasset bought.
All these costs are to be recorded as gross fixed capital formation by the new owner.

Time of recording and valuation of gross fixed capitalformation
3.134 Gross fixed capital formation is recorded when

the ownership of the fixed assets is transferred tothe institutional unit that intends to use them inproduction.
This rule is modified for:(a) financial leasing, when a change of ownershipfrom lessor to lessee is imputed;

75

3Transactions in products and non-produced assets(b) own-account gross fixed capital formation,
which is recorded when it is produced.
3.135 Gross fixed capital formation is valued at purchas-ers’ prices including installation charges and othercosts of ownership transfer. When produced on
own-account it is valued at the basic prices of similar fixed assets, and if such prices are not available,at the costs of production plus a mark-up (except
for non-market producers) for net operating surplus or mixed income.

3.136 Acquisitions of intellectual property products arevalued in different ways:(a) for mineral exploration: by the costs of actual
test drillings and borings, and the costs incurred
to make it possible to carry out tests, such as
aerial or other surveys;(b) for computer software: by purchasers’ prices
when purchased on the market, or at its estimated basic price, or if no basic price is available, at its costs of production plus a mark-up
for net operating surplus (except for non-market producers) when developed in-house;(c) for entertainment, literary or artistic originals:
valued at the price paid by the purchaser when
it is sold, or if not sold, the following methodsof estimation are acceptable:(i) at the basic price paid for similar originals;(ii) the sum of its production costs plus a mark-up(except for non-market producers) for net operating surplus; or(iii) the discounted value of expected receipts.

3.137 Disposals of existing fixed assets by sale are valued

at basic prices, deducting any costs of ownershiptransfer incurred by the seller.

3.138 Costs of ownership transfer can apply to both pro-

duced assets, including fixed assets, and non-produced assets, such as land.
These costs are included in the purchasers’ prices
in the case of produced assets. They are separated
from the purchases and sales themselves in thecase of land and other non-produced assets, andrecorded under a separate heading in the classification of gross fixed capital formation.

76

Consumption of fixed capital (P.51c)
3.139 Definition: consumption of fixed capital (P.51c) isthe decline in value of fixed assets owned, as a resultof normal wear and tear and obsolescence. The
estimate of decline in value includes a provision forlosses of fixed assets as a result of accidental damage which can be insured against. Consumption of
fixed capital covers anticipated terminal costs, suchas the decommissioning costs of nuclear power stations or oil rigs or the cleanup costs of landfill sites.
Such terminal costs are recorded as consumptionof fixed capital at the end of the service life, when
the terminal costs are recorded as gross fixed capital formation.

3.140 Consumption of fixed capital shall be calculated for

all fixed assets (except animals), including intellectual property rights, major improvements to landand costs of ownership transfers associated with
non-produced assets.

3.141 Consumption of fixed capital is different from thedepreciation allowed for tax purposes or the depreciation shown in business accounts. Consumptionof fixed capital is estimated on the basis of the stockof fixed assets and the expected average economic
life of the different categories of those goods. For
the calculation of the stock of fixed assets, the perpetual inventory method (PIM) is applied whenever direct information on the stock of fixed assets
is missing. The stock of fixed assets is valued at thepurchasers’ prices of the current period.

3.142 Losses of fixed assets occurring as a result of acci-

dental damage which can be insured against are
taken into account in calculating the average service life of the goods in question. For the economy as a whole the accidental damages within agiven accounting period will be equal, or close, tothe average. For individual units and groupings ofunits, actual and average accidental damage may
differ. In this case, for sectors, any difference isrecorded as other changes in volume of fixed assets.

3.143 Consumption of fixed capital shall be calculated

according to the ‘straight line’ method, by which
the value of a fixed asset is written off at a constantrate over the whole lifetime of the good.

European system of accounts — ESA 2010

Transactions in products and non-produced assets

3.144 In some cases, the geometric depreciation method

is used when the pattern of decline in the efficiency
of a fixed asset requires it.

3.145 In the system of accounts, consumption of fixed

capital is recorded below each balancing item,
which is shown gross and net. Recording ‘gross’means without deducting consumption of fixed
capital, while recording ‘net’ means after deducting consumption of fixed capital.

Changes in inventories (P.52)
3.146 Definition: changes in inventories are measured

by the value of the entries into inventories less thevalue of withdrawals and the value of any recurrent
losses of goods held in inventories.

3.147 Due to physical deterioration, or accidental dam-age or pilfering, recurrent losses may occur to allkinds of goods in inventories, such as:(a) losses of materials and supplies;(b) losses in the case of work-in-progress;(c) losses of finished goods;(d) losses of goods for resale (e.g. shoplifting).

3.148 Inventories consist of the following categories:(a) materials and supplies:
materials and supplies consist of all products held in stock with the intention of using
them as intermediate inputs in production; thisincludes products held in stock by the government. Items such as gold, diamonds, etc. are
included when intended for industrial use orother production;(b) work-in-progress:
work-in-progress consists of output produced
that is not yet finished. It is recorded in theinventories of its producer. Examples of the different forms it can take are the following:(1) growing crops;(2) maturing trees and livestock;(3) uncompleted structures (except those produced
under a contract of sale agreed in advance or on
own-account; both of these examples are treated as
fixed capital formation);

European system of accounts — ESA 20103(4) uncompleted other fixed assets, e.g. ships and oil
rigs;(5) partially completed research for a legal or consultant’s dossier;(6) partially completed film productions;(7) partially completed computer programs.

Work-in-progress shall be recorded for any production process that is not finished at the endof the given period. This is significant in quarterly accounts, an example being agricultural
crops not completing growth within a quarterof a year.
Reductions in work-in-progress take place when
the production process is completed. At thatpoint, all work-in-progress is transformed intoa finished product;(c) finished goods:
finished goods as part of inventories consist of
outputs that their producer does not intend toprocess further before supplying them to otherinstitutional units;(d) goods for resale:
goods for resale are goods acquired for the purpose of reselling them unchanged from theirpresent state.

Time of recording and valuation of changes ininventories
3.149 The time of recording and the valuation of changes

in inventories is consistent with those of othertransactions in products. This applies in particular to intermediate consumption (e.g. for materials and supplies), output (e.g. work-in-progressand output from storage of agricultural products) and gross fixed capital formation (e.g. workin-progress). If goods are processed abroad with achange of economic ownership, the goods are to
be included in exports (and later in imports). The
export is reflected in a concomitant reduction ininventories, and the corresponding later import isrecorded as an increase in inventories, provided it
is not sold or used at once.

3.150 In measuring changes in inventories, goods enter-ing inventories are valued at the time of entry, and77

3Transactions in products and non-produced assets

goods being withdrawn are valued at the time ofwithdrawal.
3.151 The prices used to value goods in changes in inven-tories are as follows:(a) output of finished goods transferred into the
producer’s inventories is valued as if they weresold at that time, at current basic prices;(b) additions to work-in-progress are valued inproportion to the estimated current basic priceof the finished product;(c) reductions in work-in-progress due to workwithdrawn from inventories when production
is finished are valued at current basic prices of
the unfinished product;(d) goods transferred out of inventories for sale arevalued at basic prices;(e) goods for resale entering the inventories ofwholesalers and retailers, etc. are valued at theactual or estimated purchasers’ prices of the
trader;(f) goods for resale withdrawn from inventories
are valued at the purchasers’ prices at which
they can be replaced at the time they are withdrawn, and not at the price when they wereacquired.
3.152 Losses as a result of physical deterioration, insura-

ble accidental damage or pilfering are recorded andvalued as follows:(a) for materials and supplies: as materials andsupplies actually withdrawn to be used up in
production (intermediate consumption);(b) when prices of the goods involved remain constant, fluctuations in the volume of inventories
do not invalidate the approximation of estimating the change in inventories by multiplying
the volume change by the average price;(c) if both the volume and the prices of the inventories change substantially within the accounting period, more sophisticated approximation
methods are required. For example, quarterly
valuation of the changes in inventories or theuse of information about the distribution of thefluctuations within the accounting period (fluctuations may be largest at the end of the calendar year, during harvest time, etc.);(d) if information about the values at the beginning and end of the period are available (e.g. incase of wholesale or retail trade in which inventories often exist of many different products),
but no separate information about prices andvolumes, the changes in volume between the
beginning and end of the period are estimated.
One way of estimating the change in volumes is
to estimate constant turn-over rates by type of
product.
Seasonal changes in prices may reflect a change inquality, e.g. clearance prices or off-season prices forfruit and vegetables. These changes in quality aretreated as changes in the volume.

(b) for work-in-progress: valued as deduction fromthe additions accruing to production carriedout in the same period;

Acquisitions less disposals of valuables(P.53)(c) for finished goods and goods for resale: treatedas withdrawals at the current price of undeteriorated goods.

3.154 Definition: valuables are non-financial goods that

3.153 Where information is lacking, the following

approximate methods for the estimation of change
in inventories are used:(a) when changes in the volume of inventories are
regular, an acceptable approximate method is to78

multiply the volume change of the inventories
by the average prices for the period. Purchasers’
prices are used for inventories held by users orby wholesalers or retailers; basic prices are used
for inventories held by their producers;

are not used primarily for production or consumption, do not deteriorate (physically) over time
under normal conditions and are acquired andheld primarily as stores of value.

3.155 Valuables include the following types of goods:(a) precious stones and metals, such as diamonds,
non-monetary gold, platinum, silver, etc.;

European system of accounts — ESA 2010

Transactions in products and non-produced assets(b) antiques and other art objects, such as paintings, sculptures, etc.;(c) other valuables, such as jewellery fashioned outof precious stones and metals and collectors’
items.
3.156 Such types of goods are recorded as acquisition or

disposal of valuables in the following examples:(a) the acquisition or disposal of non-monetarygold, silver, etc. by central banks and otherfinancial intermediaries;(b) the acquisition or disposal of these goods byenterprises whose principal or secondary activity does not involve the production or trade insuch types of goods. This acquisition or disposal is not included in the intermediate consumption or fixed capital formation of theseenterprises;(c) the acquisition or disposal of such goods
by households. Such acquisitions are notincluded in final consumption expenditure byhouseholds.
In the ESA, by convention also the following cases
are recorded as acquisition or disposal of valuables:(a) the acquisition or disposal of these goods by
jewellers and art dealers (following the generaldefinition of valuables, the acquisition of thesegoods by jewellers and art dealers should berecorded as changes in inventories);(b) the acquisition or disposal of these goods bymuseums (following the general definitionof valuables, the acquisition by a museum ofthese goods should be recorded as fixed capitalformation).
This convention avoids frequent reclassification
between the three main types of capital formation,i.e. between acquisition less disposal of valuables,
fixed capital formation and changes in inventories, e.g. in the case of transactions of such goods
between households and art dealers.
3.157 The production of valuables is valued at basic

prices. All other acquisitions of valuables are valued at the purchasers’ prices paid for them, including any agents’ fees or commissions. They include
trade margins when bought from dealers. Disposals

European system of accounts — ESA 20103of valuables are valued at the prices received by sellers, after deducting any fees or commissions paid
to agents or other intermediaries. Acquisitions lessdisposals of valuables between resident sectors cancel out, leaving only agents and dealers margins.

Exports and imports of goods andservices (P.6 and P.7)
3.158 Definition: exports of goods and services consistof transactions in goods and services (sales, barter,and gifts) from residents to non-residents.

3.159 Definition: imports of goods and services consist oftransactions in goods and services (purchases, barter, and gifts) from non-residents to residents.

3.160 Exports and imports of goods and services do notinclude:(a) establishment trade, i.e.:(1) deliveries to non-residents by non-resident affiliates of resident enterprises, e.g. sales abroad by foreign affiliates of a multinational owned/controlled
by residents;(2) deliveries to residents by resident affiliates of nonresident enterprises, e.g. sales by domestic affiliatesof a foreign multinational;(b) primary income flows to or from the rest of
the world, such as compensation of employees,
interest and revenues from direct investment.
The revenues from direct investment may
include an indistinguishable part for the provision of various services, e.g. training of employees, management services and the use of patents and trademarks;(c) the cross-border sale or purchase of financial
assets or non-produced assets, such as land.
3.161 Imports and exports of goods and services are dis-tinguished into:(a) intra-EU deliveries;(b) imports and exports outside the EU.
Both types are referred to as imports and exports.

79

3Transactions in products and non-produced assets

Exports and imports of goods (P.61 and
P.71)(d) electricity, gas and water;

3.162 Imports and exports of goods occur when eco-(f) parcel post;

nomic ownership of goods changes between residents and non-residents. This applies irrespectiveof corresponding physical movements of goods
across frontiers.

3.163 For deliveries between affiliated enterprises (branchor subsidiary, or foreign affiliate): a change of economic ownership is imputed whenever goods aredelivered between affiliated enterprises. Thisapplies only when the establishment receiving thegoods assumes responsibility for making the decisions about the levels of supply and prices at which
their output is delivered for the market.

(g) government exports including goods financed
by grants and loans;(h) goods transferred to or from the ownership of abuffer stock organisation;(i) goods delivered by a resident enterprise to its
non-resident affiliates, except for goods forprocessing;(j) goods received by a resident enterprise fromits non-resident affiliates, except for goods forprocessing;

3.164 Exports of goods occur without the goods crossing(k) smuggled goods or products not reported fortaxes like import duties and VAT;(a) goods produced by resident units operating ininternational waters are sold directly to nonresidents in foreign countries. Examples ofsuch goods are oil, natural gas, fishery products, maritime’s salvage;(l) other unrecorded shipments, such as gifts andthose of less than a stated minimum value.

the country’s frontier in the following examples:(b) transportation equipment or other movableequipment not tied to a fixed location;(c) goods after changing ownership, which are lostor destroyed before they have crossed the frontier of the exporting country;(d) merchanting, i.e. the purchase of a good by aresident from a non-resident and the subsequent resale of the good to another non-resident, without the good entering the merchant’s
economy.
Analogous cases occur for the imports of goods.
3.165 Imports and exports of goods include transac-

tions between residents and non-residents in thefollowing:

3.166 Imports and exports of goods exclude the following

goods which nevertheless may cross the national
frontier:(a) goods in transit through a country;(b) goods shipped to or from a country’s own
embassies, military bases or other enclaves
inside the national frontiers of another country;(c) transportation equipment and other movable
kinds of equipment which leave a country temporarily, without any change of economic ownership, e.g. construction equipment for installation or construction purposes abroad;(d) equipment and other goods which are sent
abroad for processing, maintenance, servicing
or repair; this applies also to goods processedto order abroad when a substantial physicalchange in the goods is involved;(b) silver bullion, diamonds and other precious
metals and stones;(e) other goods which leave a country temporarily,
being generally returned within a year in their
original state and without change of economic
ownership.

(c) paper money and coins not in circulation andunissued securities (valued as goods, not at facevalue);

Examples are goods sent abroad for exhibitionand entertainment purposes, goods under anoperating lease, including leases for several(a) non-monetary gold;

80(e) livestock driven across frontiers;

European system of accounts — ESA 2010

Transactions in products and non-produced assets

years and goods returned without being sold toa non-resident;(f) goods on consignment lost or destroyed after
crossing a frontier before change of ownershipoccurs.
3.167 Imports and exports of goods are recorded when

the ownership of the goods is transferred. A changeof ownership is considered to occur at the time theparties to the transaction record it in their books or
accounts. This may not coincide with the various
stages of the contractual process, such as:(a) the time of commitment (contract date);(b) the time of provision of goods and services andacquisition of a claim for payment (transferdate);(c) the time of settlement of that claim (paymentdate).

3.168 Imports and exports of goods are to be valued freeon board at the border of the exporting country(FOB). This value is:(a) the value of the goods at basic prices;(b) plus the related transport and distributive services up to that point of the border, including
the cost of loading on to a carrier for onward
transportation;(c) plus any taxes less subsidies on the goods
exported; for intra-EU deliveries this includes
VAT and other taxes on the goods paid in theexporting country.
In the supply and use and symmetric input-output tables, imports of goods for individual product groups are valued at the cost-insurance-freight(CIF) price at the border of the importing country.

3.169 Definition: the CIF price is the price of a good deliv-

ered at the frontier of the importing country, or the
price of a service delivered to a resident, before thepayment of any import duties or other taxes onimports or trade and transport margins within the
country.

3.170 Proxies or substitute measures for the FOB value

may be necessary under certain circumstances,such as:European system of accounts — ESA 20103(a) barter of goods are valued at the basic pricesthat would have been received if the goods had
been sold for cash;(b) transactions between affiliated enterprises: as arule, actual transfer values are used. However, if
they differ from market prices, they are replacedby an estimated market price equivalent;(c) goods transferred under a financial lease: thegoods are valued on the basis of the purchasers’
price paid by the lessor, and not by the cumulative value of the rental payments;(d) imports of goods estimated on the basis of customs data (for extra-EU trade) or Intrastatinformation (for intra-EU trade). Both data
sources do not apply FOB valuation; they use
respectively the CIF value at the EU borderand CIF values at the national border. As FOBvalues are only used at the most aggregate level
and CIF-values are used at the product grouplevel, these modifications are applied at themost aggregate level, and the modification is
known as the CIF/FOB adjustment;(e) imports and exports of goods estimated on thebasis of survey information or various types ofad hoc information. In such instances, the total
value of sales split out by product is obtained.
The estimate is based on purchasers’ prices andnot on FOB values.

Exports and imports of services (P.62 and
P.72)
3.171 Definition: exports of services consist of all services

rendered by residents to non-residents.

3.172 Definition: imports of services consist of all services

rendered by non-residents to residents.

3.173 Exports of services include the following cases:(a) transportation of exported goods after they
have left the frontier of the exporting country
when provided by a resident carrier (cases 2
and 3 in Table 3.3);(b) transportation of imported goods by a resident
carrier:81

3Transactions in products and non-produced assets(1) up to the frontier of the exporting country whengoods are valued FOB to offset the transportation
value included in the FOB-value (case 3 in Table
3.4);(2) up to the frontier of the importing country whengoods are valued CIF to offset the transportation
value included in the CIF-value (cases 3 and 2 CIF
in Table 3.4);(c) transportation of goods by residents on behalfof non-residents which does not involve
imports or exports of the goods (e.g. the transport of goods that do not leave the country asexports or the transport of goods outside thedomestic territory);(d) passenger transportation on behalf of non-residents by resident carriers;(e) processing and repair activities on behalf of
non-residents; these activities are to be recorded
net, i.e. as an export of services excluding thevalue of the goods processed or repaired;(f) installation of equipment abroad when a project is of limited duration by its nature;(g) financial services provided by residents to
non-residents including both the explicit andimplicit service charge, like FISIM;(h) insurance services provided by residents to
non-residents by the amount of the implicit
service charge;(i) expenditure by non-resident tourists and business travellers. The expenditure is classified asservices; for the purposes of the supply and use
and symmetric input-output tables, a breakdown by component products is necessary;(j) expenditure by non-residents on health andeducation services provided by residents; thisincludes the provision of these services on thedomestic territory as well as abroad;(k) services of owner-occupied holidays homes of
non-residents (see paragraph 3.77);(l) royalties and license fees, receipts of which
are associated with the authorised use of intellectual property rights, such as patents, copyrights, trademarks, industrial processes, franchises, etc., and with the use through licensing agreements of produced originals or

82

prototypes, such as manuscripts, paintings, etc.
paid by non-residents to residents.
3.174 There is an equivalent import of service as a mir-ror image of the list of exports of services in paragraph 3.173, and only the following imports of services require further description.

3.175 Imports of transport services include the following

examples:(a) transportation of exported goods up to thefrontier of the exporting country when provided by a non-resident carrier to offset thetransportation value included in the FOB-valueof the exported goods (case 4 in Table 3.3);(b) transportation of imported goods by a non-resident carrier:(1) from the frontier of the exporting country as a separate transportation service when imported goods
are valued FOB (cases 4 and 5 FOB in Table 3.4);(2) from the frontier of the importing country as aseparate transportation service when imported
goods are valued CIF (in this case the value of thetransportation service between the frontiers of theexporting and the importing country is alreadyincluded in the CIF-value of the good; case 4 inTable 3.4);(c) transportation of goods by non-residents onbehalf of residents which does not involve
imports or exports of goods (e.g. transport ofgoods in transit or transport outside the domestic territory);(d) international or national passenger transportation on behalf of residents by non-resident
carriers.
Imports of transport services do not include transportation of exported goods after they have left thefrontier of the exporting country when provided
by a non-resident carrier (cases 5 and 6 in Table
3.3). Exports of goods are valued FOB and all suchtransport services are thus to be regarded as transactions between non-residents, i.e. between a nonresident carrier and a non-resident importer. Thisapplies when these transportation services are paid
under export-CIF-contracts by the exporter.
3.176 Imports in respect of direct purchases abroad byresidents cover all purchases of goods and services made by residents while travelling abroad

European system of accounts — ESA 2010

Transactions in products and non-produced assets

for business or personal purposes. Two categories
must be distinguished because they require different treatment:(b) all other expenditure, whether by business travellers or other travellers, are household final
consumption expenditure.

(a) all business related expenditure by businesstravellers are intermediate consumption;

3.177 Imports and exports of services are recorded at the3time at which they are rendered. This time coincides with the time at which the services are produced. Imports of services are valued at purchasers’ price and exports of services at basic prices.

Table 3.3 — The treatment of transportation of exported goods
Domestic territory

Territory in-between

Territory of importing country

1. resident carrier ⇒2. resident carrier ⇒3. resident carrier ⇒4. non-resident carrier ⇒5. non-resident carrier ⇒6. non-resident carrier ⇒Exports of goods (FOB)

Exports of services

Imports of goods (CIF/FOB)

Imports of services

1.

x

—

—

—

2.

—

x

—

—

3.

—

x

—

—

4.

x

—

—

x

5.

—

—

—

—

6.

—

—

—

—

3.178 Explanation of how to read this table: the first partthe importing country or from the border of theimporting country to a place within the importing
country. In the second part of this table, for eachof these six possibilities, it is indicated whether thetransportation costs are to be recorded as exportsof goods, exports of services, imports of goods orimports of services.

of this table indicates that there are six possibilitiesof transportation of exported goods, depending onwhether the carrier is resident or not and depending on where the transport takes place: from aplace on the domestic territory to the national
border, from the national border to the border ofTable 3.4 — The treatment of transportation of imported goods
Domestic territory

Territory in between

Territory of exporting country

1. resident carrier ⇐2. resident carrier ⇐3. resident carrier ⇐4. non-resident carrier ⇐5. non-resident carrier ⇐6. non-resident carrier ⇐Valuation ofimported goods

Imports of goods

1.

CIF/FOB

—

—

—

—

2.

FOB
CIF

—
x

—
—

—
—

—
x

3.

CIF/FOB

x

—

—

x

4.

CIF/FOB

—

x

—

—

5.

FOB
CIF

—
x

x
—

—
—

—
—

6.

CIF/FOB

x

—

—

—

European system of accounts — ESA 2010

Imports ofservices

Exports of goods(FOB)

Exports ofservices833Transactions in products and non-produced assets

3.179 Explanation of how to read this table: the first partof this table indicates that there are six possibilities of transportation of imported goods, depending on whether the carrier is resident or not anddepending on where the transport takes place:from a place in the exporting country to the border of this exporting country, from the border ofthe exporting country to the border of the importing country and from the national border to a placeon the domestic territory. In the second part of thistable, for each of these six possibilities, it is indicated whether the transportation costs are to berecorded as imports of goods, imports of services,
exports of goods or exports of services. In someinstances (cases 2 and 5), this recording depends
on the valuation principle applied for imported
goods. Note that the transition from valuation ofimported goods at CIF to FOB consists of:(a) CIF/FOB adjustment, i.e. from 2 CIF to 2 FOB(reduces total imports and exports);(b) CIF/FOB reclassification, i.e. from 5 CIF
to 5 FOB (leaves total imports and exports
unchanged).

Transactions in existing goods
3.180 Definition: existing goods are goods that alreadyhave had a user (other than inventories).

3.181 Existing goods include:(a) buildings and other fixed capital goods whichhave been sold by producer units to other units:(1) to be reused as such;(2) to be demolished or broken up; the resulting products becoming raw materials (e.g. scrap iron) used
for the production of new goods (e.g. steel);(b) valuables sold from one unit to another;(c) consumer durables which have been sold byhouseholds to other units:(1) to be reused as such;(2) to be broken up and converted into demolitionmaterials;(d) non-durable goods (e.g. waste paper, rags, oldclothes, old bottles, etc.) which have been soldby any unit, either to be used again or to become
raw material for the manufacture of new goods.

84

The transfer of existing goods is recorded as anegative expenditure (acquisition) for the seller
and a positive expenditure (acquisition) for thepurchaser.
3.182 This definition of existing goods has the following

consequences:(a) when the sale of an existing fixed asset or valuable takes place between two resident producers, the positive and negative values recorded
for gross fixed capital formation cancel out for
the economy as a whole except for the costs ofownership transfer;(b) when an existing immovable fixed asset (e.g. abuilding) is sold to a non-resident, the latter istreated as purchasing a financial asset, i.e. theequity of a notional resident unit. This notional
resident unit is then deemed to purchase thefixed asset. The sale and purchase of the fixed
asset take place between resident units;(c) when an existing movable fixed asset, such asa ship or aircraft, is exported, no positive grossfixed capital formation is recorded in the economy to offset the seller’s negative gross fixed
capital formation;(d) durable goods, such as vehicles, may be classified as fixed assets or as consumer durables depending upon the owner and the purpose for which they are used. If the ownershipof such a good is transferred from an enterprise to a household to be used for final consumption, negative gross fixed capital formation is recorded for the enterprise and positive
consumption expenditure for the household.
Where ownership of such a good is transferredfrom a household to an enterprise, for thehousehold negative final consumption expenditure is recorded and for the enterprise positive
gross fixed capital formation is recorded;(e) transactions in existing valuables are to berecorded as the acquisition of a valuable (positive gross capital formation) by the purchaser
and as the disposal of a valuable (negative
gross capital formation) by the seller. In caseof a transaction with the rest of the world, theimport or export of a good is to be recorded.
The sale of a valuable by a household is not

European system of accounts — ESA 2010

Transactions in products and non-produced assets

to be recorded as negative final consumption
expenditure;(f) when existing military durables are sold abroadby the government, this is recorded as an exportof goods and as negative fixed capital formationby the government.
3.183 Transactions in existing goods are recorded at thetime of change of ownership. The valuation principles appropriate to the type of transactions in
products involved are applied.

Acquisitions less disposals of nonproduced assets (NP)3.184 Definition: non-produced assets consist of assetsthat have not been produced within the production
boundary, and that may be used in the productionof goods and services.

3.185 Three categories of acquisition less disposals of

non-produced assets are distinguished:(a) Acquisition less disposals of natural resources(NP.1);

recorded as acquisition of natural resources; they
are recorded as rent, i.e. as property income (seeChapter 15: Contracts, leases and licences).
3.187 Land is defined as the ground itself, including soil

covering and associated surface water. The associated surface water includes any inland waters (reservoirs, lakes, rivers, etc.) over which ownershiprights can be exercised.

3.188 The following items are not included under theheading of land:(a) buildings or other structures on the land or
through it (for example roads and tunnels);(b) vineyards, orchards, or other plantations oftrees and growing crops, etc.;(c) subsoil assets;(d) non-cultivated biological resources;(e) water resources below the ground.
Items (a) and (b) are produced fixed assets, items(c), (d) and (e) are types of non-produced assets.
3.189 Acquisitions and disposals of land and other nat-categories:

ural resources are valued at current market prices
prevailing at the time the acquisitions/disposals occur. Transactions in natural resources arerecorded at the same value in the accounts of thepurchaser and in those of the seller. This value
excludes the costs of the transfer of ownershipof the natural resource. These costs are treated as
gross fixed capital formation.

(a) Land;3.190 Contracts, leases and licenses as non-produced(b) Acquisition less disposals of contracts, leases
and licenses (NP.2);(c) Purchases less sales of goodwill and marketing
assets (NP.3).
3.186 Natural resources shall comprise the following(b) Mineral and energy reserves;(c) Non-cultivated biological resources;(d) Water resources;(e) Radio spectra;(f) Other natural resources.
Natural resources exclude the produced asset cultivated biological resources. The purchase or saleof cultivated biological resources is not recorded asacquisition less disposal of natural resources; it isrecorded as fixed capital formation. Also, payments
for the temporary use of natural resources are not

European system of accounts — ESA 2010

3

assets consist of the following classes:(a) marketable operating leases;(b) permits to use natural resources, e.g. fishingquota;(c) permits to undertake specific activities, e.g.
emission permits and licences for a limited
number of casinos or to operate taxis in a certain area;(d) entitlements to future goods and services onan exclusive basis, e.g. a footballer’s contracts
and a publisher’s exclusive right to publish newworks by a named author.

85

3Transactions in products and non-produced assets

3.191 Contracts, leases and licenses as a category of non-produced assets exclude the operating lease ofsuch assets; payments for the operating lease arerecorded as intermediate consumption.
The value of acquisitions and disposals of contracts, leases and licences excludes the associatedcosts of ownership transfer. The costs of ownership transfer are a component of gross fixed capital formation.

3.192 Definition: the value of goodwill and marketing

assets is the difference between the value paid foran enterprise as a ‘going concern’ and the sum of
its assets less the sum of its liabilities. To calculate

86

the total value of assets less liabilities, each individual asset and liability is separately identified andvalued.
3.193 Goodwill is only recorded when its value is evi-

denced by a market transaction, for example by
the sale of the whole corporation. Where identified marketing assets are sold individually and separately from the whole corporation, such sale isrecorded under this item.

3.194 Acquisitions less disposals of non-produced assets

are recorded in the capital account of the sectors,
the total economy and the rest of the world.

European system of accounts — ESA 2010

Distributive transactions

4

CHAPTER 4
Distributive transactions
4.01

Definition: distributive transactions are transactions whereby the value added generated by production is distributed to labour, capital and government, and transactions redistributing income
and wealth.
A distinction is drawn between current and capitaltransfers, with capital transfers redistributing saving or wealth, rather than income.

Compensation of employees (D.1)
4.02

Wages and salaries (D.11)
Wages and salaries in cash
4.03

Wages and salaries in cash include social contributions, income taxes, and other payments payable by the employee, including those withheldby the employer and paid directly to social insurance schemes, tax authorities, etc. on behalf of theemployee:
Wages and salaries in cash include the following
kinds of remuneration:

Definition: compensation of employees (D.1) isdefined as the total remuneration, in cash or in
kind, payable by an employer to an employee
in return for work done by the latter during an
accounting period.

(a) basic wages and salaries payable at regularintervals;

Compensation of employees is made up of the following components:(c) cost of living allowances, local allowances andexpatriation allowances;(a) wages and salaries (D.11):(d) bonuses or other exceptional payments linked
to the overall performance of the enterprise
made under incentive schemes; bonuses basedon productivity or profits, Christmas and New
Year bonuses excluding employee social benefits (see point (c) of paragraph 4.07); ‘13th to14th month’ pay also known as annual supplementary pay;

— wages and salaries in cash,— wages and salaries in kind;(b) employers’ social contributions (D.12):— employers’ actual social contributions (D.121):— employers’ actual(D.1211),

pensioncontributions— employers’ actual non-pension contributions(D.1212),— employers’ imputed social contributions (D.122):(b) enhanced payments, such as payments forovertime, night work, weekend work, disagreeable or hazardous circumstances;(e) allowances for transport to and from work,
excluding allowances or reimbursement of
employees for travelling, separation, removaland entertainment expenses incurred in thecourse of their duties (see point (a) of paragraph 4.07);— employers’ imputed pension contributions(D.1221),(f) holiday pay for official holidays or annual
holidays;— employers’ imputed non-pension contributions (D.1222).

(g) commissions, tips, attendance and directors’fees paid to employees;

European system of accounts — ESA 201087

4

Distributive transactions(h) payments made by employers to their employees under saving schemes;(h) child care for the children of employees;(i) payments for the benefit of employees, made byemployers to works councils or similar bodies;(i) exceptional payments to employees who leave
the enterprise, where those payments are notlinked to a collective agreement;(j) bonus shares distributed to employees;(k) loans to employees at reduced rates of interest. The value of this benefit is estimated as
the amount the employee would have to pay
if interest at market conditions were charged,
less the amount of interest actually paid. The
benefit is recorded in wages and salaries in thegeneration of income account, and the corresponding imputed payment of interest from theemployee to employer is recorded in the primary distribution of income account;(j) housing allowances paid in cash by employers
to their employees.

Wages and salaries in kind
4.04

4.05

Definition: wages and salaries in kind consist of
goods and services, or other non-cash benefits,provided free of charge or at reduced prices by
employers, that can be used by employees in theirown time and at their own discretion, for the satisfaction of their own needs or wants or those ofother members of their households.

(l) stock options, when an employer gives an
employee the option to buy stocks or shares at
a specified price at a future date (see paragraphs
4.168 to 4.178);

Examples of wages and salaries in kind are:(a) meals and drinks, including those consumed
when travelling on business but excluding special meals or drinks necessitated by exceptional
working conditions. Price reductions obtainedin free or subsidised canteens, or obtained byluncheon vouchers, are included in wages andsalaries in kind;(m) incomes generated by non-observed activities in corporate sectors and transferred to theemployees participating in such activities fortheir private use.
4.06

Goods and services given to employees as wages
and salaries in kind are valued at basic prices
when produced by the employer, and at purchasers’ prices when purchased by the employer.
When provided free, the whole value of the wages
and salaries in kind is calculated according to thebasic prices (or purchasers’ prices of the employer
when purchased by the employer) of the goods andservices in question. This value is reduced by theamount paid by the employee when the goods andservices are given at reduced prices rather than freeof charge.

4.07

Wages and salaries do not include the following:(b) own account and purchased housing or accommodation services of a type that can be usedby all members of the household to which theemployee belongs;(c) uniforms or other forms of special clothingwhich employees choose to wear frequently
outside of the workplace as well as at work;(d) the services of vehicles or other durables provided for the personal use of employees;(e) goods and services produced as outputs fromthe employer’s own processes of production,such as free travel for the employees of railways
or airlines, free coal for miners, or free food for
employees in agriculture;88(a) expenditure by employers necessary for theemployers’ production process. Examples are
the following:(f) the provision of sports, recreation or holiday
facilities for employees and their families;(1) allowances or reimbursement of employees fortravelling, separation, removal and entertainment
expenses incurred in the course of their duties;(g) transportation to and from work, except whenorganised in the employer’s time; car parking
when it would otherwise have to be paid for;(2) expenditure on providing amenities at the placeof work, medical examinations required becauseof the nature of the work and supplying working
clothes which are worn for work;

European system of accounts — ESA 2010

Distributive transactions(3) accommodation services at the place of work of akind which cannot be used by the households towhich the employees belong, for example cabins,
dormitories, workers’ hostels, and huts;

was put in, this kind of remuneration implies
that the worker is self-employed.

(4) special meals or drinks necessitated by exceptional
working conditions;

Employers’ social contributions (D.12)(5) allowances paid to employees for the purchaseof tools, equipment or special clothing needed
for their work, or that part of their wages or salaries which, under their contracts of employment, employees are required to devote to such
purchases. To the extent that employees who are
required by their contract of employment to purchase tools, equipment, special clothing, etc., are
not fully reimbursed, the remaining expenses they
incur are deducted from the amounts they receivein wages and salaries and the employers’ intermediate consumption increased accordingly.

4.08

Expenditure on goods and services that employers are obliged to provide to their employees
in order for them to be able to carry out theirwork is treated as intermediate consumption by
employers;(b) The amounts of wages and salaries which
employers pay to their employees temporarily in the case of sickness, maternity, industrial injury, disability, etc. Such payments aretreated as other social insurance non-pension benefits (D.6222), with the same amounts
recorded under employers’ imputed non-pension social contributions (D.1222);(c) other employment-related social insurance
benefits, in the form of children’s, spouses’,family, education or other allowances in respectof dependants, and in the form of the provisionof free medical services (other than those necessitated by the nature of the work) to employeesor their families;(d) taxes payable by the employer on the wage andsalary bill — for example, a payroll tax. Suchtaxes payable by enterprises are assessed either
as a proportion of the wages and salaries paidor as a fixed amount per person employed.
They are treated as other taxes on production;(e) payments to outworkers on piecework rates.
When the income received by the outworker
is a function of the value of the outputs fromsome process of production for which that person is responsible, however much or little work

European system of accounts — ESA 2010

4

Definition: employers’ social contributions aresocial contributions payable by employers to social
security schemes or other employment-relatedsocial insurance schemes to secure social benefits
for their employees.
An amount equal to the value of the social contributions incurred by employers in order to secure
for their employees the entitlement to social benefits is recorded under compensation of employees. Employers’ social contributions may be either
actual or imputed.

Employers’ actual social contributions (D.121)
4.09

Definition: employers’ actual social contributions(D.121) consist of the payments made by employers for the benefit of their employees to insurers (social security and other employment-relatedsocial insurance schemes). Such payments coverstatutory, conventional, contractual and voluntary
contributions in respect of insurance against social
risks or needs.
Although paid directly by employers to the insurers, such employers’ contributions are treated as acomponent of the compensation of employees. The
employees are then recorded as paying the contributions to the insurers.
Employers’ actual social contributions are comprised of two categories, the contributions related
to pensions and the contributions for other benefits, which are recorded separately under the following headings:(a) Employers’(D.1211);

actualpensioncontributions(b) Employers’ actual non-pension contributions(D.1212).
Employers’ actual non-pension contributions correspond to contributions related to social risks andneeds other than pensions, such as sickness, maternity, industrial injury, disability, redundancy, etc.
of their employees.

894Distributive transactions

Employers’ imputed social contributions (D.122)
4.10

Definition: employers’ imputed social contributions (D.122) represents the counterpart to othersocial insurance benefits (D.622) (less eventual
employees’ social contributions) paid directly by
employers to their employees or former employees and other eligible persons without involving an
insurance enterprise or autonomous pension fund,and without creating a special fund or segregatedreserve for the purpose.
Employers’ imputed social contributions are
divided into two categories:(a) Employers’ imputed pension contributions(D.1221)Social insurance schemes in respect of pensions
are classified as defined contribution schemesor defined benefit schemes.
A defined contribution scheme is one where thebenefits are determined by the contributions
made to the scheme and the return from theinvestment of the funds. At the time of retirement, it is the employee that takes on all risks
regarding benefits payable. For such schemes
there are no imputed contributions unlessthe employer operates the scheme himself. In
that case, the costs of operating the scheme
are treated as an imputed contribution payable to the employee as part of compensationof employees. This amount is also recorded as
final consumption expenditure by households
on financial services.
A defined benefit scheme is one where benefits
payable to the members are determined by therules of the scheme, i.e. by the use of a formula
to determine the payment or a minimum payment. In a typical defined benefit scheme, both
employer and employee make contributions,with the employee contribution compulsory,
being a percentage of current salary. The costsof meeting the quoted benefits are the responsibility of the employer. It is the employer who
takes the risk for providing the benefits.
Under a defined benefit scheme, there is an
imputed contribution by the employer calculated according to the following calculation:

90

The imputed contribution by the employer isequal tothe increase in benefit due to current period of
employment
lessthe sum of the employer’s actual contribution,lessthe sum of any contribution by the employee,plus

the costs of operating the scheme.

Some schemes may be expressed as non-contributory because no actual contributions are
made by either the employer or employee.
Nevertheless, an imputed contribution by theemployer is calculated and imputed as justdescribed.
Where pension entitlements of schemes forgovernment employees are not recorded in
the core accounts, the government employers’
imputed pension contributions are to be estimated on the basis of actuarial calculations.
Where the actuarial calculations cannot obtaina sufficient level of reliability, and in such cases
only, two other approaches are possible to estimate government employers’ imputed pension
contributions as follows:(1) on the basis of a reasonable percentage of wages
and salaries paid to current employees; or(2) as equal to the difference between current benefits
payable and actual contributions payable (by both
employees and government as employer).

(b) Employers’ imputed non-pension contributions (D.1222)
The fact that certain social benefits are paid
directly by employers, and not through themedium of social security funds or other insurers, does not prevent them from being recorded
as social welfare benefits. Since the costs of such
benefits form part of employers’ labour costs,
they are also included in the compensation of
employees. Remuneration is therefore imputed
for such employees equal in value to the amountof social contributions that is needed to secure
the entitlements to the social benefits that they
accumulate. Such amounts take into accountany actual contributions made by the employer
or employee and depend not only on the levels of the benefits currently payable but also on
the ways in which employers’ liabilities undersuch schemes are likely to evolve in the future

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Distributive transactions

as a result of factors such as expected changes
in the numbers, age distribution and life expectancies of their present and previous employees. The values imputed for the contributions
are based on the same kind of actuarial calculations that determine the levels of premiums
charged by insurance enterprises.
In practice, however, it may be difficult to calculate precisely the amounts of such imputed
contributions. The employer may make estimates itself, perhaps on the basis of the contributions paid into similar funded schemes,in order to calculate its likely liabilities in the
future, and such estimates may be used whenavailable. Another acceptable method is to use
a reasonable percentage of wages and salaries paid to current employees. Otherwise, theonly practical alternative is to use the unfunded
non-pension benefits payable by the employer
during the same accounting period as an estimate of the imputed remuneration that would
be needed to cover the imputed contributions.
The benefits actually paid in the current period
provide an acceptable estimate of the contributions and associated imputed remuneration.
4.11

4.12

In the accounts of the sectors, the costs of direct
social benefits appear firstly among uses in the generation of income account, as a component of thecompensation of employees, and secondly amonguses in the secondary distribution of income
account, as social benefits. In order to balance thelatter account, it is assumed that the households of
employees pay back to the employers’ sectors theemployers’ imputed social contributions, which
finance, together with eventual employees’ social
contributions, the direct social welfare benefits
provided to them by those same employers. This
notional circuit is similar to that for employers’
actual social contributions, which pass through theaccounts of households and are then deemed to be
paid by them to the insurers.
Time of recording of compensation of employees:(a) wages and salaries (D.11) are recorded in
the period during which the work is done.
However, ad hoc bonuses or other exceptional
payments such as 13th month payments arerecorded when they are due to be paid. The timeof recording of stock options is spread over

European system of accounts — ESA 20104

the period between the grant date and vestingdate. If the data are inadequate, the value of theoption is recorded at vesting date;(b) employers’ actual social contributions (D.121)
are recorded in the period during which thework is done;(c) employers’ imputed social contributions(D.122) are recorded according to following
categories:(1) Those representing the counterpart of compulsory
direct social benefits are recorded in the period
during which the work is done;(2) Those representing the counterpart of voluntary
direct social benefits are recorded at the time thesebenefits are provided.

4.13

The compensation of employees consists of the following components:(a) the compensation of resident employees by resident employers;(b) the compensation of resident employees by
non-resident employers;(c) the compensation of non-resident employees
by resident employers.
The items listed in points (a) to (c) are recorded asfollows:(1) the compensation of resident and non-resident employees by resident employers groups
together the items listed in points (a) and (c)and is recorded as uses in the generation ofincome account of the sectors and industries towhich the employers belong;(2) the compensation of resident employees byresident and non-resident employers groups
together the items listed in points (a) and (b)and is recorded as resources in the allocation ofprimary income account of households;(3) for the item referred to in point (b), compensation of resident employees by non-resident
employers is recorded as uses in the external account of primary incomes and current
transfers;(4) for the item referred to in point (c), compensation of non-resident employees by resident employers, is recorded as resources in the91

4Distributive transactions

external account of primary incomes and current transfers.

This heading comprises the value added tax whichis collected by general government and which isapplied to national and imported products, aswell as other deductible taxes applied under similar rules to those governing VAT. All value added
type taxes are hereinafter referred to as: VAT. The
common feature of VAT is that producers are
obliged to pay to the government only the difference between the VAT on their sales and the VAT
on their purchases for intermediate consumption
and gross fixed capital formation.

Taxes on production and imports (D.2)
4.14

4.15

Definition: taxes on production and imports (D.2)
consist of compulsory, unrequited payments, incash or in kind, which are levied by general government, or by the institutions of the European
Union, in respect of the production and importation of goods and services, the employment oflabour, the ownership or use of land, buildings orother assets used in production. Such taxes are payable irrespective of profits made.

VAT is recorded net in the sense that:(a) outputs of goods and services and imports arevalued excluding invoiced VAT;

Taxes on production and imports are comprised of
the following components:(b) purchases of goods and services are recorded
inclusive of non-deductible VAT. VAT isrecorded as being borne by purchasers, not sellers, and then only by those purchasers who are
not able to deduct it. The greater part of VAT isrecorded as being paid on final uses, mainly onhousehold consumption.

(a) taxes on products (D.21):(1) value added type taxes (VAT) (D.211);(2) taxes and duties on imports excluding VAT(D.212);— import duties (D.2121),— taxes on imports excluding VAT and duties(D.2122);

For the total economy, VAT is equal to the difference between total invoiced VAT and total deductible VAT (see paragraph 4.27).

(3) taxes on products, except VAT and import taxes(D.214);(b) other taxes on production (D.29).

Taxes on products (D.21)
4.16

Definition: taxes on products (D.21) are taxes
that are payable per unit of a given good or service produced or transacted. The tax may be a specific amount of money per unit of quantity of agood or service, or it may be calculated as a specified percentage of the price per unit or value of thegoods and services produced or transacted. Taxes
assessed on a product, irrespective of which institutional unit pays the tax, are included in taxes
on products, unless specifically included underanother heading.

Value added type taxes (VAT) (D.211)
4.17

92

Definition: a value added type tax (VAT) is a tax on
goods or services collected in stages by enterprises
and which is ultimately charged in full to the final
purchaser.

Taxes and duties on imports excluding VAT (D.212)
4.18

Definition: taxes and duties on imports excluding
VAT (D.212) comprise compulsory payments levied by general government or the institutions of
the European Union on imported goods, excluding
VAT, in order to admit them to free circulation on
the economic territory, and on services provided toresident units by non-resident units.
The compulsory payments include:(a) import duties (D.2121): these consist of customs duties, or other import charges, payable according to customs tariff schedules on
goods of a particular type when they enter for
use in the economic territory of the country ofutilisation;(b) taxes on imports, excluding VAT and importduties (D.2122).
This heading includes:

European system of accounts — ESA 2010

Distributive transactions(1) levies on imported agricultural products;(d) car registration taxes;(2) monetary compensatory amounts levied on
imports;(e) taxes on entertainment;(f) taxes on lotteries, gambling and betting, otherthan those on winnings;(3) excise duties and special taxes on certain
imported products, provided such duties andtaxes on similar products of domestic origin are
paid by the producer branch itself;(g) taxes on insurance premiums;(h) other taxes on specific services: hotels or lodging, housing services, restaurants, transportation, communication, advertising;(4) general sales taxes payable on imports of goods
and services;(i) general sales or turnover taxes (excluding
VAT type taxes): these include manufacturers’
wholesale and retail sales taxes, purchase taxes,
turnover taxes;(5) taxes on specific services provided by non-resident enterprises to resident units within theeconomic territory;(6) profits of public enterprises exercising amonopoly over the imports of some goods orservices, which are transferred to the state.

(j) profits of fiscal monopolies which are transferred to the state, except those exercising amonopoly over the imports of a given good orservice (included in D.2122). Fiscal monopolies
are public enterprises which have been granted
a legal monopoly over the production or distribution of a particular kind of good or service inorder to raise revenue and not in order to further the interests of public economic or social
policy. When a public enterprise is granted
monopoly powers as a matter of deliberate economic or social policy because of the special
nature of the good or service or the technology of production — for example, public utilities, post offices and telecommunications, railways and so on — it is not considered as a fiscalmonopoly;

Net taxes and duties on imports excluding VAT are
calculated by deducting import subsidies (D.311)
from taxes and duties on imports excluding VAT(D.212).

Taxes on products, except VAT and import taxes(D.214)
4.19

Definition: taxes on products, except VAT andimport taxes (D.214) consist of taxes on goods andservices that become payable as a result of the production, export, sale, transfer, leasing or delivery of
those goods or services, or as a result of their use
for own consumption or own capital formation.

4.20

This heading includes, in particular:(a) excise duties and consumption taxes (otherthan those included in taxes and duties onimports);(b) stamp taxes on the sale of specific products,
such as alcoholic beverages or tobacco, and on
legal documents or cheques;(c) taxes on financial and capital transactions,payable on the purchase or sale of non-financial and financial assets, including foreignexchange. They become payable when the ownership of land or other assets changes, except asa result of capital transfers (mainly inheritancesand gifts). They are treated as taxes on the services of intermediaries;

European system of accounts — ESA 20104(k) export duties and monetary compensatory
amounts collected on exports.
4.21

Net taxes on products are obtained by deducting
subsidies on products (D.31) from taxes on products (D.21).

Other taxes on production (D.29)
4.22

Definition: other taxes on production (D.29) consist of all taxes that enterprises incur as a result ofengaging in production, independent of the quantity or value of the goods and services produced or
sold.
Other taxes on production may be payable on
the land, fixed assets or labour employed in the934Distributive transactions

production process or on certain activities ortransactions.
4.23

Other taxes on production (D.29) include thefollowing:(g) under-compensation of VAT resulting fromthe flat-rate system, frequently found in
agriculture.
4.24(a) taxes on the ownership or use of land, buildings, or other structures utilised by enterprises
in production (including owner-occupiers of
dwellings);(b) taxes on the use of fixed assets (for example
vehicles, machinery and equipment) for purposes of production, irrespective of the assets
being owned or rented;

Taxes on production and imports paid to
the institutions of the European Union
4.25(c) taxes on the total wage bill and payroll taxes;(d) taxes on international transactions (for example travel abroad, foreign remittances, or similar transactions with non-residents) for purposes of production;(e) taxes paid by enterprises for business and professional licences, if those licences are granted
automatically on payment of the amounts
due. In this case, it is likely that they are simply a means of raising revenue, even though
the government may provide a certificate, or
authorisation, in return. However, if the government uses the issue of licences to exercise
some proper regulatory function, for example, when the government carries out checks on
the suitability or safety of the business premises, on the reliability or safety of the equipment
employed, on the professional competence ofthe staff employed, or on the quality or standard of goods or services produced as a condition for granting such a licence, the payments
are treated as purchases of services rendered,unless the amounts charged for the licences areout of all proportion to the costs of the checks
carried out by the government;(f) taxes on pollution resulting from production activities. These consist of taxes levied on
the emission or discharge into the environment of noxious gases, liquids or other harmful substances. They do not include payments
made for the collection and disposal of waste
or noxious substances by public authorities,
which constitute intermediate consumption ofenterprises;

94

Other taxes on production exclude taxes on the
personal use of vehicles etc. by households, which
are recorded under current taxes on income,wealth, etc.

The taxes on production and imports paid to theinstitutions of the European Union include the following taxes collected by national governments onbehalf of the institutions of the European Union:
receipts from the common agricultural policy:
levies on imported agricultural products, monetary compensatory amounts levied on exports
and imports, sugar production levies and the tax
on isoglucose, co-responsibility taxes on milk andcereals; receipts from trade with third countries:
customs duties levied on the basis of the Integrated
Tariff of the European Communities (TARIC).
The taxes on production and imports paid to
the Institutions of the European Union do notinclude the VAT-based third own resource whichis included in other current transfers under theheading ‘VAT- and GNI-based EU own resources’(D.76) (see paragraph 4.140).

Taxes on production and imports: time ofrecording and amounts to be recorded
4.26

Recording of taxes on production and imports:
taxes on production and imports are recorded
when the activities, transactions or other eventsoccur which create the liabilities to pay taxes.

4.27

Some economic activities, transactions or events,
which generate an obligation to pay taxes, escape
the notice of the tax authorities. Such activities,
transactions or events do not give rise to financial assets or liabilities in the form of payables or
receivables. The amounts recorded are only thoseevidenced by tax assessments, declarations or other
instruments which create liabilities in the form ofobligations to pay on the part of taxpayers. No

European system of accounts — ESA 2010

Distributive transactions

imputations are made for taxes not evidenced by
tax assessments.

balanced with the uses, which are valued inclusiveof such taxes.

Taxes recorded in the accounts are derived fromtwo sources: amounts evidenced by assessments
and declarations or cash receipts.

Other taxes on production (D.29) are recorded as
uses in the generation of income accounts of theindustries or sectors which pay them.

(a) If assessments and declarations are used, theamounts shall be adjusted by a coefficientreflecting assessed and declared amounts nevercollected. An alternative treatment is that acapital transfer (D.995), as described in point(j) of paragraph 4.165, to the relevant sectors
is recorded equal to the same adjustment. The
coefficients shall be estimated on the basis ofpast experience and current expectations in
respect of assessed and declared amounts nevercollected. They shall be specific to different
types of taxes.

Subsidies (D.3)
4.30

4.29

The total value of the taxes recorded includes
interest charged on arrears of taxes due and fines
imposed by taxation authorities where such interest and fines are not separately identifiable. The
total value of taxes includes charges imposed inconnection with the collection or recovery of taxes
outstanding. The total value is reduced by theamount of any tax rebates made by general government as a matter of economic policy and any tax
refunds made as a result of over-payments.

(a) influencing levels of production;(b) influencing the prices of products; or(c) influencing the remuneration of the factors of
production.
Non-market producers can receive other subsidies
on production only if those payments depend on
general regulations applicable to both market andnon-market producers.
Subsidies on products are not recorded in nonmarket output (P.13).
4.31

Subsidies granted by the institutions of theEuropean Union cover only current transfers madedirectly by them to resident producer units.

4.32

Subsidies are classified into:(a) subsidies on products (D.31):

In the system of accounts, taxes on production andimports (D.2) are recorded as follows:(1) import subsidies (D.311);(2) other subsidies on products (D.319);(a) on the uses side, in the generation of income
account of the total economy;(b) on the resources side, in the allocation of primary income account of the general government sector and in the external account of primary incomes and current transfers.
Taxes on products are recorded as resources in the
goods and services account of the total economy.
This enables the resources of goods and services— valued exclusive of taxes on products — to be

European system of accounts — ESA 2010

Definition: subsidies (D.3) are current unrequited
payments which general government or the institutions of the European Union make to resident
producers.
The following are examples of the objectives of giving subsidies:(b) If cash receipts are used, they shall be timeadjusted so that the cash is attributed when theactivity took place to generate the tax liability.
This adjustment is based on the average timedifference between the activity and cash tax
receipt.
4.284(b) other subsidies on production (D.39).

Subsidies on products (D.31)
4.33

Definition: subsidies on products (D.31) are subsidies payable per unit of a good or service produced
or imported.
The amount of subsidies on products can be specified in the following ways:

95

4

Distributive transactions(a) a specific amount of money per unit of quantityof a good or service;than their average costs of production as a matter of deliberate government or European economic and social policy;(b) a specified percentage of the price per unit;(d) direct subsidies on exports payable directly toresident producers when the goods leave theeconomic territory or the services are provided
to non-residents — except repayments at thecustoms frontier of taxes on products previously paid and waiving of the taxes that would
be due if the goods were to be sold or used
inside the economic territory.

(c) the difference between a specified target priceand the market price paid by a buyer.
A subsidy on a product usually becomes payable when the good is produced, sold or imported,but it may also be payable in other circumstancessuch as when a good is transferred, leased, delivered or used for own consumption or own capital formation.
Subsidies on products only apply to market output(P.11) or to output for own final use (P.12).

Other subsidies on production (D.39)
4.36

Import subsidies (D.311)
4.34

Definition: import subsidies (D.311) consists ofsubsidies on goods and services that become payable when the goods cross the frontier for use in theeconomic territory or when the services are delivered to resident institutional units.
Import subsidies include losses incurred as a matter of deliberate government policy by government
trading organisations whose function is to purchase products from non-residents and then sellthem at lower prices to residents.

Other subsidies on products (D.319)
4.35

Other subsidies on products (D.319) include thefollowing:(a) subsidies on products used domestically: these
consist of subsidies payable to resident producers in respect of their production which is usedor consumed within the economic territory;(b) losses of government trading organisations
whose function is to buy the products of resident producers and then sell them at lower
prices to residents or non-residents, when they
are incurred as a matter of deliberate government economic or social policy;(c) subsidies to public corporations and quasi-corporations to compensate for persistent losses
which they incur on their productive activities
as a result of charging prices which are lower

96

Definition: other subsidies on production (D.39)
consist of subsidies except subsidies on products
which resident producer units may receive as aconsequence of engaging in production.
For their non-market output, non-market producers can receive other subsidies on production
only if those payments from general government
depend on general regulations applicable to market and non-market producers as well.

4.37

Other subsidies on production (D.39) include thefollowing examples:(a) subsidies on payroll or work force i.e. subsidies
payable on the total wage or salary bill, or total
work force, or on the employment of particular types of persons such as physically handicapped persons or persons who have been
unemployed for long periods, or on the costsof training schemes organised or financed byenterprises;(b) subsidies to reduce pollution: these consist of
current subsidies intended to cover some or
all of the costs of additional processing undertaken to reduce or eliminate the discharge ofpollutants into the environment;(c) grants for interest relief made to resident producer units, even when they are intended toencourage capital formation. When a grant
serves the dual purpose of financing both theamortisation of the debt and the payment ofinterest on it, and when it is not possible toapportion it between two elements, the wholeof the grant is treated as an investment grant.

European system of accounts — ESA 2010

Distributive transactions

Grants for interest relief are current transfers
designed to lighten producers’ operating costs.
They are treated in the accounts as subsidies tothe producers benefiting from them, even when
the difference in the interest is paid directly by
the government to the credit institution granting the loan;

political events or national disasters. They arerecorded as other capital transfers (D.99);(h) shares and other equities in corporate enterprises purchased by general government, which
are shown under the heading equity and investment fund shares (AF.5);(i) payments made by a general government
agency which has assumed responsibility for
abnormal pension charges affecting a public enterprise. These payments are recorded as
miscellaneous current transfers (D.75);(d) over-compensation of VAT resulting from theflat-rate system, often for example found in
agriculture.
4.38

The following are not treated as subsidies (D.3):(a) current transfers from general government
to households in their capacity as consumers.
These are treated either as social benefits (D.62
or D.63) or as miscellaneous current transfers(D.75);(j) payments made by general government to market producers to pay entirely, or in part, forgoods and services that those market producers provide directly and individually to households in the context of social risks or needs (seeparagraph 4.84), and to which the households
have a right. These payments are included inindividual consumption expenditure of general government (P.31) and subsequently insocial transfers in kind — market production
purchased by government and NPISHs (D.632)
and actual individual consumption of households (P.41).

(b) current transfers between different parts of general government in their capacity as producers
of non-market goods and services, except othersubsidies on production (D.39). Current transfers are recorded as current transfers within
general government (D.73);(c) investment grants (D.92);(d) extraordinary payments into social insurance
funds, in so far as such payments are designed
to increase the actuarial reserves of these funds.
Such payments are recorded as other capitaltransfers (D.99);

4.39(g) payments made by general government or by
the rest of the world for damage to, or lossesof, capital goods as a result of acts of war, other

European system of accounts — ESA 2010

Time of recording: subsidies (D.3) are recorded
when the transaction or the event (production,
sale, import, etc.) which gives rise to the subsidy
occurs.
Particular cases are the following:(e) transfers made by general government to nonfinancial corporations and quasi-corporations
to cover losses accumulated over several financial years, or exceptional losses due to factors
outside the control of the enterprise, which arerecorded as other capital transfers (D.99);(f) the cancellation of debts which producer units
have incurred towards the government (resulting, for example, from loans advanced by a government agency to a non-financial enterprise
which has accumulated trading losses over
several financial years). Such transactions aretreated in the accounts as other capital transfers (D.99);

4(a) subsidies which take the form of the difference
between the purchase price and the selling pricecharged by a government trading agency arerecorded at the time the goods are bought by
the agency;(b) subsidies intended to cover a loss incurred bya producer are recorded at the time the general
government agency decides to cover the loss.
4.40

Subsidies (D.3) are recorded as:(a) negative uses in the generation of income
account of the total economy;(b) negative resources in the allocation of primary
income account of the general government
sector and in the external account of primary
incomes and current transfers.

97

4Distributive transactions

Subsidies on products are recorded as negative
resources in the goods and services account of thetotal economy.

(2) investment income payable on pension entitlements (D.442);(3) investment income attributable to collective
investment fund shareholders (D.443);

Other subsidies on production (D.39) are recorded
as resources in the generation of income accountsof the industries or sectors which receive them.
Consequences of a system of multiple exchange
rates on taxes on production and imports and on
subsidies: multiple exchange rates are not currently
applicable among the Member States. In such asystem:(e) rents (D.45).

Interest (D.41)
4.42(a) implicit taxes on imports are treated as taxes
on imports excluding VAT and import duties(D.2122);(a) deposits (AF.2);(b) implicit taxes on exports are treated as taxes
on products, except VAT and import taxes(D.214);(c) loans (AF.4);(b) debt securities (AF.3);(d) other accounts receivable (AF.8).
Income on SDR holdings and allocations and on
unallocated gold accounts is treated as interest. The
financial assets giving rise to interest are claims ofcreditors over debtors. Creditors lend funds to
debtors that lead to the creation of one or other ofthe financial instruments listed above.

(c) implicit subsidies on imports are treated asimport subsidies (D.311);(d) implicit subsidies on exports are treated asother subsidies on products (D.319).

Property income (D.4)
4.41

Definition: property income (D.4) accrues when
the owners of financial assets and natural resources
put them at the disposal of other institutional units.
The income payable for the use of financial assets iscalled investment income, while that payable forthe use of a natural resource is called rent. Property
income is the sum of investment income and rent.
Property incomes are classified as follows:(a) interest (D.41);(b) distributed income of corporations (D.42):(1) dividends (D.421);(2) withdrawals from income of quasi-corporations(D.422);(c) reinvested earnings on foreign direct investment (D.43);(d) other investment income (D.44):(1) investment income attributable to insurance policy holders (D.441);

98

Definition: interest (D.41) is property income
receivable by the owners of a financial asset for putting it at the disposal of another institutional unit.
It applies to the following financial assets:

Interest on deposits and loans
4.43

The amounts of interest on loans and deposits payable to and receivable from financial institutions include an adjustment for a margin that
represents an implicit payment for the services
provided by the financial institutions in providing loans and accepting deposits. The payment or
receipt is divided into the service part and into thenational accounts concept of interest. The actual
payments or receipts to or from financial institutions, described as bank interest, need to be partitioned so that the national accounts concept ofinterest and the service charges may be recorded
separately. The amounts of national accounts
interest paid by borrowers to financial institutions is less than bank interest by the estimated values of the charges payable, while the amounts ofnational accounts interest receivable by depositors
is higher than bank interest by the amount of theservice charge payable. The values of the charges
are recorded as sales of services in the production
accounts of financial institutions and as uses in theaccounts of their customers.

European system of accounts — ESA 2010

Distributive transactionsindex. The change in the value of the principal outstanding between the beginning and the end of aparticular accounting period due to the movementin the relevant index is treated as interest accruingin that period, in addition to any interest due forpayment in that period;

Interest on debt securities
4.44

Interest on debt securities comprise interest on
bills and similar short-term instruments, and interest on bonds and debentures.

(2) the amounts to be paid at maturity are linked to anarrow index that includes a holding gain motive.
Interest accruals are to be determined by fixing therate of accrual at the time of issue. Accordingly,interest is the difference between the issue priceand the market expectation, at inception, of all
payments that the debtor will have to make; thisamount is recorded as interest accruing over thelife of the instrument. This approach records asincome the yield-to-maturity at issuance, which
incorporates the results of the indexation that areforeseen at the moment the instrument was created. Any deviation of the underlying index fromthe originally expected path leads to holding gains
or losses which will not normally cancel out overthe life of the instrument.

Interest on bills and similar short-term instruments
4.45

The difference between the face value and the pricepaid at the time of issue (i.e. the discount) is ameasure of the interest payable over the life of thebill. The increase in the value of a bill due to theaccumulation of accrued interest does not constitute a holding gain because it is due to an increasein the principal outstanding and not a change inthe price of the asset. Other changes in the value ofthe bill are treated as holding gains/losses.

Interest on bonds and debentures
4.46

Bonds and debentures are long-term securities
that give the holder the unconditional right to a
fixed or contractually determined variable money
income in the form of coupon payments, or to astated fixed sum on a specified date or dates when
the security is redeemed, or both of these terms.
(a) zero-coupon bonds: there are no coupon payments. The interest based on the difference
between the redemption price and the issue
price has to be distributed over the years to
the maturity of the bond. The interest accruing
each year is reinvested in the bond by its holder,thus counterpart entries equal to the value ofthe accrued interest are recorded in the financial account as the acquisition of more bond by
the holder and as a further issue of more bondby the issuer or debtor (i.e. as a growth in the‘volume’ of the original bond);(b) other bonds, including deep-discounted bonds.
The interest has two components:(1) the amount of the money income receivable from
coupon payments each period;(2) the amount of interest accruing each period attributable to the difference between the redemption
price and the issue price, calculated in the same
way as for zero-coupon bonds;(c) index-linked securities:(1) the amounts of the coupon payments and/or the
principal outstanding are linked to a general price

European system of accounts — ESA 2010

4

The interest accruing as a result of the indexing is effectively reinvested in the security and must be recorded in
the financial accounts of the holder and issuer.

Interest rate swaps and forward rate agreements
4.47

Payment resulting from any kind of swap arrangement is recorded as a transaction in financial derivatives in the financial account, and not as interest
recorded as property income. Transactions underforward rate agreements are recorded as transactions in financial derivatives in the financial
account, and not recorded as property income.

Interest on financial leases
4.48

A financial lease is a method of financing for example the purchase of machinery and equipment. The
lessor purchases the equipment and the lessee contracts to pay rentals which enable the lessor, overthe period of the contract, to recover his costs
including the interest foregone on the money used
to purchase the equipment.
The lessor is treated as making a loan to the lessee equal to the value of the purchaser’s price paid
for the asset, this loan being repaid over the periodof the lease. The rental paid each period by thelessee is therefore treated as having two components: a repayment of principal and a payment ofinterest. The rate of interest on the imputed loan99

4Distributive transactions

is determined by the total amount paid in rentals
over the life of the lease in relationship to the purchaser’s price of the asset. The share of the rental
that represents interest declines over the duration of the lease as the principal is repaid. The initial loan by the lessee, together with the subsequent
repayments of principal, is recorded in the financial accounts of the lessor and lessee. The interest
payments are recorded as interest in the primary
distribution of income account.

the amounts of interest receivable by depositors
must be increased. The values of the charges aretreated as payments for services rendered by financial intermediaries to their customers and not as
payments of interest.
4.52(a) resources and uses in the allocation of primary
income account of the sectors;(b) resources and uses in the rest of the world
account of primary incomes and current
transfers.

Other interest
4.49

Other interest comprises the following:(a) interest charged on bank overdrafts;

Distributed income of corporations (D.42)(b) extra interest paid on deposits left longer thanoriginally agreed; andDividends (D.421)(c) payments determined by lottery, to bondholders.

4.53

Time of recording
4.50

4.51

Interest is recorded on an accrual basis, that is,interest is recorded as accruing continuously overtime to the creditor on the amount of principal outstanding. The interest accruing in each accounting
period must be recorded whether or not it is actually paid or added to the principal outstanding.
When it is not paid, the increase in the principal
is recorded in the financial account as an acquisition of a financial asset by the creditor and an equal
acquisition of a liability by the debtor.
Interest is recorded before the deduction of taxes
levied on it. Interest received and paid is recorded
inclusive of grants for interest relief, irrespectiveof whether those grants are directly paid to financial institutions, or to beneficiaries (see paragraph4.37).
The value of the services provided by financial
intermediaries being allocated among different
customers, the actual payments or receipts of interest to or from financial intermediaries are adjusted
to eliminate the margins that represent the implicit
charges made by financial intermediaries. The
amounts of interest paid by borrowers to financial
intermediaries must be reduced by the estimatedvalues of the charges payable, and on the contrary

100

In the system of accounts, interest is recorded as:

Definition: dividends (D.421) are a form of property income to which owners of shares (AF.5)
become entitled as a result of, for example, placing
funds at the disposal of corporations.
Raising equity capital through the issue of shares isa way of raising funds. In contrast to loan capital,
equity capital does not give rise to a liability thatis fixed in monetary terms and it does not entitle
the holders of shares of a corporation to a fixed orpredetermined income. Dividends are all distributions of profits by corporations to their shareholders or owners.

4.54

Dividends also include:(a) shares issued to shareholders in payment of thedividend for the financial year. Issues of bonus
shares, which represent the capitalisation of
own funds in the form of reserves and undistributed profits and give rise to new shares toshareholders in proportion for their holdings,
are not included;(b) the income paid to general government by public enterprises which are recognised as independent legal entities not constituted as corporate enterprises;(c) incomes generated by non-observed activities
and transferred to the owners of corporations
who participate in such activities for their private use.

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Distributive transactions

4.55

Dividends (D.421) exclude super-dividends.
Super-dividends are dividends that are large relative to the recent level of dividends and earnings. In order to assess whether the dividends arelarge, the concept of distributable income is used.
Distributable income of a corporation is equal toentrepreneurial income plus all current transfers
receivable less all current transfers payable andless the adjustment for the change in pension entitlements. The ratio of dividends to distributable
income over the recent past is used to assess theplausibility of the current level of dividends. If thelevel of dividends declared is greatly in excess, thedividends causing the excess are treated as financial transactions and classified as ‘super-dividends’.
Such super-dividends are treated as the withdrawalof owners’ equity from the corporation (F.5). That
treatment applies to corporations, whether incorporated or quasi-corporate and whether subject toforeign or domestic private control.

4.56(a) uses in the allocation of primary income
account of the sectors in which the corporations are classified;(b) as resources in the allocation of primary income
account of the sectors in which shareholders
are classified;(c) as uses and resources in the rest of the world
account of primary incomes and current
transfers.

Withdrawals from the income of quasi-corporations(D.422)
4.58

In the case of public corporations, super-dividends
are large and irregular payments or payments thatexceed the entrepreneurial income of the relevant
accounting period, which are funded from accumulated reserves or sales of assets. Super-dividendsof public corporations are to be recorded as withdrawal of equity (F.5) for the difference between
the payments and the entrepreneurial income of
the relevant accounting period (see paragraph20.206).

Time of recording: Although dividends represent a part of income that has been generated
over a period, dividends are not recorded on an
accrual basis. For a short period after a dividend
is declared, but before it is actually payable, shares
may be sold ‘ex dividend’ meaning that the dividend is still payable to the owner at the date thedividend was declared and not to the owner on thedate payable. A share sold ‘ex dividend’ is therefore worth less than one sold without this constraint. The time of recording of dividends is thepoint in time at which the share price starts to bequoted on an ex-dividend basis and not at a pricethat includes the dividend.
Dividends are recorded as:European system of accounts — ESA 2010

Definition: withdrawals from the income of quasicorporations (D.422) are the amounts which entrepreneurs withdraw for their own use from the profits earned by the quasi-corporations which belong
to them.
Such withdrawals are recorded before the deduction of current taxes on income, wealth, etc., which
are deemed always to be paid by the owners of thebusinesses.
When a quasi-corporation makes a trading profit,
the unit which owns it may choose to leave partor all of the profit in the business, especially forinvestment purposes. The income left in the business appears as saving by the quasi-corporation,and only the profits actually withdrawn by theowner units are recorded in the accounts under
the heading withdrawals from the income ofquasi-corporations.

Interim dividends are described in paragraph20.207.
4.57

4

4.59

When profits are earned in the rest of the worldby the branch-offices, agencies, etc. of resident
enterprises, in so far as these branch-offices etc.
are treated as non-resident units, retained earnings appear as reinvested earnings on foreign
direct investment (D.43). Only the income actually transferred to the parent enterprise is treatedin the accounts as withdrawals from the incomeof quasi-corporations received from the rest of theworld. The same principles are applied to deal withthe relations between branch-offices, agencies, etc.
operating on the economic territory and the nonresident parent enterprise to which they belong.

4.60

Withdrawals from the income of quasi-corporations include the net operating surplus received
by residents as owners of land and buildings in

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Distributive transactions

the rest of the world, or by non-residents as owners of land or buildings on the economic territory
concerned. In respect of transactions in land andbuildings carried out on the economic territory ofa country by non-resident units, notional resident
units are created, in which the non-resident owners own the equity.
The rental value of owner-occupied dwellings
abroad is registered as imports of services and thecorresponding net operating surplus as primary
income received from the rest of the world; therental value of owner-occupied dwellings belonging to non-residents is registered as exports of services and the corresponding net operating surplus
as primary income paid to the rest of the world.

(b) resources in the allocation of primary income
account of the owner sectors;(c) uses and resources in the external account ofprimary incomes and current transfers.

Reinvested earnings on foreign direct
investment (D.43)
4.64

plus	any property incomes or current transfers receivable,
minus	any property incomes or current transfers payable, including actual remittances to foreign direct investors andany current taxes payable on the income,wealth, etc., of the foreign direct investment enterprise.

Withdrawals from the income of quasi-corporations include incomes generated by non-observed
activities of quasi-corporations that are transferredto the owners participating in such activities fortheir private use.
4.61

Withdrawals from the income of quasi-corporations do not include amounts which their owners
receive from:

4.65

A foreign direct investment enterprise is an incorporated or unincorporated enterprise in which aninvestor resident in another economy owns 10 %or more of the ordinary shares or voting power in
an incorporated enterprise, or the equivalent for anunincorporated enterprise. Foreign direct investment enterprises comprise those entities that are
identified as subsidiaries, associates and branches.
A subsidiary is where the investor owns more than
50 %, an associate is where the investor owns 50 %or less, and a branch is a wholly or jointly owned
unincorporated enterprise. The foreign direct
investment relationship may be direct or indirect
as a result of a chain of ownership. ‘Foreign direct
investment enterprises’ is a broader concept than‘foreign controlled corporations’.

4.66

Actual distributions may be made from the entrepreneurial income of foreign direct investment
enterprises in the form of dividends or withdrawals
of income from quasi-corporations. In addition,
retained earnings are treated as if they were distributed and remitted to foreign direct investors inproportion to their ownership of the equity of theenterprise and then reinvested by them by meansof additions to equity in the financial account.
Reinvested earnings on foreign direct investment
can be either positive or negative.

(a) the sale of existing fixed capital goods;(b) the sale of land and other non-produced assets;(c) withdrawals of equity.
Such amounts are treated as withdrawals fromequity in the financial account as they amount to apartial or total liquidation equity in the quasi-corporation. If the quasi-corporation is owned by government, and if it runs a persistent operating deficit as a matter of deliberate government economic
and social policy, any regular transfers of funds
into the enterprise made by government to cover
its losses are treated as subsidies.
4.62

Time of recording: withdrawals from the incomeof quasi-corporations are recorded when they are
made by the owners.

4.63

In the system of accounts, withdrawals from theincome of quasi-corporations appear as:(a) uses in the allocation of primary income
account of the sectors in which the quasi-corporations are classified;

102

Definition: reinvested earnings on foreign direct
investment (D.43) are equal to the operating surplus of the foreign direct investment enterprise

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Distributive transactions

4.67

Time of recording: reinvested earnings on foreign direct investment are recorded when they areearned.

of the scheme and this must also be shown as being
distributed to the units paying the fees (which may
not be the same units which stand to benefit fromthe guarantees) and treated as supplementary feesin the secondary distribution of income account.

In the system of accounts, reinvested earnings on
foreign direct investment are recorded as:

For life insurance policies and annuities, insurance corporations have liabilities towards the policy holders and annuitants equal to the present
value of expected claims. Set against those liabilities, insurance corporations have funds belonging to the policy holders consisting of bonusesdeclared-for-with-profits policies as well as provisions for both policy holders and annuitants of thepayment of future bonuses and other claims. Those
funds are invested in a range of financial and nonfinancial assets.

(a) uses and resources in the allocation of primary
income account of the sectors;(b) uses and resources in the external account ofprimary incomes and current transfers.

Other investment income (D.44)
Investment income attributable to insurance policy
holders (D.441)
4.68

The bonuses declared to holders of life policies arerecorded as investment income receivable by thepolicyholders and are treated as premium supplements paid by the policyholders to the insurance
corporations.

Definition: Investment income attributable toinsurance policy holders corresponds to total primary incomes received from the investment of
insurance technical reserves. The reserves are thosewhere an insurance corporation recognises a corresponding liability to the policyholders.

The investment income attributable to life insurance policy holders is recorded as payable by the
insurance company and receivable by households in the allocation of primary income account.
Unlike the case of non-life insurance or pensions,the amount carries through to saving and is thenrecorded as a financial transaction, specifically an
increase in the liabilities of life insurance corporations, in addition to new premiums less the service
charge less benefits payable.

Insurance technical reserves are invested by insurance enterprises in financial assets or land (fromwhich net property income, i.e. after deducting any
interest paid, is received) or in buildings (which
generate net operating surpluses).
Investment income attributable to insurance policy holders is recorded separately between holders
of non-life and life policies.
For non-life policies, the insurance corporation has
a liability towards the policy holder of the amountof the premium deposited with the corporation but
not yet earned, the value of any claims due but not
yet paid and a reserve for claims not yet notified or
notified but not yet settled. Set against this liability,
the insurance corporation holds technical reserves.
The investment income on these reserves is treatedas income attributable to the policy holders, thendistributed to the policy holders in the allocationof primary income account and paid back to theinsurance corporation as a premium supplementin the secondary distribution of income account.
For an institutional unit operating a standardisedloan guarantee scheme against fees, there could
also be investment income earned on the reserves

European system of accounts — ESA 2010

4

Investment income payable on pension entitlements(D.442)
4.69

Pension entitlements arise from one of two different types of pension schemes. These are defined
contribution schemes and defined benefit schemes.
A defined contribution scheme is one where contributions by both employers and employees areinvested on behalf of the employees as future pensioners. No other source of funding of pensions isavailable and no other use is made of the funds.
The investment income payable on defined contribution entitlements is equal to the investment
income on the funds plus any income earned byrenting land or buildings owned by the fund.

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Distributive transactions

The characteristic of a defined benefit scheme is thata formula is used to determine the level of payments
to be made to pensioners. This characteristic makes
it possible to determine the level of entitlements as
the present value of all future payments, calculatedusing actuarial assumptions about life lengths andeconomic assumptions about the interest or discount rate. The present value of the entitlements
existing at the start of the year increases because
the date when the entitlements become payable isone year nearer. This increase is regarded as investment income attributed to the pension holders in
the case of defined benefit scheme. The amount of
the increase is neither affected by whether the pension scheme actually has sufficient funds to meet
all the obligations nor by the type of increase in thefunds, whether it is investment income or holding
gains, for example.

Time of recording: other investment income is recorded
when it accrues.
4.71(a) resources in the allocation of primary income
account of policy and investment fund holders;(b) uses in the allocation of primary income
account of the insurers, pension funds andinvestment funds;(c) resources and uses in the external account ofprimary incomes and current transfers.

Rent (D.45)
4.72

Investment income attributable to collective
investment fund shareholders (D.443)
4.70

The distinction between rent and rentals is that
rent is a form of property income and rentals are
payments for services. Rentals are payments madeunder an operating lease to use a fixed asset belonging to another unit. Rent is a payment made undera resource lease for access to a natural resource.

— dividends attributable to collective investment
fund shareholders (D.4431),— retained earnings attributable to collective
investment fund shareholders (D.4432).

The property income received by mutual funds is recorded
as shareholders’ property income even if it is not distributed but reinvested on their behalf.
Shareholders indirectly pay out of their fund shares tomanagement companies for managing their investments.
This service charge is expenditure by shareholders, andnot expenditure of funds.

104

Definition: rent is the income receivable by theowner of a natural resource for putting the natural resource at the disposal of another institutional
unit.
There are two different types of resource rents: renton land, and rent on subsoil resources. Resource
rents on other natural resources such as radio spectra follow the same pattern.

Investment income attributable to collective
investment fund shareholders, including mutual
funds and unit trusts, consists of the following separate components:

The dividend component is recorded in exactly thesame manner as dividends for individual corporations,as described above. The retained earnings component
is recorded using the same principles as those describedfor foreign direct investment enterprises but is calculated excluding any reinvested earnings on foreign direct
investment. The remaining retained earnings are attributed to the investment fund shareholders leaving theinvestment fund with no saving, and are re-injected into
the fund by the investment fund shareholders in a transaction recorded in the financial account.

In the system of accounts, other investment income
is recorded as:

Rent on land
The rent received by a landowner from a tenant constitutes
a form of property income. Rents on land also include therents payable to the owners of inland waters and rivers forthe right to exploit such waters for recreational or otherpurposes, including fishing.
A landowner pays land taxes and incurs maintenanceexpenses as a consequence of owning the land. Such taxes
and expenses are treated as payable by the person entitled
to use the land, who is deemed to deduct them from therent that he would otherwise be obliged to pay to the landowner. Rent reduced in this way by taxes or other expenses
for which the landowner is liable is called ‘after-tax rent’.
4.73

Rents on land do not include the rentals of buildings and of dwellings situated on it; those rentals are treated as the payment for a market service

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Distributive transactions

provided by the owner to the tenant of the building or dwelling, and are recorded in the accounts as
the intermediate or final consumption of the tenant. If there is no objective basis on which to split
the payment between rent on land and rental on
the buildings situated on it, the whole amount istreated as rent when the value of the land is estimated to exceed the value of the buildings on it andas rental otherwise.

Taxes on income (D.51)
4.78

Rents on subsoil assets

Definition: taxes on income (D.51) consist oftaxes on incomes, profits and capital gains. They
are assessed on the actual or presumed incomesof individuals, households, corporations or NPIs.
They include taxes assessed on holdings of property, land or real estate when these holdings areused as a basis for estimating the income of theirowners.
Taxes on income include:

4.74

This heading includes the royalties that accrue toowners of deposits of minerals or fossil fuels (coal,oil or natural gas), whether private or government units, who grant leases to other institutional
units permitting them to explore or to extract suchdeposits over a specified period of time.

(a) taxes on individual or household income,examples of which are income from employment, property, entrepreneurship, pensions,etc., and including taxes deducted by employers, for example pay-as-you-earn taxes. Taxeson the income of owners of unincorporated
enterprises are included here;

4.75

Time of recording of rents: rents are recorded in
the period when payable.

(b) taxes on the income or profits of corporations;

4.76

In the system of accounts, rents are recorded:(c) taxes on holding gains;(d) taxes on winnings from lotteries or gambling,
payable on the amounts received by winners as
distinct from taxes on the turnover of producers that organise gambling or lotteries which
are treated as taxes on products.

(a) among resources and among uses in the allocation of primary income account of sectors;(b) among resources and among uses in the external account of primary incomes and current
transfers.

Other current taxes (D.59)
4.79

Current taxes on income, wealth, etc.
(D.5)
4.77

Definition: current taxes on income, wealth, etc.
(D.5) cover all compulsory, unrequited payments,
in cash or in kind, levied periodically by general
government and by the rest of the world on theincome and wealth of institutional units, and someperiodic taxes which are assessed neither on that
income nor that wealth.
Current taxes on income, wealth, etc. are divided
into:(a) taxes on income (D.51);(b) other current taxes (D.59).

European system of accounts — ESA 2010

4

Other current taxes (D.59) includes:(a) current taxes on capital which consist of taxes
payable on the ownership or use of land or
buildings by owners, and current taxes on net
wealth and on other assets, for example jewellery — except taxes mentioned in D.29 (which
are paid by enterprises as a result of engaging in production) and those in D.51 (taxes on
income);(b) poll taxes, levied per adult or per household,independently of income or wealth;(c) expenditure taxes, payable on the total expenditures of persons or households;(d) payments by households for licences to own
or use for non-business purposes vehicles,boats or aircraft, or for licences for recreational

105

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Distributive transactions

hunting, shooting or fishing, etc. The distinction between taxes and purchases of services
from government is defined according to thesame criteria as those used in the case of payments made by enterprises namely, if the issueof licenses involves little or no work on the partof government, the licences being granted automatically on payment of the amounts due, it islikely that they are simply a device to raise revenue, even though the government may provide some kind of certificate, or authorisation,
in return; in such cases their payment is treatedas taxes. If, however, the government uses theissue of licences to organise some proper regulatory function (such as checking the competence, or qualifications, of the person concerned), the payments made are treated as purchases of services from government rather thanpayments of taxes, unless the payments areclearly out of all proportion to the cost of providing the services;

if they satisfy the criteria set out in point (d) ofparagraph 4.79 to be recorded as services.
4.81

Subsidies and social benefits made available via thetax system in the form of tax credits and the incidence of linking payment systems with the tax collection system are increasing. Tax credits represent tax relief and so reduce the tax liability of thebeneficiary.
If the tax credit system results in the beneficiary
receiving the excess when the relief is greater thanthe liability, the tax credits system is a payable tax
credit system. Under a payable tax credits system,
payments can be awarded to non-taxpayers as well
as taxpayers. Under a payable tax credits system,
the whole amount of tax credits is recorded as government expenditure, and not as a reduction of tax
revenue.

(e) taxes on international transactions, for example travel abroad, foreign remittances, foreign
investments, etc., except those payable by producers and import duties paid by households.
4.80

Current taxes on income, wealth, etc. do notinclude:(a) inheritance taxes, death duties or taxes on gifts
between living persons, which are deemed to belevied on the capital of the beneficiaries and areshown under the heading capital taxes (D.91);(b) occasional or exceptional levies on capital or
wealth, which are recorded as capital taxes(D.91);(c) taxes on land, buildings or other assets ownedor rented by enterprises and used by them forproduction, such taxes being treated as othertaxes on production (D.29);(d) payments by households for licences other thanlicences for the use of vehicles, boats or aircraft,or licences for recreational hunting, shooting or fishing: driving or pilot’s licences, firearm licences, and fees to government such as
museum or library admissions, garbage disposal fees, payments for passports, airport fees,
court fees etc. which are treated in most cases aspurchases of services rendered by government,

106

The total value of the taxes includes interest charged
on arrears of taxes due and fines imposed by taxation authorities if there is no data to estimate suchinterest and fines separately; it includes charges
imposed in connection with the recovery andassessment of taxes outstanding, less the amount of
any rebates made by general government as a matter of economic policy and any refunds made as aresult of over-payments.

In contrast, some tax credit systems are non-payable tax credits systems where tax credits are limited
to the size of the tax liability. Under a non-payabletax credits system, all tax credits are embedded in
the tax system and reduce government tax revenue.
4.82

Current taxes on income, wealth, etc. are recordedat the time when activities, transactions or otherevents occur which create the liabilities to pay.
However, some economic activities, transactions
or events, which under tax legislation ought toimpose on the units concerned the obligation to
pay taxes, permanently escape the attention of tax
authorities. It would be unrealistic to assume thatsuch activities, transactions or events give rise tofinancial assets or liabilities in the form of payables or receivables. The amounts to be recorded
are determined by the amounts due for payment
only when evidenced by tax assessments, declarations or other instruments which create liabilities
in the form of clear obligations to pay on the part

European system of accounts — ESA 2010

Distributive transactionsof taxpayers. Missing taxes are not imputed if notevidenced by tax assessments.

(a) uses in the secondary distribution of income
account of the sectors in which the taxpayers
are classified;Taxes recorded in the accounts are derived fromtwo sources: amounts evidenced by assessments
and declarations, and cash receipts.
(a) If assessments and declarations are used, theamounts shall be adjusted by a coefficientreflecting assessed and declared amounts nevercollected. As an alternative treatment, a capitaltransfer to the relevant sectors is recorded equal
to the same adjustment. The coefficients shallbe estimated on the basis of past experience andcurrent expectations in respect of assessed anddeclared amounts never collected. They shall be
specific to different types of taxes;(b) If cash receipts are used, they shall be timeadjusted so that the cash is attributed when
the activities, transactions or other events took
place to generate the tax liability (or when theamount of tax was determined, in the case ofsome income taxes). This adjustment is basedon the average time difference between theactivities, transactions or other events (or thedetermination of the amount of tax) and cash
tax receipt.
When retained at source by an employer, current
taxes on income, wealth, etc. are included in wages
and salaries even if the employer did not pass themon to the general government. The households
sector is shown as paying the full amount to thegeneral government sector. The amounts actually
unpaid are neutralised under D.995 as a capitaltransfer from general government to the employers’ sectors.
In some cases, the liability to pay income taxes canonly be determined in a later accounting period
than that in which the income accrues. Some flexibility is therefore needed concerning the point intime at which such taxes are recorded. Income taxes
deducted at source, such as PAYE taxes and regularprepayments of income taxes, may be recorded in
the periods in which they are paid and any final tax
liability on income can be recorded in the period inwhich the liability is determined.
Current taxes on income, wealth, etc. are recordedas:European system of accounts — ESA 20104(b) resources in the secondary distribution ofincome account of general government;(c) uses and resources in the external account ofprimary incomes and current transfers.

Social contributions and benefits (D.6)
4.83

Definition: social benefits are transfers to households, in cash or in kind, intended to relieve themfrom the financial burden of a number of risks
or needs, made through collectively organised
schemes, or outside such schemes by government
units and NPISHs; they include payments fromgeneral government to producers which individually benefit households and which are made in thecontext of social risks or needs.

4.84

The list of risks or needs which may give rise tosocial benefits is as follows:(a) sickness;(b) invalidity, disability;(c) occupational accident or disease;(d) old age;(e) survivors;(f) maternity;(g) family;(h) promotion of employment;(i) unemployment;(j) housing;(k) education;(l) general neediness.
In the case of housing, payments made by publicauthorities to tenants in order to reduce their rents
are social benefits, with the exception of special
benefits paid by public authorities in their capacity as employers.

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Distributive transactions

4.85

Social benefits include:(a) current and lump-sum transfers from schemes
which receive contributions, cover the entire
community or large sections of the community
and are imposed and controlled by government
units (social security schemes);

employee, whether or not the employee also
makes a contribution.
4.88(b) current and lump sum transfers from schemesorganised by employers on behalf of theiremployees, ex-employees or dependants (other
employment related social insurance schemes).
Contributions may be made by employees and/or employers; they may also be made by selfemployed persons;(c) current transfers from government units and
NPISHs which are not conditional on previous payment of contributions and which are
generally linked to an assessment of available
income. Such transfers are commonly known
as social assistance.
4.86

Social insurance schemes are organised for groups
of workers or are available by law to all workers ordesignated categories of workers, including nonemployed persons as well as employees. They range
from private schemes arranged for selected groups
of workers employed by a single employer to social
security schemes covering the entire labour force
of a country. Participation in such schemes may
be voluntary for the workers concerned, but it ismore common for it to be obligatory. For example,
participation in schemes organised by individual
employers may be required by the terms and conditions of employment collectively agreed between
employers and their employees.

Social benefits exclude:(a) insurance claims based on policies taken out
solely on the own initiative of the insured, independently of his employer or government;(b) insurance claims on policies taken out withthe sole purpose of obtaining a discount,even if those policies follow from a collective
agreement.

4.87

In order for an individual policy to be treated aspart of a social insurance scheme, the eventualities
or circumstances against which the participants are
insured shall correspond to the risks or needs listed
in paragraph 4.84, and, in addition, one or more of
the following conditions shall be satisfied:(a) participation in the scheme is obligatory either
by law or under the terms and conditionsof employment of an employee or group of
employees;(b) the scheme is a collective one operated forthe benefit of a designated group of workers,whether employees, self-employed or nonemployed, participation being restricted tomembers of that group;(c) an employer makes a contribution (actualor imputed) to the scheme on behalf of an

108

Definition: social insurance schemes are schemes
in which participants are obliged, or encouraged,
by their employers or by general government, totake out insurance against certain eventualities or
circumstances that may adversely affect their welfare or that of their dependants. In such schemessocial contributions are paid by employees or others, or by employers on behalf of their employees,
in order to secure entitlement to social insurance
benefits, in the current or subsequent periods, forthe employees or other contributors, their dependants or survivors.

4.89

Two types of social insurance schemes may be
distinguished:(a) The first consists of social security schemes covering the entire community, or large sections of
the community, that are imposed, controlled
and financed by government units. Pensions
payable under such schemes may or may not
be related to levels of salary of the beneficiaryor history of employment. Non-pension benefits are less frequently linked to salary levels;(b) The second type consists of other employment
related schemes. Such schemes derive from an
employer-employee relationship in the provision of pension and possibly other entitlementsthat are part of the conditions of employment
and where responsibility for the provision of
benefits does not devolve to general government under social security provisions.

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Distributive transactions

4.90

Social insurance schemes organised by government units for their own employees as opposedto the working population at large are classified
as other employment related schemes and not associal security schemes.

(a) employers’ actual pension contributions(D.6111) corresponds to flow D.1211;(b) employers’ actual non-pension contributions(D.6112) corresponds to flow D.1212.

Definition: net social contributions are the actualor imputed contributions made by households tosocial insurance schemes to make provision forsocial benefits to be paid. Net social contributions(D.61) consist of:Payments of actual social contributions may becompulsory by virtue of a statute or regulation,or they may be paid as a result of collective agreements in a particular industry or agreements
between employer and employees in a particular enterprise, or because they are written into thecontract of employment itself. In certain cases, thecontributions may be voluntary.

employers’ actual social contributions (D.611)

Such voluntary contributions cover:

4.93

Net social contributions (D.61)
4.91

plus	
employers’ imputed social contributions(D.612),plus	
households’(D.613),

actualsocial(a) social contributions which persons who are notlegally obliged to contribute to a social security
fund;contributions

plus	
households’ social contribution supplements(D.614),(b) social contributions paid to insurance enterprises (or pension funds classified in the same
sector) as part of supplementary insurance
schemes organised by enterprises for the benefit of their employees and which the latter join
voluntarily;

less	
social insurance scheme service charges(D.61SC).

The social insurance scheme service charges are theservice fees charged by the units administering theschemes. They appear here as part of the calculation for net social contributions (D.61); they are
not redistributive transactions but part of output
and consumption expenditure.

Employers’ actual social contributions (D.611)
4.92(c) contributions to provident insurance schemeswith membership open to employees or selfemployed workers.
4.94

Time of recording: employers’ actual social contributions (D.611) are recorded at the time when thework that gives rise to the liability to pay the contributions is carried out.

4.95

Social contributions payable to the general government sector recorded in the accounts are derived
from two sources: amounts evidenced by assessments and declarations or cash receipts.

Employers’ actual social contributions (D.611)
correspond to flow D.121.
Employers’ actual social contributions are paidby employers to social security schemes and other
employment related social insurance schemes tosecure social benefits for their employees.
As employers’ actual social contributions are madefor the benefit of their employees, their value isrecorded as one of the components of compensation of employees together with wages and salaries in cash and in kind. The social contributions
are then recorded as being paid by the employees
as current transfers to the social security schemes,
and other employment related social insurance
schemes.
This heading is split into two categories:

European system of accounts — ESA 20104(a) If assessments and declarations are used, theamounts shall be adjusted by a coefficientreflecting assessed and declared amounts nevercollected. As an alternative treatment, a capital transfer to the relevant sectors could berecorded equal to the same adjustment. The
coefficients shall be estimated on the basis ofpast experience and current expectations in
respect of assessed and declared amounts nevercollected. They shall be specific to different
types of social contributions.

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Distributive transactions(b) If cash receipts are used, they shall be timeadjusted so that the cash is attributed when theactivity took place to generate the social contribution liability (or when the liability is created).
This adjustment may be based on the averagetime difference between the activity (or the creation of the liability) and cash receipt.
When retained at source by the employer, social
contributions payable to the general government
sector are included in wages and salaries irrespective of whether the employer passed them to thegeneral government. The households sector is thenshown as paying the full amount to the general government sector. The amounts actually unpaid areneutralised under D.995 as a capital transfer fromgeneral government to the employers’ sectors.
4.96

Employers’ actual social contributions are recordedas:(a) uses in the secondary distribution of income
account of households;(b) uses in the external account of primary incomes
and current transfers (in the case of non-resident households);(c) resources in the secondary distributionof income account of resident insurers or
employers;(d) resources in the external account of primary
incomes and current transfers (in the case of
non-resident insurers or employers).

Employers’ imputed social contributions (D.612)
4.97

Definition: employers’ imputed social contributions (D.612) represent the counterpart to social
benefits (less eventual employees’ social contributions) paid directly by employers (i.e. not linked to
employers’ actual contributions) to their employees or former employees and other eligible persons.
They correspond to flow D.122 as described undercompensation of employees. Their value must be
based on actuarial considerations, or on the basisof reasonable percentage of wages and salaries paid
current employees or as equal to unfunded nonpension benefits payable by the enterprise during
the same accounting period.

110

Employers’ imputed social contributions D.612) is
split into two categories:(a) employers’ imputed pension contributions(D.6121). They correspond to flow D.1221;(b) employers’ imputed non-pension contributions(D.6122). They correspond to flow D.1222.
4.98

Time of recording: employers’ imputed social contributions which represent the counterpart of compulsory direct social benefits are recorded in the
period during which the work is done. Employers’
imputed social contributions which represent thecounterpart of voluntary direct social benefits arerecorded at the time the benefits are provided.

4.99

Employers’ imputed social contributions arerecorded as:(a) uses in the secondary distribution of income
account of households and in the external account of primary incomes and current
transfers;(b) resources in the secondary distribution ofincome account of the sectors to which theemployers or resident insurers belong and in
the external account of primary incomes andcurrent transfers.

Households’ actual social contributions (D.613)
4.100 Definition: Households’ actual social contribu-

tions are social contributions payable on theirown behalf by employees, self-employed or nonemployed persons to social insurance schemes.
Households’ actual social contributions (D.613)
are split into two categories:(a) households’(D.6131);actualpensioncontributions(b) households’ actual non-pension contributions(D.6132).
Time of recording: households’ actual social contributions are recorded on an accrual basis. For
those in work, this is at the time when the workthat gives rise to the liability to pay the contributions is carried out. For non-employed persons,this is at the time where the contributions are to
be made.

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Distributive transactions

In the system of accounts, households’ actual social
contributions are recorded:(a) among uses in the secondary distribution ofincome account of households and in the external account of primary incomes and current
transfers;(b) among resources in the secondary distributionof income account of the sectors to which theemployers belong and in the external accountof primary incomes and current transfers.

Other social insurance benefits (D.622);
Social assistance benefits in cash (D.623).

Social security benefits in cash (D.621)
4.103 Definition: social security benefits in cash aresocial insurance benefits payable in cash to households by social security funds. Reimbursements
are excluded and treated as social transfers in kind
(D.632).

Households’ social contribution supplements (D.614)

Such benefits are provided under social security
schemes.

4.101 Definition: households’ social contribution supple-

They may be split between:ments consist of the property income earned during the accounting period on the stock of pension
and non-pension entitlements.
This heading is split into two categories:— social security pension benefits in cash (D.6211),— social security non-pension benefits in cash
(D.6212).

(a) households’ pension contribution supplements(D.6141);

Other social insurance benefits (D.622)(b) households’ non-pension contribution supplements (D.6142). The heading D.6142 corresponds to households’ contributions supplements related to social risks and needs otherthan pensions, such as sickness, maternity,
industrial injury, disability, redundancy, etc.

4.104 Definition: other social insurance benefits corre-

Households’ social contribution supplements areincluded in property income payable by the administrators of pension funds to households in the
allocation of primary income account (investment
income payable on pension entitlements D.442).
As this income is retained by the administrators ofpension funds in practice, it is treated in the secondary distribution of income account as being paidback by households to pension funds in the formof households’ social contributions supplements.
Time of recording: households’ social contribution
supplements are recorded when they accrue.

Social benefits other than social transfers
in kind (D.62)
4.102 The heading D.62 is made up of three sub-headings:

Social security benefits in cash (D.621);

European system of accounts — ESA 20104

spond to benefits payable by employers in the context of other employment related social insurance
schemes. Other employment-related social insurance benefits are social benefits (in cash or in kind)payable by social insurance schemes other thansocial security to contributors to the schemes, theirdependants or their survivors.
They typically include:(a) the continued payment of normal, or reduced,
wages during periods of absence from work as
a result of ill health, accident, maternity, etc.;(b) the payment of family, education or otherallowances in respect of dependants;(c) the payment of retirement or survivors’ pensions to ex-employees or their survivors, andthe payment of severance allowances to workers or their survivors in the event of redundancy, incapacity, accidental death, etc. (iflinked to collective agreements);(d) general medical services not related to theemployee’s work;(e) convalescent and retirement homes.

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Distributive transactions

Other social insurance benefits (D.622) may be
split between:

4.107 Social benefits other than social transfers in kind

(D.62) are recorded as:

benefits(a) uses in the secondary distribution of income
account of the sectors granting the benefits;— other social insurance non-pension benefits(D.6222).

(b) uses in the external account of primary incomes
and current transfers (in the case of benefits
granted by the rest of the world);— other social(D.6221),insurance

pensionSocial assistance benefits in cash (D.623)(c) resources in the secondary distribution ofincome account of households;

4.105 Definition: social assistance benefits in cash are

current transfers payable to households by government units or NPISHs to meet the same needs associal insurance benefits but which are not madeunder a social insurance scheme requiring participation usually by means of social contributions.
They therefore exclude all benefits paid by social
security funds. Social assistance benefits may bepayable in the following circumstances:(d) resources in the external account of primary
incomes and current transfers (in the case of
benefits granted to non-resident households).

Social transfers in kind (D.63)
4.108 Definition: social transfers in kind (D.63) con-sist of individual goods and services provided forfree or at prices that are not economically significant to individual households by government units
and NPISHs, whether purchased on the market or
produced as non-market output by government
units or NPISHs. They are financed out of taxation,other government income or social security contributions, or out of donations and property incomein the case of NPISHs.

(a) no social insurance scheme exists to cover thecircumstances in question;(b) although a social insurance scheme, or schemes,
may exist, the households in question do notparticipate and are not eligible for social insurance benefits;Services provided for free, or at prices that are
not economically significant, to households aredescribed as individual services to distinguishthem from collective services provided to the community as a whole, or large sections of the community, such as defence and street lighting. Individual
services consist mainly of education and healthservices, although other kinds of services such as
housing services, cultural and recreational services
are also frequently provided.

(c) social insurance benefits are deemed to be inadequate to cover the needs in question the social
assistance benefits being paid in addition;(d) as a matter of general social policy.
Such benefits do not include current transfers paidin response to events or circumstances that are notnormally covered by social insurance schemes (i.e.
transfers made in response to natural disasters,
recorded under other current transfers or underother capital transfers).
4.106 Time of recording of social benefits other thansocial transfers in kind (D.62):

Social transfers in kind — general government and
NPISHs non-market production (D.631)(a) in cash, they are recorded when the claims on
the benefits are established;(b) in kind, they are recorded at the time the services are provided, or at the time the changes ofownership of goods provided directly to households by non-market producers take place.

112

4.109 Social transfers in kind (D.63) are subdivided into:

Definition: social transfers in kind — general government and NPISHs non-market production(D.631) are individual goods and services provided
directly to the beneficiaries by non-market producers. Any payments made by the households themselves should be deducted.

European system of accounts — ESA 2010

Distributive transactions

Social transfers in kind — market production
purchased by general government and NPISHs (D.632)
Definition: social transfers in kind — market production purchased by general government and
NPISHs (D.632) are individual goods and services(a) in the form of reimbursements by social security funds of approved expenditures made byhouseholds on specific goods and services; or(b) provided directly to the beneficiaries by market producers from which general government purchases the corresponding goods andservices.
Any payments made by the households themselves
are to be deducted.
When a household purchases a good or service
for which it is subsequently reimbursed, in partor in whole, by a social security fund, the household can be regarded as if it were acting on behalfof the social security fund. In effect, the household
provides a short-term credit to the social security
fund that is liquidated as soon as the household isreimbursed.
The amount of the expenditure reimbursed isrecorded as being incurred directly by the social
security fund at the time the household makes thepurchase, while the only expenditure recorded forthe household is the difference, if any, between thepurchaser’s price paid and the amount reimbursed.
Thus, the amount of the expenditure reimbursed is
not treated as a current transfer in cash from thesocial security funds to households.

4.110 Examples of social transfers in kind (D.63) are

medical or dental treatments, surgery, hospital
accommodation, spectacles or contact lenses, medical appliances or equipment, and similar goods orservices meeting social risks or needs.

Other examples not covered by a social insurance
scheme are social housing, dwelling allowance,
day nurseries, professional training, reductions
on transport prices (provided that there is a social
purpose), and similar goods and services in thecontext of social risks or needs. Outside the scopeof social risks or needs, when government provides individual households with goods and services such as recreational, cultural or sport services

European system of accounts — ESA 20104

for free or at prices which are not economically significant, these are treated as social transfers in kind
— government and NPISHs non-market production (D.631).
4.111 Time of recording: social transfers in kind (D.63)

are recorded at the time the services are provided,or at the time the changes of ownership of goods
provided directly to households by producers takeplace.
Social transfers in kind (D.63) are recorded:(a) among uses in the redistribution of income
in kind account of the sectors granting thebenefits;(b) among resources in the redistribution ofincome in kind account of households.
The consumption of the goods and services transferred is recorded in the use of adjusted disposable
income account.
There are no social transfers in kind with the rest of
the world (they are registered in D.62 social benefits other than social transfers in kind).

Other current transfers (D.7)
Net non-life insurance premiums (D.71)
4.112 Definition: net non-life insurance premiums (D.71)

are premiums payable under policies taken out by
institutional units. The policies taken out by individual households are those taken out on their own
initiative and for their own benefit, independentlyof their employers or government and outside
any social insurance scheme. Net non-life insurance premiums comprise both the actual premiums payable by policy holders to obtain insurance
cover during the accounting period (premiums
earned) and the premium supplements payable outof the property income attributed to insurance policy holders, after deducting the service charges of
insurance enterprises arranging the insurance.
Net non-life insurance premiums are the amounts
available to provide cover against various events or
accidents resulting in damage to goods or property,or harm to persons as a result of natural or human

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Distributive transactions

causes, examples being fires, floods, crashes, collisions, theft, violence, accidents, sickness, etc., oragainst financial losses resulting from events suchas sickness, unemployment, accidents, etc.
Net non-life insurance premiums are split into two
categories:(a) net non-life(D.711);

directinsurance

premiums(b) net non-life reinsurance premiums (D.712).
4.113 Time of recording: net non-life insurance premi-

ums are recorded when they are earned.

The insurance premiums from which the service
charges are deducted are those parts of the total
premiums, paid in the current period or previous
periods, that cover risks outstanding in the current
period.
Premiums earned in the current period must be
distinguished from the premiums due for payment
during the current period, which are likely to coverrisks in future periods as well as the current period.
Net non-life insurance premiums are recorded as:(a) uses in the secondary distribution of income
account of resident policy holders;(b) uses in the external account of primary incomes
and current transfers (in the case of non-resident policy holders);(c) resources in the secondary distributionof income account of resident insurance
enterprises;(d) resources in the external account of primary
incomes and current transfers (in the case of
non-resident insurance enterprises).

Non-life insurance claims (D.72)
4.114 Definition: non-life insurance claims (D.72) are

the claims due under contracts in respect of nonlife insurance, that is, the amounts which insurance enterprises are obliged to pay in settlementof injuries or damage suffered by persons or goods(including fixed capital goods).
This heading is split into two categories:

114(a) non-life direct insurance claims (D.721);(b) non-life reinsurance claims (D.722).
4.115 Non-life insurance claims does not include pay-ments which constitute social benefits.

The settlement of a non-life insurance claim istreated as a transfer to the claimant. Such payments are treated as current transfers, even whenlarge sums may be involved as a result of the accidental destruction of a fixed asset or serious personal injury to an individual.
Exceptionally large claims, e.g. in the wake of a disaster, may be treated not as current transfers but ascapital transfers (see point (k) of paragraph 4.165).
The amounts received by claimants are usually notcommitted for any particular purpose, and goods
or assets which have been damaged or destroyed
need not necessarily be repaired or replaced.
Claims arise because of damage or injuries thatthe policy holders cause to the property or persons of third parties. In such cases, valid claims arerecorded as being payable directly by the insurance
enterprise to the injured parties and not indirectly
via the policy holder.
4.116 Net reinsurance premiums and claims are calcu-

lated in exactly the same manner as non-life insurance premiums and claims. As the reinsurance
business is concentrated in a few countries, mostreinsurance policies are with non-resident units.
Some units, especially government units, may provide a guarantee against a debtor defaulting in conditions that have the same characteristics as nonlife insurance. This happens when many guarantees of the same sort are issued and it is possible
to make a realistic estimate of the overall level ofdefaults. In such cases, the fees paid (and the property income earned on them) are treated in thesame way as non-life insurance premiums andthe calls under the standardised loans guarantees
are treated in the same way as non-life insurance
claims.

4.117 Time of recording: non-life insurance claims arerecorded at the time the accident or other event
insured against occurs.
They are recorded as:European system of accounts — ESA 2010

Distributive transactions(a) uses in the secondary distribution of income
account of resident insurance enterprises;(b) uses in the external account of primary incomes
and current transfers (in the case of non-resident insurance enterprises);(c) resources in the secondary distribution ofincome account of the beneficiary sectors;(d) resources in the external account of primary
incomes and current transfers (in the case of
non-resident beneficiaries).

Current transfers within general
government (D.73)
4.118 Definition: current transfers within general gov-

ernment (D.73) include transfers between the different subsectors of general government (central
government, state government, local governmentand social security funds) with the exception oftaxes, subsidies, investment grants and other capital transfers.
Current transfers within general government(D.73) do not include transactions on behalf ofanother unit; these are recorded only once in theaccounts, in the resources of the beneficiary unit
on whose behalf the transaction is made (see paragraph 1.78). This situation arises particularly whena government agency (e.g. a central government
department) collects taxes which are automaticallytransferred, in total or in part, to another government agency (e.g. a local authority). In such cases,
the tax receipts destined for the other government
agency are shown as if they were collected directlyby that agency and not as a current transfer within
general government. The solution applies especially in the case of taxes destined for another government agency which take the form of additional
rates superimposed on taxes levied by central government. Delays in remitting the taxes from thefirst to the second government unit give rise to
entries under ‘other accounts receivable/payable’in the financial account.
Transfers of tax receipts which form part of a blocktransfer from central government to another government agency are included in current transfers within general government. Such transfers do
not correspond to any specific category of taxes

European system of accounts — ESA 20104

and they are not made automatically but mainly
through certain funds (county and local authority
funds) in accordance with scales of apportionment
laid down by central government.
4.119 Time of recording: current transfers within gen-eral government are recorded at the time the regulations in force stipulate they are to be made.

4.120 Current transfers within general government arerecorded as uses and resources in the secondary
distribution of income account of the subsectors ofgeneral government. Current transfers within general government are flows internal to the general
government sector, and do not appear in a consolidated account for the sector as a whole.

Current international cooperation (D.74)
4.121 Definition:

current international cooperation(D.74) includes all transfers in cash or in kind
between general government and governments
or international organisations in the rest of theworld, except investment grants and other capitaltransfers.

4.122 Heading D.74 covers:(a) the contributions of the government to international organisations (excluding taxes payable by member governments to supranationalorganisations);(b) current transfers which general government
receive from the institutions or organisations referred to in point (a). Current transfers
which the institutions of the European Union
make directly to resident market producers arerecorded as subsidies paid by the rest of theworld;(c) current transfers between governments, either
in cash (e.g. payments intended to finance thebudget deficits of foreign countries or overseas territories) or in kind (e.g. counterpart ofgifts of food, military equipment, emergency
aid after natural disasters in the form of food,clothing, medicines, etc.);(d) wages and salaries paid by a government, an
institution of the European Union or an international organisation, to advisers or technical

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Distributive transactions

assistance experts made available to developing
countries.

Gifts of unwanted or used articles from households are not recorded as transfers;

Current international cooperation includes transfers between general government and internationalorganisations located in the country, as international organisations are not treated as resident
institutional units of the countries in which they
are located.

(c) assistance and grants from general government, other than transfers made for the specific purpose of financing capital expenditure,
which are shown under investment grants.

4.123 Time of recording: the time the regulations in force

stipulate the transfers are to be made in the case ofobligatory transfers, or the time the transfers are
made in the case of voluntary transfers.

4.124 Current international cooperation is recorded as:(a) uses and resources in the secondary distribution of income account of the general government sector;(b) uses and resources in the external account ofprimary incomes and current transfers.

Miscellaneous current transfers (D.75)
Current transfers to NPISHs (D.751)
4.125 Definition: current transfers to NPISHs include

all voluntary contributions (other than legacies),
membership subscriptions and financial assistancewhich NPISHs receive from households (including
non-resident households) and, to a lesser extent,
from other units.

4.126 Current transfers to NPISHs include the following:(a) regular subscriptions paid by households totrade unions and political, sporting, cultural,religious and similar organisations classified in
the sector NPISHs;(b) voluntary contributions (other than legacies)
from households, corporate enterprises and therest of the world to NPISHs, including transfers
in kind in the form of gifts of food, clothing,blankets, medicines, etc. to charities for distribution to resident or non-resident households.
Such treatment applies to consumption goods,
as transfers of large gifts (valuables treated as
non-financial assets) are recorded in other capital transfers (D.99) (see point (e) of paragraph4.165).

116

Excluded from current transfers to NPISHs are
payments of membership dues or subscriptions
to market NPIs serving businesses, such as chambers of commerce or trade associations, which aretreated as payments for services provided.
4.127 Time of recording: current transfers to NPISHs arerecorded at the time they are made.

4.128 Current transfers to NPISHs are recorded as:(a) uses in the secondary distribution of income
account of the contributing sectors;(b) uses in the external account of primary incomes
and current transfers;(c) resources in the secondary distribution ofincome account of the NPISHs sector.

Current transfers between households (D.752)
4.129 Definition: current transfers between households(D.752) consist of all current transfers in cash orin kind made, or received, by resident households
to, or from, other resident or non-resident households. In particular, they comprise remittances by
emigrants or workers permanently settled abroad(or working abroad for a period of a year or longer)
to members of their family living in their country of origin, or by parents to children in anotherlocation.

4.130 Time of recording: current transfers between

households are recorded at the time the transfers
occur.

4.131 Current transfers between households are recordedas:(a) uses and resources in the secondary distribution of income account of households;(b) uses and resources in the external account ofprimary incomes and current transfers.

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Distributive transactions

Other miscellaneous current transfers (D.759)
Fines and penalties
4.132 Definition: fines and penalties imposed on insti-

tutional units by courts of law or quasi-judicial
bodies are treated as other miscellaneous current
transfers (D.759).

4.133 The following are not included in other miscellane-ous current transfers (D.759):(a) fines and penalties imposed by tax authorities
for the evasion or late payment of taxes, whichcannot be distinguished from the taxes themselves and remain classified as taxes;(b) payments of fees to obtain licences, such payments being either taxes or payments for services provided by government units.
4.134 Time of recording: fines and penalties are recordedat the time the liabilities arise.

Lotteries and gambling
4.135 Definition: the amounts paid for lottery tickets orplaced in bets consist of two elements: the paymentof a service charge to the unit organising the lottery
or gambling and a residual current transfer that is
paid out to the winners.

The service charge may be substantial and covertaxes on the production of gambling services. The
transfers are regarded in the system as taking place
directly between those participating in the lottery
or gambling, that is, between households. Whennon-resident households take part significant net
transfers can arise between the households sector
and the rest of the world.
Time of recording: residual current transfers arerecorded at the time they are made.

Payments of compensation
4.136 Definition: payments of compensation consistof current transfers paid by institutional units toother institutional units in compensation for injury
to persons or damage to property, excluding payments of non-life insurance claims. Payments ofcompensation are compulsory payments awarded
by a court of law, or voluntary payments agreed out

European system of accounts — ESA 2010

4of court. This heading covers voluntary payments
made by government units or NPISHs in compensation for injuries or damage caused by natural disasters other than those classified as capitaltransfers.
4.137 Time of recording: payments of compensation arerecorded when they are made (voluntary payments)
or when they are due (compulsory payments).

4.138 Other forms of other miscellaneous current

transfers:(a) current transfers from NPISHs to general government which are not taxes;(b) payments by general government to public
enterprises classified as non-financial corporate and quasi-corporate enterprises intended
to cover abnormal pension charges;(c) travelling fellowships and awards paid to resident or non-resident households by general
government or NPISHs;(d) bonus payments on savings granted at intervals by general government to households inorder to reward them for their saving during
the period;(e) the refunds by households of expenditure
incurred on their behalf by social welfareorganisations;(f) current transfers from NPISHs to the rest of theworld;(g) sponsoring by corporations if those payments
cannot be regarded as purchases of advertisingor other services (for instance, transfers for agood cause, or scholarships);(h) current transfers from general government tohouseholds in their capacity as consumers, if
not recorded as social benefits;(i) the counterpart transfer from the central bankto MFIs (S.122 and S.125) to cover the intermediate consumption of the non-directly allocated part of the output of the central bank (seeChapter 14: FISIM).
4.139 Time of recording: the transfers listed in 4.138 arerecorded when they are made, except those from or

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Distributive transactions

to general government, which are recorded when
they are due.
Other miscellaneous current transfers appear as:(a) resources and uses in the secondary distribution of income account of all sectors;(b) resources and uses in the external account ofprimary incomes and current transfers.

4.142 Since households are treated in the financial

accounts and balance sheets of the system as owning the pension entitlements, an adjustment item
is necessary to ensure that any excess of pension
contributions over pension receipts does not affecthousehold saving.

VAT- and GNI-based EU own resources(D.76)In order to neutralise this effect, an adjustment
equal to:4.140 Definition: the VAT- and GNI-based third andthe total value of actual and imputed social contributions in respect of pensions payable into pension
schemes in which households have a definite claim

fourth EU own resources (D.76) are current
transfers paid by the general government of each
Member State to the institutions of the European
Union.

The VAT-based third EU own resource (D.761)
and the GNI-based fourth EU own resource(D.762) are contributions to the budget of theUnion institutions. The level of the contribution ofeach Member State is based on the levels of their
VAT base and their GNI.
The heading D.76 also includes miscellaneous nontax contributions of the government to the institutions of the European Union (D.763).
Time of recording: VAT- and GNI-based third andfourth own resources are recorded when they are
due to be paid.
VAT- and GNI-based third and fourth own
resources are recorded as:(a) uses in the secondary distribution of income
account of general government;(b) resources in the external account of primary
incomes and current transfers.

Adjustment for the change in pension
entitlements (D.8)
4.141 Definition: the adjustment for the change in pen-sion entitlements (D.8) represents the adjustment
needed to make appear in the saving of households
the change in the pension entitlements on whichhouseholds have a definite claim. The pension

118

entitlement change comes from contributions andbenefits recorded in the secondary distribution ofincome account.

plus	
the total value of contribution supplements payable out of property
income attributed to pension schemes
beneficiaries
minus

the value of associated service charges

minus	the total value of pensions paid out associal insurance benefits by pension
schemesis added to the disposable income, or adjusted disposable income, of households in the use of income
accounts before arriving at saving.
In this way, the saving of households is the same as
it would be had pension contributions and pension
receipts not been recorded as current transfers inthe secondary distribution of income account. Thisadjustment item is necessary in order to reconcile
the saving of households with the change in theirpension entitlements recorded in the financial
account of the system. Opposite adjustments are,of course, needed in the use of income accounts of
the units responsible for paying pensions.
4.143 Time of recording: the adjustment is recorded

according to the timing of the flows which compose it.

4.144 The adjustment for the change in pension entitle-

ments is recorded as:(a) uses in the use of income accounts of the sectors in which the units responsible for paying
pensions are classified;

European system of accounts — ESA 2010

Distributive transactions(b) uses in the external account of primary incomes
and current transfers (in the case of non-resident institutions);(c) resources in the use of income accounts of thehouseholds sector;(d) resources in the external account of primary
incomes and current transfers (in the case of
non-resident households).

Capital transfers (D.9)
4.145 Definition: capital transfers require the acquisi-

Capital taxes (D.91)
4.148 Definition: capital taxes (D.91) consist of taxes lev-

ied at irregular and very infrequent intervals on thevalues of the assets or net worth owned by institutional units or on the values of assets transferred
between institutional units as a result of legacies,
gifts between persons, or other transfers.

4.149 Capital taxes (D.91) include:(a) taxes on capital transfers: inheritance taxes,
death duties and taxes on gifts between persons,which are levied on the capital of the beneficiaries. Taxes on sales of assets are not included;

tion or disposal of an asset, or assets, by at least oneof the parties to the transaction. Whether madein cash or in kind, they result in a commensuratechange in the financial, or non-financial, assets
shown in the balance sheets of one or both parties
to the transaction.

(b) capital levies: occasional and exceptional levies
on assets or net worth owned by institutional
units. These include betterment levies, that istaxes on the increase in the value of agriculturalland due to planning permission to develop theland for commercial or residential purposes.

4.146 A capital transfer in kind consists of the transfer ofTaxes on capital gains are not recorded as capitaltaxes, but as current taxes on income, wealth, etc.

ownership of an asset (other than inventories andcash), or the cancellation of a liability by a creditor,
without any counterpart being received in return.
A capital transfer in cash consists of the transfer
of cash that the first party has raised by disposingof an asset, or assets (other than inventories), orthat the second party is expected, or required, touse for the acquisition of an asset, or assets (otherthan inventories). The second party, the recipient,
is obliged to use the cash to acquire an asset, or
assets, as a condition on which the transfer is made.
The transfer value of a non-financial asset is valued according to the estimated price at which theasset, whether new or used, could be sold on themarket plus any transport, installation or othercosts of ownership transfer incurred by the donor
but excluding any such charges incurred by therecipient. Transfers of financial assets are valued in
the same way as other acquisitions or disposals offinancial assets or liabilities.

4.147 Capital transfers include capital taxes (D.91),

investment grants (D.92) and other capital transfers (D.99).

European system of accounts — ESA 2010

44.150 Taxes recorded in the accounts come from twosources: amounts evidenced by assessments anddeclarations, or cash receipts.

(a) If assessments and declarations are used, theamounts are adjusted by a coefficient reflecting
assessed and declared amounts never collected.
As an alternative treatment, a capital transfer
to the relevant sectors is recorded equal to thesame adjustment. The coefficients are estimatedon the basis of past experience and current
expectations in respect of assessed and declaredamounts never collected. They are specific todifferent types of taxes;(b) If cash receipts are used, they are time-adjusted
so that the cash is attributed to when the activity took place to generate the tax liability, or if
this is not known, when the amount of tax wasdetermined. This adjustment is based on the
average time difference between the activity (orthe determination of the amount of tax) andcash tax receipt.
4.151 Capital taxes are recorded as:

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Distributive transactions(a) changes in liabilities and net worth (-) in thecapital account of the sectors in which the taxpayers are classified;(b) changes in liabilities and net worth (+) in thecapital account of general government;(c) changes in liabilities and net worth in the capital account of the rest of the world.

Investment grants (D.92)
4.152 Definition: investment grants (D.92) consist ofcapital transfers in cash or in kind made by governments or by the rest of the world to other resident
or non-resident institutional units to finance all orpart of the costs of their acquiring fixed assets.
Investment grants made by the rest of the world
include those paid directly by the institutions of
the European Union (e.g. transfers made by theEuropean Agriculture Guarantee Fund (EAGF)
and the European Agricultural Fund for Rural
Development (EAFRD)).

4.153 Investment grants in kind consist of transfers oftransport equipment, machinery and other equipment by governments to other resident or non-resident units and also the direct provision of buildings or other structures for resident or non-resident units.

4.154 The value of capital formation carried out by general

government for the benefit of other sectors of theeconomy is recorded as investment grants whenever the beneficiary is identifiable and becomes theowner of the capital. In such cases, the capital formation is recorded as changes in assets in the capital account of the beneficiary and is financed by aninvestment grant which is recorded as changes inliabilities and net worth in the same account.

4.155 Investment grants (D.92) include both lump sum

payments designed to finance capital formation
during the same period, and instalment payments
in respect of capital formation carried out during
an earlier period. Those parts of the annual payments by general government to enterprises which
represent the amortisation of debts of enterprises
undertaken for the purpose of government capital formation projects are treated as investment
grants.

120

4.156 Grants for interest relief made by general govern-

ment are excluded from investment grants. The
assumption by public authorities of part of theinterest charges is a current distributive transaction. Nevertheless, when a grant serves the dual
purpose of financing the amortisation of the debt
contracted and the payment of the interest on thecapital borrowed, and when it is not possible toseparate these two elements, the whole of the grantis treated in the accounts as an investment grant.

4.157 Investment grants to non-financial corporate andquasi-corporate enterprises include, in addition to
grants to private enterprises, capital grants to public enterprises recognised as institutional units,provided that the government department whichmakes the grant does not retain a claim against the
public enterprise.

4.158 Investment grants to the households sector include

equipment and modernisation grants to businesses
other than corporate or quasi-corporate enterprises and grants to households for the construction, purchase and improvement of dwellings.

4.159 Investment grants to general government include

payments (except grants for interest relief) madeto subsectors of general government for the purpose of financing capital formation. Investment
grants within general government are flows internal to the general government sector and do notappear in a consolidated account for the sector as
whole. Examples of investment grants within general government are transfers from central government to local government for the specific purpose of financing their gross fixed capital formation. Transfers intended for various indeterminate
purposes are recorded as current transfers within
general government, even if they are used to cover
expenditure on capital formation.

4.160 Investment grants to non-profit institutions fromgeneral government and from the rest of the world
are distinguished from current transfers to nonprofit institutions by using the criteria set out inparagraph 4.159.

4.161 Investment grants to the rest of the world are

restricted to transfers with the specific objective offinancing capital formation by non-resident units.
They include, for example, unrequited transfers
for the construction of bridges, roads, factories,

European system of accounts — ESA 2010

Distributive transactions

hospitals or schools in developing countries, or forconstructing buildings for international organisations. They may comprise instalment payments
over a period of time as well as single payments.
This heading also covers the supply of fixed capital
goods free of charge or at a reduced value.
4.162 Time of recording: investment grants in cash arerecorded when the payment is due to be made.
Investment grants in kind are recorded when theownership of the asset is transferred.

4.163 Investment grants are recorded as:(a) changes in liabilities and net worth (-) in thecapital account of general government;(b) changes in liabilities and net worth (+) in thecapital account of the sectors receiving the
grants;(c) changes in liabilities and net worth in the capital account of the rest of the world.

Other capital transfers (D.99)
4.164 Definition: other capital transfers (D.99) covertransfers other than investment grants and capitaltaxes which do not themselves redistribute income
but redistribute saving or wealth among the different sectors or subsectors of the economy or the
rest of the world. They can be made in cash or kind(cases of debt assumption or debt cancellation) andcorrespond to voluntary transfers of wealth.

4.165 Other capital transfers (D.99) include the following

transactions:(a) payments by general government or by therest of the world to the owners of capital goods
destroyed or damaged by acts of war, otherpolitical events or natural disasters (floods etc.);(b) transfers from general government to nonfinancial corporate and quasi-corporate enterprises to cover losses accumulated over several financial years or exceptional losses fromcauses beyond the control of the enterprise(even in the case of a capital injection);(c) transfers between subsectors of general government designed to cover unexpected expenditure or accumulated deficits. Such transfers

European system of accounts — ESA 2010

4

between subsectors of general government areflows within the general government sector anddo not appear in a consolidated account for thesector as a whole;(d) non-recurrent bonus payments on savings
granted by general government to households
to reward them for their savings carried out
over a period of several years;(e) legacies, large gifts between persons, and donations between units belonging to different sectors, including legacies or large gifts to nonprofit institutions (NPIs). Examples of gifts to
NPIs are gifts to universities to cover the costsof building new residential colleges, libraries,
laboratories, etc.;(f) the counterpart transaction of cancellation ofdebts by agreement between institutional units
belonging to different sectors or subsectors (forexample, the cancellation by the government ofa debt owed to it by a foreign country; payments
in fulfilment of guarantees which free defaulting debtors from their obligations) — except
the particular case of taxes and social contributions payable to the general government sector (see point (j)). Such cancellations by mutual
agreement are treated as a capital transfer fromthe creditor to the debtor equal to the value ofthe outstanding debt at the time of cancellation.
Likewise the counterpart transaction of debt
assumption, and of other similar transactions(activation of guarantees related to non-standardised guarantee schemes, or debt rescheduling where part of debt is extinguished or transferred), is another capital transfer. However,the following are excluded:(1) cancellation of financial claims against andassumption of liabilities from quasi-corporations
by the owner of the quasi-corporation. This caseis treated as a transaction in equity and investment
fund shares (F.5);(2) debt cancellation against and debt assumption
from a public corporation by government which
disappears as an institutional unit in the system.
This case is recorded in the other changes in thevolume of assets account (K.5);(3) debt cancellation against and debt assumption
from a public corporation by government as apart of an ongoing process of privatisation to beachieved in a short-term perspective. This case is

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Distributive transactions

treated as a transaction in equity and investment
fund shares (F.5).

The writing-off of debt is not a transaction
between institutional units and therefore is notrecorded in either the capital account or thefinancial account. If the creditor decides sucha write-off, it is recorded in the other changes
in the volume of assets accounts of the creditor and the debtor. Provisions for bad debt aretreated as book-keeping entries that are internal
to the institutional producer unit and are notrecorded except in the case of expected losses
on non-performing loans, which are recorded
as memorandum items in the balance sheets.
The unilateral repudiation of debt by a debtor
is also not a transaction and is not recorded;(g) that part of realised capital gains (or losses)
which is redistributed to another sector, as, forexample, capital gains redistributed by insurance companies to households. However, thecounterpart transactions of transfers to general
government of the proceeds of privatisation
made indirectly (through a holding company
for example) are recorded as financial transactions in equity and investment fund shares (F.5)
and have no impact on the level of net lending/
net borrowing of the general government;(h) major payments in compensation for damage or injuries not covered by insurance policies (except payments by general governmentor by the rest of the world described in point(a)). The payments are awarded by courts oflaw or settled out of court. Examples are payments of compensation for damage caused bymajor explosions, oil spillages, the side-effects
of drugs, etc.;(i) extraordinary payments into social insurance
funds made by employers (including government) or by government (as part of its social
function), in so far as these payments aredesigned to increase the actuarial reserves ofthese funds. The accompanying adjustment
from social insurance funds to households isalso recorded as other capital transfers (D.99);(j) when taxes and social contributions payable to
the general government sector are recorded on
the basis of assessments and declarations, thepart unlikely to be collected is neutralised in the122same accounting period. This is done by recording an ‘other capital transfer’ (D.99), as an entry
under D.995, between general government andthe relevant sectors. This D.995 flow is subdivided according to the coding of the different
taxes and social contributions concerned;(k) insurance settlements in the wake of a catastrophe: following a catastrophe, the total valueof the claims related to the catastrophe, as
obtained from insurance industry information,is recorded as a capital transfer from the insurance corporations to the policy holders. When
information on claims related to the catastrophe cannot be provided by the insurance
industry, the catastrophe-related claims are
estimated as the difference between the actual
claims and the adjusted claims in the period of
the catastrophe;(l) community built assets where responsibility for
maintenance is then assumed by government.
4.166 Time of recording is determined as follows:(a) other capital transfers in cash are recorded
when the payment is due to be made;(b) other capital transfers in kind are recorded
when the ownership of the asset is transferredor the liability cancelled by the creditor.
4.167 Other capital transfers are shown among changes

in liabilities and net worth in the capital account ofsectors and of the rest of the world.

Employee stock options (ESOs)
4.168 A particular form of income in kind is the prac-

tice of an employer giving an employee the option
to buy stocks (shares) at a specified price at somefuture date. An ESO is similar to a financial derivative and the employee may choose not to exercise
the option, either because the share price is now
lower than the price at which he can exercise theoption or because he has left the employ of that
employer and so forfeits his option.

4.169 Typically an employer informs his employees of thedecision to make a stock option available at a given
price (the strike price or exercise price) after a certain time under certain conditions (for example,

European system of accounts — ESA 2010

Distributive transactions

that the employee is still in the enterprise’s employ,or conditional on the performance of the enterprise). The time of recording of the employee stock
option in the national accounts has to be carefully
specified. The ‘grant date’ is when the option is provided to the employee, the ‘vesting date’ is the earliest date when the option can be exercised, and the‘exercise date’ is when the option is actually exercised (or lapses).

4.174 The costs of administering ESOs are borne by the

4.170 The International Accounting Standards Board

income, there is no investment income associatedwith ESOs.

(IASB) accounting recommendations are that theenterprise derives a fair value for the options at
grant date by taking the strike price of the sharesat that time multiplied by the number of options
expected to be exercisable at vesting date divided
by the number of service years expected to be provided until the vesting date.

4.171 In the ESA, if there is neither an observable market

price nor an estimate made by the corporation inline with the recommendations just given, the valuation of the options may be estimated using a stock
options pricing model. Such models aim to capture
two effects in the value of the option. The first effectis a projection of the amount by which the market
price of the shares in question will exceed the strikeprice at the vesting date. The second effect allows
for the expectation that the price will rise further
between the vesting date and exercise date.

4.172 Before the option is exercised, the arrangement

between the employer and employee has the natureof a financial derivative and is shown as such in thefinancial accounts of both parties.

4.173 An estimate of the value of the ESO is to be made at

grant date. This amount must be included as part ofcompensation of employees spread over the period

European system of accounts — ESA 2010

4

between the grant date and vesting date, if possible.
If this is not possible, the value of the option has tobe recorded at vesting date.
employer and are treated as part of intermediate
consumption just as any other administrative functions associated with compensation of employees.

4.175 Although the value of the stock option is treated as

4.176 In the financial account, the acquisition of ESOs

by households matches the corresponding part ofcompensation of employees with a matching liability of the employer.

4.177 In principle, any change in value between the

grant date and vesting date is to be treated as partof compensation of employees while any change
in value between vesting date and exercise date is
not treated as compensation of employees but as aholding gain or loss. In practice, it is most unlikelythat estimates of the costs of ESOs to the employers
are revised between grant date and exercise date.
For pragmatic reasons, therefore, the whole ofthe increase between grant date and exercise dateis treated as a holding gain or loss. An increase invalue of the share price above the strike price is aholding gain for the employee and a holding loss
for the employer and vice versa.

4.178 When an ESO is exercised, the entry in the balance

sheet disappears and is replaced by the value of thestocks (shares) acquired. This change in classification takes place via transactions in the financial
account and not via the other changes in the volume of assets account.

123Financial transactions

5

CHAPTER 5
Financial transactions
5.01

5.02

Definition: financial transactions (F) are transactions in financial assets (AF) and liabilities between
resident institutional units, and between them andnon-resident institutional units.

5.06

Definition: liabilities are established when a debtor
is obliged to provide a payment or a series of payments to a creditor.

5.07

The gold bullion component of monetary gold,
held by monetary authorities as a reserve asset, istreated as a financial asset even if a holder does nothave claims on other designated units. There is nomatching liability for gold bullion.

A financial transaction between institutional units
is a simultaneous creation or liquidation of a financial asset and the counterpart liability, or a change
in ownership of a financial asset, or an assumptionof a liability.

Contingent assets and contingent liabilities

General features of financialtransactions

5.08

As they do not give rise to unconditional obligations, contingent assets and contingent liabilities
are not considered as financial assets and liabilities.

Financial assets, financial claims, andliabilities
5.03

5.04

5.05

Definition: financial assets consist of all financial
claims, equity and the gold bullion component ofmonetary gold.
Financial assets are stores of value representing
a benefit or series of benefits accruing to an economic owner by holding or using the assets overa period of time. They are a means of carrying
forward values from one accounting period toanother. Benefits are settled through payments,
which are typically currency (AF.21) and transferable deposits (AF.22).
Definition: a financial claim is the right of a creditor to receive a payment or series of payments froma debtor.
Financial claims are financial assets that have corresponding liabilities. Equity and investment fundshares or units (AF.5) are treated as a financial
asset with a corresponding liability even though
the claim of the holder on the corporation is not a
fixed amount.

European system of accounts — ESA 2010

Definition: contingent assets and contingent liabilities are agreements whereby one party is obliged toprovide a payment or series of payments to anotherunit only where certain specific conditions prevail.

5.09

Contingent assets and contingent liabilities
include:(a) one-off guarantees of payment by third parties since payment is only required if the debtor
defaults;(b) loan commitments providing a guarantee thatfunds will be made available but no financial
asset exists until funds are actually advanced;(c) letters of credit which constitute promises tomake a payment conditional upon the presentation of certain documents specified by acontract;(d) lines of credit which are promises to make loans
to a specified customer up to a specified limit;(e) underwritten note issuance facilities (NIFs)
providing a guarantee that a potential debtor
will be able to sell short-term debt securities
known as notes, and that the bank issuing thefacility will take up any notes not sold on the

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Financial transactions

market or will provide equivalent advances;and(b) standardised guarantees are issued in large
numbers, usually for fairly small amounts.
Examples are export credit guarantees or student loan guarantees. Even though the degreeof probability of any one standardised guarantee being called is uncertain, the fact that there
are many similar guarantees means that a reliable estimate of the number of calls under theguarantee can be made. Standardised guarantees are treated as giving rise to financial assets
and not contingent assets;(f) pension entitlements under unfunded government defined benefit employer pension
schemes or social security pension funds. Suchpension entitlements are recorded in the supplementary table on accrued-to-date pension
entitlements in social insurance, and not in thecore accounts.
5.10

Contingent assets and contingent liabilities do notinclude:(c) one-off guarantees, where the associated risk
cannot be calculated with any degree of accuracy, due to a lack of comparable cases. The
granting of a one-off guarantee is considered acontingent asset or a contingent liability and is
not recorded as a financial asset or a liability.

(a) reserves of insurance, pension and standardised guarantee schemes (AF.6);(b) financial derivatives (AF.7) where the arrangements themselves have a market value because
they are tradable or can be offset on the market.
5.11

Although contingent assets and contingent liabilities are not recorded in the accounts, they areimportant for policy and analysis, and information on them needs to be collected and presented
as supplementary data. Even though no payments
may turn out to be due for contingent assets andcontingent liabilities, a high level of contingencies
may indicate an undesirable level of risk on thepart of those units offering them.

Categories of financial assets and liabilities
5.12

Box 5.1 —Treatment of guarantees in the system

the guarantor undertakes to a lender that if a borrower defaults, the guarantor will make good theloss the lender would otherwise suffer.

B5.1.2. Three different types of guarantees are distin-

126

Monetary gold and special drawing rights;

AF.2

Currency and deposits;

AF.3

Debt securities;

AF.4

Loans;

AF.5

Equity and investment fund shares or units;

AF.7 Financial derivatives and employee stock
options;
AF.8

Other accounts receivable/payable.

5.13

Each financial asset has a counterpart liability,with the exception of the gold bullion componentof monetary gold held by monetary authorities
as a reserve asset classified in the category monetary gold and special drawing rights (F.1). With
this exception, eight categories of liabilities are distinguished corresponding to the categories of thecounterpart financial assets.

5.14

The classification of financial transactions corresponds to the classification of financial assets andliabilities. Eight categories of financial transactions
are distinguished relating to:guished. These apply only to guarantees provided
in the case of financial assets. No special treatment
is proposed for guarantees in the form of manufacturers’ warrantees or other forms of guarantee. The
three types of guarantee are:(a) guarantees provided by means of a financial
derivative, such as a credit default swap. Suchderivatives are based on the risk of default ofreference financial assets and are not linked toindividual loans or debt securities;

AF.1

AF.6 Insurance, pension and standardised guarantee schemes;

B5.1.1. Definition: guarantees are arrangements whereby

Often a fee is payable for the provision of a guarantee.

Eight categories of financial assets are distinguished:

European system of accounts — ESA 2010

Financial transactions

F.1

monetary gold and special drawing rights;

F.2

currency and deposits;

F.3

debt securities;

F.4

loans;

F.5

equity and investment fund shares or units;

F.6 insurance, pension and standardised guarantee schemes;
F.7 
financial derivatives and employee stock
options;
F.8
5.15

liabilities, is net lending (+) or net borrowing (-)(B.9F).
5.18

5.19

Financial transactions are recorded at transaction values, that is, the values in national currency at which the financial assets and/or liabilities involved are created, liquidated, exchanged orassumed between institutional units, on the basisof commercial considerations.

5.20

Financial transactions and their financial or nonfinancial counterpart transactions are recordedat the same transaction value. There are threepossibilities:(a) the financial transaction gives rise to a payment
in national currency: the transaction value isequal to the amount exchanged;

Balance sheets, financial account, andother flows
5.16

5.17

The financial assets held and the liabilities outstanding at a particular point in time are recordedin the balance sheet. Financial transactions resultin changes between opening and closing balance
sheets. However, changes between the opening
balance sheet and the closing balance sheet arealso due to other flows, which are not interactions
between institutional units by mutual agreement.
Other flows related to financial assets and liabilities are broken down into revaluations in financial assets and liabilities, and changes in the volume
of financial assets and liabilities not due to financial transactions. Revaluations are recorded in therevaluation account and changes in volume in theother changes in the volume of assets account.
The financial account is the final account in thesequence of accounts that record transactions. The
financial account does not have a balancing itemthat is carried forward to another account. The balancing item of the financial account, the net acquisitions of financial assets less net incurrence ofEuropean system of accounts — ESA 2010

The balancing item of the financial account is conceptually identical to the balancing item of the capital account. In practice, a discrepancy is usuallyfound between them because they are calculatedon the basis of different statistical data.

Valuationother accounts receivable/payable.

Given the symmetry of financial claims and liabilities, the term ‘instrument’ is used to relate toboth the asset and the liability aspect of financialtransactions. Its use does not imply an extensionof the coverage of financial assets and liabilities by
including off-balance sheet items which are sometimes described as financial instruments in monetary and financial statistics.

5(b) the financial transaction is a transaction in foreign currency and the counterpart transaction is not a transaction in national currency:
the transaction value is equal to the amount innational currency at the market rate prevailingwhen the payment takes place; and(c) neither the financial transaction nor its counterpart transaction is a transaction in cash or
via other means of payment: the transaction
value is the current market value of the financial assets and/or liabilities involved.
5.21

The transaction value refers to a specific financialtransaction and its counterpart transaction. In concept, the transaction value is to be distinguishedfrom a value based on a price quoted on the market,
a fair market price, or any price that is intended toexpress the generality of prices for a class of similar
financial assets and/or liabilities. However, in cases
where the counterpart transaction of a financialtransaction is, for example, a transfer and therefore the financial transaction may be undertaken
other than for purely commercial considerations,the transaction value is identified with the current

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Financial transactions

market value of the financial assets and/or liabilities involved.
5.22

The transaction value does not include service
charges, fees, commissions, or similar payments
for services provided in carrying out the transactions; such items are to be recorded as payments
for services. Taxes on financial transactions arealso excluded and are treated as taxes on services
within taxes on products. When a financial transaction involves a new issue of liabilities, the transaction value is equal to the amount of the liability
incurred, excluding any prepaid interest. Similarly,
when a liability is extinguished, the transaction
value for both creditor and debtor must correspond to the reduction of the liability.

of subsectors. The financial account of the rest of
the world is consolidated by definition since onlytransactions of the non-resident institutional units
with resident institutional units are recorded.
5.26

Different levels of consolidation are appropriate for different types of analysis. For example, consolidation of the financial account for the
total economy emphasises the economy’s financial transactions with non-resident institutional
units since all financial transactions between resident institutional units are netted on consolidation. Consolidation for sectors permits the tracing of overall financial transactions between sectors with net lending and those with net borrowing. Consolidation at the subsector level for financial corporations can provide much more detailon financial intermediation and allow, for example, the identification of monetary financial institutions’ transactions with other financial corporations as well as with other resident sectors andwith non-resident institutional units. Another area
where consolidation can be instructive at the subsector level is within the general government sector, since transactions between the various subsectors of government are not eliminated.

5.27

As a rule, the accounting entries in the ESA 2010
are not consolidated, as a consolidated financial
account requires information on the counterpart
grouping of institutional units. This requires financial transaction data on a from-whom-to-whombasis. For example, the compilation of consolidated general government liabilities requires a distinction to be made, among the holders of general
government liabilities, between general government and other institutional units.

Net and gross recording
5.23

Definition: net recording of financial transactions
means that acquisitions of financial assets areshown net of disposals of financial assets, and that
incurrences of liabilities are shown net of repayments of liabilities.
Financial transactions may be represented net
across financial assets with different characteristics
and with different debtors or creditors, provided
they are within the same category or subcategory.

5.24

Definition: gross recording of financial transactions
means that acquisitions and disposals of financial
assets are shown separately, as are incurrences andrepayments of liabilities.
Gross recording of financial transactions shows thesame amount of net lending and net borrowing as
if financial transactions were recorded net.
Financial transactions are to be recorded gross incases of detailed financial market analyses.

Netting
5.28

Definition: netting is the consolidation at the levelof a single institutional unit whereby accounting
entries on both sides of the account for the sametransaction item are offset against one another.
Netting is to be avoided unless source data arelacking.

5.29

Various degrees of netting can be distinguished astransactions in liabilities are subtracted from transactions in financial assets for the same financial
asset category or subcategory.

Consolidation
5.25

Definition: consolidation in the financial accountrefers to the process of offsetting transactions infinancial assets for a given group of institutional
units against the counterpart transactions in liabilities for the same group of institutional units.
Consolidation can be performed at the level ofthe total economy, of institutional sectors, and128European system of accounts — ESA 2010

Financial transactions

5.30

5.31

When a department of an institutional unit purchases bonds issued by another department of thesame institutional unit, the financial account of theunit does not record the transaction as the acquisition of a claim by one department on another.
The transaction is recorded as a redemption of liabilities rather than an acquisition of consolidating assets. Such financial instruments are viewed
as netted. Netting is to be avoided if it is necessary to keep the financial instrument on both theasset side and the liability side to follow the legal
presentation.
Netting may be unavoidable for transactions of an
institutional unit in financial derivatives, whereseparate data on transactions in assets and liabilities are usually not available. It is appropriate to net
these transactions because the value of a position in
financial derivatives may switch sign, i.e. to change
from an asset to a liability position, as the value ofthe instrument ‘underlying’ the derivative contractchanges in relation to the price in the contract.

transaction is not a financial transaction, net lending/net borrowing of the institutional units willchange.

A financial transaction with a current or acapital transfer as counterpart
5.36

The counterpart transaction of a financial transaction may be a transfer. In this case, the financial transaction involves a change in ownership ofa financial asset, or an assumption of a liability as
debtor, known as debt assumption, or the simultaneous liquidation of a financial asset and the counterpart liability, known as debt cancellation or debt
forgiveness. Debt assumption and debt cancellation are capital transfers (D.9) and recorded in thecapital account.

5.37

If the owner of a quasi-corporation assumes liabilities from or cancels financial claims against thequasi-corporation, the counterpart transaction ofdebt assumption or debt cancellation is a transaction in equity (F.51). However, if the operation isintended to cover accumulated losses or an exceptionally large loss, or is made in the context of persistent losses, then the operation is classified as a
non-financial transaction — a capital transfer or acurrent transfer.

5.38

If government cancels or assumes debt from a public corporation which disappears as an institutional
unit in the system, no transaction is recorded in
the capital account or the financial account. In thiscase a flow is recorded in the other changes in thevolume of assets account.

5.39

If government cancels or assumes debt from a public corporation as part of a process of privatisation
to be achieved in the short term, the counterparttransaction is a transaction in equity (F.51) up to
the total of privatisation receipts. In other words,
the government, by cancelling or assuming debt
of the public corporation, is considered to be temporarily increasing its equity in the corporation.
Privatisation means the giving up of control overthat public corporation by the disposal of equity.
Such a cancellation of debt or debt assumption
leads to an increase of the own funds of the public corporation, even in the absence of an issue ofequity.

Accounting rules for financial transactions
5.32

5.33

Quadruple-entry is an accounting practice inwhich each transaction involving two institutional
units is recorded twice by each unit. For example
businesses exchanging goods for cash will resultin entries in both the production account and thefinancial account for each unit. Quadruple-entry
accounting ensures symmetry of reporting by theinstitutional units involved, and so consistency inthe accounts.
A financial transaction always has a counterparttransaction. This counterpart may be anotherfinancial transaction or a non-financial transaction.

5.34

Where a transaction and its counterpart are bothfinancial transactions, they change the portfolio offinancial assets and liabilities and they may change
the totals of both financial assets and liabilities of
the institutional units, but they do not change net
lending/net borrowing or net worth.

5.35

The counterpart of a financial transaction may
be a non-financial transaction such as a transaction in products, a distributive transaction, or atransaction in non-financial non-produced assets.
Where the counterpart transaction of a financial

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5

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Financial transactions

5.40

The writing-off or writing-down of bad debts bycreditors and the unilateral cancellation of a liability by a debtor, known as debt repudiation, are nottransactions because they do not involve interactions between institutional units by mutual agreement. The writing-off or writing-down of bad debts
by creditors is recorded in the other changes in thevolume of assets account.

A financial transaction with property
income as counterpart
5.41

The counterpart transaction of a financial transaction may be property income.

5.42

Interest (D.41) is receivable by creditors and payable by debtors of certain kinds of financial claims
classified in the monetary gold and special drawing
rights (AF.1), currency and deposits (AF.2), debt
securities (AF.3), loans (AF.4) and other accounts
receivable/payable (AF.8) categories.

5.43

130

Interest is recorded as accruing continuously overtime to the creditor on the amount of principal
outstanding. The counterpart transaction of an
entry in interest (D.41) is a financial transaction
creating a financial claim of the creditor against the
debtor. The accumulation of interest is recorded in
the financial account with the financial instrument
to which it relates. The effect of this financial transaction is that interest is reinvested. The actual payment of interest is not recorded as interest (D.41),
but as a transaction in currency and deposits (F.2)
matched by an equivalent repayment of the relevant asset reducing the net financial claim of thecreditor against the debtor.

5.44

When accrued interest is not paid when due, it
gives rise to interest arrears. As it is the accrued
interest which is recorded, interest arrears do notchange the total of financial assets or liabilities.

5.45

Income of corporations comprises dividends(D.421), withdrawals of income from quasi-corporations (D.422), reinvested earnings on foreign
direct investment, (D.43) and retained earnings ofdomestic enterprises. The effect of the counterpart
financial transaction in the case of reinvested earnings is that the property income is reinvested in the
direct investment enterprise.

5.46

Dividends are recorded as investment income at
the time the shares start to be quoted ex-dividend.
This also applies to withdrawals of income fromquasi-corporations. A different recording is madefor extraordinarily large dividends or withdrawals that are out of line with recent experience of
the amount of income available for distribution tothe owners of the corporation. Such excess distribution is recorded as a withdrawal of equity in thefinancial account and not as investment income.

5.47

Property income receivable by investment funds,
net of a part of management costs, and assigned toshareholders, even though it is not distributed, isrecorded in property income with a counterpart
entry in the financial account under investment
fund shares or units. The effect is that the income
assigned to shareholders but not distributed istreated as reinvested in the fund.

5.48

Investment income is attributed to insurance policy holders (D.44), holders of pension entitlements,and holders of investment fund shares. Regardlessof the amount actually distributed by the insurance
corporation, pension fund or investment fund, thefull amount of investment income received by the
insurance corporation or fund is recorded as distributed to the policy holders or holders of shares.
The amount not actually distributed is recorded in
the financial account as reinvestment.

Time of recording
5.49

Financial transactions and their counterpart transactions are recorded at the same point in time.

5.50

When the counterpart of a financial transaction isa non-financial transaction, both are recorded at
the time the non-financial transaction takes place.
For example, when sales of goods or services giverise to a trade credit, this financial transaction is tobe recorded when the entries are made in the relevant non-financial account, when the ownershipof the goods is transferred or when the service isprovided.

5.51

When the counterpart of a financial transaction is afinancial transaction, there are three possibilities:(a) both financial transactions are transactions
in cash or other means of payment: they arerecorded at the time the first payment is made;European system of accounts — ESA 2010

Financial transactions(b) only one of the two financial transactions is atransaction in cash or other means of payment:
they are recorded at the time payment is made;andthree dimensions: the financial instrument category, the sector of the debtor, and the sector of
the creditor. A from-whom-to-whom financial
account requires three-dimensional tables covering the breakdowns by financial instrument, debtor
and creditor. Such tables show the financial transactions cross-classified by debtor sector and creditor sector as shown in Table 5.1.

(c) neither of the two financial transactions is atransaction in cash or other means of payment:
they are recorded at the time the first financialtransaction takes place.
5.54

A from-whom-to-whom financial account
5.52

The from-whom-to-whom financial account or thefinancial account by debtor/creditor is an extension of the non-consolidated financial account.
It is a three dimensional presentation of financialtransactions where both parties to a transaction are
shown, as well as the nature of the financial instrument being transacted.
This presentation provides information on debtor/
creditor relationships and is consistent with afrom-whom-to-whom financial balance sheet. No
information is provided on the institutional units
to whom financial assets were sold or from whom
financial assets were bought. This also applies tocorresponding transactions in liabilities. The fromwhom-to-whom financial account is also known as
the flow of funds matrix.

5.53

Based on the principle of quadruple-entry accounting a from-whom-to-whom financial account has

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5

The table for the financial instrument debt securities category shows that, as a result of transactions in the reference period, the debt securities
acquired, net of disposals, by households and by
non-profit institutions serving households (275)represent claims on non-financial corporations(65), financial corporations (43), general government (124), and the rest of the world (43). The tableshows that, as a result of transactions in the reference period, non-financial corporations incurred,
net of redemptions, liabilities in the form of debt
securities of 147: their liabilities in this form toother non-financial corporations increased by 30,
to financial corporations by 23, to general government by 5, to households and non-profit institutions serving households by 65 and to the rest of
the world by 24. No debt securities were issued
by households and non-profit institutions serving
households. Because of the consolidated presentation of the rest of the world, no transactions areshown between non-resident institutional units.
Similar tables can be compiled for all financial
instrument categories.

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Financial transactions

Table 5.1 — A from-whom-to-whom financial account for debt securities
Net incurrence of debt securities byDebtor sector

Creditor sector

Netacquisitionof debt
securities by

5.55

Non-financial
Financial
GeneralHouseholds
corporations corporations government and non-profit
institutions
serving
households

Rest ofthe world

Total

Non-financial
corporations

30

11

67

108

34

142

Financialcorporations

23

22

25

70

12

82

Generalgovernment

5

2

6

13

19

32

Households
and nonprofit
institutions
serving
households

65

43

124

232

43

275

National
economy

123

78

222

423

108

531

Rest of the
world

24

28

54

106

Total

147

106

276

529

The from-whom-to-whom financial accountallows analysis of who is financing whom, to whatamount and by which financial asset. It provides
the answers to questions such as:(a) What are the counterpart sectors for the financial assets acquired net, or for the liabilities
incurred net by an institutional sector?

(c) What amounts of debt securities do resident
sectors and the rest of the world acquire (netof disposals), which have been issued (net ofredemptions) by general government, financial
or non-financial corporations, and the rest of
the world?

108

637

Monetary gold and special drawing rights
(F.1)
5.56

The monetary gold and special drawing rights(SDRs) (F.1) category consists of two subcategories:(a) monetary gold (F.11); and(b) special drawing rights (SDRs) (F.12).

Monetary gold (F.11)
5.57

Definition: monetary gold is gold to which monetary authorities have title and which is held inreserve assets.
It includes gold bullion, and unallocated gold
accounts with non-residents that give title to claim
the delivery of gold.

Classification of financial transactions
by categories in detail5.58

The following definitions and descriptions are of financial instruments. When a transaction is being recorded,
the code used is F. When the underlying stock level or106

position of an asset or liability is being recorded, then thecoding is AF.

(b) Which are the corporations with which thegeneral government sector participates?

132

National
economyMonetary authorities include the central bank andcentral government institutions which carry out
operations usually attributed to the central bank.
Such operations include the issue of currency,

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Financial transactions

maintenance and management of reserve assets
and the operation of exchange stabilisation funds.
5.59

5.64

Transactions in monetary gold consist predominantly of purchases and sales of monetary gold
among monetary authorities or certain international financial organisations. There cannot be anytransactions in monetary gold involving institutional units other than those. Purchases of monetary gold are recorded in the financial accountsof monetary authorities as an increase in financial
assets and sales are recorded as a decrease in financial assets. The counterpart entries are recorded
respectively as a decrease in financial assets or an
increase in financial assets of the rest of the world.

5.65

If monetary authorities add non-monetary gold totheir holdings of monetary gold (for example, bypurchasing gold on the market), or release monetary gold from their holdings for non-monetary
purposes (for example, by selling it on the market),they are deemed to have monetised or demonetisedgold, respectively. Monetisation or demonetisationof gold does not give rise to entries in the financial
account, but to entries in the other changes in thevolume of assets account as a change in classification of assets and liabilities, i.e. the reclassificationof gold from a valuable (AN.13) to monetary gold
(AF.11) (paragraphs 6.22-6.24). Demonetisationof gold is reclassification of monetary gold to avaluable.

5.66

Deposits, loans, and securities denominated in gold
are treated as financial assets other than monetary
gold and are classified along with similar financial
assets in foreign currency in the appropriate category. Gold swaps are forms of securities repurchase agreements (repos) involving either monetary gold or non-monetary gold. They imply theexchange of gold for a deposit with an agreementthat the transaction will be reversed at an agreed
future date at an agreed gold price. Following thegeneral practice for the recording of reverse transactions, the gold taker will not record the gold on
its balance sheet, while the gold provider will not
remove the gold from its balance sheet. Gold swaps
are recorded as collateralised loans by both parties, where the collateral is gold. Monetary gold
swaps are undertaken between monetary authorities or between monetary authorities and otherparties, while non-monetary gold swaps are similartransactions without the involvement of monetary
authorities.

Being subject to the effective control of monetary
authorities means that:(a) the resident unit can transact in these claims
on non-residents only on the terms specified by
the monetary authorities or with their express
approval;(b) the monetary authorities have access on
demand to these claims on non-residents tomeet balance of payments financing needs andother related purposes; and(c) there is a prior law or other binding arrangement confirming points (a) and (b) above.

5.60

All monetary gold is included in reserve assets oris held by international financial organisations. Its
components are:(a) gold bullion (including monetary gold held inallocated gold accounts); and(b) unallocated gold accounts with non-residents.

5.61

Gold bullion included in monetary gold is the only
financial asset for which there is no counterpart liability. It takes the form of coins, ingots, or bars witha purity of at least 995 parts per 1 000. Gold bullion
not held as reserve assets is a non-financial asset
and is included in non-monetary gold.

5.62

Allocated gold accounts provide ownership of a
specific piece of gold. The ownership of the gold
remains with the entity placing it for safe custody.
These accounts typically offer purchasing, storing,and selling facilities. When held as reserve assets,
allocated gold accounts are classified as monetarygold, and so as a financial asset. When not held as
reserve assets, allocated gold accounts represent
ownership of a commodity, namely non-monetary
gold.

5.63

In contrast to allocated gold accounts, unallocated gold accounts represent a claim against theaccount operator to deliver gold. When held as
reserve assets, unallocated gold accounts are classified as monetary gold, and so as a financial asset.
Unallocated gold accounts not held as reserve
assets are classified as deposits.

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Financial transactions

5.67

5.68

Gold loans consist of the delivery of gold for agiven time period. As for other reverse transactions, legal ownership of the gold is transferred, but
the risks and benefits of changes in the gold priceremain with the lender. Gold borrowers often use
these transactions to cover their sales to third parties in periods of gold shortage. A fee, determinedby the value of the underlying asset and the duration of the reverse transaction, is paid to the original owner for the use of the gold.
Monetary gold is a financial asset; the fees for goldloans are accordingly payments for putting a financial asset at the disposal of another institutional
unit. Fees associated with loans of monetary gold
are treated as interest. This also applies as a simplifying convention to fees paid on loans of nonmonetary gold.

SDRs (F.12)
5.69

5.70

The SDR Department of the IMF manages reserve
assets by allocating SDRs among member countries of the IMF and certain international agencies,
collectively known as the participants.

5.71

The creation of SDRs through their allocation, andextinguishing them through their cancellations,
are transactions. Allocations of SDRs are recorded
gross as acquisition of an asset in the financial
accounts of the monetary authorities of the individual participant, and as an incurrence of a liability by the rest of the world.

5.72

5.73

134

Definition: SDRs are international reserve assets
created by the International Monetary Fund (IMF)
and which are allocated to its members to supplement existing reserve assets.

SDRs are held exclusively by official holders, which
are central banks and certain international agencies, and are transferable among participants andother official holders. SDR holdings represent eachholder’s assured and unconditional right to obtainother reserve assets, especially foreign exchange,from other IMF members.
SDRs are assets with matching liabilities but theassets represent claims on the participants collectively and not on the IMF. A participant may
sell some or all of its SDR holdings to anotherparticipant and receive other reserve assets, particularly foreign exchange, in return.

Currency and deposits (F.2)
5.74

Definition: currency and deposits are currency incirculation and deposits, both in national currency
and in foreign currencies.

5.75

There are three sub-categories of financial transaction in relation to currency and deposits:(a) currency (F.21);(b) transferable deposits (F.22); and(c) other deposits (F.29).

Currency (F.21)
5.76

Definition: currency is notes and coins that areissued or authorised by monetary authorities.

5.77

Currency includes:(a) notes and coins issued by resident monetary
authorities as national currency in circulation
held by residents and non-residents; and(b) notes and coins issued by non-resident monetary authorities as foreign currencies in circulation and held by residents.

5.78

Currency does not include:(a) notes and coins that are not in circulation, forexample, a central bank’s stock of its own notesor emergency stockpiles of notes; and(b) commemorative coins that are not commonlyused to make payments. They are classified as
valuables.

Box 5.2 —Currency issued by the Eurosystem
B5.2.1. Euro banknotes and coins issued by the Eurosystem

are the domestic currency of the Member States inthe euro area. Although treated as domestic currency, holdings of euro currency by residents ofeach participating Member State are liabilities of
the resident national central bank only to the extent
of its notional share in the total issue, based on its
share in the capital of the ECB. A consequence isthat, in the euro area, from a national perspective,

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Financial transactions

part of residents’ holdings of domestic currency
may be a financial claim on non-residents.

not monetary gold, and also corresponding
deposits in the form of precious metal accounts;

B5.2.2.Currency issued by the Eurosystem includes notes(d) foreign currency
arrangements;

and coins. Notes are issued by the Eurosystem;
coins are issued by central governments in the euroarea, although, by convention, they are treated asliabilities of the national central banks which as acounterpart hold a notional claim on general government. Euro banknotes and coins may be held by
euro area residents or by non-residents of the euroarea.

Definition: deposits are standardised, non-negotiable contracts with the public at large, offered bydeposit-taking corporations and, in some cases, bycentral government as debtors, and allowing theplacement and the later withdrawal of the principal
amount by the creditor. Deposits usually involvethe debtor giving back the full principal amount to
the investor.

Transferable deposits (F.22)
5.80

5.81

Definition: transferable deposits are deposits
exchangeable for currency on demand, at par, andwhich are directly usable for making payments bycheque, draft, giro order, direct debit/credit, orother direct payment facilities, without penalty or
restriction.

(b) deposits held with the central bank by deposittaking corporations in excess of the amountof reserves that they are obliged to hold, andwhich they are able to use without notice or
restriction;(c) deposits which other monetary financial institutions incur vis-à-vis the central bank in theform of unallocated gold accounts which are

European system of accounts — ESA 2010

under

swap

5.82

Transferable deposit accounts may have overdraft
facilities. If the account is overdrawn, the withdrawal to zero is the withdrawal of a deposit, andthe amount of the overdraft is the granting of a
loan.

5.83

All resident sectors and the rest of the world may
hold transferable deposits.

5.84

Transferable deposits may be divided by currency
into transferable deposits denominated in domestic currency and in foreign currencies.

Other deposits (F.29)
5.85

Definition: other deposits are deposits otherthan transferable deposits. Other deposits cannot be used to make payments except on maturity or after an agreed period of notice, and they
are not exchangeable for currency or for transferable deposits without some significant restriction or
penalty.

5.86

Other deposits include:

Transferable deposits predominantly represent
liabilities of resident deposit-taking corporations,in some cases of central government, and of nonresident institutional units. Transferable deposits
include any of the following:(a) inter-bank positions between monetary financial institutions;

deposits(e) the reserve position with the IMF forming the‘reserve tranche’, i.e. the SDR or foreign currency amounts that a member country may
draw from the IMF at short notice, and otherclaims on the IMF that are readily available tothe member country, including the reporting
country’s lending to the IMF under the generalarrangements to borrow (GAB) and the newarrangements to borrow (NAB).

Deposits (F.22 and F.29)
5.79

5(a) time deposits, which are deposits not immediately disposable, but disposable with an agreed
maturity. Their availability is subject to a fixed
term or they are redeemable at notice of withdrawal. They also include deposits with the central bank held by deposit-taking corporations
as compulsory reserves to the extent that thedepositors cannot use them without notice or
restriction;

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5

Financial transactions(b) savings deposits, savings books, non-negotiable savings certificates or non-negotiable certificates of deposit;(c) deposits resulting from a savings scheme orcontract. These deposits often involve an obligation on the part of the depositor to make regular payments over a given period, and the capital paid and interest accrued do not become
available until a fixed term has elapsed. These
deposits are sometimes combined with theissue, at the end of the savings period, of loans
which are proportionate to the accumulated
savings, for the purpose of buying or building
a dwelling;(d) evidence of deposits issued by savings andloan associations, building societies, credit
unions etc., sometimes called shares, which are
redeemable on demand or at relatively short
notice, but which are not transferable;(e) repayable margin payments related to financial derivatives which are liabilities of monetaryfinancial institutions;(f) short-term repurchase agreements (repos)
which are liabilities of monetary financial institutions; and(g) liabilities to the IMF that are components ofinternational reserves and are not evidenced byloans; they consist of use of Fund credit within
the IMF’s General Resources Account. This
item measures the amount of a member’s currency with the IMF that the member is obligated to repurchase.
5.87

Other deposits do not include negotiable certificates of deposit and negotiable savings certificates.
They are classified under debt securities (AF.3).

5.88

Other deposits may be divided by currency into
other deposits denominated in domestic currency and other deposits denominated in foreign
currencies.

Debt securities (F.3)
5.89

136

Definition: debt securities are negotiable financial
instruments serving as evidence of debt.

Main features of debt securities
5.90

Debt securities have the following characteristics:(a) an issue date on which the debt security isissued;(b) an issue price at which investors buy the debt
securities when first issued;(c) a redemption date or maturity date on which
the final contractually scheduled repayment of
the principal is due;(d) a redemption price or face value, which is theamount to be paid by the issuer to the holder atmaturity;(e) an original maturity, which is the period fromthe issue date until the final contractuallyscheduled payment;(f) a remaining or residual maturity, which is theperiod from the reference date until the final
contractually scheduled payment;(g) a coupon rate that the issuer pays to holdersof the debt securities; the coupon may be fixed
throughout the life of the debt security or varywith inflation, interest rates, or asset prices.
Bills and zero-coupon debt securities offer no
coupon interest;(h) coupon dates, on which the issuer pays the coupon to the securities’ holders;(i) the issue price, redemption price, and coupon
rate may be denominated (or settled) in either
national currency or foreign currencies; and(j) the credit rating of debt securities, whichassesses the credit worthiness of individual debt
securities issues. Rating categories are assignedby recognised agencies.
With regard to point (c) in the first subparagraph,the maturity date may coincide with the conversion of a debt security into a share. In this context, convertibility means that the holder may
exchange a debt security for the issuer’s common
equity. Exchangeability means that the holder may
exchange the debt security for shares of a corporation other than the issuer. Perpetual securities,
which have no stated maturity date, are classified
as debt securities.

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Financial transactions

5.91

Debt securities include financial assets and liabilities which may be described according to different
classifications — by maturity, holding and issuing
sector and subsector, currency, and type of interestrate.

(d) zero-coupon bonds, which are single-payment
debt securities with no coupon payments. The
bond is sold at a discount from par value, andthe principal is repaid at maturity or sometimes
redeemed in tranches. Zero-coupon bonds
may be created from fixed rate debt securities by ‘stripping off’ the coupons, that is, byseparating the coupons from the final principal payment of the security and trading them
independently;

Classification by original maturity and currency
5.92

Transactions in debt securities are divided by original maturity into two subcategories:(a) short-term debt securities (F.31); and(e) Separate Trading of Registered Interest andPrincipal Securities (STRIPS), or stripped debt
securities, which are securities whose interest and principal payment portions have been
separated, or ‘stripped’, and may then be soldseparately;(b) long-term debt securities (F.32).
5.93

5.94

Debt securities may be denominated in national
currency or in foreign currencies. A further breakdown of debt securities denominated in various
foreign currencies may be appropriate and willvary depending on the relative importance of theindividual foreign currencies for an economy.

(f) perpetual, callable, and puttable debt securities,
and debt securities with sinking fund provision;(g) convertible bonds, which may, at the optionof the holder, be converted into the equity of
the issuer, at which point they are classified asshares; andDebt securities with both principal and coupon linked to a foreign currency are classified as
denominated in that foreign currency.

Classification by type of interest rate
5.95(h) exchangeable bonds, with an embedded option
to exchange the security for a share in a corporation other than the issuer, usually a subsidiary or company in which the issuer owns
a stake, at some future date and under agreed
conditions.

Debt securities may be classified by type of interest rate. Three groups of debt securities are
distinguished:(a) fixed interest rate debt securities;(b) variable interest rate debt securities; and

5.97(c) mixed interest rate debt securities.

Fixed interest rate debt securities
5.96

Fixed interest rate debt securities cover:(a) plain debt securities, which are issued andredeemed at par value;(b) debt securities issued at discount or at premium to their par value. Examples are treasury
bills, commercial paper, promissory notes, bill
acceptances, bill endorsements, and certificatesof deposit;(c) deep-discounted bonds having small interest
payments and issued at a considerable discountto par value;

European system of accounts — ESA 2010

5

Fixed interest rate debt securities also include otherdebt securities like equity warrant bonds, subordinated bonds, non-participating preference sharesthat pay a fixed income but do not provide forparticipation in the distribution of the residual
value of a corporation on dissolution, and stapled
instruments.

Variable interest rate debt securities
5.98

Variable interest rate debt securities have theirinterest and/or principal payments linked to:(a) a general price index for goods and services(such as the consumer price index);(b) an interest rate; or(c) an asset price.

137

5

Financial transactions

5.99

Variable interest rate debt securities are usuallyclassified as long-term debt securities, unless they
have an original maturity of one year or less.

5.100 Inflation-linked and asset price-linked debt securi-ties include those debt securities issued as inflationlinked bonds and as commodity-linked bonds. The
coupons and/or the redemption value of a commodity-linked bond are linked to the price of acommodity. Debt securities, interest on which is
linked to the credit rating of another borrower, areclassified as index-linked debt securities, as credit
ratings do not change in a continuous manner in
response to market conditions.

5.101 For interest rate-linked debt securities, the con-tractual nominal interest and/or the redemption
value are variable in terms of national currency. At
the date of issue, the issuer cannot know the valueof interest and principal repayments.

Mixed interest rate debt securities
5.102 Mixed interest rate debt securities have both a fixed

and a variable coupon rate over their life and areclassified as variable interest rate debt securities.
They cover debt securities that have:(a) a fixed coupon and a variable coupon at thesame time;(b) a fixed or a variable coupon until a reference
point and then a variable or a fixed coupon
from that reference point to the maturity date;or(c) coupon payments that are pre-fixed over the lifeof the debt securities, but are not constant overtime. They are called stepped debt securities.

Private placements
5.103 Debt securities also include private placements.

Private placements involve an issuer selling debt
securities directly to a small number of investors.
The credit worthiness of the issuers of these debt
securities are typically not assessed by credit rating agencies, and the securities are generally not
resold or repriced, so the secondary market is shallow. However, most private placements meet thecriterion of negotiability and are classified as debt
securities.

138

Securitisation
5.104 Definition: securitisation is the issuance of debt

securities for which coupon or principal payments
are backed by specified assets or by future income
streams. A variety of assets or future income
streams may be securitised including, among others, residential and commercial mortgage loans;consumer loans; corporate loans, government
loans; insurance contracts; credit derivatives; andfuture revenue.

5.105 Securitisation of assets or of future income streams

is an important financial innovation that has led tothe creation and extensive use of new financial corporations to facilitate the creation, marketing, andissuance of debt securities. Securitisation has been
driven by different considerations. For corporations, these include: cheaper funding than is available through banking facilities; the reduction in regulatory capital requirements; the transfer of various types of risk like credit risk or insurance risk;
and the diversification of funding sources.

5.106 Securitisation schemes vary within and across debt

securities markets. These schemes can be grouped
into two broad types:(a) a financial corporation engaging in the securitisation of assets and a transfer of the assets
providing collateral from the original holder,known as a true-sale; and(b) securitisation schemes involving a financial corporation engaged in the securitisation of assets
and a transfer of credit risk only, using credit
default swaps (CDS) — the original ownerretains the assets, but passes on the credit risk.
This is known as synthetic securitisation.

5.107 With regard to the scheme referred to in point (a)of paragraph 5.106 a securitisation corporation iscreated to hold securitised assets or other assetsthat have been securitised by the original holder,
and issue debt securities collateralised by thoseassets.

5.108 It is essential to establish, in particular, whether thefinancial corporation engaged in the securitisationof assets actively manages its portfolio by issuingdebt securities, rather than simply acting as a trustthat passively manages assets or holds debt securities. Where the financial corporation is the legal

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Financial transactions

owner of a portfolio of assets, issues debt securities that present an interest in the portfolio, has afull set of accounts, it is acting as a financial intermediary classified in other financial intermediaries. Financial corporations engaged in the securitisation of assets are distinguished from entities that are created solely to hold specific portfolios of financial assets and liabilities. These entities
are combined with their parent corporation, if resident in the same country as the parent. However,as non-resident entities they are treated as separate institutional units and are classified as captive
financial institutions.
5.109 In the case of the securitisation scheme referred toin point (b) of paragraph 5.106, the original ownerof the assets, or protection buyer, by means ofcredit default swaps (CDS), transfers the credit risk
related to a pool of diversified reference assets toa securitisation corporation but retains the assets
themselves. The proceeds from the issue of debt
securities are placed in a deposit or in another safe
investment such as AAA bonds, and the interest
accrued on the deposit, together with the premiumfrom the CDS, finances the interest on the debt
securities issued. If a default occurs, the principal
owed to the holders of the ABS is reduced — withjunior tranches getting the first ‘hit’ etc. Coupon
and principal payments may also be redirected tothe original collateral owner from investors in thedebt securities to cover default losses.

5.110 An asset-backed security (ABS) is a debt security

whose principal and/or interest is solely payablefrom the cash flows produced by a specified pool offinancial or non-financial assets.

Main features of loans
5.113 Loans are characterised by the following features:(a) the conditions governing a loan are either
fixed by the financial corporation granting theloan or agreed by the lender and the borrower
directly or through a broker;(b) the initiative to take out a loan normally lies
with the borrower; and(c) a loan is an unconditional debt to the creditor
which has to be repaid at maturity and which isinterest-bearing.
5.114 Loans can be financial assets or liabilities of all res-ident sectors and the rest of the world. Deposit taking corporations normally record short-term liabilities as deposits, not as loans.

Classification of loans by original maturity, currency,
and purpose of lending
5.115 Transactions in loans can be categorised into two

types of original maturity:(a) short-term loans (F.41) with a short-term original maturity, including loans repayable on
demand; and(b) long-term loans (F.42) with a long-term original maturity.
5.116 For analytical purposes, loans may be subcatego-

rised further as follows:(a) loans denominated in national currency; andCovered bonds(b) loans denominated in foreign currencies.

5.111 Definition: covered bonds are debt securities issued

For households, a useful sub-categorisation is asfollows:

by a financial corporation, or fully guaranteed bya financial corporation. In case of default of theissuing or guarantor financial corporation, bondholders have a priority claim on the cover pool, in
addition to their ordinary claim on the financial
corporation.

(a) loans for consumption;(b) loans for house purchases; and(c) other loans.

Loans (F.4)

Distinction between transactions in loans andtransactions in deposits

5.112 Definition: loans are created when creditors lend

5.117 The distinction between transactions in loans (F.4)

funds to debtors.

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and transactions in deposits (F.22) is that a debtor

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Financial transactions

offers a standardised non-negotiable contract in
the case of a loan, but not in the case of a deposit.
5.118 Short-term loans granted to deposit taking corpo-

rations are classified as transferable deposits or asother deposits, and short-term loans accepted byinstitutional units other than deposit-taking corporations are classified as short-term loans.

5.119 Placements of funds between deposit-taking cor-porations are always recorded as deposits.

Distinction between transactions in loans andtransactions in debt securities
5.120 The distinction between transactions in loans(F.4) and transactions in debt securities (F.3) isthat loans are non-negotiable financial instruments while debt securities are negotiable financial
instruments.

5.121 In most cases, loans are evidenced by a single doc-

ument and transactions in loans are carried out
between one creditor and one debtor. By contrast,
debt security issues consist of a large number ofidentical documents, each evidencing a round sum,which together form the total amount borrowed.

5.122 A secondary market in loans exists. In cases whereloans become negotiable on an organised market,
they are to be reclassified from loans to debt securities, provided that there is evidence of secondary market trading, including the existence of market makers, and frequent quotation of the financial
asset, such as provided by bid-offer spreads. An
explicit conversion of the original loan is normally
involved.

5.123 Standardised loans are offered in most cases byfinancial corporations and they are often granted
to households. Financial corporations determine
the conditions and households may only choose
either to accept or refuse. The conditions of nonstandardised loans however are usually the resultof negotiations between the creditor and thedebtor. This is an important criterion which facilitates a distinction between non-standardised loans
and debt securities. In the case of public security issues, the issue conditions are determined by140

the borrower, possibly after consulting the bank/lead-manager-bank. In the case of private security
issues, however, the creditor and the debtor negotiate the issue conditions.

Distinction between transactions in loans, tradecredit and trade bills
5.124 Trade credit is credit extended directly by the sup-pliers of goods and services to their customers.
Trade credit arises when payment for goods andservices is not made at the same time as the change
in ownership of a good or the provision of a service.

5.125 Trade credit is distinguished from loans to finance

trade, which are classified as loans. Trade bills
drawn on a customer by the supplier of goods andservices, which are subsequently discounted by the
supplier with a financial corporation, become aclaim by a third party on the customer.

Securities lending and repurchase agreements
5.126 Definition: securities lending is the temporarytransfer of securities by the lender to the borrower.
The securities borrower may be required to provide
assets as collateral to the securities lender in theform of cash or securities. Legal title passes on bothsides of the transaction so that borrowed securities
and collateral can be sold or ‘on-lent’.

5.127 Definition: a securities repurchase agreement is

an arrangement involving the provision of securities like debt securities or shares in exchange forcash or other means of payment, with a commitment to repurchase the same or similar securities at
a fixed price. The commitment to repurchase may
be either on a specified future date or an ‘open’maturity.

5.128 Securities lending with cash collateral and repur-

chase agreements (repos) are different terms forfinancial arrangements with the same economic
effects, namely those of a secured loan, as both
involve the provision of securities as collateral fora loan or a deposit, where a deposit-taking corporation sells the securities under such a financial arrangement. The different features of the two
arrangements are shown in Table 5.2.

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Financial transactions

5

Table 5.2 — Main features of securities lending and repurchase agreements
FeatureSecurities lending
Cash collateral

Repurchase agreements

Without cash collateralSpecific securities

General collateral

Formal method of
exchange

Lending of securities with an agreement by theborrower to deliver it back to the lender

Form of exchange

Securities versus cash

Securities versus othercollateral (if any)

Securities versus cash

Cash versus securities

Return is paid to the
supplier ofCash collateral (thesecurities borrower)

Securities (not collateral
securities)(the securities lender)

Cash

Cash

Return repayable as

Fee

Fee

Repo rate

Repo rate

5.129 The securities provided under securities lend-

ing and repurchase agreements are treated as nothaving changed economic ownership because thelender is still the beneficiary of the income yield by
the security, and subject to the risks or benefits ofany change in the price of the security.

5.130 Neither the supply and receipt of funds under asecurities repurchase agreement, nor securities
lending with cash collateral, involve any new issuance of debt securities. Such provision of funds toinstitutional units other than monetary financial
institutions is treated as loans; for deposit taking
corporations, it is treated as deposits.

5.131 If a securities lending does not involve the supplyof cash, that is, if there is an exchange of one security for another, or if one party supplies a security
without collateral, there is no transaction in loans,
deposits or securities.

5.132 Marginal calls in cash under a repo are classified asloans.

5.133 Gold swaps are similar to securities repurchaseagreements except that the collateral is gold. They
involve an exchange of gold for foreign exchange
deposits with an agreement that the transaction bereversed at an agreed future date at an agreed gold
price. The transaction is recorded as a collateralised
loan or a deposit.

Financial leases
5.134 Definition: a financial lease is a contract underwhich the lessor as legal owner of an asset conveys the risks and benefits of ownership of the asset
to the lessee. Under a financial lease, the lessor isdeemed to make, to the lessee, a loan with which

European system of accounts — ESA 2010

Sale of securities and commitment to repurchasethem under terms of master agreement

the lessee acquires the asset. Thereafter the leased
asset is shown on the balance sheet of the lessee andnot the lessor; the corresponding loan is shown as
an asset of the lessor and a liability of the lessee.
5.135 Financial leases may be distinguished from otherkinds of leases because the risks and rewards ofownership are transferred from the legal ownerof the good to the user of the good. Other kindsof leases are (i) operating lease; and (ii) resource
lease. Contracts, leases and licenses, as defined in
Chapter 15, can be considered as leases as well.

Other types of loans
5.136 The loans category includes the following:(a) overdrafts on transferable deposit accounts,
where the amount overdrawn is not treated as anegative transferable deposit;(b) overdrafts on other current accounts, for example, intra-group balances between non-financial corporations and their subsidiaries, but
excluding balances which are liabilities of monetary financial institutions classified in thedeposit sub-categories;(c) financial claims of employees because of participation in the corporation’s profit;(d) repayable margin payments related to financial derivatives which are liabilities of institutional units other than monetary financial
institutions;(e) loans which are counterparts of bankers’
acceptances;(f) mortgage loans;

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Financial transactions(g) consumer credit;

Equity (F.51)(h) revolving credits;

5.141 Definition: equity is a financial asset that is a claim(i) instalment loans;(j) loans paid as a guarantee for fulfilling certain
obligations;(k) deposit guarantees as financial claims of reinsurance corporations on ceding corporations;(l) financial claims on the IMF evidenced by loans
in the General Resources Account, including
lending under the General Arrangements to
Borrow (GAB) and the New Arrangements to
Borrow (NAB); and(m) liabilities to the IMF evidenced by IMF credit
or Poverty Reduction and Growth Facility(PRGF) loans.
5.137 The special case of non-performing loans is dis-cussed in Chapter 7.

Financial assets excluded from the category of loans
5.138 The category of loans does not include:(a) other accounts receivable/payable (AF.8),
including trade credits and advances (AF.81);
and(b) financial assets or liabilities arising from theownership of immovable assets, such as landand structures, by non-residents. They are classified in other equity (AF.519).

Equity and investment fund shares or units(F.5)
5.139 Definition: equity and investment fund shares orunits are residual claims on the assets of the institutional units that issued the shares or units.

5.140 Equity and investment fund shares are divided into

two subcategories:(a) equity (F.51); and(b) investment fund shares or units (F.52).

142

on the residual value of a corporation, after allother claims have been met.

5.142 Ownership of equity in legal entities is usually evi-

denced by shares, stocks, depository receipts, participations, or similar documents. Shares andstocks have the same meaning.

Depository receipts
5.143 Definition: depository receipts represent owner-ship of securities listed in other economies; ownership of the depository receipts is treated as directownership of the underlying securities. A depository issues receipts listed on one exchange that
represent ownership of securities listed on anotherexchange. Depository receipts facilitate transactions in securities in economies other than theirhome listing. The underlying securities may beshares or debt securities.

5.144 Equity is subcategorised into the following:(a) listed shares (F.511);(b) unlisted shares (F.512); and(c) other equity (F.519).
5.145 Both listed shares and unlisted shares are negotia-

ble, and described as equity securities.

Listed shares (F.511)
5.146 Definition: listed shares are equity securities listed

on an exchange. Such an exchange may be a recognised stock exchange or any other form of secondary market. Listed shares are also referred toas quoted shares. The existence of quoted pricesof shares listed on an exchange means that current
market prices are usually readily available.

Unlisted shares (F.512)
5.147 Definition: unlisted shares are equity securities notlisted on an exchange.

5.148 Equity securities include shares issued by unlisted

limited liability companies as follows:

European system of accounts — ESA 2010

Financial transactions(a) capital shares which give the holders the statusof joint owners and entitle them to a share in
the total distributed profits and to a share in the
net assets in the event of liquidation;(b) redeemed shares whose capital has been repaid
but which are retained by holders who continue
to be joint owners and to be entitled to a sharein the profits left after dividends have been paidon the remaining registered capital and also toa share in any surplus which may be left on liquidation, i.e. the net assets less the remaining
registered capital;(c) dividend shares, also called founders’ shares,
profits shares, and dividend shares, which are
not part of the registered capital. Dividend
shares do not give holders the status of joint
owners — holders therefore do not have theright to a share in the repayment of the registered capital, the right to a return on this capital, the right to vote at shareholders’ meetings,
etc. Nevertheless, they entitle the holders to a
proportion of any profits remaining after dividends have been paid on the registered capitaland to a fraction of any surplus remaining on
liquidation;(d) Participating preference shares or stocks, which
entitle holders to participate in the distributionof the residual value of a corporation on dissolution. The holders have also the right to participate in, or receive, additional dividends over
and above the fixed percentage dividend. The
additional dividends are usually paid in proportion to any ordinary dividends declared. In
the event of liquidation, participating preference shareholders have the right to a share of
any remaining proceeds that ordinary shareholders receive, and receive back what they
paid for their shares.

Initial public offering, listing, de-listing, and share buy
back
5.149 An initial public offering (IPO), also referred tosimply as an ‘offering’ or a ‘flotation’, is when acorporation issues equity securities to the public
for the first time. Such equity securities are often
issued by smaller, younger corporations for financing reasons, or by large enterprises to become publicly traded. In an IPO the issuer may obtain theEuropean system of accounts — ESA 2010

5

assistance of an underwriting entity, which helps todetermine what type of equity security to issue, thebest offering price and time to bring it to market.
5.150 Listing refers to the corporation’s shares being on

the list of stocks that are officially traded on a stock
exchange. Normally, the issuing corporation is theone that applies for a listing but in some countries
the exchange can list a corporation, for instancebecause its stock is already being actively traded
via informal channels. Initial listing requirements
usually include a history of a few years of financial
statements; a sufficient size of the amount being
placed among the general public, both in absolute terms and as a percentage of the total outstanding stock; and an approved prospectus, usually including opinions from independent assessors. De-listing refers to the practice of removing
the shares of a corporation from a stock exchange.
This occurs when a corporation goes out of business, declares bankruptcy, no longer satisfies thelisting rules of a stock exchange, or has become
a quasi-corporation or unincorporated business,often as a result of a merger or acquisition. Listingis recorded as an issuance of listed shares, and as
a redemption of unlisted shares, while de-listing isrecorded as a redemption of listed shares, and an
issuance of unlisted shares where appropriate.

5.151 Corporations may buy back their own equity in ashare repurchase, also known as a stock repurchaseor a share buyback. A share buyback is recorded
as a financial transaction, providing cash to theexisting shareholders in exchange for a part of thecorporation’s outstanding equity. That is, cash is
exchanged for a reduction in the number of shares
outstanding. The corporation either retires theshares or keeps them as a ‘treasury stock’, available
for reissuance.

Financial assets excluded from equity securities
5.152 Equity securities do not include:(a) shares offered for sale but not taken up on issue.
They are not recorded;(b) debentures and loan stock convertible intoshares. They are classified as debt securities(AF.3) up to the time when they are converted;

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Financial transactions(c) the equity of partners with unlimited liability inincorporated partnerships. They are classified
as other equity;(d) government investments in the capital of international organisations which are legally constituted as corporations with share capital. They
are classified as other equity (AF.519);(e) issues of bonus shares i.e. the issue without
payment of new shares to shareholders in proportion to their holdings. Such an issue, whichchanges neither the liability of the corporation vis-à-vis the shareholders nor the proportion of the assets that each shareholder holds
in the corporation, does not constitute a financial transaction. Share split issues are also notrecorded.

Other equity (F.519)
5.153 Definition: other equity comprises all forms ofequity other than those classified in sub-categories listed shares (AF.511) and unlisted shares(AF.512).

5.154 Other equity includes:(a) all forms of equity in corporations which are
not shares, including the following:(1) the equity in incorporated partnerships subscribedby unlimited partners;(2) the equity in limited liability companies whose
owners are partners and not shareholders;(3) the capital invested in ordinary or limited partnerships recognised as independent legal entities;(4) the capital invested in cooperative societies recognised as independent legal entities;(b) investment by general government in the capital of public corporations whose capital is notdivided into shares and which by virtue of special legislation are recognised as independent
legal entities;(c) investment by general government in the capital of the central bank;(d) government investments in the capital of international and supranational organisations, withthe exception of the IMF, even if these arelegally constituted as corporations with sharecapital (e.g. the European Investment Bank);

144(e) the financial resources of the ECB contributedby the national central banks;(f) capital invested in financial and non-financial
quasi-corporations. The amount of such investments corresponds to new investments in cashor kind, less any capital withdrawals;(g) the financial claims that non-resident units
have against notional resident units and viceversa.

Valuation of transactions in equity
5.155 New shares are recorded at issue value, which isnominal value plus the issue premium.

5.156 Transactions in shares in circulation are recordedat their transaction value. When the transaction value is not known, it is approximated by thestock exchange quotation or market price for listed
shares and by the market-equivalent value forunlisted shares.

5.157 Scrip dividend shares are shares valued at the priceimplied by the issuer’s dividend proposal.

5.158 Issues of bonus shares are not recorded. However,in cases where the issue of bonus shares involveschanges in the total market value of the shares ofa corporation, the changes in market value arerecorded in the revaluation account.

5.159 The transaction value of equity (F.51) is the amountof funds transferred by the owners to corporationsor quasi-corporations. In some cases, funds can betransferred by assuming liabilities of the corporation or quasi-corporation.

Investment fund shares or units (F.52)
5.160 Definition: investment fund shares are shares of aninvestment fund if the fund has a corporate structure. They are known as units if the fund is a trust.
Investment funds are collective investment undertakings through which investors pool funds forinvestment in financial and/or non-financial assets.

5.161 Investment funds are also called mutual funds,

unit trusts, investment trusts, and undertakingsfor collective investments in transferable securities(UCITS); they may be open-ended, semi-open or
closed-end funds.

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Financial transactions

5.162 Investment fund shares may be listed or unlisted.

When they are unlisted, they are usually repayable on request, at a value corresponding to theirshare in the own funds of the financial corporation.
These own funds are revalued regularly on the basisof the market prices of their various components.

5.163 Investment fund shares are subdivided into:

Money market fund (MMF) shares or units (F.521);
andNon-MMF investment fund shares /units (F.522).

MMF shares or units (F.521)
5.164 Definition: MMF shares or units are shares issued

by MMFs. MMF shares or units can be transferable and are often regarded as close substitutes fordeposits.

Non-MMF investment fund shares/units (F.522)
5.165 Definition: other investment fund shares or units

other than MMF shares or units represent a claim
on a portion of the value of an investment fundother than an MMF. These types of shares andunits are issued by investment funds.

5.166 Other unlisted investment fund shares or units

other than MMF shares or units are usually repayable on request, at a value corresponding to theirshare in the own funds of the financial corporation.
Such own funds are revalued regularly on the basisof the market prices of their various components.

Valuation of transactions in investment fund shares orunits
5.167 Transactions in investment fund shares or units

include the value of net contributions to a fund.

Insurance, pension and standardisedguarantee schemes (F.6)
5.168 Insurance, pension and standardised guarantee

schemes are divided into six subcategories:(a) non-life insurance technical reserves (F.61);(b) life insurance and annuity entitlements (F.62);(c) pension entitlements (F.63);

European system of accounts — ESA 20105(d) claims of pension funds on pension managers(F.64);(e) entitlements to non-pension benefits (F.65);
and(f) provisions for calls under standardised guarantees (F.66).

Non-life insurance technical reserves (F.61)
5.169 Definition: non-life insurance technical reserves

are financial claims that non-life insurance policy
holders have against non-life insurance corporations in respect of unearned premiums and claims
incurred.

5.170 Transactions

in non-life insurance technical reserves for unearned premiums and claims
incurred relate to risks like accidents, sickness, orfire, and also to reinsurance.

5.171 Unearned premiums are premiums paid but not

yet earned. Premiums are usually paid at the beginning of the period covered by the policy. On an
accrual basis, the premiums are earned throughout the policy period, so that the initial payment
involves a prepayment or advance.

5.172 Claims outstanding are claims due but not yet set-tled, including cases where the amount is in dispute or the event leading to the claim has occurred
but has not yet been reported. Claims due but not
yet settled correspond to the reserves against outstanding insurance claims, which are amounts
identified by insurance corporations to cover what
they expect to pay out arising from events thathave occurred but for which the claims are not yet
settled.

5.173 Other technical reserves, such as equalisation

reserves, may be identified by insurers. However,these are only recognised as liabilities and corresponding assets when there is an event giving rise
to a liability. Otherwise, equalisation reserves areinternal accounting entries by the insurer representing saving to cover irregularly occurring
events, and do not represent existing claims of policy holders.

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Life insurance and annuity entitlements (F.62)
5.174 Definition: life insurance and annuity entitlements

5.181 Transactions in pension entitlements consist of

consist of financial claims that life insurance policy
holders and beneficiaries of annuities have against
corporations providing life insurance.

additions less reductions, which are to be distinguished from nominal holding gains or losses on
the funds invested by pension funds.

5.175 Life insurance and annuity entitlements are used to

5.182 Additions in terms of financial transactions consist

provide benefits to policy holders upon the expiryof the policy, or to compensate beneficiaries upon
the death of policyholders, so they are kept separate from shareholders’ funds. Reserves in the formof annuities are based on the actuarial calculationof the present value of the obligations to pay future
income until the death of the beneficiaries.

5.176 Transactions in life insurance and annuity entitle-

ments consist of additions less reductions.

5.177 Additions in terms of financial transactions consistof:(a) actual premiums earned during the current
accounting period; and(b) premium supplements, corresponding to theincome from the investment of the entitlements
attributed to the policy holders after deductionof service charges.
5.178 Reductions consist of:(a) amounts due to holders of endowment andsimilar insurance policies; and(b) payments due on policies that are surrendered
before maturity.
5.179 In the case of a group insurance taken out by a cor-poration on behalf of its employees, the employees,
but not the employer, are the beneficiaries since
they are considered to be the policy holders.

Pension entitlements (F.63)
5.180 Definition: pension entitlements comprise finan-cial claims that current employees and former
employees hold against either:(a) their employers;(b) a scheme designated by the employer to pay
pensions as part of a compensation agreement
between the employer and the employee; or

146(c) an insurer.

of:(a) actual contributions to pension schemes payable by employees, employers, self-employedpersons or other institutional units on behalfof individuals or households with claims on
the scheme, and earned during the current
accounting period; and(b) contribution supplements corresponding to theincome earned from the investment of the pension entitlements of the pension scheme attributed to participating households, after deduction of service charges during the period for
managing the scheme.
5.183 Reductions consist of:(a) social benefits equal to the amounts payable toretired persons or their dependants in the formof regular payments or other benefits; and(b) social benefits which consist of any lump sums
payable to persons when they retire.

Contingent pension entitlements
5.184 The pension entitlements category does not include

contingent pension entitlements established byinstitutional units classified as unfunded government defined benefit employer pension schemes or
as social security pension funds. Their transactions
are not fully recorded and their other flows andstocks are not recorded in the core accounts, but inthe supplementary table on accrued-to-date pension entitlements in social insurance. Contingent
pension entitlements are not liabilities of the central government, state government, local government or social security funds subsectors and are
not financial assets of the prospective beneficiaries.

Claims of pension funds on pension managers (F.64)
5.185 An employer may contract with a third party tolook after the pension funds for his employees. If

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Financial transactions

the employer continues to determine the termsof the pension schemes and retains the responsibility for any deficit in funding as well as theright to retain any excess funding, the employer
is described as the pension manager and the unit
working under the direction of the pension manger is described as the pension administrator. If
the agreement between the employer and the third
party is such that the employer passes the risks andresponsibilities for any deficit in funding to thethird part in return for the right of the third party
to retain any excess, the third party becomes thepension manager as well as the administrator.
5.186 When the pension manager is a unit different fromthe administrator and the amount accruing to thepension fund falls below the increase in entitlements, a claim of the pension fund on the pension
manager is recorded. Where the amount accruingto the pension fund exceeds the increase in entitlements, there is an amount payable by the pension
fund to the pension manager.

Entitlements to non-pension benefits (F.65)
5.187 The excess of net contributions over benefits rep-resents an increase in the liability of the insurance scheme towards the beneficiaries. This item
is shown as an adjustment in the use of income
account. As an increase in a liability, it is also
shown in the financial account. This item is likely
to occur only rarely and, for pragmatic reasons,changes in such non-pension entitlements may be
included with those for pensions.

Provisions for calls under standardised guarantees(F.66)
5.188 Definition: provisions for calls under standard-

ised guarantees are financial claims that holders ofstandardised guarantees have against institutional
units providing them.

5.189 Provisions relating to calls under standardisedguarantees are prepayments of net fees and provisions to meet outstanding calls under standardised guarantees. Like provisions for prepaid insurance premiums and reserves, provisions for calls
under standardised guarantees include unearned
fees (premiums) and calls (claims) not yet settled.

European system of accounts — ESA 201055.190 Standardised guarantees are guarantees that areissued in large numbers, usually for fairly small
amounts, along identical lines. Such arrangements
involve three parties: the borrower, the lender andthe guarantor. Either the borrower or the lender
may contract with the guarantor to repay the lender
if the borrower defaults. Examples are export credit
guarantees and student loan guarantees.

5.191 Although it is not possible to establish the like-lihood of any particular borrower defaulting, it
is usual to estimate how many out of a batch ofsimilar borrowers will default. Much like a nonlife insurer, a guarantor working on commerciallines will expect all the fees paid, plus the property income earned on the fees and any reserves,to cover the expected defaults and associated costs
and leave a profit. Accordingly a similar treatment
to that of non-life insurance is adopted for suchguarantees, described as standardised guarantees.

5.192 Standardised guarantees cover guarantees on vari-

ous financial instruments like deposits, debt securities, loans and trade credit. They are usually provided by a financial corporation, including but notconfined to insurance corporations, but also bygeneral government.

5.193 When an institutional unit offers standardisedguarantees, it charges fees and incurs liabilities tomeet the call on the guarantee. The value of the liabilities in the accounts of the guarantor is equal tothe present value of the expected calls under existing guarantees, net of any recoveries the guarantor expects to receive from the defaulting borrowers. The liability is called provisions for calls understandardised guarantees.

5.194 A guarantee may cover a multi-year period. A fee

may be payable annually or up-front. In principle,
the fee represents charges earned in each year theguarantee holds, with the liability decreasing as theperiod gets shorter (assuming that the borrower
repays in instalments). Thus recording follows thatof annuities with the fee paid as the future liability
decreases.

5.195 The nature of a standardised guarantee scheme isthat there are many guarantees of the same type,though not all for exactly the same time period nor
all starting and finishing on the same dates.

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5.196 Net fees are calculated as fees receivable plus fee

supplements (equal to the property income attributed to the unit paying the fee for the guarantee)
less administration, etc. costs. Such net fees may
be payable by any sector of the economy and arereceivable by the sector in which the guarantor
is classified. Calls under standardised guarantee
schemes are payable by the guarantor and receivable by the lender of the financial instrument underguarantee, regardless of whether the fee was paidby the lender or the borrower. Financial transactions refer to the difference between the paymentof fees for new guarantees and calls made under
existing guarantees.

Standardised guarantees and one-off guarantees
5.197 Standardised guarantees are distinguished fromone-off guarantees according to two criteria:(a) standardised guarantees are characterised byoften repeated transactions with similar features and pooling of risks; and(b) guarantors are able to estimate the average loss
based on available statistics.
One-off guarantees are individual, and guarantors
are not able to make a reliable estimate of the risk ofcalls. The granting of a one-off guarantee is a contingency and not recorded. Exceptions are certain
guarantees provided by government and describedin Chapter 20.

Financial derivatives and employee stock
options (F.7)
5.198 Financial derivatives and employee stock options

are divided into two subcategories:(a) financial derivatives (F.71); and(b) employee stock options (F.72).

Financial derivatives (F.71)
5.199 Definition: financial derivatives are financial instru-

ments linked to a specified financial instrument or
indicator or commodity, through which specificfinancial risks can be traded in financial markets intheir own right. Financial derivatives meet the following conditions:148(a) they are linked to a financial or non-financial
asset, to a group of assets, or to an index;(b) they are either negotiable or can be offset on themarket; and(c) no principal amount is advanced to be repaid.
5.200 Financial derivatives are used for a number of pur-poses including risk management, hedging, arbitrage between markets, speculation and compensation of employees. Financial derivatives enable
parties to trade specific financial risks such as interest rate risk, currency, equity and commodity pricerisk and credit risk, to other entities which are willing to take these risks, usually without trading ina primary asset. Accordingly, financial derivatives
are referred to as secondary assets.

5.201 The value of a financial derivative derives from theprice of the underlying asset: the reference price.
The reference price may relate to a financial or
non-financial asset, an interest rate, an exchange
rate, another derivative or a spread between two
prices. The derivative contract may also refer to anindex, a basket of prices or other items like emissions trading or weather conditions.

5.202 Financial derivatives can be categorised by instru-

ment such as options, forwards and credit derivatives, or by market risk as currency swaps, interest
rate swaps, etc.

Options5.203 Definition: options are contracts which give theholder of the option the right, but not the obligation, to purchase from or sell to the issuer of theoption an asset at a predetermined price within agiven time span or on a given date.
The right to purchase is known as a call option, andthe right to sell is known as a put option.

5.204 The purchaser of the option pays a premium (theoption price) for the commitment of the option
writer to sell or purchase the specified amount of
the underlying asset at the agreed price. The premium is a financial asset of the option holder and aliability of the option writer. The premium can beconceptually considered to include a service charge,
which is to be recorded separately. However, in theabsence of detailed data, assumptions should be

European system of accounts — ESA 2010

Financial transactions

avoided as much as possible when identifying theservice element.

party (as an asset) and a corresponding negative value (as a liability) for the other. Such positions may switch between the parties, depending on market developments in the underlying
asset in relation to the strike price in the contract. This characteristic makes it impractical toidentify transactions in assets separately fromtransactions in liabilities. Unlike other financial instruments, transactions in forwards are
therefore normally reported net over assets andliabilities. In the case of an option, the buyer isalways the creditor and the writer always the
debtor;5.205 Warrants are a form of options. They give theholder the right but not the obligation to purchase from the issuer of the warrant a certain number of shares or bonds under specified conditions
for a specified period of time. There are also currency warrants based on the amount of one currency required to purchase another and cross-currency warrants tied to third currencies as well as
index-, basket- and commodity-warrants.

5.206 The warrant may be detachable and traded sepa-

rately from the debt security. As a result, two separate financial instruments are recorded in principle, the warrant as a financial derivative and thebond as a debt security. Warrants with embedded
derivatives are classified according to their primarycharacteristics.

Forwards

5(c) at maturity, redemption is unconditional for a
forward, whereas for an option it is determinedby the buyer of the option. Some options are
redeemed automatically when they are positiveat maturity.

Swaps

5.207 Definition: forwards are financial contracts underwhich two parties agree to exchange a specified
quantity of an underlying asset at an agreed price(the strike price) on a specified date.

5.208 Futures are forward contracts traded on organised

exchanges. Futures and other forward contracts are
typically, but not always, settled by the payment ofcash or the provision of some other financial asset
rather than the delivery of the underlying asset,
and, therefore, are valued and traded separatelyfrom the underlying item. Common forward-type
contracts include swaps and forward rate agreements (FRAs).

Options vis-à-vis forwards
5.209 Options can be contrasted with forwards in that:(a) at inception, there is usually no up-front payment for a forward contract and the derivative
contract begins with zero value; in the case ofan option, a premium is paid when the contract is taken out, and at inception the contract
is valued at the amount of the premium;(b) as market prices, interest rates or exchange rates
change during the life of a forward contract, thecontract may take on a positive value for one

European system of accounts — ESA 2010

5.210 Definition: swaps are contractual arrangements

between two parties who agree to exchange,over time and according to predetermined rules,
streams of payment on an agreed notional amountof principal. The most common types are interest
rate swaps, foreign exchange swaps and currency
swaps.

5.211 Interest rate swaps are an exchange of interest pay-ments of different character on a notional amountof principal, which is never exchanged. Examplesof the types of interest rate swapped are fixed rate,
floating rate and rates denominated in a currency.
Settlements are often made through net cash payments amounting to the current difference between
the two interest rates stipulated in the contract
applied to the agreed notional principal.

5.212 Foreign exchange swaps are transactions in for-eign currencies at a rate of exchange stated in thecontract.

5.213 Currency swaps involve an exchange of cash flows

related to interest payments and an exchange ofprincipal amounts at an agreed exchange rate at theend of the contract.

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Financial transactions

Forward rate agreements (FRAs)
5.214 Definition: FRAs are contractual arrangements inwhich two parties, to protect themselves againstinterest rate changes, agree on an amount ofinterest to be paid, at a specified settlement date,on a notional amount of principal that is neverexchanged. FRAs are settled by net cash payments
in a similar way as interest rate swaps. The payments are related to the difference between the forward rate agreement rate and the prevailing market
rate at the time of settlement.

Credit derivatives
5.215 Definition: credit derivatives are financial deriv-(b) a particular debt instrument, typically a debt
security or a loan, goes into default. As withswap contracts, the buyer of the CDS, (regarded
as the risk seller), makes a series of premium
payments to the seller of the CDS (regarded as
the risk buyer).
5.219 Where there is no default on the associated unit or

the debt instrument, the risk seller continues paying premiums until the end of the contract. If there
is a default, the risk buyer compensates the risk
seller for the loss, and the risk seller ceases to pay
premiums.

atives the primary purpose of which is to tradecredit risk.

Financial instruments not included in financial
derivatives

Credit derivatives are designed for trading in loanand security default risk. Credit derivatives may
take the form of forward-type or option-type contracts and, like other financial derivatives, are frequently drawn up under standard legal agreements
which facilitate market valuation. Credit risk istransferred from the risk seller, who is buying protection, to the risk buyer, who is selling protection,
in exchange for a premium.

5.220 Financial derivatives do not include:

5.216 The risk buyer pays cash to the risk seller in theevent of a default. A credit derivative may also be
settled by the delivery of debt securities throughthe unit that has defaulted.

5.217 Types of credit derivatives are credit default

options, credit default swaps (CDS) and total returnswaps. A CDS index as a traded credit derivativeindex reflects the development of CDS premiums.

Credit default swaps
5.218 Definition: credit default swaps (CDS) are credit

insurance contracts. They are intended to coverlosses to the creditor (buyer of a CDS) when:(a) a credit event occurs in relation to a reference
unit, rather than being associated to a particular debt security or loan. A credit event affecting the reference unit of concern may be adefault, but also a failure to make a payment onany (qualifying) liability that has become due

150

as in cases such as debt restructuring, breach ofcovenants, and others;(a) the underlying instrument upon which thefinancial derivative is based;(b) structured debt securities that combine a debt
security, or a basket of debt securities, with afinancial derivative or a basket of financial
derivatives, where the derivatives are inseparable from the debt security and the principal
initially invested is large compared to the prospective returns from the embedded financial
derivatives. Financial instruments where small
principal amounts are invested relative to theprospective returns, and which are fully at risk,
are classified as financial derivatives. Financial
instruments where the debt security component and the financial derivative component
are separable from each other are classified
accordingly;(c) repayable margin payments related to financial derivatives are classified in other deposits
or loans depending on the institutional units
involved. However, non-repayable margin payments, reducing or eliminating the asset/liability positions which may emerge during the lifeof the contract, are treated as settlements under
the contract, and classified as transactions infinancial derivatives;(d) secondary instruments, which are not negotiable and cannot be offset on the market; andEuropean system of accounts — ESA 2010

Financial transactions(e) gold swaps, which have the same nature as
securities repurchase agreements.

Employee stock options (F.72)
5.221 Definition: employee stock options are agreements

made on a given date under which an employee
has the right to purchase a given number of sharesof the employer’s stock at a stated price either at astated time or within a period of time immediately
following the vesting date.
The following terminology is used:the date of the agreement is the ‘grant date’;
the purchase price agreed is the ‘strike price’;the agreed first date of purchase is the ‘vesting date’;
the period after the vesting date in which the purchase can be made is the ‘exercise period’.

5.222 Transactions in employee stock options arerecorded in the financial account as the counterpart
to the element of compensation of employees represented by the value of the stock option. The valueof the option is spread over the period between the
grant date and vesting date; if the detailed data arelacking, they are to be recorded at the vesting date.
Thereafter, transactions are recorded at exercise
date or, if they are tradable and are actually traded,between the vesting date and the end of the exercise period.

Valuation of transactions in financial derivatives andemployee stock options
5.223 Secondary trade in options and closing out options

prior to delivery involve financial transactions.
If an option proceeds to delivery, it may be exercised or not exercised. In cases where the option is
exercised, there may be a payment from the option
writer to the option holder equal to the difference
between the prevailing market price of the underlying asset and the strike price, or, alternatively,
there may be an acquisition or sale of the underlying financial or non-financial asset recorded at
the prevailing market price and a counterpart payment between the option holder and the option
writer equal to the strike price. The difference
between the prevailing market price of the underlying asset and the strike price is in both cases equal

European system of accounts — ESA 20105

to the liquidation value of the option, which is theoption price on the terminal date. In cases where
the option is not exercised, no transaction takes
place. However, the option writer makes a holding
gain and the option holder makes a holding loss
(in both cases equal to the premium paid when thecontract was taken out) to be recorded in the revaluation account.
5.224 The transactions recorded for financial derivatives

include any trading in the contracts as well as the
net value of settlements made. There may also be
the need to record transactions associated with theestablishment of derivative contracts. However, inmany cases, the two parties will enter into a derivative contract without any payment by one party
to the other; in such cases the value of the transaction establishing the contract is nil and nothing isrecorded in the financial account.

5.225 Any explicit commissions paid or received frombrokers or intermediaries for arranging options,futures, swaps, and other derivatives contracts aretreated as payments for services in the appropriate accounts. The parties to a swap are not considered to be providing a service to each other,
but any payment to a third party for arranging theswap is treated as payment for a service. Undera swap arrangement, where principal amounts
are exchanged the corresponding flows are to berecorded as transactions in the underlying instrument; streams of other payments are to be recorded
under the financial derivatives and employee stock
options (F.7) category. While the premium paid
to the seller of an option can conceptually be considered to include a service charge, in practice it isusually not possible to distinguish the service element. Therefore, the full price is to be recorded asacquisition of a financial asset by the buyer and as
incurrence of a liability by the seller.

5.226 Where contracts do not involve an exchange ofprincipal, no transaction is recorded at inception. In both cases, implicitly, a financial derivative with a zero initial value is created at that point.
Subsequently, the value of a swap will be equal toone of the following:(a) for principal amounts, the current market
value of the difference between the expected
future market values of the amounts to be

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Financial transactions

re-exchanged and the amounts specified in thecontract; and(b) for other payments, the current market value ofthe future streams specified in the contract.
5.227 Changes in the value of the financial derivative

over time are recorded in the revaluation account.

5.228 Subsequent re-exchanges of principal will be gov-

erned by the terms and conditions of the swap
contract and may imply financial assets being
exchanged at a price different from the prevailingmarket price of such assets. The counterpart payment between the parties to the swap contract willbe that specified within the contract. The difference
between the market price and the contract price isthen equal to the liquidation value of the asset/liability as it applies on the due date and is recorded asa transaction in financial derivatives and employee
stock options (F.7). In total, transactions in financial derivatives and employee stock options mustmatch the total revaluation gain or loss throughout
the duration of the swap contract. This treatment
is analogous to that set out with respect to options,which proceed to delivery.

5.229 For an institutional unit, a swap or a forward

rate agreement is recorded under the item financial derivatives and employee stock options on
the assets side where it has a net asset value.
Where the swap has a net liability value, it is also
recorded on the asset side by convention to avoid
flipping between the asset and the liability side.
Accordingly, negative net payments increase thenet value.

Other accounts receivable/payable (F.8)
5.230 Definition: other accounts receivable/payable arefinancial assets and liabilities created as counterparts to transactions where there is a timing difference between these transactions and the corresponding payments.

5.231 Other accounts receivable/payable include transac-

tions in financial claims which stem from the earlyor late payment for transactions in goods or services, distributive transactions or financial transactions on the secondary market.

152

5.232 Financial transactions in other accounts receiva-

ble/payable comprise:(a) Trade credits and advances (F.81); and(b) Other accounts receivable/payable, excluding
trade credits and advances (F.89).

Trade credits and advances (F.81)
5.233 Definition: trade credits and advances are financial

claims arising from the direct extension of creditby the suppliers of goods and services to their customers, and advances for work that is in progress
or is yet to be undertaken, in the form of prepayment by customers for goods and services not yet
provided.

5.234 Trade credits and advances arise when payment forgoods or services is not made at the same time as
the change in ownership of a good or provision ofa service. If a payment is made prior to the changeof ownership, there is an advance.

5.235 FISIM accrued but not yet paid is included withthe corresponding financial instrument, usuallyinterest, and prepayment of insurance premiums is
included in insurance technical reserves (F.61); in
neither case is there an entry in trade credits andadvances.

5.236 The trade credits and advances subcategory

includes:(a) financial claims relating to the delivery of goods
or services where payment has not taken place;(b) trade credits accepted by factoring corporations except when regarded as a loan;(c) rent of buildings accruing over time; and(d) arrears concerning the payment of goods andservices, when not evidenced by a loan.
5.237 Trade credits are to be distinguished from tradefinance in the form of trade bills, and credit provided by third parties to finance trade.

5.238 Trade credits and advances do not include loans tofinance trade credits. They are classified in loans.

5.239 Trade credits and advances may be divided by orig-

inal maturity into short-term and long-term tradecredits and advances.

European system of accounts — ESA 2010

Financial transactions

Other accounts receivable/payable, excluding tradecredits and advances (F.89)

reinvested in the financial asset, it is classified inother accounts receivable/payable.

5.240 Definition: other accounts receivable/payable are

5.243 For securities lending and gold loan fees, which

financial claims arising from timing differences
between distributive transactions or financialtransactions on the secondary market and the corresponding payments.

are treated as interest, the corresponding entries
are included under other accounts receivable/payable, rather than with the instrument to which they
relate.

5.241 Other accounts receivable/payable include finan-

5.244 Other accounts receivable/payable do not include:

cial claims created as a result of the timing difference between accrued transactions and payments
made in respect of, for example:(a) wages and salaries;(b) taxes and social contributions;(c) dividends;(d) rent; and(e) purchase and sale of securities.

5.242 Interest accrued and arrears are recorded with thefinancial asset or liability on which they accrue,and not as other accounts receivable/payable.
If the interest accrued is not recorded as being

European system of accounts — ESA 20105(a) statistical discrepancies other than timing differences between transactions in goods andservices, distributive transactions or financialtransactions and the corresponding payments;(b) early or late payment in the creation of financial assets or the redemption of liabilities otherthan those classified in other accounts receivable/payable. These early or late payments areclassified in the relevant instrument category;(c) the amounts of taxes and social contributions payable to the general government to be
included under other accounts receivable/payable omits that part of these taxes and social
contributions which is unlikely to be collected,
and which therefore represents a general government claim of no value.

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Annex 5.1

Annex 5.1
Classification of financial transactions

5.A1.01 Financial transactions may be classified accord-

ing to different criteria: by type of financial instrument, negotiability, type of income, maturity, currency and type of interest.

Classification of financial transactions by
category
5.A1.02 Financial transactions are classified in categories

and subcategories as shown in Table 5.3. This classification of the transactions in financial assets andliabilities corresponds to the classification of financial assets and liabilities.

Table 5.3 — Classification of financial transactions
Category
Monetary gold and special drawing rights (SDRs)

Code
F.1

Monetary gold

F.11

Special drawing rights (SDRs)

F.12

Currency and deposits

F.2

Currency

F.21

Transferable deposits

F.22

Other deposits

F.29

Debt securities

F.3

Short-term

F.31

Long-term

F.32

Loans

F.4

Short-term

F.41

Long-term

F.42

Equity and investment fund shares or units

F.5

EquityF.51

Listed shares

F.511

Unlisted shares

F.512

Other equity

F.519

Investment fund shares or units
Money market fund shares or units (MMFs)

F.521

Non-MMF investment fund shares/units

F.522

Insurance, pension and standardised guaranteed schemes

F.6

Non-life insurance technical reserves

F.61

Life insurance and annuity entitlements

F.62

Pension entitlements

F.63

Claims of pension funds on pension managers

F.64

Entitlements to non-pension benefits

F.65

Provisions for calls under standardised guarantees

F.66

Financial derivatives and employee stock options

154

F.52

F.7

European system of accounts — ESA 2010

Annex 5.1

Category

Code

Financial derivatives other than employee stock options

F.71

Employee stock options

F.72

Other accounts receivable/payable

F.8

Trade credits and advances

F.81

Other accounts receivable/payable, excluding trade credits and advances

F.89

5.A1.03 The classification of financial transactions and of

financial assets and liabilities is based primarily on
the liquidity, the negotiability and the legal characteristics of the financial instruments. The definitions of the categories are in general independent of the classification of institutional units. The
classification of financial assets and liabilities canbe further detailed by a cross-classification by institutional unit. An example is the cross-classificationof transferable deposits between deposit taking
corporations, other than the central bank, as interbank positions.

Classification of financial transactions by
negotiability
5.A1.04 Financial claims can be distinguished bywhether they are negotiable or not. A claim isnegotiable if its ownership is readily capable ofbeing transferred from one unit to another by
delivery or endorsement or of being offset in
the case financial derivatives. While any financial instrument can be potentially traded, negotiable instruments are designed to be traded onan organised exchange or ‘over-the-counter’,although actual trading is not a necessary condition for negotiability. Necessary conditions ofnegotiability are:(a) transferability or offsetability in the case offinancial derivatives;(b) standardisation often evidenced by fungibility
and eligibility of an ISIN code; and(c) that the holder of an asset does not retain theright of recourse against the previous holders.
5.A1.05

Securities, financial derivatives and employee
stock options (AF.7) are negotiable financial
claims. Securities include debt securities (AF.3),
listed shares (AF.511), unlisted shares (AF.512),and investment fund shares (AF.52). Financial
derivatives and employee stock options are not
European system of accounts — ESA 2010

5classified as securities even if they are negotiablefinancial instruments. They are linked to specific financial or non-financial assets or indicesthrough which financial risks can be traded infinancial markets in their own right.
5.A1.06 Monetary gold and SDRs (AF.1), currency

and deposits (AF.2), loans (AF.4), other equity(AF.519), insurance, pension and standardisedguarantee schemes (AF.6) and other accounts
receivable/payable (AF.8) are not negotiable.

Structured securities
5.A1.07

Structured securities typically combine a security, or a basket of securities, with a financial
derivative, or a basket of financial derivatives.
Financial instruments which are not structured
securities are, for instance, structured deposits
which combine characteristics of deposits andof financial derivatives. While debt securities
typically involve payment at inception of a principal to be repaid, financial derivatives do not.

Classification of financial transactions bytype of income
5.A1.08 Financial transactions are classified by the typeof income they generate. The linking of income
with the corresponding financial assets and liabilities facilitates calculation of rates of return.
Table 5.4 shows the detailed classification bytransaction and by income type. While monetary gold and SDRs, deposits, debt securities, loans and other accounts receivable/payable accrue interest, equity pays predominantly
dividends, reinvested earnings or withdrawals
from income of quasi-corporations. Investment
income is attributable to holders of investment
fund shares and of insurance technical reserves.
The remuneration related to the participation ina financial derivative is not recorded as income,because no principal amount is provided.

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Annex 5.1

Table 5.4 — Classification of financial transactions by type of income
Financial transactions

Code

Type of income

Monetary gold and special drawing rights (SDRs)

F.1

Interest

Currency

F.21

None

Transferable deposits

F.22

Interest

D.41

Other deposits

F.29

Interest

D.41

Debt securities

F.3

Interest

D.41

Loans

F.4

Interest

D.41

EquityF.51

Distributed income of corporations

D.42

Reinvested earnings

D.43

F.511

Dividends

D.421

F.512

Reinvested earnings

D.43

Withdrawals from income of quasi-corporations

D.422

Reinvested earnings

D.43

Dividends

D.421

Investment income attributable to investment
fund shareholders

D.443

Investment income attributable to insurance
policy holders

D.441

Investment income payable on pension
entitlements

D.442

Listed and unlisted shares

Other equity

Investment fund shares or units

F.519

F.52

Insurance, pension and standardised guarantee
schemes

F.6

Financial derivatives and employee stock options

F.7

None

Other accounts receivable/payable

F.8

Interest

Classification of financial transactions bytype of interest rate

D.41

D.41

5.A1.12

5.A1.09 Financial assets and liabilities accruing interest

may be broken down by the type of interest rate
namely fixed, variable, or mixed interest rates.

5.A1.10

5.A1.11156

Code

For financial instruments with a fixed interest
rate the contractual nominal interest payments
are fixed in terms of the currency of denomination for the life of the financial instrument or fora certain number of years. At the date of inception, from the debtor’s perspective, the timing
and value of interest payments and principal
repayments are known.
For financial instruments with a variable interest
rate, interest and principal payments are linked
to an interest rate, general price index for goods
and services or asset price. The reference value
fluctuates in response to market conditions.

Mixed interest rate financial instruments haveboth a fixed and a variable interest rate overtheir life and are classified as variable interest
rate financial instruments.

Classification of financial transactions bymaturity
5.A1.13

For the analysis of interest rates, asset yields,
liquidity or debt servicing capacity, a breakdown of financial assets and liabilities by a rangeof maturities may be required.

Short-term and long-term maturity
5.A1.14 Definition: a financial asset or liability withshort-term maturity is repayable on demand at
the request of the creditor, or in one year or less. A
financial asset or liability with long-term maturity
is repayable at some date beyond one year, or has
no stated maturity.

European system of accounts — ESA 2010

Annex 5.1

may be broken down by the currency in which
they are denominated.

Original maturity and remaining maturity
5.A1.15 Definition: the original maturity of financial

assets or liabilities is defined as the period from theissue date until the final scheduled payment date. A
remaining maturity of financial assets or of liabilities is defined as the period from the reference dateuntil the date of the final scheduled payment.

5.A1.16

5.A1.17

The original maturity concept is helpful inunderstanding debt issuance activity. Therefore,
debt securities and loans are split by original
maturity into short-term and long-term debt
securities and loans.

5.A1.18

5.A1.19

Many of the categories, subcategories and subpositions of the financial assets and liabilities

European system of accounts — ESA 2010

Financial assets or liabilities in foreign currency
include financial assets or liabilities denominated in a currency basket, for example SDRs
and financial assets or liabilities denominated ingold. A distinction between national currency
and foreign currencies is particularly useful for
currency and deposits (AF.2), debt securities(AF.3) and loans (AF.4).

5.A1.20 The currency of settlement may be different

from the currency of denomination. The currency of settlement refers to the currency into
which the value of positions and flows of financial instruments such as securities are converted
each time settlement occurs.

Remaining maturity is more relevant to analysis
of debt positions and debt servicing capabilities.

Classification of financial transactions by
currency

5

Measures of money
5.A1.21

Monetary policy analysis may require measuresof money such as M1, M2 and M3 to be identified in the financial account. Measures of money
are not defined in the ESA 2010.

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6

CHAPTER 6
Other flows
Introduction
6.01

Other flows are changes in the value of assets andliabilities that do not result from transactions.
The reason that these flows are not transactions
is linked to their not meeting one or more of thecharacteristics of transactions, for example, theinstitutional units involved may not be acting by
mutual agreement, as in the case of an uncompensated seizure of assets, or the change may be due toa natural event such as an earthquake rather thana purely economic phenomenon. Alternatively, thevalue of an asset expressed in foreign currency may
change as a result of an exchange rate change.

6.04

Other changes in the volume of assets and liabilities also include the effect of exceptional, unanticipated external events that are not economic innature, and changes resulting from reclassification
or restructuring of institutional units or assets andliabilities.
6.05

Other changes in assets and liabilities
6.02(b) economic disappearance of non-produced
assets (K.2);(c) catastrophic losses (K.3);(d) uncompensated seizures (K.4);

Two types of other changes are distinguished. The
first consists of changes in the volume of assets andliabilities. The second is through nominal holding
gains and losses.

6.03

In the capital account, produced and non-produced assets may enter and leave a sector throughacquisitions and disposals of assets, consumptionof fixed capital or additions to, withdrawals fromand recurrent losses from inventories. In the financial account, financial assets and liabilities enter thesystem when a debtor accepts a future obligation to
pay a creditor, and leave the system when this obligation has been fulfilled.

European system of accounts — ESA 2010

Other changes in the volume of assets and liabilities cover six categories:(a) economic appearance of assets (K.1);

Definition: other changes in assets and liabilities
are economic flows, other than those that occur
through transactions recorded in the capital andfinancial accounts, that change the value of assets
and liabilities.

Other changes in the volume of assets andliabilities (K.1 to K.6)

Other changes in the volume of assets and liabilities include flows that allow assets and liabilities
to enter or leave the accounts other than by transactions — for example, entrances and exits of the
discovery, depletion and degradation of natural
assets.

(e) other changes in volume not elsewhere classified (K.5); and(f) changes in classification (K.6).

Economic appearance of assets (K.1)
6.06

Economic appearance of assets is the increase in
the volume of produced and non-produced assetsthat is not the result of production. Included are:(a) historic monuments, e.g. those structures orsites with special archaeological, historical orcultural significance, when their value is firstrecognised in the balance sheet;(b) valuables, such as precious stones, antiques
and art objects, when the high value or artistic

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Other flows

significance of an object not already recordedin the balance sheet is first recognised;(g) initial appearance of value from granting transferable contracts, leases, licences or permits.
The value in such contracts, leases, licences or
permits represents an asset when the value ofthe entitlement they give exceeds the fees payable and the holder can realise this by transferring them to others; and(c) discoveries of exploitable subsoil resources
such as proven reserves of coal, oil, natural gas,
metallic or non-metallic minerals. This also
covers the upwards reappraisals of the value ofreserves when exploitation becomes economically viable as a result of technological progressor relative price changes;(d) natural growth of uncultivated biologicalresources, such as natural forests and the stockof fish, where the growth in such economic
assets is not under the direct control, responsibility and management of an institutional unit
and thus not treated as production;(e) transfers of other natural resources to economic activity: natural resources that change
status to qualify as economic assets. Examples
include the initial exploitation of virgin forests,
transfer of land from a wild or waste state toland that can be put to economic use, land reclamation and initial charging for extraction ofwater. The natural resources may also acquirevalue due to economic activity in the vicinity,
for example, land may be recognised as valuable because of a nearby development or creation of an access road. The cost of land improvements is recorded as gross fixed capital formation but any excess in the increase of value ofthe land over the value of the land improvements is recorded as economic appearance;(f) quality changes in natural assets due to changes
in economic uses. Changes in quality arerecorded as changes in volume. The qualitychanges recorded here occur as the counterpartof the changes in economic use that are shown
as changes in classification (see paragraph6.21). For example, the reclassification of cultivated land to land underlying buildings may
result in an increase in value as well as a change
in classification. In this case the asset is alreadywithin the asset boundary and it is the change
in quality of the asset due to the change of economic use that is regarded as the appearanceof an asset. Another example is the increase invalue of dairy cattle when sent to slaughter earlier than expected;160(h) changes in the value of goodwill and marketing assets, which materialises when institutional units are sold at prices that exceed theirown funds (see paragraph 7.07); the excess ofpurchase price over own funds is referred toas purchased goodwill and marketing assets.
Goodwill not evidenced by a sale/purchase is
not considered as an economic asset.

Economic disappearance of non-produced assets
(K.2)
6.07

Economic disappearance of non-produced nonfinancial assets includes:(a) depletion of natural resources, which covers
the reduction of the value of deposits of subsoil
assets, and the depletion of uncultivated biological resources included in the asset boundary(see point (e) of paragraph 6.06) as a result of
harvesting, forest clearance or use beyond sustainable levels of extraction. Many of the possible entries here are the opposite of the entries
described in points (c) to (f) of paragraph 6.06;(b) other economic disappearance of non-produced assets, which covers:(i) the writing-down of the value of purchased goodwill and marketing assets; and(ii) the expiration of the advantages given by transferable contracts, leases, licences and permits.

Catastrophic losses (K.3)
6.08

Catastrophic losses recorded as other changes involume result from large-scale, discrete and recognisable events that destroy economic assets.

6.09

Such events include major earthquakes, volcanic
eruptions, tidal waves, exceptionally severe hurricanes, drought and other natural disasters; acts ofwar, riots and other political events; and technological accidents such as major toxic spills or release ofEuropean system of accounts — ESA 2010

Other flows

radioactive particles into the air. Examples of such
events are:resulting from, for example, the introduction of
improved technology;(a) deterioration in the quality of land caused byabnormal flooding or wind damage;(b) differences between allowances included inconsumption of fixed capital for normal damage and actual losses. Consumption of fixed
capital does not cover unforeseen damage, andthe amount estimated for normally expected
damage may fall short or exceed the actual
damage. Adjustments must, therefore, be madefor the unforeseen decline or increase in thevalue of the fixed assets due to such events. The
losses adjusted for here are not sufficiently large
to be considered catastrophic;(b) destruction of cultivated assets by drought oroutbreak of disease;(c) destruction of buildings, equipment or valuables in forest fires or earthquakes; and(d) accidental destruction of currency or bearer
securities as a result of natural catastrophes orpolitical events, or destruction of evidence ofownership.

(c) degradation of fixed assets not accounted forin consumption of fixed capital. This covers
the decline in the value of fixed assets from, forexample, the unforeseen effects of acidity in air
and rain on building surfaces or vehicle bodies;

Uncompensated seizures (K.4)
6.10

6.11

Uncompensated seizures occur when governments
or other institutional units take possession of theassets of other institutional units, including nonresident units, without full compensation, for reasons other than the payment of taxes, fines or similar levies. The seizure of property related to criminal activity is considered to be a fine. The uncompensated part of such unilateral seizures is recorded
as other change in volume.
Foreclosures and repossessions of assets by creditors are not recorded as uncompensated seizures
because, either explicitly or by general understanding, the agreement between the parties provides forthis avenue of recourse.

Other changes in volume not elsewhere classified
(K.5)
6.12

6.13

Other changes in volume not elsewhere classified(K.5) are the effects of unexpected events on theeconomic value of assets.
Examples of other changes in volume not elsewhere classified of non-financial assets include:(a) unforeseen obsolescence. Assumptions used inderiving consumption of fixed capital will notcover unforeseen obsolescence in fixed assets.
The amount included for their expected obsolescence may fall short of the actual obsolescence. Entries must, therefore, be madefor the decline in the value of the fixed assets

European system of accounts — ESA 20106(d) abandonment of production facilities before
completion or being brought into economicuse;(e) exceptional losses in inventories (e.g. from firedamage, robberies, or insect infestation of grain
stores) that are not considered as catastrophic
losses.
6.14

Examples of other changes in volume not elsewhere classified concerning financial assets and liabilities include:(a) losses of currency or bearer securities for reasons (such as fire damage or theft) that are
not considered catastrophic, and currency
withdrawn from circulation that is no longer
exchangeable, excluding amounts where there
has been a change in classification from currency to valuables;(b) changes in financial claims resulting fromwrite-offs. These are excluded from the financial account because there is no mutual agreement between the parties. Specifically, a creditor may decide that a financial claim can nolonger be collected, for example because ofbankruptcy or liquidation, and removes theclaim from their balance sheet. The creditor’srecognition that the claim is uncollectable isrecorded as other changes in the volume ofassets. The corresponding liability must also be

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Other flows

removed from the balance sheet of the debtor
to maintain balance in the accounts of the total
economy. An exception to this general principle is made for taxes and social contributions
payable to general government (see point (d) ofparagraph 6.15);(c) changes of life insurance, annuity entitlements
and pension entitlements due to changes indemographic assumptions;

6.18

Changes in sector classification transfer the entirebalance sheet from one sector or subsector toanother. The transfer may result in consolidation
or deconsolidation of assets and liabilities, which isalso included in this category.

6.19

Changes in structure of institutional units coverappearance and disappearance of certain financial
assets and liabilities arising from corporate restructuring. When a corporation disappears as an independent legal entity because it is absorbed by one
or more corporations, all financial assets and liabilities, including shares and other equity that existed
between that corporation and those that absorbed
it, disappear from the system. However, the purchase of shares and other equity of a corporationas part of a merger is recorded as a financial transaction between the purchasing corporation andits previous owners. The replacement of existing
shares by shares in the purchasing corporation,
or a new corporation, is recorded as redemptionsof shares accompanied by the issue of new shares.
Financial assets and liabilities that existed between
the absorbed corporation and third parties remainunchanged and pass to the absorbing corporation.

6.20

Symmetrically, when a corporation is legally split
up into two or more institutional units, the appearance of financial assets and liabilities is recorded aschanges in sector classification and structure.

(d) provisions for calls under standardised guarantee schemes when the expected calls exceed the
expected receipts and recoveries.
6.15

Other changes in volume not elsewhere classified
exclude:(a) changes in financial claims resulting fromwrite-downs that reflect the actual market
values of tradable financial claims: these areaccounted for in the revaluation account;(b) cancellation of debt by mutual agreement
between debtor and creditor (debt cancellation
or debt forgiveness): this is recorded as a transaction between the creditor and the debtor (seepoint (f) of paragraph 4.165);(c) debt repudiation: the unilateral cancellation ofa liability by a debtor is not recognised;(d) taxes and social contributions payable to general government that general government unilaterally recognises as unlikely to be collected(see paragraphs 1.57, 4.27 and 4.82).

Changes in classification of assets and liabilities(K.62)
6.21

Changes in classification of assets and liabilities
occur where assets and liabilities appear under one
category in the opening balance sheet and anotherin the closing balance sheet. Examples include
changes in land use and conversions of dwellings
to commercial use or vice versa. In the case of land,
both entries (a negative entry for the old category,a positive one for the new category) are made withthe same value. Any change in land value resulting from this change in use is recorded as a volume
change rather than a revaluation and, hence, as an
economic appearance of assets or economic disappearance of non-produced assets.

6.22

Appearance or disappearance of monetary gold
held in the form of gold bullion cannot be createdby a financial transaction but enters or leaves the

Changes in classification (K.6)
6.16

Changes in classification comprise changes in sector classification and institutional unit structure,and changes in classification of assets and liabilities.

Changes in sector classification and institutional
unit structure (K.61)
6.17

162

Reclassifying an institutional unit from one sector to another transfers its entire balance sheet, e.g.
if an institutional unit classified in the households
sector becomes financially distinct from its owner,
it may qualify as a quasi-corporation and be reclassified in the non-financial corporations sector.

European system of accounts — ESA 2010

Other flows

system through other changes in the volume ofassets.
6.23

6.24

A special case of a change in classification occurs
for gold bullion. Gold bullion can be a financial
asset known as monetary gold, or a valuable known
as non-monetary gold, depending on the holder
and the motivation for the holding. Monetisationis the change in the classification of gold bullion
from non-monetary to monetary. Demonetisationis the change in the classification of gold bullion
from monetary to non-monetary.
Operations in relation to gold bullion are recorded
as follows.
(a) When a monetary authority sells gold bullion
that is a reserve asset to a non-resident institutional unit that is not a monetary authority or to a resident institutional unit, a transaction in non-monetary gold is recorded.
Demonetisation of gold as a change in the classification of gold bullion from monetary to
non-monetary occurs immediately before thetransaction and is recorded as other changes inthe volume of assets of the monetary authority.
(b) When a monetary authority purchases goldbullion from a non-resident or a resident institutional unit for its reserve assets and that gold
is not already a reserve asset, a transaction in
non-monetary gold is recorded. Monetisationof gold as a change in the classification ofgold bullion from non-monetary to monetary
occurs immediately after the transaction andis recorded as other changes in the volume ofassets of the monetary authority.

into shares, which is recorded as two financialtransactions.

Nominal holding gains and losses (K.7)
6.26

The revaluation account records the nominal holding gains and losses accruing during an accounting period to the owners of assets and liabilities,
reflecting changes in the level and structure of theirprices. Nominal holding gains and losses (K.7)
comprise neutral holding gains and losses (K.71)
and real holding gains and losses (K.72).

6.27

Definition: the nominal holding gains and losses(K.7) that relate to an asset are the increases ordecreases in the asset’s value accruing to its economic owner as a result of increases or decreases
in its price. The nominal holding gains and losses
that relate to a financial liability are the decreases
or increases in the liability’s valuation as a result of
decreases or increases to its price.

6.28

A holding gain arises from an increase in the valueof an asset or from a decrease in the value of a liability. A holding loss arises from a decrease in thevalue of an asset or an increase in the value of aliability.

6.29

The nominal holding gains and losses recordedin the revaluation account are those accruing on
assets or liabilities, whether realised or not. A holding gain is said to be realised when the asset in question is sold, redeemed, used or otherwise disposedof, or the liability repaid. An unrealised gain is one
accruing on an asset that is still owned or a liability
that is still outstanding at the end of the accounting
period. A realised gain is usually understood as thegain realised over the entire period over which theasset is owned or liability outstanding whether thisperiod coincides with the accounting period or not.
However, as holding gains and losses are recordedon an accruals basis, the distinction between realised and unrealised gains and losses, although useful for some purposes, does not appear in the classifications and accounts.

6.30

Holding gains and losses include the gains andlosses on all kinds of non-financial assets, financial assets and liabilities. Thus, holding gains andlosses on inventories of all kinds of goods held by(c) When buyer and seller are monetary authorities
of different economies and both hold the goldbullion as part of their reserve assets, there is atransaction in gold bullion, which is recordedin the financial account.
(d) In other cases, gold bullion is non-monetary
at all times and transactions in non-monetary
gold are recorded.
The above cases relating to a monetary authority
also apply to an international financial organisation.
6.25

Changes in classification of assets and liabilities
do not include the conversion of debt securities

European system of accounts — ESA 2010

6

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6

Other flows

producers, including work-in-progress, are also
covered.
6.31

6.32

(a) an asset held throughout the accounting
period: the nominal holding gain accruing during the accounting period is equal to the closing balance sheet value minus the opening balance sheet value minus any consumption of
fixed capital in the accounting period. These
values are the estimated values of the assets ifthey were to be acquired at the times the balance sheets are drawn up. The nominal gain isunrealised;Nominal holding gains and losses may accrue on
assets held or liabilities incurred for any length oftime during the accounting period and not merelyon assets or liabilities that appear in the opening
and/or closing balance sheets. The nominal holding gains and losses accruing to the owner of a particular asset or liability, or given quantity of a specific type of asset or liability, between two points oftime is defined as ‘the current value of that asset or
liability at the later point of time minus the current
value of that asset or liability at the earlier point oftime’, assuming that the asset or liability itself does
not change, qualitatively or quantitatively, duringthat time.

(b) an asset held at the beginning of the period thatis sold during the period: the nominal holding gain accruing is equal to the value at disposal minus the opening balance sheet value
minus any consumption of fixed capital in theaccounting period that occurs prior to the sale.
The nominal gain is realised;

The nominal holding gain (G) accruing on a given
quantity q of some asset between times o and t canbe expressed as follows: G = (pt - po) × q,(c) an asset acquired during the period and still
held at the end of the period: the nominal holding gain accruing is equal to the closing balance sheet value minus the value at acquisition
minus any consumption of fixed capital in theaccounting period. The nominal gain is unrealised; andwhere po and pt are the prices of the asset at timeso and t respectively. For financial assets and liabilities with fixed current values in the national currency, po and pt are unity by definition and thenominal holding gain are always zero.
6.33

6.34

6.35

164

To calculate nominal holding gains and losses,
acquisitions and disposals of assets must be valued in the same way they are recorded in the capital and financial accounts and stocks of assets must
be valued in the same way they are recorded in thebalance sheet. In the case of fixed assets, the valueof an acquisition is the amount paid by the purchaser to the producer, or seller, plus the associatedcosts of ownership transfer incurred by the purchaser. The value of a disposal of an existing fixed
asset is the amount received by the seller from thepurchaser minus the costs of ownership transfer
incurred by the seller.

(d) an asset acquired and disposed of during theaccounting period: the nominal holding gain
accruing is equal to the value at disposal minus
the value at acquisition minus any consumption of fixed capital in the accounting period
between acquisition and disposal. The nominal
gain is realised.
6.36

The nominal holding gains and losses included arethose accruing on assets and liabilities, whether
realised or not. They are recorded in the revaluation account of the sectors involved, the total economy and the rest of the world.

An exception to the case described in paragraph6.33 is where the price paid differs from the market value of the asset. In this case, a capital transfer is imputed for the difference between the pricepaid and the market value and the acquisition isrecorded at market value. This particularly occurs
in transactions involving non-market sectors.

Neutral holding gains and losses (K.71)
6.37

Definition: the neutral holding gains and losses(K.71) relate to assets and liabilities and are thevalue of the holding gains and losses that accrue if
the price of the asset or liability changes over timein the same proportion as the general price level.

Four different situations leading to nominal holding gains and losses are distinguished:

6.38

Neutral holding gains and losses are identified tofacilitate the derivation of real holding gains andEuropean system of accounts — ESA 2010

Other flows

6.39

losses, which redistribute real purchasing power
between sectors.

Holding gains and losses by types offinancial asset and liability

Let the general price index be denoted by r. The
neutral holding gain (NG) on a given quantity q ofan asset between times o and t is then given by thefollowing expression: NG = po × q (rt/ro - 1),

Monetary gold and SDRs (AF.1)

where po × q is the current value of the asset at timeo and rt/ro the factor of the change in the generalprice index between times o and t. The same term
rt/ro is applied to all assets and liabilities.
6.40

6.41

The general price index to be applied for the calculation of neutral holding gains and losses is a priceindex for final expenditure.
Neutral holding gains and losses are recordedin the neutral holding gains and losses account,which is a subaccount of the revaluation accountof the sectors, the total economy and the rest of theworld.

6.46

As the price of monetary gold is usually quoted in
US dollars, the value of monetary gold is subject tonominal holding gains and losses through changes
in the exchange rate as well as the price of the gold
itself.

6.47

As the SDRs represent a basket of currencies,
its value in national currency terms, and so thevalue of the holding gains and losses, varies withthe exchange rates of the currencies in the basket
against the national currency.

Currency and deposits (AF.2)
6.48

The current values of currency and deposits
denominated in national currency remain constantover time. The ‘price’ of such an asset is always
unity while the quantity is given by the numberof units of the currency in which they are denominated. The nominal holding gains and losses onsuch assets are always zero. For this reason, the difference between the values of the opening and closing stocks of such assets is, with the exception ofother changes in volume, entirely accounted for by
the values of the transactions in the assets. This isa rare case where it is normally possible to deduce
the transactions from the changes in balance sheet
figures.

6.49

The interest accruing on deposits is recorded in
the financial account as being simultaneously reinvested as deposits.

6.50

Holdings of foreign currency and deposits denominated in other currencies will register nominal holding gains and losses due to changes inexchange rates.

6.51

In order to calculate the neutral and real holding
gains and losses on assets of fixed current value,
data on the times and values of transactions areneeded as well as the opening and closing balance
sheet values. Suppose, for example, a deposit ismade and withdrawn within the accounting period
while the general price level is rising. The neutral
gain on the deposit is positive and the real gain
negative, the amount depending upon the length

Real holding gains and losses (K.72)
6.42

Definition: the real holding gains and losses (K.72)
relate to an asset or liability and are the difference
between the nominal and the neutral holding gains
and losses on that asset.

6.43

The real holding gain (RG) on a given quantity q ofan asset between times o and t is given by:
RG = G - NG
or RG = (pt/po - rt/ro) × po × q.

6.44

The values of the real holding gains and losses on
assets and liabilities thus depend on the movements of their prices over the period in question,
relative to movements of other prices, on average,
as measured by the general price index.

6.45

Real holding gains and losses are recorded in thereal holding gains and losses account, which is a
subaccount of the revaluation account.

European system of accounts — ESA 2010

6

165

6

Other flowsof time the deposit is outstanding and the rate of
inflation. It is impossible to record such real losses
without data on the value of the transactions during the accounting period and the times at which
they are made.
6.52

6.54

166

6.55

The prices of fixed-interest long-term debt securities also change, however, when the market rates
of interest change, the prices varying inverselywith the interest rate movements. The impact of agiven interest rate change on the price of an individual long-term debt security is lower the closer
the security is to maturity. Changes in prices oflong-term debt securities that are attributable tochanges in market rates of interest constitute priceand not quantum changes. They, therefore, generate nominal holding gains and losses for both theissuers and the holders of the debt securities. An
increase in interest rates generates a nominal holding gain for the issuer of the debt security and an
equal nominal holding loss for the holder, and viceversa in the case of a fall in interest rates.

6.56

Variable interest rate debt securities have their coupon or principal payments linked to a general priceindex for goods and services, such as the consumer
price index, an interest rate such as the Euribor, theLibor or a bond yield, or an asset price.

In general, it may be inferred that if the total absolute value of the positive and negative transactions
is large in relation to the opening and closing balance sheet levels, approximate estimates of theneutral and real holding gains and losses on financial assets and liabilities with fixed current values
derived from balance sheet data alone may not
be very satisfactory. Even recording the values offinancial transactions on a gross basis, i.e. recording deposits made and withdrawn separately as distinct from the total value of deposits minus withdrawals, may not be sufficient without informationon the timing of the deposits.

Debt securities (AF.3)
6.53

values due to the accumulation of accrued interest
are not price changes and do not generate holding
gains.

When a long-term debt security, such as a bond,is issued at premium or discount, including deep
discounted and zero coupon bonds, the difference
between its issue price and its face or redemption
value when it matures measures interest that theissuer is obliged to pay over the life of the debt security. Such interest is recorded as property income
payable by the issuer of the long-term debt security
and receivable by the holder of the debt security, in
addition to any coupon interest actually paid by theissuer at specified intervals over the life of the debt
security.
The interest accruing is recorded in the financial
account as being simultaneously reinvested in thedebt security by the holder of the debt security. It
is therefore recorded in the financial account as theacquisition of an asset, which is added to the existing asset. Thus the gradual increase in the market
value of a long-term debt security that is attributable to the accumulation of accrued reinvested
interest reflects a growth in the principal outstanding — that is, in the size of the asset. It is essentially a quantum or volume increase and not a priceincrease. It does not generate any holding gain forthe holder of the long-term debt security or a holding loss for the issuer. Debt securities change qualitatively over time as they approach maturity and
it is essential to recognise that increases in their

When the amounts of the coupon payments and/or the principal outstanding are linked to a generalor broad price index, the change in the value of theprincipal outstanding between the beginning andthe end of a particular accounting period due to the
movement in the relevant index is treated as interest accruing in that period, in addition to any interest due for payment in that period.
When indexation of the amounts to be paid atmaturity includes a holding gain motive, typicallyindexation based on a single, narrowly defined
item, any deviation of the underlying index fromthe originally expected path leads to holding gains
or losses, which will not normally cancel out overthe life of the instrument.
6.57

Nominal holding gains and losses may accrue on
short-term debt securities in the same way as forlong-term debt securities. However, as short-term
debt securities have much shorter times to maturity, the holding gains generated by interest ratechanges are generally much smaller than on longterm debt securities with the same face values.

European system of accounts — ESA 2010

Other flows

instrument, changes in the volatility of the priceof the underlying instrument, or approaching thedate of execution or maturity. All such changes invalue to financial derivatives and employee stock
options are to be regarded as price changes andrecorded as a revaluation.

Loans (AF.4)
6.58

The same situation as for currency and deposits applies for loans that are not traded. However,when an existing loan is sold to another institutional unit, the write-down of the loan, which isthe difference between the redemption price andthe transaction price, is recorded under the revaluation account of the seller and the purchaser at thetime of transaction.

Other accounts receivable/payable (AF.8)
6.63

Equity and investment fund shares (AF.5)
6.59

Bonus shares increase the number of shares andthe nominal value of the shares issued but do notby themselves alter the market value of the totality of shares. This also applies for a stock dividend
which is a pro-rata distribution of additional sharesof a corporation’s stock to owners of the common stock. Bonus shares and stock dividends do
not enter the accounts at all. However, such issues
are designed to improve the liquidity of the shareson the market and hence the total market value ofshares issued may rise as a result: any such change
is recorded as a nominal holding gain.

Insurance, pension and standardised guarantee
schemes (AF.6)
6.60

When the reserves and entitlements for insurance,
pension and standardised guarantee schemes aredenominated in national currency, there are nonominal holding gains and losses, just as there arenone for currency or deposits and loans. The assets
used by the financial institutions to meet the commitments are subject to holding gains and losses.

6.61

The liabilities to policy holders and beneficiaries
change as a result of transactions, other volume
changes and revaluations. Revaluations are due tochanges of key model assumptions in the actuarial
calculations. Those assumptions are the discountrate, the wage rate and the inflation rate.

Financial derivatives and employee stock options(AF.7)
6.62

6

The same situation as for domestic currency, deposits and loans applies for other accounts receivable/
payable, which are not traded. However, when an
existing trade credit is sold to another institutional
unit the difference between the redemption priceand the transaction price is recorded as revaluation
at the time of transaction. Nonetheless, as tradecredit generally has a short-term nature, the saleof a trade credit might imply the creation of a new
financial instrument.

Assets denominated in foreign currency
6.64

The value of assets and liabilities denominatedin foreign currency is measured by their current
market value in foreign currency converted into
national currency at the current exchange rate.
Nominal holding gains and losses may therefore
occur from both changes in the price of the asset
and the exchange rate. The total value of the nominal holding gains and losses accruing over theaccounting period is calculated by subtracting thevalue of transactions and other volume changes
from the difference between the opening and closing balance sheet values. For this purpose, transactions in assets and liabilities denominated in foreign currency are converted into the national currency using the exchange rates at the time the transactions occur, while the opening and closing balance sheet values are converted using the exchange
rates prevailing at the dates to which the balance
sheets relate. This implies that the total value of thetransactions as net acquisitions — acquisitions lessdisposals — expressed in foreign currency is, in
effect, converted by a weighted average exchange
rate in which the weights are given the values oftransactions conducted on different dates.

The value of financial derivatives may change asa result of changes in the value of the underlying

European system of accounts — ESA 2010167

Balance sheets

7

CHAPTER 7
Balance sheets
7.01.

Definition: a balance sheet is a statement, drawn up
for a particular point in time, of the values of assets
economically owned and of liabilities owed by an
institutional unit or group of units.

7.02

The balancing item of a balance sheet is called net
worth (B.90). The stock of the assets and liabilities recorded in the balance sheet are valued at theappropriate prices, which are usually the market
prices prevailing on the date to which the balance
sheet relates, but for some categories at their nominal values. A balance sheet is drawn up for resident institutional sectors and subsectors, the total
national economy and the rest of the world.

7.03

The balance sheet completes the sequence ofaccounts, showing the ultimate effect of the entries
in the production, distribution and use of income,and accumulation accounts on the stock of wealthof an economy.

7.04

For institutional sectors the balancing item on thebalance sheet is net worth.

7.05

For the total national economy the balancing item
is often referred to as national wealth — the total
value of non-financial assets, and net financial
assets with respect to the rest of the world.

7.06

The rest of the world balance sheet is compiled in
the same manner as the balance sheets of the resident institutional sectors and subsectors. It consists entirely of positions in financial assets andliabilities of non-residents vis-à-vis residents. In
the BPM6 the corresponding balance sheet drawn

European system of accounts — ESA 2010

from the viewpoint of residents vis-à-vis non-residents is called the international investment position (IIP).
7.07

Own funds are defined as the sum of net worth(B.90) plus the value of equity and investment fundshares (AF.5) as liabilities in the balance sheet.

7.08

For the non-financial corporations and financial
corporations sectors and subsectors, own funds isan analytically meaningful indicator similar to net
worth.

7.09

The net worth of corporations will usually be different from the value of their shares and other
equity issued. Quasi-corporations’ net worth iszero because the value of their owner’s equity is
assumed to be equal to its assets less its non-equity
liabilities. The net worth of resident direct investment enterprises, which are branches of non-resident enterprises and treated as quasi-corporations,is therefore also zero.

7.10

The balancing item of financial assets and liabilities
is called financial net worth (BF.90).

7.11

A balance sheet relates to the value of assets andliabilities at a particular moment of time. Balance
sheets are compiled at the beginning and end of an
accounting period; the opening balance sheet at the
beginning of the period is the same as the closingbalance sheet recorded at the end of the preceding
period.

7.12

A basic accounting identity links the value of thestock of a specific type of an asset as shown in the
opening balance sheet and the closing balance
sheet as follows:

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Balance sheets

the value of the stock of a specific type of asset in the opening balance sheet
the total value of that asset acquired in transactions that take place during
the accounting period

plus
minus

transactions

minus
plus
minus

the total value of that asset disposed of in transactions that take place
during the accounting period
consumption of fixed capital (if applicable)

other changes in the volume of assets

plus
revaluations
minus

other positive changes in volume affecting that asset
other negative changes in volume affecting that asset
the value of nominal holding gains accruing during the period resulting
from changes in the price of that asset
the value of nominal holding losses accruing during the period resulting
from changes in the price of that asset

equals the value of the stock of that asset in the closing balance sheet.

A table can also be drawn up, which links the valueof the stock of a specific type of a liability in the
opening balance sheet and the closing balance
sheet.
7.13

The accounting links between the opening balance sheet and the closing balance sheet via transactions, other changes in the volume of assets andliabilities, and holding gains and losses are shown
schematically in Annex 7.2.

Types of assets and liabilities

institutional unit entitled to claim the benefits associated with the use of the asset by virtue of accepting the associated risks.
7.18

Exclusions from the asset and liability
boundary
7.19

The assets recorded in the balance sheets are economic assets.

7.15

Definition: an economic asset is a store of value
representing the benefits accruing to the economic
owner by holding or using the entity over a periodof time. It is a means of carrying forward value
from one accounting period to another.

7.16

The economic benefits consist of primary incomessuch as operating surplus, where the economic
owner uses the asset, or property income, where
the economic owner lets others use it. The benefits
are derived from the use of the asset and the value,
including holding gains and losses, that is realisedby disposing of the asset or terminating it.

7.17

170

The economic owner of an asset is not necessarily the legal owner. The economic owner is the

Excluded from the asset and liability boundary are:(a) human capital;

Definition of an asset
7.14

An overview of the classification and coverage of
economic assets is given in Table 7.1. The detailed
definition of each asset category is set out in Annex
7.1.

(b) natural assets that are not considered as economic assets (e.g. air, river water);(c) consumer durables; and(d) contingent assets and liabilities, which are notfinancial assets and liabilities (see paragraph7.31).

Categories of assets and liabilities
7.20

Two main categories of entries in the balance sheets
are distinguished: non-financial assets (denoted asAN) and financial assets and liabilities (denoted as
AF).

7.21

Non-financial assets are divided into produced
non-financial assets (denoted as AN.1) and nonproduced non-financial assets (denoted as AN.2).

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Balance sheets

Produced non-financial assets (AN.1)
7.22

Definition: produced non-financial assets (AN.1)
are outputs from production processes.

7.23

The classification of produced non-financial assets(AN.1) is designed to distinguish among assets on
the basis of their role in production. It consists of:
fixed assets which are used repeatedly or continuously in production for more than one year; inventories which are used up in production as intermediate consumption, sold or otherwise disposedof; and valuables. Valuables are not used primarily for production or consumption, but are insteadacquired and held primarily as stores of value.

Non-produced non-financial assets (AN.2)
7.24

Definition: non-produced non-financial assets(AN.2) are economic assets that come into existence other than through processes of production.
They consist of natural assets, contracts, leases,
licences, permits, and goodwill and marketing
assets.

7.25

The classification of non-produced assets isdesigned to distinguish assets on the basis of how
they come into existence. Some of these assets exist
naturally, while others, which are known as constructs of society, come into existence by legal or
accounting actions.

7.26

The choice of which natural assets to include in thebalance sheet is determined, in compliance withthe general definition of an economic asset, bywhether the assets are subject to effective economic
ownership and are capable of bringing economic
benefits to their owners, given the existing technology, knowledge, economic opportunities, available
resources, and set of relative prices. Natural assets
where ownership rights have not been established,such as open seas or air, are excluded.

European system of accounts — ESA 2010

7.27

7

Contracts, leases, licences and permits are regarded
as non-financial assets only when a legal agreement
confers economic benefits on the holder in excess
of amounts payable under the agreement, and theholder can legally and practically realise such benefits by transferring them to others.

Financial assets and liabilities (AF)
7.28

Definition: financial assets (AF) are economic
assets, comprising all financial claims, equity andthe gold bullion component of monetary gold (paragraph 5.03). Liabilities are established when debtors are obliged to provide a payment or a series of
payments to creditors (paragraph 5.06).

7.29

Financial assets are stores of value representing
a benefit or series of benefits accruing to the economic owner through holding or using the assets
over a period of time. They are a means of carrying forward value from one accounting period toanother. Benefits are exchanged through means of
payments (paragraph 5.04).

7.30

Each financial asset has a counterpart liability, withthe exception of the gold bullion component ofmonetary gold, which is classified in the monetary
gold and special drawing rights (AF.1) category.

7.31

Contingent assets and contingent liabilities areagreements whereby one party is obliged to provide a payment or series of payments to anotherunit only if certain specific conditions prevail (paragraph 5.08). They are not financial assets andliabilities.

7.32

The classification of financial assets and liabilities
corresponds to the classification of financial transactions (paragraph 5.14). The definitions of the categories and subcategories of financial assets andliabilities and the supplementary explanations areprovided in Chapter 5 and not repeated here but
Annex 7.1 contains a summary of all assets and liabilities defined in the system.

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Balance sheets

Table 7.1 — Classification of assets
AN.

172

NON-FINANCIAL ASSETS (AN.1 + AN.2)

AN.1

Produced non-financial assets

AN.11

Fixed assets1

AN.111

Dwellings

AN.112Other buildings and structures

AN.1121

Buildings other than dwellings

AN.1122

Other structures

AN.1123

Land improvements

AN.113

Machinery and equipment

AN.1131Transport equipment

AN.1132

ICT equipment

AN.1139

Other machinery and equipment

AN.114

Weapons systems

AN.115

Cultivated biological resources

AN.1151

Animal resources yielding repeat products

AN.1152

Tree, crop and plant resources yielding repeat products

AN.117

Intellectual property products

AN.1171

Research and development

AN.1172

Mineral exploration and evaluation

AN.1173

Computer software and databases

AN.11731

Computer software

AN.11732

Databases

AN.1174

Entertainment, literary or artistic originals

AN.1179

Other intellectual property products

AN.12

Inventories

AN.121

Materials and supplies

AN.122Work-in-progress

AN.1221Work-in-progress on cultivated biological assets

AN.1222

Other work-in-progress

AN.123Finished goods

AN.124

Military inventories

AN.125

Goods for resale

AN.13

Valuables

AN.131

Precious metals and stones

AN.132

Antiques and other art objects

AN.133

Other valuables

AN.2

Non-produced non-financial assets

AN.21

Natural resources

AN.211Land

AN.2111Land underlying buildings and structures

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Balance sheets

AN.

NON-FINANCIAL ASSETS (AN.1 + AN.2)

AN.2112Land under cultivation

AN.2113

Recreational land and associated surface water

AN.2119

Other land and associated surface water

AN.212Mineral and energy reserves

AN.213

Non-cultivated biological resources

AN.214

Water resources

AN.215

Other natural resources

AN.2151

Radio spectra

AN.2159

Other

AN.22

Contracts, leases and licences

AN.221Marketable operating leases

AN.222

Permits to use natural resources

AN.223

Permits to undertake specific activities

AN.224

Entitlement to future goods and services on an exclusive basis

AN.23

Purchases less sales of goodwill and marketing assets

1

7

Memorandum item AN.m: consumer durables.

AF

FINANCIAL ASSETS2 (AF.1 + AF.2 + AF.3 + AF.4 + AF.5 + AF.6 + AF.7 + AF.8)

AF.1

Monetary gold and special drawing rights (SDRs)

AF.11

Monetary gold

AF.12

Special drawing rights (SDRs)

AF.2

Currency and deposits

AF.21

Currency

AF.22

Transferable deposits

AF.29

Other deposits

AF.3

Debt securities

AF.31

Short-term

AF.32

Long-term

AF.4

Loans

AF.41

Short-term

AF.42

Long-term

AF.5

Equity and investment fund shares or units

AF.51

EquityAF.511

Listed shares

AF.512Unlisted shares

AF.519Other equity

AF.52

Investment fund shares or units

AF.521

MMF shares/units

AF.522

Non-MMF investment fund shares/units

AF.6

Insurance, pension and standardised guarantee schemes

European system of accounts — ESA 2010

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Balance sheets

AF

FINANCIAL ASSETS2 (AF.1 + AF.2 + AF.3 + AF.4 + AF.5 + AF.6 + AF.7 + AF.8)

AF.61

Non-life insurance technical reserves

AF.62

Life insurance and annuity entitlements

AF.63

Pension entitlements

AF.64

Claims of pension funds on pension managers

AF.65

Entitlements to non-pension benefits

AF.66

Provisions for calls under standardised guarantees

AF.7

Financial derivatives and employee stock options

AF.71

Financial derivatives

AF.72

Employee stock options

AF.8

Other accounts receivable/payable

AF.81

Trade credits and advances

AF.89

Other accounts receivable/payable, excluding trade credit and advances

2

Memorandum items AF.m1: foreign direct investment; AF.m2: non-performing loans.

Valuation of entries in the balance
sheets

7.37(a) revaluing and accumulating acquisitions lessdisposals over the assets’ lifetimes; orGeneral valuation principles
7.33

7.34

The values recorded should reflect prices observable on the market on the date to which the balance
sheet relates. When there are no observable market prices, which may be the case if there is a market but no assets have recently been sold on it, estimates should be made of what the price would be if
the assets were acquired on the market on the date
to which the balance sheet relates.

7.35

Market prices are usually available for many financial assets and liabilities, existing real estate (buildings and other structures plus the underlying land),existing transport equipment, crops and livestock,
as well as for newly produced fixed assets andinventories.

7.36

174

Each item in the balance sheet is valued as if itwere being acquired on the date to which the balance sheet relates. Assets and liabilities are valued
at market prices on the date to which the balance
sheet relates.

Non-financial assets produced on own-accountshould be valued at basic prices or, if basic prices
are not available, at the basic prices of similar
goods, or, if this is not possible, at cost.

In addition to observed market prices, estimates
based on observed prices or costs incurred, valuesof non-financial assets may be estimated by:(b) the present value, i.e. the discounted value, offuture economic benefits.
7.38

Market valuation is the key principle for valuing
positions (and transactions) in financial instruments. Financial instruments are identical to financial claims. They are financial assets that have corresponding liabilities. The market value is that at
which financial assets are acquired or disposed of,
between willing parties, on the basis of commercial
considerations only, excluding commissions, fees
and taxes. In determining market values, trading
parties also take account of accrued interest.

7.39

Nominal valuation reflects the sum of funds originally advanced, plus any subsequent advances,less any repayments, plus any accrued interest.
Nominal value is not the same as face value.
(a) The nominal value in domestic currency of afinancial instrument denominated in foreign
currency includes holdings gains or losses arising from movements in exchange rates.
The value of financial instruments denominatedin foreign currency should be converted into

European system of accounts — ESA 2010

Balance sheets

the national currency at the market exchange
rate prevailing on the date to which the balance
sheet relates. This rate should be the mid-point
between the buying and the selling spot rates
for currency transactions.

7

Non-financial assets (AN)Produced non-financial assets (AN.1)
Fixed assets (AN.11)(b) For financial instruments like debt securities
linked to a narrow index, the nominal value
can also include holding gains or losses arisingfrom movements in the index.

(c) At any specific point in time, the market valueof a financial instrument may deviate from its
nominal value due to revaluations arising frommarket price changes. Movements in market
prices arise from general market conditions,such as changes in the market rate of interest, specific circumstances, such as changes in
the perceived creditworthiness of the issuer ofa debt security, and changes in general market
liquidity and in market liquidity that is specificto that debt security.

7.42Intellectual property products (AN.117)
7.43

Mineral exploration and evaluation (category
AN.1172) are valued either on the basis of theaccumulated amounts paid to other institutional
units conducting the exploration and evaluation,or on the basis of the costs incurred for exploration
undertaken on own-account. That part of exploration undertaken in the past that has not yet been
fully reduced should be revalued at the prices andcosts of the current period.

7.44

Originals of intellectual property products, such as
computer software and entertainment, literary or
artistic originals should be valued at the acquisition
price when traded on markets. The initial value isestimated by summing their costs of production,
appropriately revalued to the prices of the current
period. If it is not possible to establish the value by
this method, the present value of expected future
receipts arising from using the asset is estimated.

(d) Thus, the following basic equation applies topositions:market value = nominal value + revaluations
arising from market price changes.

7.40

7.41

For some non-financial assets, the revalued initialacquisition price reduces to zero over the asset’s
expected life. The value of such an asset, at any particular point of time, is given by its current acquisition price less the accumulated value of such
reductions.

Most fixed assets can be recorded in balance sheetsat current purchasers’ prices reduced for the accumulated consumption of fixed capital; this is
known as the written-down replacement cost. The
sum of the reduced values of all fixed assets still in
use is described as the net capital stock. The grosscapital stock includes the values of the accumulated consumption of fixed capital.

European system of accounts — ESA 2010

Fixed assets are recorded at market prices if possible (or basic prices in the case of own-accountproduction of new assets) or, if not possible, thenat purchasers’ prices at acquisition reduced by theaccumulated consumption of fixed capital. The
purchasers’ costs of transferring ownership of fixed
assets, appropriately reduced through consumption of fixed capital over the period the purchaser
expects to hold the economic asset, are included in
the balance sheet value.

Costs of ownership transfer on non-produced
assets (AN.116)
7.45

The costs of ownership transfer on non-produced
assets other than land are shown separately in thecapital account, and treated as gross fixed capitalformation, but in the balance sheets such costs areincorporated in the value of the asset to which they
relate even though the asset is non-produced. Thus,
there are no costs of ownership transfer shown separately in the balance sheets. The costs of ownership

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7

Balance sheetstransfer on financial assets are treated as intermediate consumption, where the assets are acquiredby corporations or government, final consumption
where the assets are acquired by households andexports of services where the assets are acquired by
non-residents.

Inventories (AN.12)
7.46

7.47

7.48

Inventories should be valued at prices prevailingon the date to which the balance sheet relates, andnot at the prices at which the products were valued
when they entered inventory.
Inventories of materials and supplies are valued
at purchasers’ prices, and inventories of finishedgoods and work-in-progress are valued at basic
prices. Inventories of goods intended for resale
without further processing by distributors are valued at the prices prevailing on the date to which
the balance sheet relates, excluding any transportation costs incurred by the wholesalers or retailers.
For inventories of work-in-progress, the value ofthe closing balance sheet is estimated by applying
the fraction of the total production cost incurredby the end of the period to the basic price of a similar finished product on the date to which the balance sheet relates. If the basic price of the finishedproducts is unavailable, it is estimated by the valueof the production cost with a mark-up for expected
net operating surplus or estimated net mixed
income.
Single-use crops (except timber) under cultivationand livestock raised for slaughter can be valued
by reference to the prices of such products on themarkets. Standing timber is valued by discounting
the future proceeds of selling the timber at current
prices after deducting the expenses of bringing thetimber to maturity, felling, etc.

acquisition prices, revalued to the current pricelevel.

Non-produced non-financial assets (AN.2)
Natural resources (AN.21)
Land (AN.211)
7.50

In the balance sheet land is valued at its current
market price. Any expenditure on land improvements is recorded as gross fixed capital formationand the additional value it provides is excluded
from the value of land shown in the balance sheet
and is instead shown in a separate asset category
for land improvement (AN.1123).

7.51

Land is valued at the estimated price achieved if
sold on the market, excluding the costs involvedin transferring ownership for a future sale. Whena transfer does occur, it is recorded by convention as gross fixed capital formation and the costs
are excluded from the AN.211 land value recordedin the balance sheet and instead recorded as an
AN.1123 asset. This is reduced to zero throughconsumption of fixed capital over the period thatthe new owner expects to use the land.

7.52

If the value of the land cannot be separated fromthat of buildings or other structures situated on it,
the combined assets are classified together in the
category of the asset that has the greater value.

Mineral and energy reserves (AN.212)
7.53

Valuables (AN.13)
7.49

176

Valuables such as works of art, antiques, jewellery,
precious stones, non-monetary gold and othermetals are valued at current prices. If organised
markets exist for these assets, they should be valued at the actual or estimated prices they would
fetch, excluding any agents’ fees or commissions, if
sold on the market on the date to which the balance
sheet relates. Otherwise, they should be valued atReserves of mineral deposits located on or below
the earth’s surface, that are economically exploitable given current technology and relative prices,
are valued at the present value of expected net
returns resulting from their commercial exploitation of the assets.

Other natural assets (AN.213, AN.214 and AN.215)
7.54

Observed market prices for non-cultivated biological resources (AN.213), water resources (AN.214)
and other natural resources (AN.215) are unlikely
to be available, so they are usually valued at the present value of future returns expected from them.

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Balance sheets

Contracts, leases and licences (AN.22)
7.55

Definition: contracts, leases and licences arerecorded as assets when the following conditions
are met:(a) the terms of the contract, lease or licence specify a price for the use of an asset or provision ofa service that differs from the prevailing market
price; and

7.60

7.56

7.57

7.58

The category covers assets that may arise frommarketable operating leases, licences to use natural resources, permits to undertake specific activities and entitlements to future goods and services
on an exclusive basis.
The value of the asset is equal to the net present
value of the excess of the prevailing price overthat fixed in the agreement. Other things being
equal, this will decline as the period of the agreement expires. Changes in the value of the asset due
to changes in the prevailing price are recorded asnominal holding gains and losses.
Marketable operating lease assets are only recorded
as assets when lessees exercise their rights to realise
the price difference.

7.61

The balance sheet value of goodwill and marketing
assets is the excess of the price paid at the time an
institutional unit is sold, over the value recorded
for its own funds, revalued for any subsequent
reductions as the initial value is written down as an
economic disappearance of non-produced assets(K.2). The rate of write down is in accordance withcommercial accounting standards.

European system of accounts — ESA 2010

Financial assets and liabilities as negotiable financial instruments such as debt securities, equity
securities, investment fund shares or units andfinancial derivatives, are valued at market value.
Financial instruments that are non-negotiable arevalued at nominal value (see paragraphs 7.38 and7.39). The counterpart financial assets and liabilities have the same values in the balance sheet. The
values should exclude commissions, fees and taxes.
Commissions, fees and taxes are recorded as services provided in carrying out the transactions.

Monetary gold and SDRs (AF.1)
7.62

Monetary gold (AF.11) is to be valued at the priceestablished in organised gold markets.

7.63

The value of SDRs (AF.12) is determined daily by
the IMF and the rates against domestic currencies
are obtainable from foreign exchange markets.

Currency and deposits (AF.2)
7.64

For currency (banknotes and coins — AF.21), thevaluation is the nominal value of the currency.

7.65

For deposits (AF.22, AF.29), the values recorded in
the balance sheet are nominal values.

7.66

Currency and deposits in foreign currency are converted to domestic currency at the mid-point of thebid and offer spot exchange rates prevailing on thebalance sheet date.

Purchases less sales of goodwill and marketing
assets (AN.23)
7.59

Marketing assets consist of items such as brandnames, mastheads, trademarks, logos and domainnames.

Financial assets and liabilities (AF)(b) one party to the contract can realise the pricedifference.
The contracts, leases and licences can be valued bytaking market information from the transfers of
the instruments conferring the rights, or estimatedas the present value of expected future returns at
the balance sheet date compared to the situation
when the legal agreement starts.

7

Debt securities (AF.3)
7.67

Debt securities are recorded at market value.

7.68

Short-term debt securities (AF.31) are valued
at market value. If market values are not available then, provided there are no conditions of highinflation or high nominal interest rates, the market

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Balance sheets

value can be approximated by the nominal value
for:

7.74

(a) short-term debt securities issued at par; and(b) short-term discounted debt securities.
7.69

Long-term debt securities (AF.32) are valued atmarket value, whether they are bonds on whichinterest is paid regularly or deep-discounted orzero-coupon bonds on which little or no interest is
paid.

value of unlisted shares = market price of similar listed shares × (own funds of unlisted corporations)/(own funds of similar listed corporations).

Loans (AF.4)
7.70

The values to be recorded in the balance sheets ofboth creditors and debtors are the nominal values
irrespective of whether the loans are performing or
non-performing.

7.75

The ratio of share price to own funds may varywith the branch of business. It is preferable to calculate the current price of unlisted shares branch
by branch. There may be other differences between
listed and unlisted corporations, which can have aneffect on the estimation method.

7.76

Other equity (AF.519) is equity that is not in theform of securities. It can include equity in quasicorporations (such as branches, trusts, limited liability and other partnerships), public corporations, unincorporated funds and notional units(including notional resident units created to reflect
non-resident ownership of real estate and natural
resources). The ownership of international organisations not in the form of shares is classified asother equity.

7.77

Quasi-corporations’ other equity is valued according to their own funds, since their net worth is byconvention equal to zero. For other units the mostappropriate valuation method from the methods
used for unlisted shares should be taken.

7.78

Corporations that issue shares or units may additionally have other equity.

7.79

Investment fund shares or units (AF.52) are valued at market price if they are listed. If unlisted
the market value may be estimated as described forunlisted shares. If they are redeemable by the funditself they are valued at their redemption value.

Equity and investment fund shares/units(AF.5)
7.71

Listed shares (AF.511) are valued at their market values. The same value is adopted for both theasset side and the liability side, although shares andother equity are not, legally, a liability of the issuer,
but an ownership right to a share in the liquidation
value of a corporation, where the liquidation value
is not known in advance.

7.72

Listed shares are valued at a representative midmarket price observed on the stock exchange orother organised financial markets.

7.73

The values of unlisted shares (AF.512), which are
not traded on organised markets, should be estimated with reference to either:(a) the values of quoted shares where appropriate;(b) the value of own funds; or(c) discounting forecast profits by applying anappropriate market price to earnings ratio tothe smoothed recent earnings of the institutional unit.
However, these estimates will take into accountdifferences between listed and unlisted shares,
notably their liquidity and consider the net worth
accumulated over the life of the corporation and its
branch of business.

178

The estimation method applied depends on thebasic statistics available. It may take into account,for example, data on merger activities involving
unlisted shares. If the value of unlisted corporations’ own funds moves similarly, on average andin proportion to their nominal capital, to that ofsimilar corporations with listed shares, then thebalance sheet value can be calculated using a ratio.
This ratio compares the value of own funds ofunlisted corporations to that of listed corporations:

European system of accounts — ESA 2010

Balance sheets

Insurance, pension and standardisedguarantee schemes (AF.6)
7.80

The amounts recorded for non-life insurance technical reserves (AF.61) cover premiums paid but
not earned plus the amounts set aside to meet outstanding claims. The latter represent the present
value of amounts expected to be paid out in settlement of claims, including disputed claims and anallowance for claims to cover incidents that haveoccurred but not yet been reported.

7.81

The amounts recorded for life insurance and annuity entitlements (AF.62) represent the reserves
needed to meet all expected future claims.

7.82

The amounts recorded for pension entitlements(AF.63) depend on the type of pension scheme.

7.83

In a defined benefit pension scheme the level ofpension benefits promised to participating employees is determined by a formula agreed in advance.
The liability of a defined benefit pension scheme isequal to the present value of the promised benefits.

7.84

In a defined contribution scheme the benefits paid
are dependent on the performance of the assets
acquired by the pension scheme. The liability of adefined contribution scheme is the current market
value of the funds’ assets. The funds’ net worth isalways zero.

7.85

The value recorded for provisions for calls understandardised guarantees (AF.66) is the expectedlevel of claims less the value of any expected
recoveries.

Financial derivatives and employee stock
options (AF.7)
7.86

Financial derivatives (AF.71) should be included in
the balance sheets at their market value. If market
price data are unavailable, for example in the caseof over the counter options they should be valued
at either the amount required to buy out or to offset
the contract or the amount of premium payable.

7.87

For options, the writer of the option is considered
to have incurred a counterpart liability representing the cost of buying out the rights of the option
holder.

European system of accounts — ESA 2010

7.88

The market value of options and forwards can
switch between positive (asset) and negative(li­ability) positions depending on price movementsin the underlying items and thus they can switch
being assets and liabilities for the writers and holders. Some options and forwards operate on margin
payments, where profits or losses are settled daily;
in these cases the balance sheet value will be zero.

7.89

Employee stock options (AF.72) are valued byreference to the fair value of the equity granted.
The fair value is measured at grant date using themarket value of equivalent traded options or, if
un­available, using an option pricing model.

7

Other accounts receivable/payable (AF.8)
7.90

Trade credits and advances (AF.81) and otheraccounts receivable/payable excluding trade credits
and advances (AF.89), which arise due to timing
differences between distributive transactions, suchas taxes, social contributions, dividends, rents,
wages and salaries, and financial transactions, arevalued, for both creditors and debtors, at nominal value. Any amounts of taxes and social contributions payable under AF.89 should exclude theamounts unlikely to be collected since they represent a government claim with no value.

Financial balance sheets
7.91

The financial balance sheet shows, on its left side,
financial assets and, on its right side, liabilities.
The balancing item of the financial balance sheet isfinancial net worth (BF.90).

7.92

The financial balance sheet of a resident sector
or a subsector may be consolidated or non-consolidated. The non-consolidated financial balance sheet shows all the financial assets and liabilities of the institutional units classified in the sector or subsector, including those where the corresponding asset or liability is held within that sector or subsector. The consolidated financial balance sheet eliminates the financial assets and liabilities that have counterparts in the same sector orsubsector. The financial balance sheet of the rest of
the world is consolidated by definition. As a rule,
the accounting entries in the System are not consolidated. Therefore, the financial balance sheet of

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Balance sheetsa resident sector or subsector is to be presented ona non-consolidated basis.
7.93

The from-whom-to-whom financial balance sheet(the balance sheet by debtor/creditor) is an extension of the financial balance sheet, showing in addition a breakdown of financial assets by debtor sector and a breakdown of liabilities by creditor sector. Therefore, it provides information on debtor/
creditor relationships and is consistent with thefinancial account by debtor/creditor.

Memorandum items
7.94

for production and partly by a household forfinal consumption. The values shown in the balance sheet for the non-financial corporations sector (S.11) should reflect the proportion of the usethat is attributable to the quasi-corporation. A similar example exists for employers (including ownaccount workers) subsector (S.141 + S.142). The
proportion attributed to the households sector(S.14) as final consumers should be recorded in thememorandum item, net of the equivalent accumulated charges for consumption of fixed capital.

In order to show items of more specialised analyticinterest for particular sectors, three types of memorandum items are included as supporting items tothe balance sheets:

Foreign direct investment (AF.m1)
7.98(a) consumer durables (AN.m);(b) foreign direct investment (AF.m1);

Financial assets and liabilities that constitute direct
investment are recorded according to the natureof the investment in the categories loans (AF.4),
equity and investment fund shares/units (AF.5)
or other accounts receivable/payable (AF.8). The
amount of direct investment included within eachof these categories is recorded as a separate memorandum item.

(c) non-performing loans (AF.m2).

Consumer durables (AN.m)
7.95

7.96

7.97

180

Definition: consumer durables are durable goods
used by households repeatedly over periods of timeof more than one year for final consumption. They
are included in the balance sheets as memorandum items. They are excluded from the main balance sheet because they are recorded as uses in thehouseholds sector’s use of income account as being
consumed in the period of account, and not gradually used up.
The stocks of consumer durables held by households as final consumers — transport equipment(AN.1131) and other machinery and equipment(AN.1139) — are valued at market prices in thememorandum item, net of the equivalent accumulated charges for consumption of fixed capital. A
full list of the subgroups and items of consumer
durables is given in Chapter 23.
Durable goods, such as vehicles, are classified aseither fixed assets or as consumer durables depending on the sector classification of the owner and the
purpose for which they are used. For example, avehicle may be used partly by a quasi-corporation

Non-performing loans (AF.m2)
7.99

Loans are recorded in the balance sheet at nominal
value.

7.100 Certain loans that have not been serviced for sometime are included as a memorandum item to thebalance sheet of the creditor. Such loans are termed
non-performing loans.

7.101 Definition: a loan is non-performing when (a) pay-ments of interest or principal are 90 days or morepast their due date; (b) interest payable of 90 daysor more has been capitalised, refinanced, or delayedby agreement; or (c) payments are less than 90 days
overdue, but there are other good reasons (such asa debtor filing for bankruptcy) to doubt that payments will be made in full.

7.102 This definition of a non-performing loan is to beinterpreted taking into account national conventions on when a loan is deemed to be non-performing. Once a loan is classified as non-performing, it (or any replacement loans) should remainclassified as such until payments are received or the
principal is written off on this or subsequent loansthat replace the original.

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Balance sheets

7.103 Two memorandum items are required for non-performing loans:

7.107 The example shows an outstanding amount ofloans at nominal value of 1 000 at t-1, of which
500 are performing and 500 are non-performing.
The majority of the non-performing loans, 400, is
covered by loan loss provisions, while 100 are not.
The second part of the table provides detailed supplementary information on the market equivalentvalue of the non-performing loans. It is derived as
the difference between the nominal value and theloan loss provisions. At t-1, it is assumed to be 375.
During the period from t-1 to t, parts of the loans
are reclassified from performing or not yet covered
to non-performing or vice versa, or written off. The
flows are shown in the corresponding columns of
the table. For the loan loss provisions the nominal
values and the market equivalent values are alsopresented.

(a) the nominal value of such loans, as recorded in
the main balance sheet; and(b) the market equivalent value of such loans.
7.104 The closest approximation to market equivalentvalue is fair value, which is ‘the value that approximates to the value that would arise from a market transaction between two parties’. Fair value canbe established using transactions in comparable
instruments, or using the discounted present valueof cash flows; which may be available from the balance sheet of the creditor. In the absence of fairvalue data, the memorandum item will have to use
a second-best approach and show nominal valueless expected loan losses.

Recording of non-performing loans

77.108 The assessments on loan loss provisions have to bemade in the framework of the accounting standards, the legal status and the taxation rules applicable to the units, which might lead to rather heterogeneous results in terms of amounts and duration of loan loss provisions. This makes it difficult to record non-performing loans in the main
accounts and leads to their recording as a memorandum item. It is preferable instead to provide
market equivalent values as memorandum items in
addition to the nominal values of loans, performing and non-performing.

7.105 The non-performing loans of the general govern-

ment and financial corporations sectors must berecorded as memorandum items, along with othersectors that have significant amounts. If significant,the loans to or from the rest of the world, are also
recorded as memorandum items.

7.106 The following table describes the positions andflows that are recorded for non-performing loans
to show a more complete picture on stocks, transactions, reclassifications and write-offs.

Recording of non-performing loans
Positions

Stock

Transaction

t-1

Reclassifi­
cationWrite-offperiod t-1 to t

Stock
t

Nominal value
Loans

1 000

200

0

–90

1 110

Performing loans

500

200

–50

Non-performing loans

500

50

–90

460

Covered by loan loss provisions

400

70

–90

380

Not yet covered by loan loss provisions

100

–20

650

80

Market equivalent value
Non-performing loans

375

24

–51

348

= Nominal value

500

50

–90

460

– Loan loss provisions

125

26

–39

112

o/w not yet covered

100

–20

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Annex 7.1

Annex 7.1
Summary of each asset category
Classification of assets

Summary

Non-financial assets (AN)Non-financial items over which ownership rights are enforced by institutional units, individually orcollectively, and from which economic benefits may be derived by their owners by holding, using
or allowing others to use them over a period of time. Consists of fixed assets, inventories, valuables,
constructs of society and intellectual property products.

Produced non-financial
assets (AN.1)

Non-financial assets that are outputs from production processes. Produced non-financial assets consist of
fixed assets, inventories and valuables, as defined below.

Fixed assets (AN.11)

Produced non-financial assets that are used repeatedly or continuously in production processes formore than one year. Fixed assets consist of dwellings, other buildings and structures, machinery andequipment, weapons systems, cultivated biological resources, and intellectual property products, as
defined below.

Dwellings (AN.111)

Buildings that are used entirely or primarily as residences, including any associated structures, such as
garages, and all permanent fixtures customarily installed in residences. Houseboats, barges, mobile
homes and caravans used as principal residences of households are also included, as are publicmonuments (see AN.1121) identified primarily as dwellings. Costs of site clearance and preparation are also
included.
Examples include residential buildings, such as one- and two-dwelling buildings and other residentialbuildings intended for non-transient occupancy.
Uncompleted dwellings are included to the extent that the ultimate user is deemed to have takenownership, either because the construction is on own-account or as evidenced by the existence of acontract of sale/purchase. Dwellings acquired for military personnel are included because they are used,
as are dwellings acquired by civilian units, for the production of housing services.
The value of dwellings is net of the value of land underlying dwellings, which is included in land (AN.211) if
separately classified.

Other buildings andstructures (AN.112)

Other buildings and structures consist of buildings other than dwellings, other structures and land
improvements, as defined below.
Uncompleted buildings and structures are included to the extent that the ultimate user is deemed tohave taken ownership, either because the construction is for own use or as evidenced by the existence ofa contract of sale/purchase. Buildings and structures acquired for military purposes are included.
The value of other buildings and structures is net of the value of land underlying them, which is included
in land (AN.211) if separately classified.

Buildings other thandwellings (AN.1121)

Buildings other than dwellings, including fixtures, facilities and equipment that are integral parts of
the associated structures and costs of site clearance and preparation. Public monuments (see AN.1122)
identified primarily as non-residential buildings are also included.
Public monuments are identifiable because of particular historical, national, regional, local, religious orsymbolic significance. They are described as public because they are accessible to the general public, notdue to public sector ownership. Visitors are often charged for admission to them. Consumption of fixed
capital on new monuments, or on major improvements to existing monuments, should be calculated on
the assumption of appropriately long service lives.
Other examples of buildings other than dwellings include warehouse and industrial buildings, commercial
buildings, buildings for public entertainment, hotels, restaurants, educational buildings, health buildings.

Structures other than residential structures, including the costs of the streets, sewers and site clearance
and preparation. Also included are public monuments not classified as dwellings or buildings other thandwellings; shafts, tunnels and other structures associated with mining mineral and energy reserves; andthe construction of sea-walls, dykes and flood barriers intended to improve land adjacent but not integral
Other structures (AN.1122) to them.
Examples include highways, streets, roads, railways and airfield runways; bridges, elevated highways,
tunnels and subways; waterways, harbours, dams and other waterworks; long-distance pipelines,
communication and power lines; local pipelines and cables, ancillary works; constructions for mining andmanufacture; and constructions for sport and recreation.

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Classification of assets

7

Summary

Land improvements(AN.1123)

The value of actions that lead to major improvements in the quantity, quality or productivity of land, or
prevent its deterioration.
Examples include the increase in asset value arising from land clearance, land contouring, creation of wells
and watering holes.
Also includes the costs of transfer of ownership of land, which have yet to be written off.

Machinery andequipment (AN.113)

Transport equipment, information and communication technologies (ICT) equipment, and othermachinery and equipment, as defined below, other than that acquired by households for final
consumption.
Tools that are relatively inexpensive and purchased at a relatively steady rate, such as hand tools, may
be excluded. Also excluded are machinery and equipment integral to buildings, which are included indwellings and non-residential buildings.
Uncompleted machinery and equipment is excluded, unless produced for own use, because the ultimate
user is deemed to take ownership only on delivery of the asset. Machinery and equipment other thanweapons systems acquired for military purposes are included.
Machinery and equipment such as vehicles, furniture, kitchen equipment, computers, communications
equipment, etc., that are acquired by households for final consumption are not treated as an asset. They
are instead included in the memorandum item consumer durables in the balance sheet for households.
Houseboats, barges, mobile homes and caravans used by households as principal residences are includedin dwellings.

Transport equipment(AN.1131)

Equipment for moving people and objects. Examples include products other than parts included inClassification of Products by Activity 2008 (CPA 2008) division 29: motor vehicles, trailers and semi-trailers,and division 30: other transport equipment.

ICT equipment (AN.1132)

Information and communication technologies (ICT) equipment: devices using electronic controls andthe electronic components used in the devices. Examples are products within CPA 2008 groups 261:
electronic equipment and boards, and 262 computers and peripheral equipment.

Other machinery andequipment (AN.1139)

Machinery and equipment not elsewhere classified. Examples include products other than parts,
installation, repair and maintenance services included in CPA 2008 division 26: computer, electronic andoptical products (except groups 261 and 262), division 27: electrical equipment, division 28: machineryand equipment n.e.c., division 31: furniture, and division 32: other manufactured goods.

Weapons systems(AN.114)

Vehicles and other equipment such as warships, submarines, military aircraft, tanks, missile carriers andlaunchers etc. Most single-use weapons they deliver are recorded as military inventories (see AN.124) but
others, such as ballistic missiles with highly destructive capability, that are judged to provide ongoing
deterrence against aggressors are classified as fixed assets.

Cultivated biologicalresources (AN.115)

Livestock for breeding, dairy, draught, etc. and vineyards, orchards and other plantations of trees yielding
repeat products that are under the direct control, responsibility and management of institutional units, as
defined below.
Immature cultivated assets are excluded unless produced for own use.

Animals whose natural growth and regeneration are under the direct control, responsibility andAnimal resources yielding management of institutional units. They include breeding stocks (including fish and poultry), dairy cattle,
repeat products (AN.1151) draught animals, sheep or other animals used for wool production and animals used for transportation,
racing or entertainment.
Tree, crop and plantresources yielding repeat
products (AN.1152)

Trees (including vines and shrubs) cultivated for products they yield year after year, including thosecultivated for fruits and nuts, for sap and resin and for bark and leaf products, whose natural growth andregeneration are under the direct control, responsibility and management of institutional units.

Intellectual property
products (AN.117)

Fixed assets that consist of the results of research and development, mineral exploration and evaluation,
computer software and databases, entertainment, literary or artistic originals and other intellectual
property products, as defined below, intended to be used for more than one year.

Research anddevelopment (AN.1171)

Consists of the value of expenditure on creative work undertaken on a systematic basis in order toincrease the stock of knowledge, including knowledge of man, culture and society, and use of this stockof knowledge to devise new applications.
The value is determined in terms of the economic benefits expected in the future. Unless the value
can be reasonably estimated it is, by convention, valued as the sum of the costs, including those of
unsuccessful research and development. Research and development that will not provide a benefit to theowner is not classified as an asset and is instead recorded as intermediate consumption.

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Annex 7.1

Classification of assets

Summary

Mineral exploration andevaluation (AN.1172)

The value of expenditure on exploration for petroleum and natural gas and for non-petroleum deposits
and subsequent evaluation of the discoveries made. This expenditure includes pre-licence costs, licenceand acquisition costs, appraisal costs and the costs of actual test drilling and boring, as well as the costs ofaerial and other surveys, transportation costs, etc, incurred to make it possible to carry out the tests.

Computer software(AN.11731)

Computer programs, program descriptions and supporting materials for both systems and applications
software. Included are the initial development and subsequent extensions of software as well as
acquisition of copies that are classified as AN.11731 assets.

Databases (AN.11732)

Files of data organised to permit resource-effective access and use of the data. For databases createdexclusively for own use the valuation is estimated by costs, which should exclude those for the databasemanagement system and the acquisition of the data.

Entertainment, literary or
artistic originals (AN.1174)

Original films, sound recordings, manuscripts, tapes, models, etc., on which drama performances, radio
and television programmes, musical performances, sporting events, literary and artistic output, etc. arerecorded or embodied. Included are works produced on own-account. In some cases, such as films, there
may be multiple originals.

Other intellectual
property products(AN.1179)

New information, specialised knowledge, etc., not elsewhere classified, whose use in production isrestricted to the units that have established ownership rights over them or to other units licensed by such
units.

Inventories (AN.12)

Produced assets that consist of goods and services that came into existence in the current period or inan earlier period held for sale, use in production or other use at a later date. They consist of materials andsupplies, work-in-progress, finished goods and goods for resale, as defined below.
Included are all inventories held by government, including, but not limited to, inventories of strategic
materials, grains and other commodities of special importance to the nation.

Materials and supplies(AN.121)

Goods that their owners intend to use as intermediate inputs to their own production processes, not toresell.

Goods and services that are partially complete but that are not usually turned over to other units
without further processing or that are not mature, and whose production process will be continued ina subsequent period by the same producer. Excluded are partially complete structures for which theWork-in-progress (AN.122) ultimate owner is deemed to have taken ownership, either because the production is for own use or as
evidenced by the existence of a contract of sale/purchase.
Category AN.122 consists of work-in-progress on cultivated assets and other work-in-progress, as defined
below.

184

Work-in-progress on
cultivated biologicalassets (AN.1221)

Livestock raised for products yielded only on slaughter, such as fowl and fish raised commercially, trees
and other vegetation yielding once-only products on destruction and immature cultivated assets yielding
repeat products.

Other work-in-progress(AN.1222)

Goods other than cultivated assets and services that have been partially processed, fabricated or
assembled by the producer but that are not usually sold, shipped or turned over to others without further
processing.

Finished goods (AN.123)

Goods that are ready for sale or shipment by the producer.

Military inventories(AN.124)

Ammunition, missiles, rockets, bombs and other single-use military items delivered by weapons or
weapons systems. Excludes some types of missiles with highly destructive capability (see AN.114).

Goods for resale (AN.125)

Goods acquired by enterprises, such as wholesalers and retailers, for the purpose of reselling themwithout further processing (that is, not transformed other than by presenting them in ways that are
attractive to the customer).

Valuables (AN.13)

Produced assets that are not used primarily for production or consumption, that are expected toappreciate or at least not to decline in real value, that do not deteriorate over time under normal
conditions and that are acquired and held primarily as stores of value. Valuables consist of precious metals
and stones, antiques and other art objects and other valuables, as defined below.

Precious metals andstones (AN.131)

Precious metals and stones that are not held by enterprises for use as inputs to processes of production.

Antiques and other art
objects (AN.132)

Paintings, sculptures, etc., recognised as works of art and antiques.

Other valuables (AN.133)

Valuables not elsewhere classified, such as collections and jewellery of significant value fashioned out of
precious stones and metals.

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Annex 7.1

Classification of assets

7

Summary

Non-produced nonfinancial assets (AN.2)

Non-financial assets that come into existence other than through processes of production. Non-produced
assets consist of natural resources, contracts, leases and licences, and goodwill and marketing assets, as
defined below.

Natural resources (AN.21)

Non-produced assets that naturally occur and over which ownership may be enforced and transferred.
Environmental assets over which ownership rights have not, or cannot, be enforced, such as open seas orair, are excluded. Consists of land, mineral and energy reserves, non-cultivated biological resources, water
resources and other natural resources, as defined below.

Land (AN.211)

The ground, including the soil covering and any associated surface waters, over which ownershiprights are enforced. Excluded are any buildings or other structures situated on it or running through it,
cultivated crops, trees and animals; subsoil assets, non-cultivated biological resources and water resources
below the ground.

Mineral and energy
reserves (AN.212)

Proven reserves of mineral deposits located on or below the earth’s surface that are economically
exploitable, given current technology and relative prices. Ownership rights to the subsoil assets areusually separable from those to the land itself. Category AN.212 consists of known reserves of coal, oil, gas
or other fuels, metallic ores, and non-metallic minerals.

Animal, tree, crop and plant resources that yield both once-only and repeat products over which
ownership rights are enforced but for which natural growth and/or regeneration is not under the direct
Non-cultivated biologicalcontrol, responsibility and management of institutional units. Examples are virgin forests and fisheries
resources (AN.213)
within the territory of the country. Only those resources that are currently, or are likely soon to be,
exploitable for economic purposes should be included.
Water resources (AN.214)

Aquifers and other groundwater resources to the extent that their scarcity leads to the enforcement ofownership and/or use rights, market valuation and some measure of economic control.

Other natural resources(AN.215)This covers the electromagnetic radio spectrum (AN.2151) and other natural resources (AN.2159) notelsewhere classified.

Radio spectra (AN.2151)

The electromagnetic spectrum. The leases or licences to use the spectrum are classified elsewhere(AN.222) if they meet the definition to be an asset.

Other (AN.2159)

Other natural resources not elsewhere classified.

Contracts, leases andlicences (AN.22)

Contractual agreements to undertake activities where the agreement confers economic benefits to theholder in excess of the fees payable and the holder can realise those benefits legally and practically.
The asset recorded in category AN.22 represents the realisable potential holding gain value when themarket price for the use of an asset or provision of a service exceeds the price prevailing in the contract,lease or licence, or the price that would be achieved in the absence of a contract, lease or licence.
Contracts, leases and licences consist of assets that may arise from marketable operating leases, permits
to use natural resources, permits to undertake specific activities, and entitlements to future goods andservices on an exclusive basis.

Marketable operatingleases (AN.221)

Third-party property rights relating to non-financial assets other than natural resources, where the lease
confers economic benefits to the holder in excess of the fees payable and the holder can realise thosebenefits legally and practically, through transferring them.
The asset recorded in category AN.221 is the value to the holder of transferring the rights to use theunderlying asset, i.e., the excess of the transfer price realisable over the amount payable to the permit
issuer.
Examples include where a tenant in a building has a fixed rental but the market rate of the rental is higher.
If the tenant is able to realise the price difference through subletting, then the rights to realise the value
represent a marketable operating lease asset.

Permits to use natural
resources (AN.222)

Licences, permits and leases to use natural resources for a limited time that does not fully use up the
economic value of the asset, where the agreement confers economic benefits to the holder in excess ofthe fees payable and the holder can realise those benefits legally and practically, for example throughtransferring them.
The natural resource continues to be recorded on the balance sheet of the owner and a separate asset,
representing the value to the holder of transferring the rights to use the resource, is recognised as apermit to use natural resources. The asset recorded is the value to the holder of transferring the rights touse, i.e., the excess of the transfer price above the amount payable to the permit issuer.
Examples include where a tenant of land has a fixed rent but the market rate of the rent is higher. If
the tenant is able to realise the price difference through subletting, then the rights to realise the value
represents an asset.

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Annex 7.1

Classification of assets

Summary

Transferable permits, other than to use natural resources or use an asset belonging to the permit issuer,that restrict the number of units engaging in an activity and allow the holders to earn near-monopoly
Permits to undertake
profits.
specific activities (AN.223) The asset recorded is the value to the holder of transferring the rights to use, i.e., the excess of the transfer
price above the amount payable to the permit issuer. The permit holder must legally and in practice beable to transfer the permit rights to a third party.
Transferable contractual rights to the exclusive use of goods or services.
One party has a contract to purchase goods or services at a fixed price from a second party and is, legally
Entitlement to futureand in practice, able to transfer the obligation of the second party to a third party.
goods and services on an
Examples include the transferable value of a football player under contract to a football club and theexclusive basis (AN.224)
transferable value of exclusive rights to publishing literary works or musical performances.
The asset recorded in AN.224 is the value to the holder of transferring the entitlement.

Purchases less sales of
goodwill and marketing
assets (AN.23)

The difference between the value paid for an institutional unit as a going concern and the sum of its
assets, less the sum of its liabilities, for each item that has been separately identified and valued. The valueof goodwill, therefore, includes anything of long-term benefit that has not been separately identified
as an asset, as well as the value of the fact that the group of assets is used jointly and is not simply acollection of separable assets. Category AN.23 also includes identified marketing assets, such as brandnames, mastheads, trademarks, logos and domain names, when sold individually and separately from awhole corporation.

Financial assets andliabilities (AF)Financial assets are economic assets comprising financial claims, equity and the gold bullion componentof monetary gold. Financial assets are stores of value representing benefits accruing to the economic
owner by holding them over a period of time. They are means of carrying forward values from one
accounting period to another. Benefits or series of benefits are exchanged by means of payment.
Means of payment consist of monetary gold, special drawing rights, currency and transferable deposits.
Financial claims, also called financial instruments, are financial assets that have corresponding liabilities.
Liabilities are established when debtors are obliged to provide payments or series of payments tocreditors.

Monetary gold and SDRs
(AF.1)

The financial assets classified in this category have counterpart liabilities in the system except the goldbullion component of monetary gold.

Monetary gold (AF.11)

Gold for which monetary authorities, or others who are subject to the effective control of the monetary
authorities, have title and which is held as a reserve asset. It includes gold bullion (including monetary
gold held in allocated gold accounts) and unallocated gold accounts with non-residents that give title toclaim the delivery of gold.

Special drawing rights(SDRs) (AF.12)

International reserve assets created by the International Monetary Fund (IMF) and allocated to its
members to supplement existing reserve assets.

Currency and deposits(AF.2)

Currency in circulation and deposits, both in national and foreign currencies.

Currency (AF.21)

Currency is notes and coins that are issued or authorised by monetary authorities.

Transferable deposits(AF.22)

Deposits exchangeable for currency on demand at par and which are directly usable for making
payments by cheque, draft, giro order, direct debit/credit, or other direct payment facility, without
penalty or restriction.

Inter-bank positions(AF.221)Transferable deposits between banks.

Other transferable
deposits (AF.229)

Transferable deposits other than inter-bank positions.

Other deposits (AF.29)

Other deposits are deposits other than transferable deposits. Other deposits cannot be used to makepayments except on maturity or after an agreed period of notice, and they are not exchangeable forcurrency or for transferable deposits without some significant restriction or penalty.

Debt securities (AF.3)

Negotiable financial instruments serving as evidence of debt. Negotiability refers to the fact that its legal
ownership is readily capable of being transferred from one owner to another by delivery or endorsement.
To qualify as negotiable, a debt security must be designed for potential trading on an organised
exchange or in the over-the-counter market, though demonstration of actual trading is not required.

Short-term debt securities Debt securities, the original maturity of which is one year or less and debt securities repayable on(AF.31)demand of the creditor.

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Annex 7.1

Classification of assets

7

SummaryLong-term debt securities
Debt securities, the original maturity of which is more than one year or of no stated maturity.
(AF.32)Loans (AF.4)

Financial assets created when creditors lend funds to debtors, either directly or through brokers, which
are either evidenced by non-negotiable documents or not evidenced by documents.

Short-term loans (AF.41)

Loans the original maturity of which is one year or less and loans repayable on demand of the creditor.

Long-term loans (AF.42)

Loans the original maturity of which is more than one year or no stated maturity.

Financial assets that represent property rights on corporations or quasi-corporations. Such financial assets
Equity and investment
generally entitle the holders to a share in the profits of the corporations or quasi-corporations, and to afund shares or units (AF.5)
share in their net assets in the event of liquidation.
Equity (AF.51)

Financial assets that acknowledge claims on the residual value of a corporation or quasi-corporation, after
the claims of all creditors have been met.

Listed shares (AF.511)

Equity securities listed on an exchange. Such an exchange may be a recognised stock exchange or any
other form of a secondary market. Listed shares are also referred to as quoted shares. The existenceof quoted prices of shares listed on an exchange means that current market prices are usually readily
available.

Unlisted shares (AF.512)

Equity securities with prices that are not listed on a recognised stock exchange or other form of
secondary market.

Other equity (AF.519)

All forms of equity other than those classified in subcategories AF.511 and AF.512.

Shares, if a corporate structure is used, or units, if a trust structure is used. They are issued by investment
Investment funds shares/
funds, which are collective investment undertakings through which investors pool funds for investment
units (AF.52)
in financial and/or non-financial assets.
Money market fundshares/units (AF.521)

Money market fund shares or units are issued by money market funds which are investment funds thatinvest only or primarily in short-term debt securities such as treasury bills, certificates of deposit, andcommercial paper and also in long-term debt securities with a residual short-term maturity. Money
market fund shares or units may be transferable and are often regarded as close substitutes for deposits.

Investment fund shares or units other than money market funds or units represent a claim on a portion of
the value of an investment fund other than a money market fund. Investment fund shares or units other
Non-MMF investment
than money market fund shares or units are issued by investment funds that invest in a range of assets
fund shares/units (AF. 522)
including debt securities, equity, commodity-linked investments, real estate, shares in other investment
funds and structured assets.
Insurance, pension andstandardised guarantee
schemes (AF.6)

Financial assets of policy holders or beneficiaries and liabilities of insurers, pension funds, or issuers ofstandardised guarantees.

Non-life insurance
technical reserves (AF.61)

Financial assets representing policy holders’ claims against non-life insurance companies in the form of
unearned premiums paid and claims incurred.

Life insurance andannuity entitlements(AF.62)Financial assets representing policy and annuity holders’ claims against the technical reserves ofcorporations providing life insurance.

Pension entitlements(AF.63)Financial assets that both existing and future pensioners hold against either their pension manager, i.e.
their employer(s), a scheme designated by the employer(s) to pay pensions as part of a compensationagreement between the employer and employee or a life (or a non-life) insurer.

Claims of pension funds
on pension managers(AF.64)

Financial assets representing the claims of pension funds on their pension manager for any deficit, andfinancial assets representing the claims of the pension manager on the pension funds for any excess, e.g.
where the investment income exceeds the increase in entitlements and the difference is payable to thepension manager.

Entitlements to nonpension benefits (AF.65)

The excess of net contributions over benefits as an increase in the liability of the insurance scheme
towards the beneficiaries.

Provisions for calls understandardised guarantees(AF.66)

Financial assets that holders of standardised guarantees have against corporations providing standardisedguarantees.

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Annex 7.1

Classification of assets

Summary

Financial derivatives andemployee stock options(AF.7)

Financial assets linked to a financial asset, a non-financial asset or an index, through which specificfinancial risks can be traded in financial markets in their own right.

Financial derivatives(AF.71)

Financial assets such as options, forwards and credit derivatives.
Options (AF.711), both tradable and over-the-counter (OTC), are contracts which give the holder ofthe option the right, but not the obligation, to purchase from (a call option) or to sell to (a put option)
the issuer of the option (the option writer) a financial asset or a non-financial asset (the underlying
instrument) at a predetermined price (the strike price) within a given time span (American option) or ona given date (European option). Based on these basic strategies many combined strategies have beendeveloped like bear call/put spreads, bull call/put spreads or butterfly options spreads. From these typesof options exotic options have been derived with complex payment structures.
Forwards (AF.712) are unconditional financial contracts under which two counterparties agree toexchange a specified quantity of an underlying asset (financial or non-financial) at an agreed contract
price (the strike price) on a specified date.
Credit derivatives take the form of forward-type and option-type contracts whose primary purpose isto trade credit risk. They are designed for trading in loan and security default risk. Like other financial
derivatives they are frequently drawn up under standard master legal agreements and involve collateraland margining procedures, which allow for a means to make a market valuation. The transfer of credit
risks takes place between the risk seller (security taker) and the risk buyer (security seller) based on apremium. In the event of a credit default the risk buyer pays cash to the risk seller.

Employee stock options(AF.72)Financial assets in the form of agreements made on a given date (the ‘grant’ date) under which an
employee may purchase a given number of shares of the employer’s stock at a stated price (the‘strike’ price) either at a stated time (the ‘vesting’ date) or within a period of time (the ‘exercise’ period)
immediately following the vesting date.

Other accounts
receivable/payable (AF.8)

Financial assets that are created as a counterpart of a financial or a non-financial transaction in cases
where there is a timing difference between this transaction and the corresponding payment.

Trade credits andadvances (AF.81)

Financial assets arising from the direct extension of credit by suppliers of goods and services to theircustomers and advances for work that is in progress or is yet to be undertaken and in the form of
prepayment by customers for goods and services not yet provided.

Other accounts
receivable/payable,
excluding trade credits
and advances (AF.89)

Financial assets which arise from timing differences between distributive transactions or financialtransactions on the secondary market and the corresponding payment.

Memorandum items

The system has three memorandum items that show assets not separately identified in the central
framework that are of more specialised analytic interest.

Consumer durables(AN.m)

Durable goods acquired by households for final consumption (i.e., items that are not used by households
as stores of value or by unincorporated enterprises owned by households for purposes of production).

Foreign direct investment involves a long-term relationship reflecting a lasting interest by a resident
Foreign direct investment institutional unit in one economy (the ‘direct investor’) in an institutional unit resident in another(AF.m1)
economy. The direct investor’s purpose is to exert a significant degree of influence on the managementof the unit they have invested in.
Non-performing loans(AF.m2)188

A loan is non-performing when payments of interest or principal are at least 90 days overdue, or interest
payments equal to 90 days or more have been capitalised, refinanced, or delayed by agreement, or
payments are less than 90 days overdue, but there are other good reasons (such as a debtor filing forbankruptcy) to doubt that payments will be made in full.

European system of accounts — ESA 2010

Annex 7.2

7Annex 7.2
A map of entries from opening balance
sheet to closing balance sheet
Annex 7.2 presents a map from the opening balance sheet
to the closing balance sheet, showing the detail for eachClassification of assets,
liabilities and net worth

asset category with regard to the different ways in which
the balance sheet value changes: through transactions orother changes in the volume of assets and holding gains
and losses.

IV.1
Openingbalance sheet

III.1 and III.2
Transactions

Non-financial assets

ANP.5, NP

K.1, K.2, K.3,
K.4, K.5, K.61,
K.62

K.71

K.72

AN

Produced non-financial assets

AN.1

P.5

K.1, K.3, K.4,
K.5, K.61, K.62

K.71

K.72

AN.1

Fixed assets1

AN.11

P.51g, P.51c

K.1, K.3, K.4,
K.5, K.61, K.62

K.71

K.72

AN.11

Dwellings

AN.111

P.51g, P.51c

K.1, K.3, K.4,
K.5, K.61, K.62

K.71

K.72

AN.111Other buildings and structures

AN.112

P.51g, P.51c

K.1, K.3, K.4,
K.5, K.61, K.62

K.71

K.72

AN.112

Machinery and equipment

AN.113

P.51g, P.51c

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AN.113Weapons systems

AN.114

P.51g, P.51c

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AN.114

Cultivated biological resources

AN.115

P.51g, P.51c

K.1, K.3, K.4,
K.5, K.61, K.62

K.71

K.72

AN.115

Intellectual property products

AN.117

P.51g, P.51c

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AN.117

Inventories by type of inventory AN.12

P.52

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AN.12

Valuables

AN.13

P.53

K.1, K.3, K.4,
K.5, K.61, K.62

K.71

K.72

AN.13

Non-produced non-financial
assetsAN.2

NP

K.1, K.21, K.22,
K.3, K.4, K.5,
K.71
K.61, K.62

K.72

AN.2

Natural resources

AN.21

NP.1

K.1, K.21, K.22,
K.3, K.4, K.5,
K.71
K.61, K.62

K.72

AN.21

Land

AN.211

NP.1

K.1, K.22, K.3,
K.4, K.5, K.61,
K.62

K.71

K.72

AN.211

Mineral and energy reserves

AN.212

NP.1

K.1, K.21, K.22,
K.3, K.4, K.5,
K.71
K.61, K.62

K.72

AN.212European system of accounts — ESA 2010

III.3.1
Otherchanges involumeIII.3.2
Holding gains and losses
III.3.2.1
III.3.2.2
NeutralReal holding
holding gains gains andand losses
lossesIV.3
Closingbalance
sheet

189

7

Annex 7.2

Classification of assets,
liabilities and net worth

190

IV.1
Openingbalance sheet

III.1 and III.2
Transactions

Non-cultivated biologicalresources

AN.213

NP.1

K.1, K.21, K.22,
K.3, K.4, K.5,
K.71
K.61, K.62

K.72

AN.213

Water resources

AN.214NP.1

K.1, K.21, K.22,
K.3, K.4, K.5,
K.71
K.61, K.62

K.72

AN.214

Other natural resources

AN.215NP.1

K.1, K.22, K.3,
K.4, K.5, K.61,
K.62

K.71

K.72

AN.215

Radio spectra

AN.2151

NP.1

K.1, K.22, K.3,
K.4, K.5, K.61,
K.62

K.71

K.72

AN.2151

Other

AN.2159

NP.1

K.1, K.21, K.22,
K.3, K.4, K.5,
K.71
K.61, K.62

K.72

AN.2159

Contracts, leases and licences

AN.22

NP.2

K.1, K.22, K.3,
K.4, K.5, K.61,
K.62

K.71

K.72

AN.22

Purchases less sales of goodwill
and marketing assets

AN.23

NP.3

K.1, K.22, K.3,
K.4, K.5, K.61,
K.62

K.71

K.72

AN.23

Financial assets/liabilities2

AF

F

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF

Monetary gold and SDRs

AF.1

F.1

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.1

Currency and deposits

AF.2

F.2

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.2

Debt securities

AF.3

F.3

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.3

Loans

AF.4

F.4

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.4

Equity and investment fundshares/units

AF.5

F.5

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.5

Insurance, pension andstandardised guarantees
schemes

AF.6

F.6

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.6

Financial derivatives andemployee stock options

AF.7

F.7

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.7

Other accounts receivable/
payableAF.8

F.8

K.3, K.4, K.5,
K.61, K.62

K.71

K.72

AF.8

Net worth

B.90

B.101

B.102

B.1031

B.1032

B.90

1

Memorandum item: AN.m: consumer durables.

2

Memorandum items: AF.m1: foreign direct investment; AF.m2: non-performing loans.

III.3.1
Otherchanges involumeIII.3.2
Holding gains and losses

IV.3
Closingbalancesheet

III.3.2.1
III.3.2.2
NeutralReal holding
holding gains gains andand losses
lossesEuropean system of accounts — ESA 2010

Annex 7.2

7Balancing items
B.10

Changes in net worth

B.101

Changes in net worth due to saving and capital transfers

B.102

Changes in net worth due to other changes in volume of assets

B.103

Changes in net worth due to nominal holding gains and losses

B.1031

Changes in net worth due to neutral holding gains and losses

B.1032

Changes in net worth due to real holding gains and losses

B.90

Net worth
Transactions in financial assets and liabilities

F

Transactions in financial assets and liabilities

F.1

Monetary gold and SDRs

F.2

Currency and deposits

F.3

Debt securities

F.4

Loans

F.5

Equity and investment fund shares/units

F.6

Insurance, pension and standardised guarantees

F.7

Financial derivatives and employee stock options

F.8

Other accounts receivable/payable
Transactions in goods and services

P.5

Gross capital formation

P.51g

Gross fixed capital formation

P.51c

Consumption of fixed capital (–)

P.511

Acquisitions less disposals of fixed assets

P.5111

Acquisitions of new fixed assets

P.5112Acquisitions of existing fixed assets

P.5113

Disposals of existing fixed assets

P.512

Costs of ownership transfer on non-produced assets

P.52

Changes in inventories

P.53

Acquisitions less disposals of valuables

European system of accounts — ESA 2010

191

7

Annex 7.2

Other accumulation entries

192

NP

Acquisitions less disposals of non-produced assets

NP.1

Acquisitions less disposals of natural resources

NP.2

Acquisitions less disposals of contracts, leases and licences

NP.3

Purchases less sales of goodwill and marketing assets

K.1

Economic appearance of assets

K.2

Economic disappearance of non-produced assets

K.21

Depletion of natural resources

K.22

Other economic disappearance of non-produced assets

K.3

Catastrophic losses

K.4

Uncompensated seizures

K.5

Other changes in volume n.e.c.

K.6

Changes in classification

K.61

Changes in sector classification and structure

K.62

Changes in classification of assets and liabilities

K.7

Nominal holding gains and losses

K.71

Neutral holding gains and losses

K.72

Real holding gains and losses

European system of accounts — ESA 2010

The sequence of accounts

8

CHAPTER 8
The sequence of accounts(a) current accounts cover production and theassociated generation, distribution and redistribution of income and its use in the form of
final consumption. The income not directly
used for final consumption is revealed in thebalancing item saving, which is taken forward
to the accumulation accounts as the first entry
on the resources side of the capital account;

Introduction
8.01

This Chapter sets out the details of the accounts
and balance sheets in the sequence of accountsof the national accounts. It also sets out the interactions of the domestic economy with the rest of
the world in the same sequence. The goods andservices account is also described, reflecting theaccounting identity underlying the supply and useof goods and services. Finally it presents the integrated set of economic accounts where each sector
is shown in the same account with an aggregatedform of account entries.

(b) accumulation accounts analyse changes in theassets and liabilities of the units and enablechanges in net worth (the difference between
assets and liabilities) to be recorded;(c) balance sheets show the total assets and liabilities at the beginning and the end of the accounting period, together with the net worth. The
flows for each asset and liability item recordedin the accumulation accounts are seen again in
the changes in balance sheets account.

The sequence of accounts
8.02

8.03

The ESA records flows and stocks in an ordered
set of accounts describing the economic cycle fromproduction and the generation of income, throughits distribution and redistribution, and its use forfinal consumption. Finally the ESA records the useof what is left in the form of saving to provide forthe accumulation of assets, both non-financial andfinancial.

The sequence of accounts applies to institutional
units, institutional sectors and subsectors, and thetotal economy.

8.06

The balancing items are established both gross andnet. They are gross if calculated before deduction of
consumption of fixed capital, and net if calculated
after this deduction. It is more significant to express
income balancing items in net terms, as consumption of capital is a call on disposable income whichmust be met if the capital stock of the economy is
to be maintained.

8.07

The accounts are presented in two ways:

Each of the accounts shows resources and uses,
which are brought to a balance by the introductionof a balancing item, usually on the uses’ side of theaccount. The balancing item is taken forward to thenext account as the first entry on the resources side.
The structured recording of transactions according to a logical analysis of economic life provides
the aggregates required for the study of an institutional sector or subsector, or the total economy. The breakdown of the accounts is designed toreveal the most significant economic information,and the balancing item of each account is a key element in the information revealed.

8.04

8.05

The accounts are grouped in three categories:

European system of accounts — ESA 2010(a) in the form of integrated economic accounts,
showing the accounts for all the institutional
sectors, the total economy and the rest of theworld in a single table;(b) in the form of a sequence of accounts, giving
more detailed information. The tables showing
the presentation of each account are given in

193

8

The sequence of accounts

the section of this Chapter entitled ‘Sequence ofaccounts’.
8.08

194

Table 8.1 shows a synoptic presentation of theaccounts, balancing items and main aggregates:
The code for the main aggregates is not shown in
the table, but is the same as the code for the balancing items, but with the addition of an asterisk after
the number. For example for the Balance of primary incomes, the code is B.5g and the equivalent

code of the main aggregate gross national income
is B.5*g.
8.09

The balancing items are shown in the table in theirgross form, and indicated as such by the use of ‘g’
in the code. For each such code there is a net form,
where the estimate for capital consumption has
been deducted. For example, value added, grosshas a code of B.1g, and the net equivalent (value
added, net) where capital consumption has been
deducted, is B.1n.

European system of accounts — ESA 2010

European system of accounts — ESA 2010

Accumu­lationaccounts

Current
accounts

III.

Accumulationaccounts

B.102

Other changes in
III.3.1
assets account

III.3

Other changes involume of assets account

B.9

Financial account

B.9

Acquisition of nonfinancial assets accountIII.1.2

III.2

B.101

Change in net worth
due to saving and capitaltransfers account

Capital account

III.1

III.1.1

Use of adjusted
disposable income
account

II.4.2B.8g

Use of disposable
income accountUse of income
account

II.4

II.4.1

B.7g

B.5g

Allocation ofother primary
income accountII.1.2.2

Redistribution ofincome in kindaccount

B.4g

Entrepreneurial
income accountII.1.2.1

II.3

Allocation of primary
income accountII.1.2

Value added, grossBalancing items

Changes in net
worth, due to otherchanges in volumeof assets

Net lending/net
borrowing

Net lending/net
borrowing

Change in net worth
due to saving andcapital transfers

Saving, gross

Adjusted disposable
income, gross

Disposable income,gross

Balance of primary
incomes, gross

Entrepreneurial
income, grossOperating surplus,
B.2g B.3g gross Mixed income,
gross

B.6g

Generation of income
account

Primary
distribution of
II.1.1income accounts

B.1g

Secondary
distribution ofincome account

II.1

Distribution anduse of income
accounts

II.

Production
account

II.2

I.

Production
account

I.

Full sequence of accounts for institutional sectors

Accounts

Table 8.1 — Synoptic presentation of the accounts, balancing items and main aggregates

Gross nationalsavingGross national
disposable
incomeGross national
income (GNI)

Gross domestic
product (GDP)Mainaggregates

The sequence of accounts

8

195

196

IV.

Balance sheets
B.10

Changes in balance
sheet
Closing balance sheet

IV.2

IV.3

Goods and services accountAccumulationaccounts

Current
account

V.

External accumulationaccounts
V.III.1

Capitalaccount

European system of accounts — ESA 2010

Net lending/net
borrowing

Acquisition of nonfinancial assets
account
V.III.1.2

B.9

Changes in net worth
due to current externalbalance and capitaltransfers

Changes in net worth
due to current external
B.101
balance and capitaltransfers accountCurrent external balance

External balance ofgoods and services

Balancing items

Net worth

Changes in net
worth, total

Net worth

Main aggregates

National worth

Changes innational worth

National worth

Mainaggregates

Current externalbalance

External balance ofgoods and services

Changes in net
worth due to realholding gains/losses

Changes in net
worth due to neutral
holding gains/losses

Changes in net
worth due tonominal holding
gains/losses

Balancing items

V.III.1.1

B.12

External account ofprimary income andcurrent transfers

V.II

V.III

B.11

External account ofgoods and services

Rest ofthe world V.I
account

Rest of the world account (external transactions account)0.

Transaction accounts

Accounts

B.90

B.90

B.1032

Real holding
gains/losses
account

III.3.2.2
Opening balance sheet

B.1031

Neutral holding
gains/losses
account

III.3.2.1

B.103

IV.1

Revaluation accounts

Table 8.1 — Synoptic presentation of the accounts, balancing items and main aggregates (continued)

BalancesheetsIII.3.2

Accounts

8
The sequence of accounts

Balance sheets

V.IV

External assets andliabilities account

Accounts

B.90

B.10

B.90

Changesinbalancesheet
Closingbalancesheet

V.IV.2

V.IV.3

B.103

Openingbalancesheet

Revaluation accounts

V.III.3.2

B.102

Other changes involume of assets
account

Otherchangesin assetsaccount
V.III.3.1

B.9

Financialaccount

V.IV.1

V.III.3

V.III.2

European system of accounts — ESA 2010
Net worth

Changes in net worth

Net worth

Changes in net worth,due to nominal holding
gains/losses

Changes in net worth,due to other changes involume of assets

Net lending/net
borrowing

Balancing items

Net external financial
position

Net external financial
position

Net lending/net
borrowing

Main aggregates

The sequence of accounts

8

197

8

The sequence of accounts

Sequence of accounts

Given that output is valued at basic prices andintermediate consumption at purchasers’ prices,value added does not include taxes less subsidies
on products.

Current accounts
Production account (I)8.10

The production account (I) shows the transactions
relating to the production process. It is drawn
up for institutional sectors and for industries. Its
resources include output and its uses include intermediate consumption.

8.11

The production account reveals one of the mostimportant balancing items in the system — value
added, or the value generated by any unit engaged
in a production activity — and a vital aggregate:
gross domestic product. Value added is economically significant for both institutional sectors andindustries.

8.12

198

Value added (the balancing item of the account)
may be calculated before or after allowing for the
consumption of fixed capital, i.e. gross or net.

8.13

The production account at the level of the total
economy includes in resources, in addition to the
output of goods and services, taxes less subsidies
on products. It thus enables gross domestic product (at market prices) to be obtained as a balancing item. The code for this key aggregate balancing
item, value added at whole economy level adjusted
to be at market prices, is B.1*g and this is GDP atmarket prices. Net domestic product (NDP) codeis B.1*n.

8.14

Financial intermediation services indirectly measured (FISIM) are allocated to users as costs. Thisrequires part of interest payments to financial
intermediaries to be reclassified as payments forservices, and allocated as output of the financial
intermediation producers. An equivalent value isidentified as consumption of users. The value of
GDP is affected by the amount of FISIM allocatedto final consumption, exports and imports.

European system of accounts — ESA 2010

3 077

147

380

3 077

147

380

European system of accounts — ESA 2010

Market output

Output for own final use

Non-market output

Intermediate consumption

P.11

P.12

P.13

P.2

Consumption of fixed capital

P.51c

B.1n/B.1*n Value added, net/net domestic product

Value added, gross/gross domestic
product

B.1g/B.1*g

D.21-D.31 Taxes less subsidies on products

Output

P.1

1 632

1 632

S.11

12

3

15

17

NPISHs

S.15

S.12

132

23

155

115

Households

S.14

S.12

0

2 808

2 808

S.11

S.13

Resources

99

27

126

222

S.14

82

12

94

52

0

146

146

348

0

0

348

147

123

270

D.21-D.31

32

0

0

32

Corresponding entries of the

133

380

147

3 077

3 604

1 883

133

1 883

380

147

3 077

3 604

Total

Value added, net/net domestic
product

Consumption of fixed capital

Value added, gross/gross domestic
product

Taxes less subsidies on productsIntermediate consumption

Non-market output

Output for own final use

Market output

OutputTransactions and balancing items

Total
Rest of theGoods andeconomy world account services account

S.1

1 174 B.1n/B.1*n

157 P.51c

1 331 B.1g/B.1*g

NPISHs

S.15

P.13

P.12

P.11

P.1

1 477 P.2

GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

Non-financial
Financial
GeneralHouseholds
corporations corporations government

222

222

Transactions and balancing items

1 854

1 883

1 854

133

133

3 604

1 883

S.1

Goods andRest of the
Total
Services account world account economy

3 604

Total

Corresponding entries of theTable 8.2 — Account I: production account

The sequence of accounts

8

199

8

The sequence of accounts

and NPISHs is reduced by an equal and opposite
amount, so that when saving is calculated for thegovernment, NPISHs and households sectors, theadjusted treatment gives the same balancing itemof saving for each sector as the standard treatment.

Distribution and use of income accounts (II)8.15

Distribution and use of income are analysed infour stages: primary distribution, secondary distribution, redistribution in kind and use of income.
The first stage concerns the generation of income
resulting directly from the production process
and its distribution between the production factors (labour, capital) and general government (viataxes on production and imports, and subsidies). It
enables the operating surplus (or mixed income inthe case of households) and primary income to be
determined.
The second stage traces redistribution of income
via transfers, other than social transfers in kind andcapital transfers. This yields the disposable income
as the balancing item.
For the third stage, individual services provided bygovernment and NPISHs to society are treated aspart of household final consumption, and a corresponding income imputed to households. Thisis achieved through two accounts with adjusted
items. An account is introduced called the redistribution of income in kind account, which showsin the resources the imputed extra income forhouseholds, and a corresponding use for government and NPISHs as the imputed transfer fromthese sectors. This gives a balancing item called theadjusted disposable income, which is identical todisposal income at the whole economy level, butdifferent for the sectors of households, government
and NPISHs.
In the fourth stage, the disposable income is taken
forward to the next account, the use of disposable
income account and this shows how the income isconsumed, leaving saving as the balancing item.
When individual services are recognised as consumption by households through the redistribution of income in kind account, the use of adjusted
disposable income account shows how this measure of adjusted disposable income is spent byhouseholds on the social transfers in kind received
from government and NPISHs, by adding the valueof the social transfers in kind to household final
consumption to give a measure called actual final
consumption. The consumption for government

200

Primary distribution of income accounts (II.1)
Generation of income account (II.1.1)
The layout of the generation of income account by institutional sector is shown in Table 8.3.
8.16

The generation of income account is also presented
by industries, in the columns of the supply and use
tables.

8.17

The generation of income account presents thetransactions of primary income from the point ofview of the source sectors, rather than the destination sectors.

8.18

It shows how value added covers compensationof employees and other taxes (less subsidies) on
production. The balancing item is operating surplus, which is the surplus (or deficit) on production activities before account has been taken of theinterest, rents or charges which the production
unit:(a) must pay on financial assets or on natural
resources — which it has borrowed or rented;(b) must receive on financial assets or on natural
resources of which it is the owner.

8.19

In the case of unincorporated enterprises in thehouseholds sector, the balancing item of the generation of income account implicitly contains anelement corresponding to remuneration for work
carried out by the owner or members of the family. This income from self-employment has characteristics of wages and salaries, and characteristics
of profit due to work carried out as an entrepreneur. This income, neither strictly wages nor profits alone, is referred to as ‘mixed income’.

8.20

In the case of own account production of housing
services by owner-occupier households, the balancing item of the generation of income account is
operating surplus (and not mixed income).

European system of accounts — ESA 2010

European system of accounts — ESA 2010
950
200
181
168
13
19
18
1
235

0

0

0

0

0

0

0

0

0

0

950

200

181

168

13

19

18

1

235

141

121

17

17

0

3

94

–44

–8

–8

–44

94

3

0

17

17

121

141

1 150

Goods andRest of the
Total
Services account world account economy

S.1

1 150

Total

Corresponding entries of the

1

0

1

1

0

4

4

5

6

11

NPISHs

S.15

S.14

0

0

0

0

0

0

0

0

11

11

Households

Table 8.3 — Account II.1.1: generation of income account
S.12

S.11

1

0

4

4

3

48

51

55

63

98

4

0

1

1

0

4

4

5

29

44

Value added, gross/gross domestic
product

Transactions and balancing items

D.31

D.3

88 D.29

D.214

D.2122

D.2121

D.212

D.211

D.21

D.2

1 D.1222

12 D.1221

13 D.122

10 D.1212

122 D.1211

132 D.121

145 D.12

841 D.11

Subsidies on products

Subsidies

Other taxes on production

Taxes on products except VAT and importtaxes

Taxes on imports excluding VAT and
dutiesImport duties

Taxes and duties on imports excluding
VAT

Value added type taxes (VAT)

Taxes on products

Taxes on production and imports

Employers’ imputed non-pension
contributions

Employers’ imputed pension contributions

Employers’ imputed social contributions

Employers’ actual non-pension
contributions

Employers’ actual pension contributions

Employers’ actual social contributions

Employers’ social contributions

Wages and salaries

Compensation of employees

B.1n/B.1*n Value added, net/net domestic productB.1g/B.1*g

986 D.1

GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

The sequence of accounts

8

201

202
S.1

214
8
238
53

214

8

238

53

0

3

3

0

NPISHs

S.15

53

69

8

15

61

84

–1

Households

S.14

Value added, gross/gross domestic
product

Compensation of employees

Wages and salaries

Employers’ social contributions

Employers’ actual social contributions

Employers’ actual pension contributions

D.1

D.11

D.12

D.121

D.1211B.1n/B.1*n Value added, net/net domestic productB.1g/B.1*g

Transactions and balancing items

S.12

S.12

S.13

Resources

0

27

27

0

S.14

34

12

46

0

1 174

1 331
82

94

99

126

132

155

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.11

S.13

S.11

12

15

Corresponding entries of theMixed income, net

Operating surplus, net

1 632

1 854

1 632

1 854

Total

Consumption of fixed capital on grossmixed income

Consumption of fixed capital on grossoperating surplus

Mixed income, grossOperating surplus, gross

Other subsidies on production

Other subsidies on products

Import subsidies

Transactions and balancing items

Total
Rest of theGoods andeconomy world account services account

S.1

B.3n

135 B.2n

P.51c2

157 P.51c1

B.3g

292 B.2g

NPISHs

S.15

D.319

D.311
–35 D.39

GeneralFinancial
Non-financial
government corporations corporations

Table 8.3 — Account II.1.1: generation of income account (continued)

61

–36

61

0

–36

–8
452

0

–8

0

452

0

Goods andRest of the
Total
Services account world account economy

0

Total

Corresponding entries of theUses

8
The sequence of accounts

European system of accounts — ESA 2010

S.13

S.14
Corresponding entries of the

0
0
0
0
0

Employers’ imputed non-pension
contributions

Taxes on production and imports

Taxes on products

Value added type taxes (VAT)

Taxes and duties on imports excluding
VAT

Import duties

Taxes on imports excluding VAT and
dutiesTaxes on products except VAT and importtaxes

Other taxes on production

Subsidies

Subsidies on products

Import subsidies

Other subsidies on products

Other subsidies on production

Operating surplus, grossMixed income, grossOperating surplus, net

Mixed income, net

D.1222

D.2

D.21

D.211

D.212

D.2121

D.2122

D.214

D.29

European system of accounts — ESA 2010

D.3

D.31

D.311

D.319

D.39

B.2g

B.3g

B.2n

B.3n

0

0

0

0

0

0

0

Employers’ imputed pension contributions

D.1221

0

Employers’ imputed social contributions

Total
Rest of theGoods andeconomy world account services account

S.1

D.122

NPISHs

S.15

Employers’ actual non-pension
contributions

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

D.1212

Transactions and balancing items

S.11

Resources

Total

The sequence of accounts

8

203

8

The sequence of accounts

employed in the household business. In the households sector allocation of primary income account,the entry in the resources side shows all the compensation from employment earned by the households sector working as an employee in business,the government etc. So the entry in the allocationaccount for households is much bigger than theentry in the households sector generation account.

Allocation of primary income account (II.1.2)
8.21

Unlike the generation of income account, the allocation of primary income treats resident units andinstitutional sectors as recipients rather than producers of primary income.
8.22’Primary income’ is the income which resident
units receive by virtue of their direct participationin the production process, and the income receivable by the owner of a financial asset or a natural
resource in return for providing funds to, or putting the natural resource at the disposal of, anotherinstitutional unit.

8.23

204

For the households sector, compensation of
employees (D.1) as a resource in the allocation ofprimary income account is not the same as the D.1
entry as a use, in the generation of income account.
In the household generation of income account,the use entry shows how much is paid to staff

8.24

The allocation of primary income account (II.1.2)
can be calculated only for the institutional sectors
and subsectors because, in the case of industries,
it is impossible to break down certain flows connected with financing (capital loans and borrowings) and assets.

8.25

The allocation of primary income account is broken down into an entrepreneurial income account(II.1.2.1) and an allocation of other primary income
account (II.1.2.2).

European system of accounts — ESA 2010

TotalS.1

European system of accounts — ESA 2010
D.2121
D.2122
D.214
D.29

0

0

0

D.122200

0D.1221

D.212

0

0

D.122

D.1212

D.1211

D.121

D.12

D.11

0

0

0

Mixed income, net

B.3n

D.211

0

0

Operating surplus, net

B.2n

Other taxes on production

Taxes on products except VAT and importtaxes

Taxes on imports excluding VAT and
dutiesImport duties

Taxes and duties on imports excluding
VAT

Value added type taxes (VAT)

Taxes on products

Taxes on production and imports

Employers’ imputed non-pension
contributions

Employers’ imputed pension contributions

Employers’ imputed social contributions

Employers’ actual non-pension
contributions

Employers’ actual pension contributions

Employers’ actual social contributions

Employers’ social contributions

Wages and salaries

Compensation of employees

Mixed income, gross

B.3g

D.1

Operating surplus, grossTransactions and balancing items
B.2g

0

0

0

Non-financial
corporations

S.11

D.21

0

0

S.12

GeneralFinancialgovernment corporations

S.13

0

0

0

Households

S.14

D.2

6

6

NPISHs

S.15

Uses

0

6

6

Goods andRest of the
Total
Services account world account economy

Corresponding entries of theTable 8.4 — Account II.1.2: allocation of primary income account

The sequence of accounts

8

205

206
1 642

1 642

8

1 864

0

8

6

1 864

0

6

14

65

0

14

8

25

47

0

8

653

0

8

0

47

0

14

14

25

4

European system of accounts — ESA 2010
1

4

0

1 358

1 381

27

171

198

7

15

27

0

8

6

14

8

25

47

0

0

15

97 B.5n/B.5*n254 B.5g/B.5*g

31 D.45

D.4432

D.4431

D.443

D.442

D.441

D.44

0 D.43

8 D.42239 D.421

47 D.4256 D.41

12

54

15

106

13

0

35

67

62

14

17

6

79

217

13

230

168

D.39
42

134 D.4

41

44

D.319

0

0

D.311

0

6

S.11

D.31

391

S.12

GeneralFinancial
Non-financial
government corporations corporations

S.13

0

Households

S.14

D.3

NPISHs

S.15

0

Goods andRest of the
Total
Services account world account economy

S.1

435

Total

Corresponding entries of the

Uses

Balance of primary incomes, net/national
income, net

Balance of primary incomes, gross/national income, gross

Rent

Retained earnings attributable tocollective investment fund shareholders

Dividends attributable to collective
investment fund shareholders

Investment income attributable tocollective investment fund shareholders

Investment income payable on pension
entitlements

Investment income attributable toinsurance policy holders

Other investment income

Reinvested earnings on foreign direct
investment

Withdrawals from income ofquasi-corporations

Dividends

Distributed income of corporations

Interest

Property income

Other subsidies on production

Other subsidies on products

Import subsidies

Subsidies on products

Subsidies

Transactions and balancing items

8
The sequence of accounts

S.13

S.14

18
1

121
17
17
0
3

Compensation of employees

Wages and salaries

Employers’ social contributions

Employers’ actual social contributions

Employers’ actual pension contributions

Employers’ actual non-pension
contributions

Employers’ imputed social contributions

Employers’ imputed pension contributions

Employers’ imputed non-pension
contributions

Taxes on production and imports

Taxes on products

Value added type taxes (VAT)

Taxes and duties on imports excluding
VAT

Import duties

Taxes on imports excluding VAT and
dutiesTaxes on products except VAT and importtaxes

Other taxes on production

D.1

D.11

D.12

D.121

D.1211

D.1212

D.122

D.1221

D.1222

D.2

D.21

European system of accounts — ESA 2010

D.211

D.212

D.2121

D.2122

D.214

D.29

94

141

235

0

Mixed income, net

34

B.3n

135

Operating surplus, net

19

13

168

181

200

954

1 154

53

69

61

84

B.2n

27

Mixed income, gross

46

B.3g

292

Operating surplus, grossNon-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

Resources

B.2g

Transactions and balancing items

S.11

Table 8.4 — Account II.1.2: allocation of primary income (continued)

03

NPISHs

S.15
Corresponding entries of the

94

3

0

17

17

121

141

235

1

18

19

13

168

181

200

954

1 154

53

238

61

452

0

0

0

0

0

0

0

2

2

Total
Rest of theGoods andeconomy world account services account

S.1

94

3

0

17

17

121

141

235

1

18

19

13

168

181

200

956

1 156

53

238

61

452

Total

The sequence of accounts

8

207

208
S.13

S.14

2
0

Interest

Distributed income of corporations

Dividends

Withdrawals from income ofquasi-corporations

Reinvested earnings on foreign direct
investment

Other investment income

D.41

D.42

D.421

D.422

D.43

D.44

2

Retained earnings attributable tocollective investment fund shareholders

Rent

Balance of primary incomes, gross/national income, grossBalance of primary incomes, net/national
income, net

D.4432

D.45

B.5g/B.5*g

B.5n/B.5*n

41

1

Dividends attributable to collective
investment fund shareholders

D.4431

3

5

3

0

1

0

21

0

2

2

1

3

Investment income attributable tocollective investment fund shareholders

D.443

8

8

Investment income payable on pension
entitlements

20

30

3

7

13

20

D.442

0

1

5

7

49

123

Investment income attributable toinsurance policy holders
0

8

7

25

25

14

22

–36

–8

0

D.441

5

8

4

10

10

106

Property income

D.4
33

Other subsidies on production

D.39
149

Other subsidies on products

D.319
96

Import subsidies

D.311

–8

Subsidies on products

D.31

–44

Subsidies

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

D.3

Transactions and balancing items

S.11

Resources

0

0

0

0

0

0

0

0

0

7

7

NPISHs

S.15
Corresponding entries of the

65

8

6

14

8

25

47

14

9

53

62

209

397

–36

–8

0

–8

–44

0

0

0

0

0

0

0

3

14

17

21

38

Total
Rest of theGoods andeconomy world account services account

S.1

65

8

6

14

8

25

47

14

12

67

79

230

435

–36

–8

0

–8

–44

Total

8
The sequence of accounts

European system of accounts — ESA 2010

The sequence of accounts

Entrepreneurial income account (II.1.2.1)
8.26

The purpose of the entrepreneurial income accountis to determine a balancing item corresponding
to the concept of current profit before distribution and income tax, as normally used in businessaccounting.

8.27

In the case of general government and non-profit
institutions serving households, this account concerns only their market activities.

8.28

Entrepreneurial income corresponds to the operating surplus or mixed income (on the resourcesside):

Allocation of other primary income account (II.1.2.2)
8.29

The purpose of the allocation of other primary
income account is to return from the concept ofentrepreneurial income to the concept of primary
income. It therefore contains the elements of primary income not included in the entrepreneurial
income account:(a) in the case of corporations, distributed dividends, withdrawals of income from quasi-corporations, and reinvested earnings on foreign
direct investment (on the uses side);(b) in the case of households:

plus	
property income receivable in connection with financial and other assets
belonging to the enterprise (on the
resources side),(1) property income payable, excluding rents andinterest payable in connection with the entrepreneurial activity (on the uses side);minus	interest on debts payable by the enterprise, other investment income payable, and rents payable on land and othernatural resources rented by the enterprise (on the uses side).

(3) property income receivable, excluding that receivable in connection with the activity of the enterprise (on the resources side);

Property income payable in the form of dividends,
withdrawals of income from quasi-corporations, or
reinvested earnings on foreign direct investment, is
not deducted from entrepreneurial income.

8(2) compensation of employees (on the resourcesside);(c) in the case of general government:(1) property income payable, excluding that payable
in connection with market activities (on the usesside);(2) taxes on production and imports less subsidies (onthe resources side);(3) property income receivable, excluding that receivable in connection with market activities (on the
resources side).

European system of accounts — ESA 2010

209

210
240
162

47
25
8
14
31
343
174

162

47

25

8

14

31

343

174

Goods andRest of the
Total
Services account world account economy

S.1

240

Total

Corresponding entries of the
NPISHs

S.15

Table 8.5 — Account II.1.2.1: entrepreneurial income

Households

S.14

S.12

S.11

30

42

0

14

8

25

47

106

153

Mixed income, grossOperating surplus, net
Mixed income, net

B.3g
B.2n
B.3n

Withdrawals from income ofquasi-corporations
Reinvested earnings on foreign direct
investment

D.422
D.43

144 B.4n

301 B.4g

31 D.45

D.443

D.442

D.441

Entrepreneurial income, net

Entrepreneurial income, gross

Rent

Investment income attributable tocollective investment fund shareholders

Investment income payable on pension
entitlements

Investment income attributable toinsurance policy holders

Other investment income

Dividends

D.421

D.44

Distributed income of corporations

Interest

D.42

56 D.41

Property income

Operating surplus, grossTransactions and balancing items
B.2g

87 D.4GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

8
The sequence of accounts

European system of accounts — ESA 2010

S.13

S.14

0
11

0
11

8
5

Property income

Interest

Distributed income of corporations

Dividends

Withdrawals from income ofquasi-corporations

Reinvested earnings on foreign direct
investment

Other investment income

Investment income attributable toinsurance policy holders

Investment income payable on pension
entitlements

Investment income attributable tocollective investment fund shareholders

Rent

Entrepreneurial income. gross

Entrepreneurial income, net

D.41

D.42

D.421

European system of accounts — ESA 2010

D.422

D.43

D.44

D.441

D.442

D.443

D.45

B.4g

B.4n

41

3

4

10

10

33

96

149

3

8

8

7

25

25

106

53

69

0

D.4

0

Mixed income, net

34

44

5

16

35

35

139

245

53

238

61

452

B.3n

135

3

Operating surplus, net

61

84

B.2n

27

Mixed income, gross46

Corresponding entries of the

Total
Rest of theGoods andeconomy world account services account

S.1

B.3g

292

NPISHs

S.15

Operating surplus, grossNon-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

Resources

B.2g

Transactions and balancing items

S.11

Table 8.5 — Account II.1.2.1: entrepreneurial income (continued)

44

11

0

5

16

11

0

35

35

139

245

53

238

61

452

Total

The sequence of accounts

8

211

212

European system of accounts — ESA 2010

S.1

13

36

68

98

6

6

63

6

6

62

55

151

Goods andRest of the
Total
Services account world account economy

214

Total

Corresponding entries of the6

6

NPISHs

S.15

14

41

Households

S.14

Table 8.5 — Account II.1.2.2: allocation of other primary income
S.12

S.11

35

42

15

15

Employers’ social contributions
Employers’ actual social contributions
Employers’ imputed social contributions
Taxes on production and imports
Taxes on products
Value added type taxes (VAT)
Taxes and duties on imports excluding
VAT
Import duties
Taxes on imports excluding VAT and
dutiesTaxes on products except VAT and importtaxes
Other taxes on production
Subsidies
Subsidies on products
Import subsidies
Other subsidies on products
Other subsidies on production

D.12
D.121
D.122
D.2
D.21
D.211
D.212
D.2121
D.2122
D.214
D.29
D.3
D.31
D.311
D.319
D.39

47 D.42

D.41

Distributed income of corporations

Interest

Property income

Wages and salaries

D.11

Compensation of employees

Entrepreneurial income, net

B.4n
D.1

Entrepreneurial income, grossTransactions and balancing items
B.4g

47 D.4GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

8
The sequence of accounts

S.1

European system of accounts — ESA 2010
1 642

1 642

1

4

0

NPISHs

S.15

1 358

1 381

27

Households

S.14

Entrepreneurial income. Gross

Entrepreneurial income, net

Compensation of employees

Wages and salaries

B.4g

B.4n

D.1

D.11

Transactions and balancing items

171

198

S.12

7

S.13

Resources
S.14

15

27

15

144

301

30

42

954

1 154

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.11

S.12

S.11

Investment income payable on pension
entitlements
Investment income attributable tocollective investment fund shareholders

D.442
D.443

954

1 154

174

343

Total
economyS.1

2

2

Goods andservices account

Corresponding entries of the

956

1 156

174

343

Total

Balance of primary incomes, net/national
income, net

Balance of primary incomes, gross/national income, grossRest of theworld account

97 B.5n/B.5*n254 B.5g/B.5*g

NPISHs

S.15

Investment income attributable toinsurance policy holders

D.441

Rent

Other investment income

D.44

D.45

Reinvested earnings on foreign direct
investment

Withdrawals from income ofquasi-corporations

Dividends

Transactions and balancing items

D.43

8 D.42239 D.421

GeneralFinancial
Non-financial
government corporations corporations

S.13

Table 8.5 — Account II.1.2.2: allocation of other primary income (continued)

1 864

0

1 864

14

14

8

34

36

44

54

34

0

Goods andRest of the
Total
Services account world account economy

54

Total

Corresponding entries of theUses

The sequence of accounts

8

213

214
S.13

S.14

121
17
17
0
3

5
2
0

Employers’ imputed social contributions

Taxes on production and imports

Taxes on products

Value added type taxes (VAT)

Taxes and duties on imports excluding
VAT

Import duties

Taxes on imports excluding VAT and
dutiesTaxes on products except VAT and importtaxes

Other taxes on production

Subsidies

Subsidies on products

Import subsidies

Other subsidies on products

Other subsidies on production

Property income

Interest

Distributed income of corporations

Dividends

Withdrawals from income ofquasi-corporations

Reinvested earnings on foreign direct
investment

D.122

D.2

D.21

D.211

D.212

D.2121

D.2122

D.214

D.29

D.3

D.31

D.311

D.319

D.39

D.4

D.41

D.42

D.421

D.422

D.43

7

14

22

–36

–8

0

–8

–44

94

141

Employers’ actual social contributions

D.121
235

Employers’ social contributions

European system of accounts — ESA 2010
3

7

13

20

49

123

19

181

200

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

D.12

Transactions and balancing items

S.11

Resources

0

0

0

0

7

7

NPISHs

S.15

3

9

18

27

70

152

–36

–8

0

–8

–44

94

3

0

17

17

121

141

235

19

181

200

Total
economy

S.1

0

3

14

17

21

38

Rest of theworld accountGoods andservices account

Corresponding entries of the

3

12

32

44

91

190

–36

–8

0

–8

–44

94

3

0

17

17

121

141

235

19

181

200

Total

8
The sequence of accounts

S.13

S.14

0
0
1

Investment income attributable toinsurance policy holders

Investment income payable on pension
entitlements

Investment income attributable tocollective investment fund shareholders

Rent

Balance of primary incomes, gross/national income, grossBalance of primary incomes, net/national
income, net

D.441

D.442

D.443

D.45

B.5g/B.5*g

B.5n/B.5*n0

1

Other investment income

21

2

8

20

30

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

D.44

Transactions and balancing items

S.11

Resources

0

0

0

0

0

NPISHs

S.15

21

3

8

20

31

Total
economy

S.1

0

0

0

0

Rest of theworld accountGoods andservices account

Corresponding entries of the

21

3

8

20

31

Total

The sequence of accounts

European system of accounts — ESA 2010

8

215

8

The sequence of accounts

An adjustment item is shown in the table for thesocial insurance scheme service charges. Net social
contributions (D.61) are recorded net of thesecharges, but, as it is difficult to apportion themacross the components of D.61, those contributions are shown gross of these charges in the table.
So D.61 is the sum of its components, less thisadjustment item.

Secondary distribution of income account (II.2)
8.30

The secondary distribution of income accountshows how the balance of the primary income of
an institutional sector is allocated by redistribution: current taxes on income, wealth etc., social
contributions and benefits (excluding social transfers in kind) and other current transfers.

8.31

The balancing item of the account is disposable
income, which reflects current transactions andis the amount available for final consumption orsaving.

8.32

Social contributions are recorded on the uses sideof the secondary distribution of income accountof households and on the resources side of thesecondary distribution of income account of theinstitutional sectors responsible for managementof social insurance. When payable by employers
for their employees, they are first included undercompensation of employees, on the uses side ofthe employers’ generation of income account,since they form part of wage costs; they are also
recorded, as compensation of employees, on the
resources side of the households’ allocation of primary income account, since they correspond tobenefits to households.
The social contributions shown on the uses sideof the secondary distribution of income accountof households are net of the service charges of thepension funds and other insurance companies, allor part of whose resources are made up of actualsocial contributions.

216

Redistribution of income in kind account (II.3)
8.33

The redistribution of income in kind accountgives a broader picture of households’ income byincluding the flows corresponding to the use ofindividual goods and services which these households receive free of charge from government and
NPISHs, i.e. social transfers in kind. This facilitatescomparisons over time when there are differencesor changes in economic and social conditions, andsupplements the analysis of the role of general government in the redistribution of income.

8.34

Social transfers in kind are recorded on the
resources side of the redistribution of income inkind account in the case of households, and on theuses side in the case of general government andnon-profit institutions serving households.

8.35

The balancing item in the redistribution of income
in kind account is adjusted disposable income, andthis is the first entry on the resources side of the useof adjusted disposable income account (II.4.2).

European system of accounts — ESA 2010

European system of accounts — ESA 2010

0

0

0

0

0

0

0

0

0

0

0

0

0

181

168

13

19

18

1

129

115

14

10

8

2

–6

–6

2

8

10

14

115

129

1

18

19

13

168

181

333

0

333

203
9

1

204

212

1 212

Total
economy

S.1

9

1

213

Rest of theworld account17

Goods andServices account

1 229

Total

Corresponding entries of the

0

0

0

7

NPISHs

S.15

–6

2

8

10

14

115

129

1

18

19

13

168

181

333

2

176

178

582

Households

S.14

S.13

Uses
S.12

S.11

0

0

0

248

3

7

10

277

Balance of primary incomes, net/National
income, net

B.5n/B.5*n

D.61SCD.6142

D.6141

D.614

D.6132

D.6131

D.613

D.6122

D.6121

D.612

D.6112

D.6111

D.611

D.61

4 D.5920 D.51

Social insurance scheme service charges

Households’ non-pension contribution
supplements

Households’ pension contribution
supplements

Households’ social contribution
supplements

Households’ actual non-pension
contributions

Households’ actual pension contributions

Households’ actual social contributions

Employers’ imputed non-pension
contributions

Employers’ imputed pension contributions

Employers’ imputed social contributions

Employers’ actual non-pension
contributions

Employers’ actual pension contributions

Employers’ actual social contributions

Net social contributions

Other current taxes

Taxes on income

Current taxes on income, wealth, etc.

Current transfers

Balance of primary incomes, gross/
National income, grossTransactions and balancing items
B.5g/B.5*g

24 D.598

GeneralFinancial
Non-financial
government corporations corporations

Table 8.6 — Account II.2: Secondary distribution of income account

The sequence of accounts

8

217

218

1

1

12

0

12

0

1

1

0

1

0

44

14

60

45

15

96

23

53

36

8

9

European system of accounts — ESA 2010
9
1 826
1 604

9

1 826

1 604

9

7

36

52

22

96

3

45

48

13

43

56

2

29

58

0

29

250

283

0

250

279

16

0

279

8

299

0

8

45

52

0

45

53

384

Total
economy

S.1

52

0

53

Rest of theworld account0

Goods andServices account

384

Total

Corresponding entries of the

34

37

2

0

2

0

0

2

2

3

5

5

NPISHs

S.15

1 196

1 219

4

7

29

40

31

31

71

0

0

0

0

Households

S.14

S.12

S.11

290

317

9

0

5

5

22

96

4

4

136

52

2

5

7

8

45

53

112

13

25

0

1

1

3

45

48

13

0

13

62

12

193

205

205

71 B.6n228 B.6g

D.76

3 D.759

D.752

1 D.751

4 D.75

D.74

D.73

D.722

D.721

D.72

D.712

8 D.711

8 D.71

12 D.7D.623

13 D.6222

49 D.6221

62 D.622

D.6212

D.6211

D.621

62 D.62

GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

Disposable income, net

Disposable income, gross

VAT- and GNI-based EU own resources

Other miscellaneous current transfers

Current transfers between households

Current transfers to NPISHs

Miscellaneous current transfers

Current international cooperation

Current transfers within general
government

Non-life reinsurance claims

Non-life direct insurance claims

Non-life insurance claims

Net non-life reinsurance premiums

Net non-life direct insurance premiums

Net non-life insurance premiums

Other current transfers

Social assistance benefits in cash

Other social insurance non-pension
benefits

Other social insurance pension benefits

Other social insurance benefits

Social security non-pension benefits incashSocial security pension benefits in cashSocial security benefits in cashSocial benefits other than social transfers
in kindTransactions and balancing items

8
The sequence of accounts

S.12

S.13

S.14

European system of accounts — ESA 2010
10
8
2

27
4

12
0

19
6

Employers’ actual pension contributions

Employers’ actual non-pension
contributions

Employers’ imputed social contributions

Employers’ imputed pension contributions

Employers’ imputed non-pension
contributions

Households’ actual social contributions

Households’ actual pension contributions

Households’ actual non-pension
contributions

Households’ social contribution
supplements

Households’ pension contribution
supplements

Households’ non-pension contribution
supplements

Social insurance scheme service charges

D.6111

D.6112

D.612

D.6121

D.6122

D.613

D.6131

D.6132

D.614

D.6141

D.6142

D.61SC

2

25

12

3

4

90

94

1

1

2

5

104

109

Employers’ actual social contributions

D.611

31

Net social contributions

D.61

212

Other current taxes

D.59
66

Taxes on income

D.51

275

Current taxes on income, wealth, etc.

72

Current transfers

15

27

D.5

97

Balance of primary incomes, net/national
income, net

B.5n/B.5*n254

Balance of primary incomes, gross/national income, gross

3

6

9

0

4

4

3

35

38

50

9

204

213

367

171

198

1

0

0

0

0

0

0

0

0

0

0

420

1 358

1 381

Non-financial
Financial
GeneralHouseholds
corporations corporations government

B.5g/B.5*g

Transactions and balancing items

S.11

Resources

Table 8.6 — Account II.2: secondary distribution of income account (continued)

1

0

1

0

1

1

1

2

3

5

40

1

4

NPISHs

S.15
Corresponding entries of the

6

2

8

10

14

115

129

1

18

19

13

168

181

333

9

204

213

1 174

1 642

1 864

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

55

Total
Rest of theGoods andeconomy world account services account

S.1

6

2

8

10

14

115

129

1

18

19

13

168

181

333

9

204

213

1 229

1 642

1 864

Total

The sequence of accounts

8

219

220
S.13

S.14

Other current transfers

Net non-life insurance premiums

Net non-life direct insurance premiums

Net non-life reinsurance premiums

Non-life insurance claims

Non-life direct insurance claims

Non-life reinsurance claims

Current transfers within general
government

Current international cooperation

Miscellaneous current transfers

Current transfers to NPISHs

Current transfers between households

Other miscellaneous current transfers

VAT- and GNI-based EU own resources

Disposable income, gross

Disposable income, net

D.7

D.71

D.711

D.712

D.72

D.721

D.722

D.73

D.74

D.75

D.751

D.752

D.759

D.76

B.6g

B.6n

0

6

0

15

15

3

44

6

6

1

96

1

1

Social assistance benefits in cash

D.623

6

Other social insurance non-pension
benefits

D.6222

47

29

Other social insurance pension benefits

D.6221

104

250

Other social insurance benefits

D.622

62

8

Social security non-pension benefits incash

D.6212

645

Social security pension benefits in cash

D.6211

1

1

35

35

36

52

279

53

Social security benefits in cash

D.621

384

Social benefits other than social transfers
in kindNon-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

D.62

Transactions and balancing items

S.11

Resources

36

36

0

36

NPISHs

S.15
Corresponding entries of the

6

1

36

43

1

96

15

42

57

3

44

47

244

52

29

250

279

8

45

53

384

European system of accounts — ESA 2010

9

3

7

10

22

0

0

3

3

11

11

55

0

0

0

0

0

0

0

0

Total
Rest of theGoods andeconomy world account services account

S.1

9

9

8

36

53

23

96

15

45

60

14

44

58

299

52

29

250

279

8

45

53

384

Total

8
The sequence of accounts

European system of accounts — ESA 2010
4
1 826
1 604

4

1 826

1 604

S.11

3

6

31

31

NPISHs

S.15

S.12

1 411

1 434

Households

S.14

S.12

S.13

Resources

106

133

4

180

184

S.14

13

25

211
4

Social transfers in kind — non-market
production

Social transfers in kind — purchased
market production

Adjusted disposable income, gross

Adjusted disposable income, net

D.631

D.632

B.7g

B.7n

1 196
215

290

Social transfers in kind

13

D.63

71

1 219

Disposable income, net

317

B.6n

25

Disposable income, gross

B.6g

228

S.11

34

37

NPISHs

S.15

D.632

D.631

4

211

215

1 604

1 826

Total
economyS.1

71 B.7nRest of theworld accountGoods andservices account

Corresponding entries of the

Adjusted disposable income, net

Adjusted disposable income, gross

4

211

215

1 604

1 826

Total

Social transfers in kind — purchased market
production

Social transfers in kind — non-market
production

Social transfers in kind

Disposable income, net

B.6n
D.63

Disposable income, grossTransactions and balancing items
B.6g

228 B.7g

GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

Non-financial
Financial
GeneralHouseholds
corporations corporations government

211

211

Transactions and balancing items

215

Goods andRest of the
Total
Services account world account economy

S.1

215

Total

Corresponding entries of theTable 8.7 — Account II.3: redistribution of income in kind account

The sequence of accounts

8

221

8

The sequence of accounts

disposable income account includes the concept ofactual final consumption, which corresponds to thevalue of goods and services actually at the disposalof households for final consumption, even if theiracquisition is financed by general government or
non-profit institutions serving households.

Use of income account (II.4)
8.36

8.37

For the institutional sectors with final consumption, the use of income account shows how disposable income (or adjusted disposable income)is divided between final consumption expenditure(or actual final consumption) and saving.
In the system, only government, NPISHs andhouseholds have final consumption. In addition,
the use of income account includes, for households
and for pension funds, an adjustment item (D.8 —adjustment for the change in pension entitlements)
which relates to the way that transactions between
households and pension funds are recorded. Thisis explained in the chapter on distributive transactions, paragraph 4.141.

Consequently, the actual final consumption of general government and NPISHs corresponds only tocollective final consumption.
8.41

At the level of the total economy, final consumption expenditure and actual final consumption are
equal; it is only the distribution over the institutional sectors which differs. The same is true of disposable income and adjusted disposable income.

8.42

Saving is the balancing item in both versions of theuse of income account. Its value is identical for all
sectors, regardless of whether it is obtained by subtracting final consumption expenditure from disposable income, or by subtracting actual final consumption from adjusted disposable income.

8.43

Saving is the (positive or negative) amount resulting from current transactions which establishes thelink with accumulation. If saving is positive, nonspent income is used for the acquisition of assets
or for paying off liabilities. If saving is negative,
certain assets are liquidated or certain liabilities
increase.

Use of disposable income account (II.4.1)
8.38

8.39

The use of disposable income account includes theconcept of final consumption expenditure financedby the various sectors concerned: households, general government, and non-profit institutions serving households.
The balancing item in the use of disposable income
account is saving.

Use of adjusted disposable income account (II.4.2)
8.40

222

This account links with the redistribution ofincome in kind account (II.3). The use of adjusted

European system of accounts — ESA 2010

European system of accounts — ESA 2010

Disposable income, gross

Disposable income, net

Final consumption expenditure

Individual consumption expenditure

Collective consumption expenditure

Adjustment for the change in pension
entitlements

Saving, gross

Saving, net

Current external balance

B.6n

P.3

P.31

P.32

D.8

B.8g

B.8n

B.12

Transactions and balancing items

–13

B.6g

–13

S.11

2

5

0

1

31

32

NPISHs

S.15

S.12

192

215

1 015

1 015

Households

S.14

S.12

71

228

S.11

S.13

Resources

–62

–35

0

168

184

352

S.14

2

14

11

13

25
290

317

11

1 196

1 219

34

37

11

1 604

1 826

Total
economyS.1

B.12

71 B.8n228 B.8g

NPISHs

S.15

P.32

P.31

0

Rest of theworld account

169

1 230

1 399

Goods andservices account

Corresponding entries of theCurrent external balance

Saving, net

Saving, gross

11

169

1 230

1 399

1 604

1 826

Total

Adjustment for the change in pension
entitlementsCollective consumption expenditure

Individual consumption expenditure

Final consumption expenditure

Disposable income, net

B.6n
P.3

Disposable income, grossTransactions and balancing items
B.6g

0 D.8

GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

Non-financial
Financial
GeneralHouseholds
corporations corporations government

205

205

11

11
427

169

169

427

1 230

1 230

0

1 399

Goods andRest of the
Total
Services account world account economy

S.1

1 399

Total

Corresponding entries of theTable 8.8 — Account II.4.1: use of disposable income account

The sequence of accounts

8

223

224

Adjusted disposable income, gross

Adjusted disposable income, net

Actual final consumption

Actual individual consumption

Actual collective consumption

Adjustment for the change in pension
entitlements

Saving, gross

Saving, net

Current external balance

B.7g

B.7n

P.4

P.41

P.42

D.8

B.8g

B.8n

B.12

Transactions and balancing items

–13

S.11

2

5

0

1

1

NPISHs

S.15

S.12

192

215

1 230

1 230

Households

S.14

S.12

71

228

S.11

S.13

Resources

–62

–35

0

168

168

S.14

2

14

11

13

25
106

133

11

1 411

1 434

3

11

1 604

1 826

Total
economyS.1

B.12

71 B.8n228 B.8g

6

NPISHs

S.15

P.42

P.41

0

Rest of theworld account

169

1 230

1 399

Goods andservices account

Corresponding entries of theCurrent external balance

Saving, net

Saving, gross

11

169

1 230

1 399

1 604

1 826

Total

Adjustment for the change in pension
entitlements

Actual collective consumption

Actual individual consumption

Actual final consumption

Adjusted disposable income, net

B.7n
P.4

Adjusted disposable income, grossTransactions and balancing items
B.7g

0 D.8

GeneralFinancial
Non-financial
government corporations corporations

S.13

Uses

Non-financial
Financial
GeneralHouseholds
corporations corporations government

205

205

–13

427

11

11

427

169

169

0

1 230

Total
economy1 230

Rest of theworld account

1 399

Goods andServices account

S.1

1 399

Total

Corresponding entries of theTable 8.9 — Account II.4.2: use of adjusted disposable income account8
The sequence of accounts

European system of accounts — ESA 2010

The sequence of accounts

Accumulation accounts (III)
8.44

The accumulation accounts are flow accounts.
They record the various causes of changes in theassets and liabilities of units and the change in their
net worth.

8.45

Changes in assets are recorded on the left-handside of the accounts (plus or minus), changes in liabilities and net worth on the right-hand side (plusor minus).

Capital account (III.1)
8.46

8.47

The capital account records acquisitions less disposals of non-financial assets by resident units andmeasures the change in net worth due to saving(final balancing item in the current accounts) andcapital transfers.
The capital account makes it possible to determine
the extent to which acquisitions less disposals of
non-financial assets have been financed out of saving and by capital transfers. It shows a net lending corresponding to the amount available to a unit
or sector for financing, directly or indirectly, otherunits or sectors, or a net borrowing corresponding
to the amount which a unit or sector is obliged toborrow from other units or sectors.

European system of accounts — ESA 2010

8

Change in net worth due to saving and capitaltransfers account (III.1.1)
8.48

This account makes it possible to determine thechange in net worth due to saving and capitaltransfers, which corresponds to net saving plus
capital transfers receivable, minus capital transfers
payable.

Acquisitions of non-financial assets account (III.1.2)
8.49

This account records acquisitions less disposals of
non-financial assets in order to return from theconcept of change in net worth due to saving andcapital transfers to net lending or borrowing.

Financial account (III.2)
8.50

The financial account records, by type of financial instrument, the changes in the financial assets
and liabilities that compose net lending or borrowing. As these should match the financial surplus ordeficit balancing items of the capital account, carried forward to this account as the first entry on thechanges in liabilities and net worth side, there is nobalancing item in this account.

8.51

The classification of assets and liabilities used in thefinancial account is identical to that used in the balance sheets.

225

226

–29

Rest of theworld account

Saving, net

Current external balance

Capital transfers, receivable

Capital taxes, receivable

Investment grants, receivable

Other capital transfers, receivable

Capital transfers, payable

Capital taxes, payable

Investment grants, payable

B.12

D.9r

D.91r

D.92r

D.99r

D.9p

D.91p

D.92p

S.1

S.11

20

NPISHs

S.15

S.12

S.12

European system of accounts — ESA 2010
0

–16

10

23

33

71

0

–7

0

0

2

S.11

–81

–16

S.13

S.14

–27

0

–34

4

0

2

6

–62

–2

–5

23

0

23

192

0

–3

0

0

2

NPISHs

S.15

Current external balance
Capital transfers, receivable
Capital taxes, receivable
Investment grants, receivable
Other capital transfers, receivable
Capital transfers, payable
Capital taxes, payable
Investment grants, payable
Other capital transfers, payable

B.12
D.9r
D.91r
D.92r
D.99r
D.9p
D.91p
D.92p
D.99p

–27

–2

–65

37

23

2

62

205

Total
economy

S.1

0

–1

4

4

–13

Rest of theworld accountGoods andservices account

Corresponding entries of the

–27

–2

–66

37

27

2

66

–13

205

Total

Changes in net worth due to saving andcapital transfers

Saving, net

Transactions and balancing items
B.8n

62 B.101

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in liabilities and net worth

236

Households

S.14

Non-financial
Financial
GeneralHouseholds
corporations corporations government

221

Total
economyTransactions and balancing items

Goods andServices account

B.8n

192

Total

Corresponding entries of the

Changes in assets

Table 8.10 — Account III.1.1: change in net worth due to saving and capital transfers account8
The sequence of accounts

S.12

88

Changes in net worth due to saving andcapital transfers

B.101

–5

–7

European system of accounts — ESA 2010
359
358
9
–8
17
–222
28
10
0
0
0

0

0

–10

359

358

9

–8

17

–222

28

10

0

0

0

0

0

10

0

192
376

192

376

414

Goods andRest of the
Total
Services account world account economy

414

Total

S.1

–4

0

1

1

0

0

–3

–1

1

5

5

5

2

5

NPISHs

S.15

174

1

3

4

5

2

–23

0

3

45

48

48

32

55

Households

S.14

–90

–7

S.14

S.12

210

–3

S.11

–1

–3

NPISHs

S.15

–103

0

2

2

3

0

–27

–3

0

38

35

35

11

38

–1

0

0

0

0

0

0

–12

0

8

8

8

–4

8

S.1

–56 B.9

0 NP.3–1 NP.2–6 NP.1–7 NP

2 P.5326 P.52–157 P.51c

17 P.512–4 P.5113

5 P.5112

262 P.5111

263 P.511

280 P.51g

151 P.5n

308 P.5g

B.101

202

–36

Total
economyGeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Table 8.11 — Account III.1.2: acquisition of non-financial assets account–16

Other capital transfers, payable

Corresponding entries of the

S.13

Non-financial
Financial
GeneralHouseholds
corporations corporations government

D.99p

Transactions and balancing items

S.11

Changes in liabilities and net worth

Goods andservices accountNet lending (+) net borrowing (–)

Purchases less sales of goodwill andmarketing assets

Acquisitions less disposals of contracts,
leases and licences

Acquisitions less disposals of natural
resources

Acquisitions less disposals of nonproduced assets

Acquisitions less disposals of valuables

Changes in inventories

Consumption of fixed capital

Costs of ownership transfer on nonproduced assets

Disposal of existing fixed assets

Acquisitions of existing fixed assets

Acquisitions of new fixed assets

Acquisitions less disposals of fixed assets

Gross fixed capital formation

Net capital formation

Gross capital formation

Changes in net worth due to saving andcapital transfers

192

–37

Total

Transactions and balancing items

–10

–1

Rest of theworld account

Corresponding entries of the

The sequence of accounts

8

227

228
S.13

S.14

–8
17

10
0
0

Acquisitions less disposals of fixed assets

Acquisitions of new fixed assets

Acquisitions of existing fixed assets

Disposal of existing fixed assets

Costs of ownership transfer on nonproduced assets

Consumption of fixed capital

Changes in inventories

Acquisitions less disposals of valuables

Acquisitions less disposals of nonproduced assets

Acquisitions less disposals of natural
resources

Acquisitions less disposals of contracts,
leases and licences

Purchases less sales of goodwill andmarketing assets

Net lending (+) net borrowing (–)

P.5111

P.5112

P.5113

P.512

P.51c

P.52

P.53

NP

NP.1

NP.2

NP.3

B.9

28

–222

9

358

359

376

192

414

P.511

–10

Gross fixed capital formation

202

P.51g

–1

Net capital formation

210

Goods andservices account

P.5n

–90

Rest of theworld account

Corresponding entries of theGross capital formation

–5

Total
economy

S.1

P.5g

88

NPISHsS.15

Changes in net worth due to saving andcapital transfers

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

B.101

Transactions and balancing items

S.11

Changes in liabilities and net worth

Table 8.11 — Account III.1.2: acquisition of non-financial assets account (continued)

0

0

10

28

–222

17

–8

9

358

359

376

192

414

192

Total

8
The sequence of accounts

European system of accounts — ESA 2010

European system of accounts — ESA 2010

6

9

2

7

4

3

1

12

12

10

2

0

0

0

36

95

29

66

82

25

57

119

103

87

9

7

16

7

7

16

7

7

77

91

107

56

22

78

59

27

86

30

31

2

33

26
–5

2

28

33

89

–5

3

36

0

0

11

0

100

–1

1

0

–1

1

436

Total
economy0Rest of theworld account47

Goods andServices account

S.1

483

Total

Corresponding entries of theTable 8.12 — Account III.2: financial account

0

0

0

0

0

0

0

0

0

0

–1

0

–1

0

1

1

1

2

2

NPISHs

S.15

5

13

3

2

48

53

66

0

3

3

7

3

10

27

27

27

10

64

189

Households

S.14

S.12

S.11

0

0

1

1

1

3

3

2

1

3

3

1

4

–1

–27

–27

2

–26

–10

2

3

1

1

23

25

28

49

4

53

53

13

66

0

0

–5

–5

15

10

0

–1

–1

172

B.9

0 F.5210 F.52

2 F.519

3 F.5125 F.511

10 F.51

10 F.5

5 F.42

14 F.41

19 F.4–3 F.32

10 F.31

7 F.3

4 F.2930 F.229

F.221

30 F.22

5 F.21

39 F.2

F.12

F.11

F.1

83 F

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Money market fund shares/units

Investment fund shares/units

Other equity

Unlisted shares

Listed shares

EquityEquity and investment fund shares

Long-term

Short-term

LoansLong-term

Short-term

Debt securities

Other deposits

Other transferable deposits

Inter-bank positions

Transferable deposits

Currency

Currency and deposits

SDRs

Monetary gold

Monetary gold and SDRs

Net acquisition of financial assets

Net lending (+)/net borrowing (–)

Transactions and balancing items

The sequence of accounts

8

229

230

0

0

5

7

7

5

12

8

7

2

0

12

14

10

0

14

3

8

0

3

2

15

0

2

3

15

0

3

11

10

0

11

22

25

0

22

7

2

0

7

48

9

Total
economy

S.1

2

0

48

Rest of theworld account0

Goods andServices account

9

Total

Corresponding entries of the

1

1

0

0

0

0

0

0

0

0

0

NPISHs

S.15

1

3

4

2

0

1

1

3

0

2

11

22

4

39

8

Households

S.14

S.12

S.11

4

1

5

0

0

0

0

1

0

0

1

0

1

1

5

3

8

8

2

3

0

2

7

1

1 F.893 F.81

4 F.8

0 F.72

2 F.712

1 F.711

3 F.71

3 F.7

0 F.66

F.65

F.64

F.63

0 F.62

1 F.61

1 F.6

0 F.522

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Other accounts receivable/payable,
excluding trade credits and advances

Trade credits and advances

Other accounts receivable/payable

Employee stock options

Forwards

Options

Financial derivatives

Financial derivatives and employee stock
options

Provisions for calls under standardisedguarantees

Entitlements to non-pension benefits

Claim of pension funds on pension
managers

Pension entitlements

Life insurance and annuity entitlements

Non-life insurance technical reserves

Insurance, pension and standardisedguarantee schemes

Non-MMF investment fund shares/units

Transactions and balancing items

8
The sequence of accounts

European system of accounts — ESA 2010

Net lending (+)/net borrowing (–)

Net incurrence of financial liabilities

Monetary gold and SDRs

Monetary gold

SDRs

Currency and deposits

Currency

Transferable deposits

Inter-bank positions

Other transferable deposits

Other deposits

Debt securities

Short-termLong-term

Loans

Short-termLong-term

Equity and investment fund shares

EquityListed shares

Unlisted shares

Other equity

Investment fund shares/units

Money market fund shares/units

B.9

F

F.1

F.11

F.12

F.2

F.21

F.22

F.221

F.229

F.29

F.3

F.31

F.32

F.4

F.41

F.42

F.5

F.51

F.511

F.512

F.519

F.52

F.521

Transactions and balancing items

S.12

S.13

S.14

Changes in liabilities and net worth

European system of accounts — ESA 2010
3

3

77

83

83

17

4

21

4

2

6

139

–56

5

11

4

7

11

22

0

0

0

12

18

30

39

31

–5

26

65

173

–1

6

3

9

34

4

38

2

2

35

37

93

–103

9

2

11

0

0

0

15

174

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.11

Table 8.12 — Account III.2: Financial account (continued)

4

2

6

0

0

0

6

–4

NPISHs

S.15

5

11

3

7

84

94

105

36

11

47

50

24

74

39

33

–5

28

35

102

426

10

Total
economy

S.1

2

5

4

2

3

9

14

21

14

35

16

5

21

–3

0

1

–2

0

57

–10

Rest of theworld accountGoods andservices account

Corresponding entries of the

0

7

16

7

9

87

103

119

57

25

82

66

29

95

36

33

–5

28

36

100

0

483

Total

The sequence of accounts

8

231

232
S.13

S.14

2
3
8

6
20

Pension entitlements

Claim of pension funds on pension
managers

Entitlements to non-pension benefits

Provisions for calls under standardisedguarantees

Financial derivatives and employee stock
options

Financial derivatives

Options

Forwards

Employee stock options

Other accounts receivable/payable

Trade credits and advances

Other accounts receivable/payable,
excluding trade credits and advances

F.63

F.64

F.65

F.66

F.7

F.71

F.711

F.712

F.72

F.8

F.81

F.89

26

1

0

2

2

3

Life insurance and annuity entitlements

F.62

3

11

Non-life insurance technical reserves

F.61

0

0

1

5

2

7

22

7

48

Insurance, pension and standardisedguarantee schemes

F.6

6

Non-MMF investment fund shares/units

3

6

9

0

0

0

0

0

0

0

4

4

0

0

0

0

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

F.522

Transactions and balancing items

S.11

Changes in liabilities and net worth

0

0

0

0

0

0

NPISHs

S.15

23

16

39

2

5

4

9

11

3

2

3

11

22

7

48

6

Total
economy

S.1

–13

–1

–14

2

1

3

3

0

0

0

0

0

0

0

3

Rest of theworld accountGoods andservices account

Corresponding entries of the
Total

10

15

25

2

7

5

12

14

3

2

3

11

22

7

48

9

8
The sequence of accounts

European system of accounts — ESA 2010

The sequence of accounts

A nominal holding loss corresponds to the negative revaluation of an asset or the positive revaluation of a (financial) liability.

Other changes in assets account (III.3)
8.52

The other changes in assets account records
changes in assets and liabilities of units, other thanin connection with saving and voluntary transfersof wealth, the latter being recorded in the capitaland financial accounts. It is divided into: the otherchanges in volume of assets account (III.3.1) andthe revaluation account (III.3.2).

Other changes in volume of assets account (III.3.1)
8.53

The movements recorded in the other changes involume of assets account affect the net worth of thebalance sheets of the units, sectors and subsectors
concerned. This change, called change in net worth
due to other changes in volume of assets, is the balancing item in the account.

8.55

The flows recorded in the revaluation accountchange the net worth of the balance sheets of theunits concerned. This change, called ‘change in net
worth due to nominal holding gains and losses’, isthe balancing item in the account. It is recorded on
the changes in liabilities and net worth side.

8.56

The revaluation account is broken down into two
subaccounts: the neutral holding gains and losses
account (III.3.2.1) and the real holding gains andlosses account (III.3.2.2).

Neutral holding gains and losses account (III.3.2.1)
8.57

Revaluation account (III.3.2)
8.54

The revaluation account records changes in thevalue of assets and liabilities due to changes in theirprices.
For a given asset or liability, this change is measured as either:

The neutral holding gains and losses accountrecords changes in the value of assets and liabilities in proportion to changes in the general pricelevel. Such changes correspond to the revaluation necessary to maintain the general purchasing power of assets and liabilities. The general priceindex to be applied for this calculation is the priceindex for final national uses, excluding changes ininventories.

((a) the difference between its value at the end of theaccounting period and its value at the start of
the accounting period or the date on which it
was first entered in the balance sheet; orReal holding gains and losses account (III.3.2.2)
8.58

Real holding gains and losses measure the difference between nominal holding gains and losses
and neutral holding gains and losses.

((b) the difference between its value at the date on
which it was written out of the balance sheet
and its value at the start of the accounting
period or the date on which it was first enteredin the balance sheet.

8.59

If the nominal holding gains net of the nominal
holding losses on a given asset exceed the neutral holding gains net of the neutral holding losses,
there is a real holding gain on the asset for the unit
holding it. This gain reflects the fact that the actual
price of the asset has, on average, risen faster than
the general price level. Conversely, a drop in therelative price of the asset produces a real holding
loss for the unit holding it.

This difference is called ‘nominal holding gain (orloss)’.
A nominal holding gain corresponds to the positive revaluation of an asset or the negative revaluation of a (financial) liability.

European system of accounts — ESA 20108

By the same token, a rise in the relative price of aliability produces a real holding loss on liabilities,
while a drop in the relative price of a liability generates a real holding gain on liabilities.

233

234

Total

0

2

1

0

1

0

2

2

1

0

1

0

2

–11

–11

0

–2

–2

0

–1

–1

0

0

0

0

–3

–3

0

–8

–8

0

–8

–8

0

–11

–11

0

0

0

0

4

4

–2

26

26

–2

30

30

–9

3

3

–9

33

33

S.1 Total
economyEuropean system of accounts — ESA 2010

0

0

0

0

0

0

0

0

0

0

S.15 NPISHs

0

0

0

0

0

0

0

0

0

0

S.14
Households

–4

–4

0

4

1

5

–2

–4

–6

0

–2

–2

–2

4

4

3

7

0

–2

1

1

–

0

0

0

0

0

0

0

6 K.61

6 K.6

AF

AN.2

1 AN.1

1 K.5

AF–4 AN.2–1 AN.1–5 K.4AF

AN.2–5 AN.1–5 K.3–2 AN.23–1 AN.22

AN.21–3 K.22–6 AN.21–6 K.21–9 K.2AN.23

4 AN.22

22 AN.21

26 AN.2

AN.1

26 K.1

S.13 General S.12 Financial S.11 Non-financial
government corporations
corporations

Changes in assets

Table 8.13 — Account III.3.1: other changes in volume of assets account

Changes in sector classification and structure

Changes in classification

Financial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Other changes in volume n.e.c.

Financial assets

Non-produced non-financial assets

Produced non-financial assets

Uncompensated seizures

Financial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Catastrophic losses

Purchases less sales of goodwill and marketing assets

Contracts, leases and licences

Natural resources

Other economic disappearance of non-produced assets

Natural resources

Depletion of natural resources

Economic disappearance of non-produced assets

Purchases less sales of goodwill and marketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Produced non-financial assets

Economic appearance of assets

Other flows

8
The sequence of accounts

Total

0

0

2

–2

–2

0

0

13

–7

–2

–3

–2

17

9

6

0

3

0

0

0

2

1

0

0

0

0

2

–2

–2

0

0

13

–7

–2

–3

–2

17

9

6

0

3

0

0

0

2

1

0

0

S.1 Total
economyEuropean system of accounts — ESA 2010

0

0

0

0

0

0

S.15 NPISHs

0

0

0

0

0

0

S.14
Households

0

2

1

3

–3

–3

0

0

0

0

–1

–3

1

0 AF.40

Other accounts receivable/payable
Changes in net worth due to other changes in volume ofassetsB.102

Financial derivatives and employee stock options

Insurance, pension and standardised guarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets

Purchases less sales of goodwill and marketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Total other changes in volume

Financial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Changes in classification of assets and liabilities

Financial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Other flows

AF.8

AF.7

AF.6

2 AF.50 AF.30 AF.20 AF.1

2 AF

0 AN.23

4 AN.22

10 AN.21

14 AN.2

AN.13–3 AN.12

1 AN.11–2 AN.1

140 AF

0 AN.2AN.1

0 K.62

0

0

0

1

–2

0

–2

–2

–1

0

0

–2

–2

2 AF

1 AN.2

3 AN.1

S.13 General S.12 Financial S.11 Non-financial
government corporations
corporations

Changes in assets

The sequence of accounts

8

235

236

Financial assets

Other changes in volume n.e.c.

Produced non-financial assets

Non-produced non-financial assets

Financial assets/liabilities

Changes in classification

K.5

AN.1

AN.2

AF

K.6

Catastrophic losses

K.3

AF

Purchases less sales of goodwill and marketing assets

AN.23

Non-produced non-financial assets

Contracts, leases and licences

AN.22

AN.2

Natural resources

AN.21

Produced non-financial assets

Other economic disappearance of non-produced assets

K.22

AN.1

Natural resources

AN.21

Uncompensated seizures

Depletion of natural resources

K.21

K.4

Economic disappearance of non-produced assets

K.2

Financial assets/liabilities

Purchases less sales of goodwill and marketing assets

AN.23

AF

Contracts, leases and licences

AN.22

Non-produced non-financial assets

Natural resources

AN.21

AN.2

Non-produced non-financial assets

AN.2

Produced non-financial assets

Produced non-financial assets

AN.1

AN.1

Economic appearance of assets

K.1

Other flows

European system of accounts — ESA 2010
0

0

0

0

0

0

2

0

0

S.11 Non-financial S.12 Financial S.13 General
corporations
corporations government

Changes in liabilities and net worth

Table 8.13 — Account III.3.1: other changes in volume of assets account (continued)

0

1

1

S.14
Households

0

0

0

S.15 NPISHs

S.1 Total
economy

2

1

1

Total

2

1

1

8
The sequence of accounts

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill and marketing assets

Financial assets

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardised guarantee schemes

Financial derivatives and employee stock options

Other accounts receivable/payable

Changes in net worth due to other changes in volume ofassets

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.102

Total other changes in volume

Inventories

Financial assets/liabilities

AF

AN.12

Non-produced non-financial assets

AN.2

Fixed assets

Produced non-financial assets

AN.1

AN.11

Changes in classification of assets and liabilities

K.62

Produced non-financial assets

0

Financial assets/liabilities

AF

AN.1

0

Non-produced non-financial assets

AN.2

European system of accounts — ESA 2010
14

0

0

0

Produced non-financial assets

AN.1

2

Changes in sector classification and structure

–1

0

0

0

0

0

0

–2

2

2

2

0

0

2

2

S.11 Non-financial S.12 Financial S.13 General
corporations
corporations government

K.61

Other flows

Changes in liabilities and net worth

–1

1

1

1

0

0

0

0

S.14
Households

0

0

0

0

0

0

0

S.15 NPISHs

1

2

0

3

3

0

0

2

2

10

S.1 Total
economy
Total

10

1

2

0

3

3

0

0

2

2

The sequence of accounts

8

237

238
0
0
0

0

0

0

32

35

3

0

0

40

84

91

4

2

2

44

152

152

0

154

154

0

8

8

12

7

7

12

111

111

7

126

Total
economy126

Rest of theworld account280

Goods andServices account

S.1

280

Total

Corresponding entries of the

S.15

1

1

2

3

3

5

5

8

NPISHsTable 8.14 — Account III.3.2: revaluation account

10

6

16

45

45

5

2

28

35

80

Households

S.14

S.12

S.11

1

1

23

23

2

1

18

21

44

16

30

11

57

1

1

2

2

2

4

K.7

Other accounts receivable/payable
Changes in net worth due to nominal
holding gains/losses
B.103

Financial derivatives and employee stock
options

Insurance, pension and standardisedguarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets/liabilities

Purchases less sales of goodwill andmarketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Non-financial assets

Nominal holding gains/losses

Other flows

AF.8

AF.7

AF.6

5 AF.5

AF.4

3 AF.3

AF.2

AF.1

8 AF

AN.23

1 AN.2280 AN.21

81 AN.2

1 AN.13

4 AN.1258 AN.11

63 AN.1

144 AN

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

8
The sequence of accounts

European system of accounts — ESA 2010

Nominal holding gains and losses

Non-financial assets

Produced non-financial assets

Fixed assets

Inventories

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill andmarketing assets

Financial assets/liabilities

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardisedguarantee schemes

Financial derivatives and employee stock
options

Other accounts receivable/payable

Changes in net worth due to nominal
holding gains/losses

K.7

AN

AN.1

AN.11

AN.12

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.103

Other flows

S.12

S.13

S.14

European system of accounts — ESA 2010
134

17

1

18

10

17

34

51

38

7

7

96

0

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.11

Changes in liabilities and net worth

Table 8.14 — Account III.3.2: revaluation account (continued)

10

0

NPISHs

S.15

288

34

42

76

Total
economy

S.1

4

1

2

12

15

Rest of theworld accountGoods andservices account

Corresponding entries of the

292

35

44

12

91

Total

The sequence of accounts

8

239

240

2

1

28

8
0
4

7

7

26

28

0

3

1

29

25

3

136

148

28

1

1

30

76

76

2

77

77

32

6

6

16

4

4

16

111

111

12

121

Total
economy121

Rest of theworld account198

Goods andServices account

S.1

198

Total

Corresponding entries of the

1

2

3

1

1

5

5

6

NPISHs

S.15

1

5

9

4

17

36

22

22

4

2

28

34

56

Households

S.14

S.12

S.11

3

3

2

8

12

12

1

1

18

20

32

1

14

24

18

14

71

1

1

2

2

3

K.71

B.1031

3 AF.8AF.7

1 AF.6

3 AF.5

1 AF.42 AF.38 AF.2

AF.1

18 AF

AN.23

1 AN.2240 AN.21

41 AN.2

1 AN.13

1 AN.1258 AN.11

60 AN.1

101 AN

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Table 8.14 — Account III.3.2.1: neutral holding gains and losses account

Changes in net worth due to neutral
holding gains/losses

Other accounts receivable/payable

Financial derivatives and employee stock
options

Insurance, pension and standardisedguarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets/liabilities

Purchases less sales of goodwill andmarketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Non-financial assets

Neutral holding gains and losses

Other flows and balancing items

8
The sequence of accounts

European system of accounts — ESA 2010

S.12

S.13

S.14

European system of accounts — ESA 2010
3
82

Fixed assets

Inventories

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill andmarketing assets

Financial assets/liabilities

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardisedguarantee schemes

Financial derivatives and employee stock
options

Other accounts receivable/payable

Changes in net worth due to neutral
holding gains/losses

AN.11

AN.12

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.1031

14

18

1

1

Produced non-financial assets

AN.1

37

Non-financial assets

AN

6

7

14

21

26

68

27

7

4

2

13

87

2

3

5

Non-financial
Financial
GeneralHouseholds
corporations corporations government

Neutral holding gains and losses

Other flows and balancing items

K.71

Code

S.11

Changes in liabilities and net worth

Table 8.14 — Account III.3.2.1: neutral holding gains and losses account (continued)

6

1

1

1

3

NPISHs

S.15

208

6

7

28

29

26

30

126

Total
economy

S.1

6

1

1

2

2

16

22

Rest of theworld accountGoods andservices account

Corresponding entries of the

214

7

8

28

29

28

32

16

148

Total

The sequence of accounts

8

241

242
3
2
77
76
1

–52

–5

0

–2

1

–1

1

–1

–3

3

2

77

76

1

–57

–4

–32

16

–29

7

–8

–7

–4

–7

6

–28

15

–30

–4

5

Total
economy5

Rest of theworld account82

Goods andServices account

S.1

82

Total

Corresponding entries of the

–1

0

0
0

–5

1

0

2

–17

0

–20

0

23

23

1

0

1

0

0

–2

0

–1

0

2

2

0

0

0

0
0

1

24

Households

S.14

0

2

NPISHs

S.15

S.12

S.11

0

0

0

0

–3

0

–3

–1

–7

0

11

11

1

0

0

1

12

0

0

–1

2

–24

12

0

–3

–14

1

0

1

0

0

0

0

1

K.72

B.1032–3 AF.8

0 AF.7–1 AF.6

2 AF.5–1 AF.4

1 AF.3–8 AF.2

0 AF.1–10 AFAN.23

0 AN.2240 AN.21

40 AN.2

0 AN.13

3 AN.120 AN.113 AN.143 AN

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Table 8.14 — Account III.3.2.2: real holding gains and losses account

Changes in net worth due to real holding
gains/losses

Other accounts receivable/payable

Financial derivatives and employee stock
options

Insurance, pension and standardisedguarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets/liabilities

Purchases less sales of goodwill andmarketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Non-financial assets

Real holding gains and losses

Other flows and balancing items

8
The sequence of accounts

European system of accounts — ESA 2010

S.13

S.14

European system of accounts — ESA 2010
–7
0

–3
52

Inventories

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill andmarketing assets

Financial assets/liabilities

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardisedguarantee schemes

Financial derivatives and employee stock
options

Other accounts receivable/payable

Changes in net worth due to real holding
gains/losses

AN.12

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.1032

0

3

–18

0

–1

4

0

3

0

13

–26

0

Fixed assets

AN.11

0

Produced non-financial assets

AN.1

–17

Non-financial assets

AN

–19

Real holding gains and losses

11

0

0

0

–7

3

–2

0

–6

9

–2

0

0

–3

0

0

0

–5

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

K.72

Other flows and balancing items

S.11

Changes in liabilities and net worth

Table 8.14 — Account III.3.2.2: real holding gains and losses account (continued)

4

–1

0

0

–1

0

–1

0

–3

NPISHs

S.15

80

–6

0

–7

6

–29

16

–30

0

–50

Total
economy

S.1

–2

–1

0

–1

1

0

0

–2

–4

–7

Rest of theworld accountGoods andservices account

Corresponding entries of the

78

–7

0

–8

7

–29

16

–32

–4

–57

Total

The sequence of accounts

8

243

8

The sequence of accounts

Balance sheets (IV)8.60

The aim of the balance sheets is to give a pictureof the assets, liabilities and net worth of units atthe start and end of the accounting period and ofchanges between balance sheets. The sequence is asfollows:

Changes in balance sheet (IV.2)
8.62(a) opening balance sheet (IV.1);(b) changes in balance sheet (IV.2);(c) closing balance sheet (IV.3).

Opening balance sheet (IV.1)
8.61

Closing balance sheet (IV.3)
8.63

The opening balance sheet records the value of
assets and liabilities held by units at the start of theaccounting period.
These items are categorised on the basis of the classification of assets and liabilities.
They are valued at prices current at the start of theaccounting period. The difference between assets
and liabilities — the balancing item in the account— is the net worth at the start of the accounting
period.

244

The changes in balance sheet account records
changes in the value of assets and liabilities in thecourse of the accounting period and aggregates
the amounts recorded in the various accumulationaccounts, i.e. change in net worth due to saving andcapital transfers, change in net worth due to othervolume changes in assets and change in net worth
due to nominal holding gains and losses.

The closing balance sheet records the value of
assets and liabilities held by units at the end of theaccounting period. These items are categorisedon the basis of the same classification used in the
opening balance sheet and are valued at prices current at the end of the period.
The difference between assets and liabilities is thenet worth at the end of the accounting period.

8.64

The value of an asset or liability in the closing balance sheets is equal to the sum of its value in the
opening balance sheets and the amount recorded
for the said item in the changes in balance sheet
account.

European system of accounts — ESA 2010

European system of accounts — ESA 2010

125

70

345

26

0

134

1 388

1 454

2 959

496

21

361

227

21

470

2 614

1 384

1 263

1 482

105

8 231

9 036

1 587

0

0

770

22

22

770

1 781

1 781

805

125
1 803

114

114

125

2 579

2 579

1 803

2 818

Total
economy2 818

Rest of theworld account
4 621

Goods andServices account

S.1

4 621

Total

Corresponding entries of the

3

0

4

22

8

25

110

172

35

35

2

1

121

124

159

NPISHs

S.15

55

3

391

1 749

24

198

840

3 260

573

573

95

48

713

856

1 429

Households

S.14

S.13

Assets
S.12

S.11

19

0

20

12

115

150

80

396

6

286

292

8

22

467

497

789

13

30

551

1 187

950

690

3 421

3

23

26

15

52

67

93

B.90

150 AF.8

5 AF.725 AF.6

280 AF.5

50 AF.4

90 AF.3

382 AF.2

AF.1

982 AF

3 AN.23

13 AN.22

864 AN.21

877 AN.2

5 AN.1343 AN.12

1 226 AN.11

1 274 AN.1

2 151 AN

GeneralFinancial
Non-financial
government corporations corporations

Table 8.15 — Account IV.1: balance sheets — opening balance sheet

Net worth

Other accounts receivable/payable

Financial derivatives and employee stock
options

Insurance, pension and standardisedguarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets/liabilities

Purchases less sales of goodwill andmarketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Non-financial assets

Stocks and changes in assets

The sequence of accounts

8

245

246
S.12

S.13

S.14

12
4

Fixed assets

Inventories

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill andmarketing assets

Financial assets/liabilities

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardisedguarantee schemes

Financial derivatives and employee stock
options

Other accounts receivable/payable

Net worth

AN.11

AN.12

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.90

–88

237

1 987

897

44

40

Produced non-financial assets

AN.1

3 221

Non-financial assets

–30

10

435

765

1 053

1 281

3 544

498

22

19

4

328

212

102

687

4 500

8

169

2

10

189

Non-financial
Financial
GeneralHouseholds
corporations corporations government

AN

Stocks and changes in liabilities

S.11

Liabilities and net worth

Table 8.15 — Account IV.1: balance sheets — opening balance sheet (continued)

210

35

5

43

38

121

NPISHs

S.15

5 090

302

14

471

2 756

1 437

1 311

1 471

0

7 762

Total
economy

S.1

–469

59

7

25

203

17

77

116

770

1 274

Rest of theworld accountGoods andservices account

Corresponding entries of the

4 621

361

21

496

2 959

1 454

1 388

1 587

770

9 036

Total

8
The sequence of accounts

European system of accounts — ESA 2010

European system of accounts — ESA 2010
8
0
523

54

1

11

13

4

15

0

0

10

8

0

577

12

100

139

82

156

49

14

25

15

14

49

141

78

126

89

11

178

178

0

16
186

16

32

32

186

0

246

246

1

0

0

1

0

0

2

0

4

0

0

4

4

7

7

11

NPISHs294

Total
economy294

Rest of theworld account

S.15

482

Goods andServices account

S.1

482

Total

Corresponding entries of the

4

3

39

76

3

16

64

0

205

0

0

48

48

10

4

53

67

115

Households

S.14

S.12

S.11

5

0

1

3

3

4

–26

1

–9

0

2

26

28

5

1

23

29

57

1

8

8

44

53

96

10

10

230

0

1

–1

0

–2

0

–2

–4

–4

Changes in net worth, due to
Saving and capital transfer
Other changes in volume of assets
Nominal holding gains/losses
Neutral holding gains/losses
Real holding gains/losses

B.101
B.102
B.103
B.1031
B.1032Other accounts receivable/payable

Financial derivatives and employee stock
options

Insurance, pension and standardisedguarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets/liabilities

Purchases less sales of goodwill andmarketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Non-financial assets

Stocks and change in assets

B.10

4 AF.83 AF.7

1 AF.617 AF.5

19 AF.4

10 AF.3

39 AF.2

0 AF.193 AF

0 AN.23

5 AN.22101 AN.21

106 AN.2

3 AN.1327 AN.12

165 AN.11

195 AN.1

301 AN

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Table 8.15 — Account IV.2: balance sheets — changes in balance sheet

The sequence of accounts

8

247

248
S.12

S.13

S.14

0
3

Fixed assets

Inventories

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill andmarketing assets

Financial assets/liabilities

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardisedguarantee schemes

Financial derivatives and employee stock
options

Other accounts receivable/payable

Changes in net worth, due to

Saving and capital transfer

Other changes in volume of assets

Nominal holding gains/losses

Neutral holding gains/losses

Real holding gains/losses

AN.11

AN.12

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.10

B.101

B.102

European system of accounts — ESA 2010

B.103

B.1031

B.1032

52

82

134

14

88

237

26

100

21

7

0

Produced non-financial assets

AN.1

157

Non-financial assets

4

6

10

–1

–5

2

0

8

48

39

0

64

65

224

11

27

38

–2

90

–54

9

0

0

2

9

45

37

102

9

87

96

–1

210

304

4

0

1

0

11

0

0

16

Non-financial
Financial
GeneralHouseholds
corporations corporations government

AN

Stocks and changes in liabilities

S.11

Changes in liabilities and net worth

Table 8.15 — Account IV. 2: balance sheets — changes in balance sheet (continued)

4

6

10

0

–1

9

0

0

0

0

6

0

0

6

NPISHs

S.15

80

208

288

10

202

500

39

11

49

141

47

116

102

505

Total
economy

S.1

–2

6

4

–10

–6

–14

3

0

15

35

23

–2

12

72

Rest of theworld accountGoods andservices account

Corresponding entries of the

78

214

292

10

192

494

25

14

49

156

82

139

100

12

577

Total

8
The sequence of accounts

European system of accounts — ESA 2010
0
8 754

859
1

116

138

74

360

26

3

9 613

782

1 687

1 527

1 536

3 115

545
35
242

386

519

2 755

1 462

1 389

1 571

35

144

30

30

781

1 959

1 959

2

141
1 989

141

146

146

1 989

1

2 825

2 825

4

0

4

23

8

25

112

0

176

0

0

39

39

128

131

170

NPISHs

3 112

Total
economy3 112

Rest of theworld account

S.15

5 101

Goods andServices account

S.1

5 101

Total

Corresponding entries of the

59

6

430

1 825

27

214

904

0

3 465

0

0

621

621

105

52

766

923

1 544

Households

S.14

Table 8.15 — Account IV.3: balance sheets — closing balance sheet
S.12

S.11

24

0

21

15

118

4

124

81

387

0

8

312

320

13

23

490

526

846

1

21

38

595

1 240

1 046

10

700

3 651

0

4

22

26

13

0

50

63

89

B.90

154 AF.8

8 AF.726 AF.6

297 AF.5

69 AF.4

100 AF.3

421 AF.2

0 AF.1

1 075 AF

0 AN.23

18 AN.22

965 AN.21

983 AN.2

8 AN.1370 AN.12

1 391 AN.11

1 469 AN.1

2 452 AN

GeneralFinancial
Non-financial
government corporations corporations

S.13

Assets

Net worth

Other accounts receivable/payable

Financial derivatives and employee stock
options

Insurance, pension and standardisedguarantee schemes

Equity and investment fund shares/units

Loans

Debt securities

Currency and deposits

Monetary gold and SDRs

Financial assets/liabilities

Purchases less sales of goodwill andmarketing assets

Contracts, leases and licences

Natural resources

Non-produced non-financial assets

Valuables

Inventories

Fixed assets

Produced non-financial assets

Non-financial assets

Stocks and changes in assets

The sequence of accounts

8

249

250
S.12

S.13

S.14

12
7

Fixed assets

Inventories

Valuables

Non-produced non-financial assets

Natural resources

Contracts, leases and licences

Purchases less sales of goodwill andmarketing assets

Financial assets/liabilities

Monetary gold and SDRs

Currency and deposits

Debt securities

Loans

Equity and investment fund shares/units

Insurance, pension and standardisedguarantee schemes

Financial derivatives and employee stock
options

Other accounts receivable/payable

Net worth

AN.11

AN.12

AN.13

AN.2

AN.21

AN.22

AN.23

AF

AF.1

AF.2

AF.3

AF.4

AF.5

AF.6

AF.7

AF.8

B.90

149

263

2 087

918

51

40

Produced non-financial assets

AN.1

3 378

Non-financial assets

–28

0

18

483

804

0

1 117

1 346

3 768

444

31

0

19

6

337

257

139

789

4 804

12

0

1

0

180

2

10

205

Non-financial
Financial
GeneralHouseholds
corporations corporations governmentAN

Other flows and balancing items

S.11

Liabilities and net worth

Table 8.15 — Account IV.3: balance sheets — closing balance sheet (continued)

219

35

0

5

0

49

0

38

127

NPISHs

S.15

5 590

341

25

520

2 897

1 484

1 427

1 573

8 267

Total
economy

S.1

–475

45

10

25

218

52

100

114

782

1 346

Rest of theworld accountGoods andservices account

Corresponding entries of the

5 115

386

35

545

3 115

1 536

1 527

1 687

782

9 613

Total

8
The sequence of accounts

European system of accounts — ESA 2010

The sequence of accounts

Rest of the world accounts (V)8.65

The rest of the world accounts record transactions
between resident and non-resident units. The restof the world does not constitute an institutional
sector as such, but in the structure of the system it
plays a similar role.

8.66

The sequence of rest of the world accounts follows
the same general pattern as the institutional sector
accounts, i.e.:

origin, the CIF element must be subtracted fromthe goods value measured at the point of entry of
the importing country. This CIF element is thenallocated to the appropriate service activities,
either as imports in the case of non-resident units,
and domestic output in the case of resident units
providing these services.
When transport and insurance services included in
the FOB value of imports of goods (i.e. between thefactory and the border of the country of export) areprovided by resident units, they must be includedin the value of exports of services by the economy
importing the goods. Conversely, when transport
and insurance services included in the FOB valueof exports of goods are provided by non-resident
units they must be included in the value of importsof services by the economy exporting the goods.

(a) current accounts,(b) accumulation accounts,(c) balance sheets.
8.67

The accounts listed in points (a) to (c) of paragraph8.66 are drawn up from the point of view of therest of the world. Thus, what is a resource for the
rest of the world is a use for the total economy andvice versa. By the same token, a financial asset heldby the rest of the world is a liability for the total
economy and vice versa). An exception is gold bullion held as reserve assets, which despite having
no counterpart liability, are recorded in the financial account because of their role in international
payments.

External account of primary incomes and current
transfers (V.II)
8.70

The purpose of the external account of primary
incomes and current transfers is to determine thecurrent external balance, which, in the structure of
the system, corresponds to saving by the institutional sectors. This account is a condensed versionof the sequence, for an institutional sector, extending from the allocation of primary income accountto the use of income account.

8.71

On the resources side, the external account of primary incomes and current transfers shows theexternal balance of goods and services. It also
records, on the resources or uses side, all distributive transactions which may involve the rest of theworld, apart from capital transfers.

Current accounts
External account of goods and services (V.I)
8.68

8.69

Imports of goods and services are recorded on
the resources side of the account and exports ofgoods and services on the uses side. The difference
between resources and uses is the balancing item in
the account, called ‘external balance of goods andservices’. If it is positive, there is a surplus for the
rest of the world and a deficit for the total economy
and vice versa if it is negative.
Imports and exports are both valued at the customs
frontier of the exporting country. For exports, thevalues will be collected at prices which are ‘free on
board’ (FOB). The import values will be collected
at prices including ‘carriage, insurance and freight’(CIF) incurred between the country of origin andthe importing country i.e. on a CIF basis. In orderto reduce the import value to a free on board basis
reflecting the value at the frontier of the country ofEuropean system of accounts — ESA 20108

External accumulation accounts (V.III)
Capital account (V.III.1)
8.72

The rest of the world capital account records acquisitions less disposals of non-produced assets by
non-resident units and measures the changes in
net worth due to current external balance and capital transfers.

8.73

The balancing item of the capital account is the net
lending or borrowing of the rest of the world. It isequal, but has the opposite sign, to the sum of the

251

8

The sequence of accounts

net lending or borrowing of the resident institutional sectors.

8.76

Financial account (V.III.2)
8.74

The layout of the rest of the world financial accountis identical to that of the institutional sectors’ financial account.

Balance sheets (V.IV)

Other changes in assets account (V.III.3)
8.75

The absence of produced assets in the accumulation accounts and balance sheets of the rest of theworld is due to the convention whereby a notional
institutional unit is created, the rest of the world
being deemed to have acquired a financial asset —and vice versa for assets held in other economies byresident units.

As for the institutional sectors, the changes in net
worth due to other changes in volume of assets anddue to nominal holding gains and losses are determined successively, holding gains and losses themselves being broken down into neutral and realholding gains and losses.

8.77

The balance sheets of the rest of the world containfinancial assets and liabilities. On the assets side,
they also record the total acquisitions less disposals
between non-resident and resident units of monetary gold and SDRs.

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account)
V.I: external account of goods and services
Uses

Resources

P.6

Exports of goods and services

540 P.7

Imports of goods and services

499

P.61

Exports of goods

462 P.71

Imports of goods

392

P.62

Exports of services

78 P.72

Imports of services

107

B.11

External balance of goods and services–41

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account) (continued)
V.II: external account of primary incomes and current transfers
Uses

Resources

D.1

Compensation of employees

6 B.11

D.11

Wages and salaries

6
D.1

–41

Compensation of employees

2

D.2

Taxes on production and imports

0 D.11

Wages and salaries

2

D.21

Taxes on products

0 D.12

Employers’ social contributions

0

D.211

Value added type taxes (VAT)

0 D.121

Employers’ actual social contributions

0

D.212

Taxes and duties on imports excl. VAT

0 D.122

Employers’ imputed social contributions

0

D.2121

Import duties

0

D.2122

Taxes on imports excluding VAT and
duties

0 D.2

D.214

Taxes on products except VAT and import
taxes

D.29

Other taxes on production

D.21
0 D.211
D.212

D.3

252

External balance of goods and services

Subsidies

0 D.2121

Taxes on production and imports
Taxes on products

0

Value added type taxes (VAT)

0

Taxes and duties on imports excluding
VAT

0

Import duties

0

European system of accounts — ESA 2010

The sequence of accounts

8

V.II: external account of primary incomes and current transfers
Uses

Resources

D.31

Subsidies on products

0 D.2122

Taxes on imports excluding VAT and
duties0

D.311

Import subsidies

0 D.214

Taxes on products except VAT and import
taxes

0

D.319

Other subsidies on products

0

D.39

Other subsidies on production

0 D.29Other taxes on production0

D.4

Property income

44 D.3

Subsidies0

D.41Interest

13 D.31

Subsidies on products

0

D.42

Distributed income of corporations

17 D.311

Import subsidies

0

D.421

Dividends

13 D.319

Other subsidies on products

0

D.422

Withdrawals from income ofquasi-corporations

4 D.39Other subsidies on production

0

D.43

Reinvested earnings on foreign direct
investment

14

D.44

Other investment income

0 D.4

Property income

38Interest

21

D.41
Current transfers

17 D.42

Distributed income of corporations

17

D.5

Current taxes on income, wealth, etc.

1 D.421

Dividends

14

D.51

Taxes on income

1 D.422

Withdrawals from income ofquasi-corporations

3

D.59

Other current taxes

0 D.43

Reinvested earnings on foreign direct
investment

0

D.61

Net social contributions

0 D.44

Other investment income

0

D.611

Employers’ actual social contributions

0

D.6111

Employers’ actual pension contributions

0

Current transfers

55

D.6112

Employers’ actual non-pension
contributions

0 D.5

Current taxes on income, wealth, etc.

0

D.612

Employers’ imputed social contributions

0 D.51

Taxes on income

0D.6121

Employers’ imputed pension
contributions

0 D.59Other current taxes

D.6122

Employers’ imputed non-pension
contributions

0 D.61

Net social contributions

0

D.613

Households’ actual social contributions

0 D.611

Employers’ actual social contributions

0

D.6131

Households’ actual pension contributions

0 D.6111

Employers’ actual pension contributions

0

D.6132

Households’ actual non-pension
contributions

0 D.6112

Employers’ actual non-pension
contributions

0

D.614

Households’ social contribution
supplements

0 D.612

Employers’ imputed social contributions

0

D.6141

Households’ pension contribution
supplements

0 D.6121

Employers’ imputed pension
contributions

0

D.6142

Households’ non-pension contribution
supplements

0 D.6122

Employers’ imputed non-pension
contributions

0

D.61SC

Social insurance scheme service charges

0 D.613

Households’ actual social contributions

0

European system of accounts — ESA 2010

253

8

The sequence of accounts

V.II: external account of primary incomes and current transfers
Uses
D.62

Social benefits other than social transfers
in kind0 D.6131

Households’ actual pension contributions

0

D.621

Social security benefits in cash

0 D.6132

Households’ actual non-pension
contributions

0

D.6211Social security pension benefits in cash

0 D.614

Households’ social contribution
supplements

0D.6212Social security non-pension benefits cash

0 D.6141

Households’ pension contribution
supplements

0

D.622

Other social insurance benefits

0 D.6142

Households’ non-pension contribution
supplements

0D.6221Other social insurance pension benefits

0 D.61SC

Social insurance scheme service charges

0D.6222Other social insurance non-pension
benefits

0 D.62Social benefits other than social transfers
in kind0

D.623

Social assistance benefits in cashSocial security benefits in cash

0

D.7

Other current transfers

16 D.6211

Social security pension benefits in cash

0

D.71

Net non-life insurance premiums

2 D.6212

Social security non-pension benefits in
cash

0

D.711

Net non-life direct insurance premiums

1 D.622

Other social insurance benefits

0

D.712

Net non-life reinsurance premiums

1 D.6221

Other social insurance pension benefits

0

D.72

Non-life insurance claims

12 D.6222

Other social insurance non-pension
benefits

0

D.721

Non-life direct insurance claims

0 D.623

Social assistance benefits in cash

0

D.722

Non-life reinsurance claims

12 D.7

Other current transfers

55

D.73

Current transfers within general
government

0 D.71

Net non-life insurance premiums

11

D.74

Current international cooperation

1 D.711

Net non-life direct insurance premiums

0

D.75

Miscellaneous current transfers

1 D.712

Net non-life reinsurance premiums

11

D.751

Current transfers to NPISHs

0 D.72Non-life insurance claims

3

D.752

Current transfers between households

1 D.721Non-life direct insurance claims

3

D.759

Other miscellaneous current transfers

0 D.722

Non-life reinsurance claims

0

D.73

Current transfers within general
government

0

0 D.74Current international cooperation

22

D.75

Miscellaneous current transfers

10

D.751

Current transfers to NPISHs

0

D.752

Current transfers between households

7

D.759

Other miscellaneous current transfers

3

D.76

VAT- and GNI-based EU own resources

9

D.8

Adjustment for the change in pension
entitlements

0

D.8

B.12

254

Resources

Adjustment for the change in pension
entitlements

Current external balance

D.621

–13

European system of accounts — ESA 2010

The sequence of accounts

8

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account) (continued)
V.III: accumulation accounts
V.III.1: capital accounts
V.III.1.1: change in net worth due to current external balance and capital transfers account
Changes in assets

B.101

Changes in liabilities and net worth

Changes in net worth due to current
external balance and capital transfers

B.12

Current external balance

–13

D.9r

Capital transfers, receivable

4

D.91r

Capital taxes, receivable

D.92r

Investment grants, receivable

D.99r

Other capital transfers, receivable

D.9p

Capital transfers, payable

D.91p

Capital taxes, payable

D.92p

Investment grants, payable

D.99p

Other capital transfers, payable

4
–1

–1

–10

V.III.1.2: acquisition of non-financial assets
Changes in assets

Changes in liabilities and net worthNP

Acquisitions less disposals of nonproduced assets

0 B.101

NP.1

Acquisitions less disposals of natural
resources0

NP.2

Acquisitions less disposals of contracts,
Leases and licences

0

NP.3

Purchases less sales of goodwill andmarketing assets

0

B.9

Net lending (+)/net borrowing (–)–10

Changes in net worth due to current
external balance and capital transfers–10

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account) (continued)
V.III.2: financial account
Changes in assets
F

Changes in liabilities and net worth

Net acquisition of financial assets

47 F

Net acquisition of financial assets

F.1

Monetary gold and SDRs

1 F.1

Monetary gold and SDRs

F.11

Monetary gold

1 F.11

Monetary gold

F.12

SDRs

0 F.12

SDRs

0

F.2

Currency and deposits

11 F.2Currency and deposits

–2

F.21

Currency

3 F.21

Currency

1

F.22

Transferable deposits

2 F.22

Transferable deposits

0

F.221

Inter-bank positions

F.221

Inter-bank positions

F.229

Other transferable deposits

2 F.229

Other transferable deposits

F.29

Other deposits

6 F.29Other deposits

European system of accounts — ESA 2010

57

–3

255

8

The sequence of accounts

V.III.2: financial account
Changes in assets

256

Changes in liabilities and net worth

F.3

Debt securities

9 F.3

Debt securities

21

F.31

Short-term

2 F.31

Short-term

5

F.32

Long-term

7 F.32Long-term

16

F.4

Loans

4 F.4

Loans

35

F.41

Short-term

3 F.41

Short-term

14

F.42

Long-term

1 F.42Long-term

21

F.5

Equity and investment fund shares

12 F.5Equity and investment fund shares

14

F.51

Equity12 F.51

Equity9

F.511

Listed shares

10 F.511

Listed shares

3

F.512

Unlisted shares

2 F.512

Unlisted shares

2

F.519

Other equity

0 F.519

Other equity

4

F.52

Investment fund shares/units

0 F.52

Investment fund shares/units

5

F.521

MMF shares/units

0 F.521

MMF shares/units

2

F.522

Non-MMF investment fund shares/units

0 F.522

Non-MMF investment fund shares/units

3

F.6

Insurance, pension and standardisedguarantee schemes

0 F.6

Insurance, pension and standardisedguarantee schemes

0

F.61

Non-life insurance technical reserves

0 F.61

Non-life insurance technical reserves

0

F.62

Life insurance and annuity entitlements

0 F.62

Life insurance and annuity entitlements

0

F.63

Pension entitlements

0 F.63Pension entitlements

0

F.64

Claim of pension funds on pension
managers

0 F.64Claim of pension funds on pension
managers

0

F.65

Entitlements to non-pension benefits

0 F.65

Entitlements to non-pension benefits

0

F.66

Provisions for calls under standardisedguarantees

0 F.66

Provisions for calls under standardisedguarantees

0

F.7

Financial derivatives and employee stock
options

0 F.7

Financial derivatives and employee stock
options3

F.71

Financial derivatives

0 F.71

Financial derivatives

3

F.711

Options

0 F.711

Options1

F.712

Forwards

0 F.712Forwards

2

F.72

Employee stock options

F.8

Other accounts receivable/payable

10 F.8Other accounts receivable/payable

–14

F.81

Trade credits and advances

8 F.81

Trade credits and advances

–1

F.89

Other accounts receivable/payable,
excluding trade credits and advances

2 F.89Other accounts receivable/payable,
excluding trade credits and advances

–13

F.72

Employee stock options

European system of accounts — ESA 2010

The sequence of accounts

8

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account) (continued)
V.III.3: other changes in assets accounts
V.III.3.1: other changes in volume of assets account
Other
flows
K.1

Economic appearance of assets

0 K.1

Economic appearance of assets

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0

AN.21

Natural resources

0 AN.21Natural resources

0

AN.22

Contracts, leases and licences

0 AN.22

Contracts, leases and licences

0

AN.23

Purchases less sales of goodwill andmarketing assets

0 AN.23

Purchases less sales of goodwill andmarketing assets

0

K.2

Economic disappearance of nonproduced assets

0 K.2

Economic disappearance of nonproduced assets

0

K.21

Depletion of natural resources

0 K.21

Depletion of natural resources

0

AN.21

Natural resources

0 AN.21Natural resources

0

K.22

Other economic disappearance of nonproduced assets

0 K.22Other economic disappearance of nonproduced assets

0

AN.21

Natural resources

0 AN.21Natural resources

0

AN.22

Contracts, leases and licences

0 AN.22

Contracts, leases and licences

0

AN.23

Purchases less sales of goodwill andmarketing assets

0 AN.23

Purchases less sales of goodwill andmarketing assets

0

K.3

Catastrophic losses

0 K.3

Catastrophic losses

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0AF

Financial assets/liabilities

0 AF

Financial assets/liabilities

0

K.4

Uncompensated seizures

0 K.4

Uncompensated seizures

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0AF

Financial assets

0 AF

Financial assets

0

K.5

Other changes in volume n.e.c.

0 K.5

Other changes in volume n.e.c.

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0AF

Financial assets/liabilities

0 AF

Financial assets/liabilities

0

K.6

Changes in classification

0 K.6

Changes in classification

0

K.61

Changes in sector classification andstructure

0 K.61

Changes in sector classification andstructure0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0AF

Financial assets/liabilities

0 AF

Financial assets/liabilities

0

K.62

Changes in classification of assets andliabilities

0 K.62

Changes in classification of assets andliabilities

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0European system of accounts — ESA 2010

257

8

The sequence of accounts

V.III.3: other changes in assets accounts
V.III.3.1: other changes in volume of assets account
Other
flows
AF

Financial assets/liabilities

0 AF

Financial assets/liabilities

0

Total other changes in volume0

Total other changes in volume

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.11

Fixed assets

0 AN.11

Fixed assets

0

AN.12

Inventories

0 AN.12Inventories

0

AN.13

Valuables

0 AN.13

Valuables0

AN.2

Non-produced non-financial assets

0 AN.2

Non-produced non-financial assets

0

AN.21

Natural resources

0 AN.21Natural resources

0

AN.22

Contracts, leases and licences

0 AN.22

Contracts, leases and licences

0

AN.23

Purchases less sales of goodwill andmarketing assets

0 AN.23

Purchases less sales of goodwill andmarketing assets

0AF

Financial assets

0 AF

Financial assets

0

AF.1

Monetary gold and SDRs

0 AF.1

Monetary gold and SDRs

0

AF.2

Currency and deposits

0 AF.2Currency and deposits

0

AF.3

Debt securities

0 AF.3

Debt securities

0

AF.4

Loans

0 AF.4

Loans

0

AF.5

Equity and investment fund shares/units

0 AF.5Equity and investment fund shares/units

0

AF.6

Insurance, pension and standardisedguarantee schemes

0 AF.6

Insurance, pension and standardisedguarantee schemes

0

AF.7

Financial derivatives and employee stock
options

0 AF.7

Financial derivatives and employee stock
options0

AF.8

Other accounts receivable/payable

0 AF.8Other accounts receivable/payable

0

Changes in net worth due to otherchanges in volume of assets

0Changes in net worth due to otherchanges in volume of assets

0

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account) (continued)
V.III.3: other changes in assets accounts
V.III.3.2: revaluation account
Changes in assets

258

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/losses (–)

K.7

Nominal holding gains (+)/losses (–)

AN.2

Non-produced non-financial assets

AF

Financial assets/liabilities

15

AN.21

Natural resources

AF.1

Monetary gold and SDRs

12

AN.22

Contracts, leases and licences

AF.2

Currency and deposits

0

AN.23

Purchases less sales of goodwill andmarketing assets

AF.3

Debt securities

2

AF

Financial assets

7 AF.4

Loans

0

AF.1

Monetary gold and SDRs

0 AF.5Equity and investment fund shares/units

1

AF.2

Currency and deposits

AF.6

Insurance, pension and standardisedguarantee schemes

0

AF.3

Debt securities

4 AF.7

Financial derivatives and employee stock
options

0

AF.4

Loans

0 AF.8Other accounts payable0

European system of accounts — ESA 2010

The sequence of accounts

8

V.III.3: other changes in assets accounts
V.III.3.2: revaluation account
Changes in assets

Changes in liabilities and net worth

AF.5

Equity and investment fund shares/units

3

AF.6

Insurance, pension and standardisedguarantee schemes

0

AF.7

Financial derivatives and employee stock
options0

AF.8

Other accounts receivable

0
B.103

Changes in net worth due to nominal
holding gains/losses

4

V.III.3.2.1: neutral holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses (–)

K.71

Neutral holding gains (+)/losses (–)

AN.2

Non-produced non-financial assets

AF

Financial assets

22

AN.21

Natural resources

AF.1

Monetary gold and SDRs

16

AN.22

Contracts, leases and licences

AF.2

Currency and deposits

2

AN.23

Purchases less sales of goodwill andmarketing assets

AF.3

Debt securities

2

AF

Financial assets

Loans

0

AF.1

Monetary gold and SDRs

AF.5

Equity and investment fund shares/units

0

AF.2

Currency and deposits

2 AF.6

Insurance, pension and standardisedguarantee schemes

1

AF.3

Debt securities

3 AF.7

Financial derivatives and employee stock
options

0

AF.4

Loans

1 AF.8Other accounts payable

1

AF.5

Equity and investment fund shares/units

2

AF.6

Insurance, pension and standardisedguarantee schemes

1

AF.7

Financial derivatives and employee stock
options0

AF.8

Other accounts receivable

3
Changes in net worth due to neutral
holding gains/losses

6

12 AF.4

B.1031

V.III.3.2.2: real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

Real holding gains (+)/losses (–)

AN.2

Non-produced non-financial assets

AF

Financial assets

–7

AN.21

Natural resources

AF.1

Monetary gold and SDRs

–4

AN.22

Contracts, leases and licences

AF.2

Currency and deposits

–2

AN.23

Purchases less sales of goodwill andmarketing assets

AF.3

Debt securities

0

AF

Financial assets–5 AF.4

Loans

0

AF.1

Monetary gold and SDRs

0 AF.5Equity and investment fund shares/units

1

European system of accounts — ESA 2010

259

8

The sequence of accounts

V.III.3.2.2: real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

AF.2

Currency and deposits–2 AF.6

Insurance, pension and standardisedguarantee schemes

–1

AF.3

Debt securities

1 AF.7

Financial derivatives and employee stock
options

0

AF.4

Loans

–1 AF.8

Other accounts payable

–1

AF.5

Equity and investment fund shares/units

1

AF.6

Insurance, pension and standardisedguarantee schemes

–1

AF.7

Financial derivatives and employee stock
options

AF.8

Other accounts receivable

Changes in net worth due to real holding
gains/losses–2–3
B.1032

Table 8.16 — Full sequence of accounts for the rest of the world (external transactions account) (continued)
V.IV: external assets and liabilities account
V.IV.1: opening balance sheet
AssetsLiabilities and net worthANNon-financial assets

0 AF

Financial liabilities

1 274

AN.2

Non-produced non-financial assets

0 AF.1

Monetary gold and SDRs

770

AN.21

Natural resources

0 AF.2Currency and deposits

116

AN.22

Contracts, leases and licences

0 AF.3

Debt securities

77

AN.23

Purchases less sales of goodwill andmarketing assets

0 AF.4Loans

17Equity and investment fund shares/units

203

Insurance, pension and standardisedguarantee schemes

25

Financial derivatives and employee stock
options

7

Other accounts payable

59

AF.5
AF

Financial assets

805 AF.6

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

105 AF.8

AF.3

Debt securities

125

AF.4

Loans

70

AF.5

Equity and investment fund shares/units

345

AF.6

Insurance, pension and standardisedguarantee schemes

26

AF.7

Financial derivatives and employee stock
options0

AF.8

Other accounts receivable

AF.7

134
B.90

Net worth–469

V.IV.2: changes in balance sheet
Changes in assets

260

Changes in liabilities and net worthANNon-financial assets

AF

Financial liabilities

72

AN.2

Non-produced non-financial assets

AF.1

Monetary gold and SDRs

12

European system of accounts — ESA 2010

The sequence of accounts

8

V.IV.2: changes in balance sheet
Changes in assets

Changes in liabilities and net worth

AN.21

Natural resources

AF.2

Currency and deposits

–2

AN.22

Contracts, leases and licences

AF.3

Debt securities

23

AN.23

Purchases less sales of goodwill andmarketing assets

AF.4

Loans

35

AF.5

Equity and investment fund shares/units

15

AF

Financial assets

54 AF.6

Insurance, pension and standardisedguarantee schemes

0

AF.1

Monetary gold and SDRs

1 AF.7

Financial derivatives and employee stock
options3

AF.2

Currency and deposits

11 AF.8

Other accounts payable

–14

AF.3

Debt securities

13

AF.4

Loans

4

AF.5

Equity and investment fund shares/units

15

AF.6

Insurance, pension and standardisedguarantee schemes

0

AF.7

Financial derivatives and employee stock
options0

AF.8

Other accounts receivable

10
B.10

Changes in net worth Due to:

–6

B.101

Current external balance and capitaltransfers

–10

B.102

Other changes in volume of assets

0

B.103

Nominal holding gains/losses

4

B.1031

Neutral holding gains/losses

6

B.1032

Real holding gains/losses–2

V.IV.3: closing balance sheet
AssetsLiabilities and net worthANNon-financial assets

AF

Financial liabilities

AN.2

Non-produced non-financial assets

AF.1

Monetary gold and SDRs

1 346
782

AN.21

Natural resources

AF.2

Currency and deposits

114

AN.22

Contracts, leases and licences

AF.3

Debt securities

100

AN.23

Purchases less sales of goodwill andmarketing assets

AF.4

Loans

52

AF.5

Equity and investment fund shares/units

218

Insurance, pension and standardisedguarantee schemes

25

Financial derivatives and employee stock
options

10

Other accounts payable

45

AF

Financial assets

AF.1

Monetary gold and SDRs

1 AF.7

AF.2

Currency and deposits

116 AF.8

AF.3

Debt securities

138

AF.4

Loans

74

AF.5

Equity and investment fund shares

360

European system of accounts — ESA 2010859 AF.6

261

8

The sequence of accounts

V.IV.3: closing balance sheet
AssetsLiabilities and net worth

AF.6

Insurance, pension and standardisedguarantee schemes

AF.7

Financial derivatives and employee stock
options

AF.8

Other accounts receivable

26

144
B.90

8.79

–475

capital formation, changes in inventories, acquisitions less disposals of valuables, and exports).

Goods and services account (0)8.78

Net worthThe purpose of the goods and services account is toshow, by product group and for the total economy,
the supply of products and their uses. The accountis not part of the sequence of accounts, but rather
an underpinning identity between the supply anduse of products in the economy. It represents ataggregate level the matching of supply and use of
products in the rows of the supply and use tables.
It therefore shows, by product group and for the
total economy, the resources (output and imports)
and the uses of goods and services (intermediate consumption, final consumption, gross fixed

8.80

Given the way in which output is valued at basic
prices and uses at purchasers’ prices, taxes (lesssubsidies) on products must be included in the
resources section.

8.81

Uses are recorded on the right-hand side of thegoods and services account and resources on theleft, i.e. on the opposite side from that used in thecurrent accounts for the institutional sectors, since
the product flows are the counterparts of the monetary flows.

8.82

The goods and services account is by definition inbalance and, therefore, has no balancing item.

Table 8.17 — Account 0: goods and services accountResources

262

Uses

P.1

Output

3 604 P.2

Intermediate consumption

1 883

P.11

Market output

3 077 P.3

Final consumption expenditure

1 399

P.12

Output for own final use

147 P.31

Individual consumption expenditure

1 230

P.13

Non-market output

380 P.32

Collective consumption expenditure

169

D.21

Taxes on products

141 P.5g

Gross capital formation

414

D.31

Subsidies on products–8 P.511

Acquisitions less disposals of fixed assets

359

P.7

Imports of goods andservices

499 P.5111

Acquisitions of new fixed assets

358

P.71

Imports of goods

392 P.5112

Acquisition of existing fixed assets

9

P.72

Imports of services

107 P.5113

Disposals of existing fixed assets

–8

P.512

Costs of ownership transfer on non-produced assets

17

P.52

Change in inventories

28

P.53

Acquisitions less disposals of valuables

10

P.6

Exports of goods and services

540

P.61

Exports of goods

462

P.62

Exports of services

78

European system of accounts — ESA 2010

The sequence of accounts

Integrated economic accounts
8.83

The integrated economic accounts give a concise
overview of the accounts of an economy, namely
the current accounts, accumulation accounts andbalance sheets.

8.85

To make the table readable while giving a pictureof the whole economic process, the levels of aggregation used are the highest compatible with anunderstanding of the structure of the system.

8.86

The columns in the table represent the institutional sectors, namely: non-financial corporations,financial corporations, general government, nonprofit institutions serving households, and households. There are also a column for the total economy, a column for the rest of the world, and a column which balances uses and resources of goods
and services.

8.87

The rows in the table represent the various categories of transactions, assets and liabilities, balancing
items and certain aggregates

They bring together in the same table the accountsof all the institutional sectors, the total economy
and the rest of the world, and balance all the flows
and all the assets and liabilities. They also enable
the aggregates to be read off directly.
8.84

In the table of integrated economic accounts, uses,
assets and changes in assets are recorded on theleft-hand side, while resources, liabilities, changes
in liabilities and net worth are recorded on theright-hand side.

European system of accounts — ESA 2010

8

263

264

II.1.2 Allocation ofprimary income
account

II.1.1. Generationof incomeaccount

I. Production/
external accountof goods andservices

Accounts

1 642

391

435

1 642

53

53

1 864

238

238

1 864

61

61

44

452

58

133

191

452

0

0

133

58

0

191

1 150

1 150

1 632

1 632

–41

222

1 883

Total
economy

222

–41

540

RoW

1 854

133

3 604

499

Goods andservice (res)S.1

European system of accounts — ESA 2010
1

4

6

0

3

1

11

12

3

15

17

NPISHs

S.15

Uses

1 854

133

1 883

3 604

540

499

Total

Table 8.18 — Integrated economic accounts

1 358

1 381

41

53

69

61

84

–1

11

132

23

155

115

Households

S.14

S.12

S.11

171

198

42

0

27

1

98

99

27

126

222

15

27

168

34

46

4

44

82

12

94

52

P.1

P.6

P.7

Intermediate consumption

OutputExports of goods and services

Imports of goods and services

Transactions and other flows
stocks and balancing items

Taxes less subsidies on production
and imports

Compensation of employees

External balance of goods andservices

Value added, net/net domestic
product

Consumption of fixed capital

Value added, gross/gross domestic
product

97 B.5n/B.5*n254 B.5g/B.5*g

134 D.4

B.3n

135 B.2n

B.3g

292 B.2g

53 D.29-D.39

Balance of primary incomes, net/national income, net

Balance of primary incomes, gross/national income, gross

Property income

Mixed income, net

Operating surplus, net

Mixed income, grossOperating surplus, gross

Other taxes less subsidies on
production

D.21-D.31 Taxes less subsidies on products

D.2-D.3

986 D.1

B.11

1 174 B.1n/B.1*n

157 P.51c

1 331 B.1g/B.1*g

D.21-D.31 Taxes less subsidies on products

1 477 P.2

GeneralFinancial
Non-financial
government corporations corporations

S.13

Current accounts

8
The sequence of accounts

European system of accounts — ESA 2010
S.11

11

11

–13

Imports of goods and services

Exports of goods and services

OutputIntermediate consumption

Taxes less subsidies on products

P.7

P.6

P.1

P.2

D.21-D.31

S.12

2

5

0

32

1

3

6

31

34

37

2

5

0

NPISHs

S.15

S.13

2 808

S.12

S.11

S.13

Resources

192

215

1 015

1 230

1 411

1 434

1 196

1 219

71

0

333

178

S.14

–62

–35

0

352

168

106

133

184

290

317

136

112

0

146

348

270

32

NPISHs

S.15

S.1

133

3 604

Total
economy

2

14

11

13

25

13

25

62

205

10

499

RoW

B.12

71 B.8n228 B.8g

0 D.8

P.3

1 883

540

Goods andservice (uses)

Accounts
I. Production/
external
3 604 account ofgoods and
1 883
services
133
540

499

Total

Current external balance

Saving, net

Saving, gross

Adjustment for the change inpension entitlements

Final consumption expenditure

Actual final consumption

Disposable income, net
P.4

Disposable income, gross
B.6n

Adjusted disposable income, net

Adjusted disposable income, grossSocial transfers in kind

Disposable income, net

Disposable income, gross

Other current transfers

Social benefits other than transfers
in kind

Net social contributions

Current taxes on income, wealthetc.

Transactions and other flows
stocks and balancing items

B.6g

71 B.7n228 B.7g

D.63

71 B.6n228 B.6g

12 D.7

62 D.62

D.61

24 D.5GeneralFinancial
Non-financial
Households
government corporations corporations

S.14

Non-financial
Financial
GeneralHouseholds
corporations corporations government

–13

1 399

1 399

205

1 399

1 399

205

1 604

1 604

427

1 826

1 826

427

215

215

0

1 604

1 604

283

16
1 826

384

333

212

1 826

299

S.1
Total
economy

0

0

333

384

1

RoW

213

Total

Transactions and other flows
stocks and balancing items

II.4 Use of income
account

II.3 Redistributionof income in kindaccount

II.2 Secondary
distribution ofincome account

Accounts

Goods andservice (res)

Uses

Current accounts

The sequence of accounts

8

265

266
S.13

S.14

58

96
254
97

Compensation of employees

Taxes less subsidies on production
and imports

Taxes less subsidies on products

Other taxes less subsidies on
production

Operating surplus, grossMixed income, grossOperating surplus, net

Mixed income, net

Property income

Balance of primary incomes, gross/national income, grossBalance of primary incomes, net/national income, net

Current taxes on income, wealthetc.

Net social contributions

Social benefits other than socialtransfers in kind

Other current transfers

Disposable income, gross

Disposable income, net

Social transfers in kind

D.1

D.2-D.3

D.21-D.31

D.29-D.39

B.2g

B.3g

B.2n

B.3n

D.4

B.5g

B.5n/B.5*n

D.5

D.61

D.62

D.7

B.6g

European system of accounts — ESA 2010

B.6n

D.63

71

228

6

66

135

292

133

External balance of goods andservices

13

25

62

213

15

27

149

34

46

290

317

104

50

213

171

198

22

0

27

191

99

B.11

82

1 174

27

B.1n/B.1*n

12

157

126

Consumption of fixed capital

94

Value added, net/net domestic
product

1 331

215

1 196

1 219

36

384

0

1 358

1 381

123

53

69

61

84

1 154

132

23

155

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.12

P.51c

Value added, gross/gross domestic
product

B.1g/B.1*g

Transactions and other flows
stocks and balancing items

S.11

Resources

34

37

36

4

1

4

7

0

3

12

3

15

NPISHs

S.15

215

1 604

1 826

244

384

333

213

1 642

1 864

397

53

238

61

452

58

133

191

1 154

1 632

222

1 854

Total
economy

S.1

55

0

0

0

38

0

0

0

2

–41

RoW

Goods andservice (uses)
Accounts

1 826 II.3
Redistribution
1 604
of income in
215 kind account

299

384

II.2 Secondary
213 distributionof income
333 account

1 642

1 864

435

53

238

61

452

II.1.1.
1 156 Generationof income
191 accountII.1.2 Allocation
133 of primary
income58 account

–41

1 632

222

1 854

Total

8
The sequence of accounts

European system of accounts — ESA 2010

Adjusted disposable income, net

Disposable income, gross

Disposable income, net

Actual final consumption

Final consumption expenditure

Adjustment for the change inpension entitlements

Saving, gross

Saving, net

Current external balance

B.7n

B.6g

B.6n

P.4

P.3

D.8

B.8g

B.8n

B.12

III.1.2 Acquisition of
non-financial assets
account

III.1.1 Change innet worth due tosaving and capitaltransfers account

Accounts

–10

10

0

0

0

10

10
0

28

28

–4

1

0

0

–3

5

414
–222

20

NPISHs

S.15

13

25

13

25

221

414

–29

RoW

Total
economy

S.1

71

228

71

228

–222

192

Total

Goods andservice (res)

S.12

S.13

S.14

11

1 196

1 219

1 411

1 434

S.13

S.12

34

37

3

6

NPISHs

S.15

S.11

11

1 604

1 826

1 604

1 826

Total
economy

S.1
RoW

174

4

5

2

–23

55

236

–103

2

3

0

–27

38

–81

–1

0

0

0

–12

8

–16

Accounts

Current external balance
Capital transfers, receivable
Capital transfers, payable (–)

B.12
D.9r
D.9p

308 P.5g–56 B.9–7 NP

2 P.5326 P.52–157 P.51c

Net lending (+)/net borrowing(–)

Acquisitions less disposals of nonproduced assets

Acquisitions less disposals ofvaluables

Changes in inventories

Consumption of fixed capital (–)

Gross capital formation

Changes in net worth due tosaving and capital transfers

Saving, net

Transactions and other flows
stocks and balancing items

1 399 II.4 Use of
1 399 income
account
11

1 604

1 826

1 604

1 826

Total

B.8n

0

1 399

1 399

Goods andservice (uses)

62 B.101

GeneralFinancial
Non-financial
Households
government corporations corporations

S.14

Changes in assets

Accumulation accounts

290

317

106

133

Non-financial
Financial
GeneralHouseholds
corporations corporations government

Table 8.18 — Integrated economic accounts

Adjusted disposable income, gross

B.7g

Transactions and other flows
stocks and balancing items

S.11

Resources

The sequence of accounts

8

267

268

III.3.1 Otherchanges in volumeof assets accountIII.2 Financial
account

Accounts

–11
–11
0
2
0
13
–7
17
3

–11

–11

0

2

0

13

–7

17

3

15

14

48

107

78

86

89

–1

436

33

10

25

S.1
Total
economy

33

0

14

4

82

0

9

95

48

11

100

12

1

0

119

47

RoW

483

Total

Goods andservice (res)

0

0

0

0

0

0

0

0

0

0

1

0

0

0

0

–1

2

2

NPISHs

S.15

S.13

S.12

S.11

0

0

0

0

0

2

0

0

0

0

4

3

39

66

3

10

64

189

0

3

–3

0

–4

0

5

–6

–2

7

5

0

1

3

3

4

–26

0

–10

1

0

–2

–1

–2

1

0

0

0

1

8

7

28

53

66

10

–1

172

European system of accounts — ESA 2010

B.102

2 AF

14 AN.2–2 AN.1

14

6 K.6

1 K.5

–5 K.4–5 K.3–9 K.2

26 K.1

4 F.8

3 F.7

1 F.6

10 F.519 F.4

7 F.3

39 F.2

F.1

83 F

GeneralFinancial
Non-financial
Households
government corporations corporations

S.14

Changes in assets

Accumulation accounts

Changes in net worth due toother changes in volume ofassetsFinancial assets/liabilities

Non-produced non-financial
assets

Produced non-financial assets

Of which

Other volume changes, total

Changes in classification

Other changes in volume n.e.c.

Uncompensated seizures

Catastrophic losses

Economic disappearance of nonproduced assets

Economic appearance of assets

Other accounts receivable/
payableFinancial derivatives andemployee stock options

Insurance, pension andstandardised guarantee schemes

Equity and investment fundsharesLoans

Debt securities

Currency and deposits

Monetary gold and SDRs

Net acquisition of financial assets\

Transactions and other flows
stocks and balancing items

8
The sequence of accounts

European system of accounts — ESA 2010
7

91

S.11

0

154
84

154

126

Total
economy

126

RoW

280

Goods andservice (res)

280

Total

16

45

35

80

Households

S.14

S.12

S.13

1

23

21

44

S.14

28
10
0

Changes in inventories

Acquisitions less disposals ofvaluables

Acquisitions less disposals of nonproduced assets

P.52

P.53

NP

210

–1

202

–10

–1

–222

Consumption of fixed capital (–)

P.51c

–90

–65

414

Gross capital formation

P.5g

–5

–3

4

88

–5

62

Changes in net worth due tosaving and capital transfers

–34

0

B.101

–7

23

–16

6

Capital transfers, payable (–)

0

D.9p

33

–13

Capital transfers, receivable

205

Goods andservice (uses)

D.9r

2

RoW

Accounts

II.1.2 Acquisition
28 of non-financial
assets account
10

414

192

205 II.1.1 Change in–13 net worth due
to saving and66 capital transfers–66 account

Total

Changes in net worth due tonominal holding gains (+)/losses(–)

Financial assets/liabilities

Non-produced non-financial
assets

Produced non-financial assets

Non-financial assets

Current external balance

192

Total
economy

S.1

B.103

8 AF

81 AN.2

63 AN.1

144 AN

Nominal holding gains/losses

B.12

–62

NPISHs

S.15

57

2

2

4

K.7

Transactions and other flows
stocks and balancing items

Saving, net

2

S.11

B.8n

71

S.12

GeneralFinancial
Non-financial
government corporations corporations

S.13

Changes in assets

Changes in liabilities and net worth

2

3

5

8

NPISHs

S.15

Transactions and other flows stocks Non-financial
Financial
GeneralHouseholds
and balancing items
corporations corporations government

III.3.2 Revaluationaccount

Accounts

S.1

Accumulation accounts

The sequence of accounts

8

269

270
S.12

S.13

S.14

48
8

Currency and deposits

Debt securities

Loans

Equity and investment fund shares

Insurance, pension andstandardised guarantee schemes

Financial derivatives and employee
stock options

Other accounts receivable/payable

Economic appearance of assets

Economic disappearance of nonproduced assets

Catastrophic losses

Uncompensated seizures

F.2

F.3

F.4

F.5

F.6

F.7

F.8

K.1

K.2

K.3

K.4

0

Changes in classification

Total other volume changes

K.6

0
14

18
134

Produced non-financial assets

Non-produced non-financial assets

Financial assets/liabilities

Changes in net worth due to otherchanges in volume of assets

Nominal holding gains/losses

Non-financial assets

Produced non-financial assets

Non-produced non-financial assets

Financial assets/liabilities

Changes in net worth due tonominal holding gains (+)/losses (–)

AN.1

AN.2

AF

B.102

K.7

AN

AN.1

AN.2

AF

B.103

Of which0

Other changes in volume n.e.c.

K.5

0

26

3

83

21

6

European system of accounts — ESA 2010
10

51

–1

0

0

0

0

22

0

30

65

173

Monetary gold and SDRs

139

Net incurrence of liabilities

F.1

–1

F

–56

Net lending (+)/net borrowing(–)

B.9

38

7

–2

2

2

2

0

9

0

0

9

38

37

93

–103

96

0

–1

1

1

0

1

4

0

11

0

15

174

Transactions and other flows stocks Non-financial
Financial
GeneralHouseholds
and balancing items
corporations corporations government

S.11

10

0

0

0

0

0

0

0

6

0

6

–4

NPISHsS.15

Changes in liabilities and net worth
S.1

288

76

10

3

3

2

1

39

11

48

105

47

74

102

426

10

Total
economy

4

15

–14

3

0

14

35

21

–2

57

–10

RoW

Goods andservice (uses)
0

Accounts

292

91

10

3

II.3.2 Revaluationaccount

II.3.1 Other
2 changes in
3 volume of assets
account

1

25

14

48

82 III.2 Financial
account
119

95

100

483

Total

8
The sequence of accounts

European system of accounts — ESA 2010

IV.3 Closingbalance sheet

IV.2 Changes inbalance sheet

IV.1 Opening
balance sheet

Accounts

1 989
8 754

1 989

9 613

859

3 112

3 112

523

577

5 101

186

186

5 101

294

294
54

480

8 231

9 036

480

1 803

1 803
805

2 818

Total
economy

2 818

RoW
4 621

Goods andservice (res.)

S.1

4 621

Total

Table 8.18 — Integrated economic accounts

176

39

131

170

4

4

7

11

172

35

124

159

NPISHs

S.15

3 465

621

923

1 544

205

48

67

115

3 260

573

856

1 429

Households

S.14

S.12

S.11

387

320

526

846

–9

28

29

57

396

292

497

789

3 651

26

63

89

230

0

–4

–4

3 421

26

67

93

Other changes in volume of assets
Nominal holding gains (+)/losses(–)

B.102
B.103

B.90

1 075 AF983 AN.2

1 469 AN.1

Net worthFinancial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Non-financial assets

Saving and capital transfers

B.101

2 452 AN

Changes in net worth, total

Financial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Non-financial assets

Total changes in assets

Net worthFinancial assets/liabilities

Non-produced non-financial assets

Produced non-financial assets

Non-financial assets

Transactions and other flows stocks
and balancing items

B.10

93 AF

106 AN.2

195 AN.1

301 AN

B.90

982 AF

877 AN.2

1 274 AN.1

2 151 AN

GeneralFinancial
Non-financial
government corporations corporations

S.13

Balance sheets
Assets

The sequence of accounts

8

271

272

Produced non-financial assets

Non-produced non-financial assets

Financial assets/liabilities

Net worth

AN.1

AN.2

AF

B.90

Non-financial assets

Produced non-financial assets

Non-produced non-financial assets

Financial assets/liabilities

Changes in net worth, total

Saving and capital transfers

Other changes in volume of assets

Nominal holding gains (+)/losses(–)

Non-financial assets

Produced non-financial assets

Non-produced non-financial assets

Financial assets/liabilities

Net worth

AN

AN.1

AN.2

AF

B.10

B.101

B.102

B.103

AN

AN.1

AN.2

AF

B.90

Total changes in assets

Non-financial assets

AN

Transactions and other flows stocks
and balancing items

S.12

S.13

S.14

149

3 378

134

14

88

237

157

–88

3 221

–26

3 768

10

–1

–5

4

224

–30

3 544

444

789

38

–2

–90

–54

102

498

687

4 804

205

96

–1

210

304

16

4 500

189

Non-financial
Financial
GeneralHouseholds
corporations corporations government

S.11

Liabilities and net worth

219

127

10

0

–1

9

6

210

121

NPISHs

S.15

5 590

8 267

288

10

202

500

505

5 090

7 762

Total
economy

S.1

–475

1 346

4

–10

–6

72

–469

1 274

RoW

Goods andservice(uses)

5 115

9 613

292

10

192

494

577

4 621

9 036

Total

IV.3 Closingbalance sheet

IV.2 Changes inbalance sheet

IV.1 Opening
balance sheet

Accounts

8
The sequence of accounts

European system of accounts — ESA 2010

The sequence of accounts

Aggregates
8.88

The aggregates are summary indicators of the resultof the activity of the total economy and key magnitudes for purposes of macroeconomic analysis andcomparisons over time and space.

Gross domestic product at market prices
(GDP)
8.89

Gross domestic product at market prices is the
final result of the production activity of resident
producer units. It can be defined in three ways:

Entrepreneurial income of the total
economy8.93

8.94

National income is not a production concept but
an income concept, which is more significant if
expressed in net terms, i.e. after deduction of theconsumption of fixed capital.

National disposable income
8.95

By deducting consumption of fixed capital from
GDP, we obtain net domestic product at market
prices (NDP).

Operating surplus of the total economy
8.91

The gross (or net) operating surplus of the total
economy is the sum of the gross (or net) operating
surpluses of the various industries or the various
institutional sectors.

Mixed income of the total economy
8.92

The gross (or net) mixed income of the total economy is identical to the gross (or net) mixed incomeof the households sector.

European system of accounts — ESA 2010

Gross (or net) national income (at market prices)
represents total primary income receivable by resident institutional units: compensation of employees, taxes on production and imports less subsidies,
property income (receivable less payable), (grossor net) operating surplus and (gross or net) mixed
income.
Gross national income (at market prices) equals
GDP minus primary income payable by resident
institutional units to non-resident institutional
units plus primary income receivable by resident
institutional units from the rest of the world.

(b) expenditure approach: GDP is the sum of final
uses of goods and services by resident institutional units (final consumption and gross capital formation), plus exports and minus importsof goods and services;

8.90

The gross (or net) entrepreneurial income of thetotal economy is the sum of the gross (or net)entrepreneurial incomes of the various sectors.

National income (at market prices)(a) production approach: GDP is the sum of grossvalue added of the various institutional sectors
or the various industries plus taxes and less subsidies on products (which are not allocated to
sectors and industries). It is also the balancing
item in the total economy production account;(c) income approach: GDP is the sum of uses in the
total economy generation of income account(compensation of employees, taxes on production and imports less subsidies, gross operating surplus and mixed income of the total
economy).

8

Gross (or net) national disposable income is thesum of the gross (or net) disposable incomes of
the institutional sectors. Gross (or net) national
disposable income equals gross (or net) national
income (at market prices) minus current transfers(current taxes on income, wealth etc., social contributions, social benefits and other current transfers)
payable to non-resident units, plus current transfers receivable by resident units from the rest of theworld.

Saving8.96

This aggregate measures the portion of national
disposable income that is not used for final consumption expenditure. Gross (or net) national saving is the sum of the gross (or net) savings of thevarious institutional sectors.

273

8

The sequence of accounts

Current external balance
8.97

The balancing item in the external account of primary income and current transfers represents thesurplus (if it is negative) or the deficit (if it is positive) of the total economy on its current transactions (trade in goods and services, primary
incomes, current transfers) with the rest of theworld

Net lending (+) or borrowing (–) of the total
economy8.98

The net lending (+) or borrowing (–) of the total
economy is the sum of the net lending or borrowing of the institutional sectors. It represents the net
resources that the total economy makes available
to the rest of the world (if it is positive) or receives
from the rest of the world (if it is negative). The net
lending (+) or borrowing (–) of the total economy
is equal but of opposite sign to the net borrowing(–) or lending (+) of the rest of the world.

Net worth of the total economy
8.99

The net worth of the total economy is the sum of
the net worth of the institutional sectors. It represents the value of the non-financial assets of thetotal economy minus the balance of financial assets
and liabilities of the rest of the world.

Property income, payable

D.5

Current taxes on income, wealth, etc.

D.62	Social benefits other than social transfers in kind
D.632	Social transfers in kind - purchased
market production
D.7

Other current transfers

D.8	Adjustment for the change in pension
entitlements
D.9p

Capital transfers, payableNP	Acquisitions less disposals of non-produced assets
Government revenue comprises the following
ESA categories, recorded under the resource sideof general government accounts, with the exception of D.39 which is recorded under the use sideof general government accounts:
P.11

Market output

P.12

Output for own final use

P.131

Payments for non-market output

D.2	
Taxes on production and imports,
receivable
D.39	
Other subsidies
receivableonproduction,

General government expenditure andrevenue

D.4

Property income, receivable

D.5

Current taxes on income, wealth, etc.

General government expenditure and revenue are definedby reference to a list of the ESA categories.

D.61

Net social contributions

D.7

Other current transfers

D.9r

Capital transfers, receivable

8.100 Government expenditure comprises the following

ESA categories, recorded under the use side of general government accounts, with the exception of
D.3 which is recorded under the resource side ofgeneral government accounts:

274

D.4

P.2

Intermediate consumption

P.5

Gross capital formation

D.1

Compensation of employees

D.29

Other taxes on production, payable

D.3

Subsidies, payable

By definition, the difference between general government revenue and general government expenditure is net lending (+)/net borrowing (–) of thegeneral government sector.
The transactions D.41 (interest), D.73 (current transfers within general government), D.92
(investment grants) and D.99 (other capital transfers) are consolidated. The other transactions are
not consolidated.

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

9

CHAPTER 9
Supply and use tables and the input-output framework
Introduction
9.01

9.02

9.03

The purpose of this Chapter is to provide an overview of supply and use tables and of the input-output framework.

(a) the structure of the costs of production, and theincome generated in the production process;(b) the flows of goods and services produced within
the national economy;

The core of the input-output framework is the supply and use tables in current prices and prices of theprevious year. The framework is completed by thesymmetric input-output tables which are derived
from the supply and use tables by using assumptions or additional data.
The supply and use and symmetric input-output
tables can be extended and modified for specificpurposes such as productivity accounts, labour
accounts, quarterly accounts, regional accounts
and environmental accounts in monetary or physical terms.

Supply and use tables are matrices describing thevalues of transactions in products for the national
economy categorised by product type and industry. These tables show:(c) the flows of goods and services between thedomestic economy and the rest of the world;
for analysis in a European context, a distinction
is required between intra-EU flows and flows
with countries outside the EU.
9.04

A supply table shows the supply of goods and services by product and by producing industry, anddistinguishes supply amongst domestic industries
and imports. A schematic outline of a supply table
is given in Table 9.1.

Table 9.1 — Schematic outline of a supply table
Supplies

Producing industries

Rest of the world

Totals

Products

Output values

Import values

Total supply by productTotalsTotal industry output

Total imports

Total supply

9.05

A use table shows the use of goods and services categorised by product and by type of use. The uses
shown in the columns are as follows:(a) intermediate consumption by industry;(b) final consumption expenditure: households,
government and NPISH;(c) gross capital formation; and(d) exports.

European system of accounts — ESA 2010

In the columns under the intermediate consumption by industry, the table shows the componentsof gross value-added, as follows:(a) compensation of employees;(b) other taxes less subsidies on production;(c) net mixed income, net operating surplus andconsumption of fixed capital.

275

9

Supply and use tables and the input-output framework

A schematic outline of a use table is given in
Table 9.2 below.
Table 9.2 — Schematic outline of a use table
Uses

Industries

Final consumption

Gross capitalformation

Rest of the
world

Total

Products
Total

Intermediate consumption

Components
of value
addedCompensation of employees
Other taxes less subsidies
Net operating surplus
Consumption of fixed capital

9.06

Final consumption

In the supply and use tables the following identities
apply:

therefore

This identity is valid only when supply and use
are on the same valuation basis, i.e. both at purchasers’ prices or both at basic prices (see paragraphs 9.30 to 9.33).

output – intermediate consumption + taxes on
products less subsidies on products= final consumption + gross capital formation+ exports less imports

Accordingly, for each product:
	 supply at purchasers’ prices is equal towhich shows the equivalence of the production and expenditure approaches to measuringGDP;

output of the product at basic prices

	 plus imports at basic prices(c) gross value-added as the difference between output and intermediate consumption by industry.
It is identical to the sum of the incomes generated. So gross value-added equals the sumof compensation of employees, consumptionof fixed capital, net operating surplus/mixed
income, and other taxes less subsidies on production. This enables the consistency of theincome approach to measuring GDP to bechecked with the production approach.

	 plus trade and transport margins
	 plus taxes less subsidies on products
	  which i s equal to use of the product at purchasers’ prices, which is equal tointermediate demand for the product	 plus final consumption expenditure	 plus gross capital formation
	 plus exports.
At the level of the total economy, total intermediate demand is equal to total intermediate consumption, trade and transport margins

276

Total use

output + imports + taxes on products less subsidies on products = Intermediate consumption+ final consumption +gross capital formation +exports(b) for each product, supply equals the sum of alluses, shown in balanced rows in the supply anduse framework.

		

Exports

sum to zero over the whole economy as they
are matched by the output of the margin industries, and so this identity can be stated as:(a) for each industry, output equals intermediate
consumption plus gross value added;

		Gross capitalformation

9.07

Supply and use tables are the central framework forindustry analyses, such as analysis of output, value
added, compensation of employees, employment,
operating surplus/mixed income, taxes (less subsidies) on production, gross fixed capital formation,
consumption of fixed capital and capital stock.

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

9.08

The supply and use tables contain the flows in thefollowing accounts:(a) the goods and services account;(b) the production account;(c) the generation of income account.
These accounts show the generation of income
and the supply and use of goods and services by

9institutional sector. The supply and use tables cancomplement this information by showing a breakdown by industry and by showing volume and pricechanges. The information by institutional sector in
the sector accounts and the information by industry in the supply and use tables can be linked by across-classification table such as that given in Table
9.3 below.

Table 9.3 — Table linking supply and use tables to sector accounts
Industries (NACE)

Total

SectorS.11

Non-financial corporations
Intermediate consumption
Gross value added
Compensation of employees
Other taxes less subsidies on production
Consumption of fixed capital
Net operating surplus/mixed income
OutputGross fixed capital formation
Stock of fixed assets
Employment

S.12

Financial corporations
Intermediate consumption…
Employment

S.13

General government

S.14

Households

S.142

Own-account workers
Services of owner-occupied dwellings

S.15

NPISH

Sector totals
Intermediate consumption…
Employment

9.09

A symmetric input-output table is shown in Table
9.4, and is a matrix showing how supply matches
uses using a product-by-product or industry-byindustry categorisation of output and the detailedtransactions of intermediate consumption andfinal uses. There is one major conceptual difference

European system of accounts — ESA 2010

between a symmetric input-output table and a use
table: in the use table, the entries show how products are used by industries in intermediate consumption, whereas in a symmetric input-output
table there are two alternative presentations:

277

9

Supply and use tables and the input-output framework(a) the entries show how products are used as intermediate consumption to make products; orAccordingly, in a symmetric input-output table
either a product or an industry classification is
employed for both rows and columns.

(b) the entries show how the outputs of industry
are used in the intermediate consumption ofother industries to create the industrial output.

Table 9.4 — Schematic outline of a symmetric input-output table, for products
Products
produced
Products used

Intermediate
consumption

Final consumption
Final consumptionof households,
NPISHs andgovernment

Gross capitalformation
Gross capitalformation

Rest of the world

Total

Exports

TotalsComponents ofgross value added
Rest of the world
Total

9.10

9.11

9.12

9.13

Most statistical information that can be obtained
from producer units indicates what type of products they have produced and sold and, usually inless detail, what type of products they have bought
and used. The format of the supply and use tables isdesigned to fit in with this type of statistical information (i.e. products used by industry).
By contrast, information of a product-by-productor industry-by-industry nature as required by thesymmetric input-output table is not often available. For example, surveys of industries usually provide information about the type of products usedin production, and about the products produced
and sold. Information on inputs used in making
specific products is usually not available.
Information arranged in the form of supply and use
tables is the starting point for constructing the more
analytical form of symmetric input-output tables. The
industry by product information in the supply anduse tables can be converted into symmetric tables,by adding extra information on the input structures,or by assuming identical input structures or market
shares by product or by industry.
Supply and use tables and the input-output framework combine three different roles:— description,

Description
9.14

Supply and use tables give a systematic descriptionof the generation of income and supply of product,and use by industry. Developments of the inputs
and outputs of production processes of individual
industries are shown in the context of the national
economy, i.e. related to the production processesof other domestic industries and the rest of theworld and final consumption expenditure.
A major role of supply and use tables is to showchanges in the structure of the economy, e.g.
changes in the importance of various industries,changes in the inputs used and outputs produced
and changes in the composition of final consumption expenditure, gross capital formation, imports
and exports. Such changes may reflect developments such as globalisation, outsourcing, innovation and changes in labour costs, taxes, oil prices
and exchange rates.
Supply and use tables in prices of the previous year
are used to compile GDP volume growth statistics, for describing changes in economic structure
in nominal or volume terms. They also provide
a framework in which to present national pricechanges and changes in labour costs.

— statistical tool,— tool for analysis.

278

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

Statistical tool
9.15

Using information on production, expenditureand income in the construction of supply anduse tables, and reconciling inconsistent estimates,
generates a reliable and balanced set of national
accounts, including the estimates of key aggregatessuch as GDP in current prices and prices of theprevious year.

9.16

In measuring GDP at market prices, threebasic approaches can be adopted: the production approach, the expenditure approach and theincome approach. These three different approaches
are used in the compilation of the supply and use
tables as follows:(a) according to the production approach, GDP atmarket prices is equal to output at basic prices
minus intermediate consumption at purchasers’ prices, plus taxes (less subsidies) on
products;(b) according to the expenditure approach, GDP atmarket prices is equal to the sum of final use
categories minus imports: final consumption
expenditure + gross capital formation + exports– imports;(c) according to the income approach, GDP atmarket prices is equal to the sum of compensation of employees, consumption of fixed capital, other taxes less subsidies on production andnet operating surplus/mixed income, plus taxes
less subsidies on products.
A single estimate of GDP at market prices is derived
when the supply and use tables are balanced.

9.17

The supply and use tables are, in particular, useful for estimating GDP at market prices according to the production approach and expenditureapproach. Major data sources for this are business surveys and administrative data such as VAT
records and excise duties. Supply and use tables areused to combine information from the productionand expenditure approaches by calculating and balancing supply and use at the product level. In thismethod, supply of a specific product is calculated
and allocated to various uses, such as final consumption expenditure of households, intermediate consumption and exports. The income method

European system of accounts — ESA 20109

does not provide the same robust balancing exercise, as operating surplus and mixed income areusually estimated as a residual on the basis of information from the other two approaches. However,
the income method improves the balancing when
the structure of the factor income components
can be estimated. The consistency of supply anduse tables with the sector accounts can be checked
through linkage tables as shown in Table 9.3. This
confrontation can help in the estimation of GDP
at market prices, by comparing information fromthe profit-and-loss accounts of companies with theequivalent industry estimates.
9.18

The supply and use tables serve a variety of statistical purposes:(a) identifying gaps and inconsistencies in data
sources;(b) making estimates by residual, for example estimating the final consumption of specific products as a residual after other uses of the products have been allocated;(c) making estimates by extrapolating figures froma base period to later periods for which lessreliable information is available. For example,
annual figures may be estimated on the basis of
the detailed supply and use figures for a benchmark year, and later quarterly figures can be
estimated by extrapolating from the reference
period;(d) checking and improving the consistency, plausibility and completeness of figures in the supply and use tables and derived figures such as
those in the production accounts. To this end,
the balancing process is not limited to supply
and use tables at current prices:(1) with the aid of the tables such as Table 9.3 showing
the linkage with the sector accounts, a direct comparison can be made between production, expenditure and income estimates from the supply anduse system, and those from independent sources
used in the sector accounts. Reconciliation at thisstage guarantees that, following the supply and use
balancing process, consistency is obtained between
the supply and use tables and the sector accounts;(2) deriving symmetric input-output tables from the
supply and use tables can give feedback revealing
inconsistencies and weaknesses in the supply anduse tables.

279

9

Supply and use tables and the input-output framework(3) by compiling supply and use tables at current
prices and in volume terms for two or more years,
estimates of changes in volumes, values and prices
can be balanced simultaneously: compared tocompiling and balancing supply and use tables fora single year in isolation at current prices only, thisis a major extension of the effectiveness of the supply and use framework;(e) weighting and calculation of index numbers
and price and volume measures, e.g. of GDP
by deflating final uses by product or of GDP
by applying the double-deflation method byindustry. Deflation is carried out at the lowest possible level of aggregation of transactions, consistent with reliable estimates of pricemovements, for the following reasons:(1) generally speaking, price and volume indicators will be more representative at a low level ofaggregation;

Supply and use tables in more detailClassifications
9.20

The classification used for industries in supply, use
and input-output tables is the NACE and the classification employed for products is the CPA; theseclassifications are fully aligned to each other: ateach level of aggregation, the CPA shows the principal products of the industries according to the
NACE.

9.21

In the supply and use tables, the classification for
products is at least as detailed as the classification
for industries, e.g. the three-digit level of the CPA
and the two digit-level of the NACE.

9.22

Industry and product classifications can be basedon three different types of criteria: supply-criteria,demand-criteria and size. For productivity analysis, products and their producers are in principleclassified by type of production process. For analysis of demand, products are classified by similarity of purpose, for example luxury goods aregrouped together, or similarity of marketing relationship such as the sales outlet type. For inputoutput analysis, the same classification of products or industries is used for supply and demand.
The classification is defined in such a way that thesize of each class is not too small or too large a partof the national economy. For international classifications, this implies that the quantitative importance of most of the classes is substantial in many
countries.

9.23

The industry and product classifications in thenational accounts are necessarily based on a mixture of such criteria and also the legacy of history.
They are mainly defined from a producers’ pointof view, and so less well suited to analysing supply and demand. Compilers and users of national
accounts data on industries and products shouldhave a good notion of what is actually included andexcluded in each of the groups and their implications. For example, the industry real estate activities include the services of owner-occupied dwellings and the industry insurance excludes social
security funds.

9.24

Local KAUs within one industry can have different
production processes. This may reflect substantial(2) quality change can be measured better at a lower
level of aggregation, e.g. changes in the composition of the supply or use of a product group can betaken into account;(3) available price indices from price statistics areoften of the Laspeyres type. The objection thatthey are applied in place of the theoretically more
appropriate Paasche type is less severe if they areused at a low level of aggregation.

Balancing of supply and use of a product is easier when the number of products distinguished ishigher and the source data is available at this levelof detail. The quality of the balanced results will behigher; this is in particular true when there are data
gaps.

Tool for analysis
9.19

280

A major analytic strength of input-output tables isthat they enable the measurement of not only firstorder effects when there are, for example, changes
in energy prices or labour costs, but also second
order and more indirect effects. For example, asignificant increase in energy prices will affect not
only those industries that use energy intensively,
but also those industries that use the outputs ofenergy-intensive producers. Such indirect effects
can be highly relevant, as they are sometimes moresignificant than the direct effects.

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

differences in vertical integration, with ancillary
activities such as cleaning, transport, administration and canteen services contracted out, machinery rented, labour contracted in via temporary
agencies, and marketing. It may also reflect differences between legal and illegal producers or
between producers in different regions.
9.25

9.26

Due to the changing economic importance of different industries and products, changes in production processes and the appearance of new products, the industry and product classifications are
updated regularly. However, a balance has to be
struck between keeping abreast of changes in theeconomy, and the need for comparability of dataover time combined with the costs involved of suchmajor changes for the producers and users of thedata.

will therefore only be used for sub-classifying avery limited number of industries such as healthcare and education.
9.29(b) imports and exports with non-EU countries.

Valuation principles
9.30(a) available data on products are often much moredetailed than those on industries;(b) the characteristic output of one industry may
be subject to substantially different tax regimes
and prices, for example when there is price discrimination. Compilation and analysis benefit
from different products being distinguished;(d) to ensure a transparent compilation process,separate products are needed to reveal major
specific national accounts conventions, suchas the services of owner-occupied dwellings,
insurance and the market and non-market output by government units.
9.27

9.28

The distinction between market output, output for
own final use and non-market output is only to be
used for the total output by industry; the distinction is not required for each product group.
The distinction between market producers, producers for own final use and non-market producers is used for industry when such different types of
producers are present. In general, this distinction

European system of accounts — ESA 2010

For analysing the economy of Member States froma European perspective or for deriving supply anduse tables for the whole EU, imports and exports
are subdivided into:(a) intra-EU flows, distinguishing between within
the European Monetary Union and with otherMember States;

The product classification in the supply and use
tables is generally more detailed than the industry
classification. There are four major reasons for this:(c) to enable high quality deflation and the estimation of measures in volume terms, the productgroups are homogeneous and well linked to theavailable price deflators;

9

In the supply table, flows of goods and services arevalued at basic prices. In the use table, the flows ofgoods and services are valued at purchasers’ prices.
In order to have a consistent valuation for the supply and use tables, Table 9.5 shows the transitionof supply at basic prices to supply at purchasers’
prices. As supply equals use for products, two identities now hold:(a) supply at purchasers’ prices is equal to use atpurchasers’ prices;(b) supply at basic prices is equal to use at basic
prices.

9.31

Gross value added is recorded at basic prices. It is
output valued at basic prices less intermediate consumption valued at purchasers’ prices.

9.32

Gross value added at factor cost is not a concept
used in the ESA. It can be derived from value added
at basic prices by subtracting other taxes (less subsidies) on production.

9.33

The transition from supply at basic prices to purchasers’ prices involves:(a) reallocating trade margins;(b) reallocating transport margins;(c) adding taxes on products (except deductible
VAT);(d) deducting subsidies on products.
A similar transition applies to transforming use atpurchasers’ prices into use at basic prices; however,

281

9

Supply and use tables and the input-output framework

this will amount to deducting taxes on products
and adding subsidies on products. Tables 9.8 and9.9 show the transition in more detail. These tables
also serve analytical purposes, such as analysis ofprices and analysis of the consequences of changes
in the rates of taxes on products.
9.34(a) supply and use Tables 9.5 and 9.6 showing thefinal results of balancing totals of supply anduse by products at purchasers’ prices;(b) the tables on trade and transport margins(Table 9.7) and on taxes (less subsidies) on
products (Table 9.8).

Thus, the following tables result from the balancing
process:

Table 9.5 — Supply table at basic prices, and the transformation into purchasers’ prices
Supplies

Products (CPA)1
2
3
4

Industries (NACE)

Rest of theworld

Output by product Imports by
and industry
product(CIF)

Total supply atbasic prices

Taxes lesssubsidies on
products

Total supply
at purchasers’
pricesTotal supply by
product

Total output by
industry

Total

Trade andtransport
margins0Market output

0

Output for own
final use

00

Non-market output

0

Table 9.6 — Use table at purchasers’ prices
Uses
Products (CPA)
1
2
3
4
…
Total

Industries (NACE) Final consumption Gross capital formation Rest of the world
Intermediate
consumptionof products byindustry

Total intermediate
consumption byindustry

Final consumption
expenditure by
product and by(a) households(b) NPISH(c) government

Gross capital formation by Exports by product Total use by
product and by(FOB)
product(a)	gross fixed capitalformation(b) changes in valuables(c) changes in inventories

Total final
consumption

Total gross capitalformation

Total exports

Compensation of
employees
Other taxes less subsidies
Gross value addedon production
components by
Consumption of fixedindustry
capital
Net operating surplus
Mixed income
Total

Total inputs byindustry

Supplementary
information
Gross fixed capitalformation
Fixed capital stock
Employment

282

Total

European system of accounts — ESA 2010

Total use of
products

Supply and use tables and the input-output framework

9

Trade and transport margins
Table 9.7 — Trade and transport margins — supply
Trade and transport margins on the supply of products
Wholesale trade

Retail trade

Transport

Products (CPA)
1
2
3
4
Total

Trade and transport margins
Trade and transport margins on total
supply by productTotal wholesale trade Total retail trade

Total transport

Total margins on supply by product

Table 9.7 — Trade and transport margins — use (continued)
Trade and transport margins on the use of products

Products (CPA)
1
2
3
4

Total

Industries (NACE)

Final consumption

Gross capital formation

Exports

Trade andtransport margins
on intermediate
consumption by
product and byindustry

Trade and transport
margins on final
consumption expenditureby product and by(a) households(b) NPISH(c) government

Trade and transport
margins on gross capitalformation by productand by(a)	gross fixed capitalformation(b) changes in valuables(c) changes in inventories

Trade andtransport
margins onexports

Trade andtransport margins Total trade and transport
on intermediate
margins on final
consumption, total consumption
by industry

Total trade and transport
margins on gross capitalformation

Total
trade andtransport
margins onexports

Trade andtransport
margins
Trade andtransport
margins on
total use by
product

Total margins
on use byproduct

Part of the transition of supply tables from basic
prices to purchasers’ prices, and the transition ofuse tables at purchasers’ prices into basic prices, isthe reallocation of trade margins. Valuation at basic
prices implies that the trade margins are recorded
as part of the product trade, while valuation at purchasers’ prices implies that the trade margins areallocated to the products to which they apply. The
same situation holds for transport margins.

in the trade margins of wholesale or retail traders.
Such transport margins include in particular:

9.36

The total of trade margins by product is equal to
the total of trade margins by the trade industries
plus the trade margins by other industries. The
same identity holds for transport margins.

9.37

Transport margins include transportation costs
paid separately by the purchaser and included in
the use of products at purchasers’ prices but notin the basic prices of a manufacturers’ output or(b) transport of goods arranged by the manufacturer or by the wholesale or retail trader in sucha way that the purchaser has to pay separately
for the transport costs even when the transport is carried out by the manufacturer or thewholesale or retail trader themselves.

9.35

European system of accounts — ESA 2010(a) transport of goods from where they are manufactured to where the purchaser takes delivery of them, in the event that the manufacturer
pays a third party for the transport and provided that this amount is invoiced separately tothe purchaser;

9.38

All other costs of transporting goods are notrecorded as transport margins, e.g.:

283

9

Supply and use tables and the input-output framework(a) if the manufacturer transports the goods himself, such transportation costs are included in
the basic prices of the manufacturer’s output;
this transport represents an ancillary activity
and the individual costs of transport are not
identifiable as transportation costs;

the most important distribution channels may
also be distinguished in order to take accountof the differences in their prices; the distinction
between wholesale trade and retail trade is notdetailed enough. For example, goods and services can be bought by households in a supermarket, a grocery, flower shop, department
store, abroad or obtained as income in kind.
For some products, secondary sales are important, as in the case of cigarette sales by cafes,
restaurants and petrol stations. Sales by retailers are adjusted to obtain the value of sales tohouseholds, for example sales to businesses,
government and tourists should be deducted.
Of course, such distinctions can only be introduced if the available data sources provide sufficient information for estimates of the importance of each of the distribution channels. Evenfor one trader or transporter, different products
generally have different margins. Data on margins by type of product are the most appropriate and used when available.

(b) if the manufacturer arranges for the goods to betransported without a separate invoice for thetransport services, such transportation costs
are included in the basic prices of the manufacturer’s output; such transportation costs are
identifiable as such and are recorded as part ofthe manufacturer’s intermediate consumption;(c) if wholesale and retail traders arrange for goods
to be moved from where they take delivery ofthem to where another purchaser takes delivery, the costs involved are included in the trade
margin if no separate charge is made for transportation to the purchaser. Again, as with manufacturers, such costs represent an ancillary
activity of wholesale and retail traders or thepurchase of an intermediate service, thus entering trade margins but not transport margins;(d) if a household buys goods for final consumption purposes and arranges for transport bya third party, the transport costs involved arerecorded as final consumption expenditure ontransport services and not included in trade ortransport margins.
9.39

Taxes less subsidies on production andimports
9.40

Table 9.7 shows a somewhat simplified picture of a
trade and transport margins matrix, for the following reasons.
(a) In transforming the uses, a distinction needs
to be made between wholesale trade and retailtrade in order to take account of the differences in their prices. In drawing up the tables,
it should be borne in mind that wholesale traders sell directly to households as well as industries, for example furniture, and that retail traders sell to industries such as cafes and restaurants, as well as households.
(b) In calculating and analysing trade margins
on products for final consumption expenditure by households, for each product group284(c) In calculating transport margins, a distinction
by type of transport such as rail, air, sea andinland waterway, and road, is useful.

Taxes on production and imports consist of:(a) taxes on products (D.21):(1) value added type taxes (VAT) (D.211);(2) taxes and duties on imports excluding VAT(D.212);(3) taxes on products, except VAT and import taxes(D.214);(b) other taxes on production (D.29).
Similar categories are distinguished for subsidies.
9.41

Supply at basic prices includes other taxes less subsidies on production. In order to make the transition from basic prices to purchasers’ prices, thevarious taxes on products are added and the subsidies on products deducted.

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

9

Table 9.8 — Taxes less subsidies on products
Taxes less subsidies on supply
Taxes less subsidies on product supplies
VAT

Taxes onimports

Othertaxes onproducts

Othersubsidieson
products

Subsidieson
imports

Products (CPA)12
3
4

Total taxes less subsidies on
products

Taxes less subsidies on total
supply by product and by use

TotalsTable 9.8 — Taxes less subsidies on products (continued)
Taxes less subsidies on uses
Total taxes less subsidies on products
Products (CPA)
1
2
3
4

9.42

Taxes less subsidies on products for final uses:
Final consumption(a) households(b) NPISH(c) government
Gross capital formation:(d) gross fixed capital formation(e) changes in valuables(f) changes in inventories
Exports

Table 9.8 on taxes less subsidies on products is simplified, in the following ways:(a) for the use of products, the different types oftaxes on products are not distinguished andsubsidies are not shown separately; for the supply of products, only three types of taxes on
products and two types of subsidies are distinguished. In general, it is useful to show eachmajor type of tax or subsidies on products separately, and then allocate the total to the various
product groups;

9.43

Taxes less subsidies on product uses
Industries (NACE)
Taxes less subsidies on intermediate consumption of products byindustryand subsidies on products are usually estimated byproduct by applying the official tax or subsidy rates
to the various demand flows. Afterwards an assessment should be made of the differences with the
tax assessments or the amounts actually paid.
(a) Some of these differences indicate that the initial estimate of taxes on products in the supply
and use tables does not comply with the ESA
definitions:(1) in case of exemption the initial estimate of taxes on
products is therefore lowered;(b) different tax rates and subsidies can apply to different distribution channels; the latter should
therefore also be distinguished when relevant
and sufficient information exists.

(2) in case of hidden economic activities or evasion of
the payment of taxes on products, such as when
the payment of taxes is compulsory but there is no
tax assessment, the estimate of taxes on products istherefore lowered.

Taxes and subsidies on products are the amounts
due for payment only when evidenced by tax
assessments, declarations, etc. or the amounts actually paid. In compiling supply and use tables, taxes(b) In some instances, the differences may indicatethat the initial estimate for taxes and subsidies
on products erroneous, for example because
the output of some product is underestimated.

European system of accounts — ESA 2010

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Supply and use tables and the input-output framework

Modifications of the estimates of the flows ofgoods and services can then be made.
9.44

In the institutional sector accounts, imports ofgoods are valued at FOB values, i.e. in line withthe valuation for exports of goods. However, in thecase of FOB valuation the value of transport andinsurance services provided by residents, which isincluded in the export of services, will be smaller,
since it only covers those services provided inside
the exporting country. The result of employing different valuation principles is thus that net total
imports are the same, but that both total imports
and total exports are larger for CIF valuation.

VAT may be deductible, non-deductible or not
applicable:(a) deductible VAT applies to most of intermediate consumption, most of gross fixed capitalformation and part of changes in inventories;(b) non-deductible VAT often applies to final consumption expenditure by households, partof gross fixed capital formation such as newowner-occupied dwellings, part of changes ininventories and part of intermediate consumption, for example intermediate consumption of
government units and financial corporations;

The two valuation principles can be reconciled in
the supply and use tables by introducing adjustment items for imports as well as exports. The
adjustment items should be equal to the value ofthe transport and insurance services by residents
incorporated in the CIF value but not in the FOB
value, i.e. referring to the transport and insurance from the border of the exporting country to
the border of the importing country. Such adjustment items, once incorporated in the supply anduse tables, need no special treatment in the inputoutput calculations.

(c) VAT is in general not applicable to:(1) exports to countries outside the EU;(2) the sale of any goods or services subject to a zerorate of VAT regardless of their use; however, a zerorate of VAT implies that the VAT paid on purchases can still be reclaimed; intermediate consumption and gross capital formation of these producers is therefore corrected by the amount of the
VAT reclaimed;

9.47

The transfer of existing goods is recorded in the use
table as a negative expenditure for the seller anda positive expenditure for the purchaser. For the
product group involved, the transfer of an existing good amounts to a reclassification amonguses. Only the transaction costs are not treated asa reclassification: they are recorded as a use of services, for example business or professional services.
For the purposes of description and analysis, it canbe useful to show for some product groups the relative size of the transfer of existing goods separately,for example the importance of second-hand cars in
the market for both new and second-hand cars, or
the role of recycled paper in the supply of paper
products.

9.48

For a good understanding of supply and use tables,
it is helpful to recall some of the accounting conventions employed in the ESA:

(3) any producers exempted from VAT registration,such as small businesses and religious organisations; in this situation, the right to claim back the
VAT on purchases is generally restricted.

9.45

VAT is recorded net: all supplies are valued at basic
prices, i.e. excluding invoiced VAT; intermediate
and final uses are recorded at purchasers’ prices,
i.e. excluding deductible VAT.

Other basic concepts
9.46

In the supply and use tables, two adjustment items
are used in reconciling the valuation of imports inthe supply and use tables and the valuation foundin the institutional sector accounts.
In the supply table, in order to achieve a comparable valuation with domestic production in thesame product group, imports of goods are valued
at CIF values. The CIF value includes the transport
and insurance services provided by residents, suchas own-account transport or transport by specialised resident carriers. In order to achieve a consistent valuation between imports and exports, exportsof services should include this value.

286(a) industries constitute of a group of kind-ofactivity units (KAUs) engaged in the same orsimilar kind-of-activity. An important featureof supply and use tables is that they record secondary activities separately. This implies that
KAUs need not to be homogeneous in theirproduction activities. The concept of KAUs is

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

explained in more detail in Chapter 2. A completely homogeneous unit of production is used
in a symmetric product by product input-output table;

capital stock in their owner’s industry; in theindustry of the user intermediate consumption
by amount of the rental paid is recorded;(g) persons working via temporary agencies arerecorded as being employed in the industryof those agencies and not in the industries inwhich they actually work. As a consequence, inthe latter industries, the fees paid to the agency
for the supply of labour are recorded as intermediate consumption and not as compensationof employees. Labour contracted out is treatedas services provided;(b) if an establishment undertaking purely ancillary activities is statistically observable, in that
separate accounts for the production it undertakes are readily available, or if it is in a geographically different location from the establishments it serves, it is recorded as a separate unit and allocated to the industrial classification corresponding to its principal activity,
in both national and regional accounts. In theabsence of suitable basic data being available,
the output of the ancillary activity may be estimated by summing costs.

(h) employment and compensation of employees
are broad concepts:(1) employment for social reasons is also counted as
employment; this applies, for example, to work
placements for disabled people, employment projects for people who have been unemployed for along time and employment programmes for young
people seeking jobs. As a consequence, the people involved are employees and receive employeecompensation and not social transfers, though
their productivity may be lower than that of other
employees;

If neither of these two conditions is met, all
inputs consumed by an ancillary activity suchas materials, labour, and consumption of fixed
capital, are treated as inputs to the principal orsecondary activity which they support;(c) goods or services produced and consumed
within the same accounting period and within
the same local KAU are not separately identified. They are therefore not recorded as part ofthe output or intermediate consumption of that
local KAU;(d) minor processing, maintenance, servicing or
repair on behalf of other local KAUs is to berecorded net, i.e. excluding the value of thegoods involved;(e) imports and exports occur when there is achange of ownership between residents andnon-residents. Physical movement of goods
across national borders does not by itself imply
an import or export of these goods. Goods
sent abroad for processing are not recorded asexports and imports. In contrast, buying andreselling goods with non-residents without the
goods entering the merchant’s economy arerecorded as exports and imports in the accountsof the producer and final purchaser, and a net
export of goods under merchanting is shown in
the accounts of the merchant economy;(f) durable goods can be rented or be subject tooperating leasing. In such instances, they arerecorded as fixed capital formation and fixed

European system of accounts — ESA 20109(2) employment includes cases where the persons
involved are not expected to work at all, e.g. persons dismissed but receiving, for a given period,
payments from their former employer. However,
employment in terms of hours worked is not distorted by this convention, as no hours are actually
worked.

Supplementary information
9.49

The use Table 9.6 contains supplementary information: gross fixed capital formation, stocks of
fixed assets and employment by industry. A breakdown into employees and own-account workers isvaluable additional information. The information
on gross fixed capital formation and stocks of fixed
assets by industry is needed to derive consumptionof fixed capital by industry and for recording nondeductible VAT on gross fixed capital formation.
Showing employment by industry is important forcompilation purposes:— employment figures are often used for grossing
up values of output, compensation of employees, intermediate consumption and mixed
income,287

9Supply and use tables and the input-output framework— key-ratios such as output, compensation of
employees and mixed income per unit oflabour such as hours worked, can be comparedover time and by industry to check the plausibility of the estimates,— it helps to ensure consistency between the values by industry and employment data by industry. For example, without an explicit link toemployment data, the balancing process may
result in changes in the values by industry without corresponding changes in the employment
figures.

— symmetric input-output table industry byindustry,— symmetric input-output table product byproduct.
Symmetric input-output tables can be derived
from the supply and use tables, in current prices,
and also in previous years’ prices.
9.53

Use Table 9.6 does not show to what extent the
goods and services used have been produced
domestically or imported. This information is necessary for analyses in which the link between supply
and use of goods and services within the national
economy plays a role. An example is the analysis of
the impact of changes in exports or final consumption expenditure on imports, domestic production and related variables such as employment. The
input-output framework, therefore, would benefit
from separate use tables for imported products anddomestically produced goods and services.

9.54

The use table for imported products is compiled
by exploiting all information available on the usesof imports, for example for some products the
major importing enterprises may be known andfor some producers information on the amount ofimports may exist. However, in general, direct statistical information on the use of imports is scarce.
This information has therefore usually to be supplemented by assumptions over the allocation of
product group to use.

9.55

The use table for goods and services produced
domestically can then be obtained by deducting theuse table for imported products from the use table
for the whole economy.

9.56

In theory, four basic models exist for the transformation of a supply and use table to a symmetric input-output table. Those models are based oneither technology or fixed sales structure assumptions. Most often used is the product technology
assumption: each product is produced in its own
specific way, irrespective of the industry where
it is produced. This assumption is often used toderive a product-by-product input-output table.
The second common model uses the fixed productsales structure assumption (market share assumption): each product has its own specific sales
structure, irrespective of the industry which produces it; this approach is often used to derive an

Adding information on employment by industry
is also helpful for the analysis of employment andproductivity.

Data sources and balancing
9.50

For compiling output by industry and product, themajor data sources are usually enterprise economic
surveys, production surveys and annual reports
or business accounts from major companies. The
surveys are generally exhaustive for large companies while a sample survey is carried out for small
size companies. For some specific activities, different data sources may be relevant, for example forsupervisory bodies, accounts of local and central
government or social security funds.

9.51

Such data are used to prepare a first incomplete
set of supply and use tables. These are balanced
in various steps. Balancing manually at a low levelof aggregation provides important checks on theerrors in data sources, system errors, and at thesame time modifications of the basic data can bemade, to correct for conceptual differences andmissing units. If the reconciliation takes place at ahigher level of aggregation, using an automatic balancing process or a very strict sequential balancing
process, most of those checks are absent as errors
cancel out and the causes of error cannot be traced.

Tool for analysis and extensions
9.52

For analysis, three types of tables can be used:— supply and use tables,

288

European system of accounts — ESA 2010

Supply and use tables and the input-output framework

industry-by-industry input-output table. Hybrid
models which mix these assumptions are possible. Models based on either industry technology
or fixed industry sales structure assumptions are ofless practical relevance due to their low probability of occurrence in practice. A discussion of thealternative models and transformation processes isgiven in Chapter 11 of Eurostat Manual of Supply,
Use and Input-output Tables (2008 edition)1.
9.57

The choice of the best assumption to apply in eachcase is not an easy one. It depends on the structure of national industries, e.g. the degree of specialisation, and on the homogeneity of the national
technologies used to produce products within thesame product group and not the least on the levelof detail of the basic data.
Simple application of the product technology
assumption gives results that are unacceptable,
insofar as the input-output coefficients sometimes
generated are improbable or even impossible, inthe form of negative coefficients. Improbable coefficients may be due to errors in measurement andto heterogeneity of product-mix in the industry of which the transferred product is the principal product. This can be tackled by making adjustments based on supplementary information or
exploiting informed judgement to the fullest extent
possible. Another solution is to apply the alternative assumption of fixed product sales structure.
In practice, employing mixed technology assumptions combined with supplementary information
has proven to be a useful approach for compilingsymmetric input-output tables.

9.58

The Leontief inverse is the inverse of the difference between the identity matrix I and the matrixof technical input coefficients obtained from thematrix of domestic output used as intermediate
consumption. The Leontief inverse can also bederived for imports. It should then be assumed thatthe imports have been produced in the same way as
the competing domestic products.
9.59

Supply and use tables and symmetric input-output tables can be used as tools of economic analysis. Both types of tables have different merits.
Symmetric input-output tables are readily available for calculating not only direct but also indirect
and cumulative effects. They can also be of goodquality when expert knowledge and various typesof statistical information have been used in deriving the tables from the supply and use tables.

9.60

Industry-by-industry tables are well suited foranalyses related to industries, e.g. tax reform,
impact analysis, fiscal policy and monetary policy;
they are also closer to the various statistical data
sources. Product-by-product tables are well suited
for analyses related to homogeneous production
units, e.g. productivity, comparison of cost structures, employment effects, energy policy and environmental policy.

9.61

However, the analytical properties of product-byproduct tables and industry-by-industry tables do
not differ significantly. The differences between
product-by-product tables and industry-by-industry tables are caused by the existence of a generally limited amount of secondary production. In
practice, analytical uses of input-output tables
implicitly assume an industry technology, no matter how the tables have originally been compiled.
Furthermore, in practice, any product-by-product table is a manipulated industry-by-industry
table, as it still contains all the institutional KAU
and enterprise characteristics of the supply and use
tables.

9.62

In general, many specific types of analysis areserved by supply and use tables and symmetric
input-output tables, for example:

The symmetric input-output table can be broken
down into two tables:((a) a matrix showing the use of imports; the formatof this table is the same as that of the importtable supporting the supply and use tables,
except that a symmetric structure with thesame classification on both axes is used;((b) a symmetric input-output table for domestic
output.
The latter table should be used in calculating the
cumulated coefficients, i.e. the Leontief inverse.

1Eurostat, Eurostat Manual of Supply, Use and Input-Output Tables (2008 edition),
2008, (available on: http://epp.eurostat.ec.europa.eu).

European system of accounts — ESA 20109(a) analysis of production, cost structures andproductivity;(b) analysis of prices;

289

9

Supply and use tables and the input-output framework(c) analysis of employment;(d) analysis of the structure of capital formation,
final consumption, exports, etc.;(e) analysis of economic growth by using the
cumulated costs shares to allocate imports tothe various final uses;(f) analysis of the contribution to economic growthand employment of exports to other (blocks) ofcountries;(g) analysis of imports of energy required;(h) analysis of the impact of new technologies;(i) analysis of the effects of changes in tax rates(e.g. VAT) or the introduction of a national
minimum wage;(j) analysis of the relationship between domestic
production and the environment, e.g. focusing
on the use of specific products like fuel, paperand glass or the emission of pollutants.
A macro model may also only include the cumulated costs-shares calculated from the input-output tables. In this way, information from the inputoutput table on direct and indirect effects, e.g. theimportance of labour costs or imports of energy for
private consumption or exports, is incorporated in
the macro model and can be used for analysis andforecasting.
9.63

In order to serve more specific purposes, the supply and use tables and symmetric input-output
tables can be modified by introducing alternative and supplementary classifications. The mostimportant examples are as follows:(a) more detailed product and industry classifications based on national classifications or to takeaccount of specific purposes, e.g. for the analysis of the role of research and development in
the national economy;(1) imports of products that are also domestically produced (‘competitive imports’);(2) imports of products that are not domestically produced (‘complementary imports’).

Both types of imports can be expected to havea different relationship with and importancefor the national economy. Competitive imports
can be the subject of analysis and economic
policy as they may be a substitute for domestic output; they could therefore be incorporated
as a separate category of potential final use in
the use tables. For complementary imports, forexample in the case of a sudden rise in energy
prices, analyses will mainly focus on the impact
of changes in their prices and the national
economy;(d) classification of compensation of employees by
criteria such as level of education, part-time/
full-time, age and gender. This classification
could then also be applied to the supplementary information on employment. In this way,
the supply and use tables can also be used foranalyses of the labour market;(e) breakdown of compensation of employees into:(1) wages and salaries, including social contributions
by employees(2) employers’ social contributions.

This breakdown permits analysis of the roleof social contributions for the price of labour
inputs and the shifting of this burden towards
gross operating surplus;(f) classification of final consumption by purpose,
which for households is Coicop, for NPISH it
is COPNI and for government it is COFOG.
The functional classification of this expenditure
enables the impact of each function of the restof the economy to be assessed. For example, theimportance of public and private expenditureon health care, transport and education canthen be assessed.

(b) more detailed geographical breakdown ofimports and exports, e.g. intra-EU trade subclassified by country and extra-EU trade subclassified by economic regions and some specific countries such as China, India, Japan andthe United States;(c) classification of imports into:

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Price and volume measures

10

CHAPTER 10
Price and volume measures
10.01 In a system of economic accounts, all the flows andstocks are expressed in monetary units. The monetary unit is the only common denominator which
can be used to value the extremely diverse transactions recorded in the accounts and to derive meaningful balancing items.

The problem when using the monetary unit as ameasuring unit is that this unit is neither a stable
nor an international standard. A major concern ineconomic analysis is to measure economic growthin volume terms between different periods. It isthen necessary to distinguish, in the value changes
for certain economic aggregates, the changes arising solely from price changes from the remainder
which is called the change in ‘volume’.
Economic analysis is also concerned with comparisons in space, i.e. between different national economies. These focus on international comparisonsin volume terms of the level of production andincome, but the level of prices is also of interest.
It is therefore necessary to factor the differencesin value of economic aggregates between pairs orgroups of countries into components, which reflect
the differences in volume and the differences inprice.
10.02 When time comparisons of flows and stocks areconcerned, equal importance is to be attached tothe accurate measurement of changes in prices andin volumes. In the short term, observation of pricechanges is of no less interest than the measurementof the volume of supply and demand. On a longerterm basis, the study of economic growth has totake account of movements in the relative prices ofthe different types of goods and services.
The primary objective is not simply to provide
comprehensive measures of changes in prices andvolumes for the main aggregates of the systembut to assemble a set of interdependent measures
which make it possible to carry out systematic anddetailed analyses of inflation and economic growthand fluctuations.

European system of accounts — ESA 2010

10.03 The general rule for comparisons in space is that

accurate measures must be made for both the volume and the price components of the economic
aggregates. As the spread between the Laspeyres
and Paasche formulae often is significant in spatialcomparisons, the Fisher index formula is the only
acceptable one for this purpose.

10.04 Economic accounts have the advantage of provid-

ing a suitable framework for constructing a system
of volume and price indices as well as ensuring theconsistency of the statistical data. The advantagesof an accounting approach can be summarised asfollows.
(a) On a conceptual level, the use of an accounting
framework covering the entire economic system requires the prices and physical units forthe different products and flows in the system
to be specified consistently. In a framework ofthis type, the price and volume concepts for agiven group of products are defined identicallyin both resources and uses.
(b) On a statistical level, the use of the economic
accounts framework imposes accounting constraints which must be respected at both current prices and in volume terms and will normally require some adjustments to be madeto ensure consistency of the price and volume
data.
(c) Furthermore, the creation of an integrated system of price and volume indices in the context of a system of economic accounts provides
the national accountant with extra checks.
Assuming the existence of a balanced systemof supply and use tables at current prices, theconstruction of such balanced tables in volume
terms means that a system of implicit price indices can be automatically derived. Examinationof the plausibility of these derived indices canlead to revision and correction of the data involume terms and even, in some cases, of thevalues at current prices.

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10

Price and volume measures(d) The accounting approach permits the measurement of price and volume changes for certainbalancing items in the accounts, the latter being
derived by definition from the other elementsin the accounts.
10.05 Despite the advantages of an integrated system

based on the balance, both overall and by industry, of transactions in goods and services, it has tobe acknowledged that the price and volume indices thus obtained do not meet all needs or answer
all possible questions on the subject of change inprices or volume. Accounting constraints andthe choice of price and volume index formulae,
although essential for the construction of a coherent system, can sometimes be a hindrance. There isalso a need for information for shorter periods suchas months or quarters. In such cases, other forms ofprice and volume indices may prove useful.

Scope of price and volume indices in
the national accounts
10.06 Amongst the flows, which appear in economic

accounts at current prices, there are some, mainly
concerning products, where the distinction
between changes in price and volume is similar
to that made at microeconomic level. For manyother flows in the system, the distinction is far lessobvious.
Where the flows in the accounts cover a group ofelementary transactions in goods and services, thevalue of each being equivalent to the product of anumber of physical units and their respective unit
price, it is sufficient to know the breakdown of theflow into its components in order to determinechanges in price and volume over time.
Where a flow comprises a number of transactions
relating to distribution and financial intermediation as well as to balancing items such as value
added, it is difficult or even impossible to separate
directly current values into price and volume components, and special solutions have to be adopted.
There is also a need to measure the real purchasing
power of a number of aggregates, such as compensation of employees, disposable income of households or national income. This can be done, forexample, by deflating them by means of an index292

of the prices of the goods and services which can bebought with them.
10.07 The objective and the procedure followed whenmeasuring the real purchasing power of income
estimates are different from those followed when
deflating goods and services and balancing items.
For flows of goods and services an integrated system of price and volume indices can be established,which provides a consistent framework for measuring economic growth. The valuation in real termsof flows of income uses price indices which are notstrictly linked to the income flow. So the choice of
price for income growth can differ according to theobjectives of the analysis: there is no unique priceidentified in the integrated system of price and volume indices.

The integrated system of price and volume
indices
10.08 The systematic division of changes in current val-ues into the components ‘changes in price’ and‘changes in volume’ is restricted to flows representing transactions, recorded in the goods andservices accounts and in the supporting supply
and use framework. It is carried out both for thedata relating to individual industries and products,
and for those relating to the total economy. Flows
which are balancing items, such as value added,
cannot be directly factored into price and volume
components; this can only be done indirectly using
the relevant flows of transactions.
The use of the accounting framework imposes a
double constraint on the calculation of the data:(a) the balance of the goods and services accountmust for any sequence of two years be obtainedat both current prices and in volume terms;(b) each flow at the level of the total economy must
be equal to the sum of the corresponding flows
for the various industries.
A third constraint, not inherent in the use of an
accounting framework but resulting from a deliberate choice, is that every change in the value oftransactions must be attributed either to a change
in price or to a change in volume, or to a combination of the two.

European system of accounts — ESA 2010

Price and volume measures

If those three requirements are fulfilled, valuationof the goods and services accounts and production
accounts in volume terms means that an integrated
set of price and volume indices can be obtained.

10

10.09 The items to be considered when constructing suchan integrated set are as follows:

Transactions in products
OutputP.1

Market output

P.11

Output for own final use

P.12

Non-market output

P.13

Intermediate consumption

P.2

Final consumption expenditure

P.3

Individual final consumption expenditure

P.31

Collective final consumption expenditure

P.32

Actual final consumption

P.4

Actual final individual consumption

P.41

Actual final collective consumption

P.42

Gross capital formation

P.5

Gross fixed capital formation

P.51

Changes in inventories

P.52

Acquisition less disposals of valuables

P.53

Exports of goods and services

P.6

Exports of goods

P.61

Exports of services

P.62

Imports of goods and services

P.7

Imports of goods

P.71

Imports of services

P.72

Taxes and subsidies on products
Taxes on products, excluding VAT

D.212 and D.214

Subsidies on products

D.31

VAT on products

D.211

Balancing items
Value added

B.1

Gross domestic productB.l*g

Other price and volume indices10.10 In addition to the price and volume measures con-sidered above, the following aggregates can also be
subdivided into their own price and volume components. The objectives for these measures vary.
Inventories at the beginning and at the end respectively of each period may have to be calculated inEuropean system of accounts — ESA 2010

volume terms in order to have the balance sheet
aggregates. The stock of produced fixed assets has
to be calculated in volume terms to estimate capital output ratios, as well as to obtain a basis for
estimating consumption of fixed capital in volume
terms. Compensation of employees can be calculated in volume terms for purposes of measuring
productivity and in some instances also when outputs have been estimated by using data in volume

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Price and volume measuresterms on inputs. Consumption of fixed capital,
other taxes on production and other subsidies
on production must also be estimated in volume
terms when calculating costs in volume terms.

the price at which equivalent units are sold at thetime of production of the units concerned. This ispossible in a rigorous way only for homogeneous
products.

10.11 Compensation of employees is an element of

10.14 In practice, however, two units of a product withincome. For the purpose of measuring purchasing power, it can be valued in real terms by deflating with an index reflecting the prices of products
purchased by employees. Other income elements
too, such as disposable income of households andnational income, can be measured in real terms inthe same general way.

General principles of measuring priceand volume indicesDefinition of prices and volumes of market
products
10.12 Volume and price indices can only be derived for(a) Two units with identical physical characteristics can be considered as not being equivalent
if they are sold in different places, at different
periods or according to different conditions. In
this case, the units have to be regarded as corresponding to different homogeneous products.
(b) Two units with identical physical characteristics can be sold at different prices, either due tolack of information, or to restrictions brought
to purchase freedom, or to the existence of parallel markets. In this case, the units have to be
regarded as belonging to the same homogeneous product.

variables that have price and quantity elements.
The notions of price and quantity are closely
linked to that of homogeneous products, i.e. products for which it is possible to define units which
are all considered equivalent and which can thus
be exchanged for the same monetary value. It isthus possible to define the price of a homogeneous
product as the amount of money for which eachproduct unit can be exchanged.

A homogeneous product can thus also be defined
as a product of which all units would be sold at thesame price in perfect competition. In the absenceof perfect competition, the homogeneous product price is defined by the average price of its units.
Therefore, in national accounts, for each homogeneous product there is one price and only one
price, so that it is possible to apply general rules ofvaluation of products.

For each homogeneous product flow, e.g. output, itis thus possible to define a price (p), a quantity (q)corresponding to the number of units and a value(v) defined by the equation:

10.15 Lack of information means that purchasers may

v=p×q

Quality, price and homogeneous products
10.13 Another way of defining a homogeneous productis to say that it consists of units of the same quality.
Homogeneous products play an essential role innational accounts. Indeed, output is valued atbasic price determined by the market at the time
when it takes place, i.e. very often before sale. The
units produced have therefore to be valued, not at
the price at which they will actually be sold, but at

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identical physical characteristics may be sold at different prices for two types of reasons.

not always be properly informed about existing
price differences and may therefore inadvertently
buy at higher prices. This, or the opposite, may
occur also in situations where individual buyers
and sellers negotiate or bargain over the price. On
the other hand, the difference between the average
price of a good purchased in a market or a bazaar,
where such bargaining often occurs, and the priceof the same good sold in a different type of retail
outlet, such as a department store, should normallybe treated as reflecting differences in quality due todifferent sales conditions.

10.16 Price discrimination implies that sellers may be ina position to charge different prices to different categories of purchasers for identical goods and services sold under exactly the same circumstances.

European system of accounts — ESA 2010

Price and volume measures

In such cases, there is no or limited freedom of
choice on the part of a purchaser belonging to a
special category. The principle adopted is that variations in price are to be regarded as price discrimination when different prices are charged for identical units sold under exactly the same circumstances in a clearly separable market, i.e. when different prices are charged for the same homogeneous product. Price variations due to such discrimination do not constitute differences in volume.
The possibility of the retrading of goods in a given
market implies that price discrimination for those
types of products in most cases can be assumed
to be insignificant. The price differences that may
exist for goods can normally be interpreted as due
to lack of information or to the existence of parallel markets.
In service industries, e.g. in transportation, producers may charge lower prices to groups of individuals with typically lower incomes, such as pensioners or students. If such individuals are free totravel at whatever time they choose, this must betreated as price discrimination. However, if they
are charged lower fares on condition that they
travel only at certain times, typically off-peaktimes, they are being offered lower-quality transportation since transportation with conditions andtransportation without conditions can be considered as different homogeneous products.
10.17 Parallel markets may exist for several reasons.

Buyers may be unable to buy as much as theywould like at a lower price because there is insufficient supply available at that price, and a secondary, parallel market, where higher prices arequoted, may exist. There is also the possibility thata parallel market exists, where sellers can charge
lower prices because they can avoid certain taxes.

10.18 Thus, if quality is defined by all the characteristics

common to all units of a homogeneous product,differences in quality are reflected by the following
factors:(a) physical characteristics;(b) deliveries in different locations;(c) deliveries at different times of the day or at different periods of the year;

European system of accounts — ESA 201010(d) differences in conditions of sale or the circumstances or environment in which goods or services are supplied.

Prices and volume
10.19 The introduction of the notion of volume innational accounts rests on the desire to eliminate
the effect of price variation in the pattern of values
expressed in monetary units, and it thus appears
as an extended use of the notion of quantity forgroups of products. In fact, for a given homogeneous product the equation v = p × q allows thechange of a value over time to be broken down intochange of price and change of quantity. In practice, however, there are too many homogeneous
products to be dealt with individually, with theresult that national accountants have to work at
a more aggregated level. At this aggregated level,
however, the equation v = p × q is no longer useful since, while it is possible to aggregate values, it
is not meaningful to aggregate quantities in orderto derive prices.

10.20 There is however a simple way of breaking down

the change in the value of a set of homogeneous
products between two periods, one of which is considered the base period and the other the current
period. The effect of change in price can be offset
by calculating what the value of the set of products
would have been if there had been no change inprices, i.e. by applying the prices of the base period
to the quantities of the current period. This value
at prices of the base period defines the notion of
volume.
In this way, the value of a set of products in the current period may be written as:
v 1 = Σ i p i1 × q i1
Where exponent 1 refers to the current period andindex i to a specific homogeneous product. The
volume of the set of products for the current period
is thus defined in relation to the base period by theformula:Volume = Σ i p i0 × q i1
Where exponent 0 refers to the base period. By
comparing the volume of the set of products for thecurrent period and their overall value for the base

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Price and volume measures

period it is possible to measure a change which is
not affected by any price variation. A volume index
can thus be calculated by the formula:
IVol 1 =Σ i p i0 × q i1

Σ i p i0 × q i0
The volume index which is thus defined is a
Laspeyres index of quantities in which each basic
index is weighted by the proportion of the basic
product in the overall value of the base period.
Once the notion of volume has been defined, it
is possible to define by analogy with the equationv = p × q not a price but a price index. The priceindex is thus defined by the ratio between the value
for the current period and the volume, i.e. by theformula:IP 1 =

Σ i p i1 × q i1

Σ i p i0 × q i1
This index is a Paasche price index in which eachbase price index is weighted by the proportion of
the base product in the overall value for the current period.
The volume and price indices defined in this way
prove the equation:
Value index = price index × volume index
This equation is a more general version of theequation v = p × q and it allows any change in thevalue of a set of products to be broken down into achange in volume and a change in price.
In the calculation of the volume, quantities areweighted up by prices of the base period, so thatthe result depends on the price structure. Changes
in price structure are likely to be less important for
short periods than for long periods. Therefore, thecalculation of the volume is made only for two successive years, i.e. the volume is calculated at theprices of the previous year.
For comparisons over longer periods of time, theLaspeyres volume indices and the Paasche priceindices are calculated first in relation to the previous year and then the chain indices are determined.
10.21 The main advantages of using Paasche price indi-

ces and Laspeyres volume indices are the interpretation and calculation simplicity and the additivity
property in the supply and use balances.

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10.22 Chained indices present the drawback that theylead to volumes having no additivity so that theycannot be used in the balancing procedures of
products based on supply and use tables.

10.23 The non-additive volume data calculated withchain indices are to be published without any
adjustment. This method is transparent and indicates to users the extent of the problem. This does
not preclude the possibility that there may be circumstances in which compilers may judge it preferable to eliminate the discrepancies in order toimprove the overall consistency of the data. Whenreference year values are extrapolated by chain volume indices, an explanation has to be provided tousers concerning the absence of additivity in thetables.

10.24 In practice, since it is impossible to measure prices

and quantities for all the homogeneous productsof an economy, volume or price indices are calculated using samples of representative homogeneous products, the underlying idea being that thevolumes or prices of products not included in thesample change in the same way as the sample average. It is therefore necessary to use a product classification which is as detailed as practicable so thateach product identified has maximum homogeneity, regardless of the level of detail used in the presentation of results.

10.25 In view of the equation linking the value, price andvolume indices, only two indices need to be calculated. Usually, the value index is obtained directly
by simply comparing the overall values for the current and base periods. It is then a matter of choosing between a price index and a volume index to be
calculated. In most cases the assumption of parallel change which underlies the method is provenmore by prices than by volumes because the pricesof different products are often significantly influenced by certain common factors such as the costof raw materials and wages. In this case, the priceindex is to be calculated using a sample of productsof constant quality over time, with quality being
determined not only by the physical characteristicsof the product but also by the conditions of sale,as explained above. In this way all the variationsin the overall value caused by structural changes
among the various products will appear as variations in volume and not in price.

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Price and volume measures

In some cases, however, it will be easier to calculate
a volume index and to use it to derive a price index.
Occasionally it may even be preferable to calculate
the value index on the basis of a price index and a
volume index.

10.27 For transactions in services it is frequently moredifficult to specify the characteristics which determine the physical units, and differences of opinion may arise concerning the criteria to be used.
This difficulty may concern important industries
such as financial intermediation services, wholesale and retail trade, services to enterprises, education, research and development, health or recreation. The choice of physical units for such activities is presented in Handbook on price and volume
measures in national accounts1.

New products
10.26 The method of calculating price and volume indi-

ces outlined above assumes that the products exist
in both successive years. In actual fact, however,many products appear and disappear from one
year to the next and the price and volume indicesneed to reflect this. Where volume is defined using
the prices of the previous year, there is no particular difficulty in the case of products which existed
in the previous year but which no longer exist in thecurrent year, since they are simply linked to a zero
quantity for the current year. The problem is more
complicated in the case of new products, since forthe previous year it is not possible to measure theprice of a product which does not exist.
There are two types of approaches in such a case for
estimating the price for the previous year: the first
supposes that the price of the new product changes
like the price of similar products, while the second
attempts to calculate directly what the price of the
new product would have been if it had existed in
the base period. The first approach amounts simply
to using a price index calculated on the basis of asample of homogeneous products existing in both
successive years, and in practice this is the method
used for most new products since new products
are generally too numerous to be explicitly specified, especially when the definition of homogeneous products is strictly applied. With the second approach, the methods which are most commonly used are the hedonic method which consistsof determining the price of a product on the basisof its main characteristics and the input method
which uses the cost of a product to calculate its
price.
The matter of new products has particular importance in certain fields. Many capital goods are produced only as a single item and thus appear as new
products. This is also the case of many services
which are never provided in exactly the same way,e.g. research and development services.

European system of accounts — ESA 201010

Principles for non-market services
10.28 The establishment of a comprehensive system of

price and volume indices covering all supply anduses of goods and services involves a particular difficulty when measuring the output of non-market
services. Such services differ from market services
in that they are not sold at a market price and theirvalue at current prices is calculated as the sum of
the costs incurred. Those costs are: intermediate
consumption, compensation of employees, othertaxes less subsidies on production and consumption of fixed capital.

10.29 In the absence of a unit market price, the unit costof a non-market service can be considered as theequivalent to the price. In fact, the price of a market
product corresponds to the expenditure which thepurchaser must incur in order to take possessionof it, while the unit cost of a non-market service
corresponds to the expenditure which society must
incur in order to make use of it. Thus, where it ispossible to define units of quantity for non-market services, it is also possible to apply the generalprinciples for calculating volume and price indiceswhich are outlined above.
It is generally possible to define units of quantity
for non-market services which are consumed on an
individual basis, such as education and health services, which means that the general principles must
be routinely applied in the case of such services.
The method consisting of calculating volume by
applying unit costs of the previous year to the1Eurostat, Handbook on price and volume measures in national accounts, 2001
(available on: http://epp.eurostat.ec.europa.eu).

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Price and volume measuresquantities of the current year is called the output
method.
10.30 It is difficult, however, to define units of quantity

for collective non-market services, such as services in connection with general government, justice or defence. In this case, therefore, other methods need to be used by analogy with the general
method. This method defines volume on the basisof prices of the previous year, i.e. it defines volume as the expenditure which purchasers would
have incurred if prices had not changed. This latter definition may be used when it is not possible todefine a unit of quantity provided that it is applied,
not to a unit of product, but to the expenditure asa whole. Since the value of a non-market service isdetermined by the costs involved, it is thus possible to calculate the volume by the value of the costs
at base period prices, i.e. by the value at base period
prices of intermediate consumption, compensationof employees, other taxes net of production subsidies and consumption of fixed capital. This method
is known as the input method. The calculation involume terms of the compensation of employees,
consumption of fixed capital, taxes and subsidies
on production is covered in the paragraphs which
follow.
Even in the most favourable case of non-market
services consumed on an individual basis, such as
those of education and health, it is not always easy
to distinguish homogeneous products. Indeed, thecharacteristics of such services are seldom definedin a sufficiently precise way for it to be possible todetermine with certainty whether two different service units can be considered as being equivalent,
i.e. if they have to be regarded as correspondent
with one same homogeneous product or with two
separate products. Two equivalence criteria can beretained by the national accountants.
(a) The unit cost criterion: two units of non-market services being considered equivalent if they
have the same unit cost. This criterion is basedon the idea that, collectively, those who benefit
from public services are also those who decideand pay for them. For example, citizens decide
on public services via their representatives andpay for them by their taxes. Under such conditions, citizens cannot be expected to pay different prices for service units that they consider

298

equivalent. Thus, according to this criterion,
two service units of different cost have to be
regarded as corresponding to different products, and a non-market homogeneous productis characterised by the unicity of its unit cost.
(b) The outcome criterion: two units of non-market services being considered equivalent if theygive the same outcome. This criterion is basedon the idea that two service units considered bycitizens to be equivalent can however be produced at different costs because citizens do notcheck completely the production process of theservices. The unit cost criterion is no longer
then relevant and has to be replaced by a criterion corresponding to the usefulness of thenon-market services for society.
As the outcome criterion often seems more relevant, a large amount of work has been completed
to develop methods based on this criterion andresearch to improve them continues. In practice,such methods often result in the introduction to
the volume calculation of correction coefficients
applied to quantities; they take then the name of
methods with explicit correction for quality.
The principal difficulty of implementation of suchmethods is related to the definition and the measurement of outcome. Indeed, measuring outcome
presupposes having defined objectives, which is
not so simple in the field of non-market services.
For example, what are the objectives of the public health service: improving the state of publichealth or extending lifetime? Certainly the two, butthen how are various objectives weighed up when
they are not equivalent? For example, what is thebest treatment, that which makes it possible to live
an additional year in good health or that whichmakes it possible to live two additional years in badhealth? In addition, outcome estimates are often
controversial, hence, in numerous countries, thecontroversies on improvement or deterioration of
pupils’ school performance are recurrent.
In the European Union, given the conceptual difficulties and the absence of consensus on output methods adjusted for quality (based on outcome), such methods are excluded from the central framework in order to preserve the comparability of the results. Such methods are reserved on
an optional basis for supplementary tables, while

European system of accounts — ESA 2010

Price and volume measurescontinuing research. Thus, in the field of non-market health and education, the estimates of production and of consumption in volume terms have to
be calculated on the basis of direct output measures — not adjusted for quality — by weighing up
the quantities produced by the previous year unit
costs of those services, without applying any correction to them in order to take account of quality. Such methods have to be applied to a sufficientlevel of detail, the minimum level being defined byEurostat’s Handbook on price and volume measuresin national accounts.
Although the use of input-based methods is generally to be avoided, it is possible, in the field ofhealth, to apply the input method when the varietyof the services is such that it is practically impossible to determine homogeneous products. In addition, explanatory information has to accompany
the national accounts estimates that draw users’attention to the methods of measurement.

Principles for value added and GDP
10.31 Value added, the balancing item in the production

account, is the only balancing item to form part ofthe integrated system of price and volume indices.
The very special characteristics of this item must,however, be emphasised, as must the significanceof its related volume and price indices.
Unlike the various flows of goods and services,value added does not represent any single categoryof transactions. It cannot, therefore, be directly
broken down into a price component and a volume component.

10.32 Definition: value added in volume terms is definedas the difference between output in volume terms
and intermediate consumption in volume terms.
VA = Σ P(0) Q(1) – Σp(0) q(1)where P and Q are prices and quantities for output and p and q are prices and quantities for intermediate consumption. The theoretically correct
method to calculate value added in volume terms isby double deflation, i.e. deflating separately the twoflows of the production account (output and intermediate consumption) and calculating the balanceof those two revalued flows.

European system of accounts — ESA 201010

10.33 In some cases, where the statistical data remain

incomplete or insufficiently reliable, it may be necessary to use a single indicator. If there are gooddata on value added at current prices, one alternative to double deflation is to deflate current value
added directly by a price index for output. Thisimplies the assumption that prices for intermediate consumption change at the same rate as for
output. Another possible procedure is to extrapolate value added in the base year by a volume index
for output. This volume index can be calculated
either directly from quantity data or by deflating
the current value of output by an appropriate priceindex. This method in fact assumes that the volume
changes are the same for outputs and for intermediate consumption.
For certain market and non-market service industries, such as finance, business services or defence,
it may not be possible to obtain satisfactory estimates of price or volume changes for output. In
such cases the movements of value added in volume terms can be estimated by means of changes
in compensation of employees at wage rates of theprevious year and consumption of fixed capital involume terms. Compilers of data may be forced toadopt such expedients, even when there is no goodreason to assume that labour productivity remains
unchanged in the short or long term.

10.34 By their very nature, therefore, the indices of vol-ume and price for value added are different fromthe corresponding indices for the flows of goods
and services.
The same applies to price and volume indices ofaggregate balancing items such as gross domestic product. The value of the latter is equivalent tothe sum of all the values added of all industries, i.e.
to an addition of balancing items, plus taxes lesssubsidies on products and from another point ofview can be seen to represent the balancing item
between total final uses and imports.

Specific problems in the application of
the principles
10.35 Although essentially limited to transactions

involving goods and services, the integrated system of price and volume indices does not exclude

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Price and volume measures

the possibility of calculating measures of changes
in price and volume for certain other transactions.

Taxes and subsidies on products andimports
10.36 The possibility mentioned above exists, in particu-

lar, in the case of taxes and subsidies directly linked
to the quantity or value of the goods and services
which are the subject of certain transactions. In
the supply and use tables, the values of those taxes
and subsidies are shown explicitly. By applying therules described below, it is possible to obtain priceand volume measures for the categories of taxes
and subsidies which are recorded in the goods andservices accounts, namely:(a) taxes on products, excluding VAT (D.212 andD.214);(b) subsidies on products (D.31);(c) VAT on products (D.211).

10.37 The simplest case is that of taxes which represent

a fixed amount per unit of quantity of the productwhich is the subject of the transaction. The value ofthe revenue from such a tax depends upon:(a) the quantity of products involved in thetransaction;(b) the amount levied per unit, i.e. the taxation
price.
The breakdown of the value change into its twocomponents presents virtually no difficulties. The
variation in volume is determined by the change inthe quantities of products taxed; the price variation
corresponds to the change in the amount levied perunit, i.e. to the change in the taxation price.

10.38 A more frequent case is that in which the tax repre-

sents a certain percentage of the value of the transaction. The value of the revenue from such a tax
then depends upon:(a) the quantity of products involved in thetransaction;(b) the price of the products involved in thetransaction;(c) the tax rate (as a percentage).

300

The taxation price is then obtained by applying therate to the price of the product. The change in valueof the revenue from a tax of this type can also be
divided into a volume change, determined by thechange in the quantities of products taxed, and a
price change corresponding to the change in the
taxation price (b × c).
10.39 The amount of taxes on products, excluding VAT(D.212 and D.214) is measured in terms of volume
by applying to the quantities of products produced
or imported the taxation prices of the base year
or by applying to the value of output or imports,
revalued at the prices of the base year, the tax ratesof the base year. Attention has to be paid to thefact that taxation prices may differ among different
uses. This is taken into account in the supply anduse tables.

10.40 Similarly, the amount of subsidies on products(D.31) is measured in terms of volume by applying
to the quantities of products produced or imported
the subsidy prices of the base-year or by applying
to the value of output or imports, revalued at theprices of the base-year, the rates of subsidy of thebase-year, taking into account different subsidy
prices for different uses.

10.41 VAT on products (D.211) is, both for the whole

economy and for individual industries and otherusers, calculated on a net basis and refers only to
non-deductible VAT. This is defined as the difference between VAT invoiced on the products and
VAT deductible by the users of these products.
Alternatively, it is also possible to define VAT on
products as the sum of all non-deductible amounts
which have to be paid by users.
Non-deductible VAT in volume terms can be calculated by applying the VAT rates in force in theprevious year to the flows expressed in the prices ofthe previous year. Any change in the rate of VAT
for the current year will therefore be reflected in
the price index and not in the volume index of
non-deductible VAT.
The fraction of deductible VAT in invoiced VAT
and hence non-deductible VAT may change:(a) either because of a change in the right to deduct
VAT, resulting from a change in tax laws orEuropean system of accounts — ESA 2010

Price and volume measuresregulations, taking effect with or without a timelag;(b) or because of changes in the pattern of uses ofthe product (e.g. increase in the proportion ofuses on which VAT may be deducted).
A change in the amount of deductible VAT resulting from a change in the right to deduct VAT will,by the method described, be treated as a change inthe taxation price, as will a change in the rate of
invoiced VAT.
On the other hand, a change in the amount of
deductible VAT resulting from a change in the pattern of uses of the product constitutes a change inthe volume of deductible VAT to be reflected in theindex of the volume of VAT on products.

Other taxes and subsidies on production
10.42 The treatment of other taxes (D.29) and subsi-

dies (D.39) on production raises a particular difficulty, to the extent that, by definition, it is not possible to assign them directly to units which are produced. In the case of non-market services, this difficulty is compounded by the fact that they are used
only when it is not possible to define units of quantity. However, it is generally possible to get aroundthis difficulty by defining other taxes and subsidies
on production in volume terms, by the amountto which they would have risen if there had been
no change in the tax rules and prices as a whole inrelation to the previous year. For example, taxes onproperty or the use of an asset can be evaluated involume terms by applying to the current period therules and the price of assets of the previous year.

Consumption of fixed capital
10.43 The calculation of volume measures of the con-sumption of fixed capital poses few problems whengood data on the composition of the stock of fixed
capital goods are available. The perpetual inventory
method, used by most countries, already implies,
for the estimation of the consumption of fixed capital at current prices, the need to firstly carry out
a calculation of the stock of fixed capital goods involume terms. To go from a valuation at historiccost to one at replacement cost, it is necessary firstly
to value capital goods acquired over a number ofEuropean system of accounts — ESA 201010

different periods on a homogeneous basis, i.e. baseyear prices. The price and volume indices derived
in the process can therefore be used to calculate thevalue of the consumption of fixed capital in volume
terms and the associated price index.
Where there is no perpetual inventory of the stockof fixed capital goods, the change in the consumption of fixed capital in volume terms can be obtainedby deflating the current price data by price indicesderived from data on gross fixed capital formationby product. Account has then to be taken of the age
structure of the capital goods acquired.

Compensation of employees
10.44 For the purpose of measuring the volume of input

from employee labour, the quantity unit for compensation of employees may be considered to bean hour’s work of a given type and level of skill.
As with goods and services, different qualities ofwork must be recognised and quantity relatives
calculated for each separate type of work. The priceassociated with each type of work is the compensation paid per hour, which may vary, of course,
between different types of work. A volume measure of work done may be calculated as a weighted
average of the quantity relatives for different kindsof work, weighted by the values of compensation of
employees in the previous year or fixed base year.
Alternatively, a wage rate index may be calculated
for work by calculating a weighted average of the
proportionate changes in hourly rates of compensation for different types of work, again using compensation of employees as weights. If a Laspeyres
type of volume index is calculated indirectly by
deflating the changes in compensation of employees at current values by an index of the averagechange in hourly compensation, the latter should
be a Paasche-type index.

Stocks of produced fixed assets andinventories
10.45 Volumes at the prices of the previous year are

needed both for stocks of produced fixed assets
and for inventories. For the former, such data as
are necessary for the calculation of capital output
ratios are available if use is made of the perpetualinventory method. In other cases information on

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Price and volume measuresthe values of stocks of assets may be collected fromproducers and deflation made by the price indices used for fixed capital formation, taking into
account the age structure of stocks.
Changes in inventories are measured by the valueof entries to inventories less the value of withdrawals from inventories, and the value of any recurrent
losses of goods held in inventories during a given
period. Volumes at the prices of the previous year
can be derived by the deflation of these components. In practice, however, it is rare for entries andwithdrawals of stocks to be actually known, andoften the only available information is the value ofthe stocks at the start and at the end of the period.
In such cases, it will often be necessary to assume
regular entries and withdrawals during the current
period, so that the average price for the period canbe considered relevant for both entries and withdrawals. In such circumstances, calculating thevariation in stocks by the difference between thevalues of the entries and withdrawals amounts tothe same as calculating the difference between thevalues of the initial and final stocks. The variationin stocks in volume terms can then be calculated by
deflating the initial and final stocks to bring themin line with the average price of the base period.
When the variations in stocks are known in quantity terms, it is possible, again assuming regular
entries and withdrawals, to calculate the volumeof the variation in stocks by applying the average
price of the base period to the variation in stocks inquantity terms.

Measures of real income for the total
economy10.46 It is generally not possible to divide income flows

into a price and a quantity component and forthis reason price and volume measures cannot be
defined in the same way as for the flows and stocks
of products. Income flows can be measured in realterms only if one chooses some selected basket ofgoods and services on which the income is typically spent and uses the price index for this basket as a deflator of current incomes. The choice isalways arbitrary in the sense that income is seldom
spent specifically for purchases during the period
in question. Some of it may be saved for purchases

302

in later periods or, alternatively, the purchases during the period may be partly financed from savings
made earlier.
10.47 Gross domestic product at previous year prices

measures the total production (less the intermediate consumption) in volume terms for the total
economy. The total real income of residents is
influenced not only by this volume of production
but also by the rate at which exports can be tradedagainst imports from the rest of the world. If theterms of trade improve, fewer exports are needed
to pay for a given volume of imports, so that at agiven level of domestic production goods and services can be reallocated from exports to consumption or capital formation.
Real gross domestic income can be derived by adding the so-called trading gain to volume figures ongross domestic product. The trading gain or, as thecase may be, loss is defined as:
X−M  X M 
T=
− −

P
 Px Pm 
i.e. the current balance of exports less imports,
deflated by a price index P, less the difference
between the deflated value of exports and the
deflated value of imports. The choice of an appropriate deflator P for the current trade balances
should be left to the statistical authorities in acountry, taking account of the particular circumstances of that country. In circumstances in which
there is uncertainty about the choice of deflator an
average of the import and the export price indicesis likely to provide a suitable deflator.
Various real income aggregates are identified anddefined in the way shown as follows:gross domestic product in volume terms
plus	the trading gain or loss from changes interms of tradeequalsreal gross domestic income

plus	real primary incomes receivable fromabroadminus

real primary incomes payable to abroadequalsreal gross national income

plus	real current transfers receivable fromabroadEuropean system of accounts — ESA 2010

Price and volume measuresminus

real current transfers payable to abroadequalsreal gross national disposable income

minus	consumption of fixed capital in volume
terms
equalsreal net national disposable income.

To be able to express the various national income
aggregates in real terms, it is recommended thatreceivables and payables of primary incomes andtransfers to and from abroad should be deflatedwith an index of gross domestic final expenditure.
Real national disposable income is to be expressedon a net basis by deducting from its gross value theconsumption of fixed capital in volume terms.

Interspatial price and volume indices10.48 The fact that countries have different price lev-els and currencies poses a challenge to interspatial comparisons of prices and volumes. Nominal
exchange rates are not suitable conversion factors in such comparisons, because they do not adequately reflect price level differences, and because
they are not sufficiently stable over time.

10.49 Instead, purchasing power parities (PPPs) areapplied. A PPP is defined as the number of unitsof country B’s currency that is needed in country
B in order to purchase the same quantity of goods
and services that one unit of country A’s currency
will purchase in country A. PPPs can thus be interpreted as the exchange rate of an artificial currency
commonly referred to as the purchasing power
standard (PPS). If the expenditures of countries
A and B expressed in national currencies are converted into PPS, the resulting figures are expressedin the same price level and the same currency,
allowing a meaningful comparison of volumes.

10.50 PPPs for market goods and services are based oninternational price surveys. Such price surveys
are carried out simultaneously in all participating
countries, based on a common product sample. The
sample items are clearly specified in terms of theirtechnical characteristics, as well as other variables
that are assumed to influence the price, like installation costs and the terms of sale. While priority isgiven to the comparability of the sample items, thisEuropean system of accounts — ESA 201010

must nevertheless be weighted against their representativity in national markets. The product sample should ideally be equally representative in allparticipating countries.
10.51 For non-market services, interspatial compari-sons face the same problem as intertemporal ones,
since no market prices exist in either dimension.
Traditionally, an input approach (or an input cost
approach) has been applied, under the assumption that output equals the sum of inputs. Thisapproach, which implies direct or indirect volume
comparisons of inputs, fails to take differences in
productivity into account. For this reason, as forintertemporal comparisons, methods are preferredwhich focus either on the direct measurement of
output or on output prices which are subsequently
used to deflate expenditure, at least for individual
services such as education and health.

10.52 In the calculation of PPPs, the same index number

formulae are applied as in the calculation of temporal indices. In a bilateral context involving two
countries, A and B, either country can be used togive the weights. Viewed from the angle of country
A, a Laspeyres-type index with weights from country A can be calculated as well as a Paasche-type
index using weights from country B. However, if
the two economies are structurally different, thespread between these two indices may be quite
large, and the end result would be heavily influenced by the choice of index. In binary comparisons, it is thus preferable to apply the average of thetwo, that is, a Fisher index.

10.53 Explicit numerical weights are usually not available

at the level of individual sample items. Therefore,
a form of implicit weighting is applied, based onwhether countries regard a particular item as representative of the domestic consumption patternor not. The lowest level of aggregation for which
numerical weights are available, is referred to as thebasic heading (BH) level.

10.54 Transitivity implies that the direct PPP between

countries A and C is equal to the indirect PPP
derived by multiplying the direct PPP between
countries A and B (or any other third country)
and the direct PPP between countries B and C.
The Fisher PPPs at BH level are not transitive, but
it is possible to derive from them a set of transitive PPPs that resemble the original Fisher indices,

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10

Price and volume measuresusing the criterion of least squares for this purpose.
Applying the so-called Éltetö-Köves-Szulc (EKS)
formula minimises the deviations between theoriginal Fisher indices and produces a complete setof transitive PPPs at BH level.

exchange rate between two countries produces aprice level index (PLI), that can be used in analysesof countries’ comparative price levels.
10.56 The European Commission (Eurostat) is responsi-

ble for calculating PPPs for the Member States inaccordance with Regulation (EC) No 1445/20072.
In practice, these PPP calculations are embedded
in a wider PPP program coordinated jointly byEurostat and OECD. The detailed methods used in
the program are described in the Eurostat-OECD
Methodological manual on purchasing power
parities3.

10.55 The resulting set of transitive PPPs for all countries

and all BHs are aggregated up to the level of total
GDP using expenditures from national accounts as
weights. The aggregate PPPs at the level of GDP or
any other category can be applied in, for instance,
the calculation of real expenditures and spatial
volume indices. A PPP divided by the nominal

304

2

Regulation (EC) No 1445/2007 of the European Parliament and of the Council of
11 December 2007 establishing common rules for the provision of basic information
on Purchasing Power Parities and for their calculation and dissemination (OJ L 336,
20.12.2007, p. 1).

3

Eurostat-OECD, Eurostat-OECD Methodological manual on purchasing power parities,
2006 (available on: http://epp.eurostat.ec.europa.eu).

European system of accounts — ESA 2010

Population and labour inputs

11

CHAPTER 11
Population and labour inputs
11.01 Comparisons between countries, or between

industries or sectors within the same economy, aremore useful for some purposes when aggregates in
the national accounts (for example, gross domestic product, the final consumption of households,
the value added of an industry, compensation of
employees) are considered in relation to the number of inhabitants and labour input variables. For
such cases, definitions of population and labour
inputs must be consistent with the concepts usedin national accounts, and reflect the production
boundary of national accounts.

11.02 The aim of this Chapter is to describe the frame-works and measures of population and employment statistics, and to provide guidance to theextent those frameworks correspond to the systemof national accounts.

11.03 Labour inputs are classified on the basis of the same

statistical units as used for the analysis of production, namely the local kind-of-activity unit and theinstitutional unit.

11.04 The aggregates to which the figures for popula-tion and labour inputs are related are often annual
totals. In such cases, average population and labour
inputs during the year have to be used. When surveys are conducted several times during the courseof the year, the figure taken is the average of theresults obtained on those various dates. When asurvey is carried out over a period within the year,
the period used must be representative; the latest
available information on variations throughout theyear must be used in estimating data for the year
as a whole. For example, when estimating average
employment, allowance must be made for the factthat certain people do not work throughout thewhole year, for example casual workers and seasonal workers.

European system of accounts — ESA 2010

Total population
11.05 Definition: on a given date, the total population of acountry consists of all persons, national or foreign,
who are permanently settled in the economic territory of the country, even if they are temporarily
absent from it. An annual average of head counts
will provide an appropriate basis for estimating
national accounts variables or for use as a denominator in comparisons.

11.06 Total population is defined for national accounts

according to the concept of residence as describedin Chapter 2. A person who is staying, or intends tostay, on the economic territory of the country for aperiod of one year or more is regarded as permanently settled there. A person is regarded as being
temporarily absent if he or she is permanently settled in the country but is staying, or intends to stay,in the rest of the world for a period of less than
one year. All individuals who belong to the same
household are resident where the household hasa centre of predominant economic interest: this iswhere the household maintains a dwelling, or succession of dwellings, which members of the household treat, and use, as their principal residence. A
member of a resident household continues to bea resident even if that individual makes frequent
journeys outside the economic territory because
their centre of economic interest remains in theeconomy in which the household is resident.

11.07 The total population of a country includes:(a) nationals settled in the country;(b) national civilians who are staying abroad for aperiod of less than one year. Examples are frontier workers, seasonal workers, and tourists;(c) foreign civilians settled in the country fora period of one year or more, including thepersonnel and accompanying members of
their households, of the institutions of theEuropean Union and of international civilian

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Population and labour inputs

organisations located within the geographic
territory of the country;

international organisation, which is financing
their work;(d) foreign military personnel working with international military organisations located within
the geographic territory of the country;(e) foreign students however long they study in the
country;(f) members of the armed forces of a foreign country who are stationed in the country;(e) foreign technical assistance personnel on longterm assignments who work in the country forover a year, and are deemed to be employed bytheir host government on behalf of the government, or international organisation, which isfinancing their work.
The total population also includes the following,irrespective of the length of their stay outside thecountry:(g) the foreign personnel of foreign scientificbases located on the geographic territory of thecountry;(h) members of foreign diplomatic missions stationed in the country.
11.09 The definition of population given above differsfrom the present, or de facto, population, which
consists of persons actually present on the geographic territory of a country at a given date. It also
differs from the registered population.

(a) national students however long they study
abroad;(b) members of the country’s armed forces stationed in the rest of the world;(c) nationals who are on the staff of national scientific bases established outside the geographic
territory of the country;

Economically active population
11.10 Definition: the economically active population

comprises all persons, who provide, or are available to provide, the supply of labour for productive activities falling in the production boundary ofnational accounts. It includes all persons who fulfil
the requirements for inclusion in employment orin unemployment as subsequently defined.

(d) nationals who are on the staff of diplomatic
missions abroad;(e) nationals who are members of the crews of fishing boats, other ships, aircraft and floating platforms operating outside the economic territory;(f) patients taking medical treatment abroad.

The relevant standards on labour force statistics are maintained by the International Labour
Organisation (ILO). The ILO standards are contained in ‘Resolutions’, which are adopted by sessions of the International Conference of Labour
Statisticians (ICLS). The one most relevant to collecting and compiling labour force data is the
Resolution concerning statistics of the economically active population, employment, unemployment and underemployment1. This resolution was
adopted by the 13th International Conference ofLabour Statisticians in October 1982, and amended
by resolution of the Eighteenth ICLS in December
2008. In that resolution the labour force is definedin terms of individuals engaged in an activity

11.08 Conversely, the total population of a country does

not include:(a) foreign civilians staying on the territory for lessthan a year, such as frontier workers, seasonal
workers, tourists, and patients;(b) national civilians staying abroad for a period of
one year or more;(c) national military personnel working with international organisations located in the rest of theworld;(d) national technical assistance personnel on
long-term assignments who work abroad andare deemed to be employed by their host government on behalf of the government, or306

1

http://www.ilo.org/global/statistics-and-databases/standards-and-guidelines/
resolutions-adopted-by-international-conferences-of-labour-statisticians/
WCMS_087481/lang–en/index.htm

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Population and labour inputs

included within the national accounts production
boundary.

Employment
11.11 Definition: employment covers all persons engaged

in productive activity that falls within the production boundary of the national accounts.

Persons in employment are employees or selfemployed persons. Persons holding more than one
job are classified as employees or self-employedaccording to their main job.

Employees
11.12 Definition: employees are defined as persons who,by agreement, work for a resident institutional unit
and receive a remuneration recorded as compensation of employees.

‘Employees’ correspond to the ILO definition of ‘paid
employment’. The relationship of employer to employee
exists when there is a contract, which may be formal orinformal, between an enterprise and a person, entered into
voluntarily by both parties, whereby the person works forthe enterprise in return for remuneration in cash or inkind.
Persons having both a job as an employee and a job asa self-employed person are classified as an employee if
the employee job constitutes their principal activity byincome. If income is not available, then hours worked is
to be used as a proxy.
11.13 The following categories of employees are included:(a) persons engaged by an employer under a contract of employment. Examples are manual andnon-manual workers, management personnel,
domestic staff, and people carrying out remunerated productive activity under employment
programs;(b) civil servants and other government employees
whose terms and conditions of employment arelaid down by public law;(c) the armed forces, consisting of those who havevoluntarily enlisted for both long and shortengagements, and conscripts including conscripts working for civil purposes;

European system of accounts — ESA 201011(d) ministers of religion, if they are paid directly bygeneral government or a non-profit institution;(e) owners of corporations and quasi-corporations
if they work in those enterprises;(f) students who have a formal commitment
whereby they contribute some of their own
labour as an input to an enterprise’s process of
production in return for remuneration in cash
or in kind as education services;(g) outworkers if there is an explicit agreement thatthe outworker is remunerated on the basis of
the work done: that is, the amount of labour
which is contributed as an input into someprocess of production; an outworker is an
employee if their contract with the employer isessentially to provide labour;(h) persons employed by temporary employment
agencies, who are to be included in the industry of the agency which employs them, and notin the industry of the enterprise for which they
actually work.
11.14 Persons temporarily not at work are also consid-

ered as employees provided they have a formal job
attachment. This formal attachment shall be determined according to one or more of the following
criteria:(a) the continued receipt of a wage or salary;(b) an assurance of a return to work following theend of the contingency, or an agreement as tothe date of return.
This covers persons temporarily not at work
because of illness or injury, holiday or vacation,
strike or lockout, educational or training leave,maternity or parental leave, reduction in economic
activity, temporary disorganisation or suspension of work due to reasons such as: bad weather,mechanical or electrical breakdown, or shortage ofraw materials or fuels. It also covers other temporary absences with or without leave.

Self-employed persons
11.15 Definition: self-employed persons are defined as

persons who are the sole owners, or joint owners,of the unincorporated enterprises in which they

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Population and labour inputs

work, excluding those unincorporated enterprisesthat are classified as quasi-corporations. Persons
having both an employee job and a job as a selfemployed person are classified here if the selfemployed job constitutes their principle activity byincome.
If income is not readily available, then hours
worked may be used as a proxy.
Self-employed persons may be temporarily not atwork during the reference period. The compensation for self-employment is mixed income.
11.16 Self-employed persons include the following

categories:(a) unpaid family workers, including those working in unincorporated enterprises engaged inmarket production;(b) outworkers whose income is a function of thevalue of the outputs from some process of production for which they are responsible. The
contract of those outworkers is to provide
goods or services to the commissioning party;(c) workers engaged in production undertaken
entirely for their own final consumption or
own capital formation, either individually orcollectively. Such production must be a significant part of their final use for it to be recorded.
Unpaid voluntary workers are included with selfemployed persons if their volunteer activities result
in goods; for example the construction of a dwelling, church or other building. But if their volunteer activities result in services, for example caretaking or cleaning without payment, they are notincluded under employment, because those volunteer services are excluded from production.
Although the services householders provide
to themselves as owners of their dwellings areincluded within the national accounts production
boundary, there is no labour input in the production of such services; owner-occupiers of dwellings
are not considered as self-employed persons.

Employment and residence
11.17 The results of the activity of producer units are con-sistent in coverage with employment if the latter308

includes both the residents and the non-residents
who work for resident producer units.
Employment, therefore, also includes the following
categories:(a) non-resident border workers, i.e. persons whocross the border each day to work in the economic territory;(b) non-resident seasonal workers, i.e. persons
who move into the economic territory and staythere for less than one year in order to workin industries which periodically require additional labour;(c) members of the country’s armed forces stationed in the rest of the world;(d) nationals who are on the staff of national scientific bases established outside the geographic
territory of the country;(e) nationals who are on the staff of diplomatic
missions abroad;(f) members of the crews of fishing boats, otherships, aircraft and floating platforms operated
by resident units;(g) local employees of general government bodies
situated outside the economic territory.
11.18 The following categories are excluded from

employment:(a) residents who are border workers or seasonal
workers, i.e. who work in another economic
territory;(b) nationals who are members of the crews of fishing boats, other ships, aircraft and floating platforms operated by non-resident units;(c) local employees of foreign government agencies located on the geographic territory of thecountry;(d) the personnel of the institutions of the European
Union and international civilian organisations
located within the geographic territory of thecountry (including local employees directly
recruited);

European system of accounts — ESA 2010

Population and labour inputs(e) members of armed forces working with international military organisations located on thegeographic territory of the country;(b) ’currently available for work’, i.e. were available
for paid employment or self-employment during the reference period; and(f) nationals working in foreign scientific bases
established in the economic territory.

(c) ’seeking work’, i.e. had taken specific steps ina specified recent period to seek paid employment or self-employment.

11.19 In order to be able to make the transition to theconcepts generally used in labour force statistics(employment on a national basis), the ESA specially provides for the following items to be shown
separately:

11.21 The specific steps may include: registration at a

public or private employment exchange; application to employers; checking at worksites, farms,
factory gates, markets or other assembly places;
placing or answering newspaper advertisements;
seeking assistance of friends or relatives; looking for land, building, machinery or equipment toestablish own enterprise; applying for permits andlicences or financial resources, etc.

(a) the conscripted forces (not included in thelabour force statistics, but included in the ESA
under general government services);(b) residents working for non-resident producer
units (included in labour force statistics but
not included in employment as defined in theESA);

11.22 Definition: a job is defined as an explicit or implicit

contract between a person and a resident institutional unit to perform work in return for compensation for a defined period or until further notice.

(d) resident workers living permanently in an
institution;(a) the explicit or implicit contract relates to theprovision of labour input, not to supplying output of a good or service;

Unemployment
11.20 Definition: in accordance with the guidelines estab-lished by the International Labour Organization(13th International Conference of Labour
Statisticians), further specified in the European
Union context by Commission Regulation (EC)
1897/20002, the concept of unemployment comprises all persons above a specified age who during
the reference period were:(a) ’without work’, i.e. not in paid employment or
self-employment;

2

Jobs

(c) non-residents working with resident producer
units (not included in labour force statistics
but included in employment as defined in theESA);(e) resident workers under the age taken into
account in labour force statistics.

Commission Regulation (EC) 1897/2000 of 7 September 2000 implementing Council
Regulation (EC) No 577/98 on the organisation of a labour force sample survey in
the Community concerning the operational definition of unemployment (OJ L 228,
8.9.2000, p. 18).

European system of accounts — ESA 2010

11

This definition covers the following terms:(b) work means any activity which contributes tothe production of goods and services within the
production boundary. The legality of the workand the age of the worker are irrelevant;(c) compensation is to be interpreted here in awide sense, including mixed income of selfemployed persons.
In this definition of a job, both employee and selfemployment jobs are covered; that is, an employee
job if the person belongs to another institutional
unit than the employer and a self-employment job
if the person belongs to the same institutional unit
as the employer.
11.23 The concept of jobs differs from the concept of

employment as defined above.

(a) Jobs include second, third, etc. jobs of the same
person. Those second, third, etc. jobs of a person may either successively follow one another

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Population and labour inputs

within the reference period (usually, a week) or,
as when someone has an evening job as well as a
daytime job, run in parallel.
(b) On the other hand, jobs exclude persons temporarily not at work but who have a ‘formal attachment to their job’ in the form, forinstance, of ‘an assurance of return to workor an agreement as to the date of return’. Suchan understanding between an employer anda person on lay-off or away on training is notcounted as a job in the system.

Jobs and residence
11.24 A job in the economic territory of the country is an

explicit or implicit contract between a person (whomay be resident in another economic territory)
and an institutional unit resident in the country.
For measuring labour input to domestic economic
activity, only the residence of the producer institutional unit is relevant, because resident producers
alone contribute to gross domestic product.

11.25 Moreover:(a) jobs are included in the count of jobs in theeconomic territory when the employees of aresident producer are working temporarily
in another economic territory and when thenature and duration of the activity do not warrant its treatment as a notional resident unit ofthat other territory;(b) jobs are excluded from the count of jobs in theeconomic territory when performed for nonresident institutional units, that is, for units
with a centre of interest in another country
which have no intention of being active on thedomestic territory for a year or more;(c) the jobs of the staff of international organisations and those of locally recruited staff
engaged by foreign embassies are excluded
from the count, since the employing units are
not resident.

310

The non-observed economy
11.26 Value of production activities that are not directly

observed are, in principle, included within thenational accounts production boundary. The following three types of activity are therefore included:(a) illegal activities where the parties are willing
partners in an economic transaction;(b) hidden and underground activities where thetransactions themselves are not against the law,
but are unreported to avoid official scrutiny;(c) activities described as ‘informal’, typicallywhere no records are kept.
In principle, the remuneration of these workers is
included in compensation of employees or mixed
income. This adjustment is to be taken into accountin the data on employment and self-employment
when calculating ratios and other statistics.
Illegal activities where either of the parties are notwilling participants (e.g. theft) are not economictransactions and so are not included in the production boundary.

Total hours worked
11.27 Definition: total hours worked represents theaggregate number of hours actually worked as
an employee or self-employed person during theaccounting period, when their output is within the
production boundary.
Given the broad definition of employees which
covers persons temporarily not at work but witha formal attachment, and part-time workers, theappropriate measure for productivity calculation is
not a head count but total hours worked.
Total hours worked is the most appropriate measure of labour inputs for the national accounts.

Specifying hours actually worked
11.28 Total hours actually worked represents those hoursof labour that have contributed to production andcan be defined with reference to the production
boundary of national accounts. The ILO standard

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Population and labour inputs

contained in the Resolution concerning the measurement of working time, adopted by the 18th
ICLS in December 20083, defines hours actually
worked as the time persons spend in the performance of activities that contribute to the production of goods and services during a specified reference period. The resolution defines hours worked
as follows:

outside the scope of a country’s labour force
survey;(4) statistics for hours actually worked shallexclude:(a) hours paid for but not worked, such as paid annual
leave, paid public holidays, paid sick leave, parental leave, strikes, ‘short leave’ for medical visits etc.,
bad weather shutdowns;(1) hours actually worked occur in all types ofjobs under varying work and compensation
arrangements paid or unpaid, that can be performed at all types of location;(b) meal breaks;(c) time spent on travel between home and work,
although any work undertaken while commuting
shall be included;(d) education other than training.

(2) hours actually worked are not linked to administrative or legal concepts and therefore apply
to all working persons and may occur within
normal or contractual hours or as overtime;(3) statistics for hours actually worked shall
include:More exhaustive definitions of these criteria canbe found in the ICLS Resolution concerning themeasurement of working time of December 20084.
11.29 Total hours worked is the aggregate number ofhours actually worked during the accounting
period in employee and self-employment jobs
within the economic territory:(a) hours actually worked during normal periods ofwork and directly contributing to production;(a) including work outside the economic territory
for resident employer institutional units who
have no centre of economic interest there;(b) paid time spent on training;(c) time worked in addition to hours worked during
normal periods of work, known as overtime. Notethat overtime hours worked shall be included even
if they are unpaid;(d) time spent working on tasks such as the preparation of the workplace, repairs and maintenance,
preparation and cleaning of tools, and the preparation of receipts, time sheets and reports;(e) time spent waiting or standing-by during shortterm disruptions during the workday for suchreasons as lack of supply of work, breakdownof machinery, or accidents, or time spent at theplace of work during which no work is done but
for which payment is made under a guaranteed
employment contract;(f) time corresponding to short periods of rest during
the workday, including tea and coffee breaks;(g) on-call work arrangements. Where this occurs
away from the work-place, for example at home,
the time is included in hours actually worked
according to the degree to which the person’s nonwork activities and movements are restricted;(b) excluding work for foreign employer institutional units who have no centre of economic
interest within the economic territory.
11.30 Many surveys of enterprises record hours paid nothours worked. In those cases, hours worked haveto be estimated for each job group, using whatever
information is available about paid leave etc.

11.31 For business cycle analysis, it may be useful toadjust total hours worked by adopting a standard
number of working days per year.

Full-time equivalence
11.32 Definition:

full-time equivalent employment,
which equals the number of full-time equivalentjobs, is defined as total hours worked divided by
the average annual number of hours worked infull-time jobs within the economic territory.

(h) hours worked by defence force personnel, including conscripts, shall be included even if they are3

http://www.ilo.org/global/statistics-and-databases/standards-and-guidelines/
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WCMS_112455/lang–en/index.htm

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Population and labour inputs

11.33 This definition does not necessarily describe how

the concept is estimated: since the length of a fulltime job has changed through time and differs
between industries, methods which establish theaverage proportion and average hours of less thanfull-time jobs in each job group are used. A normal
full time week must first be estimated in each jobgroup. A job group can be defined, inside an industry, according to gender and kind of work. Hours
contractually agreed upon constitute, for employee
jobs, the appropriate criteria for determining those
figures. The full-time equivalent is calculated separately in each job group, then summed up.

11.34 Total hours worked are the best measure of labour

inputs, but where this information is lacking, fulltime equivalence may be the best available proxy; it
can be estimated more easily and enables international comparisons with countries which can only
estimate full-time equivalent employment.

Employee labour input at constantcompensation
11.35 Definition: for labour inputs of similar type andqualifications in the base period, employee labour
input at constant compensation measures current

312

labour inputs valued at the levels of compensation of employee jobs ruling during a selected baseperiod.
11.36 Compensation of employees at current prices

divided by employee labour input at constant compensation yields an implicit compensation priceindex comparable with the implicit price index of
final uses.

11.37 The purpose of the concept of employee labour

input at constant compensation is to describe thechanges in the composition of the work force, forexample from lower paid to higher paid workers.
To be effective, the analysis is to be undertaken on
an industry basis.

Productivity measures
11.38 Definition: productivity is a measure of output

from a production process, per unit of input. For
example, labour productivity is typically measured
as a ratio of output per labour-hour (an input). It
is therefore essential that labour measures usedin studies where the output is based on national
accounts measures are consistent in concept andcoverage with the national accounts.

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Quarterly national accounts

12

CHAPTER 12
Quarterly national accounts
Introduction
12.01 This Chapter sets out the major principles andcharacteristics of quarterly national accounts.

12.02 Quarterly national accounts are national accounts

whose reference period is a quarter. They are a system of integrated quarterly indicators. Quarterly
national accounts provide a comprehensive accounting framework within which economic data can becompiled and presented in a format that is designed
for purposes of economic analysis, decision-taking
and policymaking, on a quarterly basis.

12.03 Quarterly national accounts adopt the same prin-ciples, definitions, and structure as annual national
accounts. Quarterly national accounts use the concepts of annual national accounts unless indicatedotherwise in this Chapter.

12.04 Quarterly national accounts cover the entire

sequence of accounts and balance sheets. In
practice, the constraints of data availability,
time, and resources mean that quarterly national
accounts are less complete than annual national
accounts.

In comparison to annual national accounts, quarterly national accounts are more limited in scope.
They focus on measuring GDP, on measuring the
supply and use of goods and services, and on thegeneration of income. There is limited detail on
industry activity and specific transactions. This
reflects a trade-off between timeliness and scope,detail and reliability.
12.05 Compared to annual national accounts, quarterly

seasonal pattern and are affected by calendar events.
The seasonal pattern is smoothed out through seasonal and calendar adjustment procedures.
12.07 Quarterly national accounts rely on more lim-

ited data sources than annual national accounts
and their compilation requires more use of statistical and econometric techniques. There are
two approaches to the compilation of quarterly
national accounts: the direct approach and theindirect approach.

12.08 The direct approach is based on the availabil-ity, at quarterly intervals, of similar data sources
as those used to compile annual accounts; under
this approach, similar methods of compilation are
applied. The indirect approach uses statistical andeconometric estimation techniques that use information from the annual accounts and short-term
indicators to interpolate and extrapolate fromthe annual estimates. The choice between those
approaches depends on the information used in
the production of annual accounts being readily
available in the same form at quarterly level.

12.09 The purpose of quarterly national accounts is dif-ferent from that of annual national accounts.
Quarterly national accounts focus on the shortterm movements of the economy and provide a
coherent measure of such movements within thenational accounts framework. Emphasis is placedon growth rates and their characteristics over timesuch as acceleration, deceleration or change insign. The annual national accounts’ emphasis is onlevels and the structure of the economy, as well as
growth rates.

national accounts are compiled and released more
frequently. They provide an early overview of economic developments and can be used for early estimates of annual national accounts.

Annual national accounts are less suitable thanquarterly national accounts for business cycle analyses, because annual data mask short-term economic developments.

12.06 The time series of quarterly national accounts sta-

12.10 Quarterly national accounts may be used in thetistics, due to their quarterly frequency, present a

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compilation of annual national accounts. They

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improve the reliability and timeliness of annual
national accounts and, in some countries, annual
national accounts are directly derived from theaggregation over the year of quarterly national
accounts. Those different roles reflect differences in data availability and in compilation
processes.
12.11 A range of data feeds into the compilation of quar-

terly national accounts, such as short term statistics on production, prices, employment and external trade, confidence indicators of business andconsumers and administrative data like VAT revenues. In comparison to such indicators, quarterly
national accounts offer:(a) a broader scope;(b) exhaustiveness;(c) a coherent national accounts framework;(d) consistency with the concepts and data innational accounts;(e) international comparability based on an international methodological framework, the 2008
SNA.

12.12 The coverage of quarterly national accounts cor-

responds to the coverage of annual accounts,
encompassing the entire sequence of accounts
and the corresponding aggregates as well as
the supply and use framework. However, thereduced availability of information and thequarterly frequency of compilation usually result
in reduced coverage and scope for quarterly
national accounts.
The quarterly accounts framework includes thefollowing:(a) main aggregates, including employment andpopulation;(b) financial and non-financial accounts by institutional sector;(c) limited detail breakdowns of key aggregatessuch as gross value added, final consumption
expenditure, gross fixed capital formation,
imports and exports of goods and services, andemployment; and(d) a simplified sequence of accounts.

314

Such elements are usefully complemented, forcompilation purposes, by a simplified supply anduse framework.

Specific features of quarterly national
accounts
12.13 Compilation issues which are especially importantfor quarterly national accounts are:(a) time of recording;(b) flash estimates;(c) balancing and benchmarking;(d) chain-linked volume measures; and(e) seasonal and calendar adjustments.

Time of recording
12.14 The rules on the time of recording that apply toquarterly national accounts are the same as thosethat apply for annual national accounts. However,specific measurement problems with respect to thetime of recording arise due to the shorter period ofrecording. This affects, in particular, measuring of:(a) work-in-progress;(b) activities in specific periods within a year; and(c) low-frequency payments.

12.15 For quarterly national accounts, recording of activ-

ities and flows concentrated in specific periods
within a year is important. The size of such activities by quarter, such as the output of agriculture,
construction and tourism, depends on external factors such as the weather and official holidays. The
payment of wages, taxes, social benefits and dividends can be subject to temporary quarterly effects
such as annual bonuses being paid in one month.
Errors in measuring the timing and size of such
events lead to errors in the measurement of quarterly growth.

Work-in-progress
12.16 Work-in-progress is incomplete output that is not

yet ready for delivery. It occurs when production

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Quarterly national accounts

lasts more than one period. Long production cycles
occur in activities such as agriculture, construction, manufacturing of machinery, cars and ships,
and services like the development of software,architectural services, the making of a film or large
sport events. Such long production processes areoften accompanied by progress payments, occurring especially in activities such as shipbuilding,aircraft construction, wine production and advertising contracts.
Measurement of such production requires that asingle process is split into separate periods. This is
more difficult for quarterly national accounts thanfor annual national accounts. However, the same
principles apply for measuring work-in-progress
on a quarterly and on an annual basis.

Activities concentrated in specific periods within
a year
12.17 Allocation of output on the basis of costs incurred

over time is the normal means of allocating eventual output to periods on an accruals basis, butdoes not always apply in full. No output should beallocated to periods in which there is no ongoingproduction process, even if there are ongoing costs.
This applies to the cost of using capital, for example rental payments for the use of machinery. Thissituation can apply to agriculture, where there may
be no production in some periods. Periods with nooutput can also arise in food processing industries
that are dependent on products from harvests.

Low-frequency payments
12.18 For an activity occurring throughout the year,

low-frequency payments are payments made oncea year, or infrequent instalments over the year.
Examples of such payments are dividends, interest, taxes, subsidies and employee bonuses, suchas end-of-year bonuses and vacation bonuses. Allsuch distributive transactions are recorded on an
accrual basis, when the claim arose rather thanwhen it was paid. This issue of timing of recording also occurs in annual national accounts, when
payments may partly relate to another accounting
year.

12.19 In order to deal with such timing issues, two cate-gories of payments are distinguished.

European system of accounts — ESA 201012(a) Payments that have a purely ad hoc character are to be recorded in the period in which
they are actually made. Dividends, for example,
are usually determined only after the books areclosed on a fiscal year and may not relate to thecompany’s profits over that year.
(b) Payments that have a fixed relation to a particular period (e.g. accrued in a previous period or
accrued over a number of accounting periods)
are to be allocated to the periods in which theyaccrued. Examples are taxes on income and products, that may be collected in a subsequent period.
12.20 The application of accrual principles to quarterly

data in such cases may be extremely difficult, andalternative methods are necessary, such as a cash
adjusted basis, or allocating accrual payments toperiods so that there is minimal distortion of thecharacteristics of time series.

Flash estimates
12.21 Quarterly national accounts provide an overview ofthe state of the economy with a short delay after theend of the reference quarter. The timely availability ofsuch information helps to identify and interpret economic trends. For this reason, flash estimates of key
macroeconomic aggregates including GDP growthand quarterly national accounts indicators are compiled more frequently by statistical authorities.

12.22 A flash estimate is an early estimate of an economic

variable for the most recent reference period. The
flash estimate is normally calculated on incomplete
data, but using the same statistical or econometricmodel as for regular estimates. The compilation of
flash estimates incorporates as much data as possible. The differences between flash estimates andtraditional estimates are as follows:(a) timeliness: flash estimates are available earlier
than the traditional estimates;(b) accuracy: there is a trade off between timeliness and accuracy. Flash estimates are in general more prone to revision than the traditional
ones;(c) coverage: the number of variables covered byflash estimates is more limited than traditional
estimates;

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Quarterly national accounts(d) information: flash estimates are based on lessinformation. Often the information for traditional estimates is not fully available;(e) estimation method: due to the lack of data, flash
estimates rely more on econometric methods
and assumptions.

Balancing and benchmarking of quarterly
national accounts
12.23 Quarterly national accounts are a coherent set ofConsistency between quarterly and annual accounts— benchmarking
12.27 The process of alignment of quarterly accounts toannual ones can be approached in two ways:

accounts compiled on a quarterly basis. They are
an integral part of the national accounts framework and are consistent with annual accounts.

(a) aligning quarterly accounts to annual accounts,
also known as benchmarking;12.24 The internal consistency of quarterly accounts is(b) deriving annual accounts from quarterly
accounts.

achieved by reconciling estimates of supply anduse for the accounts on a quarterly basis. The consistency with annual accounts is ensured either
by benchmarking quarterly accounts to annual
accounts or by deriving annual accounts fromquarterly accounts.

Balancing
12.25 The balancing or reconciliation process is an inte-gral part of the compilation process of national
accounts. It makes optimum use of the diverse
sources of information underpinning different
measures in the accounts. In broad terms, balancing seeks to fit the statistical basic data underlying the different approaches to the compilation of
GDP and the other parts of the accounts into a supply and use framework, and so use all the available
information in an effective manner.

12.26 The principles and procedures of the balancing

process applied to annual accounts apply to quarterly accounts, with additional procedures reflecting the quarterly frequency of compilation. Suchadditional procedures reflect the following featuresof quarterly accounts:(a) maintaining consistency between seasonallyadjusted and unadjusted data;(b) ensuring consistency between current priceand volume measures;(c) reconciling measures from the different
approaches to the compilation of GDP.

316

A simplified quarterly supply and use framework
will help in balancing quarterly national accounts.
When annual supply and use tables are regularlycompiled, information in the quarterly supply anduse tables can be explicitly linked to them as part ofthe balancing and benchmarking process.

12.28 Discrepancies between quarterly and annual

accounts are mainly due to differences in sources,
and availability of information from sharedsources.

12.29 Many different methods can be used for reconciling

quarterly and corresponding annual aggregates.

The ideal method is to identify the causes of thedifferences and to derive new, reconciled quarterly and annual aggregates using all available
information.
Benchmarking techniques ensure consistency
between the two sets of aggregates by taking one as
the standard and adapting the other to be consistent with it, through a variety of methods from simple mathematical adjustments to complex statistical and econometric procedures. Benchmarking
techniques aim to ensure the accounting coherenceof the two sets of aggregates in terms of preservation of movements or other well-defined criteria.
Benchmarking is an integral part of the compilation process and should, in principle, be conductedat the most detailed compilation level. In practice,
this may imply benchmarking different series instages over time, where data for some series, whichhave already been benchmarked, are used to estimate other series, followed by a second or thirdround of benchmarking.
12.30 When quarterly aggregates are taken as the bench-mark, annual aggregates are derived by adding theEuropean system of accounts — ESA 2010

Quarterly national accounts

appropriate quarterly figures. In this way, consistency is ensured.
12.31 Very often, the reconciliation between quar-

terly and annual aggregates results from a mix ofbenchmarking approaches: for example, preliminary annual estimates can be derived by aggregating quarterly figures, and, once annual information becomes available and the annual aggregate isrevised, the annual benchmark is applied to revise
the corresponding quarterly figures.

Chain-linked measures of price and volume
changes12.32 For annual national accounts, the measure of priceand volume changes is in principle through anannual chain index. For the sake of coherence, thequarterly measures of price and volume changes areconstrained to the annual chain-linked measures.

12.33 Consistency between quarterly and annual accounts

price and volume measures requires either that theannual measures are derived from quarterly measures or that the quarterly data is constrained to theannual using benchmarking techniques. This is true
even if the basic requirement is met that the quarterly and annual measures are based on the same
methods of compilation and presentation, forexample using the same index formula, base year
and reference period. Strict consistency is not possible because quarterly indices will not normallyreflect exactly the same growth as the corresponding
annual indices, due to the index mathematical form.

12.34 Whilst quarterly chain-linked volume measures

could be based on quarterly frequency of chain
linking, chain linking is in principle to be carried out annually. Quarterly volume measures areannually chain linked.

12.35 Quarterly national accounts chain-linked vol-ume series are quarterly volume changes using
the annual averages of prices of the previous year.
Three approaches for annually chain linking quarterly volume indexes may be used:(a) annual overlap;(b) one-quarter overlap;(c) over-the-year approach.

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12

Creating a time series by applying one of the threechain-linking techniques normally induces structural breaks in the resulting chain-linked series, theimpact of which is determined by the chosen linking approach and by the change of the price structure over time.
12.36 The annual overlap approach uses the annual aver-age values of the respective previous year in pricesof that year. It results in annual aggregates ofquarterly volume measures identical to the independently derived chain-linked annual national
accounts series. Moreover, the quarter-on-quarter rates of change within the same calendar year
between Q1 and Q 4 are not affected by breaks.
However, the volume series is affected by breaks
occurring from the fourth quarter of a year to
the first quarter of the following year, which also
appear in the respective quarter-on-quarter rate ofchange.

12.37 By contrast, the one-quarter overlap approach

generally leads to undistorted quarter-on-quarter
rates of change for all quarters of the year, since
the chain links refer to the quantities of the fourth
quarter of the respective previous year valued ataverage prices of that year. However, unlike theannual overlap approach, the one-quarter overlap approach leads to quarterly chain-linked series
which are not consistent with the independently
derived chain-linked annual national accounts
series.

12.38 The over-the-year approach of chain linking leads

to undistorted year-on-year growth rates for allquarters, since the chain links refer to the volumesof the same quarter in the respective previous year,
valued at average prices of that year. However, thisapproach leads to results that are affected by structural breaks in every quarter, so that each quarteron-quarter rate of change is affected by a break.
Hence, the over-the-year approach impacts moston the intra-annual profile of a series.

12.39 Provided the substitution effects (changes in vol-umes due to shifts in price structure) within a year
are small, the three approaches for quarterly chain
linking of volumes lead to very similar results.
Based on practical considerations such as quarterly growth consistency with annual chainlinked growth and simplicity and transparency of

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Quarterly national accounts

computation, the annual overlap method is therecommended method.

Seasonal and calendar adjustments
12.40 Seasonality is any pattern that recurs on a regularbasis within the same period of each year.

An example is the sale of ice cream in the summer. Regularly recurring events are smoothed
over the year by adjusting for seasonality, whereas
the impact of irregular events remains unaffected.
Adjusting for seasonality includes allowing for thedifferent lengths of months and quarters. The seasonally adjusted results reflect ‘normal’ and recurring events over the whole year in which they occur.
Seasonally adjusted series reveal more clearly thanunseasonally adjusted series the following features
for example:(a) changes in trend; and(b) turning points in the business cycle.
12.41 The calendar effect is the impact on a time series ofthe following:(a) the number and composition of working andtrading days;(b) the occurrence of fixed and moving holidays;(c) leap years and other calendar phenomena suchas bridging days.
12.42 The presence of seasonal and calendar effects inquarterly national accounts time series obscures
the trend in growth of quarterly national
accounts aggregates. So, adjustments for seasonal effects and calendar effects assist in thedrawing of inferences on trends from quarterly national accounts; furthermore, seasonal
adjustment reveals the impact of major irregular effects or events to help in understanding
economic developments through the quarterly
national accounts statistics.

12.43 Seasonal variations are commonly the effect of var-iations in energy use, tourism activity, weather
conditions that affect outdoor activity such as construction, salary bonuses and fixed holidays effects,
as well as all kinds of institutional or administrative
practices. Seasonal variations in quarterly national

318

accounts depend also on the data sources and compilation methods used.
12.44 For a reliable estimation of seasonal factors, thetime series may need to be pre-treated. This prevents outliers such as impulse outliers, transitory changes and level shifts, calendar effects andnational holidays from affecting the quality ofthe seasonal estimates. However, outliers should
remain visible in the seasonally adjusted data
unless they are the result of errors, because they
may reflect specific events such as strikes, natural disasters, etc. Therefore the outliers should be
reintroduced into the times series after the seasonal
components have been estimated.

Sequence of compilation of seasonally adjusted
chain-linked volume measures
12.45 The compilation of seasonal and calendar adjusted

quarterly national accounts chain-linked volume measures is the result of a sequence of operations including seasonal and calendar adjustment, chain linking, benchmarking and balancing, applied to the available basic or aggregatedinformation.

12.46 The sequence of application of the different stepsof the compilation process of seasonally adjusted
chain-linked quarterly national accounts volume
measures depends on the specificities of the production process and on the level of aggregation atwhich it is applied.

Ideally, seasonally adjusted chain-linked volumeseries are obtained by seasonally adjusting thechain-linked series, followed by a benchmarking of
the adjusted chain-linked series.
12.47 There are quarterly national accounts compilation

systems in which seasonally adjusted data are produced at a very detailed level, and even at a level atwhich no chain linking is applied, e.g. when producing quarterly national accounts from quarterly
supply and use tables. The order in this case is seasonal adjustment, followed by balancing, chain
linking and benchmarking. At a disaggregatedlevel, the estimates of the seasonal component may
not be as reliable as at higher quarterly national
accounts levels. Particular care is then needed forrevisions of the seasonal component. Furthermore,balancing and chain linking seasonally adjusted

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Quarterly national accounts

data must not result in a seasonal pattern being
introduced into the series.
12.48 Quarterly national accounts volume measures inaverage prices of the previous year can be chain
linked by using the one-quarter-overlap, the annual
overlap or the over-the-year technique. From theperspective of seasonal adjustment of quarterly
national accounts volume measures, the one-quarter-overlap and the annual overlap technique are
preferred. The over-the-year-technique is not recommended as it can introduce breaks in every single quarter-on-quarter movement of the series.

12.49 Seasonally adjusted chain-linked quarterly vol-ume measures are constrained to the respective
non-seasonally adjusted chain-linked annual data
by using benchmarking or constraining techniques that minimise the impact on the quarteron-quarter changes of the series. The benchmarking is required for purely practical reasons, e.g.
the consistency of annual average growth rates.
Benchmarking shall not result in introducing aseasonal pattern in the series. The reference should

European system of accounts — ESA 201012

be the independently derived chain-linked annual
series in unadjusted form for only seasonallyadjusted quarterly national accounts. Exceptions
from the desired consistency over time are acceptable if the seasonality is changing rapidly.
12.50 The calendar effect can be divided into a seasonal

and a non-seasonal component. The former corresponds to the average calendar situation that recurs
each year at the same season; the latter corresponds
to the deviation of the calendar variables, such as
numbers of trading/working days, moving holidays and leap year days, from the month- or quarter-specific average.

12.51 Calendar adjustment removes those non-seasonal

calendar components from the series, for which
there is statistical evidence and an economic explanation. Calendar effects, for which a series areadjusted for, should be identifiable and sufficiently
stable over time or, alternatively, it should be possible to model their changing impact over time
appropriately.

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Regional accounts

13

CHAPTER 13
Regional accounts
Introduction
13.01 This Chapter describes regional accounts in gen-eral and clarifies the purposes and major conceptual principles and compilation issues typical forregional accounts.

13.02 Definition: regional accounts are a regional spec-

ification of the corresponding accounts of thenational economy. Regional accounts provide aregional breakdown for major aggregates suchas gross value added by industry and householdincome.

13.03 National accounts concepts shall be used forregional accounts unless indicated otherwise inthis Chapter.

National totals hide differences in regional economic conditions and performances. Populationand economic activities are generally unevenly distributed among regions. Urban regions are generally specialised in services, while agriculture, mining activities and manufacturing tend to be locatedin non-urban regions. Major issues such as globalisation, innovation, ageing, taxation, poverty,
unemployment and the environment often have aregional economic dimension. Regional accounts
are, therefore, an important complement tonational accounts.
13.04 Regional accounts comprise the same set ofaccounts as national accounts, in that they makeregional economic structures, developments anddifferences visible. Conceptual and measurement
problems result in a set of accounts for regions
which are more limited in scope and detail thannational accounts.
The tables on regional production activities byindustry show:(a) the size and the dynamic of production andemployment by region;

European system of accounts — ESA 2010(b) the contribution of regions to national aggregates;(c) the specialisation of each region;(d) the role of the various regions for each industry.
Regional household income accounts show primary and disposable household income by region,
as well as the sources and distribution of income
amongst regions.
13.05 In several Member States, regions at various levels

have a substantial autonomy of decision-making.
Regional accounts corresponding to such regionsare, therefore, important for national and regional
policy.

13.06 Regional accounts also serve important specificadministrative purposes, e.g.:(a) to allocate the revenues of a specific national
tax to regional governments;(b) to allocate funds as part of European cohesion
policy.
13.07 Regional accounts can be used flexibly at various

levels of aggregation. This does not only correspond to geographic regions. Geographic regions
can also be grouped by economic structure, location and economic relationships with other (neighbouring) regions. This is in particular useful for
analysing national and European economic structures and development.

13.08 Regional accounts shall be compiled on the basis ofregional data collected directly, and national datawith regional breakdowns based on assumptions.
The more complete the data collected directly,
the less the role of assumptions. The lack of sufficiently complete, timely and reliable regional
information requires assumptions in compilingregional accounts. This implies that some differences between regions are not necessarily reflected
in regional accounts.

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Regional accounts

Regional territory
13.09 A regional economy of a country is part of thetotal economy of that country. The total economy
is defined in terms of institutional units and sectors. It consists of all the institutional units whichhave a centre of predominant economic interestin the economic territory of a country (see paragraph 2.04). The economic territory does not coincide exactly with the geographic territory (see paragraph 2.05). The economic territory of a country is
divided into regional territories and the extra-regio
territory.

13.10 The regional territory consists of that part of theeconomic territory of a country that is directly
assigned to a region, including any free zones,
bonded warehouses and factories.

13.11 The extra-regio territory is made up of parts of theeconomic territory of a country which cannot be
assigned to a single region. It consists of:(a) the national air-space, territorial waters and thecontinental shelf lying in international waters
over which the country enjoys exclusive rights;(b) territorial exclaves (i.e. geographic territories
situated in the rest of the world and used, underinternational treaties or agreements between
states, by general government agencies of thecountry — embassies, consulates, militarybases, scientific bases etc.);(c) deposits of oil, natural gas etc. in international
waters, outside the continental shelf of thecountry, worked by resident units.
13.12 The NUTS classification provides a single, uni-

form breakdown of the economic territory of theEuropean Union. For national purposes, regional
accounts may also be compiled at a more detailed
regional level.

Units and regional accounts
13.13 Two types of units are distinguished for thenational economy. First, records for the institutional unit reflect flows affecting income, capital and financial transactions, other flows and balance sheets. Second, records for the local kind of322

activity unit (local KAU) show flows occurring in
the process of production and in the use of goods
and services.

Institutional units
13.14 For regional accounts, depending on the regional

level, two types of institutional units can be
distinguished:(a) Uniregional units, where the centre of predominant economic interest is in one region.
Examples of uniregional units are households,
corporations the local KAUs of which are all
located in the same region, most local andregional governments, part of social security
and NPISHs.
(b) Multiregional units, where the centre of predominant economic interest is in more than
one region. Corporations and NPISHs areexamples of units which span regions. Other
examples are institutional units whose activities
span the whole country, such as central government and a small number of corporations exercising monopolies or near-monopolies.

13.15 All transactions of uniregional institutional units

are allocated to the region in which such units havetheir centre of predominant economic interest. For
households, the centre of predominant economic
interest lies in the region where they are resident,
not the region where they work. Other uniregional
units have their centre of predominant economic
interest in the region where they are located.

13.16 Some of the transactions of multiregional units

cannot be allocated to regions. This is the casefor most distributive and financial transactions. Consequently, balancing items of multiregional units such as saving and net lending are
not recorded at the regional level for multiregional
units.

Local kind-of-activity units and regional
production activities by industry
13.17 Enterprises can engage in production activities atmore than one location, and for regional accounts
it is necessary to allocate the activities to location.

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Regional accounts

Where enterprises are partitioned by location, thepartitioned parts are called local units.
13.18 Institutional units can be classified on the basis of

economic activities to describe the economy’s production activities by industry. This results in heterogeneous industries, as many enterprises have substantial secondary activities that are different fromtheir principal activity. It also results in some industries having the principal product of the industry as a small proportion of total output. In orderto obtain groups of producers whose activities are
more homogeneous in terms of output, cost structure and technology of production, enterprises are
partitioned into smaller and more homogeneousunits. These are called kind-of-activity units.

13.19 The local kind-of-activity unit (local KAU) is thepart of a kind-of -activity unit (KAU) which corresponds to a local unit. When a KAU is engaged in
production activities in several regions, the information on the KAU is split in order to obtainregional accounts. For this splitting, information is required on compensation of employees,
or employment if this is not available, and grossfixed capital formation. For enterprises situated ina single location and in which the principal activity accounts for most of the value added, the local
KAU is the same as the enterprise.

13.20 An industry for a region consists of a group of

local KAUs engaged in the same, or similar,
kind-of-activity.

13.21 When defining a local KAU there are three distinct

cases.

(a) A production activity with significant labour
input at a fixed location. Significant labour
input, in this context, at a minimum is theyearly equivalent of one person regularly working half a day.
(b) A production activity without significant
labour input at a fixed location is generally not
to be considered as a separate local KAU andthe production should be attributed to the local
unit that is responsible for managing this production. However, there are exceptions to thisrule, examples being windmills, the extractionof oil and gas, internet hubs and fully automatic
petrol stations. Such production activities may
be located in one region and fully managed inEuropean system of accounts — ESA 201013

a different region. The output of such activities is not recorded in the region where they are
managed, as production takes place in the otherregion. Gross fixed capital formation should berecorded in the same region as the associatedoutput and value added.
(c) For a production activity without a fixed location the concept of residence (see paragraph2.04) at the national level is applied. For example, major construction projects undertaken bycontractors from other regions are registered asa separate local KAU. Examples of major construction projects are building bridges, dams
and power stations, that take a year or more tocomplete and are managed through a local site
office. For construction projects of less than a
year, the residence of the parent construction
company is used to allocate the production byregion.
13.22 Production transactions between local KAUs,

which belong to the same institutional unit andare located in different regions, are recorded.
However, no delivery of ancillary output between
local KAUs is recorded, unless it is observable (seeparagraph 1.31). This implies that only deliveries ofprincipal or secondary output between local KAUs
are recorded, as far as this is practised in national
accounts.

13.23 If an establishment undertaking only ancillary

activities is statistically observable, in that separate accounts for the production it undertakes arereadily available, or if it is in a geographically different location from the establishments it serves, it
is recorded as a separate unit and allocated to theindustrial classification corresponding to its principal activity, in both national and regional accounts.
In the absence of suitable basic data being available, the output of the ancillary activity is estimatedby summing costs.

Methods of regionalisation
13.24 Regional accounts are based on the transactionsof units that are resident in a regional territory. In
general, regional accounts are compiled by using
the following:(a) bottom-up methods;

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Regional accounts(b) top-down methods; or(c) a mixture of bottom-up and top-down methods.
13.25 The bottom-up or ascending method of estimat-

ing a regional aggregate consists of collecting data
directly for resident units, and compiling regional
estimates by aggregation.
A pseudo-bottom-up approach is acceptable whendata for local KAUs is not available. Data for local
KAUs can be estimated from enterprise, KAU or
local unit data using distribution models. The estimates are aggregated to obtain regional totals as in
the bottom-up approach.
In the second stage of the compilation process,bottom-up estimates are reconciled with the totals
from the national accounts.

13.26 When information is only available at the level ofunits which contain several local KAUs engaged indifferent activities and regions, indicators such ascompensation of employees, and employment byregion, are used to compile regional breakdowns
by industry.

13.27 The top-down method is distributing a national

total across the regions, without attempting to distinguish resident units by region. The national figure is distributed using an indicator that is distributed across regions in the same way as the variable
to be estimated.
The notion of a resident unit by region is needed inorder to achieve regional coverage of the indicatorused to produce the regional allocation of the variable required.

13.28 Bottom-up methods are rarely encountered intheir pure form. Mixed methods are also acceptable. For example, regional estimates of a variable
or an aggregate of variables may only be possible
with the help of the bottom-up method at macroregional level. For estimates at a more detailed
regional level, a top-down method is then applied.

13.29 Direct measures of regional values are preferred toindirect measures. If complete and reliable microdata is available at the level of local KAUs, regional
values that correspond in concept with the national
values are estimated by the bottom-up method.
To obtain consistency with the national accounts

324

totals, those regional accounts estimates are thenmade consistent with national accounts aggregates.
13.30 Indirect measurement on the basis of national

aggregates and an indicator that is correlated withthe variable to be measured is subject to measurement errors. For example, national figures on grossvalue added by industry can be allocated to regions
using regional employment statistics, under theassumption that, for each industry, gross value
added per employee is the same for all regions.
Compiling at a detailed breakdown level of industry improves top-down calculations.

13.31 Aggregates of production are allocated to the region

where the unit carrying out the relevant transactions is resident. The residence of the local KAU
is an essential criterion for the allocation of suchaggregates to a particular region. The residence
principle is preferred to a territorial approach inwhich production activities are allocated on thebasis of their location.

13.32 For specific industries, like construction, energy

production and energy distribution, communication networks, transport and financial intermediation, and for some transactions in the household
accounts such as property income, specific problems in the allocation to regions exist. For international comparability of regional accounts, the same
compilation methods, or methods yielding similar
results, are employed.

13.33 Gross fixed capital formation is allocated to regions

by ownership. Fixed assets owned by a multiregional unit are allocated to the local KAUs where
they are used. Fixed assets used under an operatinglease are recorded in the region of the owner of theassets, and those used under a financial lease arerecorded in the region of the user.

Aggregates for production activities
Gross value added and gross domestic
product by region
13.34 Three approaches can be used for estimating

regional gross domestic product: the production,
income and expenditure approaches.

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Regional accounts

13.35 The production approach measures regional grossdomestic product at market prices as the sum ofgross value added at basic prices, plus taxes minus
subsidies on products. Gross value added at basic
prices is measured as the difference between output at basic prices and intermediate consumption
at purchasers’ prices.

13.36 The income approach measures regional grossdomestic product at market prices by measuring
and aggregating the various uses in the regionalpart of the total economy generation of income
account: compensation of employees, gross operating surplus and taxes less subsidies on production. Information by industry on compensation of
employees and employment is often available atregional level. This information is used in estimating gross value added by industry directly or via
the production approach. The income approachfor regional gross domestic product overlaps withthe production approach.

13.37 Information on gross operating surplus is gen-erally not available by industry and by region.
Information on gross operating surplus of market producers can be derived from the businessaccounts of enterprises. A breakdown by institutional sector and by region is often not available.
This is a barrier to using the income approachto the estimation of regional gross domestic
product.

13.38 Taxes (less subsidies) on production consist oftaxes (less subsidies) on products and other taxes(less subsidies) on production. The allocation oftaxes (less subsidies) on products is discussed inparagraph 13.43. For the other taxes (less subsidies) on production, information may be available by industry, e.g. in business surveys or byinferring from the specific type of tax or subsidy of the industry involved. This can then be anindicator for allocation of gross value added byregion.

13.39 For measuring regional gross domestic product,the expenditure approach is not used due to lackof information. Examples where there is a lack ofdata are direct information on inter-regional sales
and purchases, and a breakdown of exports andimports between regions.

European system of accounts — ESA 201013

The allocation of FISIM to user industries
13.40 Financial intermediation services indirectly meas-

ured (FISIM) are treated in regional accounts inthe same way as in national accounts. The allocation of intermediate consumption of FISIM by user
industries to regions poses a problem, because estimates of stocks of loans and deposits are usually
not available by region. Where this is the case, theallocation of FISIM to user industry is made witha second-best method: regional gross output orgross value added by industry are used as distribution indicators.

Employment
13.41 Regional production measures are consistent with

employment estimates in a region when employment includes both the residents and the nonresidents who work for regional producer units.
Regional employment is defined consistently withthe principles governing employment and residence for the national economy (see paragraph
11.17).

Compensation of employees
13.42 For producers, compensation of employees isallocated to the local KAUs where the people are
employed. Where this data is not available, compensation of employees is allocated, as a secondbest method, based on the hours worked. If neither
compensation of employees nor hours worked areavailable, the number of employees by local KAU
is used. Compensation of employees in the household accounts is allocated to regions according toresidence.

Transition from regional GVA to regionalGDP
13.43 In order to calculate GDP at market prices forregions, taxes and subsidies on products are allocated to the regions. By convention, these supraregional taxes and subsidies are allocated on thebasis of the relative size of gross value added of
all industries in the region valued at basic prices.
Alternative methods of allocation can be applied
on a case-by-case basis for territories with specific

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Regional accounts

fiscal systems, resulting in significantly different
rates of taxes and subsidies on products within acountry.
13.44 Per inhabitant figures can be calculated for theGDP of all regions. These figures are not calculated
for extra-regio measures.

13.45 Regional gross domestic product per inhabit-

ant can be significantly influenced by commuter
flows between regions. Net commuter inflows into
regions increase production beyond that possibleby the resident active population. GDP per inhabitant appears relatively high in regions with net commuter inflows and relatively low in regions withnet commuter outflows.

Volume growth rates of regional GVA
13.46 In measuring price and volume changes, the prin-ciples applied for the national economy shall apply
also to regions. However, there are problems with
regional data which make applying these principles
to regions difficult. Examples of the difficulties are
the following:(a) information on regional price changes is often
not available;(b) if regional value added in current prices is
directly estimated and not by deducting intermediate consumption from output, then double deflation of regional value added is notpossible;(b) regional differences in the price changes ofmajor inputs, e.g. changes in the price of labour,
land and renting office space. The existence ofnational wage agreements with no regional differentiation implies that regional differences inchanges in wage rates are small.
13.48 Regional value added is deflated by using:(a) regional deflators when available and of sufficient quality, using price changes of outputs rather than inputs. In some cases regional
deflators can be obtained indirectly by combining information on value changes and volume
changes. When regional prices are used (possibly in combination with national deflators
by industry), the regional growth rates are calculated to be consistent with national growth
rates;(b) double deflation when possible. This is in particular appropriate where the price change ofintermediate consumption deviates from thatof output and where intermediate consumption is substantial.

Regional household income accounts
13.49 Distribution and redistribution of income result in(c) in the absence of regional supply and use tables,
price and volume changes cannot be measured
and assessed in such a framework.

balancing items, namely primary income and disposable income. In regional accounts these income
measures are limited to households.

13.47 A commonly used approach is therefore to deflate

13.50 Regional accounts of households are a regional

regional value added by industry on the basis ofnational price changes by industry. This is carriedout at the most detailed level at which gross value
added at current prices is available. Differences
between national and regional price changes due todifferences in economic structure by industry aretaken into account. However, this solution is stillvulnerable to major differences between nationaland regional price changes. Examples of such differences are:326(a) differences in cost structure and composition of
outputs within one industry between producers in different regions. There can be large variations in price changes amongst regions for asingle industry;

specification of the corresponding accounts atthe national level. For measurement reasons theaccounts are limited to:(a) allocation of primary income account;(b) secondary distribution of income account.

These accounts record primary income and disposable income of households which are resident in aregion (see Table 13.1).

European system of accounts — ESA 2010

B.5 Primary income (balancing item)

Minus intraregional property
income related to B2/B3

European system of accounts — ESA 2010

Uses

Resources

Extra-regio

D.4 Property income payableb

Correction for regional flows
without any nationalcounterpart

Minus intraregional property
income related to B2/B3aRegionD.4 Property income receivable

D.1 Compensation of employees

B.2/B.3 Net operating surplus/mixed income

Disposable income per capita

Primary income per capita

Population (number of inhabitants)

Supplementary information

B.6 Disposable income (balancing item)

D.7 Other current transfers payable

D.61 Social contributions

D.5 Current taxes on income, wealth, etc.

D.7 Other current transfers receivable

D.62 Social benefits other than social
benefits in kind

B.5 Primary income

Secondary distribution of income account for households

Uses

Resources

Allocation of primary income

Table 13.1 — Regional household income accounts
National total

Regional accounts

13

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Regional accounts

13.51 The regional household accounts are based on thehouseholds that are resident in a regional territory.
The number of persons that are members of theresident households adds up to the total resident
population of the region.

13.52 The rules for determining the residence of house-holds at the national level shall also apply to theregional accounts of households. By way of exception, when the host region is in the same country
as the region of residence, students and long-term
patients are treated as resident of the host region if
they stay there more than one year.

13.53 The household accounts can be extended by the useof income accounts. This requires the allocation
by region of national accounts statistics on final
consumption expenditure by households and theadjustment for the change in net equity of households in pension fund reserves. Regional saving byhouseholds is the balancing item.

13.54 Allocation by region of final consumption expend-

iture by households requires reliable regional

328

information from for example an extended household budget survey. However, such a regional
breakdown is often absent and in the national
accounts final consumption expenditure by households is often estimated using other information.
In these circumstances, constructing a regional
breakdown is more difficult.
13.55 Governments can play an important role in pro-viding education, health care and social services to households, through social transfers inkind. The role of such social transfers in kind differs substantially between different countries andcan show major fluctuations over time. Allocatingsuch social transfers in kind to regions implies that
regional actual final consumption by households
and adjusted disposable income by households
can be obtained. Considering the important roleof social transfers in kind in some Member States,
comparing actual final consumption and actual
disposable income by households across Member
States can give a different picture from a comparison based on final consumption expenditure anddisposable income by households.

European system of accounts — ESA 2010

Financial intermediation services indirectly measured (FISIM)

14

CHAPTER 14
Financial intermediation services indirectly measured(FISIM)
The concept of FISIM and the impactof their user allocation on main
aggregates
14.01 One traditional way in which financial services areprovided is by means of financial intermediation.
This is the process whereby a financial institution
such as a bank accepts deposits from units wishing to receive interest on funds, and lends themto units whose own funds are insufficient to meettheir needs. The bank thus provides a mechanism
to allow the first unit to lend to the second. The
unit lending funds accepts a rate of interest lower
than that paid by the borrower. A ‘reference rate’of interest is the rate at which both lender and borrower would be happy to strike a deal. The difference between the reference rate and the rate actually paid to depositors and charged to borrowers isa financial intermediation service charge indirectly
measured (FISIM). The total FISIM is the sum of
the two implicit fees paid by the borrower and thelender.

14.02 However, it is seldom the case that the amount offunds lent by a financial institution exactly matches
the amount deposited with them. Some money
may have been deposited but not yet loaned;some loans may be financed by the bank’s own
funds and not from borrowed funds. However,the depositor of funds receives the same amountof interest and intermediation service whether or
not his funds are lent, and the borrower pays thesame rate of interest and receives the same intermediation service whether his funds are provided
by intermediated funds or the bank’s own funds.
For this reason FISIM are estimated for all loans
and deposits offered by a financial institution irrespective of the source of the funds. The amounts
of interest recorded are calculated as the reference
rate times the level of loan or deposit in question.

European system of accounts — ESA 2010

The difference between those amounts and theamounts actually received by or paid to the financial institution are recorded as the indirect service charges paid by the borrower or depositor to
the financial institution. The amounts recorded in
the system as interest are described as ‘ESA interest’ and the total amounts actually paid to or by thefinancial institution are described as ‘bank interest’. The total implicit service charge is the sum of
the bank interest on loans less the ESA interest on
the same loans plus the ESA interest on deposits
less the bank interest on the same deposits.
14.03 FISIM apply only to loans and deposits provided by,

or deposited with, financial institutions. The financial institutions in question need not be resident;
nor need the clients of the financial institution beresident. Imports and exports of FISIM occur. The
financial institution need not offer deposit-taking
facilities as well as making loans. The financial subsidiaries of retailers are examples of financial institutions that make loans without accepting deposits. A money lender who has sufficiently detailed
accounts to be treated as a corporation or a quasicorporation can receive FISIM.

14.04 To consider the impact of the allocation of FISIM

on GDP and national income, as compared withthe situation where FISIM would not be allocated,
five cases have to be considered:(a) loans are provided and deposits are taken byresident financial intermediaries (FIs) for intermediate consumption of market producers(including households as owners of unincorporated enterprises and of dwellings):

the FISIM output of FIs is counterbalanced by
the intermediate consumption of market producers. Therefore, there is no impact on GDP
and national income;

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Financial intermediation services indirectly measured (FISIM)(b) loans are provided and deposits are taken byresident FIs for intermediate consumption of
non-market producers and for final consumption of households:
when FISIM is consumed by non-market producers, as intermediate consumption, the output of such producers is increased by the sameamount since intermediate consumption isa part of the sum of their costs and the counterpart flow is an increase of final consumption expenditure. Therefore, GDP and national
income increase by the amount of allocated
FISIM.
Also, when FISIM is consumed by households
as final consumers, GDP and national income
increase by the amount of allocated FISIM;(c) loans are provided and deposits are taken byresident FIs to non-resident non-FIs (exportsof FISIM):
exports of FISIM are recorded, increasing GDP.
But in the transition from GDP to national
income, this increase is counterbalanced bya decrease of interest receivable less interest payable towards the rest of the world (asFISIM is deducted from interest receivable onloans and added to interest payable on deposits). Therefore, exports of FISIM do not impact
national income;(d) loans are provided and deposits are taken by
non-resident FIs for intermediate consumptionof market producers, including households asowners of unincorporated enterprises and of
dwellings (imports of FISIM):
GDP decreases by the amount of this category ofimports of FISIM, as their counterpart is intermediate consumption. But in the transition
from GDP to national income, this decreaseis counterbalanced by an increase of interest
receivable less payable towards the rest of theworld (as FISIM are added to interest receivable on deposits and deducted from interest
payable on loans). Therefore, this category ofimports does not impact national income;(e) loans are provided and deposits are taken
by non-resident FIs for intermediate consumption of non-market producers and for330

final consumption of households (imports of
FISIM):
imports of FISIM by non-market producers
correspond to intermediate consumption. The
output of such producers is increased by thesame amount since intermediate consumption is a part of the sum of their costs and thecounterpart flow is an increase of final consumption expenditure. When measuring GDP
from the production approach, the increase inintermediate consumption is matched by therise of output, leaving value added unchanged.
When measuring GDP from the expenditureside, the increase in final consumption expenditure is neutralised by the increase of importsof services. But in the transition from GDP tonational income, there is an increase of interest
receivable less payable towards the rest of theworld (as FISIM is added to interest receivable
on deposits and deducted from interest payable
on loans). Therefore, national income increases
by the amount of this category of imports of
FISIM.
Also, when FISIM is imported by households
as final consumers, there is no impact on GDP
and national income increases as there is anincrease of interest receivable less payable
towards the rest of the world.
By convention, FISIM are not calculated forinterbank loans and deposits between resident
FIs, nor between resident FIs and non-resident
FIs. But interbank loans and deposits are used
to calculate reference rates.
14.05 From the five cases presented in paragraph 14.04,

the impact of allocating FISIM on GDP andnational income can be summarised in the following way:(a) GDP increases by the amount of FISIM produced by resident FIs and allocated to sectors
S.13 (general government), S.14 (for households as consumers), S.15 (NPISHs) and S.2(rest of the world);(b) GDP decreases by the amount of imported
FISIM allocated to S.11 (non-financial corporations), S.12 (financial corporations) excluding S.121 (central bank), S.122 (deposit-taking corporations except the central bank) andEuropean system of accounts — ESA 2010

Financial intermediation services indirectly measured (FISIM)

S.125 (other financial intermediaries, except
insurance corporations and pension funds),
and S.14 (for households as owners of dwellings and unincorporated enterprises);(c) national income increases by the amount of
FISIM (produced by resident FIs or imported)
allocated to sectors S.13 (general government),
S.14 (for households as consumers) and S.15
(NPISHs).

Calculation of FISIM output by sectors
S.122 and S.125
14.06 FISIM are produced by FIs: the central bank(S.121); deposit-taking corporations except thecentral bank (S.122); and other financial intermediaries, except insurance corporations and pension
funds (S.125).
FISIM calculations concentrate on subsectors
S.122 and S.125; by convention, FISIM are not calculated for the central bank (see part VI).

Statistical data required
14.07 For each of the subsectors S.122 and S.125, data isneeded in the form of a table of stocks of loans anddeposits categorised by user sectors, and averaged
over a four quarter period, and the corresponding

14

accrued interest. The interest is calculated after reallocation of interest rate subsidies to the recipients.

Reference rates
14.08 In the balance sheets of financial intermediar-ies included in subsectors S.122 and S. 125, loans
and deposits with resident units have to be broken
down to differentiate between loans and deposits:— which are interbank (i.e. within the institutional
units providing FISIM included in subsectors
S.122 and S.125),— which are undertaken with the user institutional
sectors (S.11 — other S.12 subsectors — S.13 —S.14 — S.15) (except with the central banks).

In addition, loans and deposits with the rest of the world(S.2) are broken down into loans and deposits with nonresident financial intermediaries and loans and deposits
with other non-residents.

Internal reference rate
14.09 To obtain the FISIM output of the resident FIs by

resident user institutional sector, the internal reference rate is calculated as the ratio of interest receivable on loans within and between subsectors S.122
and S.125 to stocks of loans within and between
subsectors S.122 and S.125 as follows:interest receivable on loans within and between subsectors S.122 and S.125
stock of loans within and between subsecto
ors S.122 and S.125
In theory, the internal reference rate is the same
when using deposits data rather than loans data.
Due to data inconsistencies, the estimate from thedeposits data will be different from the estimate
from the loans data.

When the deposits data is more reliable, the internal reference rate should be calculated on interbank deposits as the ratio of:interest payable on deposits within and between subsectors S.122 and S.125
stock of deposits within and between subseectors S.122 and S.125
If the loans and deposits data are equally reliable,
the internal reference rate should be calculated oninterbank loans and deposits as the ratio between
interest receivable on loans incurred plus interest
payable on deposits held between FIs, and the stockof loans plus the stock of deposits held by FIs on
behalf of other FIs.

European system of accounts — ESA 2010

In cases where resident FIs, for their resident customers, provide loans and take deposits expressedin foreign currencies, several ‘internal’ reference
rates by currencies or groups of currencies are to
be calculated if this improves the estimates significantly. This would require splitting by currency
or groups of currencies both the calculation of the

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Financial intermediation services indirectly measured (FISIM)‘internal’ reference rates and the loans and deposits from resident FIs towards each resident user
sector.

(a) loans and deposits from non-resident FIs
towards each user sector;

External reference rates
14.10 To determine FISIM imports and exports, thereference rate used is the average interbank rate
weighted by the levels of stocks in the headings‘loans between resident FIs on the one hand, andnon-resident FIs on the other hand’ and ‘deposits between resident FIs on the one hand, and nonresident FIs on the other hand’, which are includedin the balance sheet of the FIs. So the external reference rate is calculated as the ratio of interest on
loans plus interest on deposits between resident FIs
and non-resident FIs, to the stock of loans plus thestock of deposits between resident FIs and non-resident FIs.
Several external reference rates are to be calculated
for different currencies or groups of currencies, if
Stocks(b) loans and deposits from resident FIs towards
non-resident users.

Detailed breakdown of FISIM by
institutional sector
14.11 By convention, no interbank FISIM have to be cal-culated between resident FIs, nor between resident
FIs and non-resident FIs. FISIM are calculated in
respect of non-bank user institutional sectors only.
For each institutional non-FI sector, it is necessary to have data according to the following tableof loans and deposits granted by the resident FIs:

Interest receivable byresident FIs

Loans granted by resident FIs(S.122 and S.125)

StocksInterest payable byresident FIs

Deposits with resident FIs(S.122 and S.125)

The total FISIM by institutional sector is obtained
as the sum of FISIM on loans granted to the institutional sector and of FISIM on deposits of the institutional sector.
FISIM on the loans granted to the institutional sector is estimated as interest receivable on loans less

Stocks(loan stocks multiplied by the internal referencerate).
FISIM on the deposits of the institutional sector isestimated as (deposit stocks multiplied by the internal reference rate) less interest payable on deposits.
Part of the output is exported; on the basis of thebalance sheet of the FIs we observe:Interest receivable byresident FIs

Loans to non-resident
non-banks

Exports of FISIM are estimated using the external interbank reference rate, for loans granted to
non-residents (excluding FIs), as interest receivable less (loan stock multiplied by the external reference rate).
Exports of FISIM on deposits of non-residents(excluding FIs) are estimated as (deposit stocks332

the data is available for each currency or group of
currencies for the following categories, and if thisimproves the estimates significantly:

StocksInterest payable byresident FIs

Deposits with non-resident
non-banks

multiplied by the external reference rate) less interest payable.
Where several reference rates are used for different
currencies or groups of currencies, the loans anddeposits are split both by institutional user sectors
and by the currencies (or groups of currencies) inwhich they are denominated.

European system of accounts — ESA 2010

Financial intermediation services indirectly measured (FISIM)

Breakdown into intermediate and final
consumption of FISIM allocated tohouseholds
14.12 FISIM attributable to households are broken down

into the following categories:(a) intermediate consumption of households intheir capacity as owners of dwellings;(b) intermediate consumption of households intheir capacity as owners of unincorporated
enterprises; and(c) final consumption of households.
The estimation method requires a breakdown ofloans to households (stocks and interest) into thefollowing corresponding categories:(i) dwelling loans;(ii) loans to households as owners of unincorporated enterprises; and(iii) other loans to households.

(2) deposits of households as consumers.
In the absence of statistics on deposits of households as owners of unincorporated enterprises,
stocks of deposits are calculated by one of the following methods:
Method 1
Stocks of deposits are calculated by assumingthat the ratio of stocks of deposits to value added
observed for the smallest size corporations applies
for unincorporated enterprises.
Method 2
Stocks of deposits are calculated by assuming thatthe ratio of stocks of deposits to turnover observed
for the smallest size corporations applies for unincorporated enterprises.
FISIM on the deposits of households must be distributed between FISIM on the deposits of households as owners of unincorporated enterprises andFISIM on the deposits of households as consumers
on the basis of the average stocks of those two categories, for which, in the event of lack of further
information, the same interest rate may be used.

Loans to households as owners of unincorporated
enterprises and dwelling loans are generally shown
separately in the various breakdowns of lending in
financial and monetary statistics. Other loans tohouseholds are obtained as a residual item by subtracting the two previously mentioned categories
of loans from the total. FISIM for loans to households should be distributed amongst the three categories on the basis of information on stocks andinterest for each of the three groups. Dwellingloans are not identical to mortgage loans, as mortgage loans can have other purposes.

Calculation of imports of FISIMHousehold deposits are broken down into:

14.13 Non-resident FIs grant loans to residents and(1) deposits of households as owners of unincorporated enterprises; andAs an alternative, where detailed information onloans and deposits of households is absent, FISIM
to households are allocated to intermediate consumption and final consumption assuming that allloans are attributable to households as producer
or as owners of dwellings and that all deposits are
attributable to households as consumers.

receive deposits from residents. Data according to
the following table is needed for each institutional
sector.

Interest receivable bynon-resident FIs andStockspayable by resident
users
Loans granted by nonresident FIs

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14

Interest payable bynon-resident FIs andStocksreceivable resident
users
Deposits with non-resident
FIs

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Financial intermediation services indirectly measured (FISIM)

Imports of FISIM for each institutional sector are
calculated as follows:

FISIM in volume terms
14.14 Volume estimates of FISIM are calculated using

Imports of FISIM for loans are estimated as theinterest receivable by non-resident FIs less (loanstocks multiplied by the external reference rate).
Imports of FISIM for deposits are estimated as(deposit stocks multiplied by the external referencerate) less the interest payable by non-resident FIs.
It is recommended that several external reference
rates are used by currency or groups of currencies(see paragraph 14.10).

stocks of loans and deposits deflated to base period
prices using a general price index such as theimplicit price deflator for domestic final demand.
The price of FISIM has two components: the firstis the difference between the bank rate of interestand the reference rate (or the reverse in the case of
deposits) which represents the margin earned by
the financial intermediary; the second is the priceindex used to deflate the stocks of loans and deposits to base period prices.
FISIM in volume terms are calculated as follows:

FISIM on the loans granted
FISIM in volume
to the institutional sectorbase period margin
on the loans granted to the =×
effective margin
price index
institutional sector
FISIM on the deposiits of
FISIM in volume
the institutional sectorbase period margin
on the deposits of the =×
effective margin
price
index
institutional sector
Base period margin on loans is equal to the effective interest rate on loans less the reference rate.

In nominal terms, the effective margin is equal toBase period margin on deposits is equal to the reference rate less the effective interest rate on deposits.

tive margin by this expression in the two above for-FISIM in volume
on the loans granted to the =institutional sector
FISIM in volume
on the deposits of the =institutional sector

the ratio of FISIM to stocks, so replacing the effecmulas gives the following:stocks of loanns granted to theinstitutional sector
price index
stocks of deposits of theinstitutional sector
price index

× base period margin

× base period margin

Calculation of FISIM by industry

The output of the central bank

14.15 The allocation of FISIM among user industries is

14.16 The output of the central bank is, by convention,

based on the stocks of loans and deposits of eachindustry and, if this information is not reliable, on
the output of each industry.

to be measured as the sum of costs, i.e. its intermediate consumption, compensation of employees,
consumption of fixed capital and other taxes lesssubsidies on production. FISIM do not have to be
calculated for the central bank.
Commissions and fees for directly measured services invoiced by the central bank both in respect

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European system of accounts — ESA 2010

Financial intermediation services indirectly measured (FISIM)of resident and non-resident units should be allocated to these units.

funds) — in proportion to the respective value
added of each of these subsectors.

Only the part of the total central bank output(sum of costs less commissions and fees) which is
not sold has to be, by convention, allocated to theintermediate consumption of other FIs — subsectors S.122 (deposit-taking corporations except thecentral bank) and S.125 (other financial intermediaries, except insurance corporations and pension

To equilibrate the accounts of subsectors S.122 andS.125, the amount of their respective intermediate
consumption of the service provided by the central
bank is to be counterbalanced by a current transfer(classified under D.759 ‘other miscellaneous current transfers’) received from the central bank, forthe same amount.

European system of accounts — ESA 2010

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335

Contracts, leases and licences

15

CHAPTER 15
Contracts, leases and licences
Introduction
15.01 Contracts are agreements on the terms underwhich goods, services and assets are provided tothe customer. Contracts representing straightforward sales of goods, services or assets determine
the value, and time of recording, of the transaction, which in the case of goods is the change ofownership. The difference between the time of payment and time of recording is reflected in entries
recorded as other accounts receivable or payable in
the financial account.

The distinction between operatingleases, resource leases and financial
leases15.04 Three types of leases of non-financial assets are dis-tinguished (see Table 15.1):(a) operating lease;(b) resource lease;(c) financial lease.

15.02 Leases, licences and permits are contracts which

Each of these leases relates to the use of a nonfinancial asset:

15.03 In this Chapter, the recording of various groups of— in the case of operating leases and resource
leases, there is no change of economic ownership and the legal owner continues to be theeconomic owner. Resource leases are used fornatural resources, such as land and radio spectra. Operating leases are used for all other nonfinancial assets,

determine the classification of payments and theeconomic ownership of assets; some of the contracts are a separate type of non-financial asset.

complex contracts and their underlying flows andstocks are discussed in seven sections:(a) the distinction between operating leases,
resource leases and financial leases;(b) permits to use a natural resource;(c) permits to undertake specific activities;(d) public-private partnerships;(e) service concession contracts;(f) marketable operating leases;(g) entitlements to future goods and services on an
exclusive basis.

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— in the case of financial leases, there is a changeof economic ownership of the asset, and thelegal owner of the asset is not considered to be
the economic owner. Financial leases can apply
to all non-financial assets, including in somesituations natural resources.
15.05 Every entity such as a good and service, a natu-

ral resource, a financial asset or liability has botha legal owner and an economic owner. In manycases the economic and legal owners are the same.
Where they are not, the legal owner has handed
responsibility for the risk involved in using theentity in an economic activity to the economic
owner along with the associated benefits. In returnthe legal owner accepts from the economic owner
payments for another package of risks and benefits.

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Table 15.1 — The recording of three different types of lease
Type of lease

Method of recording for the user

Operating lease (not for natural resources)

The user is not the economic owner of the non-financial asset
The rentals are recorded as payments for a service, intermediate consumption or final
consumption expenditure by general government, households and NPISHs

Resource lease (only for natural resources)

The user is not the economic owner of the natural resource. Payments are rents(property income)Financial lease

The user is the economic owner of a non-financial asset, financed by a loan from thelessor. The payments are for the most part re-payment of principal and payments ofinterest on the loan.
Part of the interest payments may be recorded as FISIM when the lender is a financial
intermediary. This payment is classified as intermediate consumption or final
consumption expenditure by general government, households and NPISHs

Table 15.2 — The recording of three different types of lease, by type of transaction
Type of transaction

Type of use, and asset involvedIntermediate consumption

Operating lease of produced assets, for example machines and intellectual property
rightsFISIM services on a financial lease

Consumption of fixed capital

Only for produced assets, and only for the economic owner

Final consumption expenditure

Operating lease of consumer durables
Purchase of consumer durables (including when financed by a financial lease or hire
purchase)
FISIM services on a financial lease to final consumers

Purchase of non-financial assets
Fixed capital formation

Purchase of produced assets (including when financed by a financial lease)

Acquisition of natural resources

Purchase of natural resources, including the right to use to extinction

Acquisition of other non-produced assets

Purchase of the right to use a natural resource for an extended period, for example afishing quota

Property income payments
Rent

Resource lease, i.e. payment for the use of a natural resource

Interest

Financial lease, i.e. purchase of a non-financial asset financed simultaneously by a loan

Financial transaction: loan

Financial lease, i.e. purchase of a non-financial asset financed simultaneously by a loan

15.06 Definition: the economic owner of entities such asa good and service, a natural resource, a financial
asset or liability is the institutional unit entitled toclaim the benefits associated with the use of theentity in the course of an economic activity by virtue of accepting the associated risks.

15.07 Definition: the legal owner of entities such as agood and service, a natural resource, a financial
asset or liability is the institutional unit entitled inlaw and sustainable under the law to claim the benefits associated with the entities.

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Operating leases
15.08 Definition: an operating lease is a lease whereby thelegal owner is also the economic owner and accepts
the operating risks and receives the economic benefits from the asset by charging for the use of it, ina productive activity.

15.09 One indicator of an operating lease is that it is the

responsibility of the legal owner to provide forrepair and maintenance of the asset.

15.10 Under an operating lease the asset remains on thebalance sheet of the lessor.

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15.11 The payments made for produced assets under anoperating lease are referred to as rentals and arerecorded as payments for a service (see Table 15.2).
The character of an operating lease is best describedin relation to equipment since operating leases areoften for vehicles, cranes, drills, etc. However, anysort of non-financial asset may be subject to an
operating lease. The service provided by the lessor goes beyond the mere provision of the asset.
It includes other elements such as convenienceand security. In the case of equipment, the lessor,
or owner of the equipment, normally maintains
a stock of equipment in good working order thatcan be hired on demand or at short notice. The lessor must normally be a specialist in the operationof the equipment. This is important in the case ofhighly complicated equipment, such as computers,
where the lessee may not have the necessary expertise or facilities to service the equipment properly.
The lessor may also undertake to replace the equipment in the event of a serious or prolonged breakdown. In the case of a building, the lessor is responsible for the structural integrity of the building andfor replacement in the case of damage due to a natural disaster, for example, and is usually responsible for ensuring that elevators, heating and ventilation systems function adequately.

15.12 Operating leasing developed originally to meet theneeds of users who require certain types of equipment only at regular intervals. Many operatingleases are for short periods though the lessee may
renew the lease when the period expires and thesame user may use the same piece of equipment
on several occasions. However, with the evolution of increasingly complicated types of machinery, especially in the electronics field, the servicing and back-up facilities provided by a lessor areimportant factors that may influence a user to leaserather than purchase. Other factors that may persuade users to lease over long periods rather thanpurchase are the consequences for the enterprise’sbalance sheet, cash flow or tax liability.

Financial leases
15.13 Definition: a financial lease is one where the lessor

is the legal owner of an asset but the lessee is the
economic owner as the latter bears the operating
risks and receives the economic benefits from using

European system of accounts — ESA 201015

the asset in a productive activity. In return, the lessor accepts another package of risks and rewards
from the lessee, in the form of repayments associated with a loan. It is frequently the case that thelessor, though the legal owner of the asset, nevertakes physical delivery of the asset but consents to
its delivery directly to the lessee. One indicator ofa financial lease is that it is the responsibility of theeconomic owner to provide any necessary repair
and maintenance of the asset.
15.14 Under a financial lease, the legal owner is shown as

issuing a loan to the lessee, which the lessee uses toacquire the asset. Thereafter the asset is shown on
the balance sheet of the lessee and not the lessor;
the corresponding loan is shown as an asset of thelessor and a liability of the lessee. Payments undera financial lease are treated not as rentals but as thepayment of interest and repayment of principal on
the imputed loan. If the lessor is a financial intermediary, part of the payment is also treated as aservice charge (FISIM).

15.15 Very often the nature of the asset subject to a finan-cial lease may be quite distinct from the assets usedby the lessor in his productive activity, for example
a commercial airliner legally owned by a bank but
leased to an airline. It makes no economic sense
to record either the aircraft or its consumption of
fixed capital in the accounts of the bank or to omit
them from the accounts of the airline. The deviceof a financial lease avoids this undesirable formof recording the ownership of the aircraft and thedecline in its value while keeping the net worth ofboth parties correct throughout the length of thelease.

15.16 It is common for a financial lease period to be forthe whole of the economic life of the asset. When
this occurs, the value of the imputed loan corresponds to the present value of the payments to bemade under the lease agreement. This value will
cover the cost of the asset and usually also include
a fee charged by the lessor, which is accrued overthe period of the lease. Payments made regularly
to the lessor can be recorded as four components:
interest payments, repayments of principal on the
imputed loan, the lessor fee, and FISIM (if the lessor is a financial intermediary). If the terms of theagreement do not specify how the first three elements are identified, the repayment of principal
must correspond to the decline in the value of the

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asset (the consumption of fixed capital), the interest payable must correspond to the return to capital on the asset and the service charge to the difference between the total amount payable and those
two elements.
15.17 A financial lease may also exist when the lease

period is less than the economic life of the asset. In
this case, the value of the imputed loan again covers
the cost of the asset and the fee charged by the lessor plus the value of the service charges to be madeunder the terms of the lease. Payments made regularly to the lessor shall be recorded as interest payments and repayments of principal on the imputedloan, the lessor fee, and for FISIM (if the lessor isa financial intermediary). It may also include prepayments funding the repurchase of the asset atthe end of the lease period. At the end of the lease,
the asset may transfer to the balance sheet of thelessee, depending upon the contractual arrangements. The value of the residual amounts outstanding on the loan will be equal to the expected market value of the asset at the end of the lease period
as determined at the start of the lease. At this point,
the asset could be returned to the lessor, an option
invoked for the lessee to legally acquire the asset, ora new lease arrangement set up.
A financial lease requires the lessee to bear therisks and rewards associated with using the asset.
Therefore, any holding gains and losses on the
expected value of the asset at the end of the lease
period shall be borne by the lessee. In this case,where the asset is legally acquired by the lessee atthe end of the lease period, then the cash payments
are recorded as the repayment of the loan since theasset is already on the balance sheet of the lessee.
If the asset reverts to the lessor, then a transaction
representing the purchase of the asset is recordedat the current market value of the asset. The proceeds are used to repay the amount outstanding on
the loan and any difference between those amounts
is recorded as a capital transfer. The payments overthe lease period will often include pre-payments of
the acquisition of the asset so that the transaction
occurs for no cash consideration, since the loan isfully repaid at this time.
If a further lease period is negotiated, then the newcontract needs to be analysed to see whether it is340

a continuation of a financial lease or an operatinglease.
15.18 Although a financial lease will typically be for sev-

eral years, the duration of the lease does not determine whether the lease is to be regarded as an
operating or financial lease. In some cases the asset
may be leased for a short period, perhaps only one
year at a time, but the contract includes the condition that the lessee takes all responsibility forthe asset, including all maintenance and cover for
exceptional damage. Even though the lease period
is short, and even though the lessor may not be afinancial institution, if the lessee accepts the majority of the risks associated with the use of the asset
in production as well as the rewards, the lease isrecorded as a financial and not an operating lease.
However, in practice, it is difficult to deviate fromthe recording in the business accounts, which follows international business accounting standards,
where financial leases are limited to leases covering the major part of the economic life time of theasset.

15.19 Any corporation that specialises in financial leas-ing, even if called a property company or aircraft
leasing company, shall be classified as a financial intermediary offering loans to the units leasing assets from them. If the lessor is not a financial intermediary, the payments associated with the
imputed loan are split into repayments of principal
and interest only; if the lessor is a financial corporation, a further component representing the service charge (FISIM) is included.

15.20 Hire purchase is a type of financial leasing.
	
Definition: a hire purchase arrangement exists

when a durable good is sold to a purchaser in
return for agreed future payments. The buyer takes
possession of the good immediately, though legally
it remains the property of the lessor as collateral/guarantee until all agreed payments have been
made by the lessee.

15.21 Hire purchase is usually restricted to consumer

durables, and most purchasers are in the households sector. Financiers of hire purchase contracts
typically are separate institutional units operating
in close cooperation with sellers of durable goods

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15.22 In the case of hire purchase, the durable good isrecorded as if acquired by the purchaser on the day
they take possession of the asset at the market pricethat would have been realised in an equivalenttransaction. The purchaser receives an imputed
loan of equivalent value. The payments from purchaser to financier are recorded as repayments ofprincipal and interest payments, using the same
method as the one applied for financial leasing.
The productive activity carried out by financiers ofhire purchase contracts is financial intermediation.
As they do not usually charge directly for their services, their entire output are FISIM, calculated as
property income receivable less interest payable.
As in the case of conventional financial leasing,
the amount of interest payable may be difficult toobserve and must therefore be estimated.

Resource leases
15.23 Definition: a resource lease is one where the ownerof a natural resource makes it available to a lessee
in return for a payment recorded as rent.

15.24 In a resource lease, the resource asset remains on

the balance sheet of the lessor even though it isused by the lessee. Any decline in value of a natural resource is recorded as an economic disappearance of non-produced assets (under K.21, ‘depletion of natural resources’). It is not recorded as atransaction similar to consumption of fixed capital, as there is no fixed capital to consume. Payables
due under a resource lease, and only such payables,
are recorded as rent.

15.25 The classic case of an asset subject to a resource

lease is land. However, the use of other natural
resources is similarly recorded in this way, e.g.
timber, fish, water, mineral resources and radio
spectra.

15

Permits to use a natural resource
15.26 Permits to use a natural resource can be issued bygovernment, but can also be issued by private owners, like farmers and businesses.

15.27 When permits are issued for using a natural

resource, three recording options can be distinguished (see Table 15.3):(a) the owner can extend or withhold permission
to continued use of the asset from one lease
period to the next;(b) the owner may allow the resource asset to be
used for an extended period of time in such a
way that in effect the user controls the use of
the resource during this time with little, if any,
intervention from the owner;(c) the owner permits the resource asset to be used
to extinction.
The first option is recorded as a resource lease; thisshould be recorded as rent.
The second option may not only lead to a recording of rent but also to the creation of an asset for
the user, distinct from the resource itself but wherethe value of the resource asset and the asset allowing use of it are linked.
This asset (category AN.222) is only recognised if
its value, the benefits to the holder in excess of thevalue accruing to the issues, is realisable throughtransferring the asset. Such permits are firstobserved through economic appearance of assets(category K.1, see point (g) of paragraph 6.06).
If the value of the asset is not realised it will tend
towards zero as the lease period ends.
The third option results in the sale (or possibly an
expropriation) of the natural resource itself.

Table 15.3 — The recording of three different types of permits for the use of natural resourcesType of use

Method of recording

Permission for temporary use, possibly for a long time

Resource lease: rent (property income)Control by user during an extended period, risks and rewards
borne by the user, transferability of permit at a realisable value

Rent and creation of new asset for the right to use the natural
resource

Use to extinction; permanent use (all risks and rewards borne by
the user)

Sale of natural resource

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15.28 In order to distinguish between rent, creation ofa new asset and sale of the natural resource, themajor criterion is the transfer of risks and rewards.
The natural resource is sold if all the risks andrewards have been transferred. A new asset is created if the transfer of risks and rewards results ina separate and transferable permit with a realisable value. Using other criteria, like pre-agreementon payments, up-front payment, length of the permit and treatment in the business accounts, can bemisleading as they do not necessarily reflect thetransfer of risks and rewards.

15.29 Natural resources, like land and mineral resources,

may be acquired by non-residents. However, saleof natural resources is not to be recorded as being
sold to a non-resident unit. In such cases a notional
resident unit is created that holds the title to thenatural resource; the non-resident unit then owns
the equity of the notional resident unit. A similar
recording applies in the case of the acquisition by
residents of natural resources in the rest of world.

15.30 The revenues of the government from a specific

type of natural resources (e.g. revenues from oiland natural gas) can consist of a wide range oftransactions. Examples are:(a) rent in case of resource leases;(b) disposition of non-produced assets, e.g. sales ofnatural resources or sales of licences for exploiting during an extended period of time;(c) dividend from a public corporation exploiting
natural resources;(d) corporation tax paid by corporations exploiting
natural resources.

Permits to undertake specific activities
15.31 In addition to licences and leases to use an asset,

permission may be granted to engage in a particular activity, quite independently of any assets
involved in the activity. The permits are notdependent on qualifying criteria (such as passing
an examination to qualify for permission to drive acar) but are designed to limit the number of individual units entitled to engage in the activity. Suchpermits may be issued by government or by private
institutional units and different treatments apply
to the two cases.

Table 15.4 — The recording of the use and purchase of non-financial assets, by type of transaction and flow
Type of transaction

Type of use/purchase and type of asset and type of payment

Intermediate consumption

Operating lease of produced assets, e.g. machines and intellectual property rights
Regular payments by corporations for the delivery of water
FISIM services related to the provision of a financial lease

Consumption of fixed capital

Only for produced assets, and for the economic owner

Final consumption expenditure

Operating lease of consumer durables
Purchase of consumer durables, including when financed by a financial lease, or through a hire
purchase agreement

Purchase of non-financial assets

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Fixed capital formation

Purchase of produced assets (including when financed via a financial lease)

Acquisition of natural resources

Purchase of a natural resource including the right to use to extinction
Purchase of the right to use a natural resource for an extended period e.g. a fishing quota

Acquisition of other nonproduced assets

Transferable time-share arrangements
Purchase of a contract transferable to a third party
Contracts for future production, for example contracts with footballers and writers

Payment as property income

Resource lease, i.e. payment for short-term use of natural resource

Rent

Regular payments for the right to extract water
Financial lease, i.e. purchase of a non-financial asset financed simultaneously by a loan

Income transfer

Permits issued by government to undertake a specific activity not dependent on qualifying
criteria, or with a disproportionate charge compared to the costs of administering the permit
schemeEmission permits issued by the government to control total emissions

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Contracts, leases and licences

Type of transaction

15

Type of use/purchase and type of asset and type of payment

Other taxes on production
Financial transaction: loan

Financial lease, i.e. purchase of a non-financial asset financed simultaneously by a loan

Exhaustion of natural resources by the owner
Other change in volume of assets Illegal logging, fishing or hunting (uncompensated seizure of cultivated assets or natural
resources)
Change in the price of assets

Expiry of contracts, licences and permits recorded as assets

15.32 When governments restrict the number of cars

entitled to operate as taxis or limit the number ofcasinos by issuing permits, for example, they are ineffect creating monopoly profits for the approved
operators and recovering some of the profits as thefee. Such fees are recorded as other taxes. This principle applies to all cases where government issues
permits to limit the number of units operating ina particular field where the limit is fixed arbitrarily
and is not dependent only on qualifying criteria.

15.33 In principle, if the permit is valid for several years,

the payment shall be recorded on an accrual basiswith another account receivable or payable entry
for the amount of the permit fee covering futureyears.

15.34 The incentive to acquire such a permit is that thepermit holder believes that he will thereby acquire
the right to make monopoly profits through the
future income being greater than the payments
to acquire the rights to them. The benefit to theholder in excess of the value accruing to the issuer
is treated as an asset if the permit holder can realise this by transferring the asset. The type of asset isdescribed as a permit to undertake specific activities (AN.223).

15.35 The permit to undertake specific activities as an

asset first appears in the other changes in the volume of assets account. Changes in value, both up
and down, are recorded in the revaluation account.

15.36 The value of the permit as an asset is determined by

the value at which it can be sold or, if no such figure is available, is estimated as the present value ofthe future stream of monopoly profits. If the permit is on-sold, the new owner assumes the right toreceive a refund from the government if the permit
is cancelled as well as the right to earn the monopoly profits.

European system of accounts — ESA 201015.37 A permit issued by government to undertake a spe-cific activity is treated as an asset only when all thefollowing conditions are satisfied:(a) the activity concerned does not utilise an asset
belonging to government; if it does, the permission to use the asset is treated as an operatinglease, a financial lease, a resource lease or possibly the acquisition of an asset representing permission to use the asset at the discretion of thelicensee over an extended period;(b) the permit is not issued subject to a qualifying criterion; such permits are treated as either
taxes or payments for services;(c) the number of permits is limited and so allows
the holder to make monopoly profits when
undertaking the activity concerned;(d) the permit holder must be able to sell the permit to a third party.
If any of the conditions is not satisfied, the payments are treated as taxes or as payments forservices.
15.38 For units other than government, it is much lesscommon to be able to limit the participation ina given activity. One instance is when it is either
compulsory or desirable to belong to a professional
association and there is a strict limit on numbers
participating. An example is where an owner ofproperty limits the number of units operating on
his property, e.g. a hotel with a policy of only allowing one taxi firm to pick up guests. In these sorts ofcases, the permits are treated as payments for services. In principle the payment shall be recorded onan accrual basis throughout the period for which
the permit is valid. There is no reason in principle why such permits could not be treated as assets
if they were marketable though this may not be acommon situation.

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15.39 A permit issued by a unit other than government

to undertake a specific activity is treated as an asset
only when all the following conditions are satisfied:(a) the activity concerned does not utilise an asset
belonging to the permit issuer; if it does, thepermission to use the asset is treated as an operating lease, a financial lease or a resource lease;(b) the number of permits is limited and so allows
the holder to make monopoly profits when
undertaking the activity concerned;(c) the permit holder must be legally and practically able to sell the permit to a third party.
If any of the conditions are not satisfied, the payments are recorded as payments for a service.

15.40 Governments issue emission permits to control

total emissions. Such permits do not involve theuse of a natural asset, as no value is placed on theatmosphere, so it is not an economic asset and thepermit fees are therefore classified as taxes. The
permits are tradable and there will be an active
market in them. The permits therefore constituteassets and shall be valued at the market price forwhich they can be sold.

Public-private partnerships (PPPS)
15.41 Public-private partnerships (PPPs) are long-term

contracts between two units, whereby one unit
acquires or builds an asset or set of assets, operates it for a period and then hands the asset over
to a second unit. Such arrangements are usually
between a private enterprise and government butother combinations are possible, with a public corporation as either party or a private NPI as the second party.
Governments engage in PPPs for a variety of reasons, such as the hope that private managements
will lead to more efficient production and thataccess to a broader range of financial sources canbe obtained and the wish to reduce governmentdebt.
In the contract period the PPP contractor has thelegal ownership. Once the contract period is over,the government has both economic and legal
ownership.

344

More details about the treatment of PPPs are provided in Chapter 20 (government accounts).

Service concession contracts
15.42 Service concession contracts provide a company

the exclusive right to provide certain services. For
example, in case of a public service concession, aprivate company enters into an agreement with thegovernment to have the exclusive right to operate,
maintain and carry out investment in a public utility (such as a water supply system or a toll highway) for a given number of years. Service concession contracts shall not be recorded as assets where
they are not transferable or no value can be realised
through transferring them.

Marketable operating leases (AN.221)
15.43 Marketable operating leases are third-party prop-

erty rights relating to non-financial assets otherthan natural resources. The lease should confer
economic benefits to the holder in excess of thefees payable and the holder should be able to realise
those benefits through transferring them. The valueof the lease is the benefit to the holder in excess ofthe value accruing to the issuer. Marketing operating leases can include all kinds of rental and operating lease contracts. For example, a tenant can
sublet an apartment to a third party.

Entitlements to future goods and services
on an exclusive basis (AN.224)
15.44 Contracts for future production may also give riseto third-party property rights assets. The value ofsuch contracts is the benefit to the holder in excessof the value accruing to the issuer. Examples are:(a) exclusive rights to have a person work forthem (e.g. football players) or to publish literary works or musical performances. The valueof such rights is the profit that can be made ontransferring the rights above the costs of cancelling the existing contract;(b) time share arrangements. Only part of the timeshare arrangements has to be regarded as theacquisition of an asset:

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Contracts, leases and licences(1) if the owner has a nominated space, available inperpetuity, is eligible to act as part of the management committee for the scheme, or can sell orbequeath the allocation at will, then the arrangement is most likely to be an asset of the same typeas a house;(2) if the owner has a fixed agreement to have someform of accommodation available at a given
period for a fixed length of time, it is likely that thisEuropean system of accounts — ESA 201015

represents a pre-paid lease, i.e. pre-paid final consumption expenditure by households;(3) this pre-paid lease could be sublet occasionally or
sold for the rest of the period of the lease as a transferable operating lease;(4) a participant in a points-based scheme may havean account that is receivable only by way of anasset.

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Insurance

16

CHAPTER 16
Insurance
Introduction
16.01 Insurance is an activity whereby institutional units

or groups of units protect themselves against thenegative financial consequences of specific uncertain events. Two types of insurance can be distinguished: social insurance and other insurance.

16.02 Social insurance is a scheme that covers social

risks and needs. It is often organised collectively
for a group; participation in the scheme is generally obligatory or encouraged by a third party.
Social insurance comprises: social security schemes
imposed, controlled and financed by the government; and employment-related schemes provided
or operated by employers on behalf of their employees. Social insurance is described in Chapter 17.

16.03 Insurance other than social insurance covers

against events such as death, survival in life, fire,
natural disasters, flooding, car accidents, etc.
Insuring against death and survival in life is known
as life insurance, and insuring against all otherevents is known as non-life insurance.

16.04 This Chapter is concerned with life and non-life

insurance. It describes how insurance activities arerecorded in the accounts.

16.05 The rights and obligations of insurance are definedby an insurance policy. The policy is an agreement
between an insurer and another institutional unit,
called the policyholder. Under the agreement, thepolicyholder makes a payment called a premium
to the insurer and when a specified event occurs,
the insurer makes a payment called a claim to thepolicyholder or a nominated person. In this way,
the policyholder protects against certain forms of
risk; by pooling the risks the insurer aims to receive
more from the receipt of premiums than it has topay out as claims.

European system of accounts — ESA 201016.06 The insurance policy defines the roles of the parties

involved, which are as follows:(a) the insurer providing cover;(b) the policyholder
premiums;

responsibleforpaying(c) the beneficiary who receives compensation;(d) the insured person or object that is subject tothe risk.
In practice, the policyholder, the beneficiary andthe insured can be the same person. The policy lists
those roles and specifies the person corresponding
to each role.
16.07 The most common form of insurance is called

direct insurance, where institutional units insure
themselves with an insurer against the financial
consequences of specific risks. But direct insurers
may in turn insure themselves, by insuring part ofthe directly insured risks with other insurers. Thisis called reinsurance, and the providers of this arecalled reinsurers.

Direct insurance
16.08 There are two types of direct insurance: life insur-

ance and non-life insurance.

16.09 Definition: life insurance is an activity whereby apolicyholder makes regular payments to an insurer
in return for which the insurer guarantees to provide the beneficiary with an agreed sum, or anannuity, at a given date or earlier if the insured person dies beforehand. A life policy can grant benefits arising from a series of risks. For example,
an old-age life insurance policy can grant a benefit when the insured becomes 65 years of age and,after the death of the insured, can grant a benefit to
the surviving spouse until his death.

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16.10 Life insurance also covers supplementary insur-

ance against personal injury including incapacity
for employment, insurance against death resulting
from an accident and insurance against disability
resulting from an accident or sickness.

16.11 Some classes of life insurance provide compensa-

tion in case the insured event occurs, e.g. insurance
that is linked to a mortgage loan and only pays abenefit to redeem the mortgage if the income
earner dies before maturity of the corresponding loan. Most of such classes contain a significant savings element combined with an element ofrisk coverage. Given the large savings element, life
insurance is seen as a form of saving, and the corresponding transactions are recorded in the financial account.

16.12 Definition: non-life insurance is an activity

whereby a policyholder makes regular payments toan insurer in return for which the insurer guarantees to provide the beneficiary with an agreed sumon the occurrence of an event other than the deathof a person. Examples of such events are: accidents,
sickness, fire, etc. Accident insurance that covers
life related risks is classified as non-life insurance
in most European countries.

16.13 A life policy that provides a benefit in the case ofdeath within a given period but in no other circumstances, usually called term insurance, is regardedin the national accounts as non-life insurance
because a claim is payable only if a specified contingency occurs and not otherwise. In practice,because of the way in which insurance units keep
their accounts, it may not always be possible to separate term insurance from life insurance. In suchcircumstances, term insurance can be treated in thesame way as life insurance.

16.14 Life and non-life insurance both involve spread-ing risk. Insurers usually receive small regular payments of premiums from policyholders and paylarger sums to claimants when the events coveredby the policy occur. For non-life insurance, the risks
are spread over the whole population that takes out
the insurance policies. An insurer determines thepremiums charged for providing an insurance service in a year according to the amount of claims it
expects to pay in the same year. Typically, the number of claimants is much smaller than the number of policyholders. For an individual non-life348

policyholder there is no relationship between thepremiums paid and the claims received, even in
the long run, but the insurer establishes such a
relationship for every class of non-life insurance
on a yearly basis. For life insurance, a relationshipbetween premiums and claims over time is important both to the policyholders and to the insurer.
For someone taking out a life policy, the benefits
to be received are expected to be at least as great
as the premiums paid up until the benefit is due
and is a form of saving. The insurer must combine this aspect of a policy with the actuarial calculations about the insured population concerning life expectancy, including the risk of fatal accidents, when determining the relationship between
the levels of premiums and benefits. Further, in
the interval between the receipt of premiums andthe payment of benefits, the insurer earns income
from investing a part of the premiums received.
This income also affects the levels of premiums andbenefits set by the insurers.
16.15 There are significant differences between life andnon-life insurance that lead to different types ofentries in the accounts. Non-life insurance consistsof redistribution in the current period between
all policyholders and a few claimants. Life insurance mainly redistributes premiums paid over a
period of time as benefits paid later to the same
policyholder.

Reinsurance
16.16 Definition: an insurer may protect against an unex-

pectedly large number of claims, or exceptionally heavy claims, by taking out a reinsurance policy with a reinsurer. Reinsurance corporations
are concentrated in a limited number of financial
centres, and so many of the reinsurance flows aretransactions with the rest of the world. It is common for reinsurers to take out reinsurance policies
with other reinsurers to spread their risks further.
This extended reinsurance is called retrocession.

16.17 Limitation of risks can also be achieved when agroup of insurers called underwriters jointly accept
the risks associated with a single policy. Each individual insurer is only responsible for its own shareof the policy, receives the corresponding share of
the premium and pays the same share in the case ofa claim or benefit paid. Management of the policy

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Insurance

is either by the lead-manager or by the insurance
broker. Lloyds of London is an example of an
insurance market where direct and indirect risks
are spread over a large number of underwriters.
16.18 Various options exist with the direct insurer toorganise indirect coverage against the risks theinsurer has accepted. The following classes of reinsurance are distinguished:(a) proportionate reinsurance where the policyholder cedes to a reinsurer an agreed percentage of all risks, or of all risks of a specified portfolio of direct insurance policies. Thismeans that the direct insurer transfers the corresponding percentage of the premiums to thereinsurer who then meets the same proportionof the claims when it incurs. In such cases, any
reinsurance commission paid by the reinsurer
to the policyholder is treated as a reduction inreinsurance premiums written;(b) non-proportionate reinsurance known as
excess of loss reinsurance, where the reinsurer
is only at risk if the amount of the direct claim
exceeds an agreed threshold. If there are no or
few direct claims above the threshold, the reinsurer may pass a share of its profits to the direct
insurer. Profit sharing is treated in the accounts
as current transfer from the reinsurer to thedirect insurer, in a similar way to the paymentof claims.

The units involved
16.19 The institutional units involved in direct insur-

ance and reinsurance are pre-eminently insurers.
It is possible for another type of enterprise to carryout insurance as a non-principal activity, but usually the legal regulations surrounding the conductof insurance mean that a separate set of accounts
covering all aspects of the insurance activity must
be kept, and so a separate institutional unit, classified to the insurance corporations (S.128) andpension funds (S.129) subsectors, is identifiable.
Government may conduct other insurance activities, but again it is likely that a separate unit can be
identified. Having noted that other sectors may be
involved, in what follows it is assumed that insurers, either resident or non-resident, carry out all
insurance.

European system of accounts — ESA 201016

16.20 Units that are primarily engaged in activities

closely related to insurance, but do not themselves
incur risks, are insurance auxiliaries. Such units areclassified within the financial auxiliaries subsector(S.126) and include for example the following:(a) insurance brokers;(b) private non-profit institutions serving insurance enterprises and pension funds;(c) units whose main activity is to act as supervisory authorities of insurance enterprises, pension funds and of insurance markets.

Output of direct insurance
16.21 The insurance company accepts a premium froma client and holds it until a claim is made or theperiod of the insurance expires. In the meantime,the insurance company invests the premium andthe investment income is an extra source of funds
from which to meet any claim due. The insurancecompany sets the level of the premiums to be suchthat the sum of the premiums plus the investment
income earned on them less the expected claim
will leave a margin that the insurance company
can retain; this margin represents the output of theinsurance company. The output of the insurance
industry is measured reflecting the premium setting policies of the insurers. To that end, four separate items need to be defined. These are(a) premiums earned;(b) premium supplements;(c) claims incurred, or benefits due;(d) insurance technical reserves.
Each of these is discussed in turn before discussing the measurement of output for direct non-life
insurance, direct life insurance and reinsurance
respectively.

Premiums earned
16.22 Definition: premiums earned are the proportionof premiums written that have been earned during
the accounting period. Premiums written cover
the period contracted in the insurance policy. The

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difference between premiums written and premiums earned are amounts set aside, and included in
the reserves for unearned premium. Such amounts
are treated as assets of the policyholders. The concept of premium earned in insurance accounting is
consistent with the accruals recording principle ofnational accounts.
16.23 The insurance premium is either a regular pre-mium payable monthly or yearly, or a single premium paid usually at the start of the insured
period. Single premiums are usual for the insurance of risks associated with large events, such as
the construction of large buildings or equipments
and the road, train, sea- or air transport of goods.

16.24 The premiums earned in the year in question takethe following form:
premiums written

plus	the reserves for unearned premiums at
the beginning of the accounting year
less	the reserves for unearned premiums at
the end of the accounting year.
Or presented differently, it takes the form of:premiums written
less	
the change (less increase or plus
decrease) in the reserves for premiums
unearned.
16.25 The reserves for unearned premiums and otherreserves are included within non-life insurance
technical reserves (AF.61) and life insurance technical reserves (AF.62). A description of insurance
technical reserves is given in paragraphs 16.43 to
16.45.

16.26 Policyholders often have to pay a dedicated tax on

payment of the insurance premium. Life insurance
premiums are excluded from this insurance tax
in many countries. As the insurers have to transfer this tax to government, the relevant amounts
do not enter the annual accounts of insurers. Onlya relatively small amount — the residual amountconcerning the year that still has to be transferred
to government — could enter the insurers’ balance
sheet under trade credit. The tax payments are notrecorded as such in the accounts of insurers. Sucha tax is treated as a tax on products in national

350

accounts. Policyholders are assumed to pay suchamounts directly into the tax authorities’ accounts.

Premium supplements
16.27 Definition: premiums supplements are the income

earned from the investment of the insurance technical reserves of the insurers, which represent liabilities towards the policyholders.

16.28 For life insurance in particular, but also to a lesser

extent for non-life insurance, the total amount ofbenefits due or claims incurred in a given period
often exceeds the premiums earned. Premiums areusually paid regularly, often at the start of an insurance period, whereas claims are incurred later, andin the case of life insurance benefits are often due
many years later. In the time between the premium
being paid and the claim being payable, the sum
involved is at the disposal of the insurer to invest
and earn income from it. Such amounts are called
insurance technical reserves. The income earnedon the reserves allows the insurers to charge lower
premiums than would be the case otherwise. The
measure of the service provided takes account of
the size of this income as well as the relative size ofpremiums and claims.

16.29 For non-life insurance, even though a premium

may be payable at the start of a period of cover, thepremiums are only earned on a continuous basis
as the period passes. At any point before the endof the cover, the insurer holds an amount due tothe policyholder relating to services and possible claims to be provided in the future. This is aform of credit extended by the policyholder tothe insurer described as unearned premiums.
Similarly, although claims become due for payment by the insurer when the contingency specified in the policy happens, they may not be paid
until some time later, often because of negotiation about the amounts due. This is another similar
form of credit, described as reserves against claims
outstanding.

16.30 Similar reserves exist for life insurance but in

addition there are two other elements of insurance reserves, actuarial reserves for life insurance
and reserves for with-profit insurance. They represent amounts set aside for payments of benefits in future. The reserves are generally invested

European system of accounts — ESA 2010

Insurancein financial assets and the income is in the formof investment income. They may be used to fundeconomic activity such as real estate, to generate a
net operating surplus either in a separate establishment or as a secondary activity.
16.31 All investment income attributed to policyholders

is shown as payable to the policyholders in the primary distribution of income account. For non-life
insurance, the same amount is then repaid to theinsurer as premium supplements in the secondary distribution of income account. For life insurance, the premiums and premium supplements areshown in the financial account.

Adjusted claims incurred and benefits due
16.32 Definition: claims incurred and benefits due are thefinancial obligations of the insurers with respect tothe beneficiary concerning the risks that the event
realises in the period in question as defined by thepolicy.

16.33 The concept of claims incurred in non-life insur-

ance and benefits due in life insurance is consistent
with the accruals basis of measurement in national
accounts.

Non-life insurance adjusted claims incurred
16.34 Claims can be distinguished between claims paid

and claims incurred. Claims incurred refer to theamounts due from insured risks that have beenrealised in the year. Whether the policyholder hasreported the corresponding event is irrelevant. Partof the claims will be paid in the next year or evenlater. On the other hand claims that are the effectof events that have occurred in previous years arepaid in the current year. The unpaid part of theclaims incurred is added to the reserve for claims
outstanding.

16.35 Non-life insurance claims incurred in the calendar

year take the following form:
claims paidless	the reserve for claims outstanding at the
beginning of the accounting year
plus	the reserve for claims outstanding at theend of the accounting year.

European system of accounts — ESA 201016

Or presented differently, they take the form of:claims paid
plus	
the change (plus increase or lessdecrease) in the reserves for claims
outstanding.
16.36 Any claims-related costs undertaken by the insurer,

either external or internal, are not included inclaims incurred. Such costs may consist of: costs ofacquisition, policy management, investment management, and claims handling. Some costs might
not be separately identifiable in the accounting
source data. The external costs include expenditure
for works that the insurer commissioned to anotherunit, thus recorded in the accounts as intermediate
consumption. The internal costs include expenditure for works performed by the insurers’ own
employees, thus recorded in the accounts as labourcosts.

16.37 In the event of catastrophes, the losses incurred

shall not affect the value of claims. The catastrophic
losses shall be recorded as a capital transfer fromthe insurer to the policyholder. The advantage ofsuch recording is that the disposable income of thepolicyholder does not increase counter-intuitively
as would be the case if the claims were recorded
otherwise (see paragraphs 16.92 and 16.93).

16.38 The production of insurance services is a con-tinuous process, not just when the risk occurs.
However, the level of claims incurred by policyholders of non-life insurance varies from year toyear and there may be events that cause a particularly high level of claims. Neither the volume nor
the price of insurance services is directly affectedby the volatility of claims. Insurers set the level ofpremiums on the basis of their own estimation of
the likelihood of claims incurring. For this reason,
the formula used for the calculation of output uses
adjusted claims incurred, which is an estimate corrected for volatility in claims.

16.39 The estimate for adjusted claims incurred may bederived statistically in an expectations approachbased on previous experience of the level of claims.
In considering the past history of claims payable,
however, allowance must be made for the shareof such claims that is met under the terms of thedirect insurer’s reinsurance policy. For example,

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Insurance

when the direct insurer has an excess of loss reinsurance, known as non-proportionate reinsurance, it sets the level of premiums to cover losses
up to the maximum loss covered by its reinsurance
policy plus the reinsurance premium it must pay.
Under a proportionate reinsurance policy, it sets
its premiums to cover the proportion of claims it
has to pay plus the reinsurance premium.
16.40 An alternative method of adjusting claims incurredfor volatility is to use accounting data on change
in own funds and in equalisation reserves. The
equalisation reserves are amounts that insurers
set aside in compliance with legal or administrative requirements to cover irregular or unforeseeable large claims in the future. Such amounts
are included within non-life insurance technicalreserves (AF.61).

Life insurance benefits due
16.41 Life insurance benefits due are the amounts pay-able under the policy in the accounting period inquestion. No adjustment for unexpected volatility
is necessary in the case of life insurance.

16.42 Any benefits-related costs shall not be included

within the benefits due, but recorded as intermediate consumption and labour costs.

Insurance technical reserves
16.43 Definition: insurance technical reserves are theamounts that insurers set aside. The reserves areassets to the policyholders and liabilities to theinsurers. The technical reserves can be distinguished between non-life and life insurance andannuities.

16.44 In accordance with Council Directive 91/674/

EEC1, seven types of technical reserves are distinguished. In each case the amount gross of reinsurance, the amount ceded to reinsurers and the net
amount are shown in the balance sheet. The sevencategories are as follows:(a) reserve for unearned premiums — the difference between written premiums and earned
premiums. This reserve can, depending on the1352

Council Directive 91/674/EEC of 19 December 1991 on the annual accounts andconsolidated accounts of insurance undertakings (OJ L 374, 31.12.1991, p. 7).

national legislation, include a separate element
relating to unexpired risks;(b) reserves for life insurance — such reserves
reflect the present value of the expected future
benefits (including but not confined to declared
bonuses) less the present value of future premiums. Supervisory authorities may set a ceilingto the discount rate used in the calculation ofpresent value;(c) reserve for claims outstanding — the difference
between incurred and paid claims. It equals thetotal estimated ultimate cost to an insurance
undertaking of settling all claims arising fromevents which have occurred up to the end of
the financial year, whether reported or not, lessamounts already paid in respect of such claims;(d) reserve for bonuses and rebates (unless shownwithin the category referred to in point (b) —comprising the amounts intended for policyholders or contract beneficiaries by way ofbonuses and rebates, to the extent that suchamounts have not already been credited to policyholders or contract beneficiaries;(e) equalisation reserve comprises amounts set
aside in compliance with legal or administrative requirements to equalise fluctuations inloss ratios in future years or to provide for special risks. National authorities may not permit
this reserve;(f) other technical reserves comprise, inter alia,
the reserve for unexpired risks if not included
within the category referred to in point (a). This
item might also include ageing reserves taking
into account the effect of ageing on the amountof claims, e.g. with health insurance;(g) technical reserves for life insurance policies
where the investment risk is borne by the policyholders. This item shall comprise technicalreserves constituted to cover liabilities to policyholders in the context of life insurance policies where the value of the return is determinedby reference to investments for which the policyholder bears the risk, or by reference to anindex, as is the case with index-linked life insurance. This item shall also comprise the technical reserves concerning tontines.

European system of accounts — ESA 2010

Insurance

16.45 When deriving the changes in the insurance tech-nical reserves (F.61 and F.62) used in the calculations of output, realised and unrealised holding
gains and losses are not included.

Defining insurance output
16.46 Insurers provide an insurance service for their cli-ents, but do not charge explicitly for their service.

16.47 The insurer collects premiums and pays claims or

benefits on the occurrence of an insured event. The
claims or benefits compensate the beneficiary forthe financial consequences of the insured event.

16.48 The insurance technical reserves are funds that

insurers use to invest and to earn income. Suchfunds and the corresponding investment income(premium supplements) are a liability towards thebeneficiaries.

16.49 This section describes the information needed to

calculate the output for direct insurance and reinsurance services.

16

intermediate costs, labour and capital costs) plus
an allowance for ‘normal profit’.

Life insurance
16.52 The output of direct life insurance is calculated sep-arately as:

premiums earned
plus

premium supplementsminus

benefits due

minus	increases (plus decreases) in technicalreserves and with-profits insurance.
16.53 If adequate data are not available for the calcula-tion of life insurance according to this formula, an
approach based on the sum of costs, similar to that
described for non-life insurance, is to be used. As
for non-life insurance, an allowance for normal
profits is included.

16.54 In the calculation of output, holding gains andlosses must not be included.

Non-life insurance
16.50 The output of the insurer is the service provided tothe beneficiaries.

16.51 If an expectations approach is being used, the for-mula to calculate output is:premiums earned
plus

premium supplements

minus

adjusted claims incurred;

where adjusted claims incurred is corrected for thevolatility in claims using historical data or accounting data on changes in the equalisation reserves
and own funds. Premium supplements are less volatile than claims, and no adjustment for volatility
is necessary. In estimating adjusted claims, information is broken down by product, for example
motor insurance, buildings insurance, etc.
If the necessary accounting data are not available and the historical statistical data are not sufficient to allow reasonable average estimates of output to be made, the output of non-life insurance
may be estimated as the sum of costs (including

European system of accounts — ESA 2010

Reinsurance
16.55 The formula to calculate the output of reinsur-

ance services is analogous to that for direct insurance. However, because the primary motivation ofreinsurance is to limit the direct insurer’s exposure
to risk, a reinsurer deals with exceptionally large
claims as a matter of normal business. For this reason, and because the market for reinsurance is concentrated in relatively few large firms worldwide,
it is less likely that the reinsurer will experience an
unexpectedly large loss than a direct insurer does,
especially in the case of excess of loss reinsurance.

16.56 The output of reinsurance is measured in the same

way as the output of direct non-life insurance.
However, there are some payments peculiar toreinsurance. Such payments are commissions payable to the direct insurer under proportionate reinsurance and profit sharing in excess of loss reinsurance. Once these are taken into account the output
of reinsurance is calculated as:
premiums earned less commissions payableplus

premium supplements

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Insuranceminus	both adjusted claims incurred and profit
sharing.

Transactions associated with non-life
insurance
16.57 This section describes the set of entries record-

ing the implications of a non-life insurance policy.
Policies may be taken out by businesses, households as individuals and units in the rest of theworld. However, when a policy taken out by a member of a household qualifies as social insurance, theentries required are as described in Chapter 17.

Allocation of insurance output amongusers
16.58 The output of non-life insurers is described in par-agraph 16.51. The value of the output of insurers isrecorded as a use as follows:(a) intermediate consumption of businesses,
including the following sectors: non-financial corporations (S.11), financial corporations(S.12), general government (S.13), households
as employers (S.141) and own-account workers (S.142), or non-profit institutions serving
households (S.15);(b) final consumption expenditure of households
as individuals (S.143 and S.144); or(c) exports to non-resident policyholders (S.2).
16.59 The value of output is allocated to users according

to the type of insurance.

16.60 Alternatively, the value of output is allocated as

uses to policyholders in proportion to their actual
premiums payable.

16.61 The allocation of output to intermediate consump-tion is broken down by industry.

Insurance services provided to and fromthe rest of the world
16.62 Resident insurers may provide insurance cover

to households and businesses in the rest of theworld, and resident households and businesses354

may purchase cover from insurers in the rest of theworld. The investment income attributed by resident insurers to policyholders includes an allocation to policyholders in the rest of the world. Such
non-resident policyholders then also pay premium
supplements to the resident insurer.
16.63 Similar considerations also apply to the treatmentof resident businesses and households taking out
policies with non-resident insurers. Resident policy holders receive imputed investment income
from abroad and pay premiums and supplements to abroad. Estimation of the size of suchflows is difficult, especially when there is no resident insurer against which to make comparisons.
Counterpart data may be used to make estimates
for the national economy. The level of transactions by residents has to be known and the ratio ofpremium supplements to actual premiums in theeconomy providing the services can be used to estimate the investment income receivable and premium supplements payable.

The accounting entries
16.64 Altogether six pairs of transactions are recorded

in respect of non-life insurance that is not part ofsocial insurance; two pairs relating to the measurement of the production and consumption of theinsurance service, three pairs relating to distribution and one in the financial account. Under exceptional circumstances, a seventh transaction relating to distribution may be recorded in the capital account. The value of the output of the activity,
the investment income to be attributed to the policyholders and the value of the service charge arecalculated specifically for non-life insurance in themanner described below.

16.65 The production and consumption transactions are

as follows:(a) since all such activity by resident institutional
units is undertaken by insurers, the output(P.1) is recorded in the production account of
insurers;(b) the service may be consumed by any of the sectors of the economy or by the rest of the world;
the value of the service is payable to insurers.
Payments by business constitute intermediate

European system of accounts — ESA 2010

Insurance

consumption (P.2), recorded in their production account. Insurance payments by households as individuals are final consumption expenditure (P.3), recorded in the use ofincome account. Payments by the rest of theworld are recorded as exports of services (P.62)
in the external account of goods and services.
16.66 The distributive transactions are investment

income attributed to policyholders in respect of
non-life insurance, net non-life insurance premiums, and insurance claims:(a) investment income from investing non-life
insurance technical reserves is attributed topolicyholders (D.441). Thus it is recorded aspayable by insurers and as receivable by all sectors and the rest of the world. The investment
income shall be allocated among policyholders in proportion of their non-life technicalreserves, or alternatively in proportion to theactual premium written (payable). Both payables and receivables are recorded in the allocation of primary income account;(b) net non-life direct insurance premiums (D.711)
are the amounts of premiums and investment
income used to finance expenditures of theinsurers. Such premiums are calculated as premiums earned plus premium supplements
less the output value of the insurers. Those net
premiums are recorded as payable by all sectors of the economy or the rest of the world
and as receivable by insurers. The allocation

16of net premiums between sectors is carried out
according to the allocation of the output;(c) non-life direct insurance claims (D.721) areamounts in respect of which insurers become
liable to the policyholder when an event occurs.
The insurance claims are recorded as receivableby all sectors of the economy and the rest of theworld and as payable by the insurers. Both net
premiums and claims are recorded in the secondary distribution of income account. Some
claims arise because of damage or injuries thatthe policyholder causes to the property or persons of third parties. In such cases, valid claims
are recorded as directly payable by the insurer
to the injured parties and not indirectly via thepolicyholder;(d) claims arising from catastrophic losses areother capital transfers (D.99) rather than current transfers, and they are recorded in thecapital account as payable to policyholders by
insurers;(e) the financial balance sheet records the nonlife insurance technical reserves (AF.61). Suchreserves are recorded as liabilities of insurers and assets of all sectors and the rest of theworld. The reserves consist of prepayments ofpremiums and payments of claims. A breakdown of this category is not required, althoughboth components are needed in the calculationof premiums earned and claims incurred.
16.67 An example of the accounting records for suchflows is shown in Table 16.1.

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Insurance

Table 16.1 — Non-life insurance

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Insurance

Transactions of life insurance(a) the output (P.1) of the life insurance is recordedin the production account for the insurers;

16.68 This section describes how records for life insur-(b) the value of the services consumed is recorded
as final consumption expenditure (P.3) byhouseholds in the use of disposable income
account or as payable by the rest of the world,
treated as exports of services (P.62) to non-resident households. Payments by households tonon-resident insurers are imports of services(P.72);

ance differ from non-life insurance records. For alife insurance policy the benefits from the policy
are treated as changes in wealth, recorded in thefinancial account. For a policy qualifying as social
insurance, the benefits in the form of pensions arerecorded as income in the secondary distributionof income account. The reason for the different
treatment is that a policy other than social insurance is entered into entirely on the initiative of thepolicyholder. Policies that qualify as social insurance reflect the intervention of a third party, usually the government or the employer, to encourage or oblige the policyholder to make reserve forincome in retirement. Social insurance is describedin Chapter 17.

16.69 The holder of a life insurance policy is an individ-

ual classified within the households sector (S.143
or S.144). If a company takes out an insurance policy on the life of an employee, this is term insurance and not life insurance. Life insurance transactions therefore take place only between insurers(classified within the insurance corporations subsector — S.128) and resident households as individuals (S.143 and S.144), unless exported to nonresident households (classified within the rest of
the world sector — S.2). The output value of life
insurance is matched by the value of the households’ final consumption expenditures and exports
in services, following the same approach as for
non-life insurance. The investment income attributed to insurance policyholders is treated as premium supplements. However, premiums andclaims are not shown separately in the case of life
insurance and are not treated as current transfers.
Rather they constitute components of a net transaction recorded in the financial account, the financial asset involved being life insurance and annuities entitlements.

16.70 Four pairs of transactions are recorded in theaccounts; two pairs relate to production and consumption of the insurance service, one pair shows
the attribution of investment income to the policy holders and one pair shows the change in life
insurance and annuities entitlements:

European system of accounts — ESA 201016(c) investment income earned from investing life
insurance technical reserves attributed to policyholders (D.441) is recorded in the allocationof primary income account. Bonuses declared
in connection with life policies are treated as
being distributed to policyholders even if theyexceed the investment income earned by theinstitution declaring the bonus. The investment
income is recorded as payable by insurers andreceivable by resident households or non-resident households in the rest of the world. The
investment income shall be allocated among
policyholders in proportion to their life technical reserves, or, if that information is not available, in proportion to the premiums written;(d) the financial balance sheet holds entries for life
insurance technical reserves and annuity entitlements (AF.62). Such reserves are recorded asliabilities of insurers and assets of households
and the rest of the world. These amounts reflect
the savings character of life insurance policies.
This includes the prepayment of premiums andthe payment of benefits. A breakdown of thiscategory is not required, although both components are needed in the calculation of premiums earned and benefits due.
16.71 Life insurance technical reserves and annuities

entitlements reflect policies that yield a lump sum
at a given date. The lump sum may be used to purchase an annuity that itself converts a lump sum
into a stream of payments. The conditional entitlements of the individual policyholders — theamount receivable at or after maturity as a lumpsum payment or an annuity — do not aggregate to
the value of the insurer’s obligations. The difference
is derived from the conditionality and the present
value calculation. The amount to be reported under

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Insurancelife insurance and annuity entitlements’ is definedaccording to the insurers’ accounting principles.

16.72 An example of such flows is shown in Table 16.2.

Table 16.2 — Life insurance

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Insurance

Transactions associated withreinsurance

to claims or benefits. The gross treatment is inline with the original policyholder’s point of view.
This policyholder normally is not aware of any
amount ceded by the direct insurer to a reinsurer
and, should the reinsurer go bankrupt, the direct
insurer remains liable to pay the full amount of theclaims on ceded risks.

16.73 Accounts of reinsurers are largely the same as theaccounts of direct insurers. The only difference isthat direct insurance transactions with policyholders who are not themselves providers of insurance
are replaced by insurance transactions between
reinsurers and direct insurers.

16

16.75 The output of direct insurance is calculated gross ofreinsurance. The alternative calculation net of reinsurance would be to show part of the direct policyholders’ premiums being paid to the direct insurer
and part to the reinsurer, but this way of recording,called ‘net recording’, is not allowed.

16.74 Insurance transactions are recorded gross of rein-surance. Premiums are first payable to the direct
insurer who may then pay a proportion of the premium to the reinsurer (cession), who might thenpay a smaller amount to another reinsurer, and soon (retrocession). Analogously, the same applies

Chart 1 below illustrates this process.

Chart 1 — Flows between policyholders, direct and indirect insurers
1a. Gross premium
Policyholder

2a. Gross claim

1b. Reins. premium
Direct insurer

3a. Gross property income

2b. Reins. claim

Reinsurer

3b. Property income
Property income

16.76 Chart 1 summarises the following flows:

1 the policyholder makes the payment of the premium gross of reinsurance to the direct insurer(1a), of which the reinsurance part of the grosspremium is ceded to the reinsurer (1b);
2 similarly, the payment of claim is recorded,
but in the opposite direction. The claim is paidby the reinsurer to the direct insurer (2b). The
direct insurer adds to this amount its own claim
paid further to the policyholder (2a);3 both the direct insurer and the reinsurer earned
property income from investing their technicalreserves. Property income is transferred by thereinsurer to the direct insurer (3b) who thenadds this amount to its own property income
earned and further distributes to the policyholder (3a).
16.77 All gross flows between the policyholder and the

direct insurer include the corresponding amountsof the flows between the direct insurer and theEuropean system of accounts — ESA 2010reinsurer; for this reason these arrows are shown as
being thicker in the chart.
16.78 As with direct insurance, for example following acatastrophic disaster, part of reinsurance claims arerecorded as capital transfers rather than as current
transfers.

16.79 The whole of the output of the reinsurer is interme-

diate consumption of the direct insurer holding thereinsurance policy. As noted above, many reinsurance policies are between insurers resident in different economies. Thus, the value of the output insuch cases represents imports by the insurer taking out the reinsurance policy and exports by thereinsurer.

16.80 The recording of flows associated with reinsurance

resembles the recording for non-life insurance
except that the policyholder of a reinsurance policy is always another insurer.

16.81 The production and consumption transactions are

as follows:

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Insurance(a) the output (P.1) is recorded in the production
account of reinsurers. Reinsurance services areoften provided by non-resident reinsurers andin such cases are recorded as imports of services(P.72);

16.84 If direct insurance claims are treated as capital(b) the service of the reinsurer can only be consumed by a direct insurer or another reinsurer.
If the policyholder is resident, the use of thereinsurance service is recorded as intermediate consumption (P.2) of the policyholder unit.
Where the policyholder is non-resident, the use
is recorded as exports of services (P.62).

Transactions associated with insurance
auxiliaries

16.82 The distributive transactions cover investment

income attributed to policyholders in respect ofreinsurance, net reinsurance premiums and reinsurance claims:(a) investment income (D.441) earned by reinsurers from investing reinsurance technicalreserves is payable to policyholders who canbe direct insurers or reinsurers. Both reinsurance and direct insurers may be resident or
non-resident;(b) net non-life reinsurance premiums (D.712)
are payable by policyholders and receivable byreinsurers. Either of the units due to make thepayment or to receive it may be non-resident;(c) non-life reinsurance claims (D.722) are payable
by reinsurers and receivable by policyholders,either resident or non-resident. Both net premiums and claims are recorded in the secondary distribution of income account;(d) the financial balance sheet holds records reflecting the reinsurance technical reserves (under
AF.61, ‘non-life insurance technical reserves’).
Such reserves are recorded as liabilities of reinsurers and assets of policyholders. Such policyholders can be direct insurers or reinsurers.

16.83 Commissions payable by reinsurers to the insurer

as the reinsurance policyholder are treated as
reductions in the premiums payable to the reinsurers. Profit sharing payable by the reinsurer tothe direct insurer is recorded as a current transfer.
Although they are recorded differently, both commissions payable and profit sharing reduce the output of the reinsurer.

360

and not current transfers, the reinsurance claims
for the same event are also treated as other capitaltransfers (D.99).

16.85 The output of auxiliary insurance services is valued

on the basis of the fees or commissions charged.
In the case of non-profit institutions operating
as business associations for insurance enterprises
and pension funds, their output is valued by theamounts of subscriptions paid by the members of
the associations. This output is used as intermediate
consumption by the members of the associations.

Annuities
16.86 The simplest case of a life insurance policy is one

where a stream of payments is made by the policyholder to the insurer over time in return for asingle payment received as a claim at some pointin the future. With the simplest form of annuity,
the equivalent to the policyholder, called the annuitant, pays a single lump sum to the insurer and in
return receives a stream of payments either for anominated period or for the rest of the annuitant’slife, or for the rest of the life of both the annuitantand a nominated other person.

16.87 Annuities are organised by insurers and are ameans of risk management. The annuitant avoids
risk by agreeing to accept a known payment stream,
known either in absolute terms or subject to a formula, such as being index-linked, in return for asingle payment. The insurer takes the risk of making more from investing the single payment thanis paid to the annuitant as a payment stream. Life
expectancy is taken into account in determining
the stream of payments.

16.88 When an annuity is initiated, there is a trans-

fer of funds from the household to the insurer. In
many cases, however, this may simply be a ‘rollover’ from a lump sum payable by that or anotherinsurer from the maturing of a normal life insurance policy immediately into an annuity. In sucha case there is no need to record the payment ofEuropean system of accounts — ESA 2010

Insurance

the lump sum and the acquisition of the annuity; there will simply be a change from life insurance reserves to annuity reserves in the insurer andpension fund subsector. If an annuity is purchased
independently of the maturing of a life insurance
policy, this is recorded as a pair of financial transactions between the household and the insurer.
The household makes a payment to the insurer andreceives in return an asset arising from the terms of
the annuity. The insurer receives a financial asset
from the household and incurs a liability towards
it.
16.89 Annuities are terminated by death, at which point

any remaining reserves for that annuitant aretransferred to the insurer. However, assuming theinsurer has predicted life expectancy accurately,
for the group of annuitants as a whole, the averagefunds remaining at death will be zero. If life expectancies change, revisions to the reserves must be
made. For annuities in operation, an extension oflife expectancies will reduce the amount available
to the insurer as a service charge, possibly making
this negative. In such a case, the insurer will haveto draw on its own funds and hope to build themup again in future by associating higher service
charges with new annuities.

Recording non-life insurance claims
Treatment of adjusted claims
16.90 The time of recording claims incurred is gener-

ally when the related event occurs. This principle isapplied even when, in the case of disputed claims,
the settlement may take place years after the event
concerned. An exception is made in cases where
the possibility of making a claim is recognised
only long after the event has happened. For example, an important series of claims were recognised
only when exposure to asbestos was established asa cause of serious illness and was judged to give

European system of accounts — ESA 201016

rise to claims under an insurance policy valid at
the time of the exposure. In such cases the claim
is recorded at the time that the insurance company
accepts the liability. This may not be the same time
as when the size of the claim is agreed on or when
the claim is paid.
16.91 Given that the formula for output uses adjusted

claims and not actual claims, only when the actual
claims happen to be the same values as expectedclaims will net premiums and claims be equal ina given period. They should however be approximately equal over a period of years excluding a year
in which a disaster is recorded.

Treatment of catastrophic losses
16.92 Claims are recorded as current transfers payable by

the insurer to the policyholder. There is one casewhere claims are recorded as other capital transfers (D.99) rather than current transfers and that isin the wake of a major catastrophe. The criteria forwhen the effects of a disaster should be treated likethis must be determined according to national circumstances, but these may involve the number ofpolicyholders affected and the amount of the damage done. The rationale for recording the claims ascapital transfers in this case comes from the factthat many of the claims will relate to destruction orserious damage to assets such as dwellings, buildings and structures.

16.93 Following a catastrophe, the total value of theclaims in excess of the premiums is recorded asa capital transfer from the insurer to the policyholder. Information on the level of claims to be
met under insurance policies is obtained from theinsurance industry. If the insurance industry cannot provide this information, one approach to estimating the level of the catastrophe-related claims
is to take the difference between the adjusted
claims and the actual claims in the period of thecatastrophe.

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17

CHAPTER 17
Social insurance including pensions
Introduction
17.01 Definition: social insurance schemes are schemes inwhich participants are obliged, or encouraged, by
a third party to take out insurance against certainsocial risks or circumstances that may adversely
affect their welfare or that of their dependants.
In such schemes, social contributions are paid byemployees or others, or by employers on behalf of
their employees, in order to secure entitlement tosocial insurance benefits, in the current or subsequent periods, for the employees or other contributors, their dependents or survivors. Contributions
to social insurance schemes can also be paid by,or on behalf of, self-employed or non-employedpersons.

17.02 There are two types of social insurance schemes:(a) the first consists of social security schemes covering the entire community, or large sections of
the community, that are imposed, controlled
and financed by government units. Pensions
payable under such schemes may or may not
be related to levels of salary of the beneficiaryor history of employment. Non-pension benefits are less frequently linked to salary levels;(b) the second type consists of other employment
related schemes. Such schemes derive from an
employer-employee relationship in the provision of pension, and possibly other, entitlements

European system of accounts — ESA 2010that are part of the conditions of employment
and where responsibility for the provision of
benefits does not devolve to general government under social security provisions.
17.03 The scope of social insurance schemes varies fromcountry to country, and from scheme to schemewithin the same country. Examples of such schemes
are the following:(a) general government obliges all employees toparticipate in a social security scheme;(b) employers make it a condition of employmentthat employees participate in an insurance
scheme specified by the employer;(c) an employer encourages employees to join ascheme by making contributions on behalf ofthe employee;(d) a trade union arranges advantageous insurance cover available only to the members of the
trade union; or(e) the schemes other than social security may
be arranged with an insurance corporation
as a group policy or series of policies, or they
may be managed by an insurance corporationin return for a fee. Alternatively, the schemes
may be managed by an employer directly on his
own behalf or by employers on behalf of theiremployees and their dependants or by others
on behalf of a specified group.

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Table 17.1 — Social insurance schemes
Type of insurance

Characteristics

Form of organisation

Social security

The participants are obliged bygeneral government to insure
against certain social risks

Organised by general
government via social security
fundsSocial security funds (S.1314)

Employment-related social
insurance schemes other thansocial security

Employers can make it acondition of employmentthat employees insure against
certain social risks

Organised by employers onbehalf of their employees andtheir dependents or by others
on behalf of a specified group

Sector or subsector of
employer, insurance
corporations and pension
funds or non-profit institutions
serving households

Social insurance schemes, social assistanceand individual insurance policies
17.04 Social assistance is not part of social insur-

ance. Social assistance benefits are payable independently of participation in a social insurance
scheme, i.e. without qualifying contributions having been made to a social insurance scheme.

17.05 Social assistance is distinguished from social secu-

rity, by the eligibility to receive social assistancebenefits from general government, and is notdependent on having elected to participate as demonstrated by the payment of contributions. Usually
all members of resident households are entitled toapply for social assistance but the conditions underwhich it is granted are often restrictive. Frequently
there is an assessment of available income including social insurance benefits, in relation to the perceived needs of a household. Only those households falling below a given threshold may be entitled to this type of social assistance.

17.06 Individual insurance policies qualify as social

insurance schemes if they cover social risks andneeds such as sickness and old age. In order for anindividual policy to be treated as part of a social
insurance scheme, the eventualities or circumstances against which the participants are insured
shall correspond to the risks or needs listed in paragraph 4.84; in addition, one or more of the following conditions shall be satisfied:(a) participation in the scheme is obligatory either
by law or under the terms and conditionsof employment of an employee, or group of
employees;(b) the scheme is collective and is operated forthe benefit of a designated group of workers,

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Sector/subsector

whether employees, self-employed or nonemployed, participation being restricted tomembers of that group;(c) an employer makes a contribution (actualor imputed) to the scheme on behalf of an
employee, whether or not the employee also
makes a contribution.
17.07 Insurance claims on policies taken out with thesole purpose of obtaining a discount, even if thosepolicies follow from a collective agreement, areexcluded from social insurance. Such individual
insurance policies are recorded as life and nonlife insurance. Insurance claims based on policies taken out solely on the own initiative of theinsured, independently of his employer or government, are also excluded from social insurance.

Social benefits
17.08 Social benefits become payable when certain

events occur, or certain conditions exist that may
adversely affect the welfare of the households concerned either by imposing additional demands ontheir resources or reducing their incomes. Social
benefits are provided in cash or in kind. There are
a number of circumstances in which social benefits
are payable:(a) the beneficiaries, or their dependants, require
medical, dental or other treatment, or hospital, convalescent or long-term care, as a resultof sickness, injuries, maternity, chronic invalidity, old age, etc. The social benefits may beprovided in kind in the form of treatments orcare provided free or at prices that are not economically significant, or by reimbursing expenditures made by households. Social benefits in

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Social insurance including pensions

cash may also be payable to beneficiaries needing health care;(b) the beneficiaries have to support dependants ofvarious kinds: spouses, children, elderly relatives, invalids, etc. The social benefits are usually paid in cash in the form of regular dependants’ or family allowances;(c) the beneficiaries suffer a reduction in income
as a result of not being able to work full-time orwork at all. The social benefits are usually paid
regularly, in cash, and for the duration of thecondition. In some instances a lump sum may
be provided additionally or instead of the regular payment. Examples of why people may be
prevented from working are as follows:(1) voluntary or compulsory retirement;

requiring participation in a scheme or qualifying
requirements. The services are treated as socialtransfers in kind and not as part of social security
or social assistance. In addition to health and education services provided by general government,such services may also be provided to individuals by non-profit institutions serving households.
Such services are also treated as social transfers inkind and not as part of social insurance schemes.

Social benefits provided by other institutional units17.12 Social benefits can be provided by employers totheir employees and their dependents or provided
by other units such as trade unions. All social benefits provided by units other than general government are made under a social insurance scheme.

(2) involuntary unemployment, including temporary
lay-offs and short-time working;Pensions and other forms of benefit(3) sickness, accidental injury, the birth of a child, etc.,that prevents a person from working, or working
full time;

17.13 Social insurance benefits and the corresponding(d) the beneficiaries receive payments to compensate for suffering a reduction in income becauseof the death of the main income earner;(e) the beneficiaries are provided with housing
either for free or at prices that are not economically significant or by reimbursing expenditure
made by households. Such items are social benefits in kind;(f) the beneficiaries are provided with allowances
to cover education expenses incurred on behalfof themselves or their dependants. Education
services may be provided as social benefits in
kind.

Social benefits provided by general government

17

contributions are divided between those relating
to pensions and those relating to all other formsof benefit. The most important pension benefit covered by social insurance schemes is income
in retirement, but there are other examples. For
instance, pensions may be payable to widows andwidowers or to people who suffer an industrial
injury and are no longer able to work. The mainincome earner is no longer able, through death orincapacity, to provide an income, and so payments
are made and recorded as pensions.

17.14 All other benefits are grouped together as non-pension benefits. The distinction between pension
and non-pension benefits is important because liabilities are recorded for pensions whether there are
actually assets set aside to meet the entitlements
or not, but reserves are recorded for non-pension
benefits only when the reserves actually exist.

17.09 General government provides social benefits aspayments under social security, social assistance orsocial transfers in kind.

17.10 Social security refers to social insurance schemes

operated by general government.

17.11 The definition of social benefits includes the pro-vision of health and education services. Typicallygeneral government makes such services available to all members of the community without

European system of accounts — ESA 2010

Social insurance benefits other thanpensions
17.15 Definition: other social insurance benefits, or non-pension benefits, are benefits which beneficiaries
receive, directly or indirectly, depending on specific events and usually under predetermined legal
or contractual terms.

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Excluding income in retirement, a number of othercontingencies may be covered such as health insurance, unemployment insurance and long-termcare insurance benefits.
17.16 Other social insurance benefits are provided to ben-eficiaries under social security and under employment-related schemes other than social security.

Social security schemes other than pension
schemes17.17 Definition: social security schemes other than pen-sion schemes are contractual insurance schemes
where the beneficiaries as participants of a social
insurance scheme are obliged by general government to insure against risks other than old age
and other age-related risks. Social security benefits
other than pension benefits, known as non-pension benefits, are provided to beneficiaries by general government.

17.18 Beneficiaries usually make compulsory contribu-

tions towards a social security scheme other than asocial security pension scheme which is frequently
financed on a pay-as-you-go basis. Pay-as-you-go
contributions in a period are used to finance thebenefits in the same period. There is no saving element involved, either for general government or
the employer operating the scheme or for the beneficiaries participating in it. So there is generally
no question of a surplus arising and, if there is a
shortfall in resources, government may have powers to change the commitments not just relating
to future employment but also for past employment. However, in some countries social security
schemes other than pension schemes may accumulate reserves, known as buffer funds.

17.19 Social security entitlements other than pension

entitlements, as outstanding amounts for a social
security scheme, are not recognised in the core
national accounts of the ESA. Estimates of the outstanding amounts of entitlements under social
security schemes other than pensions, as well asof any other employment-related non-pension
schemes provided by general government, are notincluded in the core accounts and not recorded inTable 17.5.

366

Other employment-related social insurance
schemes17.20 Definition: other employment-related social insur-

ance schemes are contractual insurance schemes,
either compulsory by law or encouraged by a third
party. In other employment-related social insurance schemes employers can make it a conditionof employment that employees, the beneficiaries, participate in a social insurance scheme specified by the employer to insure against risk otherthan old age and age-related. Such employmentrelated schemes are provided to beneficiaries either
by the employer or by other units on behalf of theemployer.

17.21 Other

employment-related social insurance
schemes are seen, like related pension schemes, aspart of the compensation package, and negotiations between employees and employers may focus
on current conditions of service and pay scales.
Often social insurance benefits other than pensions
are provided by private employers from schemesthat the employers control or contract to a third
party such as an insurance corporation providing
social benefits like private medical coverage.

Recording of stocks and flows by type of
non-pension social insurance scheme
Social security schemes
17.22 In recognition of the fact that social security is nor-mally financed on a pay-as-you-go basis, entitlements accruing under social security such as social
benefits including pensions are not shown in thecore national accounts.

17.23 Pension entitlements arising from social security

schemes are included in the supplementary table
for accrued-to-date pension entitlements in social
insurance, but this is not the case for entitlements
arising from social security schemes, other thanpension schemes.

17.24 The recording of the flows for social security

schemes other than pensions refers to contributions made by the employer and by the employees
and to social security benefits.

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Social insurance including pensions

17.25 Any contribution made by the employer istreated as part of compensation of employees. It
is recorded as a distributive transaction payable
by the employer and receivable by the employee.
The employee then pays an amount equal to what
he receives from the employer together with any
contribution of his own to the social security fund.
This amount is recorded as a use for households
and a resource for government.

17.26 Any contributions made by self-employed or non-employed persons are also included with the contributions by households to government.

17.27 Social security benefits are recorded as distrib-

utive transactions, from general government tohouseholds.

17.28 Table 17.2 shows the transactions related to a social

security pension scheme. They are identical to thetransactions related to social security schemes
excluding pensions.

Other employment-related non-pension social
insurance schemes
17.29 For other employment-related non-pension social

insurance schemes, entitlements of the participants
are usually recorded as they build up. Investment
income earned on existing entitlements is recorded
as being distributed to the beneficiaries and reinvested by them in the scheme.

17.30 The social contribution made by an employer toan insurance scheme on behalf of an employee istreated as part of the compensation of employees.

17.31 The investment income on accumulated entitle-

ments is recorded as being distributed to households by the scheme. The investment income
includes interest and dividends plus, if the institutional unit holds shares in them, the distributed
income of collective investment schemes. It is possible that the scheme may own property and so generate a net operating surplus, and this is included
with the investment income distributed to the beneficiaries. In that case, the term investment income
is to be interpreted as including that source ofincome. Holding gains and losses generated by theinvestment of the cumulated entitlements are not

European system of accounts — ESA 201017

included in investment income but are recorded asother changes due to revaluations.
17.32 Part of the income distributed to households isused to meet the costs of operating the scheme. This
cost is shown as output of the scheme and household final consumption expenditure. The remaining part of the distributed income is treated as contribution supplements paid back by households tothe scheme.

17.33 Social contributions are shown as paid by house-holds to the scheme. The total amount of the social
contributions is made up of the actual contributions from the employers as part of compensation of employees, actual contributions by employees and by individuals formerly participating in ascheme, self-employed and non-employed persons
as well as retirees, and the contribution supplements specified in paragraph 17.32.

17.34 Those who contribute to a social insurance scheme,

who are not employees, may be self-employed or
non-employed persons, who participate by virtueof their profession or former employment status.

17.35 The social benefits paid to households by thescheme administrator are shown as distributive
transactions under other social insurance benefits.

17.36 The payment of the service provided by the scheme

administrator, equal to the value of the scheme’s
output, is recorded as final consumption expenditure of households.

17.37 An increase in entitlements caused by an excess ofcontributions over benefits is shown as paid by thesocial insurance scheme to households. The rationale for this is that, since this increase in entitlements directly affects the net worth of households,
it should be included in the saving of the households sector.

17.38 The adjustment for the change in the entitlements

paid by the scheme to households is recorded as aclaim from households to the scheme.

17.39 Table 17.3 shows the transactions for an employ-ment-related pension scheme. They are identical to the transactions related to social insurance
schemes other than pension schemes.

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Pensions

and therefore national perceptions, of the term‘social security’ vary considerably.

17.40 Definition: social insurance pensions are bene-fits which beneficiaries receive upon retirement,
usually under predetermined legal or contractual
terms and typically in the form of a guaranteedannuity.
The most important pension benefit of social
insurance schemes is income in retirement, but anumber of other cases may also occur. For example, pensions may be payable to widows and widowers or to people who suffer an industrial injury
and are no longer able to work. All events that giverise to payments because the income earner is nolonger able, through death or incapacity, to provide an income for himself or herself and dependants are treated as pensions.

Types of pension schemes
17.41 Pensions provided to beneficiaries can take the fol-lowing forms:(a) social insurance pension schemes;(b) social assistance; and(c) individual
pensions.

insurance

policies

related

to

They are usually provided by social security funds,
other government entities, insurance corporations and pension funds, or institutional units as
employers. However, other institutions could be
involved, depending on national circumstances.
The use of the term social security funds does notmean that there is always an actual fund of assets
created within the scheme. Social security funds
and social security schemes are synonymous terms.
17.42 Social insurance pensions are provided to benefi-

ciaries as participants in social insurance schemes.
The part provided by general government is calledsocial security pensions, including social security funds, and the part provided by other units
is called other employment-related pensions. The
division between which pensions are provided bysocial security and which by other employmentrelated schemes varies considerably from country
to country with the consequence that the coverage,

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Social security pension schemes
17.43 Definition: social security pension schemes are con-tractual insurance schemes where the beneficiaries as participants of a social insurance scheme are
obliged by general government to insure against
old age and other age-related risks such as disability, health etc. Social security pensions are provided to beneficiaries by general government.

17.44 When general government takes over the responsi-

bility for providing pensions to large sections of thecommunity, the social security function is in effectfilling the role of a multi-employer scheme.

17.45 Beneficiaries usually make compulsory contri-

butions towards a social security pension scheme
which is frequently financed on a pay-as-you-gobasis. The contributions in a period are used tofinance the benefits in the same period. There is nosaving element involved, either for general government or the employer operating the scheme or forthe beneficiaries participating in it. So a surplus on
the scheme will not exist, and, if there is a shortfall in resources, government may have powers tochange the commitments not just relating to future
employment but also for the past. In some countries however social security pension schemes may
accumulate reserves, known as buffer funds.

17.46 The narrowest form of social security pension isvery basic. The level may be fixed independently of
the size of contributions, though not of the fact that
contributions have been made for a given periodof time or under other specific conditions. An
employee’s right to a pension under social security
is often transferable from one employer to another.

17.47 By contrast, in some countries most or all pen-sion provision may be made via social security.
In this case, government acts as an intermediaryfor employers so that once the government hasreceived the contributions to the scheme paid by
the employer and the households; the government
then takes on the risk of making the eventual payment. Government relieves the employer of therisk that the cost of pensions may be too great for
his enterprise to meet and assures the populationthat pensions will be paid, though it may do so

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Social insurance including pensions

with the qualification that it may alter the amountof pensions due, even retrospectively.
17.48 Pension entitlements as outstanding amounts for asocial security pension scheme are not recognisedin the core national accounts of the ESA. Estimatesof the outstanding amounts of entitlements undersocial security pension schemes as well as of any
other employment-related defined benefit pension scheme provided by general government are
not included in the core national accounts but arerecorded in the supplementary table for accruedto-date pension entitlements shown in Table 17.5.

Other employment-related pension schemes
17.49 Definition: other employment-related pension

schemes are contractual insurance schemes, either
compulsory by law or encouraged by government,
or where employers make it a condition of employment that employees (the beneficiaries) participate in a social insurance scheme specified by theemployer to insure against old age and other agerelated risks. These employment-related pensions
are provided to beneficiaries either by the employer
or by other units on behalf of the employer.

17.50 Unless employers and beneficiaries agree to change

the amounts payable, pension schemes run by private employers are usually not subject to retrospective adjustments. However there is a risk thatthe employer may be unable to pay because he hasgone out of business. Protection for the pension
entitlements of individuals is becoming more common. The pension built up with one employer may
not be transferable to a new employer. Employer
schemes are increasingly likely to have reserves
set aside. Even if there are no reserves, accounting
conventions may require them to recognise pension entitlements of present and past employees intheir accounts.

17.51 Other employment-related pensions are seen as

part of the compensation package, and negotiations between employees and employers may focus
on current conditions of service and pay scales
and pension entitlements. Often pensions are provided by private employers from schemes thatthe employers control or contract to a third party
such as an insurance corporation. It is sometimes
possible for a specialised unit to agree to assume

European system of accounts — ESA 201017

responsibility for providing pensions for a number of employers in return for assuming the risk ofensuring adequate funding is available to make thepromised pensions. Such an arrangement is calleda multi-employer pension scheme.
17.52 Both current employees and former employees,

who are the beneficiaries, may make contributions
to the scheme and are assumed to receive property income from it. This property income is thentreated as contribution supplements payable bythem.

17.53 Pension schemes are categorised according to theirnature into defined contribution schemes anddefined benefit schemes.

Defined contribution schemes
17.54 Definition: a defined contribution scheme is a pen-sion scheme where the benefits are defined exclusively in terms of the level of the fund built up fromthe contributions made over the employee’s working life and the increases in value that result fromthe investment of such funds by the manager of thepension scheme.

17.55 The entire risk of a defined contribution scheme toprovide an adequate income in retirement is borneby the employee.

17.56 Providing detail on defined contribution schemesis relatively straightforward since full accounts
must be available and no actuarial estimation is
involved. Most of those schemes are in the corporations sectors (column A of Table 17.5) but it ispossible that in some cases government acts as ascheme manager. The pension entitlements of all
defined contribution pension schemes are includedin the core national accounts.

Defined benefit schemes
17.57 Definition: a defined benefit scheme is a pension

scheme where the benefits payable to the employee
on retirement are determined by the use of a formula, either alone or in combination with a guaranteed minimum amount payable.

17.58 The risk of a defined benefit scheme to provide

an adequate income in retirement is borne by theemployer or a unit acting on his behalf.

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Notional defined contribution schemes and hybrid
schemes17.59 Notional defined contribution schemes and hybrid

schemes are grouped as defined benefit schemes.

17.60 Definition: a notional defined contribution scheme

is similar to a defined contribution scheme butwith a guaranteed minimum amount payable.

17.61 In a notional defined contribution scheme, con-tributions (both from employee and employer)
are credited to, and accumulated on, individual
accounts. Those individual accounts are notional,
in the sense that the contributions to the schemes
are used to pay pension benefits to current pensioners. At retirement, the accumulated balance is converted into an annuity through a formula, based,among other factors, on a measure of life expectancy, and is revised annually to catch up with ameasure of the standard of living.

17.62 Hybrid schemes are those schemes which haveboth a defined benefit and a defined contribution
element. A scheme is classified as ‘hybrid’ either
because both defined benefit and defined contribution provisions are present or because it embodies
a notional defined contribution scheme and, at thesame time, a defined benefit or defined contribution provision. The provision might be combined
for a single beneficiary, or differentiated according
to groups of beneficiaries by type of contract, pension provided, etc.

17.63 The risk to provide an adequate income in retire-

ment is shared between the employer and theemployee under a notional contribution scheme
and under a hybrid scheme.

17.64 In certain cases, the employer’s risk may be borneby the multi-employer scheme that operates thedefined benefit pension scheme on behalf of theemployer.

Defined benefit schemes as compared to defined
contribution schemes
17.65 The fundamental difference in accounting for adefined benefit pension scheme as compared to adefined contribution pension scheme is that, forthe defined benefit pension scheme, the benefit to
the employee in the current period is determined370

in terms of the undertakings made by the employer
about the level of pension, whereas for the defined
contribution pension scheme the benefit to theemployee in the current period is determined by
the contributions made to the scheme, and theinvestment income and holding gains and losses
earned on those and previous contributions. Thus
while there is in principle complete information
available on the benefits for the participant in thedefined contribution pension scheme, the benefits for the participants in a defined benefit pension
scheme are estimated actuarially.
17.66 There are four sources of change in pension enti-

tlements in a defined benefit pension scheme. The
first of these, the current service increase, is theincrease in entitlement associated with the wages
and salaries earned in the current period. The second source, the past service increase, is the increasein the value of the entitlement due to the fact thatfor all participants in the scheme, retirement (anddeath) are one year nearer. The third change in thelevel of entitlement is a decrease due to the payment of benefits to retirees of the scheme. The
fourth source of change comes from other factors,
factors that are reflected in the other changes in
assets account.

17.67 As with a defined contribution pension scheme,

the employer and/or employee may make actual
contributions to the scheme in the current period.
However, such payments may not be sufficient tomeet the increase in the benefits accruing from thecurrent year’s employment. An additional contribution from the employer is, therefore, imputed tobring equality between contributions (actual andimputed) and the increase in current service entitlements. Such imputed contributions are usually
positive but it is possible for them to be negative if
the sum of the contributions received exceeds theincrease in current service entitlements.

17.68 At the end of an accounting period, the level ofthe pension entitlements due to past and present
employees can be calculated by estimating the present value of the amounts due to be paid in retirement using actuarial calculations. One element in
the increase of this amount year by year is the factthat the present value of the entitlements existingat the beginning of the year, and still due at theend of the year, has increased because the future is
one year nearer and so a discount factor less must

European system of accounts — ESA 2010

Social insurance including pensions

be used to calculate the present value. It is thisunwinding of the discount that accounts for the
past service increase in entitlements.
17.69 A further basic difference between a defined bene-

fit pension scheme and a defined contribution pension scheme concerns the payment for the cost ofoperating the pension scheme. Under a defined contribution pension scheme all of the risk is borne by
the beneficiaries. The pension scheme is operated on
their behalf and they pay for the cost of it. Since a unit
other than the employer may operate the scheme, it isappropriate to treat the operating cost as part of theinvestment income that is retained by the scheme tomeet its costs and generate a profit. In keeping withaccounting for insurance, the investment income istreated as being attributed in full to the beneficiaries,
part being used to meet the cost and the remainder
being reinvested with the scheme.

17.70 For a defined benefit pension scheme, the situation

is different. The risk that the fund may be insufficient to meet pension entitlements is borne in partor in whole by the employer, or a unit acting on
his behalf, and not by the beneficiaries alone. The
scheme may be directly controlled by the employer
and be part of the same institutional unit or may be
purely notional. Even in this case, there are costs
associated with operating the scheme. Althoughsuch costs are initially borne by the employer, it isappropriate to regard this as a form of income inkind provided to the employees and for convenience it may be included with the employers’ contributions. This assumes all the costs are borne bycurrent employees and none by retirees. It also
assumes that the attribution that must be madein the case of notional schemes can be applied inother circumstances.

17.71 For a defined benefit scheme, it is unlikely that self-

employed and non-employed persons currently contribute, though it is possible if they were previously in
employment giving rise to a defined benefit pension
and have the right to continue to participate. Those
persons previously in employment, whether currently in receipt of a pension or not, receive property
income and pay contribution supplements.

European system of accounts — ESA 201017

Pension administrator, pension manager,
pension fund and multi-employer pension
scheme17.72 Social insurance schemes may be organised by

employers or by government, they may be organised by insurance corporations on behalf of employees or separate institutional units may be established to hold and manage the assets to be used tomeet pensions and to distribute pensions. The pension fund subsector consists of only those social
insurance pension funds that are institutional units
separate from the units that create them.

17.73 An employer may contract with another unit to

manage the pension scheme and arrange disbursements to the beneficiaries. There are different ways
in which this may happen.

17.74 First, the operator of the pension scheme, the pen-sion administrator, simply acts as the employer’s
agent, undertaking the day-to-day administrationof the pension scheme, and the responsibility forany shortfall in the scheme, or the benefit of any
excess, remains with the employer.

17.75 Second, the pension manager is responsible also

for determining the terms of another employmentrelated pension scheme and bears the ultimate
responsibility for pension entitlements. The pension manager also retains a significant degree of
responsibility over the long-term policy of investment in assets, including the selection of investment options and the structure of administrative
providers. Although the same unit may frequently
carry out both the functions of a pension manager
and of a pension administrator, in some cases they
are the responsibilities of different units.

17.76 Third, it is not uncommon for a single unit to con-tract with several employers to manage their pension schemes as a multi-employer pension scheme.
The arrangements are such that the multi-employer
pension scheme accepts the responsibility for any
shortfall in the funds to meet the entitlements inreturn for the right to keep any excess funds. By
pooling the risks over a number of employers themulti-employer scheme expects to balance underand over-funding so as to emerge with an excess
over all the schemes taken as whole in a similar way
that an insurance corporation pools risk for many

371

17

Social insurance including pensions

clients. In this case, the multi-employer pension
scheme is the pension manager.
17.77 When government takes responsibility for provid-

ing benefits to large sections of the community,
the social security function fills the role of a multiemployer scheme. Like the insurance corporation,
the government then takes on the responsibility forany shortfall in funds to meet the pension liabilities or may be entitled to retain any surplus generated. It is often the case, though, that social security
is funded on a pay-as-you-go basis so there is noquestion of a surplus arising and, if there is a shortfall in resources, government may have powers tochange the entitlements not just relating to future
employment but also for the past.

17.78 The pension manager’s responsibility for any

underfunding, or the benefit of any over-funding, of a pension scheme is recorded as a liability/asset relationship with the pension administrator. The change in the liability between the pension manager and the pension administrator isrecorded period by period. It is not the pension
entitlements of the scheme that are recorded as liabilities of the pension manager, but rather the difference between the pension entitlements and theassets held by the scheme. Where assets held by thescheme are greater than the pension entitlements,
a situation described as over-funding, a liability/
asset relationship with the pension manager will berecorded where it is certain that any over-funding
would become the property of the pension manager in case of liquidation of the scheme.

17.79 Any holding gains and losses on the assets man-aged by the pension administrator are attributed tothe pension manager so that the net worth of thepension fund remains exactly zero at all times.

Recording of stocks and flows by typeof pension scheme in social insurance

entitlements accruing under social security are notshown in the core national accounts. If all countries had similar benefits provided under social
security and under social insurance schemes, international comparisons would be straightforward.
However, this is not the case and national perceptions of what is covered by social security varyconsiderably.
17.81 Pension entitlements arising from social secu-

rity schemes are not included in the core national
accounts. The diversity of such schemes andemployer schemes varies across Member States.
Pension entitlements arising from social security
schemes are included in the supplementary table
for accrued-to-date pension entitlements in social
insurance (Table 17.5) to allow comparison ofcountry data.

17.82 The recording of the flows for social security pen-sion schemes refers to contributions made by theemployer and by the employees and to social security benefits.

17.83 Any contribution made by the employer is treatedas part of compensation of employees. It is recorded
as a distributive transaction from the employer tothe employee. The employee then pays what hereceives from the employer together with any contribution he makes on his own behalf to the social
security fund. This amount is recorded as paid byhouseholds to government.

17.84 Any contributions made by self-employed or non-employed persons are also included with the contributions made by households to government.

17.85 Social security benefits are recorded as distrib-

utive transactions from general government tohouseholds.

17.86 Table 17.2 shows the transactions of a social secu-

rity pension scheme.

Transactions for social security pension schemes
17.80 In recognition of the fact that social security is nor-mally financed on a pay-as-you-go basis, pension

372

European system of accounts — ESA 2010

Social insurance including pensions

17

Table 17.2 — Accounts for social contributions and pension benefits paid through social security
Uses
Employer

Social House­ Other
Total
security holds sectors economy
fundType of accountand transaction

Resources
Employer

Social House­ Other
Total
security holds sectors economy
fund

Generation of income account
139,0

139,0

Employers’
actual pension
contributions (D.1211)

Allocation of primary income accountEmployers’
actual pension
contributions (D.1211)

139,0

139,0

Secondary distribution of income account

210,0

226,0

226,0

Social security
contributions(pensions)

226,0

226,0

139,0

139,0

Employers’
actual pension
contributions (D.6111)

139,0

139,0

87,0

87,0

Households’
actual pension
contributions(D.6131)

87,0

87,0

210,0

Social security
pension benefits incash (D.6211)

210,0

210,0

Transactions for other employment-related pension
schemes

Transactions for defined contribution pension
schemes17.87 For other employment-related schemes, pen-17.90 The contribution made by an employer to a definedsion entitlements of the participants are usually
recorded as they build up. Investment income
earned on existing pension entitlements is recorded
as being distributed to the beneficiaries and reinvested by them in the pension scheme.

17.88 The recording of transactions for a defined contri-

bution scheme is less complicated than the recording of transactions for a defined benefit scheme.

17.89 For both types of schemes, a pension fund isassumed to exist. For a defined contribution pension scheme, a real fund must exist. For a defined
benefit pension scheme a fund may exist in reality
or it may be a notional fund. If it exists, it may bepart of the same institutional unit as the employer,
it may be a separate institutional unit with anautonomous pension scheme, or it may be part ofanother financial institution, either an insurance
corporation or a multi-employer pension scheme.

European system of accounts — ESA 2010

contribution pension scheme on behalf of an
employee is treated as compensation of employees.

17.91 The investment income on accumulated pension

entitlements is also recorded as being distributed
to households from the pension fund. The investment income includes interest and dividends plus
the distributed income of collective investment
schemes if the pension fund holds shares in them.
It is possible that the pension fund may own property and generate net operating surplus, which isincluded with the investment income as being distributed to the pension beneficiaries. In this case,the term investment income includes this source ofincome, if it exists. Holding gains and losses generated by the investment of the cumulated pension entitlements are not included in investment
income but are recorded as other changes due torevaluations.

373

17

Social insurance including pensions

17.92 Part of the income distributed to households isused to meet the costs of operating the pension
fund. This cost is recorded as output of the pension
fund and as household final consumption expenditure. The remaining part of the distributed income
is treated as pension contribution supplements
paid back by households to the pension fund.

17.93 Social contributions are recorded as paid by house-

under other social insurance pension benefits(D.6221).
17.96 There is also a transaction for the service provided

by the pension fund (equal to the value of the pension fund’s output), recorded as final consumption
expenditure by households.

17.97 The increase in pension entitlements caused by anexcess of contributions over benefits is recorded as
paid by the pension fund to households. Similarly, adecrease in pension entitlements caused by a deficitof contributions compared to benefits is recorded
as a payment from households to the pension fund.
The change in pension entitlements directly affects
the net worth of households, and so the savingof the households sector. Given that much of theincrease in the pension entitlement of participantsin a defined contribution pension scheme, and thus
ultimately the funding for the benefits, comes fromholding gains that are not included in the contribution supplements of participants in defined contribution pension schemes, the adjustment for thechange in pension entitlements for such individuals will frequently be negative.

holds to the pension fund. The total amount ofsocial contributions is made up of the actual contributions by the employers as part of compensation of employees, actual contributions by employees and possibly by other individuals, such as individuals formerly participating in a scheme, selfemployed and non-employed persons as well as
retirees, and the contribution supplements specified in paragraph 17.92. For clarity, and to enhance
the comparison with defined benefit schemes, thesupplements are shown at full value. The total contributions made by households to the pensions
fund are net in the same way that insurance premiums are net, that is to say they are the total of allcontributions made, less the service charge.

17.94 Contributors other than employees who con-tribute to a defined contribution pension scheme
may include self-employed persons participating
in a defined contribution pension scheme or may
be non-employed persons who participate in adefined contribution pension scheme by virtue of
their profession or former employment status.

17.98 The adjustment for the change in pension entitle-

ments paid by the pension fund to households isrecorded as a claim from households to the pension fund.

17.99 Table 17.3 illustrates the entries necessary to

17.95 Pension benefits to households from the pen-sion fund are recorded as distributive transactions

record the transactions related to a defined contribution scheme. It is simpler than the corresponding table for a defined benefit scheme, because of
the absence of any imputed transactions.

Table 17.3 — Accounts for pension benefits payable under a defined contribution scheme
Uses
Employer Pension House­ Other
Total
fund
holds sectors economy

Type of accountand transactions

Resources
Employer Pension House­ Other
Total
fund
holds sectors economy

Production accountOutput (P.1)

1,4

1,4

Generation of income account
11,0

11,0

Employers’
actual pension
contributions (D.1211)

Distribution of primary income
Employers’
actual pension
contributions (D.1211)

374

11,0

European system of accounts — ESA 201011,0Social insurance including pensions

Uses
Employer Pension House­ Other
Total
fund
holds sectors economy
3,0

3,0

Type of accountand transactions

Resources
Employer Pension House­ Other
Total
fund
holds sectors economy

Property income
(D.4)

3,0

Investment income
16,2 payable on pension
entitlements (D.442)

16,2

17

3,0
16,2

16,2

Secondary distribution of income account
37,3

37,3

Householdtotal pension
contributions

37,3

37,3

11,0

11,0

Employers’
actual pension
contributions (D.6111)

11,0

11,0

11,5

11,5

Households’
actual pension
contributions(D.6131)

11,5

11,5

16,2

16,2

Households’ pension
contribution
supplements (D.6141)

16,2

16,2

–1,4

–1,4

Social insurance
scheme service
charges (D.61SC)

–1,4

–1,4

26,0

Other social
insurance pension
benefits (D.6221)

26,0

26,0

26,0

11,3

11,3

Use of income account
1,4
11,3
–11,0

–11,8

25,8

–3,0

1,4

Final consumption
expenditure (P.3)

11,3Adjustment for thechange in pension
entitlements (D.8)

0Changes in assets

SavingFinancial accountNet borrowing/lending (B.9)

11,3
–11,0

–0,5

14,5

–3,0

11,3

Pension entitlements(F.63)

0,0

Other financial assets

Other flows related to defined contribution pension
schemes17.100 The other factors affecting the change in the bal-ance sheet entry for the change in pension entitlements are shown in the other changes in assets
accounts. In particular, the entitlements of thescheme’s beneficiaries show holding gains or losses
in the revaluation account corresponding exactly

European system of accounts — ESA 2010

Changes in liabilities
–11,0

–11,8
11,3

25,8

–3,0

0,0
11,3

to those on the assets held by the pension fund tomeet such obligations.
17.101 The investment of the entitlements of defined con-tribution pension schemes leads to holding gains
or losses. Such gains or losses come about throughvalue changes of the assets held by the pension
fund, and an amount exactly equal to the holding
gains and losses is attributed as an increase in the

375

17

Social insurance including pensions

pension entitlements of the beneficiaries. This isrecorded in the revaluation account.

Transactions for defined benefit pension schemes
17.102 For defined benefit pension schemes, the employer

retains responsibility for meeting the pension payments. Alternatives involving the use of a multiemployer scheme or where government assumes
responsibility on behalf of the employer follow thedefinitions given in paragraphs 17.76 and 17.77.

17.103 The total contribution made by an employer toa defined benefit pension scheme on behalf of
his employee must be sufficient, so that, together
with any actual contribution by the employee
and excluding the cost of operating the scheme, itmatches the current service increase in the employee’s pension entitlements. The contribution by theemployer is divided into an actual and an imputedpart, the latter being calculated so as to be an exact
match between all contributions to the fund adding to the entitlements of the employee and thecurrent service cost of these entitlements.

17.104 The contribution by the employer is calculated inrelation to the pension entitlement earned in the
period regardless of any investment income earned
by the scheme in the same period or any overfunding of the scheme. The current period entitlement is part of compensation of employees, andnot including the full value of the employer’s contribution will result in an understatement of compensation of employees, and an overstatement of
the employer’s operating surplus. It is importantthat contributions continue to be recorded evenin the event of a contributions holiday, when theemployer does not make an actual contribution,
the benefit to the employer being regarded as achange in liabilities between the pension fund andthe employer. This leaves the net worth of boththe same as when contributions are not recorded
under a contributions holiday, without reducing
compensation of employees artificially.

17.105 In defined benefit schemes, a qualifying period

before an employee becomes eligible to receivea pension in retirement is possible. Despite thisqualifying period, both contributions and entitlements are to be recorded from the start of employment, adjusted by a factor reflecting the probability

376that the employee will in fact satisfy the qualifying
period.
17.106 The sum of employers’ actual and imputed pen-sion contributions is treated as compensation of
employees. It is recorded as a use of the employer
in the generation of income account, and a
resource of the employee in the allocation of primary income account.

17.107 The increase in the present value of the entitle-

ments of continuing employees and those who nolonger contribute but remain eligible for pensions
in future represents the investment income distributed to the employees. No deduction is made forany amount that may be funded from holding gains
or that is not actually matched by existing funds.
The investment income distributed to employees matches the amount that is unequivocally due
to the employee under the prevailing agreements;
the means by which the employer may ultimately
match this obligation is not relevant for the recording of this as investment income any more thanthe means by which interest or dividends are actually financed affect their recording as investment
income. The investment income is recorded as ause for the pension fund and a resource for households. It is immediately reinvested by the households in the fund and included in pension contribution supplements.

17.108 In the secondary distribution of income account,social contributions are shown as a use of households and a resource for the pension fund. The
total amount of the social contributions payable is made up of the actual and imputed contributions of the employers as part of compensationof employees, excluding the amount of the costs ofrunning the pension scheme, plus actual contributions by employees plus the contribution supplements specified in paragraph 17.107. As explainedin paragraphs 17.54 to 17.56 with regard to defined
contribution schemes, the accounts show the fullvalue of the contributions and contribution supplements with an offsetting item representing theservice charge payable. The amount actually paid isa net contributions figure.

17.109 The pension benefits to households from the pen-sion scheme are recorded in the secondary distribution of income account. When the benefits aretaken in terms of an annuity, the annuity payments

European system of accounts — ESA 2010

Social insurance including pensions

are shown here, not the lump sums payable at thetime of retirement.

17.112 The amount in the use of income account as paidby the pension fund to households is shown in thefinancial account as a change in assets of households vis-à-vis the pension fund.

17.110 In the use of income account, there is an entry forthe payment of the service provided by the pension fund, equal to the value of the pension fund’s
output plus the output of the enterprises operating annuities bought with pension entitlements. It
is shown as a use for households and a resource forthe pension fund.

17.113 Other organisations, such as a trade union, may

operate a defined benefit pension scheme, fortheir members, that is in all respects parallel toan employer’s defined benefit pension scheme.
Exactly the same recording is followed except thatreferences to the employer should be understoodto refer to the pension manager and references tothe employee should be understood to refer to theparticipant in the scheme.

17.111 Also in the use of income account, there is anentry showing the increase in pension entitlements
caused by the granting of further pension entitlements by the employer, on the one hand, less thedecrease from the benefits receivable, on the other.
This amount is shown as a resource for households
and a use for the pension fund. The rationale forthis is that since this change in pension entitlements directly affects the net worth of households,
it should be included in the saving of the households sector.

1717.114 To illustrate the recording of transactions con-nected with a defined benefit pension scheme,
Table 17.4 shows a numerical example. Figuresthat are imputed are shown in bold; those that
result from re-routing are shown in italics.

Table 17.4 — Accounts for pension benefits payable under a defined benefit scheme
Uses

Type of accountand transactions

Employer Pension House­ Other
Total
fund
holds sectors economy

Resources
Employer Pension House­ Other
Total
fund
holds sectors economy

Production accountOutput (P.1)

0,6

0,6

Generation of income account
10,0

4,1

10,0

Employers’
actual pension
contributions (D.1211)

4,1

Employers’
imputed pension
contributions(D.1221)

Allocation of primary income account

2,2
4,0

Employers’
actual pension
contributions (D.1211)

10,0

10,0

Employers’
imputed pension
contributions(D.1221)

4,1

4,1

2,2

Property income
(D.4)

4,0

Investment income
payable on pension
entitlements (D.442)

European system of accounts — ESA 2010

2,2

2,2
4,0

4,0

377

17

Social insurance including pensions

Uses
Employer Pension House­ Other
Total
fund
holds sectors economy

Type of accountand transactions

Resources
Employer Pension House­ Other
Total
fund
holds sectors economy

Secondary distribution of income account
19,0

19,0

Householdtotal pension
contributions

19,0

19,0

10,0

10,0

Employers’
actual pension
contributions (D.6111)

10,0

10,0

4,1

Employers’
imputed pension
contributions(D.6121)

4,1

4,1

1,5

1,5

Households’
actual pension
contributions(D.6131)

1,5

1,5

4,0

4,0

Households’ pension
contribution
supplements (D.6141)

4,0

4,0

–0,6

–0,6

Social insurance
scheme service
charges (D.61SC)

–0,6

–0,6

16,0

Other social
insurance pension
benefits (D.6221)

4,1

16,0

16,0

16,0

3

3

Use of income account
0,6
3
–14,1

–1,2

17,5

–2,2

0,6

Final consumption
expenditure (P.3)

3

Adjustment for thechange in pension
entitlements (D.8)

0SavingChanges in assets

Financial accountNet borrowing/lending (B.9)

3
4,1
–10,0

–2,3

14,5

–2,2

3

Pension entitlements(F.63)

4,1

Claims of pension
funds on pension
managers (F.64)

0

Other financial assets

17.115 Actuarial calculations show that the increase inpension entitlements coming from current service, that is the net amount of the further pension
entitlements ‘earned’ in the year in question, is 15.
Households (the policyholders/employees) contribute 1,5. The employer, therefore, is obliged toprovide 13,5. In addition, the cost of operating the378

Changes in liabilities
–14,1

–1,2

17,5

–2,2

3
4,1

0
3
4,1

scheme is estimated at 0,6. In total, therefore, theemployer must provide 14,1. He actually contributes 10 so the remaining 4,1 is an imputed contribution. The output of 0,6 is shown in the production account; the consumption of this service isreported in the ‘use of income account’. The contributions by the employer are shown as a use forEuropean system of accounts — ESA 2010

Social insurance including pensions

the employer in the generation of income accountand a resource for the households in the allocationof primary income account.
17.116 In the allocation of primary income accounts,

property income is shown. The increase in pension
entitlement coming from past service, due to theunwinding of the discount factor because retirement is one year nearer, is 4. This is shown as an
imputed flow of property income from the pension fund to households. At the same time, thepension fund actually earns 2,2 from investment
income of the funds they manage. At this point,
therefore, there is a shortfall of 1,8 in the pension
fund resources but it is not shown in the current
accounts.

17.117 In the secondary distribution of income accounts,

the payments from households to the pension fundare shown. This can be viewed in one of two ways.
The sum of the contributions paid by households
should be equal to the increase in entitlements
coming from current service (15) plus that comingfrom income on past entitlements (4) or 19 in total.
The amounts actually paid are 10 received as theemployers’ actual contributions, 4,1 as the imputed
contributions, 1,5 of the households own contributions, contribution supplements of 4 less the service charge of 0,6; again 19 in total.

17.118 In the use of income account, as well as the pur-chase of the service charge as part of household
final consumption expenditure, the change in pension entitlement is shown as a use for the pension
fund and a resource for households. In this example, the amount of household contributions of 19
is set against pension benefits of 16. Thus, there isan increase in pension entitlements of 3 owing tohouseholds.

17.119 Households have saving of 17,5 of which 3 is theincrease in their pension entitlements. This meansthat they have acquired other financial assets (orreduced liabilities) by 14,5. This figure is the difference between the benefits received (16) and households’ actual contributions of 1,5.

17.120 In the financial account of the pension fund, thefigure of 4,1, which was the imputed contribution,is shown as the claim of the pension administrator
on the employer. There is a claim by householdson the pension fund of the change in pension entitlements of 3. In addition, the pension fund either

European system of accounts — ESA 201017

runs down financial assets, or increases liabilities, by 2,3, the figure corresponding to disposable
income excluding the imputed contribution element from the employer.

Supplementary table for accrued-todate pension entitlements in social
insurance
Design of the supplementary table17.121 The supplementary table (Table 17.5) on accrued-

to-date pension entitlements in social insurance
provides a framework for compiling and presenting comparable balance sheets and transactions
and other flow data of all types of pension entitlements from a debtor’s (pension manager) andalso from a creditor’s (household) point of view.
The table also covers stock and flow data not fullyrecorded in the core national accounts for specificpension schemes such as government-unfunded
defined benefit schemes with government as thepension manager, and social security pension
schemes.

17.122 The supplementary table covers the pension partof social insurance regarding old age pensions
only, including those pensions paid before normal
retirement age. Social assistance, health and longterm care insurance, separate sick leave and disablement insurance are not covered in this table.
Neither are individual insurance policies included.
However, in practice, it may not be feasible, or
sufficiently important, to completely separate thenon-pension social insurance elements. Elementsof social assistance within pension schemes generally organised as social insurance may not be separable, and so occur in the supplementary table.

17.123 Entitlements for survivors (e.g. dependent spouses,

children, and orphans) as well as disability- andinvalidity-type benefits are included in the supplementary table when they are an integral part of thepension scheme.

17.124 All elements of the supplementary table arerecorded with no deductions made for taxation,
further social contributions or the service charge
associated with the pension scheme.

379

380

Σ 2.1
to 2.4
– 2.5

Rela­
tions

Employer actual social
contributions

Employer imputed social
contributions

Household actual social
contributions

Household social contribution
supplements5

Less: pension scheme service
charges

Other (actuarial) change ofpension entitlements in social
security pension schemes

Reduction in pension
entitlements due to payment ofpension benefits

2.2

2.3

2.4

2.5

3

4

Increase in pension entitlements
due to social contributions

Pension entitlements

Column number

Pension manager

Recording

2.1

2

1

Row
No

A

Definedcontri­butionschemes

B

E

F

G

Classified
Classified
Classified
in financial
in generalin general
corpo­rations govern­ment4 gover­nment
H

Socialsecurity
pensionschemes

Not in the core
national accounts

Defined benefit schemes for general
government employees3

Opening balance sheet

D

Definedcontri­butionschemes

General government

Changes in pension entitlements due to transactions

C

Defined benefit
schemes andother2 nonTotal
defined contri­
bution schemes

Non-general government

Core national accounts

Table 17.5 — Supplementary table on accrued-to-date pension entitlements in social insurance

I

Total
pensionschemes

J

Counter­parts: pension
entitle­ments of
non-resident
house­holds1

17
Social insurance including pensions

European system of accounts — ESA 2010

European system of accounts — ESA 2010

Changes in entitlements due toother changes in volume6

9

C

D

Definedcontri­butionschemesE

F

A more detailed split of these positions must be provided for columns G and H based on the model calculations carried out for these schemes.

will contain different data from the core national accounts.

These supplements represent the return on members’ claims on pension schemes, both through investment income on defined contribution schemes’ assets and for defined benefit schemes through the unwinding of the discount rate applied.

6

are not applicable; the cells in

These are non-autonomous defined benefit schemes whose pension entitlements are recorded in the core national accounts.

5

The cells shown as

Schemes organised by general government for its current and former employees.

J

Counter­parts: pension
entitle­ments of
non-resident
house­holds1

4

I

Total
pensionschemes

Such other non-defined contribution schemes, often described as hybrid schemes, have both a defined benefit and a defined contribution element.

H

Socialsecurity
pensionschemes3

Related indicators

Closing balance sheet

G

Classified
Classified
Classified
in financial
in generalin general
corpo­rations govern­ment4 gover­nment

Defined benefit schemes for general
government employees3

Changes in pension entitlements due to other flows

B

Defined benefit
schemes andother2 nonTotal
defined contri­
bution schemes

General government

Not in the core
national accounts

Counterpart data for non-resident households will only be shown separately when pension relationships with the rest of the world are significant.

A

Definedcontri­butionschemesNon-general government

Core national accounts

2

OutputChanges in entitlements due torevaluations68

11

Change in entitlements due tonegotiated changes in scheme
structure

7

Pension entitlements

Transfers of pension
entitlements between schemes

610

Changes in pension entitlements
due to social contributions andpension benefits

5

Column number

Pension manager

Recording11+Σ
5 to 9

2
+3
–4

Rela­
tions

Row
No

Social insurance including pensions

17

381

17

Social insurance including pensions

The columns of the table17.125 The columns of the table refer to the three group-

ings of pension schemes, as follows:(1) by type of recording into pension schemes completely recorded in the core national accounts(columns A to F) and those whose entitlements
are only recorded in the supplementary table(columns G and H);(2) by type of pension manager into non-general
government (columns A to C) and general government pension schemes (columns D to H);
pension schemes including social security classified in general government are shown in columns D, F, G and H; and(3) by type of pension scheme into defined contribution schemes (columns A and D) and defined
benefit schemes (columns B and E to G).
17.126 For the most part, the beneficiaries of pension

schemes are resident households. In some countries, the number of non-resident households
receiving pension benefits may be significant. In
this case, column J is added to show the total for
non-resident households.

17.127 The decision to record the pension entitlements ofan unfunded employment-related defined benefit
pension scheme where government is the pension
manager within the standard national accounts or
only in the supplementary table depends on thenature of the defined benefit scheme. The guiding
principle for inclusion in the national accounts isthe closeness of the scheme to the national social
security pension scheme.

17.128 There is a wide diversity of schemes in the EU, andincluding all schemes would lead to inconsistencies
in recording. So entitlements of unfunded employment-related defined benefit schemes where government is the pension manager are recorded onlyin the supplementary table. This affects the calculation method in the core national accounts of theimputed employer social contributions for theseschemes.

382

17.129 Pension schemes are classified further according

to the pension manager, as government and nongovernment pension managers. The definition of apension manager is provided in paragraph 17.75.

17.130 Some employer pension schemes have a mixed

membership, for example including both government employees and employees of public corporations, and many pension schemes have frozen themembership of participants who have moved toother employers. A scheme having a small proportion of non-government employees does not prevent the scheme being described as having a government pension manager.

17.131 General

government-funded defined benefit
schemes for its own employees are shown in columns E and F. Column E shows schemes managed
by a pension fund or an insurance corporation andcolumn F those schemes managed by general government itself. Government schemes for its own
employees where the pension entitlements do notappear in the core national accounts are shown incolumn G. The sum of columns E, F and G therefore shows the total responsibility of government
for pension entitlements for its own employees.

17.132 Pension schemes are classified by type of scheme as

defined contribution pension schemes (columns A
and D) and defined benefit pension schemes (columns B, E, F and G). Column H relates to social
security pension schemes.

The rows of the table17.133 The rows of the table relate to balance sheet posi-tions, transactions and other flows associated withpension entitlements of the schemes includedin the supplementary table and they are shown
separately in Table 17.6. There is reconciliation
between the opening stock of pension entitlementsof such schemes at the beginning of a period andthe closing stock of pension entitlements at theend of a period, taking account of all transactions
and other flows during the period. For schemes
recorded in columns G and H, the stocks of pension entitlements are not recorded in the core
national accounts, but many of the transactions arerecorded in the core national accounts.

European system of accounts — ESA 2010

Social insurance including pensions

17

Table 17.6 — Rows of the supplementary table on accrued-to-date pension entitlements in social insurance
Row NoOpening balance sheet
1Pension entitlements
Changes in pension entitlements due to transactions

2

Increase in pension entitlements due to social contributions

2.1

Employer actual social contributions

2.2

Employer imputed social contributions

2.3

Household actual social contributions

2.4

Household social contribution supplements1

2.5

Less: pension scheme service charges

3

Other (actuarial) increase of pension entitlements in social security pension schemes

4

Reduction in pension entitlements due to payment of pension benefits

5

Changes in pension entitlements due to social contributions and pension benefits

6

Transfers of pension entitlements between schemes

7

Change in entitlements due to negotiated changes in scheme structure
Changes in pension entitlements due to other economic flows

8

Changes in entitlements due to revaluations29

Changes in entitlements due to other changes in volume2

10

Pension entitlements

Closing balance sheet
Related indicators
11

Output1

Such supplements represent the return on members’ claims on pension schemes, both through investment income on defined contribution schemes’ assets and for defined benefit
schemes through the unwinding of the discount factor applied.

2

A more detailed split of such positions has to be provided for columns G and H based on the model calculations carried out for those schemes (see paragraphs 17.158-17.160).

Opening and closing balance sheets
17.134 Row 1 shows the opening stock of pension entitle-

ments, which is exactly equivalent to the closing
stock of the previous accounting period. Row 10shows the corresponding closing stock of pension
entitlements at the end of the accounting period.

Changes in pension entitlements due to transactions
17.135 Employer and employee actual social contribu-

tions are recorded in rows 2.1 and 2.3, as in thecore national accounts. In the case of some pension schemes, notably social security pension
schemes, it is necessary to distinguish actual social
contributions relating to pensions from social contributions relating to other social risks such as
unemployment.

European system of accounts — ESA 201017.136 For defined benefit pension schemes, employer

imputed social contributions are generally measured as the balancing item — any changes in entitlements over the year not included in other rowsof the table are captured in row 2.2. This row covers‘experience effects’ where the observed outcomeof pension modelling assumptions (wage growthrate, inflation rate and discount rate) differs fromthe levels assumed. Zeros are shown in this row for
defined contribution schemes.

17.137 Row 2.4 shows the property income earned or

imputed in the schemes, which is routed via the households sector or the rest of the world sector. It should
be noted that for all defined benefit schemes including social security, whether funded or unfunded, thisproperty income is equivalent to the unwinding of the
discount rate. In other words, the value is equal to the

383

17

Social insurance including pensions

discount rate times the pension entitlements at the
beginning of the accounting period.
H, specifically the actual contributions made byboth employers and employees, appear in the core
national accounts, even though the entitlements
and change in entitlements do not. Other entries in
the columns for G and H shown only in the supplementary table are shaded in the table and explained
below.

be positive or negative — the negative cases occur
in a social security pension scheme where the discount rate is higher than the scheme’s internal rateof return. The internal rate of return of a pension
scheme is the discount rate that equalises the present value of the actual contributions paid and thediscounted value of pension entitlements accrued
through those contributions. Negative entries
occur for example when contributions have beenraised above the actuarial required level in order tofinance a short-run cash shortfall.

17.139 The imputed contribution by employers for those

17.142 Row 3 does not represent cash transfers from tax

17.138 Some of the entries in the rows of columns G andgovernment schemes for which entitlements
appear in column G but not in the core national
accounts requires special consideration. Within
the core national accounts the imputed contributions are to be estimated on the basis of actuarial calculations. In cases where the actuarial calculations cannot obtain a sufficient level of reliability and in such cases only, two other approaches
are possible to estimate government employers’
imputed pension contributions as follows:(1) on the basis of a reasonable percentage of wages
and salaries paid to current employees; or(2) as equal to the difference between current benefits
payable and actual contributions payable (by both
employees and government as employer).
Items for household social contribution supplements and the other changes in entitlements areshown on the same basis as for private schemes.

17.140 An item calculated on the same actuarial basis inrespect of social security is shown in row 3 as ‘other(actuarial) accumulation of pension entitlements
in social security funds’. It is, thus, distinguishedfrom employers’ imputed social contributions.

17.141 Given that the supplementary table provides a com-plete breakdown of the changes in pension entitlements over the accounting period, it is necessary
to introduce a specific row to deal with the casewhereby actual social contributions to the social
security pension scheme are not actuarially based,
and, therefore, there is an imputed contribution,
which is not the responsibility of any employer.
Such imputed transactions of social security pension schemes are shown in row 3 as other actuarial increase of pension entitlements in social security pension schemes. The entries in this row can384

revenues, and would be recorded in the standard
accounts as current transfers between government
units if they have no impact on pension entitlements. In some Member States, governments maketransfers to pension schemes which do increase
pension entitlements (for example where transfers
are made for specific social groups which are unable to contribute directly), which would indicatethat the amounts should be implicitly included inthis row figure calculated by difference.

17.143 Differences in the accounting period encountered

between assumed and actual wage growth (that is thewage growth part of the ‘experience effects’ or ‘actuarial effects’ when modelling) need to be reflected intransactions (employer’s imputed social contributions), along with all other experience effects.

17.144 Row 3 captures any ‘experience effects’ observed forsocial security pension schemes where the observed
outcome of pension modelling assumptions (wagegrowth rate, inflation rate and discount rate) in any
one year differs from the levels assumed.

17.145 Row 4 shows pension benefits that are paid during

the accounting period. Payment of pension benefits
has the effect of ‘settling’ some of the pension entitlements included in the opening stock in row 1.

17.146 Row 5 presents the changes in pension entitle-

ments due to contributions and benefits. It is row
2 plus row 3 less row 4. This balancing item measured from the non-financial accounts is equivalent
to that measured from the financial accounts.

17.147 One characteristic of the changing environmentof pensions is the increasing possibility of having ‘portable pensions’, where a person moving
jobs can transfer the pension entitlement with theformer employer to one with the new employer.

European system of accounts — ESA 2010

Social insurance including pensions

When this happens, the pension entitlement of thehousehold concerned is unaffected but there is atransaction between the two pension schemes as
the new one assumes the liability of the former. In
addition, there will be a counterpart transaction insome assets to match these liabilities.
17.148 If government assumes the responsibility for pen-sion provision for the employees of a non-government unit through an explicit transaction, any
payment by the non-government unit needs to berecorded as pre-paid social contributions (F.89).
There is further discussion of this type of arrangement in paragraphs 20.272 to 20.275.

17.149 When one unit takes over the responsibility for pen-sion entitlements from another unit, two transactions
are recorded in row 6. First, there is a transfer of pension entitlements from the original pension scheme
to the new pension scheme. Second, there may be atransfer in cash or other financial assets to compensate the new pension scheme. It is possible that thevalue of the transfer of financial assets is not exactly
equal to the value of the pension entitlements transferred. In that case a third entry is needed in transactions of capital transfers to correctly reflect thechanges in net worth of the two units concerned.

17.150 Employers are increasingly reforming the pen-sion schemes they manage in response to demographic and other factors. Reforms may take theform of a change to the benefit formula, a change
in the retirement age, or a change in other scheme
provisions.

17.151 Only enacted pension reforms lead to recording

in the national accounts, in the estimates of pension entitlements in the year in which enactment
takes place and subsequently in observed flows. An
announcement by an employer of its intention toundertake a pension reform is not a sufficient basis
to introduce the effects of the reform into national
accounts data.

17.152 In some cases of reform, the employer chooses

to leave the vested rights of existing members
untouched and only applies the reformed arrangements for future acquisition of additional entitlements. There would be no immediate impact on
current pension benefits. The impact would be seenin future measures of pension benefits, in line withthe accrued-to-date approach.

European system of accounts — ESA 20101717.153 However, in some cases the employer decides tomake reforms which affect the accrued-to-dateentitlements for existing members; for example,
a general increase in retirement age for all members. Such types of reforms change the stock ofpension entitlements during the year in which they
are enacted. This effect must be accounted for asa flow. It may be very large since it affects current
and future pension entitlements.

17.154 Changes in pension entitlements are recorded astransactions as follows:(a) if the entitlements of a pension scheme areincluded in the core national accounts, and theemployer agrees to a change in the terms ofpension entitlements via negotiation with theaffected employee, this change is recorded as atransaction in the core national accounts (under
imputed employer social contributions);(b) if the entitlements of a pension scheme are notrecorded in the core national accounts, andthe employer agrees a change in the terms ofpension entitlements via negotiation with theaffected employees, this change is recorded asa transaction in the supplementary table;(c) in the case of social security, if changes in pension entitlements are agreed by the parliamentary authorities, this is recorded in the supplementary table as if it were negotiated.
17.155 Changes in pension entitlements that are imposed

without negotiation are recorded as other changes
in the volume of assets.

17.156 Changes in accrued-to-date entitlements arisingfrom past service are recorded as capital transfers.

17.157 Row 7 shows the impact of reforms of pension scheme

structures on entitlements relating to past service.

Changes to pension entitlements due to othereconomic flows
17.158 Rows 8 and 9 account for the other flows as reval-uations and other changes in volume associatedwith pension schemes in social insurance. Table
17.7 illustrates the other flows, divided into revaluations and other changes in volume.

17.159 Revaluations are due to changes of key model

assumptions in the actuarial calculations. These

385

17

Social insurance including pensions

assumptions are the discount rate, the wage rate
and the inflation rate. Experience effects are notincluded here unless it is not possible to identify them separately. Other changes in actuarial
estimates are more likely to be recorded as otherchanges in volume of assets. The effects of pricechanges due to the investment of the entitlements
are recorded as revaluations appearing in the revaluation account.
17.160 When the demographic assumptions used in

the actuarial calculations are changed, they arerecorded as other changes in the volume of assets.

Table 17.7 — Other flows as revaluations and otherchanges in the volume of assets
Revaluations
Changes in assumed discount rate

Changes in assumed wage developments
Changes in assumed price developments

Related indicators
17.161 Financial services produced by all pension schemes

are recorded as being paid by scheme members, andso the costs of pension schemes are not recorded asintermediate consumption of the employer operating the scheme. Accordingly, Chart 17.1 showsfinancial services separate from social contributions. Presenting financial services in this way
means the figures shown as contributions received
by employees from their employers are exactly thesame as that part of the contributions paid by theemployees to the pension scheme. Furthermore, it
is not necessary to show which element of social
contributions covers the service fee. It is the household contribution supplement that covers the service fee for a defined contribution scheme and it iseither the employers’ or the household contribution that does so for a defined benefit scheme.
As output is recorded for all employer pension
schemes, which the scheme’s members consume,row 11 shows the output by type of scheme.

Other changes in the volume of assets
Changes in demographic assumptions
Other changes

Chart 17.1 — Pension entitlements and their changes

Contributions(actual, imputedof which: property
income)(rows 2 and 3)

Pension benefits(row 4)

Financial services
Other flows(revaluations,other changes involume)(rows 8 and 9)

Changes in pension
entitlements (due totransactions and othereconomic flows)

Pension entitlements
at the beginningof the period(row 1)
Stock at t0

Transactions and other flows between t0 and t1

Pension entitlements
at the endof the period(row 10)Stock at t1

This chart is purely illustrative and no specific meaning
should be attributed to the size of the different boxes.

386

European system of accounts — ESA 2010

Social insurance including pensions

Actuarial assumptions
Accrued-to-date entitlements
17.162 Pension entitlements in national accounts aremeasured on a gross basis. No assets or accumulated social contributions are taken into account tocompile any type of net entitlements. Only pension
entitlements due to actual and future pension benefits are covered.

17.163 The accrued-to-date liability concept is appropri-ate for national accounts purposes. It includes thepresent value of pension entitlements arising fromalready accrued pension rights. For example, it
covers the pension entitlements accrued by current employees, including deferred pension entitlements, and the remaining pension entitlementsof existing pensioners.

17.164 As for all national accounts data, the data are meas-

ured ex post, as they include only the current valuesof the entitlements that arise from the accrued pension rights at the balance sheet date. The method
is based on observable past events and transactions, such as membership of the pension schemeand paid contributions. However, such ex post
measures also rely on a number of assumptionsin the modelling process. Estimates are made forthe probability of current contributors dying or
becoming disabled before reaching the pensionable age. The measures also reflect future changes ofthe payment stream due to any legislation enacted
prior to the year for which pension entitlements
are being calculated. Finally, the method requires
some important assumptions on future developments, notably regarding the discount rate for
future pension disbursements.

Discount rate
17.165 The discount rate applied to estimates of future

pension benefits in the case of accrued-to-dateentitlements is one of the single most important
assumptions to be made in the modelling of pension schemes, since its accumulated impact overmany decades can be very large. The discount ratefrom a chosen approach may change over time,
which would lead to revaluations in the accounts.

European system of accounts — ESA 201017

17.166 The discount rate can be seen as equivalent to the

expected risk-free rate of return on assets held bya pension scheme. In the case of pension entitlements to be paid in the future, the discount rate
can also be seen as the cost of capital in a sense thatthe future payments have to be financed by government, via the usual sources:(a) net acquisitions of liabilities, such as loans anddebt securities;(b) net sales of assets; and(c) government revenue.
A discount rate can be derived from this cost offinancing.

17.167 The discount rate should be a risk-free rate. Some

criteria for identifying suitable rates are given in
the following sentences. The discount rate on highquality government and corporate bonds, e.g. of‘AAA’-rating provides an appropriate reference.
Yields for high quality corporate bonds are onlyused where the markets are broad. The bonds areto be of a residual maturity of the same order as
the pension entitlements. The use of a discount rate
based on a long-term maturity, where long-term istaken to be 10 years or longer, is recommended.
The average of several years of the discount rate,
linked to the length of the economic cycle, can beapplied to smooth the time series of the discountrate. The assumption on the discount rate and thefuture development of wages should be consistent. Member States are required to provide the elements demonstrating the validity of the discountrate used for pension entitlements in the light ofthe various criteria mentioned above.

17.168 The same discount rate has to be used for all pen-sion schemes where government is the pension manager (including social security pension
schemes) at whatever level of government since thedesired result should approximate risk-free yields.

Wage growth
17.169 Defined benefit pension schemes often apply a for-mula to the member’s salary — whether it be thefinal salary, an average of a period of years, or lifetime earnings — to determine the level of pension.
The final pensions paid are affected by the average

387

17

Social insurance including pensions

growth of members’ salaries, notably through promotions and career progression.

practice depending on how price and wage effects
are treated.

17.170 It is, therefore, appropriate to consider what

17.176 One important factor is the treatment of indexa-

assumptions are made for the future developmentof wages. The assumed long-term development ofwages should correspond with the observed discount rate. Both variables are, in the long-term,interdependent.

17.171 The accounting profession uses two actuarial

methods to measure the impact of wage increases.
The accrued benefit obligation (ABO) records only
the benefits actually accrued to date. It represents
the amount an employee could walk away with if
he left the firm tomorrow, and may be the basis
for assessing a person’s net worth in the case of adivorce settlement, for example.

17.172 A projected benefit obligation (PBO) is a more

prudent measure of what the eventual level of entitlement is likely to be. For an individual, the PBO
makes assumptions about how many future promotions the person is likely to receive and calculates his final salary accordingly. Then, if that
individual has in fact only worked 20 out of an
expected 40 years, it halves the final salary and calculates pension entitlement for the individual as if
this were his current salary. Where an individual’s
ABO increases in steps as he is promoted, the PBO
increases steadily over time. For the individual,
PBO is always higher than ABO until the momentof retirement when the ABO catches up with thePBO.

17.173 The impact of wage increases needs to be reflectedin transactions, because awarding a wage increaseis a conscious economic decision taken by theemployer. Moreover, in concept the ABO and PBO
approaches lead, in the long run, to the same transactions being recorded, even if the timing of thosetransactions differs depending on the demographics of the scheme.

17.174 Changes to assumptions of future wage changes,

which are generally made every few years in
response to a general review of pension modelling assumptions or due to a major restructuring of the workforce, are recorded as other flows(revaluations).

17.175 A number of possible variants in the applicationof the ABO and PBO methods are observed in

388tion arrangements on pensions, where the pension
to be paid will increase in line with nominal wage
growth after retirement.

17.177 Given the importance of wage effects, it is rec-ommended that the choice of an ABO or PBO
approach be based on the underlying benefit formula in the pension scheme. Where this formula
includes implicitly or explicitly a factor for wage
increases (before or after retirement) then a PBO
approach is followed. Where such a factor is notpresent, an ABO approach is used.

Demographic assumptions
17.178 Future pension payments are subject to demo-

graphic effects, in terms of the age/ gender balanceof members and their longevity. Demographic
tables are well established for the modelling of pension and life insurance schemes.

17.179 In the case of employment-related pension

schemes, the membership of the scheme is welldefined and, therefore, the data should be available.
In the case of social security schemes, recourse ismade to general population data if no specific data
are available on social security membership.

17.180 In the use of longevity tables, also known as mor-tality tables, tables which are specified with regard
to gender and groups of employees are preferred.
The group of members receiving a disability pension should be modelled with different longevity
assumptions, if possible.

17.181 Longevity assumptions should include the increaseof longevity over time.

17.182 The modelling of pension schemes may involve theuse of demographic assumptions other than longevity, for example future fertility rates, labour participation rates or migration rates in the case where
the pension benefit or indexation formula is basedon a ‘dependency ratio’ or similar type of approach.

17.183 Where early retirement within a scheme is actu-

arially neutral, modelling is unaffected. Nonactuarially neutral early retirements have an effect,
and they frequently arise given the way in which

European system of accounts — ESA 2010

Social insurance including pensions17

different interest rates are usually applied at early
retirement. Therefore, the appropriate modellingof early retirement behaviour is important, particularly where a reform raises the future pensionable age.

European system of accounts — ESA 2010389

Rest of the world accounts

18

CHAPTER 18
Rest of the world accounts(1) the capital account (V.III.1), showing capital transfers and acquisitions less disposals of non-produced non-financial assets;

Introduction
18.01 The accounts of resident institutional sectors show(2) the financial account (V.III.2), showing transactions in financial assets and liabilities;

economic activity: production; generation, distribution and redistribution of income; consumption; and accumulation of assets and liabilities.
These accounts capture transactions amongst resident units, and transactions of resident with nonresident units that make up the rest of the world.

(3) other changes in volume of assets account(V.III.3.1), showing uncompensated seizures etc.;(4) revaluation account (V.III.3.2), showing nominal
holding gains and losses;(d) the external assets and liabilities account (V.IV)
presents the opening and closing balance sheets,
and the changes in the value of those assets andliabilities between opening and closing balance
sheets.

18.02 The ESA is a closed system in that both sides toevery transaction are recorded in the accounts asa use and a resource. For resident units, this enables a coherent articulated set of accounts to be
drawn up, and all the economic activities of each
institutional unit are included in the sequence ofaccounts. This is not true for non-resident units.
Non-resident units can only be observed throughtheir interaction with resident units of the economy being measured, and so only their transactions with resident units can be recorded. This isdone through the creation of a sector called ‘therest of the world’ sector, and the compilation of a
special set of accounts with limited entries whichshow, for non-resident units, only the transactions
with resident units.

The full sequence is shown in Chapter 8, and theaccount numbers in brackets above refer to theaccount numbers in that Chapter.
18.04 As the accounts are drawn up from the point ofview of the rest of the world sector, imports to thedomestic economy are shown as a resource, andexports from the domestic economy as a use of theexternal account of goods and services. A similar
reversal occurs throughout the rest of the world
accounts. If a balance is positive, it signifies a surplus for the rest of the world, and a deficit for the
total domestic economy. Similarly, a negative balance shows a deficit for the rest of the world, and asurplus for the domestic economy. A financial asset
held by the rest of the world is a liability for thedomestic economy, and a liability held by the restof the world is an asset for the domestic economy.

18.03 The sequence of accounts for the rest of the world

sector is as follows:(a) the external account of goods and services(V.I), covering imports and exports of goods
and services;(b) the external account of primary and secondary incomes (V.II), covering compensation of
employees, property and investment income,and current transfers such as personal transfers(including workers’ remittances) and international aid;(c) the external accumulation accounts (V.III),consisting of:European system of accounts — ESA 201018.05 The standard framework for statistics on the trans-

actions and positions between an economy andthe rest of the world is set out in the Balance ofPayments and International Investment Position
Manual 2008 (Sixth edition) (BPM6)1. That man-

1

International Monetary Fund, Balance of payments and international investment
position manual, sixth edition (BPM6), 2009, ISBN 978-1-58906-812-4 (available on
http://www.imf.org).

391

18

Rest of the world accounts

ual is harmonised with the System of National
Accounts 2008, but sets out the interactions
between the domestic economy and the rest of
the world in a set of accounts and balance sheets
which present the information in a different way.
This Chapter sets out the rest of the world sector
accounts of the ESA 2010, and how they relate to
the international accounts of the BPM6.

Economic territory
18.06 The most commonly used concept of economic ter-ritory is the area under the effective economic control of a single government. However, currency or
economic unions, regions, or the world as a whole
may be used, as they may also be a focus for macroeconomic policy or analysis. The full definition is
given in Chapter 2 (paragraphs 2.04-2.06)

18.07 In order to determine whether an entity is a res-ident in a given economic territory, one must
establish:(1) whether the entity qualifies as an institutional
unit; and, if so,(2) whether the entity also meets the criteria set
out in Chapter 2 concerning determination ofresidency.

Residence
18.08 The residence of each institutional unit is the eco-nomic territory with which it has the strongest
connection, expressed as its centre of predominanteconomic interest. The concepts are identical in
the ESA, the 2008 SNA and the BPM6. The introduction of the terminology ‘centre of predominanteconomic interest’ does not mean that entities with
substantial operations in two or more territories nolonger need to be split (see paragraph 18.12) or that
institutional units without any significant physicalpresence can be disregarded (see paragraphs 18.10
and 18.15). The concept of residence in general,and for households, enterprises and other entities
in particular, is described fully in Chapter 2.

392

Institutional units
18.09 The concept of ‘institutional unit’ is the same in

the ESA, the 2008 SNA and the BPM6. The generaldefinition is given in Chapter 2, paragraphs 2.122.16. Given the focus on the national economy,
there are special treatments of units in cross-border situations. In some cases, legal entities are combined into a single institutional unit if they are resident in the same economy, but are not combined ifthey are resident in different economies. Similarly,
a single legal entity may be split when it has substantial operations in two or more economies. As
a result of those treatments, the residence of theunits concerned becomes more clear-cut and theconcept of economic territory is strengthened.

18.10 Corporations’ and governments’ use of Special

Purpose Entities (SPEs) is normally to raise finance.
Where the SPE is resident in the same economy as
the parent, then the treatment is straightforward.
The SPE will normally have none of the attributes
that would make it a separate entity from the parent, and assets and liabilities incurred by the SPE
will be shown in the accounts of the parent corporation. Where the SPE is non-resident, the residence criteria for the rest of the world sector
demand that a separate entity is recognised. In thiscase, any assets and liabilities incurred by the SPE
are shown in the rest of the world sector, and not
in a sector of the domestic economy. The treatmentof non-resident SPEs belonging to the general government is defined in paragraph 2.14.

18.11 Members of a household must all be resident in thesame economy. If a person resides in a different
economy from the other members of a household,that person is not regarded as a member of thathousehold, even though they may share income
and expenses, or hold assets together.

Branches as a term used in theinternational accounts of the balance of
payments
18.12 A branch is an unincorporated enterprise thatbelongs to a non-resident unit, known as the parent. It is treated as a resident and a quasi-corporation in the territory where it is situated. The

European system of accounts — ESA 2010

Rest of the world accounts

identification of branches as separate institutional
units requires indications of substantial operations
that can be separated from the rest of the entity. A
branch is recognised in the following cases:(a) either a complete set of accounts, including abalance sheet, exists for the branch; or(b) it is possible and meaningful, from both an economic and legal viewpoint, to compile thoseaccounts if required. The availability of separate records indicates that an actual unit exists
and makes it practical to prepare statistics.
In addition, one or more of the following factors
tend to be present:(a) the branch undertakes or intends to undertake
production on a significant scale and that production is based in a territory other than that ofits head office, for one year or more:(1) if the production process involves physical presence, then the operations should be physicallylocated in that territory;(2) if the production does not involve physical presence, such as some cases of banking, insurance,other financial services, ownership of patents,
trademarks or copyrights, merchanting and ‘virtual manufacturing,’ then the operations should berecognised as being in the territory by virtue of theregistration or legal domicile of those operations inthat territory;(b) even if it has tax-exempt status, the branch isrecognised as being subject to the income tax
system, if any, of the economy in which it islocated.
18.13 The identification of branches has implications forthe statistical reporting of both the parent and thebranch. The operations of the branch are excluded
from the institutional unit of its head office and thedelineation of parent and branch has to be madeconsistently in both of the affected economies. A
branch may be identified for construction projects or mobile operations such as transport, fishing or consulting. However, if the operations are
not substantial enough to identify a branch, they
are treated as an export of goods or services fromthe head office.

18.14 In some cases, preliminary operations related toa future direct investment project prior to incorporation are sufficient evidence of establishing

European system of accounts — ESA 201018

residence with the result that a quasi-corporation is established. For example, licenses and legal
expenses for a project are shown as being incurredby a quasi-corporation, and are part of direct
investment flows into that unit rather than salesof licenses to non-residents, or exports of services,
respectively, to the head office.

Notional resident units
18.15 When land located in a territory is owned by anon-resident entity, a notional unit that is treatedas resident is identified for statistical purposes as
being the owner of the land. This notional resident
unit is a quasi-corporation. This manner of treatinga notional unit as resident is also applied to associated buildings, structures and other improvementson that land, leases of land for long periods, andownership of natural resources other than land.
As a result of such treatment, the non-resident isowner of the notional resident unit, rather thanowning the land directly, so there is an equity liability to the non-resident, but the land and othernatural resources are always assets of the economy in which they are located. The notional resident unit usually supplies services to its owner, forexample, accommodation in the case of vacation
homes.

18.16 In general, if a non-resident unit has a long-termlease on an immovable asset such as a building,this is associated with it undertaking productionin the economy where it is located. If, for any reason, there is no associated production activity, anotional resident unit is also created to cover sucha lease. The non-resident unit is treated, therefore,
as owning the notional resident unit and not thebuilding, which is the property of the economy
where it is located.

Multi-territory enterprises
18.17 Some enterprises operate as a seamless operation

over more than one economic territory, typicallyfor cross-border activities such as airlines, shipping lines, hydroelectric schemes on border rivers,
pipelines, bridges, tunnels and undersea cables.
Separate branches need to be identified unless theentity is run as a single operation with no separate

393

18

Rest of the world accounts

accounts or decision-making for each territory thatit operates in. In such cases, because of the central focus on data for each national economy, it
is necessary to split the operations between economies. The operations are then pro-rated according to an appropriate enterprise-specific indicatorof the proportions of operations in each territory.
The pro-rating treatment may also be adopted forenterprises in zones subject to joint administrationby two or more governments.

Geographical breakdown
18.18 For the purpose of compiling the accounts of the

The international accounts of thebalance of payments
18.20 The national accounts are different from the inter-national accounts shown in the BPM6. The international accounts show the transactions between
a domestic economy and foreign economies
from the point of view of the domestic economy.
Accordingly, imports are shown as a use (a debit)
and exports as a resource (a credit).

European Union, the rest of the world sector (S.2)
is subdivided into:

A summarised form of the international accounts
as presented in the BPM6 is given in Table 18.1.

(a) Member States and institutions and bodies of
the European Union (S.21):

18.21 A second major difference between the interna-(1) Member States of the European Union (S.211);(i)

Member States of the euro area (S.2111);(ii) Member States outside the euro area (S.2112);(2) institutions and bodies of the European Union(S.212):(i)the European Central Bank (ECB) (S.2121);(ii) European institutions and bodies, except the
ECB (S.2122);(b) non-member countries and internationalorganisations non-resident in the European
Union (S.22).
18.19 For the purpose of compiling the accounts of theeuro area, the above subsectors may be grouped asfollows:
the Member States of the euro area and theEuropean Central Bank
(S.2I = S.2111 + S.2121);
countries and international organisations that are
non-resident in the euro area
(S.2X = S.2112 + S.2122 + S.22).

394

A description of the European accounts is provided in Chapter 19.

tional accounts of the balance of payments, andthe rest of the world sector accounts in the ESA,
is the use of functional categories in the international accounts rather than instruments in the classifications of financial transactions in the ESA. Thisissue is further discussed in paragraphs 18.57 and18.58.

Balancing items in the current accountsof the international accounts
18.22 The structure of the balancing items in the balanceof payments is somewhat different from that in thenational accounts, in that each account in the international accounts has its own balancing item andanother that carries down to the next account. To
illustrate this, the primary income account has its
own balancing item (balance on primary income)and a cumulative balance (balance on goods, services and primary income). The external balanceon primary income corresponds to the balance ofprimary incomes and is the item feeding into GNI.
The current external balance corresponds to saving by the rest of the world relative to the domestic
economy. The balancing items in the BPM6 structure of accounts are shown in Table 18.1.

European system of accounts — ESA 2010

Rest of the world accounts

18

Table 18.1 — The international flow accounts of the balance of payments
Balance of payments
Current accounts

Credits

DebitsBalance

Goods and services account   Goods

462

392

70

   Services

78

107

–29

   Goods and services

540

499

41

   Compensation of employees

62   Interest

13

21   Distributed income of corporations

36

17   Reinvested earnings

140

Primary income

69

40

29

   Goods, services and primary income

609

539

70

Primary income account

Secondary income accountCredits

DebitsBalance   Taxes on income, wealth10   Net non-life insurance premiums

2

11   Non-life insurance claims

123   Current international transfers

131   Miscellaneous current transfers

110Secondary income

17

55

–38

Current account balance32

Capital account
Acquisitions/disposals of non-produced assets

0Capital transfers

1–4Capital account balance–3

Net lending (+)/borrowing (–)

29

Financial account (by functional category)

Change in assets

Change in liabilities

Balance

Direct investment–48

Portfolio investment

17

7

Financial derivatives etc.

30

Other investment

42

22

Reserve assets

8

—

66

37

Total change in assets/liabilities
Net lending (+)/net borrowing (–) (financial)

29

Net errors and omissions

0

European system of accounts — ESA 2010

395

18

Rest of the world accounts

The accounts for the rest of the world
sector and their relationship with theinternational accounts of the balance of
payments

with a cross-border dimension. Goods and services
are recorded when there is a change of economic
ownership from a unit in one economy to a unit inanother country. Although there is usually a physical movement of goods when there is a change ofownership, this is not necessarily the case. In thecase of merchanting, goods may change ownershipand not change location until they are resold to athird party.

The external account of goods and services
18.23 The goods and services account consists only of

Tables 18.2 and 18.3 show how primary and secondary income is recorded in the ESA and theBPM6.

imports and exports of goods and services because
they are the only transactions in goods and services

Table 18.2 — External account of goods and services (ESA V.1)
Uses

Resources

P.6

Exports of goods and services

540 P.7

Imports of goods and services

499

P.61

Exports of goods

462 P.71

Imports of goods

392

P.62

Exports of services

78 P.72

Imports of services

107

B.11

External balance of goods and services–41

Table 18.3 — Goods and services account of the BPM6
Current accounts

Credits

DebitsBalance

Goods and services account
Goods

462

392

70

Services

78

107

–29

Goods and services

540

499

41

statistics: Concepts and definitions2 Rev. 2 (IMTS) of
the UN. The BPM6 identifies some possible sourcesof difference between the value of goods recorded
in merchandise trade statistics and in the balanceof payments. It also recommends a standard reconciliation table to assist users in understanding suchdifferences. One major source of difference is thatthe standards for IMTS use a CIF-type (cost, insurance and freight) valuation for imports, while thebalance of payments use a uniform FOB (the value
at the customs frontier of the exporting economy,
that is, free on board) valuation for both exports
and imports. It is, therefore, necessary to exclude
freight and insurance costs incurred between thecustoms frontier of the exporter and the customs
frontier of the importer. Given variations between
the FOB-type valuation and actual contractual

18.24 Goods that change locations from one economy toanother but do not change economic ownershipdo not appear in imports and exports. Thus, goods
sent abroad for processing, or returned after processing, do not appear as imports and exports ofgoods; only the fee agreed for processing appears
as a service.

18.25 The balance of payments gives emphasis to the dis-tinction between goods and services. That distinction reflects policy interests, in that there are separate international treaties covering goods and services. It also reflects data issues, in that data on
goods are usually obtained from customs sources,
while data on services are usually obtained frompayment records or surveys.

18.26 International merchandise trade statistics are themain source of data for goods. International standards are given in International merchandise trade396

2

United Nations, International merchandise trade statistics: Concepts and definitions,
1998, ISBN 92-1-161410-4 (available on http://unstats.un.org).

European system of accounts — ESA 2010

Rest of the world accounts

arrangements, some freight and insurance costs
need to be rerouted.
The valuation principles are the same in the ESA
and the balance of payments. FOB valuation is,therefore, to be followed for recording exports andimports of goods (see paragraph 18.32).
18.27 The change of ownership basis used for the balanceof payments means that goods entries will have atime of reporting consistent with the corresponding financial flows. In the BPM6, there are no longer
exceptions to the change of ownership principle.
In contrast, IMTS follow the timing of customs
processing. While this timing is often an acceptable approximation, adjustments may be needed insome cases, such as goods sent on consignment. In
the case of goods sent abroad for processing withno change of ownership, the values of goods movements are included in IMTS, but changes in ownership are the primary presentation in the balance of
payments, and, therefore, the balance of payments
will only show the fees related to ‘manufacturingservices on physical inputs owned by others’; however, the values of goods movements are recommended as supplementary items to understand thenature of such processing arrangements. Further
details of the recording of processing arrangements
are given later in this chapter. Other adjustments
to IMTS may be needed to bring estimates into linewith the change of economic ownership of goods,
either generally or because of the particular coverage of each country. Possible examples include
merchanting, non-monetary gold, goods enteringor leaving the territory illegally, and goods procured in ports by carriers.

18.28 Re-exports are foreign goods (goods produced inother economies and previously imported with achange of economic ownership) that are exportedwith no substantial transformation from the statein which they were previously imported. Given
that re-exported goods are not produced in theeconomy concerned, they have less connection to
the economy than other exports. Economies thatare major trans-shipment points and locations ofwholesalers often have large values of re-exports.
Re-exports increase the figures for both imports
and exports and when re-exporting is significant,the proportions of imports and exports to economic aggregates are increased also. It is, therefore, useful to show re-exports separately. Goods

European system of accounts — ESA 201018

that have been imported and are waiting to be reexported are recorded in inventories of the resident
economic owner.
Transit trade is where goods cross a country on
their way to their final destination, and, for thecountry crossed, are generally excluded from foreign trade statistics, balance of payments statistics
and the national accounts.
Quasi transit trade are goods imported into a country, cleared through Customs for free circulation
within the EU, and then dispatched to a third country in the EU. The entity used for Customs clearance is usually not an institutional unit as definedin Chapter 2, and so does not acquire ownershipof the goods. In this case, the import is shown in
the national accounts as a direct import to the finaldestination, as in the case of simple transit trade.
The appropriate value is that recorded as the goods
enter the final destination country.
18.29 Goods are presented at an aggregate level in thebalance of payments. More detailed commodity
breakdowns can be obtained from IMTS data.

18.30 In the balance of payments, detail is produced forthe following 12 standard components of services:(a) manufacturing services in relation to physicalinputs owned by others;(b) maintenance and repair services n.i.e.;(c) transport;(d) travel;(e) construction;(f) insurance and pension services;(g) financial services;(h) charges for the use of intellectual property
n.i.e.;(i) telecommunications, computer and information services;(j) other business services;(k) personal, cultural and recreational services; and(l) government goods and services n.i.e.

397

18

Rest of the world accounts

18.31 Three of the balance of payments’ standard com-ponents above are transactor-based items, that is,they relate to the acquirer or provider, rather thanthe product itself. The items fall into the categoriesof travel, construction and government goods andservices n.i.e.
(a) Travel covers all goods or services, acquired by
non-residents during visits, whether for own
use or to give away. Travel includes goods, local
transport, accommodation, meals and otherservices.
(b) Construction covers the total value of the product delivered by the contractor, including any
materials sourced locally and, therefore, notrecorded in imports and exports of goods.
(c) Government goods and services n.i.e. cover arange of items that cannot be allocated to more
specific headings.
Besides those three transactor-based items, theremaining components are product-based, built
from the more detailed classes of CPA Rev. 2.
Additional standards for services trade are shownin the Manual on Statistics of International Tradein Services3 (MSITS), which is harmonised with theinternational accounts.

Valuation
18.32 Valuation principles are the same in the ESA andthe international accounts. In both cases, market
values are used, with nominal values used for somepositions in instruments where market prices are
not observable. In the international accounts, thevaluation of exports and imports of goods is a special case where a uniform valuation point is used,
namely the value at the customs frontier of theexporting economy, that is, the FOB-type valuation(free on board). This treatment brings about consistent valuation between exporter and importerand provides for a consistent basis for measurement in circumstances where the parties may
have a wide range of different contractual arrangements, from ‘ex-works’ at one extreme (where theimporter is responsible for arranging all transport
and insurance) to ‘delivered duty paid’ at the other3

398

United Nations, Eurostat, OECD, IMF, WTO et al., Manual on Statistics of International
Trade in Services, 2011, (available on: http://unstats.un.org).

(where the exporter is responsible for arranging alltransport, insurance and any import duties).

Goods for processing
18.33 Between the ESA 95 and the ESA 2010, there has

been a fundamental change in the treatment ofgoods sent abroad for processing without changeof ownership. In the ESA 95, such goods wereshown as exports on being sent abroad, and thenrecorded as imports on return from abroad, at ahigher value as a result of the processing. This was
known as the gross recording method, and effectively imputes a change of ownership so that international trade figures represent an estimate of thevalue of the goods being traded. The 2008 SNA, theBPM6 and the ESA 2010 do not impute a changeof ownership, but rather show only one entry — animport of the processing service. This would be anexport of the service for the country in which theprocessing takes place. This recording is more consistent with the institutional records and associated financial transactions. It does, however, cause
an inconsistency with the international merchandise trade statistics (IMTS). The IMTS continue toshow the gross value of the exports for process andreturning imported processed goods.

18.34 In order to avoid such an inconsistency in thenational accounts, the value of the exported goods
can be recorded alongside that of the imported
goods as supplementary items, the values being
those recorded in the IMTS. This will enable thenet processing service to be derived as the value ofthe processed goods exported less the value of theunprocessed goods which are imported. It is thisservice which is recorded in the national accounts.
So for the country having the goods processedabroad, the exports will be scored alongside theimported processed goods, as supplementary itemsin the external goods and services account. This
will reconcile the IMTS entries with the net importservices figure reflecting the processing costs.

18.35 An example related to the treatment of goods forprocessing in the supply and use tables will demonstrate the change. Consider the case where a food
manufacturing firm harvests and processes vegetables, then outsources the actual canning of the vegetables to a wholly owned subsidiary abroad, andEuropean system of accounts — ESA 2010

Rest of the world accounts

then takes them back canned and sells the canned
food on.
18.36 In Table 18.4 for the ESA 95, the imports andexports figures should match the entries in the

18

international merchandise trade statistics (IMTS).
The exports of goods to the canning subsidiaryabroad are 50, and then the canned vegetables are
returned as imports of 90.

Table 18.4 — The ESA 95 treatment of goods for processing as international trade
Purchases
Sales

Final demand

Food manufacturing

Household expenditure

Food

Total
Exports

90

Canned food imports

90

Value added

50

Total output

140

50

140
90

GDP (E) =50

Table 18.5 — The ESA 2010 treatment of goods for processing as international trade
Purchases
Sales

Final demand

Food manufacturing

Household expenditure

Food

90

Canning services imports

40

Value added

50

Total output

90

18.37 Table 18.5 shows the ESA 2010 treatment of goods

for processing on a net basis: only the trade in services is shown and there will be no match with the
movement in goods recorded in the IMTS. The net
position, of exports less imports, will be shown inthe balance of payments international accounts
and the corresponding rest of the world sector
accounts. The BPM6 recommends that where itis known that imports and exports in the IMTS
reflect a situation where there is no change in ownership, then the two are recorded side by side in
the balance of payments figures, so that the services

European system of accounts — ESA 2010

Total
Exports
0

90
40

GDP (E) =50

element can be immediately calculated. So, for the
food manufacturing industry, the vegetables sent
abroad for canning would be shown as an exportof 50, and the reimported canned vegetables would
be shown as an import of 90. Those figures can be
set beside each other in the international accounts
statistics as supplementary items, with the exports
recorded as negative imports, so enabling a net
import of canning services of 40 to be derived.
The recording of this example in the BPM6 isshown in Table 18.6.

399

18

Rest of the world accounts

Table 18.6 — Recording of processing in the BPM6
Current accounts

Credits

DebitsBalance

Goods and services account–40

Services (standard components)‘Manufacturing services on physicalinputs owned by others’

40

–40

90

–40

Supplementary items
Goods for processing abroad

Merchanting
Goods under merchanting

50

high-technology goods, these non-physical contributions may be large in relation to the value ofmaterials and assembly.
18.40 Goods under merchanting are recorded in the

18.38 Merchanting is defined as the purchase of goods

by a resident (of the compiling economy) from a
non-resident combined with the subsequent resaleof the same goods to another non-resident without
the goods being present in the compiling economy.
Merchanting occurs for transactions involving
goods where physical possession of the goods by
the owner is unnecessary for the process to occur.
These and the following clarifications related tomerchanting follow the corresponding paragraphs
in the BPM6 (paragraphs 10.41-10.48).

18.39 Merchanting arrangements are used for wholesal-

ing and retailing. They may also be used in commodity dealing and for the management andfinancing of global manufacturing processes. For
example, an enterprise may contract the assembly of a good among one or more contractors,
such that the goods are acquired by this enterpriseand resold without passing through the territoryof the owner. If the physical form of the goods ischanged during the period the goods are owned,
as a result of manufacturing services performedby other entities, then the goods transactions arerecorded under general merchandise rather thanmerchanting. In other cases where the form of
the goods does not change, the goods are included
under merchanting, with the selling price reflecting minor processing costs as well as wholesalemargins. In cases where the merchant is the organiser of a global manufacturing process, the selling
price may also cover elements such as providing
planning, management, patents and other knowhow, marketing, and financing. Particularly for

400

accounts of the owner in the same way as any othergoods it owns. However, the goods are detailed
specifically in the international accounts statisticsof the economy of the merchant because they are ofinterest in their own right and because they are notcovered by the customs system of that economy.
The treatment of merchanting is that:(a) the acquisition of goods by merchants is shown
under goods as a negative export of the economy of the merchant;(b) the sale of goods is shown under goods soldunder merchanting as a positive export of theeconomy of the merchant;(c) the difference between sales over purchases ofgoods for merchanting is shown as the item
‘net exports of goods under merchanting’. This
item includes merchants’ margins, holding
gains and losses, and changes in inventories ofgoods under merchanting. As a result of losses
or increases in inventories, net exports of goods
under merchanting may be negative in somecases; and(d) Merchanting entries are valued at transaction
prices as agreed by the parties, not FOB.

18.41 Merchanting items appear only as exports in theaccounts of the economy of the territory of the merchant. In the counterpart exporting and importing
economies, export sales to merchants and importpurchases from merchants are included under general merchandise.

European system of accounts — ESA 2010

Rest of the world accounts

18.42 Wholesaling, retailing, commodity dealing, and18

Imports and exports of FISIM

management of manufacturing may also be carriedout under arrangements where the goods are present in the economy of the owner, in which casethey are recorded as general merchandise, rather
than as merchanting. In cases where the goods do
not pass through the economy of the owner, but
the physical form of the goods changes, because
they are processed in another economy, international transactions are recorded under generalmerchandise, rather than merchanting (the processing fee is recorded as a manufacturing service
paid for by the owner).

18.44 Actual interest on loans paid and received includes

an income element and a charge for a service. Credit
institutions operate by offering rates of interest to
their depositors that are lower than the rates thatthey charge to their borrowers. The resulting interest margins are used by the financial corporations
to defray their expenses and to provide an operating surplus. Interest margins are an alternative
to charging customers explicitly for financial services. The ESA prescribes the imputation of a service charge for FISIM. The concept of FISIM andthe guidelines for estimating the values of FISIM
are given in Chapter 14.

18.43 When a merchant resells goods to a resident of

the same economy as the merchant, this does notmeet the definition of merchanting. Accordingly,
the purchase of goods is shown as imports of general merchandise to the economy in that case. If
the entity that purchased from a merchant in thesame economy subsequently resells the goods to aresident of another economy, whether or not the
goods enter the economy of the merchant, thesales of goods are recorded in exports of generalmerchandise from the economy of the merchant.
While such a case is very similar to merchanting,it does not meet the definition given in paragraph18.38. In addition, it is impractical for the firstmerchant to record the purchases as merchanting
because that merchant may not know whether or
not the second merchant will bring the goods into
the economy.

18.45 The financial institutions that implicitly charge

FISIM are not necessarily resident, nor need theclients of such institutions be resident. Imports
and exports, therefore, of this type of financial service are possible. Guidelines for compiling FISIM
imports and exports are in paragraph 14.10.

The external account of primary andsecondary income
Tables 18.7 and 18.8 show an example of recording of primary and secondary income in the ESA and the BPM6.

Table 18.7 — External account of primary and secondary incomes (ESA V.II)
Uses

Resources
B.11

External balance of goods and services

–41

D.1

Compensation of employees

6 D.1

Compensation of employees

2

D.2

Taxes on production and imports

0 D.2

Taxes on production and imports

0

D.3

Subsidies

0 D.3

Subsidies0

D.4

Property income

63 D.4

Property income

38

D.5

Current taxes on income, wealth

1 D.5

Current taxes on income, wealth0

D.6

Social contributions and benefits

0 D.6

Social contributions and benefits

0

D.7

Other current transfers

16 D.7

Other current transfers

55

D.8

Adjustment for the change in pension
entitlements

0 D.8

Adjustment for the change in pension
entitlements

0

B.12

Current external balance

European system of accounts — ESA 2010

–32

401

18

Rest of the world accounts

Table 18.8 — The primary income account and secondary income account of the BPM6
ESA code

Credits

DebitsBalance

From goods and services

41

Primary income account   Compensation of employees

D.1  Interest   Distributed income of corporations

D.4  Reinvested earnings

6

2

13

21

36

17

14

0

   Taxes on production and imports

D.2

0

0

  Subsidies

D.3

0

0

69

40

29

609

539

70

1

0

2

11

12

3

1

31

1

10

17

55

Primary income
Goods, services and primary income
Secondary income account   Taxes on income, wealthD.5   Net non-life insurance premiums   Non-life insurance claims   Current international transfers

D.6, D.7, D.8   Miscellaneous current transfers
Secondary income
Current account balance

The primary income account
18.46 In the balance of payments, the entries in the pri-mary income account include compensation of
employees and property income, exactly as in the
allocation of primary income account in the ESA.
Payments of taxes on production by residents andreceipts of subsidies by residents from the domestic government are recorded in the generation ofincome account, an account that does not form
part of the balance of payments. Any paymentsof taxes on production payable by a resident toanother government as well as any subsidy receivable by a resident from another government arerecorded in the primary income account of thebalance of payments. The matching entries for thedomestic government are shown in the allocationof primary income account and for foreign governments in the rest of the world column of that
account and in the primary income account of thebalance of payments.

18.47 Rent may arise in cross-border situations, butrarely, since all land is deemed to be owned by

402

–38
32

residents, including if necessary, by creating a
notional resident unit. If such notional resident
units are owned by non-residents then any income
earned by those units is classified as direct investment income and not as rent. An example whererent is recorded in the international accounts isshort-term fishing rights in territorial waters provided to foreign fishing fleets. It is common in theinternational accounts to use the term investment
income meaning property income excluding rent.
Investment income reflects income arising fromthe ownership of financial assets, and the disaggregation of investment income matches that of financial assets and liabilities so that rates of return canbe calculated.

Direct investment income
18.48 The role of direct investment is particularly impor-tant and reflected in both the flows and positionsin the international accounts. In the case of a direct
investment, it is assumed that a proportion of theenterprise’s retained earnings is distributed to thedirect investor as a form of investment income.

European system of accounts — ESA 2010

Rest of the world accounts

The proportion corresponds to the direct investor’sholding in the enterprise.
18.49 Retained earnings are equal to the net operating

surplus of the enterprise plus all property income
earned less all property income payable (before
calculating reinvested earnings) plus current transfers receivable less current transfers payable andless the item for the adjustment for the change inpension entitlements. Reinvested earnings accrued
from any immediate subsidiaries are included in
the property income receivable by the direct investment enterprise.

18.50 Reinvested earnings may be negative, for example

where the enterprise makes a loss or where dividends are distributed from holding gains, or in aquarter when an annual dividend is paid. Just as
positive reinvested earnings are treated as being an
injection of equity into the direct investment enterprise by the direct investor, negative reinvested
earnings is treated as a withdrawal of equity.
For a direct investment enterprise that is 100 per
cent owned by a non-resident, reinvested earnings
are equal to retained earnings and the balance ofprimary incomes of the enterprise is exactly zero.

The secondary income (current transfers) account of
the BPM6
18.51 The secondary income account shows current

transfers between residents and non-residents. The
range of entries of current transfers corresponds
exactly to those in the secondary distribution ofincome account. Several of those entries are particularly important in the international accounts,
especially current international cooperation andremittances sent to their home countries by individuals working abroad.

18.52 Cross-border personal transfers are household-to-household transfers and are of interest because
they are an important source of international funding for some countries that provide large numbersof long-term workers abroad. Personal transfers
include remittances by long-term workers, that is,
those who change their economy of residence.

European system of accounts — ESA 201018

18.53 Other workers, such as border and seasonal work-ers, do not change their economy of residence fromthe home economy. Instead of transfers, the international transactions of such workers include compensation of employees, taxes and travel costs. In
the balance of payments, a supplementary presentation of personal remittances brings together personal transfers with those related items. Personal
remittances include personal transfers, compensation of employees less taxes and travel, and capitaltransfers between households.

18.54 Insurance flows, especially flows relating to rein-surance, can be important internationally. The
transactions between the direct insurer and thereinsurer are recorded as an entirely separate setof transactions and no consolidation takes place
between the transactions of the direct insurer as
issuer of policies to its clients, on the one hand,
and the holder of a policy with the reinsurer on theother.

The external capital account18.55 The elements of the capital account subject to inter-national transactions are more restricted than those
covered in the domestic sectors. The entries in thecapital account only cover acquisitions and disposals of non-produced non-financial assets and capital transfers. There are no transactions recorded ascapital formation of produced assets because theultimate use of exports and imports of goods is notknown at the time of recording. Neither are landacquisitions and disposals included.

18.56 Net lending or net borrowing is the balancing item

for the sum of the current and capital accounts andfor the financial account. It covers all instruments
used for providing or acquiring funding, not justlending and borrowing. Conceptually, the BPM6
net lending or net borrowing has the same value
as the corresponding national accounts item forthe total economy, and the same as the national
accounts item for the rest of the world but with thesign reversed. Tables 18.9, 18.10 and 18.11 show
the recording of the current and capital accountelements and the resulting balance both in the ESA
and the BPM6.

403

18

Rest of the world accounts

Table 18.9 — Change in net worth due to current external balance and capital transfers (ESA V.III.1.1)1
Change in assets

B.101
1

Changes in net worth due to current
external balance and capital transfers

Change in liabilities and net worth
B.12

Current external balance

–32

D.9

Capital transfers, receivable

4

D.9

Capital transfers, payable

–1

–29

For the rest of the world, this refers to changes in net worth due to current external balance and capital transfers.

Table 18.10 — Acquisition of non-financial assets account (ESA V.III.1.2)
Changes in assets

Changes in liabilities and net worth
B.101

NP

Acquisitions less disposals of nonproduced assets

0

B.9

Net lending(+)/net borrowing(–)–29

Changes in net worth due to current
external balance and capital transfers–29

Table 18.11 — Capital account of the BPM6
Credits

DebitsBalance

Current account balance32

Capital account
Acquisitions/disposals of non-produced assets

0Capital transfers

1

4Capital account balance–3

Net lending (+)/borrowing (–)

29

The external financial account andinternational investment position (IIP)

vulnerability. Compared to the classification offinancial instruments used in the ESA, in balance of payments the classification of the financial
instruments is based on functional categories (seeparagraph 18.21), with additional data on instruments and institutional sectors. Tables 18.12 and18.13 show the financial account in the ESA and in
the BPM6 respectively.

18.57 The financial account of the balance of payments

and the IIP are of particular importance because
they provide an understanding of international
financing as well as of international liquidity andTable 18.12 — Financial account (ESA V.III.2)
Changes in assets

404

Changes in liabilities and net worth

F

Net acquisition of financial assets

37 F

Net incurrence of liabilities

66

F.1

Monetary gold and SDRs

1 F.1

Monetary gold and SDRs

0

F.2

Currency and deposits

11 F.2Currency and deposits

–2

F.3

Debt securities

9 F.3

Debt securities

20

F.4

Loans

4 F.4

Loans

45

F.5

Equity and investment fund shares

2 F.5

Equity and investment fund shares

14

European system of accounts — ESA 2010

Rest of the world accounts

Changes in assets

18

Changes in liabilities and net worth

F.6

Insurance, pension and standardisedguarantee schemes

0 F.6

Insurance, pension and standardisedguarantee schemes

0

F.7

Financial derivatives and employee stock
options

0 F.7

Financial derivatives and employee stock
options3

F.8

Other accounts receivable/payable

10 F.8Other accounts receivable/payable

–14

B.9

Net lending (+)/net borrowing (–)–29

Table 18.13 — Financial account of the BPM6
Net lending (+)/borrowing (–) (current and capital
accounts)
Financial account (by functional category)

29
Change in assets

Change in liabilities

Direct investment–48

Portfolio investment

17

7

Financial derivatives etc.

30

Other investment

42

22

Reserve assets

8—

Total change in assets/liabilities

66

37

Balance

Net lending (+)/net borrowing (–) (financial account)29

Net errors and omissions

0

18.58 The functional categories of the BPM6 convey

information about the motivation and relationshipbetween the parties, which are of particular interest
to international economic analysis. Data by functional category are further subdivided by instrument and institutional sector, which makes it possible to link them to the corresponding ESA andmonetary and financial statistics items. The institutional sector classification in the BPM6 is the sameas in the ESA, although it is usually abbreviated (tofive sectors in the standard components). In addition, a supplementary subsector is used for monetary authorities, which is a functional subsector

linked to reserve assets. It covers the central bankand any parts of general government or financial
corporations other than the central bank that holdreserve assets, so it is relevant for countries wheresome or all reserves are held outside the centralbank.
18.59 The main links between the financial instrument

categories of the national accounts and the functional categories of the international accounts areshown in Table 18.14. The functional categories areused both on the asset side and the liabilities sideof the financial account of the BPM6. Relatively
uncommon links are not shown.

Table 18.14 — Links between the functional categories of the BPM6 and the financial instrument categoriesof the ESA

International account functional categories
ESA instruments

Direct investment Portfolio investment Financial derivatives Other investment

Monetary gold
Special Drawing Rights(SDRs)

Reserve assets
X

X

X  Currency

X

X  Interbank positions

X

X

Currency and deposits

European system of accounts — ESA 2010

405

18

Rest of the world accounts

International account functional categories
ESA instruments

Direct investment Portfolio investment Financial derivatives Other investment

Reserve assets  
Other transferable
deposits

X

X

X  Other deposits

X

X

X

Debt securities

X

Loans

X

X

X
X

X

Equity and investment fundsharesEquity:  Listed shares

X

X

X

  Unlisted shares

X

X

X

  Other equity

X

X

Investment fund shares/
units:  Money market fundshares/units

X

X

  
Non-MMF investment
fund shares/units

X

X

X
X

X

Insurance, pensions, andstandardised guarantee
schemes  
Non-life insurance
technical reserves

X

X  Life insurance andannuity entitlements

X

X  Pension entitlements  Claims of pension funds
on pension managers

X
X

X  Entitlements to nonpension benefits  Provisions for calls
under standardisedguarantees

X
X

X

Financial derivatives andemployee stock options  Financial derivatives

X   Employee stock options

X

X

Other accounts receivable/
payable406  Trade credits andadvancesX

X  Other accounts
receivable/payable,
excluding trade credits
and advances

X

X

European system of accounts — ESA 2010

Rest of the world accounts

Balance sheets for the rest of the world
sectorits role in international payments. However, nonfinancial assets are excluded, as they do not have acounterpart liability or other international aspect.

18.60 The IIP is that part of the balance sheets covered in

18.61 The balancing item on the IIP is the net IIP. The net

18

IIP plus non-financial assets in the national balance sheet equal national net worth, because resident-to-resident financial claims net to zero in thenational balance sheet. Table 18.15 shows an example of the balance sheet for the rest of the world sector, and Table 18.16 provides an example of IIP.

the international accounts. The terminology highlights the specific components of the national balance sheet which are included. The IIP covers only
financial assets and liabilities. In the case of directly
owned real estate in a country by a non-resident
unit, a notional resident unit is regarded as theowner of the real estate, and in turn subject to ownership by the non-resident unit in terms of a financial asset (see also paragraph 18.16). In the case offinancial claims, the cross-border element arises
when one party is a resident and the other party isa non-resident. In addition, while gold bullion is anasset that has no counterpart liability, it is includedin the IIP when held as a reserve asset, because of

18.62 The same broad categories are used for invest-

ment income and the IIP. As a result, average rates
of return can be calculated. Rates of return can becompared over time and for different instruments
and maturities. For example, the trends in returnon direct investment can be analysed, or the returncan be compared with other instruments.

Table 18.15 — Balance sheets for the rest of the world sector (ESA)
Openingbalance

Changes due Other changes Revaluation
to transactions
in volume

Closingbalance

AssetsNon-financial assets
Financial assets

805

37

0

7

849

AF.1

Monetary gold and SDRs

0

1

0

0

1

AF.2

Currency and deposits

105

11

0

0

116

AF.3

Debt securities

125

9

0

4

138

AF.4

Loans

70

4

0

0

74

AF.5

Equity and investment fund shares

345

2

0

3

350

AF.6

Insurance, pension and standardisedguarantee schemes

26

0

0

0

26

AF.7

Financial derivatives and employee
stock options

0

0

0

0

0

AF.8

Other accounts receivable/payable

134

10

0

0

144

1 074

66

0

3

1 143

Liabilities
AF.1

Monetary gold and SDRs

770

0

0

0

770

AF.2

Currency and deposits

116

–2

0

0

114

AF.3

Debt securities

77

20

0

2

99

AF.4

Loans

17

45

0

0

62

AF.5

Equity and investment fund shares

3

14

0

1

18

AF.6

Insurance, pension and standardisedguarantee schemes

25

0

0

0

25

AF.7

Financial derivatives and employee
stock options

7

3

0

0

10

AF.8

Other accounts receivable/payable

59

–14

0

0

45

Net worth269

European system of accounts — ESA 2010

265

407

18

Rest of the world accounts

Table 18.16 — The integrated IIP statement of the BPM6International investment position (IIP)

Opening
positionTransactions

Other changes Revaluationin volume

Closing
position

AssetsDirect investment

42

–4

0

1

39

Portfolio investment

40

17

0

2

59

Financial derivatives

0

3

0

0

3

Other investment

152

42

0

0

194

Reserve assets

63

8

0

0

71

Total assets

297

66

0

3

366

Direct investment

132

8

0

2

142

Portfolio investment

180

7

0

5

192

Financial derivatives

0

0

0

0

0

Other investment

261

22

0

0

283

Total liabilities

573

37

0

7

617

Net international investment position (net IIP)

–276

29

0

–4

–251

Liabilities

408

European system of accounts — ESA 2010

European accounts

19

CHAPTER 19
European accounts
Introduction
19.01 The process of European integration made it neces-sary to compile a full set of accounts that reflect theEuropean economy as a whole and enable better
analysis and policy making at the European level.
European accounts cover the same set of accounts,
and are based on the same concepts, as the national
accounts of the Member States.

19.02 This chapter describes the distinguishing featuresof European accounts, that is, the accounts of theEuropean Union and of the euro area. European
accounts require particular attention to be given
to the definition of resident units, rest of the world
accounts and the netting of intra-European economic transactions (flows) and financial balance
sheets (stocks).

19.03 The economic territory of the European Union

consists of:(a) the economic territories of the Member Statesof the European Union; and(b) the economic territories of European institutions.
19.04 The economic territory of the euro area consists of:(a) the economic territories of the Member Statesof the euro area; and(b) the economic territory of the European Central
Bank.

of Member States to European accounts. The ways
in which the reinvested earnings of foreign direct
investment enterprises or special purpose entities
are treated are good examples in this context. In
the national accounts of the Member States, a foreign direct investment enterprise may have investors which are residents of another Member State of
the European Union/the euro area. The corresponding reinvested earnings are not recorded as such inEuropean accounts. Besides, special purpose entities may need to be reclassified in the same institutional sector as their parent company when the latteris resident of another Member State. Finally, crossborder economic flows and financial stocks between
European countries need to be reclassified. These
differences are presented in diagrams 19.1 and 19.2
assuming, for the sake of simplicity, a European
area composed of only two Member States: A and B.
Flows and stocks involving residents and non-residents are schematically displayed with arrows.
Diagram 19.1 — Aggregation of the national

accounts of the Member States

When the national accounts of countries A and B are
aggregated, the aggregated rest of the world accounts
record intra-flows between countries A and B, and withother countries and European institutions.

European institutions

From national to european accounts
19.05 European accounts are conceptually not equal to

the sum of the national accounts of the Member
States after conversion to a common currency. The
accounts of resident European institutions need
to be added. The scope of the concept of residencechanges when one steps from the national accounts

European system of accounts — ESA 2010

Country A

Country B

409

19

European accounts

Diagram 19.2 — European accounts
The European Union/euro area is considered as a single entity: the accounts of European institutions/theEuropean Central Bank are included and only transactions of resident units with third countries are recorded in
the rest of the world accounts.

European institutions

Country A

Country B

Conversion of data in different currencies
19.06 In European accounts, the economic flows and thestocks of assets and liabilities must be expressed in
one single monetary standard. For this purpose,
data recorded in the different national currencies
are converted into euro by either:(a) using market exchange rates (or an average
thereof) prevailing during the time period forwhich the accounts are compiled;or(b) using fixed exchange rates, over the whole time
period. The fixed rate can be the one prevailingat the end of the period, in the beginning, or
as an average of exchange rates over the wholetime period. The exchange rate used affects
the (fixed) weight of a given Member State inEuropean aggregates;or(c) calculating an index between consecutive periods as the weighted average of the growth indices of the data of each Member State expressedin national currency. Weights are constructed
as the exchange-rate converted share of each
Member State in the first period of comparison. After a reference period is chosen as a

410

benchmark, the chain-linked index can beapplied to this benchmark to generate levels forother periods of observation.
With method (a), the weights of Member States in
European aggregates are updated according to theparities of their respective currencies. European
aggregates’ levels are therefore up-to-date, at any
moment in time, but their movements may beaffected by exchange rate fluctuations. In the caseof ratios, the impact of exchange rate fluctuations
on the numerator and denominator may cancel out
to a large extent.
With method (b), the weights of Member States
are not updated, which preserves the movementsof European aggregates from exchange rate fluctuations. However, European aggregates’ levels may
be influenced by the choice of the (fixed) exchange
rates that reflect the parities of Member States’ currencies at a given moment in time.
Method (c) preserves the movements of European
aggregates from exchange rate fluctuations whereas
European aggregates’ levels broadly reflect the parities in force for each time period. This is at theexpense of additivity and other accounting constraints. If these are required, they must be restored
as a last step.
19.07 European accounts can also be calculated by con-verting data recorded in the different national currencies into purchasing power standards (PPS).
Method (a), (b) or (c) set out in paragraph 19.06
can be used for this purpose replacing exchange
rates by corresponding purchasing power parities(PPPs).

European institutions
19.08 In the ESA, European institutions comprise thefollowing entities:(a) European non-financial institutions: theEuropean Parliament, the European Council,
the Council, the European Commission, theCourt of Justice of the European Union and theEuropean Court of Auditors;(b) European non-financial bodies, including theentities covered by the general budget of theEuropean Union (e.g. the Social and Economic

European system of accounts — ESA 2010

European accounts

Committee, the Committee of the Regions,
European agencies etc.) and the European
Development Fund; and(c) European financial institutions and bodies including notably: the European Central
Bank, the European Investment Bank and theEuropean Investment Fund.
Note that in category (b) European agencies do notinclude agricultural market regulatory agencies
whose main activity consists in buying and selling
agricultural products to stabilize prices. The latteragencies are considered resident in the Member
State in which they carry out their activities.
19.09 European non-financial institutions and bodies

covered by the general budget of the European
Union form one institutional unit which principally provides non-market government services
for the benefit of the European Union. It is thusclassified in the ‘European institutions and bodies’ subsector (S.1315)1 of the ‘general government’sector (S.13).

19.10 As long as its budget is not adopted as a part of

the general budget of the European Union, theEuropean Development Fund forms a separate
institutional unit classified in the ‘European institutions and bodies’ subsector (S.1315) of the ‘general government’ sector (S.13).

19.11 The European Central Bank is an institutional unitclassified in the ‘central bank’ subsector (S.121) ofthe ‘financial corporations’ sector (S.12).

19.12 The European Investment Bank and the European

Investment Fund are separate institutional units
classified in the ‘other financial intermediaries,
except insurance corporations and pension funds’
subsector (S.125) of the ‘financial corporations’sector (S.12).

19.13 The economic territory of the European insti-

tutions includes the territorial enclaves that arelocated in the Member States of the European
Union or in non-EU countries, such as representations, delegations, offices, etc.

1

This code is specific to European accounts. It is not mentioned in Chapter 23,‘Classifications’, as Chapter 23 presents the codes to be used in the national
accounts of the Member States whereas European institutions are recorded in therest of the world sector.

European system of accounts — ESA 201019

19.14 The main transactions of European institutions arerecorded in resources and uses as described in the
Annex.

The rest of the world account
19.15 In European accounts, the rest of the world

accounts record the economic flows and the financial stocks of assets and liabilities between the resident units of the European Union/the euro areaand non-resident units. Hence, European rest of
the world accounts exclude transactions taking
place within the European Union/the euro area.
The flows taking place within the EU/euro area
are called ‘intra-flows’ and the financial positions
between residents of the EU/euro area are called‘intra-stocks’.

19.16 Imports and exports of goods include quasi-transit

trade, that is:(a) goods imported from third countries into a
Member State of the European Union/euroarea by an entity which is not considered to
be an institutional unit and then dispatched toanother Member State of the European Union/
euro area; and(b) goods arriving from a Member State of theEuropean Union/euro area which are thenexported to third countries by an entity which
is not considered to be an institutional unit.
Exports of goods shall be valued FOB at the borderof the European Union/the euro area.
For goods in quasi-transit to be exported, transportation and distribution costs within the European
Union/the euro area shall be considered as output of transportation services if the carrier is resident in the European Union/the euro area and asimports of transportation services if it is not.
19.17 In European accounts, merchanting includes only

the purchase of goods by a resident of the European
Union/the euro area from a non-resident withthe subsequent resale of the same goods to a nonresident without the goods being present in theEuropean Union/the euro area. It is recorded firstas a negative export of goods and then as a positive
export of goods, with any timing differences between

411

19

European accounts

the purchase and sale being recorded as changes ininventories (see paragraphs 18.41 and 18.60).

Price and volume measures

Where a merchant who is a resident of theEuropean Union/euro area buys goods from a
non-resident and then sells them to a resident ofanother Member State, the purchase is recorded
as negative exports in the national accounts of theMember State of the merchant but as imports in
European accounts.

19.22 European non-financial accounts at the prices of

19.18 A foreign direct investment enterprise is a resi-

dent of the European Union/the euro area where
an investor which is not a resident owns 10 per centor more of the ordinary shares or voting power (foran incorporated enterprise) or the equivalent (foran unincorporated enterprise).
In the national accounts of the Member States, aforeign direct investment enterprise may haveinvestors who are resident in another Member Stateof the European Union/the euro area. The corresponding reinvested earnings are not recorded assuch in European accounts.

Balancing of transactions
19.19 One method to compile the European rest of theworld accounts consists of withdrawing intraEuropean flows, on both the resources and uses
sides, from the rest of the world accounts of theMember States. Although these mirror flows
should balance in theory, they generally do not do
so in practice because of the asymmetrical recording of the same transaction in the national accountsof the counterparties.

19.20 Asymmetries create a mismatch, in European

accounts, between the total economy and rest of
the world accounts. The compilation of European
accounts therefore requires reconciliation of theaccounts. This is achieved by reconciliation methods such as minimum least squares or proportional
allocation. In the case of goods, intra-Union trade
statistics may be used to allocate asymmetries byexpenditure category.

19.21 The removal of asymmetries and subsequent bal-ancing of the accounts causes further differences
between European aggregates and the sum of thenational accounts of the Member States.

412

the previous year can be compiled, for transactions in goods and services, using a similar methodology as for European accounts at current
prices. First, the accounts of the Member Statesand European institutions/the European Central
Bank, compiled at the prices of the previous year,
are aggregated. Second, cross-border transactions
among Member States, valued at the prices of theprevious year, are eliminated from the rest of theworld accounts. Third, the resulting discrepancies
between resources and uses are eliminated using
the method chosen to balance European transactions at current prices.

19.23 European accounts at the prices of the previ-

ous year allow the calculation of volume indicesbetween the current time period and the previous
year. After a reference period is chosen as a benchmark, volume indices can be chain linked and thenapplied to the European accounts at current pricesof the benchmark year. This generates European
accounts in volume for any period of observation.
The series obtained in this way are not additive.
If additivity and other accounting constraints are
required for measures in volume terms for specificpurposes, these must be restored as a last step inorder to obtain additive adjusted series.

Balance sheets
19.24 In European accounts, financial balance sheets

can be compiled using a similar treatment as fortransactions:(a) the financial balance sheets of the Member
States are complemented by stocks of assets
held and liabilities assumed by European institutions which are resident of the European
Union/euro area;(b) stocks of financial assets of a resident of theEuropean Union/euro area held by anotherresident (intra-stocks) are withdrawn from thenational rest of the world accounts; and(c) imbalances created by the mismatch between
intra-stocks of financial assets and theEuropean system of accounts — ESA 2010

Annex 19.1

corresponding liabilities are allocated to thedifferent sectors through balancing.
19.25 In European accounts, non-financial balance

sheets can be compiled as the sum of the nonfinancial balance sheets of the Member States of theEuropean Union/euro area.

‘From whom-to-whom’ matrices
19.26 ’From whom-to-whom’ matrices detail the eco-nomic transactions (respectively holdings of financial assets) between institutional sectors. In thenational accounts of the Member States, thesematrices map in detail the transactions/financial assets between sectors of origin/creditor and19

destination/debtor, as well as between domestic
sectors and the rest of the world.
19.27 In European accounts, ‘from whom-to-whom’matrices can be compiled by aggregation of thenational matrices and reclassification of intraEuropean flows and stocks as resident flows andstocks. For this purpose, a distinction is then to bemade in these national matrices between transactions, and the holding of financial assets, vis-à-vis
the resident units of the European Union/the euroarea and the non-residents in the rest of the world
account. Moreover, flows and stocks vis-à-vis theresidents units of the European Union/the euroarea need to be further distinguished by counterpart sectors.

Annex 19.1
The accounts of european institutions
Resources
19.28 The main resources of European non-financial

institutions and bodies include the following:(a) customs and agricultural duties;(b) production charges on producers of sugar, isoglucose and inulin syrup;(c) the value added tax resource; and(d) The gross national income (GNI) resource.
19.29 In the accounts of European institutions, theseflows are recorded as resources of the ‘European
institutions and bodies’ subsector (S.1315) and as
uses of the rest of the world (S.211).

19.30 Customs and agricultural duties are levied at theexternal frontiers of the European Union under thecommon customs tariff. They are classified as ‘taxes
and duties on imports excluding VAT’ (D.212) andinclude collection costs.

19.31 Production charges are levied on the sugar, isoglu-

cose and inulin syrup quotas held by the producers. They are classified as ‘taxes on products, except

European system of accounts — ESA 2010

VAT and import taxes’ (D.214) and include collection costs.
19.32 A fixed share of the amounts collected underpoints (a) and (b) of paragraph 19.28 is retained by
Member States as collection costs. This share was
25 % in 2009. In the accounts of European institutions, these collection costs are recorded, on theuses side, as ‘intermediate consumption’ (P.2) ofthe ‘European institutions and bodies’ subsector(S.1315). On the resources side, they are recorded
as ‘imports of services’ (P.72) in the rest of theworld accounts (S.211).

19.33 The value added tax resource is calculated byapplying a fixed percentage rate, known as the
VAT rate of call, to the harmonised VAT assessment base of each Member State. The VAT base iscapped in relation to gross national income. The
capping of the VAT base means that, if the VAT
base of a Member State exceeds a given percentageof this Member State’s GNI assessment base, thenthe VAT rate of call is not applied to the VAT basebut to the latter percentage of the GNI assessment
base. The value added tax resource includes payments for the current year as well as balances fromprevious years, corresponding to revisions of past
VAT bases, when they are due to be paid. The value

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Annex 19.1

added tax resource is classified as ‘VAT- and GNIbased EU own resources’ (D.76).
19.34 The gross national income resource is a residual

contribution to the budget of the European institutions which is assessed on the levels of grossnational income of each Member State. It is classified as ‘VAT- and GNI-based EU own resources’(D.76) and includes reimbursements as well as thebalancing payments for previous years. The correction of budgetary imbalances paid by the otherMember States to the countries concerned is also
recorded under D.76, as resources and uses of therest of the world (S.211).

19.35 The contributions of Member States to theEuropean Development Fund are classified as ‘current international cooperation’ (D.74).

19.36 The Member States subscriptions to the paid-in capital of the European Investment Bank, theEuropean Investment Fund and the European
Central Bank are recorded in the financial accounts
as ‘other equity’ (F.519). They are recorded aschanges in assets of the rest of the world (S.211)
and changes in liabilities of the ‘other financial
intermediaries, except insurance corporations
and pension funds’ (S.125)/’central bank’ (S.121)
subsectors.

19.37 Interests payable on loans granted by the European

Investment Bank, after deduction of financial intermediation services indirectly measured (FISIM),are classified as ‘interest’ (D.41). In the accountsof European institutions, they are recorded as usesof the rest of the world (S.2) and resources of the‘other financial intermediaries, except insurance
corporations and pension funds’ (S.125).

19.38 Interests payable on loans granted by the European

Central Bank are classified as ‘interest’ (D.41). In
the accounts of European institutions, they arerecorded as uses of the rest of the world (S.2111) andresources of the ‘central bank’ (S.121) subsector.

Uses(b) distributive transactions related to the transfers from European institutions to Member
States. They take mainly the form of ‘subsidies
on products’ (D.31), ‘other subsidies on production’ (D.39), ‘current international cooperation’ (D.74), ‘other miscellaneous current
transfers’ (D.759), ‘investment grants’ (D.92)
and ‘other capital transfers’ (D.99); and(c) payments of the European Development Fundto third countries which are classified as ‘current international cooperation’ (D.74).
19.40 The accounts of European institutions record thepayments made by European non-financial institutions and bodies as uses of the ‘European institutions and bodies’ subsector (S.1315) and resourcesof the rest of the world (S.211 or S.22).

19.41 Payments made by European non-financial insti-

tutions and bodies are generally recorded on thebasis of the expenditure statements provided by theMember States. Advance and ex-post payments arerecorded in the financial accounts of the European
institutions as ‘other accounts receivable/payable,
excluding trade credits and advances’ (F.89).

19.42 Payments made by European financial institutions

and bodies consist of the following:(a) transactions related to their activities as market
producers of financial services, mainly: ‘intermediate consumption’ (P.2), ‘gross fixed capital formation’ (P.51) and ‘compensation of
employees’ (D.1);(b) interest payments (D.41).
As the subscriptions of Member States to the capital of the European Investment Bank are not considered as foreign direct investment, there is no
imputed flow of reinvested earnings (D.43) to berecorded in its accounts.
19.43 The accounts of European institutions record the19.39 Payments made by European non-financial insti-

tutions and bodies consist of the following:(a) transactions related to their activities as nonmarket producers, mainly: ‘intermediate414

consumption’ (P.2), ‘gross fixed capital formation’ (P.51) and ‘compensation of employees’(D.1);

payments made by European financial institutions
and bodies as uses of the ‘other financial intermediaries, except insurance corporations and pension
funds’ (S.125) subsector and resources of the rest of
the world (S.211 or S.22).

European system of accounts — ESA 2010

Annex 19.1

Consolidation
19.44 In European accounts, flows between Member

States and European institutions are normallynot consolidated, among resources and uses,
within the ‘general government’ sector (S.13).
However, in the case of ‘current international

European system of accounts — ESA 201019

cooperation’ (D.74), the payments of Member
States to the European institutions to finance,
e.g. the European Development Fund, are consolidated and recorded, in European accounts, as
uses of national ‘central government (excluding
social security)’ (S.1311) and resources of the restof the world (S.22).

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20

CHAPTER 20
The government accounts
Introduction
20.01 The activities of government are presented sep-arately from those of the rest of the economy
because the powers, motivation, and functions ofgovernment are different from those of other sectors. This Chapter presents general government
sector accounts and a government finance statistics(GFS) presentation that gives an integrated picture of government economic activities: revenue,
expenditure, deficit/surplus, financing, other economic flows and balance sheet.

20.02 Governments have powers to raise taxes andother compulsory levies and to pass laws affecting the behaviour of economic units. The principal economic functions of government are as
follows:(a) to provide goods and services to the community, either for collective consumption suchas public administration, defence, and law
enforcement, or individual consumption suchas education, health, recreation and cultural
services, and to finance their provision out of
taxation or other incomes;(b) to redistribute income and wealth by meansof transfer payments such as taxes and social
benefits;(c) to engage in other types of non-market
production.
20.03 The GFS presentation of general government

economic activities presents the usual sequenceof accounts in a manner that is more suitable forgovernment finance analysts and policymakers.
The GFS presentation uses aggregates and balancing items defined in terms of the ESA concepts, definitions, classifications, and accounting rules so that they are measured consistently
with other macroeconomic variables, and with

European system of accounts — ESA 2010

the same measures in other countries. Items
such as saving and net lending/net borrowing
are already available in the sequence of accounts.
Other items, such as total revenue, total expenditure, the tax burden and total debt, are notshown explicitly.
20.04 Additional rules on some more difficult issues ofclassification and measurement for the general government sector are given in the section ‘Accounting
issues relating to general government’.

Defining the general government
sector
20.05 The general government sector (S.13) consists ofall government units and all non-market nonprofit institutions (NPIs) that are controlled bygovernment units. It also comprises other nonmarket producers as identified in paragraphs
20.18 to 20.39.

20.06 Government units are legal entities established bypolitical process which have legislative, judicial or
executive authority over other institutional units
within a given area. Their principal function is toprovide goods and services to the community andto households on a non-market basis and to redistribute income and wealth.

20.07 A government unit usually has the author-

ity to raise funds through compulsory transfersfrom other institutional units. In order to satisfy the basic requirements of an institutional
unit, a government unit must have funds of its
own either raised by income from other units
or received as transfers from other government
units, and must have the authority to disburse
such funds in the pursuit of its policy objectives.
It must also be able to borrow funds on its own
account.

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The government accounts

Identification of units in the government
Government units
20.08 In all countries, there is a core entity, notably inside

the central government that exercises national
executive, legislative and judiciary powers. Its revenues and expenditures are directly regulated andcontrolled by a Ministry of Finance, or its equivalent, by means of a general budget approved by thelegislature. Despite its size and diversity, this entity
is usually a single institutional unit. Ministerial
departments, agencies, boards, commissions, judicial authorities, and legislative bodies are part ofthis core central government unit. The separate
ministries within it are not recognised as separate
institutional units as they do not have the authority
to own assets, incur liabilities, or engage in transactions in their own right.

20.09 General government subsectors such as state andinclude unincorporated enterprises that are market producers and quasi-corporations. If they qualify as institutional units, such enterprises are notconsidered to be part of general government, butclassified to the non-financial or financial corporations sector.

20.12 Social security funds are government units devoted

to the operation of social security schemes. Social
security schemes are social insurance schemes
covering all or a large part of the community as awhole, which are imposed and controlled by government. A social security fund is an institutional
unit if it is organised separately from the otheractivities of government units, holds its assets andliabilities separately, and engages in financial transactions on its own account.

NPIs classified to the general government sector

local governments can include such primary core
government units as described in paragraph 20.08,
each related to a given level of government andgeographic area.

20.13 Non-profit institutions (NPIs) that are non-market

20.10 In addition to this primary unit, there are gov-

than government agencies to carry out government
policies because they are seen as more detached,objective, and less subject to political pressures.
For example, research and development and thesetting and maintenance of standards in fields suchas health, safety, the environment, and education
are areas in which NPIs may be more effective thangovernment agencies.

ernment entities with separate legal identities andsubstantial autonomy, including discretion overthe volume and composition of their expenditures
and a direct source of revenue, such as earmarked
taxes. Such entities are often established to carryout specific functions, such as road constructionor the non-market production of health, education or research services. These entities are considered to be separate government units where
they maintain full sets of accounts, own goods or
assets in their own right, engage in non-market
activities for which they are held accountable atlaw, and are able to incur liabilities and enter into
contracts. Such entities (together with non-profit
institutions controlled by government) are known
as ‘extra-budgetary units’ because they have separate budgets, receive substantial transfers fromthe main budget, and their primary sources offinance are supplemented with own sources ofrevenue that fall outside the main budget. These
extra-budgetary units are classified to the general
government sector unless they are predominantly
market producers controlled by another government unit.

418

20.11 The general budget of any government level can

producers and are controlled by government units
are units of the general government sector.

20.14 Governments may choose to use some NPIs rather

20.15 Control of a NPI is defined as the ability to deter-mine the general policy or programme of the NPI.
Public intervention in the form of general regulations applicable to all units working in the sameactivity is irrelevant when deciding whether thegovernment holds control over an individual unit.
To determine whether a NPI is controlled by thegovernment, the following five indicators of control should be considered:(a) the appointment of officers;(b) other provisions of the enabling instrument,such as the obligations in the statute of theNPI;(c) contractual agreements;

European system of accounts — ESA 2010

The government accounts(d) degree of financing;20

20.16 The non-market characteristic of an NPI is deter-

mined in the same way as for other units of general
government.

(e) risk exposure.
A single indicator can be sufficient to establish control. However, if a NPI that is mainly financed bygovernment remains able to determine its policy orprogramme to a significant extent along the lines
mentioned in the other indicators, then it would
not be considered as being controlled by government. In most cases, a number of indicators willcollectively indicate control. A decision based onthese indicators will be judgmental in nature.

Other units of general government
20.17 It can be difficult to decide on the classification of

producers of goods and services that operate under
the influence of government units. The alternatives
are to classify them as general government or, if they
qualify as institutional units, as public corporations.
For such cases, the following decision tree is used.

Diagram 20.1 — Decision tree

Is the entity an institutional
unit?

no

Part of the controlling unit

yes

Is the unit controlled bygovernment?

no

Unit is classified tothe private sectors

noUnit is classified as a public
corporationyes

Is the unit a non market
producer?

yes

Unit is part of general
government

Public control
20.18 Control over an entity is the ability to determine

the general policy or programme of that entity. In

European system of accounts — ESA 2010

order to determine the existence of control by government, the criteria used are those used for corporations liable to be public corporations, as set out
in paragraph 2.32.

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The government accounts

Market/non-market delineation

Criteria of the purchaser of the output of a public
producer

Notion of economically significant prices

The output is sold primarily to corporations
and households.

20.19 Non-market producers provide all or mostof their output to others free of charge or at
prices that are not economically significant.
Economically significant prices are prices whichhave a substantial influence on the amounts ofproducts producers are willing to supply and on
the amounts of products that purchasers wish toacquire. It is the criterion that is used to classify
output and producers as market or non-market,
thus deciding whether an institutional unit inwhich government has a controlling interest is
to be designated as a non-market producer andso classified in the general government sector, or
as a market producer and so classified as a public corporation.

20.20 Whereas the assessment of whether a price is eco-nomically significant is carried out at the level ofeach individual output, the criterion determining the market/non-market character of a unit isapplied at the level of the unit.

20.21 When the producers are private corporations,

it can be presumed that prices are economically significant. By contrast, when there is public control, a unit’s prices may be established or
modified for public policy purposes, which may
cause difficulties in determining whether the
prices are economically significant. Public corporations are often established by government
to provide goods and services that the market
would not produce in the quantities or at theprices to meet government policy. For such public units enjoying government support, the sales
may cover a large part of their costs, but they will
respond to market forces differently from private corporations.

20.22 To analyse the difference between a market anda non-market producer, in relation to changes inmarket conditions, it is useful to specify which
units are the consumers of the goods and services in question and whether the producer
actually competes on the market or is the only
supplier.

420

20.23 Economically significant prices normally result

when two major conditions are fulfilled:(1) the producer has an incentive to adjust supply either with the goal of making a profit in
the long run or, at a minimum, covering capital and other production costs, including consumption of fixed capital, by sales; and(2) consumers are free to choose on the basis of theprices charged.

The output is sold only to government.
20.24 Some services are typically required as ancillary ser-vices. They include activities such as transportation,
financing and investment, purchasing, sales, marketing, computer services, communications, cleaning, and maintenance. A unit that provides this typeof services exclusively to its parent unit or to otherunits in the same group of units is an ancillary unit.
It is not a separate institutional unit and is classified
with its parent unit. Ancillary units provide all of
their output to their owners for use as intermediate
consumption or gross fixed capital formation.

20.25 If a public producer sells only to government andis the only supplier of its services, it is presumed to
be a non-market producer unless it competes witha private producer. A typical case is tendering fora contract with government on commercial terms
and therefore government payments are only forservices delivered.

20.26 If a public producer is one of several suppliers togovernment, it is considered a market producer
if it competes with other producers on the market and its prices satisfy the general criteria to beeconomically significant, as defined in paragraphs
20.19 to 20.22.

The output is sold to government and others.
20.27 If a public producer is the only supplier of its ser-vices, it is presumed to be a market producer if its
sales to non-government units are more than half

European system of accounts — ESA 2010

The government accounts

of its total output or its sales to government fulfils
the tendering condition of paragraph 20.25.
20.28 If there are several suppliers, a public producer isa market producer if it competes with the otherproducers through tendering for a contract withgovernment.

The market/non-market test
20.29 The sector classification of core government units,

engaged in the provision of goods and services ona non-market basis and/or in the redistribution ofincome and wealth, is straightforward.
For other producers that operate under the control
of government, an assessment of their activity andresources is necessary. In order to decide if they aremarket units, and charge economically significant
prices, the criteria as set out in paragraphs 20.19
to 20.28 are to be checked. In summary the conditions are as follows:(a) the producer is an institutional unit (a necessary condition; see also the decision tree in paragraph 20.17);(b) the producer is not a dedicated provider ofancillary services;(c) the producer is not the only supplier of goods
and services to government, or, where that producer is, it has competitors; and(d) the producer has an incentive to adjust supply
to undertake a viable profit-making activity, tobe able to operate in market conditions and tomeet its financial obligations.
The ability to undertake a market activity will bechecked notably through the usual quantitative criterion (the 50 % criterion), using the ratio of sales
to production costs (as defined in paragraphs 20.30
and 20.31). To be a market producer, the public
unit shall cover at least 50 % of its costs by its sales
over a sustained multi-year period.

20.30 For the market/non-market test, sales of goods

and services correspond to sales receipts, in otherwords to the market output (P.11) increased by
payments for non-market output (P.131), if any.
Own-account production is not considered aspart of sales in this context. Sales exclude also all

European system of accounts — ESA 201020

payments received from government unless they
are granted to other producers undertaking thesame activity.
20.31 Production costs are the sum of intermediate con-sumption, compensation of employees, consumption of fixed capital and other taxes on production.
For the purpose of the market/non-market test,
production costs are increased by the net interest
charge and decreased by the value of any imputed
production, notably own-account production.
Subsidies on production are not deducted.

Financial intermediation and the government
boundary
20.32 The case of units engaged in financial activities

needs special consideration. Financial intermediation is the activity in which units acquire financial
assets and at the same time incur liabilities on theirown account by engaging in financial transactions.

20.33 A financial intermediary places itself at risk by

incurring liabilities on its own account. For
instance, if a public financial unit manages assets
but does not place itself at risk by incurring liabilities on its own account, it is not a financial intermediary and the unit is classified in the general
government sector rather than in the financial corporations sector.

20.34 Applying the quantitative criterion of the market/

non-market test to public corporations involved infinancial intermediation or in managing assets isgenerally not relevant, because their earnings arise
from both property income and holding gains.

Borderline cases
Public head offices
20.35 Public head offices are entities whose main func-tion is to control and direct a group of subsidiaries
under the control of a government unit. Two cases
are distinguished.
(a) To the extent that the public head office is an
institutional unit and is engaged in the management of market producers, it is classified
according to the main activity of the group, in
sector S.11 if the main activity is to produce

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The government accounts

goods and non-financial services, or in sector
S.12 if it produces mainly financial services (seealso paragraphs 2.23 and 2.59).
(b) If the public head office is not an institutional
unit, and so sometimes known as a ‘shell’, oracts as a government agent for public policy
purposes, such as channelling funds amongst
subsidiaries, and organising privatisation or
defeasance, it is classified to the general government sector.
20.36 The term ‘public head office’ used here covers units

20.41 A government establishment or a group of estab-lishments engaged in the same kind of production
under common management is treated as a public
quasi-corporation if:

which are also known under the label of ‘publicholding companies’.

(a) it charges prices for its outputs that are economically significant;20.37 Subsidiaries forming part of the group, engaged in(b) it is deemed to have autonomy of decision; andproduction and keeping a full set of accounts, aredeemed to be institutional units even if they havepartially surrendered some of their autonomy ofdecision to the central body (see paragraph 2.13).
The market/non-market test is applied to individual units. It may thus happen that one subsidiary,
but not others, is recognised as non-market andclassified to the general government sector.

Pension funds
20.38 Employers’ pension schemes are arrangements

set up to provide retirement benefits to participants, based on a contractual employer-employee
relationship. They include funded, unfunded, andpartly funded schemes.

20.39 A defined-contribution funded scheme, estab-lished by a government unit, is not treated as asocial security scheme, where there is no government guarantee on the level of pensions due,and the level of pensions is uncertain because it
depends on asset performance. As a consequence,
the unit identified as managing the scheme — aswell as the fund itself, if it is a separate institutional
unit — is considered a financial corporation, classified in the insurance corporations and pension
funds subsector.

Quasi-corporations
20.40 Quasi-corporations are unincorporated enter-

prises that function as if they were corporations.
Quasi-corporations are treated as corporations:that is, as separate institutional units from the422units to which they belong in recognition of
their distinct economic and financial behaviour.
Thus, market establishments controlled by government units and recognised as public quasicorporations are grouped with corporationsin the non-financial or financial corporations
sectors.

(c) a complete set of accounts exists that enables its
operating balances, savings, assets and liabilities to be separately identified and measured, or
it is possible to construct such a complete set ofaccounts.
20.42 The amount of income withdrawn from a quasi-

corporation during a given accounting period
is decided by the owner. Such a withdrawal isequiva­lent to the payment of a dividend by acorpor­ation to its shareholders. Given the amountof the income withdrawn, the amount of earnings
retained within the quasi-corporation is determined. The owner may invest more capital in theenterprise or withdraw capital from it by disposing of some of its assets, and such flows of capital shall also be identifiable in the accounts whenever they occur. Investment and property income
flows in the quasi-corporation are recorded in thesame way as similar flows in corporations. In particular, investment grants are recorded as capitaltransfers.

20.43 The producer entities that are not treated as quasi-

corporations remain integrated with the government units that own them. While units of government consist largely of non-market producers,
market establishments can exist within a government unit. The sales of these market establishments
are in addition to incidental sales, which are secondary output sold by non-market establishments
at economically significant prices. As a result, anon-zero net operating surplus is possible for agovernment unit: the net operating surplus generated by market establishments.

European system of accounts — ESA 2010

The government accounts

Restructuring agencies
20.44 Some public units are involved in the restruc-turing of corporations. Such corporations may
or may not be controlled by government. The
restructuring agencies may be long-standing public units or agencies created for this special purpose. Government funds the restructuring in vari­
ous ways, either directly through capital injections
such as capital transfers, loans or acquisition ofequity, or indirectly, through granting guarantees.
The major criteria determining sector classificationof restructuring agencies are whether such entities
are financial intermediaries, the market characterof the main activity and the degree of risk assumed
by the public agency. In many cases, the degree ofrisk taken by the restructuring agency is low dueto the fact that it acts with public financial support
and on behalf of the government. Restructuring
agencies can handle privatisation or defeasance.

Privatisation agencies
20.45 The first type of restructuring agency manages pri-vatisation of public sector units. There are two cases.

(a) The restructuring unit, whatever its legal status, acts as a direct agent of the government or
has a limited lifespan. Its main function is toredistribute national income and wealth, channelling funds from one unit to the other. The
restructuring unit is classified in the general
government sector.
(b) The restructuring unit is a holding company
controlling and managing a group of subsidiaries, and only a minor part of its activity is dedicated to conducting privatisation and channelling funds from one subsidiary to the other onbehalf of the government and for public policy purposes. The unit is classified as a corpor­
ation, and any transactions made on behalf ofthe government should be rerouted throughthe general government.

20

A restructuring agency shall be classified according to the degree of risk it assumes, considering thedegree of financial support of the government.
In the most common case, the restructuring agency
purchases assets above market prices with thedirect or indirect financial support of government.
Its activities result in redistribution of national
income and wealth. If the defeasance structure
does not place itself at risk, it is classified to thegeneral government sector.

Special purpose entities
20.47 Special purpose entities (SPEs), also called special

purpose vehicles (SPVs), may be set up for financial convenience by governments or by privateen­tities. The SPE may be involved in fiscal operations, including securitisation of assets, borrowing
on behalf of government, etc. Such SPEs are not separate institutional units when resident. These entities are classified according to the principal activityof the owner, and SPEs performing fiscal operations
are classified to the general government sector.

20.48 Non-resident SPEs are recognised as separate

institutional units. All flows and stock positions
between the general government and the nonresident SPE are recorded in the general government and SPE accounts. In addition, when suchnon-resident SPEs undertake government borrowing or incur government outlays abroad, evenwhen there are no flows recorded between the government and the SPE related to those fiscal activities, transactions are imputed in the accounts ofboth the government and the non-resident entity
to reflect the fiscal activities of the government. If a
non-resident SPE engages in a securitisation operation without a sale of asset, the operation is considered to be a borrowing transaction of the government. The economic substance of this transaction is accounted for by imputing general government borrowing from the non-resident SPE for thesame value and at the same time the SPE incurs aliability to the foreign creditor.

Defeasances structures
Joint ventures
20.46 The second type of restructuring agency deals

with impaired assets, and may be set up in a banking or other financial crisis. Such agencies arereferred to as defeasance structures or ‘bad banks’.

European system of accounts — ESA 201020.49 Many public units enter into arrangements withprivate entities or other public units to undertake avariety of activities jointly. The activities can result

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The government accounts

in market or non-market output. Joint operations
can be structured broadly as one of three types:
jointly controlled units, referred to here as joint
ventures; jointly controlled operations; and jointly
controlled assets.
20.50 A joint venture requires the establishment of a cor-poration, partnership or other institutional unit inwhich each party has joint control over the activities of the unit. As an institutional unit, the joint
venture may enter into contracts in its own nameand raise finance for its own purposes. A joint venture maintains its own accounting records.

20.51 Normally, the percentage of ownership will be suf-

ficient to determine control. If each owner owns
an equal percentage of the joint venture, the otherindicators of control must be considered.

20.52 Public units can also enter into joint operating

arrangements that are not run by separate institutional units. In this case, there are no units requiring classification, but care must be taken to ensurethat the ownership of assets is recorded correctly
and sharing arrangements of revenues and expense
are made in accordance with the provisions of thegoverning contract. For example, two units may
agree to be responsible for different stages of a joint
production process or one unit may own an asset
or a complex of related assets but both units agree
to share revenues and expenses.

Market regulatory agencies
20.53 Public agencies acting in the field of agriculture

engage in two types of activity:(a) either to buy, hold and sell agricultural andother food products on the market; or(b) to be exclusively or principally a distributor ofsubsidies or other transfers to producers.
In the first case, given that it acts as a market producer, the institutional unit is classified in the nonfinancial corporations sector (S.11). In the second
case, the institutional unit is classified in the general government sector (S.13).
20.54 Where the market regulatory agency performs

both activities described in paragraph 20.53, itis split into two institutional units, according to
the principal activity, one being classified in the424

non-financial corporations sector (S.11), the otherin the general government sector (S.13). In the casewhere it would be difficult to split the agency in thisway, a convention is to adapt the usual sector classification test applying a ‘principal activity’ criter­
ion on the basis of costs. If the costs of the unit
are very significantly linked to the market managing activity, the unit is classified in the non-financial corporations sector. An 80 % threshold of costs
to sales ratio is recommended. If the costs to sales
ratio linked to the regulatory activity are less than
this threshold, the unit is classified in the general
government sector (S.13).

Supranational authorities
20.55 Some countries are part of an institutional agree-

ment whereby the countries form part of a supranational authority. Normally such an arrangement implies monetary transfers from the member countries to the supranational authority andthe reverse. The supranational authority will also
engage in non-market production. In the national
accounts of the member countries, the supra­
national authorities are non-resident institutional
units that are classified to a specific subsector of therest of the world.

The subsectors of general government
20.56 Depending on the administrative and legal arrange-ments, there is generally more than one level ofgovernment within a country. In Chapter 2, threelevels of government are specified: central, state (orregional) and local, with a subsector for each level.
In addition to these levels of government, the existence and size of social security and its role in fiscal policy require that statistics for all social security units be compiled as a fourth separate subsector of general government. Not all countries have
all levels; some may have only a central government or a central government and one lower level.
In countries that have more than three levels, thevarious units should all be classified to one of thelevels above.

Central government
20.57 The central government (excluding social secur­ity) subsector (S.1311) consists of all government

European system of accounts — ESA 2010

The government accounts

units having a national sphere of competence, withthe exception of social security units. The political authority of a country’s central government
extends over the entire territory of the country. The
central government can impose taxes on all resident institutional units and on non-resident units
engaged in economic activities within the country. Central government typically is responsible forproviding collective services for the benefit of thecommunity as a whole, such as national defence,
relations with other countries, public order andsafety, and for regulating the social and economic
system of the country. In addition, it may incur
expenditure on the provision of services, such as
education or health, primarily for the benefit ofindividual households, and it may make transfers
to other institutional units, including other levelsof government.
20.58 The compilation of statistics for central governmentis important because of the special role it plays ineconomic policy analysis. It is mainly through central government that fiscal policy impacts on inflationary or deflationary pressures within the economy. It is generally at the central government levelthat a decision-making body formulates and carries out policies directed toward nationwide economic objectives.

20.59 The central government subsector is a large andcomplex subsector in most countries. It is generally composed of a central group of departmentsor ministries that make up a single institutional
unit plus miscellaneous bodies operating under thecontrol of the central government with a separate
legal identity and enough autonomy to form add­
itional central government units.

20.60 The main central group or primary central govern-

ment is sometimes called budgetary central government emphasising the fact that an essential ofits key reporting statement is the ‘budget’. This suggests that the budget provides an implicit delimitation of this underlying institutional unit of central government. It is sometimes called the ‘State’,
which should not be confused with the notion ofstate government such as provinces, Länder, cantons, republics, prefectures, or administrative
regions in a federal system of government. Whendrawing up the complete sequence of accounts forbudgetary central government, it is often appropriate to include the activities of extra-budgetary

European system of accounts — ESA 2010

20

funds, when they are not institutional units, andgenerally all treasury operations not reported in
the budget.
20.61 The other component of central government con-sists of other central government bodies, also called
extra-budgetary units, which comprise extrabudgetary agencies or entities that qualify as institutional units, non-market public enterprises withlegal status and non-market public controlled NPI.

20.62 Central government can be partitioned into two

components: budgetary central government andother central government bodies. This partition is amatter of judgment and can be influenced by practical considerations. An important criterion is theinstitutional coverage of the ‘budget’. However, theexact composition should be precisely known andagreed between compilers at the national level, toreinforce the consistency of source data. The ability
to draw a complete sequence of accounts for thesetwo ‘subsectors’ of central government is import­
ant in assessing the quality of the data.

State government
20.63 The state government (excluding social security)

subsector (S.1312) consists of all government units
in a federal system of government having a stateor regional sphere of competence, with the pos­sible exception of social security units. A state is
the largest geographical area into which the country as a whole is divided for political or administrative purposes. Such areas are known by terms
such as provinces, Länder, cantons, republics, or
administrative regions. They all enjoy the sufficient level of power required in a federal systemof government. The legislative, judicial, and executive authority of a state government extends overthe entire area of an individual state, which usually
includes numerous localities, but does not extend
over other states. In many countries, state governments do not exist. In federal countries, considerable powers and responsibilities may be assigned tostate governments, and compiling a state government subsector is appropriate in such cases.

20.64 A state government usually has the fiscal author-

ity to levy taxes on institutional units that are resident in, or engage in economic activities in, its areaof competence. To be recognised as a government
unit, the entity must be able to own assets, raise

425

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The government accounts

funds, and incur liabilities on its own account, andit must also be entitled to spend or allocate at least
some of the taxes or other income that it receives
according to its own policies. The entity may, however, receive transfers from the central government that are tied to certain specified purposes. A
state government is able to appoint officers independently of external administrative control. If a
government entity operating in a state is entirely
dependent on funds from central government,
and if central government also dictates the ways inwhich those funds are to be spent, then the entity isan agency of central government.

Local government
20.65 The local government (excluding social security)

subsector (S.1313) consists of government units
having a local sphere of competence (with the possible exception of social security units). Local governments typically provide a wide range of services
to local residents, some of which may be financedout of grants from higher levels of government.
Statistics for local government cover a wide varietyof governmental units, such as counties, municipalities, cities, towns, townships, boroughs, school
districts, and water or sanitation districts. Often
local government units with different functional
responsibilities have authority over the same geographic areas. For example, separate government
units representing a town, a county, and a school
district have authority over the same area. In add­
ition, two or more contiguous local governments
may organise a government unit with regional
authority that is accountable to local governments.
Such units are classified to the local government
subsector.

20.66 The legislative, judicial, and executive authority of

local government units is restricted to the smallest
geographic areas distinguished for administrativeand political purposes. The scope of a local government’s authority is generally much less than thatof the central or a state government, and such governments may or may not be entitled to levy taxes
on institutional units or economic activities taking place in their areas. They are often dependent on grants from higher levels of government,
and act as agents of central or state governments
to some extent. To be treated as institutional units,
however, they must be entitled to own assets, raise426

funds, and incur liabilities by borrowing on theirown account. They must also have discretion over
how such funds are spent, and they should be able
to appoint their own officers independently of
external administrative control.

Social security funds
20.67 The social security funds subsector (S.1314) con-sists of all social security units, regardless of thelevel of government that operates or manages theschemes. If a social security scheme does not meetthe requirements to be an institutional unit, it
would be classified with its parent unit in one of theother subsectors of the general government sector.
If public hospitals provide a non-market service
to the community as a whole and if they are controlled by social security schemes, they are classified to the social security funds subsector.

The government finance presentationof statistics
Framework
20.68 Experience has shown that for government, an alter-

native presentation to the ESA sequence of accounts
in the central framework is better suited to certain
analytical requirements. This alternative is known as
the government finance statistics (‘GFS’) presentation. It gives a different but still integrated picture ofgovernment accounts with the following measuresof government economic activity: revenue, expenditure, deficit/surplus, financing, other economic
flows and balance sheet levels.

20.69 The ESA based GFS presentation consists oftransactions recorded in the various ESA current
accounts, capital account and financial account,rearranged for non-financial transactions into asingle account presentation more appropriate tofiscal analysis.

20.70 In the GFS system, revenue is defined as the aggre-

gate of all transactions recorded under positive
resources in the ESA central framework, and subsidies receivable in the current accounts as well as
capital transfers receivable recorded in the capital account. Expenditure is an aggregate of all

European system of accounts — ESA 2010

The government accounts

transactions recorded under positive uses and undersubsidies payable in the current accounts as well as
capital expenditure — gross capital formation plus
capital transfers payable — recorded in the capital
account. These measures of revenue and expenditure are specific to the GFS presentation, but theunderlying transactions are those of the ESA.

acquisitions of financial assets and net incurrencein liabilities are recorded. Expenditure and rev­enue entries have a counterpart entry in the financial account. Financial transactions may also leadto two entries in the financial account. This reflects
the double entry principle where every transaction has a matching transaction in the financial
account. In principle, the net lending/net borrowing can be derived also from transactions in financial assets and liabilities.

20.71 The difference between revenue and expenditure,equivalent to the surplus/deficit, is the net lending/
net borrowing (B.9). The financing of the surplus/
deficit is shown in the financial account, where net

20

20.72 The GFS presentation is shown below:

Government finance statistics presentation
Revenue
Taxes
Social contributions
Sales of goods and services
Other current revenue
Capital transfer revenue
less

Expenditure
Intermediate consumption
Compensation of employees
Interest
Subsidies
Social benefits
Other current expenditure
Capital transfer expenditure
Investment expenditureequalsNet lending/net borrowing

equalsNet financial transactions

20.73 Additional accounts in the GFS system arefor other economic flows, and balance sheets,
coherent with the ESA sequence of accounts.
Such accounts allow a complete reconciliationof the change in balance sheet and the flows
taking place during the accounting period. For
each asset or liability, the following identity
holds:

opening balance sheet
plus

transactions

plus

revaluations

plus

other changes in volume

equalsclosing balance sheet

20.74 The balance sheet shows total asset levels — non-financial and financial — as well as liabilities stocks
outstanding, which enables the following to be

European system of accounts — ESA 2010derived: net worth as total assets minus total liabilities, and financial net worth as total financial assets
minus total liabilities.

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20

The government accounts

20.75 Government finance statistics presents the finan-

usually dominated by compulsory levies imposedby government in the form of taxes and social contributions. For some levels of government, transfers from other government units and grants
from international organisations are a major
source of revenue. Other general categories ofrevenue include property income, sales of goods
and services, and miscellaneous transfers otherthan grants. The total government revenue of an
accounting period is calculated by summing transactions that are receivable, as follows:cial performance of general government and its
subsectors, or any grouping of government units,
and also individual institutional units such as thebudgetary central government.

Revenue
20.76 A revenue transaction is one that increases net

worth, and has a positive impact on net lending(+)/net borrowing (–). Government revenue is

Total revenue=

total taxes

D.2 + D.5 + D.91+

total social contributions

D.61

+

total sales of goods and services

P.11 + P.12 + P.131+

other current revenue

D.39 + D.4 + D.7+

other capital revenue

D.92 + D.99

Taxes and social contributions

taneously with tax statistics and are included in themeasures of fiscal burden or compulsory levies.

20.77 Total taxes comprise taxes on production andimports (D.2), current taxes on income andwealth, etc. (D.5) and capital taxes (D.91). Totalsocial contributions consist of actual social contributions (D.611) and imputed social contributions (D.612).

20.78 Estimating taxes and social contributions can bedifficult. The problems involved and the recommended solutions are described in the section‘Accounting issues relating to general government’of this Chapter. While taxes are recorded in several of the accounts of the ESA central framework,in the government finance statistics presentation
all taxes are presented as one category of revenue,
with sub-classifications according to the base on
which the tax is levied. Capital taxes are shown asrevenue taxes in the government finance statistics
presentation.

20.79 Tax and social contributions revenue data are used1

to compile total tax or fiscal burden ratios, such as
the ratio of total tax to the level of GDP, used ininternational comparisons. In this context, compulsory social contributions are presented simul-

1

428

The ESA based total tax and social contributions revenue measure is consistent
with that of the OECD Revenue Statistics, except for the recording of payabletax credits and of imputed social contributions. The ESA recording of taxes andsocial contributions is also harmonised with the IMF government finance statistics
presentation, with some differences in breakdowns.

Sales
20.80 Total sales of goods and services consist of market

output (P.11) and payments for non-market output (P.131). They also include — except when they
are used for the market/non-market test (see para­graph 20.30) — output for own final use (P.12).
Most of the output produced by general government consists of goods and services that are notsold, or that are sold at prices that are not economically significant. The distribution of a non-market output does not accord with the concept ofrevenue. For goods and services, only actual sales
and some specific imputed sales are included inrevenue.

20.81 Market output (P.11) of government comprises:(a) the market output of market establishments
included in government, such as a weapons factory that is part of the ministry of defence, or
canteens set up by government units for theiremployees, that charge economically significant prices;(b) secondary market products sold by non-market establishments, sometimes referred to as‘incidental sales’, such as those arising fromresearch and development contracts between

European system of accounts — ESA 2010

The government accounts

public universities and corporations, or publications sold by government units at economically significant prices.
20.82 The above-quoted ‘incidental sales’ are distinct

from the token museum entrance fees paid by visitors, which are usually partial payments for nonmarket output (P.131). Other significant partial
payments include payments to hospitals or schools,
when these are non-market.

20

include also the value of goods and services produced and provided as compensation of employees
in kind or as other payment in kind.
20.84 Sales revenue in the ESA based government finance

20.83 The value of own-account capital formation is con-sidered revenue in the ESA based government
finance statistics, and included under sales. Sales

statistics takes an output perspective: they do notdiffer from output, whereas actual sales to customers differ by changes in inventories. However suchchanges in inventories are likely to be small forgovernment units and other non-market producers, mostly engaged in the production of services
rather than in the production of goods. Sales arevalued at basic prices.

Box 20.1 — From the ESA central framework to GFS transactions and aggregates
ESA resources
P.1

ESA GFS revenue

Output, of which
Market output (P.11)

Sales of goods and services

Output for own final use (P.12)

Sales of goods and services

Non-market output (P.13), of which:— Payments for non-market output (P.131)

Sales of goods and services— Non-market output, other (P.132)

Not accounted for in Total revenue

D.2

Taxes on production and imports (receivable)

Total taxes

D.3

Subsidies (receivable)

Other current revenue

D.4

Property income

Other current revenue

D.5

Current taxes on income and wealth

Total taxes

D.61

Social contributions

Total social contributions

D.7

Other current transfers

Other current revenue

D.91r

Capital taxes (receivable)

Total taxes

D.92r

Investment grants (receivable)

Other capital revenue

D.99r

Other capital transfers (receivable)

Other capital revenue

ESA uses and capital transactions

ESA GFS expenditure

P.2

Intermediate consumption

Intermediate consumption

D.1

Compensation of employees

Compensation of employees

D.2

Taxes on production and imports (payable)

Other current expenditure

D.3

Subsidies (payable)

Subsidies

D.41

Interest

Interest

D.4

Property income (excluding D.41)

Other current expenditure

D.5

Current taxes on income

Other current expenditure

D.62

Social benefits other than social transfers in kindSocial benefits other than ST in kind

D.632

Social transfers in kind via market producers

Social transfers in kind via market producers

D.7

Other current transfers

Other current expenditure

D.8

Adjustment for the change in pension entitlements

Other current expenditure

European system of accounts — ESA 2010

429

20

The government accounts

ESA uses and capital transactions

ESA GFS expenditure

P.31

Individual consumption expenditure on market output

Social transfers in kind via market producers

P.31

Individual consumption expenditure on non-market
outputNot accounted for in Total expenditure

P.32

Collective consumption expenditure

Not accounted for in Total expenditure

P.5

Gross capital formation

Capital expenditureNP

Acquisition less disposal of non-produced assets

Capital expenditure

D.92p

Investment grant (payable)

Capital expenditure

D.99p

Other capital transfers (payable)

Capital expenditure

In the ESA central framework, net lending/net borrowing (B.9) is the balancing item of the capital account. The balancing item of general government in the ESA GFS presentation is identical to the net lending/net borrowing (B.9).
This box explains why.
The ESA central framework
The first account is the production account, and therefore the first resource of an institutional sector in the ESA is its
output. As the majority of services provided by government are not sold at economically significant prices and so are
non-market, government output is measured by convention as the sum of production costs.
Similarly, final collective consumption expenditure, consisting of services provided to the community by government such as general services, defence, safety and public order, are measured as the sum of production costs.
Also by convention, collective consumption expenditure (P.32) is equal to the actual final consumption (P.4) ofgovernment.
Final individual consumption expenditure of households provided directly by government on a non-market basis isalso measured by its production costs.
As a result, two types of flows are ‘imputed’ in the ESA accounts of government:(1) on the resources side, the non-market output, other (P.132) recorded in the production account;(2) on the uses side, the actual final consumption (P.4) and the social transfers in kind — non-market production (D.631). They are recorded in the redistribution of income in kind account, and in the use of adjusted
disposable income account.
Each imputed flow is equal to the sum of actual flows: the production costs. These two types of imputed flows,on the resource side and on the uses side, balance in the ESA sequence of accounts.
The ESA GFS presentation of statistics
The same basic transaction categories are used in the ESA GFS presentation, but mainly on the basis of actual monetaryflows, to obtain the total revenue and the total expenditure of government. Only a selection of imputed flows is taken
into account: imputed social contributions and capital transfers in kind.
Eliminating from the resources side the non-market output (P.132) to obtain total revenue, and eliminating from theuses side the actual final consumption (P.4=P.32) and the social transfers in kind — non-market production (D.631)
to obtain total expenditure, results in the same balancing item: the net lending/net borrowing (B.9).
The only social transfers in kind that are accounted for in the GFS aggregate total expenditure of government are socialtransfers in kind provided to households via market producers (D.632), as they are subject to real payments of government units. Those transactions are also to be added to the sum of production costs (equal to non-market output, other— P.132) to obtain the final consumption expenditure of the general government.
P.3 = P.132 + D.632

430

European system of accounts — ESA 2010

The government accounts

received by one government unit from anothergovernment unit or an international organisation,
are not an ESA category. Their amount should beequivalent to the sum of the following transfer revenue: D.73 + D.74 + D.92, together with D.75 +D.99 in some cases.

Other revenue
20.85 Other current revenue consists of property income(D.4), other subsidies on production (D.39) andother current transfers (D.7).

20.86 Property income comprises interest (D.41), distrib-

uted income of corporations (dividends and withdrawals from income of quasi-corporations) (D.42)
and, more marginally, reinvested earnings on foreign direct investment of government (D.43), otherinvestment income (D.44) and rent (D.45).

20.87 Other current transfers (D.7) include mainly intra-

government transfers. They shall be consolidated
when drawing up the accounts of the sector as awhole.

20.90 Subsidies received by government units con-sist only in other subsidies on production. When
received by producing entities belonging to general
government, subsidies on products are included in
the valuation of the output and sales at basic prices.

Expenditure
20.91 An expenditure transaction is one that has a nega-tive impact on net lending (+)/net borrowing (–).
Total expenditure consists of current and capital expenditure. Current expenditure includes
production related expenses (compensation of
employees and intermediate consumption); property income payable (which is mainly interest); andtransfer payments (such as social benefits, current
grants to other governments, and miscellaneous
other current transfers).

20.88 Other capital revenue comprises investment grants(D.92) and other capital transfers (D.99) received
from other units, predominantly from other government units (although consolidation carried out
when presenting statistics may reduce their apparent size) and EU institutions, but also from othervarious units, reflecting transactions such as repayment by a debtor subsequent to the activation of aguarantee.

20.89 Grants, which are sometimes defined in other stat­

20.92 The total government expenditure of an account-istical systems as transfers other than subsidies

Total expenditure=

ing period is calculated using the following equation, summing transactions which are payable:intermediate consumption

P.2+

compensation of employees

D.1+

interest

D.41+

social benefits other than social transfers in kind

D.62

+

social transfers in kind via market producers

D.632

+

subsidies

D.3+

other current expenditure

D.29 + (D.4 – D.41) + D.5 + D.7 + D.8+

capital expenditure

P.5 + NP + D.92 + D.99

Compensation of employees and intermediate
consumption
20.93 Compensation of employees and intermediate

consumption are costs of production for units ofgovernment.

20.94 Compensation of employees (D.1) includes wages

and salaries (D.11) paid as well as employers’ social
contributions (D.12), including imputed social

European system of accounts — ESA 201020

contributions, that are viewed in the ESA as usesof households and as resources of government,
and thus not to be consolidated. Compensation isrecorded on an accrual basis, at the time the work
is done, and not at the time the wage is due forpayment or paid. Wages include bonus and otherlump sums (due to arrears or contract renewal)
paid, and the relevant time of recording can be difficult to determine: when covering long periods of
employment, it is often the time of determination

431

20

The government accountsof the bonus rather than the time period that thebonus is nominally intended to cover.

the latter: social benefit in cash (D.62) plus socialtransfers in kind (D.63).

20.95 Intermediate consumption (P.2) comprises the

20.99 In the ESA, even when retirement benefits paid

goods and services consumed during the accounting period in the production process. It differs inconcept from purchases, and other possible kindsof acquisitions: any acquisition enters inventories
prior to being removed upon consumption. Goods
and services may be acquired by market and nonmarket establishments of government as well.

20.96 In concept, the time of recording of intermed­

iate consumption is clear: at the time the productis used up in the production process. The time ofrecording of purchases and other acquisitions is inconcept the delivery, although there may be cases
when delivery can be difficult to ascertain.

Social benefits expenditure

Interest

20.97 Social benefits expenditure consists of social bene-

20.100 Interest expenditure includes what is due for thefits other than social transfers in kind (D.62), that,in turn, consist mainly of cash payments, and ofsocial transfers in kind provided to households via
market producers (D.632). Social transfers in kind
via market producers are government expenditure
financing goods and services provided to households by market producers. Typical examples arehealth care, and goods and services provided bydoctors and pharmacists, financed by government
units, through social security schemes or social
assistance programmes.

20.98 Social benefits expenditure excludes social trans-

fers in kind provided to households by non-market producers of government. Governments often
produce services and goods and distribute themfor free or at prices that are not economically significant. To avoid duplication, in the government finance statistics presentation, the relevantcosts of production of these goods and services arerecorded only once as expenditure — intermediate
consumption, compensation of employees, othertaxes on production — and as revenue — othersubsidies on production. In the ESA sequence ofaccounts, these costs are balanced by a resource
under non-market output, and recorded again asa use under final consumption expenditure (P.3)
to be distributed as social transfers in kind. It canbe relevant, for analytical purposes, to calculatea broader aggregate of social transfers to include

432

to government employees are considered as theli­quidation of a government liability (see section‘Accounting issues relating to general government’), they are also recorded as a payment of current expenditure and the related contributions areincluded as revenue. However, when the scheme isfunded, such contributions and benefits are considered to be financing, and so an adjustment forthe change in pension entitlements (D.8) is added
to expenditure: it is equal to social contributions
received as pensions or other retirement benefits less social benefits paid for pensions or otherretirement benefits for those schemes the obligations of which are recognised as liabilities.

cost of incurring liabilities, notably on loans, bills,
notes and bonds, but also on deposit liabilities orother instruments that are liabilities of government.
Interest is recorded on an accrual basis (see section‘Accounting issues relating to general government’).

20.101 Interest expenditure is adjusted for FISIM in the

ESA-based government finance statistics. Interest
paid to financial institutions on loans and de­posits
is partitioned into a service component, whichis recorded as intermediate consumption, and aproperty income component which is recorded asinterest paid. The same adjustment applies to government interest revenue paid by financial institutions on deposits or loans.

Other current expenditure
20.102 Other current expenditure comprises other taxes

on production (D.29), property income other thaninterest (D.4-D.41), current taxes on income andwealth etc. (D.5), other current transfers (D.7) andthe adjustment for the change in pension entitlements (D.8).

20.103 Whereas other taxes on production paid by units ofgovernment are recorded as government expenditure, taxes on products are not separately shownas government expenditure. This is because, on
the one hand, such taxes, not being a resource forEuropean system of accounts — ESA 2010

The government accounts

market producers of government, whose output isvalued at basic prices, do not appear under theiruses, and, on the other hand, taxes on products
entering intermediate consumption of government
are included in its valuation at purchasers’ prices.

final consumption expenditure (P.3) is important for users of fiscal and other macroeconomic
statistics.
20.106 Final consumption expenditures by general gov-

ernment are equal to the total of their output(P.1), plus the expenditure on products supplied tohouseholds via market producers (i.e. social transfers in kind — D.632), minus the sales of goods andservices (P.11+P.12+P.131).

Capital expenditure
20.104 Capital expenditure comprises capital transfers, inthe form of investment grants (D.92) and other capital transfers (D.99), as well as investment expenditure: gross capital formation (P.5, which consists ofgross fixed capital formation — P.51g, plus changes
in inventories — P.52, and acqui­sitions less disposals of valuables — P.53); and acquisitions less disposals of non-produced non-financial assets (NP).
Disposals of non-financial assets, such as buildings,
are not recorded as revenue, but as negative capital
expenditure, making the net lending/net borrowing (B.9) more positive.

Link with government final consumption expenditure
(P.3)

20

20.107 The output of government — market output, own

account capital formation and non-market output — is equal to the sum of its costs of production (compensation of employees, intermediate consumption, consumption of fixed capital,
and taxes on production paid net of subsidies on
production received), plus the net operating surplus (B.2n) generated by market establishments ofgovernment.

20.108 Thus, the following calculation gives final con-sumption expenditures using selected items of government expenditure and revenue, as well as thenet operating surplus (B.2n):

20.105 Making the link between total government

expenditure and its components with government

compensation of employees (D.1)
plusintermediate consumption (P.2)

plus

consumption of fixed capital (P.51c1)

plus

other taxes on production, payable (D.29 U)

lessother subsidies on production, receivable (D.39 R)

plus

operating surplus, net (B.2n)equalsoutput (P.1)

and:
outputlesssales of goods and services (P.11+P.12+P.131)

plus

social transfers in kind via market producers (D.632)

equalsfinal consumption expenditure (P.3)

Government expenditure by function (COFOG)
20.109 A classification of expenditure transactions using

the classification of functions of government(COFOG) is integral to the government financepresentation: it is a major analytical instrument ofEuropean system of accounts — ESA 2010

government expenditure, especially useful for international comparisons. This classification shows the
purpose for which expenditure transactions areundertaken. Such purposes differ from the administrative arrangement of governments, for ex­ample anadministrative unit responsible for health services

433

20

The government accounts

can undertake activities with an educational purpose, such as training of medical professionals. A
cross presentation of government transactions by
economic nature (the usual ESA classification) andaccording to functions is requested.

20.111 The COFOG classification is consistent with thedistinction made between collective non-market
services and individual non-market services provided by government: the six first functions corres­
pond to collective services, as well as some limit­edparts of the others. This enables government final
collective consumption expenditure to be calculated. The total expenditure aggregate and theexpenditure transactions broken down by function
are consistent with those in the ESA government
finance statistics. Therefore, it does not include
social transfers in kind — non-market production(D.631), already accounted for with production
costs of government.

20.110 The COFOG classification describes government

expenditure according to 10 major functions set
out below, and according to two additional ­levels
of increased detailed breakdown not presented
here. As an example, the second level is necessary
to provide information on research and development expenditure, as well as to provide information on government expenditure dedicated to therisks and social needs of social protection.

Table 20.1 — COFOG, the 10 functions of government
CodeFunction

01

General public services

Collective

02

DefenceCollective

03

Public order and safety

Collective

04

Economic affairs

Collective

05

Environmental protection

Collective

06

Housing and community amenities

Collective

07

HealthMainly individual

08

Recreation, culture and religion

Mainly collective

09

Education

Mainly individual

10Social protection

Mainly individual

Balancing items
The net lending/net borrowing (B.9)
20.112 The government net lending (+)/net borrowing (–)(B.9) is the difference between total revenue andtotal expenditure. It is equal to the balancing itemof the capital account (B.9N) in the ESA accounts.
It represents the amount the government has available to lend or must borrow to finance its nonfinancial operations.

20.113 Net lending (+)/net borrowing (–) is also the bal-ancing item of the financial account (B.9F in thecentral framework). In concept, it is the sameas the balancing item of the capital account,
although in practice a statistical discrepancy canoccur.

434

Type of service

20.114 The term ‘net lending/net borrowing’ is a sort ofterminological shortcut. When the variable is posi­tive (meaning that it shows a financing capacity),
it should be called net lending (+); when it is nega­tive (meaning that it shows a borrowing need), it
should be called net borrowing (–).

Changes in net worth due to saving and capitaltransfers (B.101)
20.115 The difference between all transactions that affect

net worth during the accounting period is the balancing item: changes in net worth due to saving
and capital transfers (B.101).

20.116 The changes in net worth due to saving and capitaltransfers provide a useful measure of government
accounts and policies as they represent the resources

European system of accounts — ESA 2010

The government accounts

acquired or consumed in the government’s current
operations.
20.117 The changes in net worth due to saving and cap-

20

plus net acquisition of non-financial assets(P.5 + NP) minus consumption of fixed capital(P.51c1).

ital transfers equal net lending/net borrowing

Net saving plus capital transfers (B.101)
lessacquisitions less disposals of non-financial assets (P.5+NP)

plus

consumption of fixed capital (P.51c1)

equalsnet lending/net borrowing (B.9)

equalstransactions in financial assets less liabilities (financing)

Financing
20.118 The financial account of government in the GFS

records the transactions in financial assets and liabilities as described in Chapter 5.

Transactions in assets
20.119 Currency and deposits (F.2) reflects mainly

movements in government deposits at banks,
notably at central banks, which can fluctuate substantially from one period to another, in particular due to Treasury operations. Other government
units such as local government and social secur­
ity funds also hold substantial deposits in bankaccounts.

20.120 Debt securities (F.3) mainly reflect net pur-chases of bills, notes or bonds issued by banks,
non-financial corporations, or non-residents
including foreign governments, the purchases
being carried out predominantly by asset-richsocial security funds or other reserve funds.
Government purchases of bonds issued by otherresident government units are reported under
this heading in a non-consolidated presentation,
but are excluded from this heading in a consoli­
dated presentation, being reported instead as
debt redemption.

20.121 Loans (F.4) include, in addition to loans to othergovernment units, lending to foreign governments,
public corporations, and students. Loan cancellations are also reflected here with a counterpart
entry under capital transfer expenditure. Loans
granted by government not likely to be repaid arerecorded in the ESA as capital transfers, and are
not reported here.

European system of accounts — ESA 201020.122 Equity and investment fund shares (F.5) cap-

ture acquisitions less disposals of equity in corporations by government units. These may reflectequity injections in public corporations or port­
folio investments, privatisation proceeds or superdividends. They consist mainly of the following:(a) equity injections (generally in the form of cash)
to specific public corporations where government is acting as an investor with the expectation of a return on invested funds. Such
injections are not considered as government
expenditure in national accounts;(b) portfolio investments, in the form of purchasesof quoted shares on the market made by government units such as asset-rich social security
funds, or other portfolio investment operations;(c) net investment in mutual funds, which arealternative investment vehicles. In particular,
placements in money market mutual funds
are reported here, rather than under currency
and deposits, despite being close substitutes forbank deposits;(d) privatisations conducted by special privatisation agencies, as such entities are classified togeneral government;(e) distributions by public corporations to theirowners in excess of their operational profit
excluding holding gains/losses, recorded as
financial transactions as withdrawal of equity
akin to a partial liquidation of the enterprise,rather than as government revenue.

20.123 Transactions in other accounts receivable (F.8) cap-

ture the impact of the accrual principle applicable

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The government accounts

in the ESA of recording transactions when the obligation to pay arises, not when the payment is actually made, even though public accounts or budget
recordings have long been cash-based in mostcountries. The impact on the financing needs ofgovernment does not directly arise from the def­
icit, as government revenue can be cashed, or government expenditure can be settled, at accounting
periods different from the economic transaction
itself. Other receivables include receivables of taxes
and social contributions as well as amounts concerning EU transactions (amounts paid by government on behalf of the EU but not yet reimbursedby the EU), trade credits or advances for expend­
iture, such as military equipment or rare occasionsof wages or benefits paid one month in advance,
etc. Whereas, in concept, such assets are tempor­
ary in nature, and they necessary individually disappear after a lapse of time, the flow reported fora sector, such as general government, do usually
average above zero even over a period of time,
because the stock of receivables tends to grow withrest of the economy.
20.124 In most countries, monetary gold and SDRs aremanaged by the central bank. When they are managed by government, they are recorded in thefinancial account of government.

20.125 Financial transactions are recorded at the trans-

action values, that is, the values in national currency at which the financial assets and/or liabil­ities involved are created, liquidated, exchanged orassumed between institutional units, on the basisof commercial considerations only.

20.126 The transaction value refers to a specific finan-cial transaction and its counterpart transaction.
In concept, the transaction value is to be distinguished from a value based on a price quoted in
the market, a fair market price, or any price thatis intended to express the generality of prices fora class of similar or even identical financial assets
and/or liabilities. The value to report in the financial accounts for a loan sold on the secondary market is the value for which the loan was sold, andnot the nominal value, and the reconciliation withthe balance is entered in the other changes in assets
accounts.

20.127 However, in cases where the counterpart trans-

action of a financial transaction is, for example, a436transfer and therefore the financial transaction isundertaken other than for purely commercial considerations, the transaction value is identified withthe current market value of the financial assets and/or liabilities involved. Thus, a loan purchased by agovernment at its nominal value, rather than at its
fair or written-down value, is partitioned between
an entry as a loan in the financial accounts at thefair value and a capital transfer, in recognition of atransfer of wealth by the government.
20.128 The transaction value does not include service

charges, fees, commissions, and similar payments
for services provided in carrying out the transactions; such items are to be recorded as payments
for services. Taxes on financial transactions are also
excluded and treated as taxes on services withintaxes on products. When a financial transaction
involves a new issue of liabilities, the transaction
value is equal to the amount of the liability incurredexclusive of any prepaid interest. Similarly, when aliability is extinguished, the transaction value forboth creditor and debtor must correspond to the
reduction of the liability.

Transactions in liabilities
20.129 Transactions in liabilities are recorded at the value

at which the liabilities are issued, or redeemed.
This value may not be the nominal value. A transaction in liabilities includes the impact of interest
accrued.

20.130 The repurchase by a unit of a liability is recorded asredemption in liabilities and not as an acquisitionof assets. Likewise, at a subsector or sector level, thepurchase by a government unit of a liability issued
by another unit of the subsector in question will
be presented in the consolidated presentation, as
redemption of liability by that subsector.

20.131 Financial leasing and public-private partnerships(PPP) contracts when the asset is on government
balance sheet imply recognising a debt of the lessee
or grantor. Payments on such leases or PPP contracts are not expenditure for the full amounts, but
debt servicing: redemption of a loan and interest
expenditure.

20.132 Financing presented as long-term trade credits

or accounts receivable/payable arrangements areto be classified as loans, because these involve theEuropean system of accounts — ESA 2010

The government accounts

provision of long-term financing to the benefit of
the borrowing party that is distinguished from atreasury facility that sellers commonly provide
buyers with short-term trade-credit. In extending
the maturity of the payment obligation consider­
ably, the constructor assumes a financial role thatis separate from its other activity of producer.
20.133 Lump sums exchanged at inception on off-market

swaps are classified as loans (AF.4) when the lumpsum is received by government. Off-market swaps
are partitioned in the balance sheet into a loan
component and a regular, ‘at-the-money’ swap
component.

20.134 Similarly to receivables, transactions in otheraccounts payable reflect the time impact of theaccrual principle, but on the liability side: when
expenditure is incurred but not yet paid, or when
payments are made in advance of the revenue
recording. In addition to trade credit when they
are short-term, payables include sums received
from the EU but not yet paid out by government
to the final beneficiary, prepayments in taxes or tax
refunds not yet paid out.

Other economic flows
20.135 Both the other changes in volume of assets accountand the revaluation account of the ESA GFS are
identical to the accounts described in Chapter 6.
All changes in assets and changes in liabilities arising from events other than economic transactions
are recorded in one of these accounts.

Revaluation account
20.136 Revaluations are the same as described in

Chapter 6. Additional relevant information as
memoranda items, for example, revaluations in theequity of public corporations held by government
units, are likely to be particularly important and,at the same time, difficult to measure because it isunlikely that there will be any market prices.

20.137 In the ESA, balance sheets entries are ideally atmarket value, apart from one or two specific instruments, and movements in interest rates reflected instock market indices lead to noticeable changes invalue of stock as well as in the net worth of institutional units. Such changes are not income in theEuropean system of accounts — ESA 2010

20

ESA, and so they are not government revenue or
expenditure, and do not affect government deficit/
surplus. The changes are recorded in the revaluation account, which leads to changes in net worth
due to nominal holding gains/losses (B.103). Thechanges in net financial worth of government during an accounting period are substantially affectedby revaluations. The main sources of revaluations
affecting net financial worth are, apart from theimpact of foreign exchange denominated assets
and liabilities, as follows:(a) real estate assets of government;(b) equity of government;(c) security liabilities.
20.138 When a capital injection by government into apublic corporation is considered a capital transfer, the equity valuation of the government stake inthe beneficiary will generally increase, with entries
in the revaluation account and not the financial
account.

20.139 When an existing loan or trade credit is sold toanother institutional unit the difference between
the redemption price and the transaction price isrecorded in the revaluation account of the seller
and the purchaser at the time of transaction.

Other changes in volume of assets account
20.140 The other changes in volume of assets accounts

include flows that are neither economic transactions nor revaluations. For example, it captures theimpact of a change in sector classification of units.

20.141 Loans write-off which do not reflect a debt cancel-

lation with an explicit or implicit bilateral agreement are not transactions and are recorded in theother changes in the volume of assets account, withno impact on net lending/net borrowing.

Balance sheets
20.142 The same definition of an asset is used in the GFS

general government accounts as in Chapter 7. The
classification and value of assets and liabilities are
identical in the ESA and the ESA-based GFS.

20.143 The sum of liabilities may be considered as a stockof debt. However, the definition of government

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The government accounts

debt in the context of fiscal surveillance departs
from the total stock of liabilities in the ESA andin the GFS, both in terms of scope of liabilities
accounted for and in terms of valuation.
20.144 Some assets are more specific to government: heri­tage assets, like historic monuments; infrastructure
assets, such as roads and communications facilities; and equity stakes in public corporations thatare without private equivalent.

20.145 On the liability side, equity liability (AF.5) will

not normally be recorded for government units.
However at a more aggregated level of government subsectors, equity liability can appear if
entities have been classified inside the general
government sector, as a result of the market/nonmarket test.

20.146 Net worth is the balancing item (B.90) of the bal-ance sheet:

Net worth=

Total assets
minus

Total liabilities

20.147 Own funds are the sum of net worth (B.90) andequity (AF.5) issued. Thus, in the ESA, own fundsof units is defined as assets less liabilities excluding equity liabilities, while net worth is defined asassets less liabilities including equity liabilities. The
ESA net worth is not the same as business accounting shareholders’ equity or net worth. Businessaccounting net worth is closer in concept to the
ESA own funds.

20.148 Where the net worth (B.90) of the general govern-

ment sector cannot be calculated — due to the lackof information for measuring the stock of nonfinancial assets — the financial net worth (BF.90) ispresented, showing the difference between the total
financial assets and the total liabilities.

20.149 The ESA values balance sheet at market value,

except for three specific instruments: currency anddeposits (AF.2), loans (AF.4) and other accounts
receivable/payable (AF.8). For those three instruments, the values recorded in the balance sheetsof both creditors and debtors are the amounts ofprincipal that the debtors are contractually obliged
to repay to the creditors, even in cases where theloan was traded at a discount or premium, including interest accrued.

438

20.150 Security liabilities are valued at market value. Even

though the debtor is only obligated for the valueof the principal, the market value is significant
because the debtor is obligated to pay a stream of
future cash flows, for which the present value varies according to market yield, and the market value
reflects the price that government would have to
pay if it redeemed the instrument by purchasing itback on the market.

20.151 Quoted equity is valued using the most recent

quotation price when drawing up the balance
sheet. Unquoted equity can be valued by comparing ratios such as own funds at book value to themarket value of equity, in similar classes of quoted
companies. Other approaches can be used for valu­
ing unquoted equity, such as using the own fundsof the corporation, thus setting the net worth tozero. This approach can be used for public corpor­
ations that have unique types of activities suchas when government has equity stakes in central
banks. However, it is not recommended to use theown funds at book value, without adjustments, nomore than using the nominal value of the issued
equity.

Consolidation
20.152 Consolidation is a method of presenting theaccounts for a set of units as if they constituted one
single entity (unit, sector, or subsector). It involves
eliminating transactions and reciprocal stock pos­itions and associated other economic flows among
the units being consolidated.

20.153 Consolidation is important for the general gov-

ernment sector and its subsectors. For example, assessing the overall impact of government
oper­ations on the total economy or the sustainability of government operations is more
effective when the measure of government
operations is a set of consolidated statistics.
To relate government aggregates to the economy as a whole as in revenue or expenditure to
GDP ratios, it is better to eliminate the internal churning of funds and include only thosetransactions that cross the boundaries withother domestic sectors and with the rest of theworld sector. This is of particular relevance forthe following transactions:

European system of accounts — ESA 2010

The government accounts(a) property income such as interest;(b) current and capital transfers;(c) transactions in financial assets and liabilities.
20.154 Consolidation does not affect balancing items

because the consolidated items appear symmetrically within each account. For example, a
grant from a central government to a local government unit is consolidated by eliminating theexpenditure from central government and therevenue from the local government, thus leaving
unchanged the net lending/net borrowing of general government.

20.155 Conceptually, the nature of consolidation is toeliminate all flows among the consolidated units,
but practicality should be kept in mind. In concept, transactions in the production account,such as sales and purchases of goods and services, may not or cannot be consolidated. The
decision about the level of detail employed inconsolidation should be based on the policy usefulness of the consolidated data and the relative
importance of the various types of transactions
or stocks.

20.156 When drawing up the consolidated accountsof government, the ESA prescribes consolidating the following major transactions (in order ofimportance):(a) current and capital transfers, such as central governments grants to lower levels ofgovernment;(b) interest arising on intergovernmental holdingsof financial assets and liabilities;(c) transactions, other economic flows and stocks
in financial assets and liabilities, such as loans
to other governments or acquisitions of government securities by social security units.

20.157 Purchases/sales of goods and services between

government units are not consolidated in the
ESA. This is because the accounts show sales
on an output basis, and not on a disposal basis
so that it is difficult to decide who is the counterpart transactor for this output. In addition,intermediate consumption and output follow
two different valu­a tion rules, basic prices andEuropean system of accounts — ESA 2010

20

purchasers’ prices, which creates additionaldifficulties.
20.158 Taxes or subsidies paid by one government unit

or entity to another are not to be consolidated.
However, taxes or subsidies on products cannot be consolidated in the system because there
is no counterpart sector transactor in the ESA
for such transactions; the relevant amounts are
not separately recognised as expenditure and rev­enue (respectively) and are instead included in, or
excluded from, the value of the intermediate consumption or of the sales.

20.159 Acquisitions/disposals of non-financial assets, includ-ing intergovernmental transactions in land, buildings, and equipment are not consolidated, because
they already appear on a net basis in the account:acquisitions less disposals. Non-consolidated andconsolidated accounts always show equal amounts
for those items.

20.160 Some types of transactions that appear to takeplace between two government units are neverconsolidated because they are rerouted in thesystem to other units. For instance: employer
social contributions, whether paid to social
security or to government pension funds, aretreated as being paid to the employee as part ofcompensation and then paid by the employee
to the fund. Taxes withheld by government
units from the compensation of their employees, such as pay-as-you-earn (PAYE) taxes, andpaid to other government subsectors are treatedas being paid directly by the employees. The
government employer is simply the collecting
agent in this case for the second government
unit.

20.161 Practical difficulties arise with consolidation.

For example, when a transaction to be consolidated is identified in the records of one unit, it isexpected that the corresponding transaction will
be found in the accounts of the counterparty; but
it may not show there, as it may be recorded in adifferent period, it may have a different value, or
it may be classified as a different type of transaction due to different accounting practices.
These difficulties are inherent in the quadruple
system of recording used in the ESA, but they
may be more obvious with inter-governmental
transactions.

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The government accounts

Accounting issues relating to general
government
20.162 National accounts principles apply to the general

government sector in the same way as to othersectors of the economy. However, due to the economic nature of the activities of government units
or due to practical considerations, additional rules
are given in this section.

20.163 Similarly, the national accounts principles apply inthe same way to the measurement of government
revenue and government expenditure. However,these principles, including notably the accrual principle, are applied given that the creditworthinessand liquidity constraints of government are fundamentally different from other measures. If expenditure is recorded in the government accounts whenincurred by each government unit, irrespective oflong lags of payment, revenue should be recordedin the accounts only when there is a high expect­ation and sufficient certainty that the respective
cash flows will effectively take place.

20.164 When classifying a transaction, national account-ants are not constrained by the designation of
the transaction in the public accounts of government or in the bookkeeping of a corporation. As an
example, a large payment to government made outof the corporation’s reserves or from sales of assets
and called ‘dividend’ in the public accounts is categorised as a super-dividend and recorded as afinancial transaction in the national accounts — itis a withdrawal of equity. Reporting the economic
reality where it is different from the legal form is afundamental accounting principle to give consistency and to make sure that transactions of a similar
type will produce similar effects on the macroeconomic accounts, irrespectively of the legal arrangements. This is of particular importance for transactions involving the general government.

Tax revenue
Character of tax revenue
20.165 Taxes are compulsory unrequited payments, incash or in kind, made by institutional units to general government or supranational bodies exercising their sovereign or other powers. They usually440

constitute the major part of government revenue.
Taxes are viewed in the system as transactions,as they are deemed to be interactions between
units carried out by mutual agreement. Taxes aredescribed as unrequited because the government
provides nothing commensurate with the payment in exchange to the individual unit making thepayment.
20.166 However, there are cases where the government

provides something to the individual unit against
the payment, in the form of the direct granting of apermit or authorisation. In this case, the payment
is part of a mandatory process that ensures proper
ownership recognition and performance of activities by law. The categorisation of such payments
as a tax, or as the sale of a service, or the sale of anasset by the government, requires additional rules.
Those rules are set out in Chapter 4.

Tax credits
20.167 Tax relief can take the form of a tax allowance,

exemption, or deduction — which is subtracted
from the tax base — or of a tax credit — which is
subtracted directly from the tax liability otherwise
due by the beneficiary household or corporation.
Tax credits can be payable, in the sense that any
amount of the credit that exceeds the tax liability
will be paid to the beneficiary. In contrast, sometax credits are non-payable, and described as ‘wast­
able’. They are limited to the size of the tax liability.

20.168 In national accounts, a tax relief that is embeddedin the tax system is recorded as reducing the tax
liability and therefore as reducing government tax
revenue. This is the case of tax allowances, exemptions, and deductions, as they enter directly into
the calculation of the tax liability. This will also be
the case for non-payable tax credits as their value
to the taxpayer is limited to the size of their tax liability. In contrast, this is not the case for pay­able
tax credits, which by definition can affect nontaxpayers as well as taxpayers. As they are pay­able, payable tax credits are classified as expend­
iture and recorded as such for their total amount.
The government tax revenue will, therefore, be thatliable, with no reduction for payable tax credits
awarded, and government expenditure will include
all payable tax credits awarded. This has no impact
on the net borrowing/net lending of the general

European system of accounts — ESA 2010

The government accounts

government, but does have an impact on both thetax burden and the government expenditure, andon the corresponding ratios to GDP. The presentation of statistics shall permit the derivation of tax
credits on a net basis.

Amounts to record
20.169 Appropriately recording tax revenue is essential

for the measurement of government activities andperformance. The amounts to record should correspond to amounts likely to be actually collectedby government: this implies that amounts declared
but deemed uncollectible should not be recorded
as revenue.

Amounts uncollectible
20.170 In all cases, only amounts that government real-istically expects to collect should be recorded.
Uncollectible taxes should not be accounted forin the net lending/net borrowing of the general
government and generally not in the total revenue. Accordingly, the impact on general government net lending/borrowing of taxes andsocial contributions recorded in the system onan accrual basis shall be equivalent over a reasonable amount of time to the corresponding
amounts actually received. The rules for therecording of taxes and social contributions are
explained in Chapter 4.

Time of recording
Accrual recording
20.171 Accrual accounting records flows at the time eco-nomic value is created, transformed, exchanged,transferred or extinguished. It is different fromcash recording and, in principle, from due-forpayment recording, defined as the latest time payments can be made without additional charges
or penalties. Any period of time between the
moment a payment accrues and the moment it
is actually made is accounted for by recording a
receivable or a payable in the financial accounts.
The ESA recording is on an accrual basis. For
some transactions such as payment of dividends
or some specific transfers, the due for payment
time is used.

European system of accounts — ESA 201020

Accrual recording of taxes
20.172 For government, recording revenue and claims at

the time of the underlying event is particularly difficult, since often government records, for tax for
example, are on a cash basis. When accrued taxes
are calculated from assessments of taxes due, there
is a risk of over-recording the tax revenue, a crucial
government finance aggregate.

20.173 The period of time between the moment a trans-

action is recorded as accruing in the non-financial
accounts, and the moment the payment is actuallymade, is bridged by recording an account receiv­
able in the financial account in the accounts of one
party and an account payable in the accounts of theother party. In cases where a prepayment, covering
two or more accounting periods, is made to government, an account payable, which is a form ofborrowing, is recorded in the financial account ofgovernment for the amounts due in future periods.
This liability is extinguished when recording
the due amounts of the transaction in the future
periods. However, recording such a liability occurs
only when the government has, legally or by meansof a constructive obligation, the obligation to makea refund to the payer for the pre-paid amounts if
the taxable event does not occur.

20.174 In accordance with accrual recording, taxes should

be recorded when the activities, transactions orother events occur which create the liability to pay
tax — in other words when the taxable events occur— and not when the payments are due to be madeor are actually made. This time is usually whenincome is earned or when a transaction (such as
the purchase of goods and services) generating theliability occurs, to the extent that the tax li­ability
can reliably be measured. The different institutional arrangements for taxation (existence or notof assessments, like tax rolls) may lead in practice to using different recording methods, according to the characteristic of the tax. Thus, notably
when there are no reliable assessments available oramounts unlikely to be collected cannot be reliably
estimated, the time-adjusted cash method is considered an acceptable proxy for accruals.

20.175 In practice, when taxes are based on assessments,

some flexibility is permitted concerning the time ofrecording where the measurement cannot be madein a reliable way before the time of assessment. In

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The government accounts

particular, for taxes on income, tax systems may
require the development of a tax roll or anotherform of tax assessment before the amounts of tax
due will be known in a reliable way, taking into
account the changes in tax rates and final settlements. This moment, which might be the one
where the economic behaviour of households isaffected, is an acceptable time of recording. It is notnecessarily the accounting period in which the payment is received.

Interest
20.176 Interest is an expenditure incurred by a debtor for

the use of another unit’s funds. Under the termsof the financial instrument agreed between them,interest (D.41) is the amount that the debtor
becomes liable to pay to the creditor over a given
period of time without reducing the amount ofprincipal outstanding.

20.177 Interest is classified within property income (D.4).

Differently to dividends (D.421), interest (D.41)
entitles the holder/the lender to a fixed and predetermined income (or according to an agreed reference in the case of a floating interest rate). Interestis usually a major expense item of general government, since governments are often structural borrowers on the market.

20.178 In the system, interest is recorded on an accrualbasis, i.e. interest is recorded as accruing continu­
ously over time to the creditor on the amount ofprincipal outstanding.

20.179 There are two ways in which the value of a dis-counted security can be determined during its life
when the prevailing interest rate is different fromthe rate prevailing when the security was initiated.
The debtor approach is from the perspective of theunit issuing the security and the creditor approach
is from the perspective of the unit holding thesecur­ity. From the debtor approach, the interest
rate agreed on initiation is used throughout thelife of the security. From the creditor approach,the current interest rate is used to value the interest
between any two points in the life of the security.

20.180 Accrual interest is recorded according to the debtor

approach, that is: based on the rate or yield prevailing at the time of creation of the financial instrument. Thus, interest expenditure to be recorded on

442

fixed-rate debt securities does not vary over timein sympathy with market fluctuations, despite thefact that the market value of the securities fluctuates and that, accordingly, the opportunity costsof carrying this debt vary. In that way, interest
expenditure avoids the volatility that the creditor
approach entails. The repurchase of securities on
the market, at a premium or at a discount to theprincipal outstanding, does not lead to any entry
in revenue or expenditure at time of purchase orlater on. Instead, any repurchase premium or discount reflects the settlement, recorded in the financial accounts, of a holding gain or loss that accruedin the past and was recorded in the revaluationaccounts at that time.
20.181 Recording interest as accruing continuously has

the consequence, on a security for instance, that theaccrued interest charge is recorded starting fromthe time the security has been issued, not waiting
for the time of the first coupon payment (often in
the following year, in the classic case of a security
with a yearly coupon payment). It means also that
accrued interest on securities starts appearing as
a liability as soon as issued interest is reinvested
under the financial asset bearing it. As a result, thestock of accrued interest outstanding is always tobe added to the value of the principal of the underlying instrument, and, subsequently, any interest
payments reduce the debtor’s liability. This basic
principle covers all financial instruments bearing
interest.

20.182 In many countries, government bonds or notes areissued in fungible tranches, over several years, withthe same conditions concerning the nominal rateof interest. Because the market yield at time of further sale of tranches varies, each tranche is actuallysold at a premium or at a discount. Thus, the rateof interest agreed on at time of issuing the bond isused for calculating interest, which will vary for eachtranche, reflecting different amortisations of premium or discounts at issue, in a manner similar toamortisation of discounts on zero coupon bonds.

20.183 The issue price of bonds and notes issued in fun-gible tranches, and carrying coupons, includes anamount for coupons accrued to date, which arein effect ‘sold’ upon issuance. Such sold coupons
are neither government revenue at time of sale nortreated as a premium. They are instead seen as afinancial advance.

European system of accounts — ESA 2010

The government accounts

Discounted and zero-coupon bonds

Financial derivatives

20.184 Zero-coupon bonds are instruments where the20.188 Settlements on swap transactions are not consid-

debtor has no obligation to make any payments
to the creditor until the redemption of the bond.
The amount of the principal borrowed is lower
than the value of the bond that will be repaid by
the debtor. In effect, the debtor’s liability is discharged by a single payment at maturity covering both the amounts of the principal and theinterest accrued over the life of the instrument.
The difference between the amount repaid atthe end of the contract and the amount initiallyborrowed is interest and is allocated over theaccounting periods between the beginning andthe end of the contract. The interest accruing
each period is treated as if paid by the debtor andthen reinvested as an additional amount of thesame liability. Interest expenditure and increases
in the liability are then simultaneously recorded
each period.

20.185 The gradual increase in the market value of abond that is attributable to the accumulation of
accrued and reinvested interest reflects a growthin the principal outstanding, that is, in the size ofthe asset.

20.186 The same principle applies to discounted bonds orbonds issued at a premium. In this case, the interest expenditure to be recorded is the amount of
accrued coupon interest as specified in the contract, plus the amount accruing each period attributable to the difference between the redemption
price and the issue price.

Index-linked securities
20.187 Index-linked securities are financial instru-

ments, usually long-term bonds, for which theamounts of the periodic payments and/or the
principal are linked to a price index or otherindex. Any additional payments to creditors due
to changes in the index are considered as interest, including the uplift of the principal, to berecorded as accruing continuously. When thevalue of the principal is index linked, the difference between the eventual redemption price andthe issue price is treated as interest accruing overthe life of the asset, in addition to any interest
due in that period.

European system of accounts — ESA 201020

ered as property income in the ESA. The settlements related to financial derivatives are financial transactions, to be recorded at the time of theeffective exchange of financial instrument.

Court decisions
20.189 When a court of justice rules that compensationmust be paid, or a transaction reversed, resulting
from or related to past events, the time of recording of the expenditure or revenue is when the claimants have an automatic and incontrovertible rightfor a given amount that can be individually determined, and when it is unlikely that claimants will failrequesting their due. When a court of justice merely
sets a principle of compensation, or when the claims
must be reviewed for eligibility and in relation todetermination of the amount by administrative services, expenditure or revenue is recorded as soon as
the value of the obligation is reliably determined.

Military expenditure
20.190 Military weapon systems, comprising vehicles

and other equipment such as warships, submar­
ines, military aircrafts, tanks, missile carriers andlaunchers etc. are used continuously in the production of defence services. They are fixed assets, likethose used continuously for more than one year incivilian production. Their acquisition is recorded as
gross fixed capital formation, i.e. as capital expenditure. Single-use items, such as ammunition, missiles, rockets and bombs are treated as military
inventories. However, some types of ballistic missiles are regarded as providing an on-going service
of deterrence and therefore meet the general cri­
teria for classification as fixed assets.

20.191 The time of recording of asset acquisition is thetime of the transfer of the ownership of the asset.
In case of long-term contracts involving complex
systems, the time of recording of the transfer ofassets should be upon actual delivery of the assets,
not the time of cash payments. If some long-term
contracts cover in addition the provision of services, government expenditure should be recordedat the time of the provision of services, recorded
separately from the provision of assets.

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20.192 If military equipment is leased, the transaction isinvariably recorded as a finance lease and not as an
operating lease. This implies that the recording ofan acquisition of military asset is matched by the
incurrence of an imputed loan by the government
lessee. As a result, payments by government arerecorded as debt servicing, a part as repayment of
the loan, another part as interest.

Relations of general government
with public corporations
Equity investment in public corporations
and distribution of earnings
20.193 Government units have a close relationship withpublic corporations and quasi-corporations that theyown. Despite this close relationship, flows between agovernment unit and its controlled corporation or
quasi-corporation related to its equity investment aretreated in the same way as flows between any corpor­
ation and its owners: equity investments from theinvestor into the unit invested in; distributions ofearnings by the unit invested in, to the investor.

Equity investment
20.194 An equity investment occurs when economic

agents place funds at the disposal of corporations,in exchange for a promise of future dividends orother types of return. The amount invested is
known as equity capital, and is part of the own
funds of the corporation and the corporation has alarge degree of freedom in the way of using them.
In exchange, the owners receive shares or someother form of equity. These represent property
rights on corporations and quasi-corporations andentitle the holders to:(a) a share of any dividends (or withdrawals of
income from quasi-corporations) paid at the
choice of the corporation but not to a fixed andpredetermined income; and(b) a share in the net assets of the corporation in
the event of its liquidation
and, as such, the shares are financial assets.

20.195 It is important to distinguish between the with-drawal of equity by the corporation to its owner

444

and the return on equity investment, notably the
income earned in the form of dividends. Only regu­
lar distributions from the entrepreneurial income
are recorded as dividends by corporations or withdrawals of income from quasi-corporations. Largeand irregular payments to the owner are recorded
as a withdrawal of equity.
20.196 It is necessary to determine when payments ofgovernment into public corporations are government expenditure or acquisition of an asset and soa financial transaction, and conversely when distributions to government by public corporations aregovernment revenue or a financial transaction.

Capital injections
Subsidies and capital injections
20.197 Subsidies are current transfers, usually made ona regular basis, from government, or occasionallyfrom the rest of the world, to producers designed
to influence their levels of production, the prices atwhich their outputs are sold or the remunerationof factors of production.

20.198 Payments to public corporations on a large andirregular basis, often called ‘capital injections’, arenot subsidies. They are events that aim at capitalising or re-capitalising the beneficiary corporation,
being put at the disposal of the latter in a long term
perspective. According to the ‘capital injection
test’, such capital injections are either capital transfers or acquisitions of equity, or a combination of
both. The two cases are as follows.
(a) A payment to cover accumulated, exceptionalor future losses, or provided for public policy purposes, is recorded as a capital transfer.
Exceptional losses are large losses recorded in
one accounting period in the business accounts
of a corporation, which usually arise fromdownward revaluations of balance sheet assets,
in such a way that the corporation is under
threat of financial distress (negative own funds,
breach of solvency, etc.).
(b) A payment where the government is acting as ashareholder in that it has a valid expectation of
earning a sufficient rate of return, in the formof dividends or holding gains is an acquisitionof equity. The corporation must enjoy a large

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The government accounts

degree of freedom in how it uses the funds provided. When private investors are part of thecapital injection, and the conditions for private
and government investors are similar, this isevidence that the payment is likely to be acquisition of equity.
20.199 In many cases, payments made by government units

to public corporations are intended to compensate
for losses in the past or in future. Government payments are treated as an acquisition of equity only
if there is sufficient evidence of the corporation’s
future profitability and its ability to pay dividends.

20.200 Given that capital injections increase the own

funds of the unit invested in, it is likely to also leadto an increase of the investor’s equity stake in theinvested unit. This is automatically the case of those
100 % owned public corporations whose equity isthe value of their own funds. Such an increase inequity is not used as a criterion to judge the natureof the capital injection; instead, it leads to an entry
in the revaluation account when the injection isrecorded as capital transfer, and to an entry in thefinancial accounts when the injection is recorded
as addition to equity.

Rules applicable to particular circumstances
20.201 Capital injections carried out in the context of pri-vatisation, when privatisation is expected to occur
in less than one year, are recorded as a transaction
in equity for the amount not in excess of privatisation proceeds, the remainder being subject to thecapital injection test. The proceeds of privatisation
are then deemed to repay the capital injection.

20.202 Capital injections can be carried out by way ofdebt cancellation or debt assumption. Accounting
rules applicable to those events result in the payment being a capital transfer, except for a privat­
isation when they are an acquisition of equity, thevalue of which is within the amount of privatisation proceeds.

20.203 Capital injections in kind, by way of the provision of

non-financial assets, are without impact on net lending/net borrowing. When the injection is expectedto earn a sufficient rate of return, it is treated as achange in structure (K.61), the asset provided entering the balance sheet of the corporation via the otherchange in volume of assets accounts. When theEuropean system of accounts — ESA 201020

injection is not expected to earn a sufficient rate of
return, a capital transfer (investment grant, D.92) isrecorded together with a matching entry in disposalof non-financial assets (P.5 or NP).

Fiscal operations
20.204 Fiscal operations are carried out by government

and financed through the budget under the usualbudgetary procedures. However, some operations
originated by government units may involve theintervention of entities not ruled by the legal government framework, including public corpor­
ations. Though they will not be reported in thebudget, and might escape the usual control proced­
ures, it is appropriate to record them within government revenue and expenditure. This is because
the ESA recognises when government is the principal party to an operation and the public corpor­
ation is acting as an agent.

Public corporations distributions
Dividends versus withdrawal of equity
20.205 The earnings from equity investment in public cor-porations may be recorded as a distributive transaction which are usually dividends, or as a financial transaction. Dividends are property income.
The resource available for distribution of dividends is the entrepreneurial income of the corporation. Thus, the resources from which dividends
are paid would include neither the proceeds ofsales of assets nor the distribution of revaluation
gains. Dividends funded from, or based on, such
sources are recorded as withdrawal of equity. The
same basic principles apply to withdrawals fromincome of quasi-corporations.

20.206 Large and irregular payments or payments thatexceed the entrepreneurial income of the year are
called super-dividends. They are funded from accumulated reserves or sale of assets, and are recorded aswithdrawal of equity equal to the difference between
the payment and the entrepreneurial income of
the relevant accounting period. In the absence of ameasure of entrepreneurial income, the operating
profit in business accounts is used as a proxy.

20.207 Interim dividends are recorded as property income(D.42) to the extent that they can be related to the

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accrued income of the corporation. In practice,
two conditions must be fulfilled:(a) the corporation making this payment makes
short-period accounts available to the public and the payment is based on at least twoquarters;(b) the interim payment should be in the same proportion as the dividends paid in the previous
years, consistent with the usual rate of return tothe shareholder and with the trend in growth ofthe corporation.
If these conditions are not met, the interim payment is recorded as a financial advance, classified
under other account receivable/payable (F.8), until
the annual result is determined, given the need to
conduct the super-dividend test of comparing theinterim dividends with the entrepreneurial incomeof the year.

Taxes versus withdrawal of equity
20.208 Taxes have a legal basis and are under the controlof legislative procedure. These transactions, which
are by mutual agreement, constitute the main revenue of general government.

20.209 However, it may occasionally happen that a trans-

action described as a tax in legal documents is notrecorded as such in the ESA. One example is thecase of an indirect privatisation. If a public holding
corporation sells its equity ownership in anotherpublic corporation and remits some of the proceeds
to the government under the heading of tax, or isliable to a tax generated by the privatisation eventand subsequent realised gains, under the headingof a capital gains tax, the payment is recorded as afinancial transaction.

Privatisation and nationalisation
Privatisation
20.210 Privatisation commonly involves the sale by gov-

ernment of shares or other equity in a public
corporation. Privatisation proceeds are not government revenue but a financial transaction recorded in
the financial account, with no impact on the government deficit/surplus, as this event is net worth neutral and is a reclassification of assets (AF.5 against

446AF.2) in the balance sheet of government. A direct
sale of non-financial assets, such as buildings andland rather than an entire corporation, is recordedin the capital account as disposals of fixed assets or
non-produced non-financial assets, unless carriedout in the context of corporate restructuring.
20.211 Any purchase of services to achieve this process

should, however, be recorded as government intermediate consumption and should not be netted
out of the privatisation proceeds. Thus, privatisation proceeds are to be recorded gross in the financial accounts.

Indirect privatisations
20.212 Privatisation can occur under more complicatedinstitutional arrangements. For instance, assets ofa public corporation may be sold by a public holding company, or another public corporation, controlled by government, and all or part of the proceeds are passed to government. In all cases, thepayment to government of the proceeds on thesale of assets in this manner is to be recorded asa financial transaction, irrespective of the way it
is presented in the books of the government orof its subsidiary, with a simultaneous decrease inshares and other equities corresponding to the partial liquidation of assets of the holding company.
Any privatisation proceeds retained by the holding
are privatisation receipts of government ploughedback by way of a capital injection, which is thensubject to the capital injection test to determine thenature of the payment.

20.213 It may also happen that the public holding com-pany, or other public corporation, acts as a ‘restructuring agency.’ In such a context, the proceeds ofthe sale may not be paid to government but kept by
the restructuring agency to inject capital into otherenterprises. When the restructuring unit, whatever
its legal status, acts as a direct agent of government,
its main function is to restructure and change theownership status of public corporations and tochannel funds from one unit to the other. The classification of the unit will normally be to the general
government sector. However, when the restructuring unit is a holding company controlling a groupof subsidiaries, and only a minor part of its activity is dedicated to channelling funds in the way
described above, on behalf of government and forEuropean system of accounts — ESA 2010

The government accounts

public policy purposes, the public holding company is classified in one of the corporations sectors
according to its main activity, and the transactions
made on behalf of government are to be rerouted
through government.

Nationalisation
20.214 Nationalisation means government taking controlof specific assets or an entire corporation, usuallyby acquiring the majority or the whole stake in thecorporation.

20.215 Nationalisation usually takes the form of a pur-chase of shares: government buys all or part of theshares in the corporation at market price — or ata price sufficiently close, considering usual market
practices with regard to valuation of corporationsin the same activity. The transaction is by mutual
agreement, even though the former owner may
have little choice with regard to refusing the offer,or negotiating the price. The purchase of shares is afinancial transaction to be recorded in the financial
account.

20.216 Exceptionally, government may acquire owner-ship over a corporation through an appropriationor confiscation: the change in ownership of assets
is not the result of a transaction made by mutual
agreement. There is no payment to the owners, orsuch payment which is made does not reflect thefair value of assets. The difference between themarket value of the assets acquired and any compensation provided is recorded as an uncompensated seizure in the other changes in the volume ofassets account.

Transactions with the central bank
20.217 Two types of payments by the central bank to thegovernment are observed in practice:(a) payments made on a regular basis, usually inthe form of dividends, based on the current
activity of the central bank (like managing
foreign exchange reserves). These payments
are recorded as dividends as long as they are
not higher than a measure of net operating
income, consisting of net property income,net of costs and of any transfers. Amounts
in excess of this sum are to be recorded as adecrease in equity;

European system of accounts — ESA 201020(b) exceptional payments following the sale or therevaluation of reserve assets. These payments
are recorded as a withdrawal of equity. The
rationale is that the value of such assets affects
the value of the equity liability of the central bank and the equity assets of government.
Thus, holding gains on the reserve assets of thecentral bank have a counterpart in the equity
assets of government via the equity liability of
the central bank.
Payments from central government to the central bank are to be recorded in a similar way as forother public corporations. In particular, large payments are subject to the ‘capital injection test’ todetermine the character of the payments.

Restructures, mergers, and reclassifications
20.218 When a public corporation is restructured, finan-cial assets and liabilities may appear or dis­appear
reflecting new financial relationships. These changes
are recorded as changes in sector classification andstructure in the other changes in the volume ofassets account. An example of such a restructuring is when a corporation is split into two or more
institutional units and new financial assets andli­abilities are created.

20.219 The purchase of shares and other equity of a corpor­

ation as part of a merger, on the other hand, is tobe recorded as a financial transaction between thepurchasing corporation and the previous owner.

20.220 Any change in the classification of assets andli­abilities not related to restructuring or changes
in sector classification, such as the monetisation ordemonetisation of gold, is recorded as a change inthe classification of assets or liabilities in the otherchanges in the volume of assets account.

Debt operations
20.221 Debt operations can be particularly important for

the general government sector, as they often serve
as a means for government to provide economic
aid to other units. The recording of these oper­
ations is covered in Chapter 5. The general principle for any cancellation or assumption of debt
of a unit by another unit, by mutual agreement,
is to recognise that there is a voluntary transfer of

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wealth between the two units. This means that thecounterpart transaction of the liability assumed orof the claim cancelled is a capital transfer. No flowof money is usually observed, this may be characterised as a capital transfer in kind.

Debt assumptions, debt cancellation and debt
write-offs
Debt assumption and cancellation
20.222 Debt assumption occurs when a unit assumes

responsibility for another unit’s outstanding
liability towards a creditor. This happens frequently when a government guarantees a debt
of another unit and the guarantee is called or
activated.

20.223 When a government assumes a debt, the counter-part transaction of the new government liability isa capital transfer in favour of the defaulting debtor.
The case where a financial asset is recorded as acounterpart is to be examined carefully. There are
two different contexts.
(a) An actual pre-existing financial asset is
acquired against a third party, as in the caseof guaranteed export insurance. Thus, government records, as the counterpart transaction of
its new liability, the acquisition of a financial
asset equal to the present value of the amount
expected to be received. If this amount is equal
to the liability assumed, no further entries are
required. If the amount expected to be recovered is less than the liability assumed, the government records a capital transfer for the difference between the liability incurred and thevalue of the asset acquired.
(b) Government simply records a claim against
the benefiting corporation, which is in
most cases a public corporation in difficulty. In general, because of the very hypothetical value of this claim, no such claim isrecorded. Possible future repayments by thebeneficiary will be recorded as revenue by thegovernment.

20.224 Debt payments on behalf of others are similar to

debt assumptions, but the unit making the payments does not assume the entire debt. The transactions recorded are similar.

448

20.225 Debt cancellation (or debt forgiveness) is theextinction or reduction of a claim by agreement
between the creditor and the debtor. The creditor
records a capital transfer payable for the amountcancelled and the other unit records a capital transfer receivable. Mutual agreement is often presumed
though not formally established in case of government forfeiting claims, such as in the case of student loans and lending to farmers.

20.226 Debt assumptions and debt cancellations which

benefit a controlled entity result in an increase in
the value of the equity in the unit being investedin, that is reflected in the revaluation accounts. If a
government has its debt assumed by another government, then it records a capital transfer revenue,
a new debt to the assuming government unit, or
both.

20.227 Debt assumptions and debt cancellations carriedout in the context of privatisation are recorded astransactions in equity, for the amount not in excess
of privatisation proceeds, the remainder being acapital transfer, in order to ensure the accounting
neutrality of the way in which privatisation is conducted. Privatisation must be carried out within
one year.

20.228 When debtor governments offer to repay the debt

in anticipation, at a value below the principal value
which includes interest in arrears, the event leads
to an entry in the capital account with an impact
on the government net lending/net borrowing, asa grant by the creditor is presumed. When early
redemption leads to the payment of a penalty or
fee to the lender as foreseen in the contract, theamount shall be recorded as income of the lender.
In the case of securities, a buyback on the market
leads to an entry in the revaluation accounts, unlessthe early redemption is imposed on the securities
holder.

20.229 The difference in value in case of sale to a third

party of government claims against other governments leads to a capital transfer entry in the capital
accounts, with an impact on the government deficit, because the nature of the claim implies an ori­ginal intention to convey a benefit, and the sale is a
way to conduct debt restructuring.

20.230 As a result, the capital transfer expenditure of gov-

ernment is revenue of the debtor, in recognition

European system of accounts — ESA 2010

The government accountsof the fact that it is the genuine beneficiary of
the transaction, with an entry in the rest of theworld account matching the creditor government
expenditure. For the seller, the transaction value ofthe claim disposed off is the principal value. The
value of the claim enters both the new creditor’sand debtor’s accounts, i.e. respectively, the bankbalance sheet and the ROW accounts — for theinternational investment position, at its reduced
value.
20.231 In rarer cases, when the discount negotiated withthe third party or with a debtor offering the repurchase of its debt only reflects changes in market
interest rates, and not a change in credit worthiness, the government creditor can be presumed tobe acting as a normal investor. The difference, netof any penalty or fee, is entered in the revaluationaccounts. One test is whether the amount repaid
could have exceeded the principal value.

Debt assumption involving a transfer of nonfinancial assets
20.232 If a government wants to ease the debt burden ofa public corporation, it may also, in addition to
the debt assumed by a government unit, take overnon-financial assets such as public transport infrastructure. This debt assumption involving a transfer of non-financial assets to the government unit
is deemed to be made by mutual agreement, andhas exactly the same impact as a debt assumption
on the government net lending/net borrowing: theamount of the capital transfer to be recorded infavour of the corporation is equal to the amount of
the debt assumed. An acquisition of non-financial
assets has a negative effect on net lending (+)/net
borrowing (–).

Debt write-offs or write-downs
20.233 Debt write-offs are the reduction by a creditor in

the balance sheet of the amount owed to it, usually when a creditor concludes that a debt obligation has little or no value, because the debt is
not going to be paid; the debtor is bankrupt, has
dis­appeared or cannot be realistically pursued
for recoveries that would justify the various costs
incurred. Debt write-downs refer to the reduction
by a creditor in the carrying value of an asset in its
balance sheet.

European system of accounts — ESA 201020

20.234 Write-downs and write-offs are internal account-ing actions by the creditor and are often not recognised as transactions, because they are not carriedout by mutual agreement. However, it happensthat write-downs and write-off do not amount tothe annulment of the claim over the debtor andconsequently there may commonly be reversals of
write-downs, and less frequently write-offs.

20.235 Debt write-downs do not lead as such to entries inthe balance sheet of the creditor because the carrying value of the debt already reflects the market
value of the instrument or is at nominal value inthe case of loans, unless the market value is proxiedby the written down book value (in the case where
the write down enters the revaluation accounts). In
contrast, debt write-offs lead to the removal of theasset from the creditor balance sheet by way of another change in the volume for the amount exiting— the principal value for loan, a market value forsecurities, unless the write-off reflects a debt cancellation event. Thus, differently from debt assumption or debt cancellation, debt write-offs and writedowns have no effect on net lending/borrowing ofgovernment.

Other debt restructuring
20.236 Debt restructuring is an agreement to alter theterms and conditions for servicing an existing debt,
usually on more favourable terms for the debtor.
The debt instrument that is being restructured isconsidered to be extinguished and replaced by a
new debt instrument with the new terms and conditions. If there is a difference in value between theextinguished debt instrument and the new debt
instrument, it is a type of debt cancellation anda capital transfer is necessary to account for thedifference.

20.237 A debt-for-equity swap occurs when a creditor

agrees to replace a debt owed to it by an equity
security. For example, government may agreewith a public enterprise owned by it to accept anincrease in the government’s equity stake in the
public enterprises in place of an existing loan. In
such circumstance, the event should be subject
to the capital injection test. Any difference in thevalue of the debt instrument being extinguishedand the equity recognised is a capital transfer withan entry recorded in the revaluation accounts.

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20.238 Debt arrears occur when a debtor misses an interestor principal payment. The debt instrument will notnormally change, but knowing the amount of debts
in arrears can provide important information.

Purchase of debt above the market value
20.239 The acquisition of debt for a value above the mar-ket value, at inception is called concessional loans,and later on debt defeasance. Both intend to convey a benefit and so the recording of expendituresuch as a capital transfer is required.

20.240 Debt defeasance occurs when a debtor matches

20.243 A bailout is a term meaning a rescue from finan-cial distress. It is often used when a government
unit provides short-term financial assistance to a
corporation to help it survive a period of financial difficulty or a more permanent injection offinancial resources to help recapitalise the corporation. Bailouts of financial institutions are often
referred to as financial defeasance. Bailouts arelikely to involve highly publicised one-time transactions with large values and, therefore, to be easy
to identify.

debt instruments with financial assets having thesame or greater debt service inflows. Even when
the defeased instruments have been transferred toa separate entity, the gross position should still berecorded by treating the new entity as an ancillary
unit and consolidating it with the defeasing unit.
If the ancillary unit is non-resident, it is treatedas a special purpose entity and the transactionsof government with this unit should be treated as
described in section ‘The government finance presentation of statistics’.

20.244 Intervention of general government can take vari-20.241 Debt issued on concessional terms. There is no pre-(d) a government may create a special purpose
entity or other type of public body to financeand/or to manage the sales of assets or liabil­itiesof the enterprise to be assisted.

cise definition of concessional loans, but it is generally accepted that they occur when units of the general government sector lend to other units in sucha way that the contractual interest rate is intentionally set below the market interest rate that otherwise would apply. The degree of concessionality
can be enhanced with grace periods, frequencies of
payments, and a maturity period favourable to thedebtor. Since the terms of a concessional loan are
more favourable to the debtor than market conditions would otherwise permit, concessional loans
effectively include a transfer from the creditor to
the debtor.

20.242 Concessional loans are recorded at their nominal

value just as other loans, but a capital transfer isrecorded as a memorandum item at the point ofloan origination equal to the difference between
the contract value of the debt and its present value
using a relevant market discount rate. There is no
single market interest rate that should be used tomeasure the capital transfer. The commercial interest reference rate published by the OECD may be
applicable when the loan is issued by one of its
member countries.

450

Defeasances and bailouts

ous forms. Examples are the following:(a) a government may guarantee certain liabilitiesof the enterprise to be assisted;(b) a government may provide equity financing on
exceptionally favourable terms;(c) a government may purchase assets from theenterprise to be assisted for prices greater thantheir true market value;

20.245 Government guarantees during a bailout aretreated as one-off guarantees to entities in financial distress. An example is where the entity is
not able or has substantial difficulties to meet its
obligations since its cash generating abilities arelimit­ed or the tradability of its assets is severely
limited due to exceptional events. This will normally lead to recording a capital transfer at inception, as if the guarantee were called, for the entiretyof the granted guarantee or, in case a reliable estimation is available, for the amount of the expected
call, which is the expected loss of government. See
also paragraph 20.256.

20.246 If the government buys assets from the enterprise

to be assisted, the amount paid will normally bemore than the true market price of the assets. The
purchase is recorded at the actual market priceand a capital transfer recorded for the difference
between the market price and the total amount
paid.

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The government accounts

20.247 During a bailout, governments often buy loans

from financial institutions for their nominal value
rather than their market value. Even though loans
are recorded at nominal prices, the transaction ispartitioned by recording a capital transfer and an
entry in the revaluation accounts. If there is reli­able information that some loans are irrecoverable, fully or for nearly their total amount, or if
there is no reliable information on the expected
loss, these loans are accounted for at zero value
and a capital transfer is recorded for their former
nominal value.

20.248 If a public institutional unit is created by govern-

ment with its only task being to assume management of the bailout, the unit should be classified in
the general government sector. If the new unit isintended to be an on-going concern with the bailout a temporary task, its classification as a government unit or a public corporation is made following the general rules as described in the section
on restructuring agencies above. Units that purchase financial assets from distressed financial corporations with the objective of selling them in anorderly manner cannot be considered financial
intermediaries because they do not place themselves at risk. They are classified in the general government sector.

Debt guarantees
20.249 A debt guarantee is an arrangement in whicha guarantor agrees to pay a creditor if a debtor
defaults. For general government, giving a guarantee is a way to support economic activities without
a need for an immediate cash outlay. Guarantees
have a significant impact on the behaviour of economic agents by modifying the lending and borrowing conditions on financial markets.

20.250 For each guarantee, there are three parties

involved: the lender, the borrower, and the guarantor. Originally, stocks and flows of the credit
relationship are recorded between the lenderand the borrower, while after the call stocks andflows related to the guarantee relationship arerecorded between the lender and the guarantor. Thus, the activation of guarantees involves
the recording of flows and changes in the balance sheets of the debtor, the creditor, and theguarantor.

European system of accounts — ESA 201020

20.251 There are three main types of guarantee:(i) guarantees that meet the definition of a financial derivative;(ii) standardised guarantees; and(iii) one-off guarantees.

Derivatives-type guarantees
20.252 Guarantees that meet the definition of financial

derivatives are those that are actively traded on
financial markets, such as credit default swaps. The
derivative is based on the risk of default of a reference instrument and generally not actually linked
to an individual loan or bond.

20.253 When such a guarantee is initiated, the purchaser

makes a payment to the financial institution creating the derivative. This is recorded as a transaction in financial derivatives. Changes to the valueof the derivative are recorded as revaluations. If thereference instrument defaults, the guarantor pays
the purchaser for its theoretical loss on the reference bond. This is also recorded as a transaction in
financial derivatives.

Standardised guarantees
20.254 Standardised guarantees cover similar types ofcredit risk for a large number of cases. It is not possible to estimate precisely the risk of any one loan
being in default, but it is possible to estimate how
many, out of a large number of such loans, will
default. The treatment of standardised guarantees
is explained in Chapter 5.

One-off guarantees
20.255 One-off guarantees exist where the conditions of

the loan or the security are so particular that it is
not possible for the degree of risk associated withthe loan to be calculated with any degree of accur­acy. In general, the granting of a one-off guarantee
is considered a contingency and is not recorded asa financial asset/liability in the balance sheet of theguarantor.

20.256 In exceptional cases, one-off guarantees granted

by governments to corporations in certain welldefined financially distressed situations (for

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example where the corporation has negative own
funds), implying a very high likelihood to be called,
are treated as if such guarantees were called atinception (see also paragraph 20.245).
20.257 The activation of a one-off guarantee is treated in

the same way as a debt assumption. The original
debt is liquidated and a new debt is created between
the guarantor and the creditor. The debt assumption implies the recording of a capital transfer infavour of the defaulting debtor. The capital transfer is offset by a financial transaction, the financial liability transferred from the corporation to
government.

20.258 The activation of a guarantee may or may not

require repayment of debt at once. The accrual
principle for time of recording suggests that the
total amount of debt assumed should be recordedat the time the guarantee is activated and thedebt assumed. The guarantor is the new debtor,
and principal repayments by the guarantor andinterest accruals on the assumed debt should berecorded when these flows occur. Thus, whencalls on guarantees solely involve the settlementof the debt service due on the debt during theaccounting period, as in the case of cash calls, acapital transfer is recorded for the amounts settled. However when a pattern of partial calls areobserved such as three times in succession, andis expected to continue, a debt assumption isrecorded.

20.259 When the original debtor refunds the guarantor

while an expenditure has been recorded on pastguarantee calls, revenue is recorded by the guarantor. However this revenue should be tested for thesuper-dividend test when the debtor is controlled
by the guarantor; any excess of the refund over theentrepreneurial income is recorded as withdrawalof equity.

Securitisation
Definition
20.260 Securitisation consists of issuing securities on thebasis of cash flows that are expected to be generated by assets, or other income streams. Securities
depending on cash flows from assets are called‘asset backed securities’ (ABS).

452

20.261 In securitisation, the originator conveys owner-ship rights over assets, or the right to receive specific future flows, to a securitisation unit, which
in return pays an amount to the originator fromits own source of financing. Such a securitisation
unit is often known as a special purpose entity.
The securitisation unit obtains its own financing
by issuing securities using the assets or rights tofuture flows transferred by the originator, as collateral. The key question in recording the payment by
the securitisation unit to the originator is whether
the transfer of the asset is a sale of an existing asset
to the securitisation unit, or a means of borrowing
using future flows of revenues as collateral.

Criteria for sale recognition
20.262 In order for the securitisation to be treated as a sale,a marketable asset must exist in the balance sheetof government and there must be a full change ofownership to the securitisation unit as evidenced
by the transfer of the risks and rewards linked tothe asset.

20.263 Thus, securitisation of future revenue flows notrecognised as a return on economic assets, such as
future oil royalties, is borrowing by the originator.

20.264 When a securitisation involves flows associated toa financial or a non-financial asset, the risks andrewards associated with owning the assets must betransferred for a sale to be recorded.

20.265 If government retains a beneficial interest in the

securitisation, by way of retaining a deferred purchase price, which is the right to excess flows above
the original securitisation value, or the right to own
the last tranche issued by the securitisation unit, orby other means, no sale has occurred, and the eventis originator’s borrowing.

20.266 If government, as originator, guarantees repay-

ment of any debt incurred by the securitisation
unit related to the asset, risks associated withthe asset have not been transferred. No sale has
occurred and the event is originator’s borrowing.
Guarantees can take various forms such as insurance contracts, derivatives, or clauses of substitution of assets.

20.267 If it is determined that the securitisation con-tract involves the true sale of a marketable asset,

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The government accounts

the sector classification of the securitisation unit
must be examined. Criteria are set in the section‘Defining the general government sector’ for establishing if the securitisation unit is an institutional
unit and if it has a financial intermediation function. If the securitisation unit is classified to thegovernment sector, the securitisation is government borrowing. If the securitisation unit is classified as other financial intermediary (S.125), thenthe securitisation will be reported as a sale of assets,with no direct impact on government debt, andwith an impact on government deficit if the flows
are securitised on a non-financial asset.
20.268 If government provides compensation, in the formof cash after the event, or other means such as guarantees, thus removing the transfer of risks, a securi­
tisation originally viewed as a sale is from thatmoment classed as borrowing, with the following
transactions: incurrence of a liability and acquisition of assets with a capital transfer expenditure in
the event that the value of the liability exceeds thatof the asset.

Recording of flows
20.269 When a securitisation operation is recorded as bor-

rowing, the cash flows passed on to the securitisation unit are first recorded in the accounts of government and simultaneously as repayment of debt,
both interest and principal.

20.270 When cash flows extinguish prior amortisationof the debt incurred, the remainder liability isremoved from the government balance sheet byanother change in volume.

20.271 After complete extinction of a debt incurred, any

remaining cash flows passed over to the securitisation unit in accordance with the securitisation contract are recorded as originator’s expenditure.

Other issues

security schemes. The pension entitlements of government sponsored unfunded employment-related
defined benefit schemes are to be recorded only inthose supplementary accounts.

Lump sum payments
20.273 On occasion, units may pay a lump sum to gov-

ernment in exchange for taking over some of theirpension obligations. Such large one-off transactions occur between a government and anotherunit, usually a public corporation, often linked tothe change of status of the corporation, or to its
privatisation. The government usually assumes theobligations in question in exchange for a cash payment covering the expected deficit resulting fromthe transfer.

20.274 In concept, being an equal exchange of cash for the

incurrence of an obligation that is a liability, thetransaction should not affect measures of net worth
and financial net worth, and should not alter government net lending/net borrowing. However, thepension obligation may not appear as a liability on
the balance sheet of either of the units transferring
and assuming the obligations. For example, whentransferred to the government, the pension obligations may be merged with a social security scheme
for which no liability is recognised.

20.275 In this context, such a lump sum payment should

be viewed as a prepayment of social contributions.
In consideration of the various arrangements
observed in practice and in order to avoid any distortion in the calculation of some aggregates suchas labour costs and compulsory levies, the lumpsum is recorded as a financial advance (F.8), a prepayment of miscellaneous current transfers (D.75)
which will be recorded in the future in proportion
to the related payments of pensions. As a result, thelump sum payment has no impact on the net lending/net borrowing of the general government in
the year of transfer of obligations.

Pension obligations

Public-private partnerships

20.272 The treatment of pension schemes is described in

Scope of PPP

Chapter 17, including a supplementary table to thecore national accounts of the ESA, where all obligations of pension schemes are to be accounted for,including pension obligations arising from social

European system of accounts — ESA 201020

20.276 Public-private partnerships (PPPs) are complex,

long-term contracts between two units, one ofwhich is normally a corporation (or a group of

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The government accounts

corporations, private or public) called the oper­
ator or partner, and the other normally a government unit called the grantor. PPPs involve a signifi­
cant capital expenditure to create or renovate fixed
assets by the corporation, which then operates andmanages the assets to produce and deliver services
either to the government unit or to the generalpublic on behalf of the public unit.
20.277 At the end of the contract, the grantor usuallyacquires legal ownership of the fixed assets. The
fixed assets are in most cases characteristic of somecore public service such as schools or universities,
hospitals, and prisons. They also may be infrastructure assets because many of the large projects
undertaken by means of PPPs involve the provision of transportation, communications, utilities,
or other services typically described as infrastructure services.

20.278 A general description that includes the most com-

mon accounting problems is as follows: a corpor­
ation agrees to acquire a complex of fixed assets andthen to use those assets together with other production inputs to produce services. Those services may
be delivered to government, either for use as an
input to its own production such as in motor vehicle
maintenance services, or for distribution to the public without payment such as education services, inwhich case government makes periodic payments
during the contract period and the corporation
expects to recover its costs and earn an adequate rateof return on its investment from those payments.

20.279 PPP contracts under this definition involve thegrantor paying the operator ‘availability’ or‘demand’ fees, and as such constitute a procurement arrangement. In contrast to other longterm service contracts, a dedicated asset is created.
Thus, a PPP contract implies the government purchase of a service produced by a partner throughthe creation of an asset. There can be many vari­ations in PPP contracts regarding the dispositionof the assets at the end of the contract, the required
operation and maintenance of the assets during thecontract, the price, quality, and volume of services
produced, and so forth.

20.280 When the corporation sells the services directly tothe public through for example a toll road, the contract is seen as a concession rather than a PPP. The
price is routinely regulated by the government and454

set at a level that the corporation expects will permit it to recover its costs and earn an adequate rateof return on its investment. At the end of the contract period, the government may gain legal ownership and operational control of the assets, possibly without payment.
20.281 In PPP contract, the corporation acquires the fixed

assets and is the legal owner of the assets during thecontract period, in some cases with the backing of
the government. The contract often requires thatthe assets meet the design, quality, and cap­acity
specified by government, be used in the manner
specified by government to produce the services
required by the contract, and be maintained inaccordance with standards defined by government.

20.282 Furthermore, the assets typically have service lives

much longer than the contract period so that government may control the assets, bear the risks andreceive the rewards, for a major portion of theassets’ service lives. Thus, it is frequently difficult
to determine whether it is the corporation or thegovernment that bears the majority of the risks andreaps the majority of the rewards.

Economic ownership and allocation of the asset
20.283 As with leases, the economic owner of the assets in

a PPP is determined by assessing which unit bears
the majority of the risks and which unit is expected
to receive a majority of the rewards of the assets.
The asset will be allocated to this unit, and consequently the gross fixed capital formation. The main
risk and reward elements to be assessed are:(a) construction risk, which includes costs overruns, the possibility of additional costs resulting from late delivery, not meeting specifications or building codes, and environmental andother risks requiring payments to third parties;(b) availability risk, which includes the possibility of additional costs such as maintenanceand financing, and the incurrence of penalties because the volume or quality of the services do not meet the standards specified in thecontract;(c) demand risk, which includes the possibility thatdemand for the services is higher or lower than
expected;

European system of accounts — ESA 2010

The government accounts(d) residual value and obsolescence risk, which
include the risk that the asset will be less thanits expected value at the end of the contract
and the degree to which the government has an
option to acquire the assets;(e) the existence of grantor financing or granting
guarantees, or of advantageous termination
clauses notably on termination events at theinitiative of the operator.
20.284 The risks and rewards are with the operator if theconstruction risk and either the demand or theavailability risks have been effectively transferred.
Majority financing, guarantees covering a majorityof financed levied, or termination clauses providing for a majority reimbursement of finance provider on termination events at the initiative of theoperator lead to the absence of effective transfer of
either of these risks.

20.285 In addition, owing to the specificity of PPP con-tracts, which involve complex assets, and when theassessment of risks and rewards is not conclusive, a
relevant question is which unit has a decisive influence on the nature of the asset and how the terms
and conditions of the services produced with theasset are determined, notably:(a) the degree to which the government determines
the design, quality, size, and maintenance of theassets;(b) the degree to which the government is able todetermine the services produced, the units towhich the services are provided, and the pricesof the services produced.

20.286 The provisions of each PPP contract shall be evalu-

ated in order to decide which unit is the economic
owner. Due to the complexity and variety of PPPs,
all of the facts and circumstances of each contract should be considered, and then the accounting treatment, that best reflects the underlying economic relationships, selected.

Accounting issues
20.287 If the corporation is assessed as being the economic

owner and if — as is commonly the case — the government obtains legal and economic ownership at
the end of the contract without an explicit payment,a transaction is recorded for the government’s

European system of accounts — ESA 201020

acquisition of the assets. One general approach isfor the government gradually to build up a financial claim and the corporation gradually to accrue
a corresponding liability such that the value of bothwill equal the expected residual value of the assets
at the end of the contract period. Implementing
this approach requires existing monetary transactions to be rearranged or new transactions to
be constructed using assumptions about expectedasset values and interest rates. This implies partitioning the PPP payments, when the PPP asset isoff government balance sheet, in a component representing the acquisition of a financial asset.
20.288 An alternative approach is to record the change oflegal and economic ownership at the end as a capital transfer in kind. The capital transfer approach
does not reflect the underlying economic reality
as well, but data limitations, uncertainty about the
expected residual value of the assets, and contract
provisions allowing various options to be exercised by either party make using a capital transfer
approach the most prudent.

20.289 Another significant problem arises when govern-

ment is assessed as being the economic owner of
the assets but does not make any explicit payment at
the beginning of the contract. A transaction must be
constructed to accomplish the acquisition. The mostcommon suggestion is that the acquisition be madewith an imputed financial lease because of the similarity with actual financial leases. The implementation of that choice, however, depends on the specific contract provisions, how they are interpreted,and possibly other factors. For example, a loan could
be imputed and actual government payments to thecorporation, if they exist, could be rearranged sothat a portion of each payment represents repayment of the loan. If there are no actual government
payments, then non-monetary transactions could beconstructed for the loan payments. Other means of
payment by government for the asset could be an
operating lease prepayment if an operating lease isimputed or an intangible asset for the right of thecorporation to access the assets for the productionof services.

20.290 Another important problem concerns the measure-ment of production. Whatever decisions are madeabout which unit is the economic owner of the assets
during the contract period and how the government
eventually acquires them, care should be taken that

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The government accounts

production is correctly measured. Again, there are
options and their desirability varies with the exact
situation and the availability of data. The difficultyarises when the government is assessed as being the
economic owner of the assets but the assets are usedby the corporation to produce services. It is desirable to show the value of the capital services as acost of production of the corporation, but that may
require the imputation of an operating lease, which
in turn may require a rearrangement of actual transactions or a construction of non-monetary transactions to identify the lease payments. An alternative
is to show the cost of capital services in the production account of the general government sector but
to classify the output of the government in the same
way as the classification of the output of the corpor­
ation so that the total output in the economy is correctly classified.

Transactions with international and supranationalorganisations
20.291 Transactions that occur between resident units andinternational or supranational organisations areclassified to the rest of the world sector.

20.292 An example of such transactions is between non-government residents and institutions of theEuropean Union, where these are considered as
the principal parties to the transaction even thoughgovernment units play a role as an intermediary agent in channelling the funds. The recordingof the main transactions is directly between thetwo parties and does not impact on the government sector. The government’s role is recorded as afinancial transaction (F.89).

20.293 The recording of specific transactions between

national residents and institutions of the European
Union are set out below for various categories:(a) taxes: some taxes on products, such as importduties and excises, are payable to institutionsof the European Union or other supranationalorganisations. These form three categories:(1) those payable directly, such as, in the past, theEuropean Coal and Steel Community levy on mining and iron and steel producing entities, which
are recorded directly;(2) those collectible by national governments as agentson behalf of the institutions of the European Unionor other supranational organisations, but where456

the tax is judged as payable directly by the resident producers. Examples are levies on imported
agricultural products, monetary compensatory
amounts levied on imports and exports, sugar
production levies and the tax on isoglucose, coresponsibility taxes on milk and cereals, and custom duties levied on the basis of the integrated tariff of the European Communities. Such items arerecorded directly from the producers to the supranational organisation, with government’s role as anintermediary recorded as a financial transaction;(3) receivables of value added tax in each Member State.
They are recorded as receivable by national governments, with the amounts that Member States provide to the European Union recorded as a current
transfer (D.76). The time of recording of the transfer from government is when it is to be paid;(b) subsidies: any subsidies directly payable by supranational organisations to resident producers arerecorded as directly payable by the supranationalorganisation rather than a resident government
unit. Subsidies payable to resident producers andchannelled through government units as intermediaries are similarly recorded directly between theprincipal parties, but also create entries in otheraccounts receivable/payable (F.89) in the government financial accounts;(c) miscellaneous current transfers: contributions to
the European Union budget from Member States
for the third and fourth types of payment designed
to give the European Union its own resources.
The third resource is calculated by applying a flat
rate to the Value Added Tax base of each Member
State. The fourth resource is based on the grossnational income of each Member State. Such payments are considered to be compulsory transfersfrom governments to the European Union. They
are classified as miscellaneous current transfers
and recorded when they are to be paid;(d) current international cooperation: most othercurrent transfers, in cash or in kind, between
government and non-resident units, including international organisations, are classified as current international cooperation. This
includes current aid to developing countries,
wages payable to teachers, advisers and othergovernment agents in activity abroad etc. One
characteristic of current international cooperation is that it consists of transfers made on a
voluntary basis;

European system of accounts — ESA 2010

The government accounts(e) capital transfers: investment grants, in cash orin kind, and other capital transfers, especiallyas the counterpart transaction of debt cancellation or debt assumption, can be payable toor receivable from an international or supra­
national organisation;

unwinds the other accounts payable it has withgovernment. If the beneficiary cannot repay, then acapital transfer from government is recorded cancelling the other accounts payable.
20.299 When government units are the beneficiaries, the(f) financial transactions: some financial transactions, usually loans, may be recorded whengranted by international organisations such as theWorld Bank and International Monetary Fund.
Government investments in the capital of international and supranational organisations apartfrom the International Monetary Fund are classified as other equity (F.519), unless there is no possibility of repayment in which case they are classified as current international cooperation.

government revenue is moved forward to matchthe time of expenditure in a departure from thegeneral rules on time of recording for such transfers. If there is a considerable time lag between thegovernment expenditure taking place and cash
being received, then the revenue can be recorded
when the claim to the European Union is submitted; this is applicable only when: reliable information on the time of the expenditure is not available;or amounts are big; or the time lag between the
expenditure and submission of claim is small.

20.294 The institutions of the European Union make sig-

20.300 All advance payments from the European Union

nificant current and capital transfers throughstructural funds such as the European Social Fund,the European Regional Development Fund andthe Cohesion Fund. The final beneficiaries of suchtransfers can be government or non-government
units.

20.295 Grants paid from structural funds often involve

co-financing, whereby the European-Union jointly
funds an investment made by government. Therecan be a mixture of pre-payments, interim andfinal payments, which may be channelled throughat least one government unit. Resident government units may also make advances payments of
the receipts expected from the European Union.

20.296 When non-government units are the beneficiar-

ies, any payments made by government in advanceof European Union cash receipts are recorded as
financial transactions in other accounts receivable/
payable. The counterpart of the financial transaction is the European Union if the accrual point of
the non-financial transaction has occurred, otherwise it is the beneficiary. The accounts receivable/
payable positions unwind when the cash is paid.

20.297 The recording time of co-financed government

expenditure transfers is the time when European
Union authorisation is given.

20.298 There may be circumstances where government

advances exceed the amount allowable once thisis determined by the authorisation process. If thebeneficiary is in a position to repay the excess thisEuropean system of accounts — ESA 201020

to government units as final beneficiaries at the
inception of multi-year programmes are recorded
as financial advances.

Development assistance
20.301 Governments provide assistance to other countries

by lending funds at an interest rate that is intentionally less than the market interest rate for aloan with comparable risk (concessional loans as
described in the section ‘Accounting issues relating to general government’, ‘Dept operations’), or
grants in cash and in kind.

20.302 Recording the international assistance throughgrants in kind, such as deliveries of food stocks,
often creates difficulty. The prices of the goods orservices being delivered in kind, such as the foodstocks, in the receiving country might be quite different from the prices in the donor country. As ageneral principle, the value of the donation to therecipient should be regarded as equal to the costof providing the assistance to the recipient. It follows that the prices of the donor country should
be used as a basis for the calculation of the value ofthe donation. In addition to the goods or services
themselves, all supplemental costs identifiablewith the delivery of the goods or services should
be included, such as transportation to the foreigncountry, delivery within that country, the compensation of government employees of the donating
country to prepare the shipments or oversee theirdelivery, insurance, and so forth.

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The government accounts

The public sector

sector structure of the system and can be re­arranged
to compile the public sector accounts. This is undertaken by putting together the subsectors of thegeneral government sector and the public sub­sectorsof non-financial and financial corporations.

20.303 The public sector consists of general government

and public corporations. The elements composing
the public sector are already present in the main

Non-financial
corporations

Financial corporations

PublicPublicPrivatePrivateGeneral government

PublicNPISHsPrivatePrivate20.304 Public financial corporations can be further divided

Households

corporations, which can be further subdivided into
subsectors of financial corporations as appropriate.

into the central bank, and other public financial

Table 20.2 — The public sector and its subsectors
General government
CentralgovernmentStategovernment

Local
government

Public corporations

Social security

20.305 Public sector accounts may be constructed accord-

ing to the ESA framework and sequence ofaccounts, and in principle both consolidated andunconsolidated versions are analytically useful.
Alternative presentations, such as the consolidated
and unconsolidated equivalents of the Government
Finance Statistics presentation described earlier inthis Chapter, are also useful.

20.306 All institutional units included in the public

sector are resident units controlled by government, either directly or indirectly by public sector units in aggregate. The control over an entity
is defined as the ability to determine the generalpolicy of that entity. This is described in moredetail below.

20.307 The distinction between a public sector unit being

part of general government or a public corpor­
ation is determined by the market/non-market
test, as described in Chapter 3 and above. Nonmarket public sector units are classified in general government and market public sector units
are classified as public corporations. The only
exception to this general rule is for certain financial institutions that either supervise or serve
the financial sector, which are classified as public financial corporations irrespective of whether
they are market or non-market.

458

Public nonfinancial
corporations

Public financial corporations
Central bank

Other publicfinancialcorporations

20.308 The legal form of a body is not a guide to its sec-

tor classification. For example, some legally constituted public sector corporations may be non-market units and hence classified to general government rather than as public corporations.

Public sector control
20.309 Control of a resident public sector unit is definedas the ability to determine the general policy of
the unit. This can be through the direct rights of asingle public sector unit or the collective rights ofmany. The following indicators of control are to beconsidered:(a) rights to appoint, veto or remove a majority
of officers, board of directors etc. The rights
to appoint, remove, approve or veto a majority of the governing board of an entity are sufficient to determine control. Such rights may bedirectly held by one public sector unit, or indir­
ectly by public sector units in aggregate. If thefirst set of appointments are controlled by the
public sector but subsequent replacements are
not subject to these controls, then the entity
remains in the public sector until the time
when the majority of the directors are not controlled appointments;

European system of accounts — ESA 2010

The government accounts(b) rights to appoint, veto or remove key personnel. If the control of general policy is effect­
ively determined by influential members of
the board, such as the chief executive, chairperson and finance director, then the powers
to appoint, veto or remove those personnel are
given greater prominence;(c) rights to appoint, veto or remove a majority of
appointments for key committees of the entity.
If key factors of the general policy, such as
remuneration of senior staff, pay and businessstrategy, are delegated to subcommittees, thenthe rights to appoint, remove or veto of direct­
ors on these subcommittees is a determinant ofcontrol;(d) ownership of the majority of the voting interest. This will normally determine control when
decisions are made on a one-share, one-votebasis. The shares may be held directly or indir­
ectly, with shares owned by all public sector
units aggregated. If decisions are not made on
a one-share, one-vote basis the situation should
be analysed to see if the public sector has amajority vote;(e) rights under special shares and options. These
golden or special shares were once common
in privatised corporations and also feature insome special purpose entities. In some cases
they give public sector entities some re­sidual
rights to protect interests; such rights may bepermanent or time-limited. The existence ofsuch shares is not by itself an indicator of control, but needs to be carefully analysed, in particular the circumstances where the powers
may be invoked. If the powers influence thecurrent general policy of the entity they will
be important to the classification decisions.
In other cases they will be reserve powers that
may confer rights to control general policy intimes of emergency etc, these are judged asirrelevant if they do not influence existing policy, although in the event that they are utilised
they will usually trigger immediate reclassification. The existence of a share purchase
option to public sector entities in certain circumstances is a similar situation, and a judgement is necessary on whether the powers to
implement the option influence the generalpolicy of the entity;

European system of accounts — ESA 201020(f) rights to control via contractual agreements.
If all the sales of an entity are to a single public sector entity, or a collection of public sector
entities, there is scope for dominant influencethat can be judged as control. The presence ofother customers, or the potential to have othercustomers, is an indicator that the entity is notcontrolled by public sector units. If the entity is
restricted from dealing with non-public sector
customers due to public sector influence, thenthis is an indicator of public sector control;(g) rights to control from agreements/permission
to borrow. Lenders often impose controls asconditions of making loans. If the public sector
imposes controls through lending, or to protect
its risk exposure from a guarantee, which are
tougher than a private sector entity would typically face from a bank, this is an indicator ofcontrol. If an entity requires permission fromthe public sector to borrow, then this is an indicator of control;(h) control via excessive regulation. When regulation is so tight that it effectively dictates thegeneral policy of the business, it is a form ofcontrol. Public authorities can in some cases
have powerful regulatory involvement, particularly in areas such as monopolies and privatised
utilities where there is a public service element.
It is possible for regulatory involvement to exist
in important areas, such as price setting, without an entity ceding control of general policy.
Choosing to enter into or operate in a highly
regulated environment is similarly an indicator
the entity is not subject to control;(i) others. Control may also be obtained fromstatutory powers or rights contained in an
entity’s constitution, for example to limit theactivities, objectives and operating aspects,
approve budgets or prevent the entity changing its constitution, dissolving itself, approving
dividends, or terminating its relationship withthe public sector. An entity that is fully, or close
to fully, financed by the public sector is considered to be controlled if the controls on thatfunding stream are restrictive enough to dictate
the general policy in that area.
20.310 Each classification case needs to be judged on its

own merits and some of these indicators may not

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be relevant to the individual case. Some indicators,
such as (a), (c) and (d) in paragraph 20.309, aresufficient by themselves to establish control. For
others a number of separate indicators may collect­ively indicate control.

Central banks
20.311 Central banks are generally assumed to be pub-lic financial corporations, even in the case whereother than government are their sole or majority
legal owner. They are considered as public corpor­
ations through governments having economic
ownership or exerting control by other means.

20.312 A central bank is a financial intermediary, whose

activity is subject to specific legal provisions, andwhich is placed under general control of government, representing the national interest, eventhough the central bank enjoys a large degree of
autonomy or independence with respect to exercising its main activity (notably the monetary policy).
The key issue here is the recognition of the central
bank’s main function and activity — to manage thenation’s reserve assets, to issue the national currency and to conduct the monetary policy — rather
than its legal status. Government often has a formal
right to liquidation proceeds.

20.313 Because of the existence of such beneficial interestor because of the government role, ownership ofgovernment over the central bank equity — or, atleast, over the reserve assets managed by the central bank — is recognised in national accounts,
as an economic ownership even in circumstanceswhere it has no legal ownership.

Public quasi-corporations
20.314 Public quasi-corporations do not possess the legal

characteristics of independent corporations but
behave sufficiently differently from their owners,
and more like entities in the non-financial or financial corporations sectors, to be recognised as institutional units.

20.315 The activities of the quasi-corporation must be

ring-fenced, with sufficient information to allow

460

a complete set of accounts to be compiled (seepoint (f) of paragraph 2.13), and be market units.

Special purpose entities and non-residents
20.316 Public sector entities may set up or use special pur-pose entities (SPEs) or special purpose vehicles.
Such units often have no employees or non-financial assets and little physical presence beyond a‘brass plate’ confirming their place of registration.
They may be resident in a different territory.

20.317 SPE units set up by the public sector must be

investigated to see if they have the power to act
independently, are restricted in their activities,
and carry the risks and rewards associated withthe assets and liabilities they hold. If they do notmeet such criteria they are not recognised as separate institutional units and, if resident, are consolidated into the public sector unit that createdthem. If non-resident they are recognised as partof the rest of the world and any transactions they
undertake are re-routed via the public sector unitthat created them.

20.318 Non-resident international joint ventures between

governments, where neither party has controlof the entity, are apportioned to governments as
notional resident units.

Joint ventures
20.319 Public and private sector units can enter into a

joint venture whereby an institutional unit is established. That unit may enter into contracts in its
own name and raise finance for its own purposes.
The unit is allocated to the public or private sectors
depending on which party controls it.

20.320 In practice, in most joint ventures there is joint

control. If the unit is classified as non-market it
is by convention classified to general government
since its behaviour is that of a government unit.
If the unit is classified as a market producer andcontrol is evenly divided, then the unit is partitioned into halves, one half allocated to the public sector and the other allocated to the private
sector.

European system of accounts — ESA 2010

Links between business accounts and national accounts and the measurement of corporate activity

21

CHAPTER 21
Links between business accounts and national accounts
and the measurement of corporate activity
21.01 Business accounts represent, alongside businesssurveys, a major source of information for corporate activity in national accounts. National
accounting shares with business accounting a
number of characteristics, the most noticeable ofwhich are:(a) the recording of transactions in accounts, i.e. in
two-column tables;(b) monetary valuation;(c) use of balancing items;(d) recording of transactions as they take place;and(e) internal coherence of the system of accounts.
However, national accounting differs on a number of points, because it has a different object​ive:
national accounting aims to describe within acoherent framework all the activities of a country and not just those of an enterprise or group ofenterprises. This objective of a consistent picture
across all entities in an economy and their relationship with the rest of the world brings constraints
which do not affect business accounting.

21.02 National accounting has international standards

shared across every country in the world. The development and application of business accounting differ amongst countries. However, business accounting is moving to applying shared international
standards. Harmonisation at world level began on
29 June 1973 with the creation of the International
Accounting Standards Committee (IASC) whose
mission was to develop basic accounting standards referred to as IAS (International AccountingStandards) and then later as IFRS (International

European system of accounts — ESA 2010

Financial Reporting Standards), that could beapplied across the world. In the European Union,
the consolidated accounts of EU listed companies
are prepared according to the IFRS frame of reference from 2005 onwards.
21.03 Detailed guidelines on the contents of businessaccounts and how to link business accounts tonational accounts belong in specialised manuals.
This Chapter answers the most common questions
raised when compiling national accounts on thebasis of business accounts, and addresses specificissues of the measurement of corporate activity.

Some specific rules and methods ofbusiness accounting
21.04 In order to extract information from businessaccounts, national accountants should understandthe international accounting standards for private corporations and for government bodies. The
standards for private corporations are drawn up
and maintained by the International AccountingStandards Board (IASB), and, for government bodies, by the International Public Sector AccountingStandards Board (IPSASB). The following para­graphs set out general principles of businessaccounting.

Time of recording
21.05 Business accounts record transactions when theytake place, giving rise to claims and obligations,
independently of the payment. This is recording onan accruals basis, as opposed to a cash basis. The
national accounts are also drawn up on an accruals
basis.

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Links between business accounts and national accounts and the measurement of corporate activity

Double entry and quadruple entry
accounting
21.06 In business accounts, each transaction of the enter-

prise is recorded in at least two different accounts,
once on the debit side and once on the credit side
for the same amount. This double entry systemenables a check of the consistency of the accounts.
In national accounts, a quadruple entry system
can also be used for most transactions. A transaction is reflected twice by each of the institutional
units involved, for example once as a non-financial transaction in the production, income andcapital accounts, and once as a financial transaction associated with the change in financial asset
and liability.

Valuation
21.07 In business accounts and in national accounts,transactions are recorded at the price agreed uponby the transactors.
Assets and liabilities are generally valued at their
original or historical cost in the financial statements of business entities, in possible combin­ation
with other prices, e.g. market prices for inventories. Financial instruments should be valued atfair value, which aim to reflect prices observed inmarkets by using specific valuation techniques ifnecessary.
In national accounts, assets and liabilities arerecorded at current values at the time to which thebalance sheet relates, not at their original valuation.

Income statement and balance sheet
21.08 For business accounts, two financial statements

are prepared: the income statement and the balance sheet. The income statement groups together
the transactions for income and costs, and the balance sheet stocks of assets and liabilities. Thesestatements show the balances of the accounts, andtransactions at an aggregate level. The statements
are presented in the form of accounts. Both statements are closely linked to each other. The balanceof the income statement is a profit or loss of the462

enterprise. This profit or loss is also included in thebalance sheet.
21.09 The transaction accounts whose balance is includedin the income statement are flow accounts. Theirobjective is to show the totals of income andexpenditure during the financial year.

21.10 Balance sheets are stock accounts. They show thevalue of the assets and liabilities at the end of thefinancial year.

National accounts and businessaccounts: practical issues
21.11 In order that national accountants may use busi-

ness accounts on a large scale, and not just in isolated cases, a number of conditions must be met.
The first is access to businesses’ accounts. Usually,
the publication of accounts is mandatory for large
enterprises. Databases of such accounts are set up
by private or public bodies, and it is important thatnational accountants are able to access these. For
large enterprises, it is generally possible to obtainaccounts directly from them.
The second condition is a minimum degree ofstandardisation of the accounting documents published by enterprises, since this is a necessary condition for computerised processing. A high level ofstandardisation is often associated with the existence of a body collecting accounts from enterprises
in a standardised form. Collection may be organised on a voluntary basis, as in the case of the bodyrunning a financial statements centre which performs analyses for its members, or it may be mademandatory by law, as is the case where the collecting body is the tax authority. In both cases, national
accountants are to request access to the databases,
respecting the confidentiality policies that apply.

21.12 Business accounts can be used when the accounts

are not compiled on a standardised basis. In many
countries, sectors of the economy are dominatedby a small number of large enterprises, and theaccounts of those large enterprises can be used forthe national accounts. Useful information can also
be found in the notes to the accounts, such as moredetail or guidance on how to interpret the entries
in the accounts.

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Links between business accounts and national accounts and the measurement of corporate activity

21.13 Business surveys are the other major source ofdata for the national accounts on corporate activ­
ities. Such surveys provide satisfactory results if thequestions asked are compatible with entries andconcepts of business accounts. An enterprise will
not provide reliable information which is not basedon its own internal information system. Businesssurveys are generally necessary, even in the bestcase where national accountants are able to accessaccounting databases, as the information contained in such databases is rarely detailed enoughto meet all the needs of national accountants.

21.14 Globalisation complicates the use of business

The transition from business accounts
to national accounts: the example ofnon-financial enterprises
21.16 The use of data from business accounts of non-financial enterprises for the preparation of national
accounts requires several adjustments. These
adjustments can be placed in three categories: conceptual adjustments, adjustments to enable consistency with the accounts of other sectors, andadjustments for exhaustiveness.

Conceptual adjustments

accounts in preparing national accounts. Businessaccounts must be drawn up on a national basis to
be useful and this is not the case when enterprises
have subsidiaries abroad. When the activity of theenterprise extends beyond the national territory,
adjustments are necessary to create a national picture based on the enterprise’s business accounts.
Enterprises must provide to the business accounts
database, either accounts on a national basis, or the
adjustments to render the enterprise accounts ona national basis. When the accounts are collectedfrom the enterprises by the tax authority, the tax
authority generally requires that the data are provided on a national basis in order to be able to calculate the tax on profit, and this is the most favourable case for use in national accounts.

21.17 Conceptual adjustments are required because busi-

21.15 Another practical condition is that the financial(b) insurance premiums. Insurance premiums paidby enterprises are part of their expenditure, but
national accounts require that they be broken
down into three elements: net premiums, theinsurance service and premium supplements.
Only the part corresponding to the service isintermediate consumption, and a correction
is made by deducting net premiums and premium supplements from the gross payment.

year should correspond with the reference periodof the national accounts. For annual accounts, thisis generally the calendar year, and so it is desir­able,
in order to make best use of business accounts, thatthe majority of these enterprises start their financial year on 1 January. Enterprises can choose
other financial year start dates. For operations corresponding to flows in the national accounts, it isoften acceptable to recreate accounts on the basis of
the calendar year by combining proportions of two
successive financial years, but for balance sheets
this method provides less satisfactory results, especially for items liable to rapid fluctuations during
the year. Quarterly accounts are often compiled bylarge enterprises but they are rarely collected on asystematic basis.

European system of accounts — ESA 201021

ness accounts are not based on exactly the same
concepts as national accounts and because wherethese concepts are close to each other, the valu­
ation methods can be different. Examples of conceptual adjustments for the calculation of output
are as follows:(a) adjustment for the transition to the basic price.
The turnover of enterprises is generally net
of VAT but often includes taxes on products.
Conversely, subsidies on products are rarely
included in the turnover. It is therefore necessary to make an adjustment to the data frombusiness accounts by deducting these taxes on
products and adding these subsidies on products to arrive at an estimate of output at basic
prices;Adjustments to achieve consistency withthe accounts of other sectors
21.18 National accounts require that the accounts ofenterprises are consistent with those of otherenterprises and units in other institutional sectors.

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Links between business accounts and national accounts and the measurement of corporate activity

So, taxes and subsidies valued on the basis ofaccounts of enterprises must be consistent withthose received by or paid by general government.
In practice, this is not observed and a rule is neededin order to achieve consistency. Normally information from general government is more reliable thanthat from enterprises, and the data from businessaccounts is adjusted.

Examples of adjustments forexhaustiveness21.19 Examples of adjustments to enterprise accounting

data for exhaustiveness are absence from statisticalfiles, exemption from tax and social declarations,and evasion.
Examples of specific adjustments are as follows:(a) evasion regarding output sold and sale of goods
for resale. Enterprises may underestimate thevalue of sales to evade paying tax, and an adjustment is made for this under-declaration basedon information provided by the tax offices;(b) income in kind is employee recompense in theform of goods and services supplied free ofcharge. When this output and income are notrecorded in the business accounts, an adjustment is made to the recorded values, for use
in the national accounts. Where employees arehoused free of charge, an estimate of the corres­
ponding property rentals is included in output
and income of employees where they are notalready included in the business accounts;(c) tips. When employees receive tips from customers of the enterprise, these must be considered as part of the turnover and thus of output. Tips not recorded as output and employee
income in the business accounts are estimatedand the output and income adjusted for thenational accounts.

464

Specific issues
Holding gains/losses
21.20 Holding gains and losses are one of the main dif-ficulties in the transition from business accounts
to national accounts, mainly due to the nature of
the information available in business accounts. For
example, intermediate consumption of raw materials may not be a direct purchase, but a withdrawal from stock. In national accounts, the withdrawal from stock is valued at the current market
price, while in business accounts the withdrawal
from stock is valued at its historical cost, i.e. at theprice of the goods when purchased. The difference
between the two prices is a holding gain/loss innational accounts.

21.21 Eliminating holding gains/losses on stocks is noteasy as it requires the collection of numerous piecesof supplementary accounting information and theuse of many assumptions. The information collected must relate both to the nature of the products stocked and the change in prices in the courseof the year. Since the information available on thenature of products more often than not relates tosales and purchases rather than to the stocks themselves, it is necessary to base the estimates on models the relevance of which is difficult to verify. But,
despite its imprecision, this exercise is the pricethat has to be paid for being able to use the datafrom business accounting.

21.22 The valuations of assets at fair value provide a bet-

ter picture of the balance sheet than valuations at
historic cost but they also generate more data on
holding gains/losses.

Globalisation
21.23 Globalisation makes the use of business accounts

more difficult when businesses have foreign establishments. The activity carried out beyond national
borders must be excluded from the accounts inorder to use them for national accounts. This exclusion is difficult except in the best case where tax
regulations require enterprises to publish accounts
for their activity exclusively on national territory.
The existence of multi-national groups poses valuation problems, as exchanges between subsidiaries

European system of accounts — ESA 2010

Links between business accounts and national accounts and the measurement of corporate activity

can be made on the basis of prices not observedin the open market, but set to minimise global tax
burden. National accountants make adjustments
to bring the prices of intra-group transactions intoline with market prices. In practice this is extremely
difficult, due to the lack of information and the lackof a comparable free market for highly specialised
products. Adjustments can only be made in exceptional cases, based on an analysis that is acceptedby experts in the area concerned.
21.24 Globalisation has supported the reintroductionof recording imports and exports on the basis ofchange of ownership of goods, rather than changeof physical location. This renders business accounts
more appropriate for national accounts, as business accounts are also based on a change of ownership of goods rather than physical change of location. When an enterprise places processing withan enterprise based outside the national economic
territory, business accounts are on the appropriate basis to act as a data source for the national
accounts. Whilst this helps, there remain manymeasurement issues in the estimation of multinational businesses in the national accounts.

21

Mergers and acquisitions
21.25 Corporate restructuring causes the appearance anddisappearance of financial assets and liabilities.
Where a corporation disappears as an independent legal entity because it has been absorbed by
one or more corporations, all financial assets/liabi­
lities including shares and other equity that existed
between that corporation and those that absorbed
it disappear from the system of national accounts.
That disappearance is recorded as changes in sector
classification, and structure in the other changes inthe volume of assets accounts.

21.26 However, the purchase of shares and other equityof a corporation as part of a merger is recorded as
financial transaction between the purchasing corporation and the previous owner. Replacement ofexisting shares by shares in the takeover or new
corporation are recorded as redemptions of sharesaccompanied by the issue of new shares. Financial
assets/liabilities that existed between the absorbed
corporation and third parties remain unchanged
and pass to the absorbing corporation(s).

21.27 Where a corporation is legally split up into two

or more institutional units, new financial assets
and liabilities (appearance of financial assets) arerecorded as changes in sector classification andstructure.

European system of accounts — ESA 2010

465

Satellite accounts

22

CHAPTER 22
Satellite accounts
Introduction
22.01 This Chapter provides a general introduction tosatellite accounts. It describes and discusses how
the central framework can be used as a buildingblock-system to serve many important specificdata needs.

22.02 Satellite accounts elaborate or modify the tables

and accounts in the central framework to serve
specific data needs.

22.03 The central framework consists of the following:(a) integrated economic accounts (institutional
sector accounts) providing an overview of all
economic flows and stocks;(b) an input-output framework providing an overview of the supply and use of goods and services in current prices and in volume terms;(c) tables linking the industry information in the
input-output framework with the institutional
sector accounts;(d) tables on expenditure by function of government, households and corporations;such as welfare or transactions costs, administrative concepts such as taxable income or profits in the business accounts, and policy concepts
such as strategic industries, the knowledge economy and business investments used in national or
European economic policy. In such cases, the satellite system will contain a table showing the link
between its major aggregates and those in the central framework
22.05 Satellite accounts can range from simple tables toan extended set of accounts. Satellite accounts canbe compiled and published on an annual or quarterly basis. For some satellite accounts, production
at more extended intervals such as once every five
years is appropriate.

22.06 Satellite accounts can have various characteristics:(a) links to functions, as in functional satellite
accounts;(b) links to industries or products, which is one
type of special sector accounts;(c) links to institutional sectors, a second type of
special sector accounts;(e) tables on population and employment.

(d) extension with physical or other non-monetarydata;

The accounts and tables can be on an annual orquarterly basis, and be national or regional.

(e) extra detail;22.04 Satellite accounts can meet specific data needs byproviding more detail, by rearranging concepts
from the central framework or by providing supplementary information, such as non-monet­
ary flows and stocks. They may deviate from thecentral concepts. Changing those concepts canimprove the link with economic theory concepts

European system of accounts — ESA 2010(f) use of supplementary concepts;(g) modification of some basic concepts;(h) use of modelling or inclusion of experimental
results.
For a specific satellite account, one or more of thecharacteristics mentioned in points (a) to (h) canapply. This is illustrated in Table 22.1.

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Satellite accounts

Table 22.1 — Overview of satellite accounts and their major characteristics
Eight characteristics of satellite accounts
Special sector
accounts
Functional
accounts

Links to Inclusion
Links toSupple­ Different
Experimental
Part of EU
institu­ of non- Extra
industries
mentary
basic
results and more transmission
tional monetary detailor products
concepts concepts use of modelling programme
sectorsdata

1. Satellite accounts described in this Chapter
Agricultural

X

Environmental

X

X

HealthX

X

Household production

X

X

X

X

X

X

X

X

X

X

X

X

X

X
X

X

X

X

Productivity andgrowth

X

X

X

X

X

X

X

X

X

X

Social protection

X

Tourism

X

X

X

X

X

X

X

Labour and SAM

R&D

X

X

X

X
X

X

X
X

2. Satellite accounts described in other chapters
Balance of payments

X

X

X

Government finance

X

X

X

X

Monetary andfinancial statistics, andflow of funds

X

X

X

X

Supplementary
pension table

X

X

X

X

X

X

3. Examples of other satellite accounts with international guidelines, or in the EU data transmission programme
Corporate activity

X

Informal sector

X

X
X

Non-profit institutions

X

X

Public sector

X

X

Tax revenue tables

X

X

22.07 In this Chapter, characteristics of satellite accounts

will be discussed and the following nine different
satellite accounts described briefly:(a) agricultural accounts;(b) environmental accounts;(c) health accounts;(d) household production accounts;(e) labour accounts and social accounting matrices;

468

X

X

(f) productivity and growth accounts;(g) R&D accounts;(h) social protection accounts;(i) tourism accounts.
Other chapters hold descriptions of other satellite
accounts such as balance of payments, government
finance statistics, monetary and financial statistics
and the supplementary pension table.

European system of accounts — ESA 2010

Satellite accounts

In the 2008 SNA, several satellite accounts aredescribed at length which are covered to a limited
extent in the ESA 2010. Examples are as follows:(g) residential building accounts, showing the economic importance of residential building forthe nation and regions;(a) 2008 SNA Chapter 21 Corporate activity
accounts;(h) safety-related accounts, showing public andprivate expenditure on safety;(b) 2008 SNA Chapter 22 Public sector accounts;(i) sports-related accounts, showing the economic
importance of sports;(c) 2008 SNA Chapter 23 Non-profit institutions
accounts; and(d) 2008 SNA Chapter 25 Informal sector accounts.
For international comparison of the level andcomposition of taxes, national tax revenue statistics are reported to the OECD, IMF and Eurostat.
The concepts and data are fully linked to those in
the national accounts. Tax revenue statistics is an
example of a national accounts’ satellite.
Those examples are of well-established satellite
accounts, as they are subject to international guidelines or are already part of an international transmission programme. Satellite accounts developedin various countries illustrate the importance andusefulness of satellite accounts, and examples are:(a) cultural and creative sector accounts, illustrating the economic importance of the culturaland creative sectors;(b) education accounts, showing the economic
importance of the supply, use and financing of
education;(c) energy accounts, showing the economic import­
ance of the various types of energy and their linkto imports, exports and government taxes andsubsidies;(d) fishery and forestry accounts, showing theireconomic importance for the nation andregions;(e) information and communication technology(ICT) accounts, showing the supply and use ofmajor ICT products and their producers;(f) redistribution by public expenditure account,showing which income groups benefit frompublic expenditure on education, health care,
culture and housing;

European system of accounts — ESA 201022(j) water-related accounts, showing the interaction between the physical water system and theeconomy at national and river basin level.
22.08 A major group of satellite accounts have a func-

tional approach. The various functional classifications are described in this Chapter.

22.09 The wide range of satellite accounts illustrates thatthe national accounts serve as a frame of reference
for a variety of statistics. They also illustrate themerits and limitations of the central framework.
By applying the concepts, classifications and presentations such as the supply and use tables of thecentral framework to a wide range of topics, theflexibility and relevance of the satellite accounts
approach for these topics is demonstrated. At thesame time, additions, rearrangements and conceptual modi­fications illustrate the limitations of thecentral framework for the study of these topics.
For ex­ample, the environmental accounts extend
the central framework to take account of environmental externalities and the household production accounts extend the production boundary toinclude unpaid household services. In this way,
they demonstrate that the central framework’s
concepts of product, income and consumption are
not complete measures of welfare.

22.10 Major advantages of satellite accounts include thefollowing:(a) they are based on a set of clear definitions;(b) application of a systematic accounting
approach. Examples are the breakdown of one
total into various dimensions, such as the supply and use of goods and services by productand by industry; who produces, who pays andwho benefits from a service; systematic stockflow accounting; and consistent accounting
in monetary and non-monetary terms. A systematic accounting approach is characterised

469

22

Satellite accounts

by consistency and coherence. It also enables
bookkeeping analyses based on decompos­
ition, where change in the total is explained interms of changes in the parts, change in value
is explained by changes in volume and price,and changes in stocks are accounted for by
the corresponding flows and constant ratios
used in input-output analysis. Such bookkeeping analyses can be supplemented with modelling in which economic behaviour is taken into
account;(c) linkage to basic national accounting concepts.
Examples are the concepts of specific stocks
and flows like production, compensation of
employees, taxes, social benefits and capitalformation, the concepts in the classifications
by industry and by institutional sector such as
the agriculture and manufacturing industries
or the government sector, and major balancing
items such as value added, domestic product,
disposable income and net worth. Such basic
national accounting concepts are well-established throughout the world, stable over time
and their measurement is relatively immune topolitical pressure;(d) linkage to national accounts statistics; these arereadily available, comparable over time, compiled to common international standards, andplace the satellite accounts measures in thecontext of the national economy and its major
components, such as the relationship with economic growth and public finance.

Functional classifications
22.11 Functional classifications classify expenditure bysector, and by the purpose of the expenditure. They
illustrate the behaviour of consumers, government,
non-profit institutions and producers.

22.12 The four different functional classifications thatexist in the ESA are as follows:(a) classification of individual consumption bypurpose (Coicop);(b) classification of the functions of government(COFOG);470(c) classification of the purposes of non-profit
institutions (COPNI);(d) classification of outlays of producers by purpose (COPP).
22.13 In Coicop 14 main categories are distinguished:(a) food and non-alcoholic beverages;(b) alcoholic beverages, tobacco and narcotics;(c) clothing and footwear;(d) housing, water, electricity, gas and other fuels;(e) furnishings, household equipment and routine
household maintenance;(f) health;(g) transport;(h) communication;(i) recreation and culture;(j) education;(k) restaurants and hotels;(l) miscellaneous goods and services;(m) individual consumption expenditure of nonprofit institutions serving households; and(n) individual consumption expenditure of general
government.
The first 12 categories sum up total individual consumption expenditure by households. The last
two identify individual consumption expenditureby the non-profit institutions serving households(NPISHs) and general government sectors, i.e.
their social transfers in kind. Together all 14 items
represent actual final consumption by households.
22.14 The individual consumption expenditure of

NPISHs and general government is broken down
into five common sub-categories reflecting major
policy issues: housing, health, recreation and culture, education and social protection. These arealso Coicop functions for the individual consumption expenditure by households; social protection
is a sub-category of 12 miscellaneous goods andservices. As a consequence, Coicop also shows foreach of these five common sub-categories, the role

European system of accounts — ESA 2010

Satellite accounts

of private households, government and non-profit
institutions serving households. For example, it
can describe the role of government in providing
housing, health and education.
22.15 Coicop also serves other major uses such as using

the subcategories to show expenditure by households on consumer durables. Household budget
surveys frequently use a classification scheme
based on Coicop to collect household expenditure
information. This can then be allocated to products
for a supply and use table.

22.16 The classification of government expenditure by(e) social protection;(f) religion;(g) political parties, labour and professionalorganisations;(h) environmental protection; and(i) services n.e.c.
22.18 For describing and analysing the behaviour of pro-

ducers, COPP can be used. Six main categories are
distinguished:function (COFOG) is a major tool for describing
and analysing government finance. The 10 major
categories distinguished are:(a) outlays on infrastructure;(a) general public services;(c) outlays on environmental protection;(b) defence;(d) outlays on marketing;(c) public order and safety;(e) outlays on human resource development;(d) economic affairs;(f) outlays on current production programmes,
administration and management.

(e) environmental protection;(f) housing and community amenities;(g) health;(h) recreation, culture and religion;(i) education; and(j) social protection.
The classification can be used to classify individu­al
and collective consumption expenditure by thegovernment. However, it also serves to illustrate
the role of other types of expenditure such as subsidies, investment grants and social assistance in
cash, for pursuing policy purposes.
22.17 For describing and analysing the expenditure ofprivate non-profit institutions serving households,
COPNI is used. The nine major categories distinguished are:(a) housing;(b) health;(c) recreation and culture;(d) education;

European system of accounts — ESA 201022(b) outlays on research and development;

In combination with information by transaction, COPP can provide information on the ‘outsourcing’ of business services, i.e. the substitutionof ancillary activities by purchases of corresponding services from other producers such as cleaning,catering, transport and research.
22.19 COFOG and COPP show expenditure on environ-mental protection by the government and produ­
cers. This information is used to describe and analyse the interaction between economic growth andenvironment.

22.20 Some expenditure, like final consumption expend-

iture and intermediate consumption, can be classified by function and by product group. The productclassification shows which products are involved
and gives a description of the different production
processes and their links with the supply and use of
products. This contrasts with the functional classifications as follows:(a) expenditure on different products can serve
one function;(b) expenditure on one product can serve different
functions;

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22

Satellite accounts(c) some expenditure is not transactions in products, but can be very important for a functionalclassification, e.g. subsidies and social security
benefits in cash for the classification of expenditure by general government.

product analysis. Such a combined approach isuseful for many fields, such as culture, sport, education, health, social protection, tourism, envir­
onmental protection, research and development(R&D), development aid, transportation, safety
and housing. Most of the fields refer to services;
they generally cover a number of activities and correspond in many cases to subjects that are related toquestions of economic growth or of social concern.

Major characteristics of satellite
accounts

22.23 A key concept in functional satellite accounts isnational expenditure on the function as shown in
Table 22.2. This key concept is also useful in defining the coverage of the functional satellite account.

Functional satellite accounts
22.21 Functional satellite accounts focus on describing

and analysing the economy for a function, suchas environment, health, and research and development. For each function they provide a systematic accounting framework. They do not provide
an overview of the national economy, but focus
on what is relevant for the function. To that end,
they show detail not visible in the aggregated central framework, rearrange information, add information on non-monetary flows and stocks, ignore
what is irrelevant for the chosen function anddefine functional aggregates as the key concepts.

22.24 To analyse the uses for a function involves ask-

22.22 The central framework is mainly institutional innature. A functional satellite account can combine a functional approach with an activity anding questions such as ‘How many resources are
devoted to education, transportation, tourism,
environmental protection, and data processing?’.
In order to answer such questions, decisions haveto be made with regard to:(a) which products are relevant for the field concerned. National expenditure includes all thecurrent uses of, and capital formation in, suchproducts;(b) for which activities will capital be recorded;(c) which transfers are relevant for this field.

Table 22.2 — National expenditure on a function or productAnnual data series
Actual final consumption of the products chosenMarket products
Non-market products
IndividualCollective
Intermediate consumption
ActualInternal
Gross capital formation
In the chosen products
Other
Chosen current transfers
Chosen capital transfers
Uses of resident units financed by the rest of the world
National expenditure

472

European system of accounts — ESA 2010

European system of accounts — ESA 2010

Total

Other
products

…

2.

1.

Connected
products

…

2.

1.

Characteristic
products

Characteristic producers

Other producers

Total
Total
Trade andSubsidies
supplyTaxes onsupply at
Total Imports
transportonat basic
productspurchasers’
margins
products
Principal Secondary Ancillary Total Principal Secondary Ancillary
pricespricesproduct productOutput by industry

Table 22.3 — The supply of characteristic and connected products

Satellite accounts

22

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474

European system of accounts — ESA 2010

Other

Specific products

Fixed capital stock,
net

Other

Specific products

Gross fixed capitalformation

Labour inputs

Supplementary
information

Total

Operating surplus,
net

Other

 Specific products(characteristic orconnected)

Consumption of
fixed capital

Other net taxes on
production

Compensation of
employees

Total

Other products

….

2.

1.

Connected products

…

2.

1.

Characteristic
products

Principal
product

Secondaryproduct

Ancil­
lary

Characteristic producers

Costs of production by industry

Total

Principal

Secon­
dary

Other producers

Table 22.4 — The use of characteristic and connected products

Ancil­
lary

Total

Exports
Government

Collective IndividualHouseholds

Final consumption
NPISH

Total

Gross capitalformation

Total use atpurchasers’
prices22
Satellite accounts

Satellite accounts

22.25 Depending on the field, the design of a satellite

22.29 The concepts in the satellite account may deviate(c) production, uses and transfers equally, such as
for education and health;from those in the central framework. For example, voluntary work may be included in satellite accounts on education and health. For a satellite account on transport, the ancillary transport services can be shown separately. For a satellite account on development aid, the loans which
are given at preferential conditions are accountedfor. Benefits or costs resulting from rates of interest
lower than the market ones are recorded as implicit
transfers.

(d) uses as such, in areas such as tourism and envir­
onmental protection;

22.30 For satellite accounts on social protection andaccount will emphasise the following:(a) the detailed analysis of the production and usesof the specific goods and services, such as R&D,
ICT or transport;(b) the detailed analysis of transfers, such as forsocial protection;(e) the financing of social protection and health bygovernment and non-profit institutions.
22.26 Two types of products can be distinguished: char-acteristic products and connected products. The
first category covers the products which are typicalfor the field under study. For such products, the satellite account can show how the products are produced, what kinds of producers are involved, whatkinds of labour and fixed capital they use and theefficiency of the production process. For ex­ample,
for health, characteristic products are health services, public administration services, education
and R&D services in health.

22.27 Connected products are relevant for a function

without being typical, either by nature or because
they are classified in broader categories of products.
For example, for health, transport of patients is aconnected service. Other examples of connected
products are pharmaceutical products and othermedical goods, like glasses. For such products, thesatellite account does not show the features of production. The precise borderline between characteristic and connected products depends on the economic organisation in a country and the purposeof a satellite account.

22.28 Some services may appear in two or more satellite

accounts. For example, research in health services
in higher education institutions is a product relevant for satellite accounts on research and development, as well as education and health. This also
implies that the national expenditure on various
functions may partly overlap; simple aggregationof such expenditures to arrive at a total as a percentage of GDP may involve double-counting.

European system of accounts — ESA 201022

development aid, specific transfers are the mostimportant components of national expenditure.
In other fields, such as education and health, themajor part of the transfers, most of which are in
kind, are a means of financing the acquisition byusers. This implies that they are already included
in expenditure on final consumption, intermediate
consumption and capital formation and should not
be recorded twice. However, this does not apply to
all the transfers, e.g. student grants may serve tofinance various outlays in addition to tuition feesor school books; this residual part should then berecorded as a transfer in the satellite account.

22.31 The functional satellite account can provide an

overview of the users or beneficiaries. The classification of users and beneficiaries can be based on
the classification of institutional sectors and typesof producers, e.g. market producers, non-market
producers, government as a collective consumer,
households as consumers and rest of the world.
Various sub-categories may be distinguished, e.g.
by industry and by institutional subsector.

22.32 In many satellite accounts, households or individu­

als are the most important type of users and bene­
ficiaries. In order to be useful for social policy andanalysis, a further breakdown of households isne­cessary. Various criteria may be used according
to different purposes, such as income, age, gender,
location, etc. For policy and analysis, knowledge ofthe number of people concerned in each category isneeded in order to calculate the average consumption or transfer, or the number of people who do
not benefit.

475

22

Satellite accounts

Special sector accounts
22.33 Special sector accounts provide an overview

focused on one industry or product, a regroupingof various industries or products, one subsector ora regrouping of various subsectors. Three types of
special sector accounts can be distinguished:(a) those linked to industries or products;(b) those linked to institutional sectors;(c) those combining both approaches.
Examples of special sector accounts linked toindustries or products are agricultural accounts,
forestry and fishery accounts, tourism accounts,
ICT accounts, energy accounts, transport accounts,
residential building accounts and accounts for thecreative sector.
Examples of special sector accounts linked to institutional sectors are government finance statistics, monetary and financial statistics, balance of
payments, public sector accounts, accounts for
non-profit institutions, household accounts andaccounts on corporate activity. Tax revenue statistics can be regarded as supplementary tables togovernment finance statistics.

22.34 The special sector accounts can also focus on an

integrated analysis of economic activities within
one or more institutional sectors. For example,
accounts for subsectors of non-financial corporations may be established by grouping according
to their principal economic activity. The ana­lysis
may cover the full economic process, from production to accumulation. This can be done systematically at a fairly aggregated level of the standard
industry classification. It can also be carried out for
selected industries of special interest to a country.
Similar analyses can be made for household production activities, at least up to the point whereentrepreneurial income is calculated. It can also
be useful to emphasise activities that play a predominant role in the economy’s external transactions. These key activities may include the petrol­
eum sector, banking, mining activities, activ­ities
linked to specific crops, food products and beverages such as coffee, flowers, wine and whiskey, and tourism. They can play a vital role in thenational economy, by accounting for an importantpart of exports, employment, foreign exchange

476

assets and government resources. Key sectors may
also include sectors that deserve special attention
from the point of view of social economic policy.
Examples of this are agricultural activities receiving subsidies and other transfers from central, local
or European government, or that are protected bysubstantial import duties.
22.35 The first step in drawing up special sector accounts

is defining the key activities and their corresponding products. For this, items of the International
Standard Industrial Classification (ISIC) or thecorresponding national classification may need to
be grouped together. The extension of the key sector depends on the economic circumstances andthe requirements for policy and analysis.

22.36 A goods and services account for the key products

is established showing the resources and uses ofthese products. A production account and a generation of income account for the key industries
are built up. For the key industries and products,
detailed classifications are used for a full understanding of the economic process and the related
valuation procedures in this field. There generally exists a combination of market and administered prices, and a complex system of taxes andsubsidies.

22.37 The key products and key industries may be ana-

lysed in the context of a supply and use table, as
shown in Tables 22.5 and 22.6. Key industries
are shown in detail in columns, and other industries may be aggregated. In the rows, key products are similarly shown in detail, and other products aggregated. At the bottom of the use table,rows show labour inputs, gross fixed capital formation and stocks of fixed assets. When the key activity is carried out by very heterogeneous types of
producers, such as small farmers and big plantations owned and operated by corporations, the twogroups of producers are distinguished, as they havedifferent cost structures and behave differently.

22.38 A set of accounts is compiled for the key sector.

To this end, the key sector has to be delimited. In
the case of oil and mining activities, the key sector generally consists of a limited number of big
corpor­ations. All transactions of the latter are covered, even when they carry out secondary activities.
The distinction between public, foreign controlled
and private corporations can also be fundamental

European system of accounts — ESA 2010

Satellite accounts

when dealing with a key sector. The businessaccounts themselves have to be carefully studied
for each big corporation involved to carry out an
integrated analysis. Part of mining activities may
be carried out by small corporations or unincorporated enterprises. These units must be included in
the key sector, even if it is necessary to rely on partial information coming from statistical surveys oradministrative data.

22

activity and subsidies. Accordingly, the detailed
study of transactions between the key sector andgeneral government is important. The classification of transactions may be extended to identify
those flows connected with the key activity, including the relevant taxes on products. Such flows arereceived, in addition to the general budget itself, byvarious government agencies, such as ministries
for special purposes, universities, funds and special
accounts. For analysis, it can be very useful to indicate what uses are made by the government of suchfunds. This calls for an analysis by purpose of thispart of government expenditure.

22.39 In many cases, government plays an important rolein connection with key activities, either via taxes
and property income receipts, or via regulatory

Table 22.5 — A supply table for key industries and products
Output by industry
Key industries
1

2…

Other
Total Imports
producers

Total

Total
supplyat basic
pricesTrade andtransport
margins

Taxes onproducts

Subsidieson
products(—)

Total
supply atpurchasers’
pricesKey
products
1.
2.
…
Other
products
Total

European system of accounts — ESA 2010

477

478

Fixed capital stock, net

Gross fixed capital formation

Labour inputs

Supplementary information

Total

Operating surplus, net

Consumption of fixed capital

Other net taxes on production

Compensation of employees

Total

Other products

…

2.

1.

Characteristic products

1

2

…

Total

Key industries

Costs of production
Other
Total Exports
by industry
producers

Table 22.6 — A use table for key industries and productsCollective IndividualHouseholds

Government

Final consumption

NPISH

Total

Gross
Total use atcapitalpurchasers’
formation
prices22
Satellite accounts

European system of accounts — ESA 2010

Satellite accounts

22.40 When the key activities are based on natural non-renewable resources such as subsoil resources, thekey sector accounts record the changes in theseresources through new discoveries and depletion,in the other changes in volume of assets accountand holding gains and losses on them in the revalu­
ation account. Those data are crucial for assessing
the economic performance of the economy. More
broadly, the key sector accounts may be extended
to environmental accounting.

relationship between the key sector and other sectors, including the rest of the world.

Inclusion of non-monetary data
22.42 A major characteristic of many satellite accounts is

the inclusion of non-monetary data, such as dataon CO2 emissions by industry in the environmental
accounts or number of treatments by type of healthcare in the health accounts. The linkage of suchnon-monetary data with monetary data can provide key ratios, such as CO2 emissions per billionsof euro of value added or the costs per treatment.
Table 22.7 provides a wide range of examples.

22.41 The key sector accounts can be presented in theframework of integrated economic accounts. A
column or group of columns is introduced for key
sectors and other columns are renamed where rele­vant, such as ‘other non-financial corporations’ or‘other households’. This makes it possible to see therespective shares of the key sector and other sectors in transactions and balancing items. The precise format of such a table depends on the object­ives pursued. One more step may consist in showing in additional tables the ‘from-whom-to-whom’

22

Extra detail and supplementary concepts
22.43 Two other major characteristics of satellite

accounts are extra detail and supplementary concepts. A wide range of examples are provided inTables 22.8 and 22.9.

Table 22.7 — Examples of non-monetary data in satellites
Satellite

Example of non-monetary data

Ratio of monetary and non-monetary data?

Number of pupils and students

Costs and fees per pupil/student

Number of teacher

Compensation of employees per teacher

Tonnes of oil

Price of oil per barrel

CO2 emission by industry

CO2 emission by industry per bin euro of value
added

Employment in government sector

Compensation of employees per employee

Number of social benefits

Average social benefit

Health accounts

Number of treatments/patients by type of
health care

Costs per treatment/patientHousehold production accounts

Time use in household production

Opportunity cost of time use

Labour accounts

Employment (hours worked/fte) byindustry

Compensation of employees per hour worked/fte

Education accounts

Environmental accounts

Government finance

Number of jobs
Productivity and growth accounts
R&D accounts

Labour input by industry

Labour productivity by industry

Number of patents granted
Employment in R&D sector

Compensation of employees per employee

Safety accounts

Number of prisoners

Costs per prisoner

Social protection accounts

Number of social benefits, e.g. pension
beneficiaries

Average social benefit by (type of) scheme

Tourism accounts

Number of tourists

Expenditure per tourist

European system of accounts — ESA 2010

479

22

Satellite accounts

Table 22.8 — Examples of extra detail in various satellites
Satellite
Agricultural accounts
Environmental accounts

Extra detailMore detail on the production of various agricultural products
Much more detail on the values of the stocks and flows of natural resources
More detail on environmental protection expenditure

Health accounts

Detailed breakdown of health care services

Household production accounts

Household production broken down by principal function (e.g. housing, nutrition, care)

Personal income and wealth accounts

Information on the distribution of personal income and wealth

Labour accounts and SAM

Compensation of employees and employment by age, gender and level of education

Social protection accounts

Revenue and expenditure by individual social protection scheme and grouping ofschemesTax revenue tables

Tax revenue broken down into a much more detailed classification

Table 22.9 — Examples of supplementary concepts in various satellites
Satellite

Supplementary concepts

Agricultural accounts

Three indicators of agricultural income

Environmental accounts

Environmental taxes

Government finance

Government revenue and expenditure

Informal sector accounts

Informal sector

Productivity and growth accounts

Total factor productivity

Social protection accounts

Total expenditure on old age benefits

Tax revenue tables

Total tax revenues according to various alternative definitions

Different basic concepts
22.44 The use of different basic concepts is not common

in satellite accounts. A relatively minor variation isthat for various satellite accounts some services are
not treated as ancillary, e.g. for a transport satellite
account, transport service is not treated as ancillary. However, for some satellite accounts, majorchanges in the basic concepts can be required,e.g. in the environmental account domestic product could be adjusted for depletion of natural
resources. Examples are provided in Table 22.10.

Use of modelling and inclusion ofexperimental results
22.45 Some satellite accounts may be characterised by

the inclusion of experimental results or the useof modelling; the figures in the satellite accountare less reliable than those in the core accounts.
However, compiling the core accounts also
involves the use of econometric or mathematicalmodels and the inclusion of experimental results.
This is therefore not a fundamental difference
between the core accounts framework and satellite
accounts. These issues are illustrated by the examples in Table 22.11.

Table 22.10 — Examples of different basic concepts in satellites
Satellite

480

Different basic concept

Environmental accounts

Adjustment of Domestic Product for depletion, defensive expenditure by the government
and for degradation

Health accounts

Occupational health care is not an ancillary service

Household production accounts

Unpaid household services and volunteer services are inside the production boundary

European system of accounts — ESA 2010

Satellite accounts

Satellite

22

Different basic concept

Extended accounts

Accounts including substantially more extended concepts of production and capitalformation (e.g. human capital and consumer durables)

Supplementary pension table

Unfunded defined pension benefits are treated as liabilities and assets

Transport accounts

Transport services are not an ancillary service

Table 22.11 — Examples of the use of econometric or mathematical models in compiling the central

framework and satellites

Estimate of the value of financial or non-produced assets as thenet present value of expected future revenue and expenditure
Correcting household surveys for non-response using regression
analysisCentral framework

Estimate of net fixed capital stock and consumption of fixed
capital using the perpetual inventory method, expectedeconomic life times and mathematical functions of depreciation
Estimate of the value of the services of owner-occupied dwellings
using housing stock data, market rents and regression analysis
Estimate of seasonal corrections using a mathematical model
Estimate of hedonic price changes using a mathematical model

Satellites
Environmental accounts

Estimate of the value of depletion and degradation

Household production accounts

Estimate of the value of unpaid household services

Informal sector accounts

Experimental estimates of the value of all kinds of informal
activities

Productivity and growth accounts

Estimate of the volume of capital input using age-efficiency
functions for each type of asset

Supplementary pension table

Estimate of the pension entitlements using all kinds of actuarial
assumptions about demography, discount rate and wage growth

Table with experimental results on treating R&D expenditure as capital formation

Designing and compiling satellite accounts
22.46 Designing and compiling a satellite account con-sists of four steps:(a) defining the purposes, uses and requirements;(b) selecting what is relevant from the national
accounts;(c) selecting relevant supplementary information,e.g. from various specific statistics or administrative data sources;(d) combining both sets of concepts and figures
into one set of tables and accounts.

European system of accounts — ESA 201022.47 Designing and compiling satellite accounts for the

first time often reveals unexpected results during
the four steps. As a consequence, drawing up satellite accounts is a work-in-progress. Only after
experience of compiling and using the satellite,
and making modifications where necessary, canan experimental set of tables be transformed into amature statistical product.

22.48 In selecting what is relevant from the national

accounts, three aspects can be distinguished: theinternational national accounting concepts, theoperational concepts used in the national accountstatistics of a country, and the reliability of thenational accounts statistics.

481

22

Satellite accounts

22.49 In designing and compiling a satellite account,applying the concepts of the central framework fora purpose often reveals features. From the point ofview of the purpose, these can be helpful as wellas unexpected limitations. For example, in designing and compiling a research and development
account for the first time, problems such as theoverlap with R&D on software and health care, or
the role of multinationals in importing and exporting R&D, may be revealed.

resolved and the plausibility of the results assessed.
Preferably a fully balanced set of tables will result.
However, it may be necessary to show discrepancies
between data sources and alternative approaches.
22.54 Transforming a consistent satellite account into a

product for data users may involve additional steps.
An overview table with key indicators for a numberof years may be introduced. These key indicators
could focus on describing the size, components
and developments of the specific issue involved, or
may show the links to the national economy andits major components. Extra detail or classifications relevant for political and analytic­al purposes
may be added. Detail with little value added orcompiled at relatively high costs may be dropped.
Efforts could also focus on reducing the complexity of the tables, increasing simplicity and transparency for data users and including standard bookkeeping decompositions in a separate table.

22.50 A similar process applies to the operational con-cepts used in compiling national accounts statistics. Essential detail may turn out to be absent due
to an excessively aggregate level of compilation or
publication, or to the fact that universal concepts
may not have been applied strictly. For example,
the R&D activities by some major multinationals may be included in the industry of their major
activities and not in the industry of R&D services.

22.51 The reliability of parts of the national accounts

stat­istics may be a problem. The national accounts
statistics were compiled and published without the
purpose of the satellite account in mind. Simply
selecting the relevant figures out of the official
national accounts statistics will often reveal thatthe size, composition or development over time is
not plausible for the purpose. As a consequence,current data sources and compilation methods
have to be checked and enhanced by additional
data sources or improved compilation methods.

Nine specific satellite accounts
22.55 In the remainder of this Chapter, the following sat-

ellite accounts are discussed briefly:(a) agricultural accounts;(b) environmental accounts;(c) health accounts;(d) household production accounts;

22.52 Selecting relevant information from sources otherthan the national accounts such as other official
statistics or administrative data sources will generate similar problems in terms of concepts and figures: the concepts officially used may reveal unexpected flaws in terms of the specific purpose of thesatellite, the actual concepts used may differ fromthe official concepts and the reliability, detail, timing and frequency may pose problems. All these
problems should be tackled, either through making additional estimates to overcome the differencein concepts, by classifying flows in non-monet­
ary terms by industry or sector, or by adjusting theconcepts used in the satellite account.

(e) labour accounts and SAMs;(f) productivity and growth accounts;(g) R&D accounts;(h) social protection accounts;(i) tourism satellite accounts.

Agricultural accounts
22.56 An example of an agricultural account is the eco-nomic accounts for agriculture (EAA)1. Its purpose is to describe agricultural production and the22.53 Combining the national accounts informationand the other information into one set of tables
or accounts requires additional work: omissions,overlaps and numerical inconsistencies should be482

1

Regulation (EC) No 138/2004 of the European Parliament and of the Council of
5 December 2003 on the economic accounts for agriculture in the Community (OJ L
33, 5.2.2004, p. 1).

European system of accounts — ESA 2010

Satellite accounts

development of agricultural income. This information is used for analysing the economic situation of
a Member State’s agriculture and for monitoringand evaluating the common agricultural policy in
the Union.

of import duties, and developments in the demand
for agricultural products such as exports and final
consumption by households, and the role of related
taxes and subsidies. The agricultural accounts could
also be expanded by including secondary non-agricultural activities, such as those for leisure activity. This can reveal important trends and substitution mech­anisms. The interaction with the government can be made explicit by adding a table showing all income and capital transfers by local, central, or European government to the agriculturalindustry; this may also include special treatmentsin the tax system. Agricultural accounts could
also be designed like a special sector account andinclude a full sequence of accounts including balance sheets and financial accounts, for farmers andcorporations engaged in agriculture.

22.57 The EAA consist of a production account, a gen-eration of income account, an entrepreneurial
income account and a capital account for agricultural production. The production account contains an elaborate breakdown showing output for arange of agricultural products, as well as non-agricultural secondary activities; substantial detail isalso presented for intermediate consumption andcapital formation. Data for the production accountand gross fixed capital formation are at both current prices and in volume terms. In addition, three
agricultural income indicators are presented asfollows:(a) index of the real income of factors in agriculture per annual work unit, which is taken as thefull-time equivalent;

Environmental accounts
22.60 In the international guidelines on environmen-

tal accounts (System of Environmental-Economic
Accounting, SEEA, 2003)2, an elaborate accounting
framework is presented for describing and analysing the environment and its interactions with theeconomy. The environmental accounts are a satellite account of the national accounts. This implies
that the same classifications and concepts are used;
modifications are introduced only where it is necessary for the purpose of environmental accounts.

(b) index of real net agricultural entrepreneurial income per non-salaried annual work unit,
which is taken as the full-time equivalent;(c) net entrepreneurial income of agriculture.
The indices and changes in real terms of the valuesof the income indicators are obtained by deflating
the corresponding nominal data with the implicit
price index of GDP.

22.61 The integrated set of accounts for economic andenvironmental information permits an ana­lysis of
the contribution of the environment to the economy and the impact of the economy on the environment. It meets the needs of policy­makers byproviding indicators and descriptive statistics tomonitor the interaction between the envir­onment
and the economy. It can also serve as a tool for
strategic planning and policy analysis to identify
more sustainable development paths. For example, policymakers determining the developmentof industries making extensive use of environmental resources either as inputs or sinks need to
be aware of the long-term environmental effects.
Policymakers setting environmental standards alsoneed to be aware of the likely consequences for the22.58 The agricultural industry in the EAA closely

resembles the agricultural industry in the central
framework. However, there are some differences.
For example, units engaged in seed production forresearch or certification or units for which the agricultural activity represents solely a leisure activity,
are left out. But most of the agricultural activities ofunits whose principal activity is not agricultural are
included in the agricultural industry.

22.59 The EAA focus on the production process andthe income derived from it. However, in principle a satellite account on agriculture need not correspond fully to the EAA. Agricultural accounts
could also include a supply and use table providing a systematic overview of the supply and use of
agricultural products. This would provide information on the role of imports including the role

European system of accounts — ESA 201022

2

The handbook is published under the joint responsibility of the United Nations, theEuropean Commission, the International Monetary Fund, the OECD and the World
Bank.

483

22

Satellite accounts

economy, e.g. which industries are likely to suffer
and what the consequences for employment andpurchasing power are. Alternative environmental
strategies can be compared by taking into accountthe economic consequences.
22.62 In the central framework, various aspects ofenvir­onmental accounting have been taken into
account. In particular, many cost and capital itemsof accounting for natural resources are identified
separately in the classifications and accounts dealing with stocks and other volume changes of assets.
For example, the classification of non-produced
assets shows separate items for subsoil assets likeoil reserves, mineral reserves, non-cultivated biological resources and water resources. Such features facilitate the use of the central framework as
a point of departure for environmental accounting.
However, several elements of the central framework, particularly those in the account for othervolume changes, are broken down further andreclassified in the satellite account, and other elements are added.

22.63 From an environmental point of view, there are

two major drawbacks with the central frameworkand its key aggregates such as GDP, capital formation and saving. First, the depletion and scarcity ofnatural resources has limited coverage, and thesefactors can threaten the sustained productivity ofthe economy. Second, the central framework does
not cover the degradation of environmental quality and the consequences for human health andwelfare.

22.64 In the central framework, only produced assets aretaken into account in the calculation of net value
added. The cost of their use is reflected in intermediate consumption and consumption of fixed capital. Non-produced natural assets — such as land,mineral reserves and forests — are included in theasset boundary insofar as they are under the effective control of institutional units. However, theiruse is not accounted for in the costs of production. This implies either that the price of the products does not reflect such costs, or, in case of depletion costs, that such costs are included with otherunidentified elements in the residual deriv­ationof operating surplus. Environmental accounts
allow such costs to be explicitly recognised andestimated.

484

22.65 The SEEA 2003 environmental accounting frame-

work comprises five categories:(a) physical and hybrid flow accounts;(b) economic accounts
transactions;forenvironmental(c) environmental asset accounts in physical andmonetary terms;(d) accounts for
depletion;

defensive

expenditureand(e) modifying aggregates from the central framework to account for degradation.
22.66 Physical and hybrid flow accounts record four dif-ferent types of flows:(a) natural resources: mineral, energy resources,
water, soil and biological resources. At the
moment they are sold on markets, they enter
the economic sphere and can be characterised
as products;(b) ecosystem inputs: oxygen necessary for combustion and water through rainfall or nat­ural watercourses and other natural inputs likenutrients and carbon dioxide required by plants
for growth; this excludes water, nutrients or
oxygen supplied as products by the economy;(c) products: goods and services produced within
the economic sphere and used within it, including flows of goods and services between thenational economy and the rest of the world.
This includes cultivated biological assets, nat­ural resources sold or bought such as oil, woodand water, and scrap materials with an economic value;(d) residuals: incidental and undesired outputs
from the economy that have a zero or negativevalue to the generator. Residuals cover solid,
liquid and gaseous wastes. They may be recyc­
led or reused, or discharged into the environment. Residuals may have a positive value fora unit other than the generation. For ex­ample,
household waste collected for recycling has
no value to the household but may have somevalue to the recycler. Scrap materials that have avalue realisable by the generator, like discarded

European system of accounts — ESA 2010

Satellite accounts

equipment, are treated as products and not as
residuals.
22.67 Physical flows are measured in units of quantity,

which reflect the physical characteristics of thematerial, energy or residuals in question. A physical flow can be measured in alternative units
depending on the physical characteristic that istaken into consideration. The appropriateness of
one particular unit depends on the purpose andintended use of the flow account. For physical flow
accounting, weight and volume are the most frequently used physical characteristics. In case ofenergy flows, joules or tonnes of oil equivalent are
the most common unit used. The quantity units
in the physical flow accounts differ from the volumes used in the central framework. For ex­ample,
in the central framework the volume of a computer is not its weight, but is a weighted mix of thecharacteristics desired by the user, such as speed of
calculation.

European system of accounts — ESA 20102222.68 Physical flow accounts can be presented as supply

and use tables. This is shown in Tables 22.12 and22.13.

22.69 Hybrid flow accounts is a single matrix presenta-tion containing both national accounts in monet­
ary terms and physical flow accounts. An import­
ant type of hybrid accounts are hybrid supply anduse tables; they combine information from thephysical supply and use tables with that of supply
and use tables in monetary terms.

22.70 The information in the hybrid flow accounts canbe linked to environmental themes addressing particular environmental concerns, like the ‘greenhouse’ effect, ozone layer depletion and acidification. This requires conversion factors to translate
the figures for specific substances into aggregatedindicators for environmental themes. This can thenresult in an overview table showing the contribution of consumption and the production of various
industries to the various environmental themes
and GDP as in Table 22.14.

485

Products
2,000
7,000

Plastic andplastic products

Wood, paper,
etc.

Other
commodities

P5

P6

P7

All products

10,000

Metals,machinery, etc.

P4

9,000

59,000

C1

I

1,000

16,000M2

10,00014,0002,000

10,000150,000

13,000

1,000

2,000

10,00095,000CF

124,000

C

13,000C2

CapitalImports of products

275,000

1,000 116,000

I3

Total industries

250,000 299,000 2,000 551,000

7,000

65,000

EnergyP3

163,000

112,000

Stone, graveland building
materials

P2

49,00066,000

Animal andvegetable
products

I2

Agriculture, fishing and mining

P1

Manufacturing electricity andconstruction

I1

Own account transport

Consumption

Total consumption(Millions of tonnes)

Other consumption

Industries

Services

Physical supply table

Capital formation, changes
in inventories, waste storage

Table 22.12 — Physical supply and use table

Rest of the world

M1

Natural resources and ecosystem
inputs supplied by nonresidents in national territory

486
M1

Residuals by non-residents in
RoW

Cross-boundary inflows from
RoW by environmental media
M3

E

National
environment
Total material supply
701,000

23,00015,0004,000

20,000219,000

288,000

132,000

22
Satellite accounts

European system of accounts — ESA 2010

European system of accounts — ESA 2010

Residuals

SO2

NH3

Other to air

P

N

R5

R6

R7

R8

R9

0,590

0,070

0,010

0,020

0,023

0,061

8,103

35,240Total to national
territory

To RoW territory

R12

Other solid
waste

7,233

NOX

R4

0,073

R11 Mining waste

CH4

R3

0,007

0,030

N2O

R2

I1

Services
I3

Own account transport
C1

Total industries
I
C2

C

Total consumption

0,006

0,098

0,004

0,015

0,038

0,030

0,151

0,125

0,012

186,680 53,338

275,258

17,102 30,359

5,060

0,021

0,057

0,100

0,117

0,898
9,553

0,011

0,094

0,001
0,012

0,003

0,192

0,026

0,086

0,084

0,487

0,020

0,007

0,004

0,650

0,004

0,181

0,003

0,061

71,619 22,929 102,651

2,320

0,021

0,210

0,020

0,061

0,123

0,139

0,275

0,452

0,042

Capital

0,001

0,024

0,003

0,477

0,990

CF

47,461

72,5955,160 71,100

0,021

0,117

0,011

0,012

0,007

0,004

0,110

0,024

0,007

111,398 29,930 160,348 16,908 25,080 41,988

I2

Agriculture, fishing and mining

19,020

Manufacturing electricity andconstruction

R10 Other to water

CO2

R1

To national territory

Other consumption

Consumption
Capital formation, changes
in inventories, waste storage

Industries

Imports of products
M2

Rest of the world

M1

Natural resources and ecosystem
inputs supplied by non-residents
in national territory(Millions of tonnes)

5,756

1,548

0,001

0,006

0,001

0,001

0,025

0,001

0,001

4,172

M1

Residuals by non-residents in
RoW

Physical supply table

8,221

7,656

0,003

0,323

0,014

0,002

0,019

0,087

0,117

Cross-boundary inflows from
RoW by environmental media
M3

E

National
environment
Total material supply
409,291

188,115

9,553

0,083

1,368

0,123

0,100

0,207

0,284

0,739

1,152

0,069

207,498

Satellite accounts

22

487

4,587

Total to RoW territory

Source: SEEAland data set.

Net accumulation of all materials(use less supply)

Total material supply

Total residuals

0,008

SO2

R5
0,745

0,002

0,008
4,587

0,739
0,004

0,010

I
4,569

C1

Total industries

C2

0,745

0,002

0,004

0,739

C

CapitalCF

285,240

485,680

59,925 830,845

30,359 48,206 72,595 150,000

M2

Imports of products

1,153

15,641

16,794

72,215–49,000

NetNet
Net increase by consumption increase
export of(consumer durables)inproducts
capital17,84735,240 186,680 57,925 279,845 17,847 30,359 48,206 72,595

0,010

CO2

4,569

I3

NOX

Agriculture, fishing and mining

R4

I2

Services

R1

To airManufacturing electricity andconstruction

I1

Other consumption

Consumption

Total consumption(Millions of tonnes)

Capital formation, changes
in inventories, waste storage

Industries

Own account transport

Physical supply table

Rest of the world

3,000–0,424–4,302

Net crossboundary
outflow ofresiduals byenvironmental
media
Net
Net
residuals
extraction
byby nonresidents
residentsin RoW

8,221

M3

8,221

5,756

M1

Cross-boundary inflows from
RoW by environmental media

5,756

M1

Natural resources and ecosystem
inputs supplied by non-residents
in national territory

488
Residuals by non-residents in
RoW

372,717Net
accumulationof residuals in
the national
environment

E

National
environment
Total material supply
411,000

Netbalance

1115,623

414,623

5,332

0,010

0,014

5,308

22
Satellite accounts

European system of accounts — ESA 2010

European system of accounts — ESA 2010
2,000
7,000
8,000

Plastic and plastic
products

Wood, paper, etc.

Other
commodities

P4

P5

P6

All products

P7

11,000

Metals, machinery,etc.

101,000

74,000 337,000

5,000

34,000

EnergyP3

148,000

12,000Stone, gravel andbuilding materials

P2

60,00023,000

Animal andvegetable
products

I2

Agriculture, fishing andmining

P1

Manufacturing
electricity andconstruction

I1

Services

14,00011,0002,000

11,000155,000

162,000

2,000

1,000

10,0002,000

16,000C2

Total consumption
2,000

1,000

1,000

17,0002,000

16,000C

Capital

1,000

1,000

114,000

3,000

CF

6,000

3,000

2,000

7,000

47,00010,00026,000

X2

Exports

8,000 31,000 39,000 119,000 101,000

1,000

7,000

I
87,000C1

Total industries

31,000 442,000

1,000

4,000

20,000

2,000

4,000

I3

Own accounttransport

Consumption

Other consumption

Industries
Capital formation,changes in inventories,
waste storage

Products(Millions of tonnes)
Rest of the world

X1

Resources andecosystem inputs usedby non-residents innational territory

Physical use table

X1

Residuals by residents
in RoW

Table 22.13. — Physical supply and use table (continued)

Cross-boundary
outflows to RoW byenvironmental media
X3

E

National
environment
Total material use
701,000

23,00015,0004,000

20,000219,000

288,000

132,000

Satellite accounts

22

489

European system of accounts — ESA 2010
121,000

25,00081,000Total ecosystem inputs

15,0003,000

261,000

3,000

81,00065,000118,000

15,000196,000

5,000

1,000

4,000

256,000

7,000

2,000

1,000

8,000

173,000

27,00038,00011,0001,000

10,000C1

I

22,000National ecosystem
inputsTotal natural resources

1,000

4,000

Total RoW natural
resources

64,000

1,000

4,000

192,000

N7 Water

N5 FishRoW natural resources

Total national natural
resources

6,000

1,000

1,000

N5 Fish1,000

N7 Water

7,000

N4 Wood

55,0002,000

118,000

N3 Other

N6 Other

27,000N2 GasServices
I3

Total industries

Ecosystem
inputsRoW ecosystem inputs

Naturalresources

38,000N1 OilNational natural
resources

I2

Agriculture, fishing andminingI1

Own accounttransport
13,00013,000

2,000

1,000

1,000

1,000

1,000

C2

2,000

1,000

1,000

1,000

1,000

C

Total consumption
24,0001,000

23,000Consumption

Other consumption

Industries

Manufacturing
electricity andconstruction(Millions of tonnes)
CapitalCF

Capital formation,changes in inventories,
waste storage

Physical use table

Exports
X2

Rest of the world

2,000

2,000

1,000

1,000

1,000

X1

Resources andecosystem inputs usedby non-residents innational territory

490
X1

Residuals by residents
in RoW
Cross-boundary
outflows to RoW byenvironmental media
X3

E

National
environment
Total material use
147,000

4,000

143,000

264,000

6,000

2,000

4,000

258,000

7,000

2,000

2,000

9,000

173,000

27,00038,00022
Satellite accounts

European system of accounts — ESA 2010

P

N

R9

0,240

Total from national
territory

19,00046,00065,00025,81025,81025,810CF

101,000

X2

X1

0,010

0,014

5,308

X1

485,680

59,925

830,845

144,8103,000 5,332

285,240

6,845

C

Total material use

3,925

C2

5,332

2,680

6,845

6,700

0,010

0,115

0,020

I

Rest of the world

0,240

SO2

R5

3,925

3,780

0,010

0,115

0,020

C1

Total industries

Total

NOX

R4

2,680

2,680

Services
I3

Total consumption

5,332

CO2

R1

From RoW territory

0,240

Agriculture, fishing andmining

R12 Other solid waste

R11 Mining waste

R10 Other from water

Other from air

R8

SO2

R5

R7

NOX

R4

NH3

CH4

R3

R6

N2O

R2

I2

Own account transport

Capital

Exports

Total from RoW territory

Residuals

CO2

R1

From national territory

Manufacturing
electricity andconstruction

I1

Other consumption

Consumption
Capital formation,changes in inventories,
waste storage

Industries
Resources andecosystem inputs usedby non-residents innational territory(Millions of tonnes)

Residuals by residents
in RoW

Physical use table

Cross-boundary
outflows to RoW byenvironmental media
3,919

3,919

3,919

2,398

0,002

0,543

0,010

0,002

0,099

0,196

0,669

X3

Total material use
414,623

5,332

0,010

0,014

5,308

409,291

188,115

9,553

0,083

1,368

0,123

0,100

0,207

0,284

0,739

1,152

0,069

372,717 1526,623

372,717372,717

153,207

9,553

0,071

0,710

0,093

0,098

0,108

0,088

0,070

1,152

0,069

207,498 207,498

E

National
environment

Satellite accounts

22

491

22

Satellite accounts

Table 22.14 — Net contribution of consumption and production to GDP and to six environmental themes in

the Netherlands, 1993

Percentage
EconomyTotal

Environment
Greenhouse effect Ozone layer depletion Acidification

Eutrophication

Solid waste

100

100

100

100

100

Consumption

19

2

15

9

31

Industry

79

97

85

91

66

2

1

—

—

3

100

100

100

100

100

100

Own transport

8

38

—

88

21

1

Other consumption

92

62

100

12

79

99

100

100

100

100

100

100

 Agriculture, hunting,forestry, fishing

3

15

2

47

91

7

Mining and quarrying

3

2

—

1

—

1

  Petroleum industry

1

7

—

11

—

  Chemical industry

2

14

27

6

2

16

  Metal products andmachinery industry

3

2

9

1

—

2

  Other manufacturing

12

12

20

7

6

25

Public utilities

2

26

—

9

1

2

Transport and storage

6

8

6

12

1

5

Other services

68

14

36

6

–1

42

 Capital and othersources
Consumption

Production

Manufacturing

Source: de Haan (1997).
Note: a dash (—) indicates that the amount is nil.

22.71 The economic accounts for environmental transac-

tions consist of environmental protection accounts
and accounts for other environmentally relatedtransactions, such as taxes, subsidies, investment
grants, property income and the acquisition ofemission and property rights.

22.72 For describing environmental protection, a func-

tional approach combined with a kind of activity
and product analysis is very useful. Environmental
protection covers a wide range of economic activities and products. Examples are investment inclean technologies, restoring the environment
after it has been polluted, recycling, the production of environmental goods and services, conservation and the management of natural assets andresources. A national aggregate of environmental

492

protection expenditure can be defined to include
ancillary activities and connected products.
22.73 In the environmental asset accounts, three differ-ent types of environmental assets are distinguished:natural resources; land and surface water; and ecosystems. Several of these environmental assets are
not recorded in the central framework. This applies
to environmental assets over which ownershipright cannot be established. These include elementsof the environment such as air, major water bodies
and ecosystems that are so vast or uncontrollable
that effective ownership rights cannot be enforced.
Likewise, resources whose existence has not beenclearly established by exploration and development such as speculative oil deposits, or that are
currently inaccessible such as remote forests, areEuropean system of accounts — ESA 2010

Satellite accounts

not considered assets in the central framework.
The same is true for resources that have been established geologically or are readily accessible but thatbring no current economic benefit because theycannot yet be profitably exploited.
22.74 Environmental asset accounts in physical and mon-etary terms describe the stocks of the various envir­
onmental assets and their changes. While such an
account can be drawn up in monetary terms forsome of the assets, for some others only physicalaccounts are possible. For ecosystems assets, it isunlikely that sufficient information is available todraw up stocks or changes during a year in exactly
the same manner as for the other environmental
assets. For these assets, it is more useful to concentrate on measuring changes in quality, most ofwhich will relate to degradation, e.g. acidificationof land and water and defoliation of timber.

22.75 The aggregates in the central framework can be

modified to better account for the environmental
issues. Three types of adjustments are commonly
recommended: for depletion, for defensive expenditure by the government, and for degradation.

22.76 From an environmental point of view, the adjust-ment for depletion should be made because GDP
and its growth rate do not make an allowance forthe depletion of various environmental assets, suchas oil and non-cultivated fish and forests. How toaccount for depletion is not straightforward, andmany different options are available. One extreme
option is to regard the whole use of such non-produced natural assets as depletion and therefore notas income from production. The other extreme
option is to regard all the revenues from sellingsuch assets as income contributing to domestic
income. All the other options split the use of theassets into a component for depletion and a component for income. Different principles and different assumptions for life times and discount rates
result in different figures for the adjustment for
depletion.

22.77 Defensive expenditure on the environment does notconsist only of environmental protection expenditure. It may be for the administration to establish
and monitor fishing quotas or health expenditure
related to atmospheric pollution or a nuclear disaster. An adjustment for defensive expenditure by
the government is recommended in order to avoid

European system of accounts — ESA 201022

them increasing GDP: they are intended to mitigate or undo negative environmental externalities
of production or consumption not at all recorded
in GDP. In terms of net domestic product, a solution can be to record all defensive expenditure by
the government as capital formation and simultaneously as capital consumption. However, in termsof the more commonly used GDP, this makes nodifference.
22.78 Domestic product, saving and other key aggregatescan be adjusted for degradation, such as the impact
of pollution in air and water. However, incorpor­
ating the effects of degradation is more difficult,less certain and more controversial than making adjustments to the accounts for either depletion or defensive expenditure. For example, how toaccount for damage to human health or for plants
or animals growing more slowly, reproducing lessand dying earlier because of environmental pollution? Should disasters be recorded as being theresult of human economic activity and therefore be
deducted from GDP?

Health accounts
22.79 The health accounts (see OECD, A System of Health

Accounts, 2000) are an international frameworkfor health data aimed at serving analysis and policy needs, national as well as European and international. The framework is designed for countries
with a wide range of different models of organising their national health systems. The framework
is a major tool for monitoring fast changing andincreasingly complex health care systems. It measures and presents structural changes, such as shifts
from in-patient to out-patient care and the emergence of multifunctional providers.

22.80 The health accounts provide answers to three basic

questions:(a) What kind of services and goods are purchased
for health purposes?
(b) Who is the provider of these services andgoods?
(c) What are the sources of funding?
22.81 Health care goods and services are split by func-

tion. Three categories are distinguished: personal

493

22

Satellite accounts

health care services and goods; collective healthcare services; and health related functions.
22.82 The major types of personal health care services

and goods distinguished are: services of curative
care; services of rehabilitative care; services of longterm nursing care; ancillary services to health care;and medical goods dispensed to out-patients. For
these personal services, a subdivision by mode of
production is very useful: in-patient care, day care,out-patient care and home care. Also many otherdimensions for classifying personal health careare important, such as by age, gender and income
level for major categories of health care or by majordisease groups, which is useful for cost of illness
studies.

22.83 In comparison to the central framework, the pro-duction boundary is extended in two respects:(a) occupational health care such as medical
check-ups of employees or emergency healthcare services on or off business premises is notrecorded as ancillary services;(b) cash transfers to households for home care forthe sick and disabled are treated as paid household production of health care; however, allsuch care with no link to cash transfers, are still
excluded.
22.84 Two types of collective health services are

distinguished:(a) prevention and public health service;(b) health administration and health insurance.
22.85 Seven types of health-related functions are

distinguished:494(a) capital formation of health care provider
institutions;(b) education and training of health personnel;(c) research and development in health;(d) food, hygiene and drinking water control;(e) environmental health;(f) administration and provision of social services
in kind to assist living with disease and impairment; and(g) administration and provision of health-related
cash-benefits.
22.86 For the providers of health care, a detailed industry

classification has been developed; for this purpose,
the International Standard Industrial Classification
was refined and modified.

22.87 Basically, health care financing can be recorded

from two different perspectives. The first perspective gives a breakdown of expenditure on healthinto the complex range of third-party-payment
arrangements plus the direct payments by households or other direct funders such as government
provided health care. The second perspective seeks
the ultimate burden of financing born by source offinance. This implies that the sources of financing
of intermediary sources of funding are traced backto their origin. Additional transfers such as intergovernmental transfers, tax deductions, subsidies
to providers and financing by the rest of the world
are included to complete the picture.

22.88 Simple overview tables showing the importanceof health in the national economy can be derived
from health accounts, as in Table 22.15.

European system of accounts — ESA 2010

Satellite accounts

22

Table 22.15 — Key-statistic on health% GDP
year t% value change
year
t+1

year
t+2

year t

Year
t+1

year
t+2

% volume change% price change

year tyear t

year
t+1

year
t+2

year
t+1

year
t+2

Expenditureon health careservices
Personal healthexpenditure
curative care rehabilitativecare long-term
nursing care ancillary services
to Health care
medical goods
Collectieve healthexpenditure
Total population
growth expenditure percapitaSources offinance
Government andsocial security
Private health
Insurance
Other
Total
GDP

100

100

100

 population
growthGDP per capita% of national total% volume change% wage rate change

Employment
i health careindustries

Household production accounts
22.89 In the central framework, household activities

such as the services of owner-occupied dwellings;
the production of agricultural production for own
consumption; and own-account construction of
dwellings; are recorded as production. However,European system of accounts — ESA 2010

two major types of household activity, unpaid services by household members consumed within
the same household, and volunteer services, are
not recorded as production. Even in the context
of a satellite account, the issues of unpaid andvoluntary household services raise difficult conceptual and measurement problems. They are an

495

22

Satellite accounts

area of ongoing research. The purpose of a satellite account for household production3 is to provide a complete picture of household production;
to show income, consumption and saving of different types of households; and the interactions withthe rest of the economy.

22.91 Household production includes only services that

Major questions addressed are as follows:

22.92 For household production, different principal(a) Which services are provided?
(b) Who is providing the services?
(c) What is the value of the services?
(d) What are the capital inputs and what happens
to productivity?
(e) What are the implications for the size and distribution of income, consumption and saving
over various types of households and over thelife cycle?
(f) Are there shifts between paid and unpaid
household services, due to structural economic
and social developments, business cycle effects
or government policy such as taxation issues or
subsidies for paid child care?
22.90 Household production accounts may be of particu-

lar interest for the analysis of long-term economic
developments and for the international comparison of levels of production, income and consumption. The major data sources used for compilinghousehold production accounts are household
budget surveys and time use surveys, and annual
aggregates from these sources are distorted bysampling errors, which prevents the calculation of
accurate annual growth rates. Household production accounts are therefore compiled on a regular
but not annual basis, such as at five-yearly intervals
and linked to an extensive time use survey.

can be delegated to someone other than the person benefiting from it, and this is known as thethird party principle. As a consequence, personalcare for oneself, studying, sleeping and leisure time
activities are excluded.
functions can be distinguished: housing, nutrition,
clothing, care of children, adults and pets, and volunteer work which is by definition consumed inanother household. For each of these principal
functions, main or characteristic activities can be
defined. This allows the allocation of expenditureor time use on such activities to those principal
functions. However, some activities, like shopping,travel and household management, refer to various functions. As a consequence, the expend­itureor time use of these activities is split over thesefunctions.

22.93 In the central framework, expenditure on con-sumer durables are part of final consumption
expenditure. However, in the household production accounts, expenditure such as expenditure
on vehicles, refrigerators and equipment for construction and repair, is recorded as capital formation. The capital services of such assets are inputs
to household production.

22.94 The output and value added of household pro-duction can be valued using an input or an output
method. The output method is that household production is valued at market prices, i.e. at the priceobserved for similar services sold on the market.
For the input method, valuing output as the sumof costs, the choice of valuation method for labour
inputs is crucial. The possibilities include valuing
wages including or excluding social security contributions, and different choices of reference group— average wages over all workers, wages of specialist workers or wages of housekeepers.

22.95 A major issue for household production accounts
3496

See e.g. Eurostat, Household Production and Consumption — Proposal for a
Methodology of Household Satellite Accounts, 2003; J. Varjonen and K. Aalto,
Household Production and Consumption in Finland — Household Satellite Account,
Statistics Finland and the National Consumer Research Centre, 2006; S. Holloway, S.
Short, S. Tamplin, Household Satellite Account, ONS London, 2002; J.S. Landefeld and
S.H. McCulla, Accounting for nonmarket household production within a national
accounts framework, Review of Income and Wealth, 2000.

is the size and composition of household production and the links with the central framework. Thisis shown in the form of a use table as in Table 22.16.

European system of accounts — ESA 2010

European system of accounts — ESA 2010

 Conceptual
differences

SNA

Labour inputs

Supplementary
information Conceptual
differences

SNA

Total

Operatingsurplus, net Conceptual
differences

SNA

Consumptionof fixed capital

Other net taxes
on production Conceptual
differences

SNA

Compensationof employees

Total Conceptual
differences

SNA

Products

Other Total Exports Final consumption Total Gross Total use at
produ­
capital purchasers’Household production by function
HH
Govern­cers
forma­ prices
ment
tion
Housing Nutrition Clothing Care,
Care, Care, Volun­ Total
Collec­ Indivi­children adults other teer
tive
dual

Costs of production

Table 22.16 — A use table for household production

Satellite accounts

22

497

498

 Conceptual
differences

SNA

Fixed capitalstock, net Conceptual
differences

SNA

Gross fixed
capitalformation

Other Total Exports Final consumption Total Gross Total use at
produ­
capital purchasers’Household production by function
HH
Govern­cers
forma­ prices
ment
tion
Housing Nutrition Clothing Care,
Care, Care, Volun­ Total
Collec­ Indivi­children adults other teer
tive
dual

Costs of production

22
Satellite accounts

European system of accounts — ESA 2010

Satellite accounts

Labour accounts and SAM
22.96 In many countries, a wide range of labour market

data are collected. Population and establishment
censuses, household and enterprise surveys on thelabour force, hours of work, earnings and labourcosts, as well as registers of population, taxes andsocial security provide data for monitoring andanalysing labour market developments on a regular basis. Despite the availability of a large amountof such statistical information, they do not provide a complete and reliable picture of the labour
market. The major measurement problems are as
follows:(a) contradictory results between different data
sources;(b) many different concepts without a clear linkage;(c) incomplete coverage;(d) limitations
dynamics;

indescribing

labourmarket(e) absence of links between labour market statistics and national accounts, demographic data,and other social and economic statistics such as
education and social security.
A system of labour accounts can resolve such problems by combining all information on the labour
market and showing the links with the major concepts and classifications of the labour market in thenational accounts, such as the concepts of compensation of employees and classification by industry.
A strong link with the national accounts improves
the compilation of both national accounts andEuropean system of accounts — ESA 201022

labour accounts, and is helpful in describing therelationship between the labour market and therest of the economy.
22.97 A simple system of labour accounts is shownin Table 22.17. It exploits accounting iden­
tities between compensation of employees, hours
worked, number of jobs, persons employed andthe active and potential labour force. It is a simple system in that it shows a limited breakdown bysocio-economic characteristics such as gender, but
not age or level of education, and a simple breakdown by only three industries, with no cross-border workers.

22.98 A social accounting matrix (SAM) is a matrix pres-entation which shows the links between the supply
and use tables and the institutional sector accounts.
A SAM commonly provides additional information on the level and composition of employment,
via a subdivision of compensation of employees
and mixed income by type of person employed.
This subdivision applies both to the use of labour
by industry, as shown in the use tables, and the
supply of labour by socio-economic subgroup, asshown in the allocation of primary income accountfor subsectors of the sector households. In this way,
the supply and use of paid labour is shown systematically. A SAM can be thought of as an expanded
system of labour accounts put in a matrix-format.
Like the labour accounts and the national accounts,
a SAM shows aggregates and allows analysis onlyin terms of aggregates and averages. Therefore, formany socio-economic analyses, the preferred models use an extended micro-database with information on socio-economic characteristics per person
and household.

499

500

Total

FemaleMale

Self employed

FemaleMale

Employees

Total

FemaleMale

Self employed

FemaleMale

Employees

Total

FemaleMale

Self employed

FemaleMale

Employees

(2)

(1)

(3)

Services(4) = 1 + 2 + 3

Total hours
workedRemuneration per hour worked

Compensation of employees/mixed
incomeManufacturing

Agriculture

Hours worked by industry

Table 22.17 — A simple system of labour accounts

(5)

Hours
per job(6) = (4/5)

Numberof jobs(7)(8) = 6 - 7(9)(10) = 8 + 9(11)

Number of
Persons Persons not
ActiveNot active
second jobs employed employed labour force labour force

Jobs, persons employed and labour force(12) = 10 + 11

Potential
labour force

22
Satellite accounts

European system of accounts — ESA 2010

Satellite accounts

Productivity and growth accounts
22.99 A major use of the national accounts is to describe,

monitor and analyse productivity growth (for an
extended overview on productivity analysis, seeOECD, OECD Manual — Measuring Productivity:
Measurement of Aggregate and Industry-level
Productivity Growth, 2001). Measuring and analysing productivity growth is used in understanding the major changes in industry structure andthe rise in living standards during the past century
in many countries. Measuring and analysing productivity growth is also used to form policies that
stimulate productivity growth and raise prosperity,
while also taking into account other policy considerations such as equity and environmental issues.

22.100 Economic growth in national accounts terms

is the volume growth of GDP, and this can be
decomposed into components including changes
in labour productivity, the productivity per unitof labour, and changes in the volume of labour.
The same breakdown can be made for the volume change of value added by industry. This simple approach provides a framework for monitoring
and analysing economic growth by industry. Morehomogeneous figures on labour inputs obtainedby using not just the number of employed, but fulltime equivalents or hours worked and distinguishing between various qualities of labour, will resultin more detailed labour productivity figures.

22.101 This simple approach omits the role of other inputs,

such as capital services and intermediate products.
This can be very misleading. For ex­ample, labour
productivity may apparently increase substantially due to much higher capital intensity but may
also increase due to efficiency gains while using
the same amount of capital. By also accounting
for other inputs, multifactor productivity is measured and the sources of productivity growth canbe better understood. Measuring multifactor productivity amounts to decomposing the change
in the volume of output into changes in the various volumes of all inputs plus a residual: multifactor productivity growth. Multifactor productivity
growth reflects all that is not explained by the various inputs, i.e. the role of other inputs. However, it
may also reflect measurement errors in the outputs
or inputs.

European system of accounts — ESA 20102222.102 The volume of capital input from the fixed capitalstock can be measured in various ways. There arethree crucial choices to be made:(a) the form of the age-efficiency or age-price function for each type of asset; common options are
straight-line, geometric or hyperbolic;(b) the nature of the weights that are used to aggregate across different types of assets: user costweights or market prices;(c) the index number formula by which this aggregation takes place. Options are a base weighted
index number such as Laspeyres, or a mixed
weighted index number such as Fisher and
Törnqvist.
22.103 Multifactor productivity measurement helps to

identify the direct growth contributions of labour,
capital, intermediate inputs and multifactor productivity change. It is used in reviewing past growth
patterns and for assessing the potential for future
economic growth. However, for analysis and policy, in interpreting multifactor productivity measures, the following must be considered.
(a) Not all technical changes translate into multifactor productivity growth. Embodied technological change may be accounted for via thevolumes of capital and intermediate inputs.
Embodied technological change represents
advances in the design and quality of new vintages of capital and intermediate inputs and its
effects are attributed to the respective factors aslong as the factor is remunerated accordingly.
In contrast, disembodied technical change isconsidered to be ‘costless’, for example in theform of general knowledge, blueprints, network effects or spillovers from other factors of
production including better management andorganisational change. Such technical change
ends up by definition in the residual, i.e. multi­
factor productivity growth.
(b) Multifactor productivity growth is not necessarily caused by technological change: other
non-technology factors will also be picked upby the residual. This includes adjustment costs,
scale effects, business cycle effects, pure changes
in efficiency and measurement errors.

501

22

Satellite accounts(c) Multifactor productivity growth is a static
measure and fails to explicitly measures feedback effects between productivity change andcapital, e.g. extra output per person may lead to
additional savings and investment and to a risein the capital-labour ratio. As a consequence, it
tends to understate the eventual importance of
productivity change in stimulating the growthof output.
(d) Multifactor productivity measurement helps
to identify the relative importance of different
sources of productivity growth. However, it has
to be complemented by institutional, histor­
ical and case studies to explore the underlying
causes of growth, innovation and productivity
change.
22.104 For better measuring, analysing and monitoring

growth and productivity, KLEMS growth and productivity accounts have been developed all over
the world. A key objective is to move beneath theaggregate economy level and examine the productivity performance of individual industries andtheir contributions to economic growth. In orderto reveal the enormous heterogeneity in output
and productivity growth across industries, manydifferent industries are distinguished and, in theUnion, EU-KLEMS distinguishes 72. The accounts
include quantities and prices of output, capital (K),labour (L), energy (E), material (M) and services(S) inputs at the industry level. Output and productivity measures are provided in terms of growth
rates and relative levels. Additional measures onknowledge creation such as R&D, pa­tents, embodied technological change, other innovation activity and cooperation are under development. Suchmeasures are developed for individual Member
States, and linked with KLEMS databases acrossthe rest of the world.

22.105 The accounts consist of three interdependent

modules: an analytical module and two statisticalmodules.

22.106 The analytical module provides a research data-base for use in the academic world and by policymakers. It uses ‘best practice’ techniques ingrowth accounting, focuses on international comparability, and aims at achieving full coverage interms of number of countries, industries and variables. It can also adopt alternative or pioneering

502

assumptions with regard to statistical conventions,such as how to treat ICT goods, non-market services and the measurement of capital services.
22.107 The statistical modules of the database are devel-

oped in parallel with the analytical module. They
include data which are broadly consistent withthose published by national statistical institutes. Its
methods correspond to those in the central framework of the national accounts, e.g. supply and use
tables are used as the coordinating framework for
productivity analysis and chain indices are applied.
The statistical module includes not only national
accounts data, but also supplementary information, such as employment statistics on the quantity (persons and working hours) and quality (distribution of quantities by age, gender and education level) of labour input per industry.

Research and development accounts
22.108 In the central framework, research and develop-

ment expenditure is treated as intermediate consumption, i.e. as current expenditure benefiting
production for the current period only. This runs
counter to the nature of R&D, the aim of which is
to improve production for future periods. In orderto resolve the conceptual and practical issues ofrecording R&D as capital formation, R&D satellite
tables recognising R&D as capital formation will
be drawn up by Members States. This will enable
Member States to develop robust and comparable
methods and estimates. In a second stage, when asufficiently high level of reliability and comparability has been achieved, R&D will be capitalised in
the core accounts of the Member States.

22.109 In addition to this supplementary experimen-

tal table, a set of R&D accounts can be drawn up.
The purpose of such R&D accounts is to show therole of R&D in the national economy. Questions
answered include the following:(a) Who is producing R&D?
(b) Who is financing R&D?
(c) Who is using R&D?
(d) What is the value of R&D assets in comparison
to the various other assets?

European system of accounts — ESA 2010

Satellite accounts(e) What are the consequences for productivity
and economic growth?

European system of accounts — ESA 201022

A supply and use table provides an overview of who
is producing and using R&D, and this is shown in
Tables 22.18 and 22.19.

503

504

European system of accounts — ESA 2010

Labour inputs

Supplementary
information

Total

Operating surplus, net

Other

R&D

Consumption of fixed
capitalOther net taxes on
production

Compensation of
employees

Total

Other products

Non-market R&D

Own-account R&D

Market R&D

Manufacture ofchemical products

Table 22.19 — The use of R&D

Total

Other products

Non-market R&D

Own-account R&D

Market R&D

Manufacture of
R&D
University
PublicOther
Total
ICT hardware industry Education adminis­tration Indus­tries

Costs of production by Industry

Exports

Capitalformation

Total use atpurchasers’ prices

Manufacture Manufacture
R&D
University Public
Other Total Imports Total Trade and Taxes on Subsidies
Totalof chemicalof ICT
industry Education adminis­ indus­
supply transport products
onsupply at
products
hardwaretrationtries
at basic margins
products purchasers’
prices(—)
pricesTable 22.18 — The supply of R&D

22
Satellite accounts

OtherR&D(Fixed) capital stock, net

Other

R&D

Gross (fixed) capitalformation

Manufacture ofchemical products

Manufacture of
R&D
University
PublicOther
Total
ICT hardware industry Education adminis­tration Indus­tries

Costs of production by Industry

Exports

Capitalformation

Total use atpurchasers’ prices

Satellite accounts

European system of accounts — ESA 2010

22

505

22

Satellite accounts

Social protection accounts
22.110 Social protection and its interaction with issues

such as ageing, health care and social exclusion isa major issue for national and European economic
and social policy. For monitoring, forecasting,analysing, and discussing social protection issues,detailed, comparable and up-to-date informationon the organisation, current standing and developments of social protection in the Member States
and beyond is required.

22.111 Social protection benefits are transfers to house-holds or individuals, in cash or kind intended torelieve them from a number of risks or needs. The
risks or needs of social protection refer to the functions: disability, sickness/health care, old age, survivors, family/children, unemployment, housing and social exclusion not elsewhere classified.
In principle, education is not included as a risk orneed unless it is a support to indigent families withchildren.

22.112 Social protection benefits are made through social

protection schemes. These are administered andorganised by public or private bodies, such associal security funds, government agencies, insurance companies, public or private employers andprivate welfare and social assistances institutions.
The schemes do not necessarily refer to specificinstitutions, regulations or laws; although they doin many cases. All schemes that are solely basedon individual arrangements or where simultan­
eous reciprocal agreements exist are not regarded
as social protection.

22.113 Where the reciprocal arrangement from theemployee is not simultaneous, the expenditure isclassified as social protection. This applies to retirement and survivors’ pensions paid by an employer
and free housing offered to retired employees. The
continued payment of wages and salaries, while
an employee is unable to work during sickness,maternity, disability, redundancy and so on, isregarded as social protection benefits provided by
the employer.

22.114 Government-controlled schemes are where thegovernment takes all the principal decisions about
the level of benefits, the terms on which they arepaid and the ways in which the scheme is financed.
Government-controlled social protection is506

usually established by law or regulation. It includes
schemes that provide social protection to public servants on the same lines as that provided to
the general population by government-controlled
schemes. However, it excludes schemes that government may set up in its role of employer without
government-controlled counterparts in the private
sector.
22.115 Examples of government-controlled schemes are

as follows:(a) non-contributory schemes set up by government to meet its general social responsibility,
such as an income support scheme for destitutepeople or a rent benefit scheme;(b) schemes run by social security funds;(c) schemes originally established in the private
sector and for which the government has laterassumed responsibility.
22.116 Examples of non-government-controlled schemes

are as follows:(a) schemes run by non-profit institutions, likemutual benefits societies, friendly societies
and institutions co-administered by the social
partners;(b) schemes administered by commercial insurance companies;(c) non-autonomous schemes run by employers;
this covers both funded schemes where there
are separate reserves in the balance sheet tocover the liability to pay benefits in the future,and unfunded schemes with no such separate
reserves.
22.117 Using information on specific individual schemes,

the accounts for social protection provide a multi­
dimensional overview of social protection, as
described in The European System of integrated
Social PROtection Statistics (ESSPROS), (Eurostat,2008). The accounts describe the size and compos­
ition of social protection benefits, their finan­cing
and the administrative costs involved. Social protection benefits are classified by function suchas sickness and old age, by type such as in cash
and in kind, and whether they are means tested.
Underlying schemes are classified according towhether they are government-controlled schemes

European system of accounts — ESA 2010

Satellite accounts

or not, or whether they are basic versus supplementary schemes.
22.118 For each individual social protection scheme,

information is provided on revenue and expend­
iture and a whole range of qualitative information,such as the scope, financing, history and major
modifications over time.

22.119 The standard information on the various individu­alsocial protection schemes is known as the coresocial protection system, and is supplemented byvarious modules. Possible modules are as follows:(a) a module covering the number of pension
beneficiaries;(b) a module on net social protection benefits.
This covers the influence of taxes and social

European system of accounts — ESA 201022

contributions paid on benefits by beneficiaries and the extent to which social benefits
are provided in the form of tax rebates or tax
reductions.
22.120 The concepts and classifications in the accounts forsocial protection are closely linked to those in thecentral framework. The major difference betweensocial protection benefits and social benefits inthe central framework is that the latter cover also
expenditure on education; another difference isthat social protection benefits may include capitaltransfers with a social purpose. A simple overview
table as given in Table 22.20 shows these links andat the same time provides an overview of the sizeand composition of social protection benefits in acountry.

507

508

European system of accounts — ESA 2010

Total social protection
benefits

Total other social
protection benefits

Other social protection
benefits

Social assistance benefits inkind by NPISH

Unfunded employee social
benefits (including those by
the government)

Other private social
insurance benefits

Pension benefits (funded)

Non-government
controlled schemes

Total governmentcontrolled social
protection benefits

Other social protection
benefits (e.g. capital transfers
by the government) in kind as other nonmarket output in kind via market
producers

in cashSocial assistance benefits

in kindin cashSocial security benefits

Government-controlled
schemes

Sickness Disability Old age Survivors

Children/
FamilyEmpty bydefinition

Empty bydefinition

Employment/ Housing
Social Total social Education social benefits
Unemployment
Exclusion protection
national
n. e. c.
benefits
accounts

Table 22.20 — Overview of social (protection) benefits by social risk/need and transaction

22
Satellite accounts

Satellite accounts

22.121 The close linkage between standard national

accounts statistics and social protection statistics
provides opportunities for both types of statistics.
From the point of view of social protection statistics, they can be related to the official statistics on
the national economy such as on economic growthand public finance. National accounts statistics
broken down by social protection scheme can also
serve as a check on the completeness and reliabilityof social protection statistics. The compilation processes of both statistics can also be linked, saving
compilation costs, increasing reliability and providing new opportunities, such as making social
protection statistics as timely as national accounts
statistics4. Similar advantages apply to the national
accounts. The accounts for social protection are relatively easy to derive from the sector accounts andthe table on government expenditure by COFOG
function and are used in forming economic andsocial policy. Furthermore, they serve as a checkon the reliability and completeness of the standard national accounts figures, such as social benefits and contributions.

22.122 The OECD also publishes data on social expend­

iture by individual scheme, in the Social
Expenditure Database, SOCX. It collects the data
for non-EU countries, while Eurostat provides
the OECD with the data on the social protection
expenditure for the Member States. A specific feature of the OECD work on social expenditure isits focus on international comparison of net social
expenditure; this includes an adjustment for the
impact on household consumption of differences
in taxes on production and imports.

Tourism satellite accounts
22.123 The tourism satellite account5 provides an over-view of the supply and use of goods and services
for the various types of tourism and their importance for domestic employment, balance of payments, government finance and personal and business income.

4

The ESSPROS dissemination timetable is defined in Regulation (EC) No 458/2007of the European Parliament and of the Council of 25 April 2007 on the European
system of integrated social protection statistics (ESSPROS) (OJ L 113, 30.4.2007, p. 3).

5

See Eurostat, OECD, UNSD, UNWTO, Tourism Satellite Account: Recommended
Methodological Framework, 2008.

European system of accounts — ESA 20102222.124 ‘Tourism’ comprises the activities of persons trav-

elling to and staying in places outside their usualenvironment for less than a year and for a main
purpose other than to be employed by a resident
entity in the place visited. Such activities encompass all that visitors do for a trip or while on a trip.
‘Tourism’ is not restricted to typical tourism activities such as sightseeing, sunbathing and visiting sites. Travelling for the purpose of conducting
business and for education and training can also bepart of tourism.

22.125 The demand generated by tourism covers a vari-

ety of goods and services, in which transportation,accommodation and food services figure prominently. In order to obtain international comparability, tourism characteristic products are definedas products which, in the absence of visitors, inmost countries would probably not exist in meaningful quantities or for which the level of consumption would be significantly reduced, and forwhich it seems possible to obtain statistical information. Tourism-connected products are a residual category, including those that have been identified as tourism-specific in a given country but for
which this attribute has not been acknowledged ona worldwide basis.

22.126 Some of the services for tourism purposes, suchas accommodation in second homes or transportation in individual motor vehicles, can be produced in significant amounts on own account.
However, in the central framework, unlike ownaccount housing services, transportation services
produced within households for their own benefit are not regarded as production. It is recommended to follow that convention in the tourism
satellite account. But for countries in which ownaccount transportation services are significant,they can show them separately in the tourism satellite account.

22.127 The key measure for describing the demand for

tourism is visitor consumption by households,
government, non-profit institutions serving households and business. It consists of the following
components:(a) visitor final consumption expenditure in cash;(b) visitor final consumption expenditure in kind,such as own-account housing services;

509

22

Satellite accounts(c) tourism social transfers in kind such as individual non-market services absorbed by visitors,
including health services of a spa and the nonmarket services of a museum;(d) tourism business expenses. This includes tourism expenses classified as intermediate consumption and does not include other expenses
corresponding to employees on business trips
paid by businesses, such as payments for meals
treated as remuneration in kind. As a consequence, tourism business expenses do not represent total consumption of visitors on business trips;(e) in addition, in order to underline the economic
importance of the actions undertaken by public authorities to create a favourable environment for the development of tourism, specific510

measurement of the aggregate value of tourism
collective consumption is suggested. This refers
to activities such as the promotion of tourism by a government unit, the maintenance oforder and security and the maintenance of public space.
22.128 The supply and use of goods and services for tour-

ism purposes, as well as value added and employment generated by tourism, can be shown in a supply and use table distinguishing its characteristic products and industries and the tourism-connected products.

22.129 In their tourism satellite account, countries canfurther disaggregate and typify their markets,
based on duration of stay, purpose of the visit, features of the visitors such as whether they are international or domestic visitors.

European system of accounts — ESA 2010

Classifications

23

CHAPTER 23
Classifications(g) B codes relating to balancing and net worth
items;

Introduction
23.01 The classifications in the ESA 2010 are fully in line(h) L codes relating to balance sheet entries;

with the new coding of the 2008 SNA, the NACE
Rev. 2, the CPA 2008 (at the levels of aggregation
used in the transmission programme), COFOG,
Coicop, COPNI and COPP. Only a very limited
number of additional codes have been introduced.

23.02 The accounts are built around a small number ofconceptual elements, in particular sectors, transactions and classifications of the items subject totransactions and other flows, especially assets andliabilities. For each of these elements, a hierarchical classification exists. Accounts can be compiled
at greater or lesser degrees of detail by using higher
or lower levels of these hierarchies.

(i) AN codes relating to non-financial assets (bothproduced and non-produced);(j) AF codes relating to stocks of financial assets
and liabilities.
23.04 In the context of a production approach of GDP,

tables by industry and the input-output framework, use is also made of two European classifications: NACE Rev. 2 for economic activities
and CPA 2008 for products by economic activities. NACE Rev. 2 is the European version of ISIC
Rev. 4. Also, for an expenditure approach of GDP,CPA 2008, COFOG (classification of expenditureaccording to purpose: classification of the functions of government) and Coicop (classification ofindividual consumption according to purpose) areused; the latter two classifications are establishedby UN.

23.03 The entries in the accounts are divided into types

designated by one or two letters as follows:(a) S codes relating to sectors;(b) P codes relating to transactions in products;(c) NP codes relating to transactions in non-financial non-produced assets;

23.05 Apart from COFOC and Coicop, the functional(d) D codes relating to distributive transactions;(e) F codes relating to transactions in financial
assets and liabilities;(f) K codes relating to other changes in assets;

classifications include also COPNI (classificationof the purposes of non-profit institutions serving
households) and COPP (classification of outlaysof producers by purpose). These classifications areused for functional analysis of the expenditure bycorporations, government, households and nonprofit institutions serving households and for functional satellite accounts.

Classification of institutional sectors (S)S.1

Total economy1

S.11

Non-financial corporations

S.11001

Public non-financial corporations

S.11002

National private non-financial corporations

S.11003

Foreign controlled non-financial corporations

European system of accounts — ESA 2010

511

23

512

Classifications

S.12

Financial corporations

S.121

Central bank 2 (public)

S.122

Deposit-taking corporations except the central bank 2

S.12201

PublicS.12202

National private

S.12203

Foreign controlled

S.123

Money market funds

S.12301

PublicS.12302

National private

S.12303

Foreign controlled

S.124

Non-MMF investment funds

S.12401

PublicS.12402

National private

S.12403

Foreign controlled

S.125

Other financial intermediaries, except insurance corporations and pension funds

S.12501

PublicS.12502

National private

S.12503

Foreign controlled

S.126

Financial auxiliaries

S.12601

PublicS.12602

National private

S.12603

Foreign controlled

S.127

Captive financial institutions and money lenders

S.12701

PublicS.12702

National private

S.12703

Foreign controlled

S.128

Insurance corporations3

S.12801

PublicS.12802

National private

S.12803

Foreign controlled

S.129

Pension funds3

S.12901

PublicS.12902

National private

S.12903

Foreign controlled

S.121 + S.122 + S.123

Monetary financial institutions

S.13

General government

S.1311

Central government (excluding social security funds)

S.1312

State government (excluding social security funds)

S.1313

Local government (excluding social security funds)

S.1314Social security funds

S.14

Households

European system of accounts — ESA 2010

Classifications

S.141

Employers

S.142

Own-account workers

S.143

Employees

S.144

Recipients of property and transfer income

S.1441

Recipients of property income

S.1442

Recipients of pensions

S.1443

Recipients of other transfers

S.15

Non-profit institutions serving households

S.15002

National private

S.15003

Foreign controlled

S.2

Rest of the world

S.21

Member States and institutions and bodies of the European Union

S.211

Member States of the European Union

S.2111

Member States of the euro area

S.2112

Member States outside the euro area

S.212

Institutions and bodies of the European Union

S.2121The European Central Bank (ECB)

S.2122European institutions and bodies, except the ECB

S.22

Non-member countries and international organisations non-resident in the European Union

1

For all codes in sectors S.11 and S.12, the fifth digit 1/2/3 refers to public/national private/foreign controlled.

2

Central bank (S.121) plus deposit-taking corporations except the central bank (S.122) correspond to S.12B.

3

Insurance corporations (S.128) plus pension funds (S.129) correspond to S.12I.

23

Classification of transactions and otherflows
Transactions in products (P)P.1

OutputP.11

Market output

P.119

Financial intermediation services indirectly measured (FISIM)

P.12

Output for own final use

P.13

Non-market output

P.2

Intermediate consumption

P.3

Final consumption expenditure

P.31

Individual consumption expenditure

P.32

Collective consumption expenditure

P.4

Actual final consumption

P.41

Actual individual consumption

P.42

Actual collective consumption

European system of accounts — ESA 2010

513

23

Classifications

P.5

Gross capital formation/P.5n net capital formation

P.51g

Gross fixed capital formation

P.511

Acquisitions less disposals of fixed assets

P.5111

Acquisitions of new fixed assets

P.5112Acquisitions 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

P.52

Changes in inventories

P.53

Acquisitions less disposals of valuables

P.6

Exports of goods and services

P.61

Exports of goods

P.62

Exports of services

P.7

Imports of goods and services

P.71

Imports of goods

P.72

Imports of services

Transactions in non-produced nonfinancial assets (NP codes)
The codes used for transactions in non-produced nonfinancial assets can be further disaggregated if desired byappending the classification of non-produced non-financial assets, AN.2.
NP

Acquisitions less disposals of non-produced assets

NP.1

Acquisitions less disposals of natural resources

NP.2

Acquisitions less disposals of contracts, leases and licences

NP.3

Purchases less sales of goodwill and marketing assets

Distributive transactions (D)

514

D.1

Compensation of employees

D.11

Wages and salaries

D.12

Employers’ social contributions

D.121

Employers’ actual social contributions

D.1211

Employers’ actual pension contributions

D.1212

Employers’ actual non-pension contributions

European system of accounts — ESA 2010

Classifications

D.122

Employers’ imputed social contributions

D.1221

Employers’ imputed pension contributions

D.1222

Employers’ imputed non-pension contributions

D.2

Taxes on production and imports

D.21

Taxes on products

D.211

Value added type taxes (VAT)

D.212

Taxes and duties on imports excluding VAT

D.2121

Import duties

D.2122

Taxes on imports excluding VAT and duties

D.214

Taxes on products except VAT and import taxes

D.29

Other taxes on production

D.3

Subsidies

D.31

Subsidies on products

D.311

Import subsidies

D.319

Other subsidies on products

D.39

Other subsidies on production

D.4

Property income

D.41Interest

D.42

Distributed income of corporations

D.421

Dividends

D.422

Withdrawals from income of quasi-corporations

D.43

Reinvested earnings on foreign direct investment

D.44

Other investment income

D.441

Investment income attributable to insurance policy holders

D.442

Investment income payable on pension entitlements

D.443

Investment income attributable to collective investment fund shareholders

D.4431Dividends attributable to collective investment fund shareholders

D.4432Retained earnings attributable to collective investment fund shareholders

D.45

Rent

23

Current transfers in cash and kind (D.5-D.8)
D.5

Current taxes on income, wealth, etc.

D.51

Taxes on income

D.59

Other current taxes

D.6

Social contributions and benefits

D.61

Net social contributions

D.611

Employers’ actual social contributions

D.6111

Employers’ actual pension contributions

D.6112

Employers’ actual non-pension contributions

D.612

Employers’ imputed social contributions

European system of accounts — ESA 2010

515

23

516

Classifications

D.6121

Employers’ imputed pension contributions

D.6122

Employers’ imputed non-pension contributions

D.613

Households’ actual social contributions

D.6131

Households’ actual pension contributions

D.6132

Households’ actual non-pension contributions

D.614

Households’ social contribution supplements

D.6141

Households’ pension contribution supplements

D.6142

Households’ non-pension contribution supplements

D.61SC

Social insurance scheme service charges (–)1

D.62

Social benefits other than social transfers in kind

D.621

Social security benefits in cash

D.6211Social security pension benefits in cash

D.6212Social security non-pension benefits in cash

D.622

Other social insurance benefits

D.6221Other social insurance pension benefits

D.6222Other social insurance non-pension benefits

D.623

Social assistance benefits in cash

D.63

Social transfers in kind

D.631

Social transfers in kind — non-market production

D.632

Social transfers in kind — purchased market production

D.7

Other current transfers

D.71

Net non-life insurance premiums

D.711

Net non-life direct insurance premiums

D.712

Net non-life reinsurance premiums

D.72

Non-life insurance claims

D.721

Non-life direct insurance claims

D.722

Non-life reinsurance claims

D.73

Current transfers within general government

D.74

Current international cooperation

D.75

Miscellaneous current transfers

D.751

Current transfers to NPISHs

D.752

Current transfers between households

D.759

Other miscellaneous current transfers

D.76

VAT- and GNI-based EU own resources

D.8

Adjustment for the change in pension entitlements

D.9

Capital transfers

D.9r

Capital transfers, receivable

D.91r

Capital taxes, receivable

D.92r

Investment grants, receivable

D.99r

Other capital transfers, receivable

D.9p

Capital transfers, payable

European system of accounts — ESA 2010

Classifications

D.91p

Capital taxes, payable

D.92p

Investment grants, payable

D.99p

Other capital transfers, payable

1

23

Employers’ contributions appear in both the generation of income account and allocation of primary income account as payable by employers and receivable by employees.
In the secondary distribution of income account, these amounts are payable by households and receivable by those administering social insurance schemes. In order to show
exactly the same value in each case, the deduction of the charge that represents part of the output of the schemes and final consumption of the beneficiary households is also
shown in the secondary distribution of income account as a separate item. The social insurance scheme service charges item (D.61SC) is thus an adjustment item only and not a
distributive transaction in itself.

Transactions in financial assets andliabilities (F)(Net acquisition of financial assets/net incurrence ofliabilities)
F.1

Monetary gold and SDRs

F.11

Monetary gold

F.12

SDRs

F.2

Currency and deposits

F.21

Currency

F.22

Transferable deposits

F.221

Inter-bank positions

F.229

Other transferable deposits

F.29

Other deposits

F.3

Debt securities

F.31

Short-term

F.32

Long-term

F.4

Loans1

F.41

Short-term

F.42

Long-term

F.5

Equity and investment fund shares/units

F.51

EquityF.511

Listed shares

F.512

Unlisted shares

F.519

Other equity

F.52

Investment fund shares/units

F.521

Money Market Fund shares/units

F.522

Non-MMF investment fund shares/units

F.6

Insurance, pension and standardised guarantee schemes

F.61

Non-life insurance technical reserves

F.62

Life insurance and annuity entitlements

F.63

Pension entitlements

F.64

Claims of pension funds on pension managers

European system of accounts — ESA 2010

517

23

Classifications

F.65

Entitlements to non-pension benefits

F.66

Provisions for calls under standardised guarantees

F.7

Financial derivatives and employee stock options

F.71

Financial derivatives

F.711

Options

F.712

Forwards

F.72

Employee stock options

F.8

Other accounts receivable/payable

F.81

Trade credits and advances

F.89

Other accounts receivable/payable, excluding trade credits and advances

1

Memo item: foreign direct investment (add code FDI).

Other changes in assets (K)K.1-5

Total changes in volume

K.1

Economic appearance of assets

K.2

Economic disappearance of non-produced assets

K.21

Depletion of natural resources

K.22

Other economic disappearance of non-produced assets

K.3

Catastrophic losses

K.4

Uncompensated seizures

K.5

Other changes in volume n.e.c.

K.6

Changes in classification

K.61

Changes in sector classification and structure

K.62

Changes in classification of assets and liabilities

K.7

Nominal holding gains and losses

K.71

Neutral holding gains and losses

K.72

Real holding gains and losses

Classification of balancing items andnet worth (B)1

518

B.1g

Value added, gross/Gross domestic product

B.2g

Operating surplus, gross

B.3g

Mixed income, gross

B.4g

Entrepreneurial income, gross

B.5g

Balance of primary incomes, gross/National income, gross

B.6g

Disposable income, gross

B.7g

Adjusted disposable income, gross

B.8g

Saving, gross

European system of accounts — ESA 2010

Classifications

B.9

Net lending (+)/net borrowing (–)

B.9N

Net lending (+)/net borrowing (–) of the non-financial accounts

B.9F

Net lending (+)/net borrowing (–) of the financial accounts

B.10

Changes in net worth

B.101

Changes in net worth due to saving and capital transfers2, 3

B.102

Changes in net worth due to other changes in volume of assets

B.103

Changes in net worth due to nominal holding gains and losses

B.1031

Changes in net worth due to neutral holding gains and losses

B.1032

Changes in net worth due to real holding gains and losses

B.11

External balance of goods and services

B.12

Current external balance

B.90

Net worth

BF.90

Financial net worth

1

All balancing items can be measured gross or net of consumption of fixed capital. The code for gross balancing items is constituted of the code of the item plus the letter ‘g’.
Similarly, the letter ‘n’ attached to a code indicates the net value.

2

This is not a balancing item in the structure of the accounting system. It is the total of the right-hand side of the capital account. However, as a significant component of changes
in net worth, it is coded with the other components of the latter.

3

For the rest of the world, this refers to changes in net worth due to current external balance and capital transfers.

Classification of balance sheet entries(L)(LX). All three codes need to be qualified by asset types.
The LX entries are the sum of the entries of P.5, NP, F andK codes for the assets in question for the period covered.

For a single balance sheet, as for the financial account, theonly codes necessary are those giving the details of assets
by type, using AN and AF codes. However, an account canbe drawn up showing the stock levels at the start (LS) andend (LE) of a period, and the total changes between them

From the entries in the opening balance sheet a value ofnet worth (B.90) can be calculated. The difference between
this and the value of B.90 in the closing balance sheet must
be equal to the balance of all the LX codes, which mustalso be equal to the value for B.10.

LS

Opening balance sheet

LX

Changes in balance sheet

LE

Closing balance sheet

23

Classification of assets (A)Non-financial assets (AN)AN.1

Produced non-financial assets

AN.11

Fixed assets by type of asset

AN.111

Dwellings

AN.112Other buildings and structures

AN.1121

Buildings other than dwellings

AN.1122

Other structures

European system of accounts — ESA 2010

519

23

520

Classifications

AN.1123

Land improvements

AN.113

Machinery and equipment

AN.1131Transport equipment

AN.1132

ICT equipment

AN.1139

Other machinery and equipment

AN.114

Weapons systems

AN.115

Cultivated biological resources

AN.1151

Animal resources yielding repeat products

AN.1152

Tree, crop and plant resources yielding repeat products(AN.116)(Costs of ownership transfer on non-produced assets)1

AN.117

Intellectual property products

AN.1171

Research and development

AN.1172

Mineral exploration and evaluation

AN.1173

Computer software and databases

AN.11731

Computer software

AN.11732

Databases

AN.1174

Entertainment, literary or artistic originals

AN.1179

Other intellectual property products

AN.12

Inventories by type of inventory

AN.121

Materials and supplies

AN.122Work-in-progress

AN.1221Work-in-progress on cultivated biological assets

AN.1222

Other work-in-progress

AN.123Finished goods

AN.124

Military inventories

AN.125

Goods for resale

AN.13

Valuables

AN.131

Precious metals and stones

AN.132

Antiques and other art objects

AN.133

Other valuables

AN.2

Non-produced non-financial assets

AN.21

Natural resources

AN.211Land

AN.2111Land underlying buildings and structures

AN.2112Land under cultivation

AN.2113

Recreational land and associated surface water

AN.2119

Other land and associated surface water

AN.212Mineral and energy reserves

AN.213

Non-cultivated biological resources

AN.214

Water resources

AN.215

Other natural resources

European system of accounts — ESA 2010

Classifications

AN.2151

Radio spectra

AN.2159

Other

AN.22

Contracts, leases and licences

AN.221Marketable operating leases

AN.222

Permits to use natural resources

AN.223

Permits to undertake specific activities

AN.224

Entitlement to future goods and services on an exclusive basis

AN.23

Purchases less sales of goodwill and marketing assets

1

23

Costs of ownership transfer on non-produced assets (AN.116) are treated as part of fixed capital formation, that is the acquisition of fixed assets. However, when stock levels are
itemised, the value of these costs of ownership transfer is included with the non-produced assets to which they refer and so are not shown separately as part of AN.11. In the caseof land transferring, the costs of ownership transfer on all land are to be included with land improvements (AN.1123). The item AN.116 is included in the full list, shown below, forpresentation purposes only.

Financial assets (AF)
There is a one-to-one match between the codes shown fortransactions in financial assets and liabilities (F codes) andthose for stock levels or positions (AF codes) for the sameassets and liabilities. In practice, though, balance sheet
data may be less detailed and not exist beyond the firstlevel breakdown, shown below. If desired, the AF codes
can be disaggregated in line with the detail provided for F
codes, as follows:

AF.1

Monetary gold and SDRs

AF.11

Monetary gold

AF.12

SDRs

AF.2

Currency and deposits

AF.21

Currency

AF.22

Transferable deposits

AF.221

Inter-bank positions

AF.229Other transferable deposits

AF.29

Other deposits

AF.3

Debt securities

AF.31

Short-term

AF.32

Long-term

AF.4

Loans1

AF.41

Short-term

AF.42

Long-term

AF.5

Equity and investment fund shares/units

AF.51

EquityAF.511

Listed shares

AF.512Unlisted shares

AF.519Other equity

AF.52

Investment fund shares/units

AF.521

Money Market Fund shares/units

AF.522

Non-MMF investment fund shares/units

AF.6

Insurance, pension and standardised guarantee schemes

European system of accounts — ESA 2010

521

23

Classifications

AF.61

Non-life insurance technical reserves

AF.62

Life insurance and annuity entitlements

AF.63

Pension entitlements

AF.64

Claims of pension funds on pension managers

AF.65

Entitlements to non-pension benefits

AF.66

Provisions for calls under standardised guarantees

AF.7

Financial derivatives and employee stock options

AF.71

Financial derivatives

F.711

Options

F.712

Forwards

AF.72

Employee stock options

AF.8

Other accounts receivable/payable

AF.81

Trade credits and advances

AF.89

Other accounts receivable/payable, excluding trade credits and advances

1

Memo item: foreign direct investment (add code FDI).

Classification of supplementary items

Non-performing loans

The general convention is that a supplementary code
begins with X and is linked to the code of a standard itemby building on the code of that item.

The following codes apply to stocks and flows of non-performing loans. Since loans have the code AF.4 and F.4, thesupplementary codes begin XAF4 for stocks and XF4 forflows.
The codes for stocks are:

XAF4_NNP

Loans: nominal value, non-performing

XAF4_MNP

Loans: market value, non-performing

and the associated flows:
XF4_NNP

Loans: nominal value, non-performing

XF4_MNP

Loans: market value, non-performing

In both sets of codes, the underscore is a placeholder forthe detailed codes for loans where relevant, for example,
on the balance sheet:

522

XAF41NNP

Short-term loans: nominal value, non-performing

XAF42MNP

Long-term loans: market value, non-performing

European system of accounts — ESA 2010

Classifications

23

Capital services
The following codes apply to capital services.
XCS

Capital services

XCSC

Capital services — Corporations

P.51c1

Consumption of fixed capital on gross operating surplus

XRC

Return to capital — Corporations

XOC

Other costs of capital — Corporations

XCSU

Capital services — Unincorporated enterprises

P.51c2

Consumption of fixed capital on gross mixed income

XRU

Return to capital — Unincorporated enterprises

XOU

Other costs of capital — Unincorporated enterprises

Pensions table

Columns

The following codes apply to the supplementary table
described in the chapter on pensions. Different codes areproposed for the columns and rows of the table.

In the Column description the letter ‘W’ corresponds to‘non-government’ and the numbers in these codes refer tothe corresponding institutional sectors.

(a) Liabilities recorded in the main sequence of accounts
Schemes where responsibility for the design and implementation lies outside general government
XPC1W

Defined contribution schemes

XPB1W

Defined benefit schemes

XPCB1W

Total

Schemes where responsibility for the design and implementation lies within general government
XPCG

Defined contribution schemes

General government employee defined benefit schemes
XPBG12In the financial corporations sector

XPBG13In the general government sector(b) Liabilities not recorded in the main sequence ofaccounts
XPBOUT13

In the general government sector

XP1314Social security pension schemes

XPTOT

Total pension schemes

XPTOTNRHof which: non-resident households

European system of accounts — ESA 2010

523

23

Classifications

Rows(a) Opening balance sheet
XAF63LS

Pension entitlements(b) Transactions
XD61p

Special contributions relating to pension schemes

XD6111

Employer actual social contributions

XD6121

Employer imputed social contributions

XD6131

Household actual social contributions

XD6141

Household social contribution supplements

XD619

Other (actuarial) accumulation of pension entitlements in social security funds

XD62p

Pension benefits

XD8

Adjustment for the change in pension entitlements

XD81

Change in pension entitlements due to transfers of entitlements

XD82

Change in entitlements due to negotiated changes in scheme structure(c) Other economic flows
XK7

Revaluations

XK5

Other changes in volume(d) Closing balance sheet
XAF63LE

Pension entitlements(e) Related indicators
XP1

Output

XAFN

Assets held by pension schemes at end-year

Consumer durables
Consumer durables are coded using X as a prefix plus
DHHCE (durable household consumption expenditure)
Coicop524

plus a one-digit affix for subgroups and two digits forthe items. The corresponding Coicop numbers are also
provided.

SNA codes
XDHHCE1

Furniture and household appliances

05.1.1XDHHCE11

Furniture and furnishings

05.1.2XDHHCE12

Carpets and other floor coverings

05.3.1XDHHCE13

Major household appliances whether electric or not

05.5.1XDHHCE14

Major tools and equipment for house and garden

XDHHCE2

Personal transport equipment

07.1.1XDHHCE21

Motor cars

07.1.2XDHHCE22

Motor cycles

European system of accounts — ESA 2010

Classifications

07.1.3XDHHCE23

Bicycles

07.1.4XDHHCE24

Animal drawn vehicles

XDHHCE3

Recreational and entertainment goods

08.2.0XDHHCE31

Telephone and telefax equipment

09.1.1XDHHCE32

Equipment for the reception, recording and reproduction of sound andpictures09.1.2XDHHCE33

Photographic and cinematographic equipment and optical instruments

09.1.3XDHHCE34

Information processing equipment

09.2.1XDHHCE35

Major durables for outdoor recreation

09.2.2XDHHCE36

Musical instruments and major durables for indoor recreation

XDHHCE4

Other durable goods

12.3.1XDHHCE41

Jewellery, clocks and watches

06.1.3XDHHCE42

Therapeutic medical appliances and equipment

23

Foreign direct investment
Supplementary items for foreign direct investment (FDI)
can be coded with X as prefix plus the F or AF code plus a
FDI suffix, for example:
XF42FDIfor foreign direct investment transaction in long-term loans

Contingent positions
Supplementary codes for contingent positions are codedwith X as prefix plus the AF code plus a CP suffix, forexample:XAF11CP

when the pledge of monetised gold may affects its usability as reserve asset

Currency and deposits
Supplementary items for the classification of national andforeign denominated currency and deposits are coded withX as prefix plus the F or AF code plus a suffix NC indicating currency and deposits in national currency or an affix
FC with and international currency code indicating currency and deposits in foreign currency, for example:

For transactions
XF21NC

local currency notes and coins

XF22FC

deposits in foreign currency

For stocks
XAF21NC

local currency notes and coins

XAF22FC

deposits in foreign currency

European system of accounts — ESA 2010

525

23

Classifications

Classification of debt securities according
to outstanding maturity

prefix plus the AF code plus a suffix indicating a maturity
date, for example:

It is suggested to classify debt securities according to outstanding maturity. This can be achieved by using an X
XAF32Y20

for debt securities maturing in 2020

Listed and unlisted debt securities
Supplementary items on debt securities are coded with X
as prefix plus the F or AF code plus a 1 for listed and 2 forunlisted, for example:
For transactions
XF321

for transactions in listed long-term debt securities

XF322

for transactions in unlisted long-term debt securities

For stocks
XAF321for stocks of listed long-term debt securities

XAF322for stocks of unlisted long-term debt securities

Long-term loans with outstanding maturityof less than one year and long-term loans
secured by mortgage

coded with X as prefix plus the F or AF code plus an affix
L1 indicating outstanding maturity of less than one year
and a suffix LM indicating loans secured by mortgage, forexample:Long-term loans with outstanding maturity of less than
one year and long-term loans secured by mortgage are
For transactions
XF42L1for long-term loans with outstanding maturity of less than one year

XF42LMfor long-term loans secured by mortgage

For stocks
XAF42L1

for long-term loans with outstanding maturity of less than one year

XAF42LMfor long-term loans secured by mortgage

Listed and unlisted investment shares
Listed and unlisted investment fund shares are coded withX as prefix plus the F or AF code plus 1 for listed and 2 forunlisted, for example:
For transactions

526

XF5221for transactions in listed non-MMF investment fund shares

XF5222for transactions in unlisted non-MMF investment fund shares

European system of accounts — ESA 2010

Classifications

23

For stocks
XAF5221for stocks of listed non-MMF investment fund shares

XAF5222for stocks of unlisted non-MMF investment fund shares

Arrears in interest and repayments
Arrears in interest and repayments are coded with X as
prefix plus the AF code plus an IA affix for interest arrears
and PA affix for repayment arrears, for example:
XAF42IAfor interest arrears on long-term loans; andXAF42PAfor repayment arrears on long-term loans.

Personal and total remittances

prefix plus the current transfer code plus a suffix PR for
personal remittances and TR for total remittances, as
follows:

Personal remittances and total remittances between resi­
dent and non-resident households are coded with X as
XD5452PR

for personal remittances between resident and non-resident households

XD5452TRfor total remittances between resident and non-resident households

A*10, A*21, A*38 and A*64 for economic activities andP*3, P*10, P*21, P*38 and P*64 for products. While notused in the ESA Transmission Programme, the levels
A*88 (NACE Rev.2) and P*88 (CPA) are also presented
in this Chapter.

Regrouping and coding of industries(A) and products (P)The classifications of activities and products to be used are
NACE Rev. 2 and CPA 2008. The corresponding aggregations for the ESA Transmission Programme are: A*3,

In the following, the new aggregations are presented.
A*3

Seq. No

NACE Rev. 2 sections

Description

1

A

Agriculture, forestry and fishing

2

B, C, D, E and F

Mining and quarrying; manufacturing; electricity, gas, steam and air
conditioning supply; water supply; sewerage, waste management andremediation activities, construction

3

G, H, I, J, K, L, M, N, O, P, Q,
R, S, T and U

Services

European system of accounts — ESA 2010

527

23

Classifications

A*10
Seq. No

NACE Rev. 2 sections

Description

1

A

Agriculture, forestry and fishing

2

B, C, D and E

Mining and quarrying; manufacturing; electricity, gas, steam and air
conditioning supply; water supply; sewerage, waste management andremediation activities

2aCof which: manufacturing3

F

Construction

4

G, H and I

Wholesale and retail trade; repair of motor vehicles and motorcycles;
transportation and storage; accommodation and food service activities

5

J

Information and communication

6

K

Financial and insurance activities

7

L

Real estate activities

8

M and N

Professional, scientific and technical activities; administrative and support
service activities

9O, P, and Q

Public administration and defence; compulsory social security; education;
human health and social work activities

10

R, S, T and U

Arts, entertainment and recreation; other service activities; activities ofhouseholds as employers; undifferentiated goods- and services-producing
activities of households for own use; activities of extraterritorial organisations
and bodies

Seq. No

NACE Rev. 2 section

NACE Rev. 2 division

Description

1

A

01-03

Agriculture, forestry and fishing

2

B

05-09

Mining and quarrying

3

C

10-33

Manufacturing

4

D

35

Electricity, gas, steam and air conditioning supply

5

E

36-39

Water supply; sewerage, waste management andremediation activities

6

F

41-43

Construction

7

G

45-47

Wholesale and retail trade; repair of motor
vehicles and motorcycles

8

H

49-53

Transportation and storage

9

I

55-56

Accommodation and food service activities

10

J

58-63

Information and communication

11

K

64-66

Financial and insurance activities

12

L

68

Real estate activities

13

M

69-75

Professional, scientific and technical activities

14

N

77-82

Administrative and support service activities

15

O

84

Public administration and defence; compulsory
social security

16

P

85

Education

17

Q

86-88

Human health and social work activities

18

R

90-93

Arts, entertainment and recreation

A*21

528

European system of accounts — ESA 2010

Classifications

Seq. No

NACE Rev. 2 section

NACE Rev. 2 division

Description

19

S

94-96

Other service activities

20

T

97-98

Activities of households as employers;
undifferentiated goods- and services-producing
activities of households for own use

21

U

99

Activities of extraterritorial organisations andbodies23

A*38
Seq. No

NACE Rev. 2 divisions

Description

1

01-03

Agriculture, forestry and fishing

2

05-09

Mining and quarrying

3

10-12

Manufacture of food products, beverages and tobacco products

4

13-15

Manufacture of textiles, wearing apparel and leather products

5

16-18

Manufacture of wood and paper products, and printing

6

19

Manufacture of coke and refined petroleum products

7

20

Manufacture of chemicals and chemical products

821

Manufacture of basic pharmaceutical products and pharmaceuticalpreparations

9

22-23

Manufacture of rubber and plastics products, and other non-metallic mineralproducts

10

24-25

Manufacture of basic metals and fabricated metal products, except
machinery and equipment

11

26

Manufacture of computer, electronic and optical products

1227

Manufacture of electrical equipment

13

28

Manufacture of machinery and equipment n.e.c.

14

29-30

Manufacture of transport equipment

15

31-33

Manufacture of furniture; other manufacturing; repair and installation ofmachinery and equipment

16

35

Electricity, gas, steam and air conditioning supply

17

36-39

Water supply; sewerage, waste management and remediation activities

18

41-43

Construction

19

45-47

Wholesale and retail trade, repair of motor vehicles and motorcycles

20

49-53

Transportation and storage

21

55-56

Accommodation and food service activities

22

58-60

Publishing, audiovisual and broadcasting activities

23

61

Telecommunications

24

62-63

Computer programming, consultancy and related activities; information
service activities

25

64-66

Financial and insurance activities

26

68

Real estate activities

26a
27of which: imputed rents of owner-occupied dwellings
69-71

European system of accounts — ESA 2010

Legal and accounting activities; activities of head offices; management
consultancy activities; architecture and engineering activities; technicaltesting and analysis

529

23

Classifications

Seq. No

NACE Rev. 2 divisions

Description

28

72

Scientific research and development

29

73-75

Advertising and market research; other professional, scientific and technicalactivities; veterinary activities

30

77-82

Administrative and support service activities

31

84

Public administration and defence; compulsory social security

32

85

Education

33

86

Human health activities

34

87-88

Social work activities

35

90-93

Arts, entertainment and recreation

36

94-96

Other service activities

37

97-98

Activities of households as employers of domestic personnel andundifferentiated goods and services production of households for own use

38

99

Activities of extra-territorial organisations and bodies

A*64

530

Seq. No

NACE Rev. 2 divisions

Description

1

01

Crop and animal production, hunting and related service activities

202

Forestry and logging

3

03

Fishing and aquaculture

4

05-09

Mining and quarrying

5

10-12

Manufacture of food products, beverages and tobacco products

6

13-15

Manufacture of textiles, wearing apparel and leather products

7

16

Manufacture of wood and of products of wood and cork, except furniture;
manufacture of articles of straw and plaiting materials

8

17

Manufacture of paper and paper products

918

Printing and reproduction of recorded media

10

19

Manufacture of coke and refined petroleum products

11

20

Manufacture of chemicals and chemical products

12

21

Manufacture of basic pharmaceutical products and pharmaceuticalpreparations

13

22

Manufacture of rubber and plastics products

14

23

Manufacture of other non-metallic mineral products

15

24

Manufacture of basic metals

16

25

Manufacture of fabricated metal products, except machinery and equipment

17

26

Manufacture of computer, electronic and optical products

18

27

Manufacture of electrical equipment

19

28

Manufacture of machinery and equipment n.e.c.

20

29

Manufacture of motor vehicles, trailers and semi-trailers

21

30

Manufacture of other transport equipment

22

31-32

Manufacture of furniture; other manufacturing

23

33

Repair and installation of machinery and equipment

24

35

Electricity, gas, steam and air conditioning supply

European system of accounts — ESA 2010

Classifications

Seq. No

NACE Rev. 2 divisions

Description

25

36

Water collection, treatment and supply

26

37-39

Sewerage; waste collection, treatment and disposal activities; materials
recovery; remediation activities and other waste management services

27

41-43

Construction

28

45

Wholesale and retail trade and repair of motor vehicles and motorcycles

2946

Wholesale trade, except of motor vehicles and motorcycles

30

47

Retail trade, except of motor vehicles and motorcycles

31

49

Land transport and transport via pipelines

32

50

Water transport

33

51

Air transport

34

52

Warehousing and support activities for transportation

35

53

Postal and courier activities

36

55-56

Accommodation; food and beverage service activities

37

58

Publishing activities

38

59-60

Motion picture, video and television programme production, soundrecording and music publishing activities; programming and broadcasting
activities

39

61

Telecommunications

40

62-63

Computer programming, consultancy and related activities; information
service activities

41

64

Financial service activities, except insurance and pension funding

42

65

Insurance, reinsurance and pension funding, except compulsory social
security

43

66

Activities auxiliary to financial services and insurance activities

44

68

Real estate activities

44a

23

of which: imputed rents of owner-occupied dwellings

45

69-70

Legal and accounting activities; activities of head offices; management
consultancy activities

46

71

Architecture and engineering activities; technical testing and analysis

47

72

Scientific research and development

48

73

Advertising and market research

49

74-75

Other professional, scientific and technical activities; veterinary activities

50

77

Rental and leasing activities

51

78

Employment activities

52

79

Travel agency, tour operator reservation service and related activities

53

80-82

Security and investigation activities; services to buildings and landscapeactivities; office administrative, office support and other business support

54

84

Public administration and defence; compulsory social security

55

85

Education

56

86

Human health activities

57

87-88

Social work activities

58

90-92

Creative, arts and entertainment activities; libraries, archives, museums andother cultural activities; gambling and betting activities

59

93

Sports activities and amusement and recreation activities

European system of accounts — ESA 2010

531

23

Classifications

Seq. No

NACE Rev. 2 divisions

Description

60

94

Activities of membership organisations

61

95

Repair of computers and personal and household goods

62

96

Other personal service activities

63

97-98

Activities of households as employers of domestic personnel andundifferentiated goods and services production of households for own use

64

99

Activities of extraterritorial organisations and bodies

A*88

532

Seq. No

NACE Rev. 2 divisions

Description

1

01

Crop and animal production, hunting and related service activities

202

Forestry and logging

3

03

Fishing and aquaculture

405

Mining of coal and lignite

506

Extraction of crude petroleum and natural gas

607

Mining of metal ores

708

Other mining and quarrying

809

Mining support service activities

9

10

Manufacture of food products

10

11

Manufacture of beverages

11

12

Manufacture of tobacco products

12

13

Manufacture of textiles

13

14

Manufacture of wearing apparel

14

15

Manufacture of leather and related products

15

16

Manufacture of wood and of products of wood and cork, except furniture;
manufacture of articles of straw and plaiting materials

16

17

Manufacture of paper and paper products

17

18

Printing and reproduction of recorded media

18

19

Manufacture of coke and refined petroleum products

19

20

Manufacture of chemicals and chemical products

20

21

Manufacture of basic pharmaceutical products and pharmaceuticalpreparations

21

22

Manufacture of rubber and plastic products

22

23

Manufacture of other non-metallic mineral products

23

24

Manufacture of basic metals

24

25

Manufacture of fabricated metal products, except machinery and equipment

25

26

Manufacture of computer, electronic and optical products

26

27

Manufacture of electrical equipment

27

28

Manufacture of machinery and equipment n.e.c.

28

29

Manufacture of motor vehicles, trailers and semi-trailers

29

30

Manufacture of other transport equipment

30

31

Manufacture of furniture

31

32

Other manufacturing

European system of accounts — ESA 2010

Classifications

Seq. No

NACE Rev. 2 divisions

Description

32

33

Repair and installation of machinery and equipment

33

35

Electricity, gas, steam and air conditioning supply

34

36

Water collection, treatment and supply

35

37

Sewerage

36

38

Waste collection, treatment and disposal activities; materials recovery

37

39

Remediation activities and other waste management services

38

41

Construction of buildings

39

42

Civil engineering

40

43Specialised construction activities

41

45

Wholesale and retail trade and repair of motor vehicles and motorcycles

4246

Wholesale trade, except of motor vehicles and motorcycles

43

47

Retail trade, except of motor vehicles and motorcycles

44

49

Land transport and transport via pipelines

45

50

Water transport

46

51

Air transport

47

52

Warehousing and support activities for transportation

48

53

Postal and courier activities

49

55

Accommodation

50

56

Food and beverage service activities

51

58

Publishing activities

52

59

Motion picture, video and television programme production, soundrecording and music publishing activities

53

60

Programming and broadcasting activities

54

61

Telecommunications

55

62

Computer programming, consultancy and related activities

56

63

Information service activities

57

64

Financial service activities, except insurance and pension funding

58

65

Insurance, reinsurance and pension funding, except compulsory social
security

59

66

Activities auxiliary to financial services and insurance activities

60

68

Real estate activities

60a

23

of which: imputed rents of owner-occupied dwellings

61

69

Legal and accounting activities

62

70

Activities of head offices; management consultancy activities

63

71

Architectural and engineering activities; technical testing and analysis

64

72

Scientific research and development

65

73

Advertising and market research

66

74

Other professional, scientific and technical activities

67

75

Veterinary activities

68

77

Rental and leasing activities

69

78

Employment activities

70

79

Travel agency, tour operator reservation service and related activities

European system of accounts — ESA 2010

533

23

Classifications

Seq. No

NACE Rev. 2 divisions

Description

71

80

Security and investigation activities

72

81

Services to buildings and landscape activities

73

82

Office administrative, office support and other business support activities

74

84

Public administration and defence; compulsory social security

75

85

Education

76

86

Human health activities

77

87

Residential care activities

78

88

Social work activities without accommodation

79

90

Creative, arts and entertainment activities

80

91

Libraries, archives, museums and other cultural activities

81

92

Gambling and betting activities

82

93

Sports activities and amusement and recreation activities

83

94

Activities of membership organisations

84

95

Repair of computers and personal and household goods

85

96

Other personal service activities

86

97

Activities of households as employers of domestic personnel

87

98

Undifferentiated goods- and services-producing activities of privatehouseholds for own use

88

99

Activities of extraterritorial organisations and bodies

P*3
Seq. No

CPA 2008 sections

Description

1

A

Products of agriculture, forestry and fishing

2

B, C, D, E and F

Mining and quarrying; manufactured products; electricity, gas, water andwaste management; constructions and construction work

3

G, H, I, J, K, L, M, N, O, P, Q,
R, S, T and U

Services

P*10

534

Seq. No

CPA 2008 sections

Description

1

A

Products of agriculture, forestry and fishing

2

B, C, D and E

Mining and quarrying; manufactured products; electricity, gas, water andwaste management

2aCof which: manufactured products

3

FConstructions and construction work

4

G, H and I

Wholesale and retail trade services; repair of motor vehicles and motorcycles
services; transportation and storage services; accommodation and foodservices

5

J

Information and communication services

6

K

Financial and insurance services

7

L

Real estate services

8

M and N

Professional, scientific and technical services; administrative and support
service services

European system of accounts — ESA 2010

Classifications

Seq. No

CPA 2008 sections

Description

9O, P, and Q

Public administration and defence services; compulsory social security
services; education; human health and social work services

10

R, S, T and U

Arts, entertainment and recreation services, repair of household goods andother services

23

P*21
Seq. No

CPA 2008 section

CPA 2008 division

Description

1

A

01-03

Products of agriculture, forestry and fishing

2

B

05-09

Mining and quarrying

3

C

10-33

Manufactured products

4

D

35

Electricity, gas, steam and air conditioning

5

E

36-39

Water supply; sewerage, waste management andremediation services

6

F

41-43

Constructions and construction works

7

G

45-47

Wholesale and retail trade services; repair
services of motor vehicles and motorcycles

8

H

49-53

Transportation and storage services

9

I

55-56

Accommodation and food services

10

J

58-63

Information and communication services

11

K

64-66

Financial and insurance services

12

L

68

Real estate services

13

M

69-75

Professional, scientific and technical services

14

N

77-82

Administrative and support services

15

O

84

Public administration and defence services;compulsory social security services

16

P

85

Education services

17

Q

86-88

Human health and social work services

18

R

90-93

Arts, entertainment and recreation services

19

S

94-96

Other services

20

T

97-98

Services of households as employers;
undifferentiated goods and services producedby households for own use

21

U

99

Services provided by extraterritorial organisations
and bodies

P*38
Seq. No

CPA 2008 divisions

Description

1

01-03

Products of agriculture, forestry and fishing

2

05-09

Mining and quarrying

3

10-12

Food products, beverages and tobacco products

4

13-15

Textiles, wearing apparel and leather products

5

16-18

Wood and paper products, and printing services

6

19

Coke and refined petroleum products

European system of accounts — ESA 2010

535

23

Classifications

Seq. No

CPA 2008 divisions

Description

7

20

Chemicals and chemical products

8

21

Basic pharmaceutical products and pharmaceutical preparations

9

22-23

Rubber and plastics products, and other non-metallic mineral products

10

24-25

Basic metals and fabricated metal products, except machinery andequipment

1126

Computer, electronic and optical products

1227Electrical equipment

1328

Machinery and equipment n.e.c.

14

29-30

Transport equipment

15

31-33

Furniture; other manufactured goods; repair and installation services ofmachinery and equipment

16

35

Electricity, gas, steam and air conditioning

17

36-39

Water supply; sewerage, waste management and remediation services

18

41-43

Constructions and construction works

19

45-47

Wholesale and retail trade services; repair services of motor vehicles andmotorcycles

20

49-53

Transportation and storage services

21

55-56

Accommodation and food services

22

58-60

Publishing, audiovisual and broadcasting services

23

61

Telecommunications services

24

62-63

Computer programming, consultancy and related services; information
services

25

64-66

Financial and insurance services

26

68

Real estate services

26a

536

of which: imputed rents of owner-occupied dwellings

27

69-71

Legal and accounting services; services of head offices; management
consultancy services; architectural and engineering services; technical testing
and analysis services

28

72

Scientific research and development services

29

73-75

Advertising and market research services; other professional, scientific andtechnical services; veterinary services

30

77-82

Administrative and support services

31

84

Public administration and defence services; compulsory social security
services32

85

Education services

33

86

Human health services

34

87-88

Social work services

35

90-93

Arts, entertainment and recreation services

36

94-96

Other services

37

97-98

Services of households as employers; undifferentiated goods and services
produced by households for own use

3899Services provided by extraterritorial organisations and bodies

European system of accounts — ESA 2010

Classifications

23

P*64
Seq. No

CPA 2008 divisions

Description

1

01

Products of agriculture, hunting and related services

202

Products of forestry, logging and related services

3

03

Fish and other fishing products; aquaculture products; support services tofishing

405-09

Mining and quarrying

5

10-12

Food products; beverages; tobacco products

6

13-15

Textiles; wearing apparel; leather and related products

7

16

Wood and products of wood and cork, except furniture; articles of straw andplaiting materials

817

Paper and paper products

918

Printing and recording services

10

19

Coke and refined petroleum products

11

20

Chemicals and chemical products

12

21

Basic pharmaceutical products and pharmaceutical preparations

13

22

Rubber and plastics products

14

23

Other non-metallic mineral products

15

24

Basic metals

1625

Fabricated metal products, except machinery and equipment

17

26

Computer, electronic and optical products

1827Electrical equipment

1928

Machinery and equipment n.e.c.

20

29Motor vehicles, trailers and semi-trailers

21

30

Other transport equipment

22

31-32

Furniture; other manufactured goods

23

33

Repair and installation services of machinery and equipment

24

35

Electricity, gas, steam and air conditioning

25

36

Natural water; water treatment and supply services

26

37-39

Sewerage services; sewage sludge; waste collection, treatment anddisposal services; materials recovery; remediation services and other waste
management services

27

41-43

Constructions and construction works

28

45

Wholesale and retail trade and repair services of motor vehicles andmotorcycles

2946

Wholesale trade services, except of motor vehicles and motorcycles

30

47

Retail trade services, except of motor vehicles and motorcycles

31

49

Land transport services and transport services via pipelines

32

50

Water transport services

33

51

Air transport services

34

52

Warehousing and support services for transportation

35

53

Postal and courier services

36

55-56

Accommodation and food services

European system of accounts — ESA 2010

537

23

Classifications

Seq. No

CPA 2008 divisions

Description

37

58

Publishing services

38

59-60

Motion picture, video and television programme production services, soundrecording and music publishing; programming and broadcasting services

39

61

Telecommunications services

40

62-63

Computer programming, consultancy and related services; information
services

41

64

Financial services, except insurance and pension funding

42

65

Insurance, reinsurance and pension funding services, except compulsory
social security

43

66

Services auxiliary to financial services and insurance services

44

68

Real estate services

44aof which: imputed rents of owner-occupied dwellings

45

69-70

Legal and accounting services; services of head offices; management
consulting services

46

71

Architecture and engineering services; technical testing and analysis services

47

72

Scientific research and development services

48

73

Advertising and market research services

49

74-75

Other professional, scientific and technical services; veterinary services

50

77

Rental and leasing services

51

78

Employment services

52

79

Travel agency, tour operator and other reservation services and related
services

53

80-82

Security and investigation services; services to buildings and landscape;office administrative, office support and other business support services

54

84

Public administration and defence services; compulsory social security
services55

85

Education services

56

86

Human health services

57

87-88

Residential care services; social work services without accommodation

58

90-92

Creative, arts and entertainment services; library, archive, museum and othercultural services; gambling and betting services

59

93Sporting services and amusement and recreation services

60

94

Services furnished by membership organisations

61

95

Repair services of computers and personal and household goods

62

96

Other personal services

63

97-98

Services of households as employers of domestic personnel andundifferentiated goods and services produced by private households forown use64

99

Services provided by extraterritorial organisations and bodies

P*88

538

Seq. No

CPA 2008 divisions

Description

1

01

Products of agriculture, hunting and related services

202

Products of forestry, logging and related services

European system of accounts — ESA 2010

Classifications

Seq. No

CPA 2008 divisions

Description

3

03

Fish and other fishing products; aquaculture products; support services tofishing

405

Coal and lignite

506

Crude petroleum and natural gas

6

07

Metal ores

708

Other mining and quarrying products

809

Mining support services

9

10

Food products

1011

Beverages

1112

Tobacco products

12

13

Textiles13

14

Wearing apparel

14

15

Leather and related products

15

16

Wood and products of wood and cork, except furniture; articles of straw andplaiting materials

16

17

Paper and paper products

17

18

Printing and recording services

18

19

Coke and refined petroleum products

19

20

Chemicals and chemical products

20

21

Basic pharmaceutical products and pharmaceutical preparations

21

22

Rubber and plastics products

22

23

Other non-metallic mineral products

23

24

Basic metals

24

25

Fabricated metal products, except machinery and equipment

25

26

Computer, electronic and optical products

2627Electrical equipment27

28

Machinery and equipment n.e.c.

28

29Motor vehicles, trailers and semi-trailers

29

30

Other transport equipment

30

31

Furniture31

32

Other manufactured goods

32

33

Repair and installation services of machinery and equipment

33

35

Electricity, gas, steam and air conditioning

34

36

Natural water; water treatment and supply services

35

37

Sewerage services; sewage sludge

36

38

Waste collection, treatment and disposal services; materials recovery services

37

39

Remediation services and other waste management services

38

41

Buildings and building construction works

39

42

Constructions and construction works for civil engineering

40

43Specialised construction works

41

45

Wholesale and retail trade and repair services of motor vehicles andmotorcycles

European system of accounts — ESA 2010

23

539

23

Classifications

Seq. No

CPA 2008 divisions

Description

42

46

Wholesale trade services, except of motor vehicles and motorcycles

43

47

Retail trade services, except of motor vehicles and motorcycles

44

49

Land transport services and transport services via pipelines

45

50

Water transport services

46

51

Air transport services

47

52

Warehousing and support services for transportation

48

53

Postal and courier services

49

55

Accommodation services

50

56

Food and beverage serving services

51

58

Publishing services

52

59

Motion picture, video and television programme production services, soundrecording and music publishing

53

60

Programming and broadcasting services

54

61

Telecommunications services

55

62

Computer programming, consultancy and related services

56

63

Information services

57

64

Financial services, except insurance and pension funding

58

65

Insurance, reinsurance and pension funding services, except compulsory
social security

59

66

Services auxiliary to financial services and insurance services

60

68

Real estate services

60a

540

of which: imputed rents of owner-occupied dwellings

61

69

Legal and accounting services

62

70

Services of head offices; management consulting services

63

71

Architectural and engineering services; technical testing and analysis services

64

72

Scientific research and development services

65

73

Advertising and market research services

66

74

Other professional, scientific and technical services

67

75

Veterinary services

68

77

Rental and leasing services

69

78

Employment services

70

79

Travel agency, tour operator and other reservation services and related
services

71

80

Security and investigation services

72

81

Services to buildings and landscape

73

82

Office administrative, office support and other business support services

74

84

Public administration and defence services; compulsory social security
services75

85

Education services

76

86

Human health services

77

87

Residential care services

78

88

Social work services without accommodation

European system of accounts — ESA 2010

Classifications

Seq. No

CPA 2008 divisions

Description

79

90

Creative, arts and entertainment services

80

91

Library, archive, museum and other cultural services

81

92

Gambling and betting services

82

93Sporting services and amusement and recreation services

83

94

Services furnished by membership organisations

84

95

Repair services of computers and personal and household goods

85

96

Other personal services

86

97

Services of households as employers of domestic personnel

87

98

Undifferentiated goods and services produced by private households forown use88

99

Services provided by extraterritorial organisations and bodies

23

Classification of the functions of thegovernment (COFOG)
01

General public services

01.1

Executive and legislative organs, financial and fiscal affairs, external affairs

01.2

Foreign economic aid

01.3

General services

01.4

Basic research

01.5

R&D general public services

01.6

General public services n.e.c.

01.7

Public debt transactions

01.8

Transfers of a general character between different levels of government

02

Defence

02.1

Military defence

02.2

Civil defence

02.3

Foreign military aid

02.4

R&D defence

02.5

Defence n.e.c.

03

Public order and safety

03.1

Police services

03.2

Fire-protection services

03.3

Law courts

03.4

Prisons

03.5

R&D public order and safety

03.6

Public order and safety n.e.c.

04

Economic affairs

04.1

General economic, commercial and labour affairs

European system of accounts — ESA 2010

541

23

542

Classifications

04.2

Agriculture, forestry, fishing and hunting

04.3

Fuel and energy

04.4

Mining, manufacturing and construction

04.5

Transport

04.6

Communication

04.7

Other industries

04.8

R&D economic affairs

04.9

Economic affairs n.e.c.

05

Environmental protection

05.1

Waste management

05.2

Waste water management

05.3

Pollution abatement

05.4

Protection of biodiversity and landscape

05.5

R&D environmental protection

05.6

Environmental protection n.e.c.

06

Housing and community amenities

06.1

Housing development

06.2

Community development

06.3

Water supply

06.4

Street lighting

06.5

R&D housing and community amenities

06.6

Housing and community amenities n.e.c.

07

Health07.1

Medical products, appliances and equipment

07.2

Outpatient services

07.3

Hospital services

07.4

Public health services

07.5

R&D health

07.6

Health n.e.c.

08

Recreation, culture and religion

08.1

Recreational and sporting services

08.2

Cultural services

08.3

Broadcasting and publishing services

08.4

Religious and other community services

08.5

R&D recreation, culture and religion

08.6

Recreation, culture and religion n.e.c.

09

Education

09.1

Pre-primary and primary education

09.2

Secondary education

09.3

Post-secondary non-tertiary education

09.4

Tertiary education

09.5

Education not definable by level

European system of accounts — ESA 2010

Classifications

09.6

Subsidiary services to education

09.7

R&D education

09.8

Education n.e.c.

10Social protection

10.1

Sickness and disability

10.2

Old age

10.3

Survivors

10.4

Family and children

10.5

Unemployment

10.6

Housing

10.7

Social exclusion n.e.c.

10.8

R&D social protection

10.9

Social protection n.e.c.

23Classification of individual
consumption by purpose (Coicop)
01-12 Individual consumption expenditure of households
01

Food and non-alcoholic beverages

01.1

Food

01.2

Non-alcoholic beverages

02

Alcoholic beverages, tobacco and narcotics

02.1

Alcoholic beverages

02.2

Tobacco02.3

Narcotics

03

Clothing and footwear

03.1

Clothing

03.2

Footwear04

Housing, water, electricity, gas and other fuels

04.1

Actual rentals for housing

04.2

Imputed rentals for housing

04.3

Maintenance and repair of the dwelling

04.4

Water supply and miscellaneous services relating to the dwelling

04.5

Electricity, gas and other fuels

05

Furnishings, household equipment and routine household maintenance05.1

Furniture and furnishings, carpets and other floor coverings

05.2

Household textiles

05.3

Household appliances

05.4

Glassware, tableware and household utensils

05.5

Tools and equipment for house and garden

European system of accounts — ESA 2010

543

23

544

Classifications

05.6

Goods and services for routine household maintenance

06

Health06.1

Medical products, appliances and equipment

06.2

Outpatient services

06.3

Hospital services

07

Transport

07.1

Purchase of vehicles

07.2

Operation of personal transport equipment

07.3

Transport services

08

Communication

08.1

Postal services

08.2

Telephone and telefax equipment

08.3

Telephone and telefax services

09

Recreation and culture

09.1

Audio-visual, photographic and information processing equipment

09.2

Other major durables for recreation and culture

09.3

Other recreational items and equipment, gardens and pets

09.4

Recreational and cultural services

09.5

Newspapers, books and stationery

09.6

Package holidays

10

Education

10.1

Pre-primary and primary education

10.2

Secondary education

10.3

Post-secondary non-tertiary education

10.4

Tertiary education

10.5

Education not definable by level

11

Restaurants and hotels

11.1

Catering services

11.2

Accommodation services

12

Miscellaneous goods and services

12.1

Personal care

12.2

Prostitution

12.3

Personal effects n.e.c.

12.4

Social protection

12.5

Insurance

12.6

Financial services n.e.c.

12.7

Other services n.e.c.

13

Individual consumption expenditure of non-profit institutions serving households (NPISHs)

13.1

Housing

13.2

Health

13.3

Recreation and culture

European system of accounts — ESA 2010

Classifications

13.4

Education

13.5

Social protection

13.6

Other services

14

Individual consumption expenditure of general government

14.1

Housing

14.2

Health

14.3

Recreation and culture

14.4

Education

14.5

Social protection

23

Classification of the purposes of nonprofit institutions serving households(COPNI)01

Housing

02.

Health02.1

Medical products, appliances and equipment

02.2

Outpatient services

02.3

Hospital services

02.4

Public health services

02.5

R&D health

02.6

Other health services

03

Recreation and culture

03.1

Recreational and sporting services

03.2

Cultural services

04

Education

04.1

Pre-primary and primary education

04.2

Secondary education

04.3

Post-secondary non-tertiary education

04.4

Tertiary education

04.5

Education not definable by level

04.6

R&D education

04.7

Other educational services

05

Social protection

05.1

Social protection services

05.2

R&D social protection

06

Religion

07

Political parties, labour and professional organisations

07.1

Services of political parties

07.2

Services of labour organisations

European system of accounts — ESA 2010

545

23

Classifications

07.3

Services of professional organisations

08

Environmental protection

08.1

Environmental protection services

08.2

R&D environmental protection

09

Services n.e.c.

09.1

Services n.e.c. (excluding R&D)

09.2

R&D services n.e.c.

Classification of outlays of producers bypurpose (COPP)

546

01

Outlays on infrastructure

01.1

Outlays on road and land construction and improvement

01.2

Outlays on engineering and related technological work

01.3

Outlays on information management

02

Outlays on research and development

02.1

Outlays on research and experimental development on natural sciences and engineering

02.2

Outlays on research and experimental development on social sciences and humanities

03

Outlays on environmental protection

03.1

Outlays on protection of ambient air and climate

03.2

Outlays on waste water management

03.3

Outlays on waste management

03.4

Outlays on protection of soil and groundwater

03.5

Outlays on noise and vibration abatement

03.6

Outlays on protection of biodiversity and landscape

03.7

Outlays on environmental protection n.e.c.

04

Outlays on marketing

04.1

Outlays on direct sales effects

04.2

Outlays on advertising

04.3

Outlays on marketing n.e.c.

05

Outlays on human resource development

05.1

Outlays on education and training

05.2

Outlays on health05.3

Outlays on social services

06

Outlays on current production programmes, administration and management

06.1

Outlays on current production programmes

06.2

Outlays on external transportation

06.3

Outlays on safety and security

06.4

Outlays on management and administration

European system of accounts — ESA 2010

The accounts

24

CHAPTER 24
The accounts
Table 24.1 — Account 0: Goods and services accountResources

Uses

P.1

Output

3 604 P.2

Intermediate consumption

1 883

P.11

Market output

3 077 P.3

Final consumption expenditure

1 399

P.12

Output for own final use

147 P.31

Individual consumption
expenditure

1 230

P.13

Non-market output

380 P.32

Collective consumption
expenditure

169

D.21

Taxes on products

141 P.5g

Gross capital formation

414

P.511

Acquisitions less disposals of fixed
assets359–8 P.5111

Acquisitions of new fixed assets

358

Acquisitions of existing fixed
assets9

D.31

Subsidies on products

P.5112
P.7

Imports of goods and services

499 P.5113

Disposals of existing fixed assets

–8

P.71

Imports of goods

392 P.512

Costs of ownership transfer on
non-produced assets

17

P.72

Imports of services

107
P.52

Changes in inventories

28

P.53

Acquisitions less disposals ofvaluables

10

P.6

Exports of goods and services

540

P.61

Exports of goods

462

P.62

Exports of services

78

European system of accounts — ESA 2010

547

24

The accounts

Table 24.2 — Full sequence of accounts for the total economy
I: Production account
Uses
P.2

Resources
Intermediate consumption

1 883 P.1

B.1*g

Gross domestic productP.51c

Consumption of fixed capital

222

B.1*n

Net domestic product1 632

Output

3 604

P.11

Market output

3 077

P.12

Output for own final use

147

P.13

Non-market output

380

D.21 – D.31

Taxes less subsidies on products

133

1 854

II: Distribution and use of income accounts
II.1: Primary distribution of income accountII.1.1: Generation of income account
Uses

548

Resources

D.1

Compensation of employees

1 150 B.1*g

Gross domestic product

1 854

D.11

Wages and salaries

950 B.1*n

Net domestic product

1 632

D.12

Employers’ social contributions

200

D.121

Employers’ actual social
contributions

181

D.1211

Employers’ actual pension
contributions

168

D.1212

Employers’ actual non-pension
contributions

13

D.122

Employers’ imputed social
contributions

19

D.1221

Employers’ imputed pension
contributions

18

D.1222

Employers’ imputed non-pension
contributions

1

D.2

Taxes on production and imports

235

D.21

Taxes on products

141

D.211

Value added type taxes (VAT)

121

D.212

Taxes and duties on imports
excluding VAT

17

D.2121

Import duties

17

D.2122

Taxes on imports excluding VAT
and duties

0

D.214

Taxes on products except VAT andimport taxes

3

D.29

Other taxes on production

94

D.3

Subsidies

–44

D.31

Subsidies on products

–8

D.311

Import subsidies0

European system of accounts — ESA 2010

The accounts

Uses

24

Resources

D.319

Other subsidies on products

–8

D.39

Other subsidies on production

–36

B.2g

Operating surplus, gross

452

B.3g

Mixed income, gross61

P.51c1

Consumption of fixed capital on
gross operating surplus

214

P.51c2

Consumption of fixed capital on
gross mixed income

8

B.2n

Operating surplus, net

238

B.3n

Mixed income, net

53II.1.2: Allocation of primary income account
Uses

Resources

D.4

Property income

391 B.2g

Operating surplus. gross

452

D.41

Interest

217 B.3g

Mixed income, gross

61

D.42

Distributed income ofcorporations

62 B.2nOperating surplus, net

238

D.421

Dividends

54 B.3nMixed income, net

53

D.422

Withdrawals from income ofquasi-corporations

8

D.43

Reinvested earnings on foreign
direct investment

0 D.1

Compensation of employees

1 154

D.44

Other investment income

47 D.11

Wages and salaries

954

D.441

Investment income attributable
to insurance

Employers’ social contributions

200

Employers’ actual social
contributions

181

Employers’ actual pension
contributions

168

Employers’ actual non-pension
contributions

13

policy holders
D.442

D.4431

D.45

D.1211
8 D.1212

Investment income attributable
to collective

D.122

Employers’ imputed social
contributions

19

investment fund shareholders

14 D.1221

Employers’ imputed pension
contributions

18

D.1222

Employers’ imputed non-pension
contributions

1

Retained earnings attributable tocollective

D.2

Taxes on production and imports

235

investment fund shareholders

8 D.21

Taxes on products

141

Rent

65 D.211

Value added type taxes (VAT)

121

D.212

Taxes and duties on imports
excluding VAT

17

D.2121

Import duties

17

Dividends attributable tocollective
investment fund shareholders

D.443225 D.121

Investment income payable on
pensionentitlements

D.443

D.12

European system of accounts — ESA 2010

6

549

24

The accounts

Uses

Resources

B.5*g

Gross national income

1 864

B.5*n

Net national income

1 642

D.2122

Taxes on imports excluding VAT
and duties

0

D.214

Taxes on products except VAT andimport taxes

3

D.29

Other taxes on production

94

D.3

Subsidies

–44

D.31

Subsidies on products

–8

D.311

Import subsidies

0

D.319

Other subsidies on products

–8

D.39

Other subsidies on production

–36

D.4

Property income

397

D.41

Interest

209

D.42

Distributed income ofcorporations

62

D.421

Dividends

53

D.422

Withdrawals from income ofquasi-corporations

9

D.43

Reinvested earnings on foreign
direct investment

14

D.44

Other investment income

47

D.441

Investment income attributable
to insurance policy holders

25

D.442

Investment income payable on
pension entitlements

8

D.443

Investment income attributable
to collective investment fundshareholders

14

D.4431Dividends attributable tocollective investment fundshareholders

6

D.4432Retained earnings attributable
to collective investment fundshareholders

8

D.45

Rent

65

II.1.2.1: Entrepreneurial income account
Uses

550

Resources

D.4

Property income

240 B.2g

Operating surplus, gross

452

D.41

Interest

162 B.3g

Mixed income, gross

61

D.44

Other investment income

47 B.2nOperating surplus, net

238

D.441

Investment income attributable
to insurance policy holders

25 B.3nMixed income, net

53European system of accounts — ESA 2010

The accounts

Uses
D.442

Resources
Investment income payable on
pensionentitlements

D.443

D.45

24

8 D.4

Investment income attributable
to collective

D.41

Property income

245Interest

139

investment fund shareholders

14 D.42

Distributed income ofcorporations

35

Rent

31 D.421

Dividends

35

D.422

Withdrawals from income ofquasi-corporations

0

D.43

Reinvested earnings on foreign
direct investment

11

D.44

Other investment income

16

D.441

Investment income attributable
to insurance policy holders

5

D.442

Investment income payable on
pension entitlements

0

D.443

Investment income attributable
to collective investment fundshareholders

11

D.45

Rent

44

B.4g

Entrepreneurial income, gross

343

B.4n

Entrepreneurial income, net

174II.1.2.2: Allocation of other primary income account
Uses

Resources

D.4

Property income

151 B.4g

Entrepreneurial income. gross

343

D.41

Interest

55 B.4n

Entrepreneurial income, net

174

D.42

Distributed income ofcorporations

62

D.421

Dividends

54 D.1Compensation of employees

1 154

D.422

Withdrawals from income ofquasi-corporations

8 D.11

Wages and salaries

954

D.43

Reinvested earnings on foreign
direct investment

0 D.12

Employers’ social contributions

200

D.44

Other investment income

D.121

Employers’ actual social
contributions

181

D.441

Investment income attributable
to insurance

D.122

Employers’ imputed social
contributions

19

Investment income payable on
pensionD.2

Taxes on production and imports

235

entitlements

D.21

Taxes on products

141

Investment income attributable
to collective

D.211

Value added type taxes (VAT)

121

investment fund shareholders

D.212

Taxes and duties on imports
excluding VAT

17policy holders
D.442

D.443

European system of accounts — ESA 2010

551

24

The accounts

Uses
D.45

ResourcesRent

34 D.2121

B.5*g

Gross national income

1 864

B.5*n

Net national income

1 642

Import duties

17

D.2122

Taxes on imports excluding VAT
and duties

0

D.214

Taxes on products except VAT andimport taxes

3

D.29

Other taxes on production

94

D.3

Subsidies

–44

D.31

Subsidies on products

–8

D.311

Import subsidies

0

D.319

Other subsidies on products

–8

D.39

Other subsidies on production

–36

D.4

Property income

152

D.41

Interest

70

D.42

Distributed income ofcorporations

27

D.421

Dividends

18

D.422

Withdrawals from income ofquasi-corporations

9

D.43

Reinvested earnings on foreign
direct investment

3

D.44

Other investment income

31

D.441

Investment income attributable
to insurance policy holders

20

D.442

Investment income payable on
pension entitlements

8

D.443

Investment income attributable
to collective investment fundshareholders

3

D.45

Rent

21

II.2: Secondary distribution of income account
Uses

Resources
Current transfers

552

1 212 B.5*g

Gross national income

1 864

Net national income

1 642

D.5

Current taxes on income, wealth,etc.

212 B.5*n

D.51

Taxes on income

203

D.59

Other current taxes

D.61

Net social contributions

333 D.5

Current taxes on income, wealth,
etc.

213

D.611

Employers’ actual social
contributions

181 D.51

Taxes on income

204

D.6111

Employers’ actual pension
contributions

168 D.59

Other current taxes

9

9 Current transfers

European system of accounts — ESA 2010

1 174

The accounts

Uses

24

Resources

D.6112

Employers’ actual non-pension
contributions

13 D.61

Net social contributions

333

D.612

Employers’ imputed social
contributions

19 D.611

Employers’ actual social
contributions

181

D.6121

Employers’ imputed pension
contributions

18 D.6111

Employers’ actual pension
contributions

168

D.6122

Employers’ imputed non-pension
contributions

1 D.6112

Employers’ actual non-pension
contributions

13

D.613

Households’ actual social
contributions

129 D.612

Employers’ imputed social
contributions

19

D.6131

Households’ actual pension
contributions

115 D.6121

Employers’ imputed pension
contributions

18

D.6132

Households’ actual non-pension
contributions

14 D.6122

Employers’ imputed non-pension
contributions

1

D.614

Households’ social contribution
supplements

10 D.613

Households’ actual social
contributions

129

D.6141

Households’ pension contribution
supplements

8 D.6131

Households’ actual pension
contributions

115

D.6142

Households’ non-pension
contribution supplements

2 D.6132

Households’ actual non-pension
contributions

14

D.61SC

Social insurance scheme service
charges–6 D.614

Households’ social contribution
supplements

10Households’ pension contribution
supplements

8

D.6141
D.62

Social benefits other than socialtransfers in kind

384 D.6142

Households’ non-pension
contribution supplements

2

D.621

Social security benefits in cash

53 D.61SC

Social insurance scheme service
charges

6

D.6211Social security pension benefits
in cash45

D.6212Social security non-pension
benefits in cash

8 D.62Social benefits other than socialtransfers in kind

384

D.622

Other social insurance benefits

279 D.621

Social security benefits in cash

53

D.6221Other social insurance pension
benefits

250 D.6211

Social security pension benefits
in cash45

D.6222Other social insurance nonpension benefits

29 D.6212

Social security non-pension
benefits in cash

8

D.623

Social assistance benefits in cash

52 D.622

Other social insurance benefits279

D.6221Other social insurance pension
benefits250

D.7

Other current transfers

283 D.6222

Other social insurance nonpension benefits

29

D.71

Net non-life insurance premiums

56 D.623

Social assistance benefits in cash

52

D.711

Net non-life direct insurance
premiums

43

D.712

Net non-life reinsurance
premiums

13 D.7

Other current transfers

244

D.72

Non-life insurance claims

48 D.71

Net non-life insurance premiums

47

European system of accounts — ESA 2010

553

24

The accounts

Uses

Resources

D.721

Non-life direct insurance claims

45 D.711

Net non-life direct insurance
premiums

44

D.722

Non-life reinsurance claims

3 D.712

Net non-life reinsurance
premiums

3

D.73

Current transfers within general
government

96 D.72

Non-life insurance claims

57

D.74

Current international cooperation

22 D.721

Non-life direct insurance claims

42

D.75

Miscellaneous current transfers

52 D.722

Non-life reinsurance claims

15

D.751

Current transfers to NPISHs

36 D.73

Current transfers within general
government

96

D.752

Current transfers between
households

7 D.74Current international cooperation

1

D.759

Other miscellaneous current
transfers

9 D.75

Miscellaneous current transfers

43

D.76

VAT- and GNI-based EU own
resources

9 D.751

Current transfers to NPISHs

36

D.752

Current transfers between
households

1

D.759

Other miscellaneous current
transfers

6

B.6*g

National disposable income,
gross

1 826

B.6*n

National disposable income, net

1 604

II.3: Redistribution of income in kind account
Uses

554

Resources

D.63

Social transfers in kind

215 B.6*g

National disposable income,
gross

1 826

D.631

Social transfers in kind —non-market production

211 B.6*n

National disposable income, net

1 604

D.632

Social transfers in kind —purchased market production

4

B.7*g

Adjusted national disposable
income, gross

1 826

B.7*n

Adjusted national disposable
income, net

1 604

D.63

Social transfers in kind

215

D.631

Social transfers in kind — nonmarket production

211

D.632

Social transfers in kind —purchased market production

4

European system of accounts — ESA 2010

The accounts

24

II.4: Use of income accountII.4.1: Use of disposable income account
Uses

Resources
B.6*g

P.3

Final consumption expenditure

1 399 B.6*n

P.31

Individual consumption
expenditure

1 230

P.32

Collective consumption
expenditure

169 D.8

D.8

Adjustment for the change inpension entitlements

11

B.8*g

National saving, gross

427

B.8*n

National saving, net

205

National disposable income,
gross

1 826

National disposable income, net

1 604

Adjustment for the change inpension entitlements

11

Adjusted disposable income,
gross

1 826

Adjusted disposable income, net

1 604

II.4.2: Use of adjusted disposable income account
Uses

Resources
B.7g

P.4

Actual final consumption

1 399 B.7n

P.41

Actual individual consumption

1 230

P.42

Actual collective consumption

169 D.8

D.8

Adjustment for the change inpension entitlements

11

B.8*g

National saving, gross

427

B.8*n

National saving, net

205

Adjustment for the change inpension entitlements

11

III: Accumulation accounts
III.1: Capital accountIII.1.1: Change in net worth due to saving and capital transfers account
Changes in assets
B.101

Changes in net worth due tosaving and capital transfers

European system of accounts — ESA 2010

Changes in liabilities and net worth
National saving, net

205

D.9r

Capital transfers, receivable

62

D.91r

Capital taxes, receivable

2

D.92r

Investment grants, receivable

23

D.99r

Other capital transfers, receivable

37

D.9p

Capital transfers, payable

–65

D.91p

Capital taxes, payable

–2

D.92p

Investment grants, payable

–27

D.99p

Other capital transfers, payable–36

202 B.8*n

555

24

The accounts

III.1.2: Acquisition of non-financial assets account
Changes in assets

Changes in liabilities and net worth

P.5g

Gross capital formation

414 B.101

P.5n

Net capital formation

192

P.51g

Gross fixed capital formation

376

P.511

Acquisitions less disposals of fixed
assets359

P.5111

Acquisitions of new fixed assets

358

P.5112Acquisitions of existing fixed
assets

9P.5113

Disposal of existing fixed assets

–8

P.512

Costs of ownership transfer on
non-produced assets

17

P.51c

Consumption of fixed capital

–222

P.52

Changes in inventories

28

P.53

Acquisitions less disposals ofvaluables

10NP

Acquisitions less disposals of nonproduced assets

0

NP.1

Acquisitions less disposals ofnatural resources

0

NP.2

Acquisitions less disposals ofcontracts, leases and licences

0

NP.3

Purchases less sales of goodwill
and marketing assets

0

B.9

Net lending (+)/net borrowing(–)

10

Changes in net worth due tosaving and capital transfers

202

III.2: Financial account
Changes in assets

Changes in liabilities and net worth
B.9

556

Net lending (+)/net borrowing
(–)

10

F

Net acquisition of financial assets

436 F

Net incurrence of liabilities

426

F.1

Monetary gold and SDRs

–1 F.1

Monetary gold and SDRs

0

F.11

Monetary gold

–1 F.11

Monetary gold

F.12

SDRs

0 F.12

SDRs

F.2

Currency and deposits

89 F.2Currency and deposits

102

F.21

Currency

33 F.21

Currency

35

F.22

Transferable deposits

26 F.22

Transferable deposits

28

F.221

Inter-bank positions–5 F.221Inter-bank positions

–5

F.229

Other transferable deposits

31 F.229

Other transferable deposits

33

F.29

Other deposits

30 F.29

Other deposits

39

F.3

Debt securities

86 F.3

Debt securities

74

F.31

Short-term

27 F.31

Short-term

24

European system of accounts — ESA 20100

The accounts

Changes in assets

24

Changes in liabilities and net worth

F.32

Long-term

59 F.32

Long-term

50

F.4

Loans

78 F.4

Loans

47

F.41

Short-term

22 F.41

Short-term

11

F.42

Long-term

56 F.42

Long-term

36

F.5

Equity and investment fundshares107 F.5

Equity and investment fundshares105

F.51

Equity91 F.51

Equity94

F.511

Listed shares

77 F.511

Listed shares

84

F.512

Unlisted shares

7 F.512

Unlisted shares

7

F.519

Other equity

7 F.519

Other equity

3

F.52

Investment fund shares/units

16 F.52

Investment fund shares/units

11

F.521

Money market fund shares/units

7 F.521

Money market fund shares/units

5

F.522

Non-MMF investment fundshares/units

9 F.522

Non-MMF investment fundshares/units

6

F.6

Insurance, pension andstandardised guarantee schemes

48 F.6

Insurance, pension andstandardised guarantee schemes

48

F.61

Non-life insurance technicalreserves

7 F.61

Non-life insurance technicalreserves

7

F.62

Life insurance and annuity
entitlements

22 F.62

Life insurance and annuity
entitlements

22

F.63

Pension entitlements

11 F.63

Pension entitlements

11

F.64

Claim of pension fund on pension
managers

3 F.64Claim of pension fund on pension
managers

3

F.65

Entitlements to non-pension
benefits

2 F.65

Entitlements to non-pension
benefits

2

F.66

Provisions for calls understandardised guarantees

3 F.66

Provisions for calls understandardised guarantees

3

F.7

Financial derivatives andemployee stock options

14 F.7

Financial derivatives andemployee stock options

11

F.71

Financial derivatives

12 F.71

Financial derivatives

9

F.711

Options

5 F.711

Options4

F.712

Forwards

7 F.712Forwards

5

F.72

Employee stock options

2 F.72

Employee stock options

2

F.8

Other accounts receivable/
payable15 F.8Other accounts receivable/
payable39

F.81

Trade credits and advances

7 F.81

Trade credits and advances

16

F.89

Other accounts receivable/
payable, excluding trade credits
and advances

8 F.89Other accounts receivable/
payable, excluding trade credits
and advances

23

III.3: Other changes in assets accounts
III.3.1: Other changes in volume of assets account
Changes in assets

Changes in liabilities and net worth

K.1

Economic appearance of assets

33 K.5

Other changes in volume n.e.c.

AN.1

Produced non-financial assets

3 AN.1

Produced non-financial assets

European system of accounts — ESA 2010

1

557

24

The accounts

Changes in assets

558

Changes in liabilities and net worth

AN.2

Non-produced non-financial
assets30 AN.2

Non-produced non-financial
assetsAN.21

Natural resources

26 AF

Financial assets/liabilities

1

AN.22

Contracts, leases and licences

4 K.6

Changes in classification

2

AN.23

Purchases less sales of goodwill
and marketing assets

0 K.61

Changes in sector classificationand structure2

K.2

Economic disappearance of nonproduced assets–11 AN.1

Produced non-financial assets

K.21

Depletion of natural resources–8 AN.2

Non-produced non-financial
assetsAN.21

Natural resources–8 AF

Financial assets/liabilities

2

K.22

Other economic disappearance of
non-produced assets–3 K.62

Changes in classification of assets
and liabilities

0

AN.21

Natural resources

0 AN.1

Produced non-financial assets

AN.22

Contracts, leases and licences–1 AN.2

Non-produced non-financial
assets

AN.23

Purchases less sales of goodwill
and marketing assets–2 AF

Financial assets/liabilities

K.3

Catastrophic losses–11 Total other changes in volume

AN.1

Produced non-financial assets–9 AN.1

Produced non-financial assets

AN.2

Non-produced non-financial
assets–2 AN.11

Fixed assets

AF

Financial assets/liabilities

0 AN.12Inventories

K.4

Uncompensated seizures

0 AN.13

Valuables

AN.1

Produced non-financial assets

0 AN.2

Non-produced non-financial
assetsAN.2

Non-produced non-financial
assets

0 AN.21Natural resources

AF

Financial assets

0 AN.22

Contracts, leases and licences

K.5

Other changes in volume n.e.c.

2 AN.23

Purchases less sales of goodwill
and marketing assets

AN.1

Produced non-financial assets

1 AF

Financial assets

AN.2

Non-produced non-financial
assets

0 AF.1

Monetary gold and SDRs

AF

Financial assets/liabilities

1 AF.2Currency and deposits

K.6

Changes in classification

0 AF.3

Debt securities

K.61

Changes in sector classificationand structure

2 AF.4

Loans

0

AN.1

Produced non-financial assets

0 AF.5Equity and investment fundshares2

AN.2

Non-produced non-financial
assets

0 AF.6

Insurance pension andstandardised guarantee schemes

1

AF

Financial assets/liabilities

2 AF.7

Financial derivatives andemployee stock options

K.62

Changes in classification of assets
and liabilities–2 AF.8

Other accounts receivable/
payableEuropean system of accounts — ESA 2010

0
3

3

The accounts

Changes in assets

24

Changes in liabilities and net worth

AN.1

Produced non-financial assets

–2

AN.2

Non-produced non-financial
assets0

AF

Financial assets/liabilities

0

Total other changes in volume

13

AN.1

Produced non-financial assets

–7

AN.11

Fixed assets

–2

AN.12

Inventories

–3

AN.13

Valuables

–2

AN.2

Non-produced non-financial
assets17

AN.21

Natural resources

9

AN.22

Contracts, leases and licences

6

AN.23

Purchases less sales of goodwill
and marketing assets

0AF

Financial assets

3

AF.1

Monetary gold and SDRs

0

AF.2

Currency and deposits

0

AF.3

Debt securities

0

AF.4

Loans

AF.5

Equity and investment fundshares2

AF.6

Insurance pension andstandardised guarantee schemes

1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
B.102

Changes in net worth due toother changes in volume ofassets10

III.3.2: Revaluation account
Changes in assets

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/ losses(–)

AN

Non-financial assets

280 AF

Liabilities

76

K.7

Nominal holding gains(–)/losses
(+)

AN.1

Produced non-financial assets

126 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

111 AF.2

Currency and deposits

0

AN.12

Inventories

7 AF.3

Debt securities

42

AN.13

Valuables

8 AF.4

Loans

0

AN.2

Non-produced non-financial
assetsEquity and investment fundshares34

European system of accounts — ESA 2010

154 AF.5

559

24

The accounts

Insurance, pension andstandardised guarantee schemes

0

2 AF.7

Financial derivatives andemployee stock options

0

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

84

AF.1

Monetary gold and SDRs

12

AF.2

Currency and deposits

0

AF.3

Debt securities

40

AF.4

Loans

0

AF.5

Equity and investment fundshares32

AF.6

Insurance, pension andstandardised guarantee schemes

0

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0

AN.21

Natural resources

AN.22

Contracts, leases and licences

AN.23

152 AF.6

B.103

Changes in net worth due tonominal holding gains/losses

288

III.3.2.1: Neutral holding gains/losses account
Changes in assets

560

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses(–)

AN

Non-financial assets

198 AF

Liabilities

AN.1

Produced non-financial assets

121 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

111 AF.2

Currency and deposits

30

AN.12

Inventories

4 AF.3

Debt securities

26

AN.13

Valuables

6 AF.4

Loans

29

AN.2

Non-produced non-financial
assets77 AF.5

Equity and investment fundshares28

AN.21

Natural resources

76 AF.6

Insurance, pension andstandardised guarantee schemes

7

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable6

AF

Financial assets

136

AF.1

Monetary gold and SDRs

16

AF.2

Currency and deposits

30

AF.3

Debt securities

25

AF.4

Loans

28

AF.5

Equity and investment fundshares26

K.71

Neutral holding gains (–)/losses(+)

European system of accounts — ESA 2010

126

The accounts

Changes in assets

24

Changes in liabilities and net worth

AF.6

Insurance, pension andstandardised guarantee schemes

7

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable4
B.1031

Changes in net worth due toneutral holding gains/losses

208

III.3.2.2: Real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

AN

Non-financial assets

82 AF

Liabilities

AN.1

Produced non-financial assets

5 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

0 AF.2Currency and deposits

–30

AN.12

Inventories

3 AF.3

Debt securities

16

AN.13

Valuables

2 AF.4

Loans

–29

AN.2

Non-produced non-financial
assets77 AF.5

Equity and investment fundshares6

AN.21

Natural resources

76 AF.6

Insurance, pension andstandardised guarantee schemes

–7

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable–6

AF

Financial assets

–52

AF.1

Monetary gold and SDRs

–4

AF.2

Currency and deposits

–30

AF.3

Debt securities

15

AF.4

Loans

–28

AF.5

Equity and investment fundshares6

AF.6

Insurance, pension andstandardised guarantee schemes

–7

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable–4
Changes in net worth due to realholding gains/losses

80

B.1032European system of accounts — ESA 2010

Real holding gains (–)/losses (+)
–50

561

24

The accounts

IV: Balance sheets
IV.1: Opening balance sheet
AssetsLiabilities and net worthANNon-financial assets

4 621 AF

Liabilities

AN.1

Produced non-financial assets

2 818 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

2 579 AF.2

Currency and deposits

AN.12

Inventories

114 AF.3

Debt securities

1 311

AN.13

Valuables

125 AF.4

Loans

1 437

AN.2

Non-produced non-financial
assets

1 803 AF.5

Equity and investment fundshares

2 756

AN.21

Natural resources

1 781 AF.6

Insurance, pension andstandardised guarantee schemes

471

AN.22

Contracts, leases and licences

22 AF.7

Financial derivatives andemployee stock options

14

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable302

AF

Financial assets

8 231

AF.1

Monetary gold and SDRs

770

AF.2

Currency and deposits

1 482

AF.3

Debt securities

1 263

AF.4

Loans

1 384

AF.5

Equity and investment fundshares

2 614

AF.6

Insurance, pension andstandardised guarantee schemes

470

AF.7

Financial derivatives andemployee stock options

21

AF.8

Other accounts receivable/
payable227
B.90

Net worth

7 762
0
1 471

5 090

IV.2: Changes in balance sheet

562

AssetsLiabilities and net worth

Total changes in assets

Total changes in liabilities

AN

Non-financial assets

482 AF

Liabilities

AN.1

Produced non-financial assets

294 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

246 AF.2

Currency and deposits

102

AN.12

Inventories

32 AF.3

Debt securities

116

AN.13

Valuables

16 AF.4

Loans

47

AN.2

Non-produced non-financial
assets186 AF.5

Equity and investment fundshares141

AN.21

Natural resources

178 AF.6

Insurance, pension andstandardised guarantee schemes

49

AN.22

Contracts, leases and licences

Financial derivatives andemployee stock options

11

8 AF.7

European system of accounts — ESA 2010

505

The accounts

Assets24

Liabilities and net worth

AN.23

Purchases less sales of goodwill
and marketing assets

AF

Financial assets

523

AF.1

Monetary gold and SDRs

11

AF.2

Currency and deposits

89

AF.3

Debt securities

126

AF.4

Loans

78

AF.5

Equity and investment fundshares141

AF.6

Insurance, pension andstandardised guarantee schemes

49

AF.7

Financial derivatives andemployee stock options

14

AF.8

Other accounts receivable/
payable15

Other accounts receivable/
payable39

B.10

Changes in net worth

500

B.101

Changes in net worth due tosaving and capital transfers

202

B.102

Changes in net worth due toother changes in volume of assets

10

B.103

Changes in net worth due tonominal holding gains and losses

288

B.1031

Changes in net worth due toneutral holding gains and losses

208

B.1032

Changes in net worth due to realholding gains and losses

80

0 AF.8IV.3: Closing balance sheet
AssetsLiabilities and net worthANNon-financial assets

5 101 AF

Liabilities

AN.1

Produced non-financial assets

3 112 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

2 825 AF.2

Currency and deposits

1 573

AN.12

Inventories

146 AF.3

Debt securities

1 427

AN.13

Valuables

141 AF.4

Loans

1 484

AN.2

Non-produced non-financial
assets

1 989 AF.5

Equity and investment fundshares

2 897

AN.21

Natural resources

1 959 AF.6

Insurance, pension andstandardised guarantee schemes

520

AN.22

Contracts, leases and licences

30 AF.7

Financial derivatives andemployee stock options

25

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable341

AF

Financial assets

AF.1

Monetary gold and SDRs

781

AF.2

Currency and deposits

1 571

European system of accounts — ESA 2010

8 267
0

8 754

563

24

The accounts

AssetsLiabilities and net worth

AF.3

Debt securities

1 389

AF.4

Loans

1 462

AF.5

Equity and investment fundshares

2 755

AF.6

Insurance, pension andstandardised guarantee schemes

519

AF.7

Financial derivatives andemployee stock options

35

AF.8

Other accounts receivable/
payable

242
B.90

564

Net worth

European system of accounts — ESA 2010

5 590

The accounts

24

Table 24.3 — Full sequence of accounts for non-financial corporations
I: Production account
Uses
P.2

Resources
Intermediate consumption

1 477 P.1

B.1g

Value added, gross

P.51c

Consumption of fixed capital

157

B.1n

Value added, net

1 174

Output

2 808

P.11

Market output

2 808

P.12

Output for own final use

0

1 331

II: Distribution and use of income accounts
II.1: Primary distribution of income accountII.1.1: Generation of income account
Uses

Resources

D.1

Compensation of employees

986 B.1g

Value added, gross

1 331

D.11

Wages and salaries

841 B.1n

Value added, net

1 174

D.12

Employers’ social contributions

145

D.121

Employers’ actual social
contributions

132

D.1211

Employers’ actual pension
contributions

122

D.1212

Employers’ actual non-pension
contributions

10

D.122

Employers’ imputed social
contributions

13

D.1221

Employers’ imputed pension
contributions

12

D.1222

Employers’ imputed non-pension
contributions

1

D.29

Other taxes on production

88

D.39

Other subsidies on production

–35

B.2g

Operating surplus, gross292

P.51c1

Consumption of fixed capital on
gross operating surplus

157

B.2n

Operating surplus, net

135

II.1.2: Allocation of primary income account
Uses

Resources

D.4

Property income

134 B.2g

Operating surplus, gross

292

D.41

Interest

56 B.2nOperating surplus, net

135

D.42

Distributed income ofcorporations

47

D.421

Dividends

39 D.4

Property income

96

D.422

Withdrawals from income ofquasi-corporations

8 D.41

Interest

33

European system of accounts — ESA 2010

565

24

The accounts

Uses

Resources

D.43

Reinvested earnings on foreign
direct investment

0 D.42Distributed income ofcorporations

10

D.45

Rent

31 D.421

Dividends

10

B.5g

Balance of primary incomes,
gross

254

B.5n

Balance of primary incomes, net

97

D.422

Withdrawals from income ofquasi-corporations

D.43

Reinvested earnings on foreign
direct investment

4

D.44

Other investment income

8

D.441

Investment income attributable
to insurance policy holders

5

D.442

Investment income payable on
pension entitlements

D.443

Investment income attributable
to collective investment fundshareholders

3

D.4431Dividends attributable tocollective investment fundshareholders

1

D.4432Retained earnings attributable
to collective investment fundshareholders

2

D.45

Rent

41

II.1.2.1: Entrepreneurial income account
Uses

566

Resources

D.4

Property income

87 B.2g

Operating surplus, gross

292

D.41

Interest

56 B.2nOperating surplus, net

135

D.45

Rent

31
D.4

Property income

96

D.41

Interest

33

D.42

Distributed income ofcorporations

10

D.421

Dividends

10

D.43

Reinvested earnings on foreign
direct investment

4

D.44

Other investment income

8

D.441

Investment income attributable
to insurance policy holders

5

D.443

Investment income attributable
to collective investment fundshareholders

3

D.45

Rent

41

B.4g

Entrepreneurial income, gross

301

B.4n

Entrepreneurial income, net

144European system of accounts — ESA 2010

The accounts

24

II.1.2.2: Allocation of other primary income account
Uses

Resources

D.4

Property income

47 B.4g

Entrepreneurial income. gross

301

D.42

Distributed income ofcorporations

47 B.4n

Entrepreneurial income, net

144

D.421

Dividends

39

D.422

Withdrawals from income ofquasi-corporations

8

D.43

Reinvested earnings on foreign
direct investment

0

B.5g

Balance of primary incomes,
gross

254

B.5n

Balance of primary incomes, net

9798 B.5g

Balance of primary incomes,
gross

254

Balance of primary incomes, net

97II.2: Secondary distribution of income account
Uses

Resources

Current transfers
D.5

Current taxes on income, wealth,etc.

24 B.5nD.51

Taxes on income

20

D.59

Other current taxes

4 Current transfers
D.61

Net social contributions

66

D.62

Social benefits other than socialtransfers in kind

62 D.611

Employers’ actual social
contributions

31

D.622

Other social insurance benefits

62 D.6111

Employers’ actual pension
contributions

27

D.6221Other social insurance pension
benefits

49 D.6112

Employers’ actual non-pension
contributions

4

D.6222Other social insurance nonpension benefits

13 D.612

Employers’ imputed social
contributions

12

Employers’ imputed pension
contributions

12

D.612172

D.7

Other current transfers

12 D.6122

Employers’ imputed non-pension
contributions

0

D.71

Net non-life insurance premiums

8 D.613

Households’ actual social
contributions

25

D.711

Net non-life direct insurance
premiums

8 D.6131

Households’ actual pension
contributions

19

D.75

Miscellaneous current transfers

4 D.6132

Households’ actual non-pension
contributions

6

D.751

Current transfers to NPISHs

1 D.61SC

Social insurance scheme service
charges2

D.759

Other miscellaneous current
transfers

3
D.7

Other current transfers

6

D.72

Non-life insurance claims

6

D.721

Non-life direct insurance claims

6

European system of accounts — ESA 2010

567

24

The accounts

Uses

Resources
D.75

B.6g

Disposable income, gross

228

B.6n

Disposable income, net

71

Miscellaneous current transfers

0II.4: Use of income accountII.4.1: Use of disposable income account
Uses

Resources
B.6g

Disposable income, gross

228

0 B.6n

Disposable income, net

71

D.8

Adjustment for the change inpension entitlements

B.8g

Saving, gross

228

B.8n

Saving, net

71

III: Accumulation accounts
III.1: Capital accountIII.1.1: Change in net worth due to saving and capital transfers account
Changes in assets
B.101

Changes in net worth due tosaving and capital transfers

Changes in liabilities and net worth
Saving, net

71

D.9r

Capital transfers, receivable

33

D.92r

Investment grants, receivable

23

D.99r

Other capital transfers, receivable

10

D.9p

Capital transfers, payable

–16

D.91p

Capital taxes, payable

0

D.99p

Other capital transfers, payable

88 B.8n–16III.1.2: Acquisition of non-financial assets account
Changes in assets

568

Changes in liabilities and net worth

P.5g

Gross capital formation

308 B.101

P.5n

Net capital formation

151

P.51g

Gross fixed capital formation

280

P.511

Acquisitions less disposals of fixed
assets263

P.5111

Acquisitions of new fixed assets

262

P.5112Acquisitions of existing fixed
assets5

P.5113

Disposal of existing fixed assets

–4

P.512

Costs of ownership transfer on
non-produced assets

17

P.51c

Consumption of fixed capital

–157

P.52

Changes in inventories

26

P.53

Acquisitions less disposals ofvaluables

2

Changes in net worth due tosaving and capital transfers

European system of accounts — ESA 2010

88

The accounts

Changes in assets

24

Changes in liabilities and net worthNP

Acquisitions less disposals of nonproduced assets

–7

NP.1

Acquisitions less disposals ofnatural resources

–6

NP.2

Acquisitions less disposals ofcontracts, leases and licences

–1

NP.3

Purchases less sales of goodwill
and marketing assets

0

B.9

Net lending (+)/net borrowing (–)–56

III.2: Financial account
Change in assets

Change in liabilities and net worth
B.9

Net lending (+)/net borrowing (–)

–56
139

F

Net acquisition of financial assets

83 F

Net incurrence of liabilities

F.2

Currency and deposits

39 F.2Currency and deposits

F.21

Currency

5 F.21

Currency

F.22

Transferable deposits

30 F.22

Transferable deposits

F.229

Other transferable deposits

30 F.229

Other transferable deposits

F.29

Other deposits

4 F.29Other deposits

F.3

Debt securities

7 F.3

Debt securities

6

F.31

Short-term

10 F.31

Short-term

2

F.32

Long-term–3 F.32

Long-term

4

F.4

Loans

19 F.4

Loans

21

F.41

Short-term

14 F.41

Short-term

4

F.42

Long-term

5 F.42Long-term

17

F.5

Equity and investment fundshares

10 F.5Equity and investment fundshares83

F.51

Equity10 F.51

Equity83

F.511

Listed shares

5 F.511

Listed shares

77

F.512

Unlisted shares

3 F.512

Unlisted shares

3

F.519

Other equity

2 F.519

Other equity

3

F.52

Investment fund shares/units

0 F.52

Investment fund shares/units

F.521

Money market fund shares/units

0 F.521

Money market fund shares/units

F.522

Non-MMF investment fundshares/units

0 F.522

Non-MMF investment fundshares/units

F.6

Insurance, pension andstandardised guarantee schemes

1 F.6

Insurance, pension andstandardised guarantee schemes

F.61

Non-life insurance technicalreserves

1 F.61

Non-life insurance technicalreserves

F.62

Life insurance and annuity
entitlements

0 F.62

Life insurance and annuity
entitlements

F.66

Provisions for calls understandardised guarantees

0 F.66

Provisions for calls understandardised guarantees

F.7

Financial derivatives andemployee stock options

3 F.7

Financial derivatives andemployee stock options

European system of accounts — ESA 2010

3

569

24

The accounts

Change in assets

Change in liabilities and net worth

F.71

Financial derivatives

3 F.71

Financial derivatives

2

F.711

Options

1 F.711

Options2

F.712

Forwards

2 F.712Forwards

0

F.72

Employee stock options

0 F.72

Employee stock options

1

F.8

Other accounts receivable/
payable

4 F.8

Other accounts receivable/
payable26

F.81

Trade credits and advances

3 F.81

Trade credits and advances

6

F.89

Other accounts receivable/
payable, excluding trade credits
and advances

1 F.89Other accounts receivable/
payable, excluding trade credits
and advances

20

III.3: Other changes in assets accounts
III.3.1: Other changes in volume of assets account
Changes in assets

570

Changes in liabilities and net worth

K.1

Economic appearance of assets

26 K.5

Other changes in volume n.e.c.

AN.1

Produced non-financial assets

0 AN.1

Produced assets

AN.2

Non-produced non-financial
assets

26 AN.2

Non-produced non-financial
assetsAN.21

Natural resources

22 AF

Financial assets/liabilities

0

AN.22

Contracts, leases and licences

4 K.6

Changes in classification

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 K.61

Changes in sector classificationand structure0

K.2

Economic disappearance of nonproduced assets–9 AN.1

Produced non-financial assets

K.21

Depletion of natural resources–6 AN.2

Non-produced non-financial
assetsAN.21

Natural resources–6 AF

Financial assets/liabilities

0

K.22

Other economic disappearance of
non-produced assets–3 K.62

Changes in classification of assets
and liabilities

0

AN.21

Natural resources

0 AN.1

Produced non-financial assets

AN.22

Contracts, leases and licences–1 AN.2

Non-produced non-financial
assets

AN.23

Purchases less sales of goodwill
and marketing assets–2 AF

Financial assets/liabilities

K.3

Catastrophic losses–5 Total other changes in volume

AN.1

Produced non-financial assets–5 AN.1

Produced non-financial assets

AN.2

Non-produced non-financial
assets

0 AN.11

Fixed assets

AF

Financial assets/liabilities

0 AN.12Inventories

K.4

Uncompensated seizures–5 AN.13

Valuables

AN.1

Produced non-financial assets–1 AN.2

Non-produced non-financial
assetsAN.2

Non-produced non-financial
assets

–4 AN.21

Natural resources

European system of accounts — ESA 2010000The accounts

Changes in assets

Changes in liabilities and net worth

AF

Financial assets

0 AN.22

Contracts, leases and licences

K.5

Other changes in volume n.e.c.

1 AN.23

Purchases less sales of goodwill
and marketing assets

AN.1

Produced non-financial assets

1 AF

Financial assets

AN.2

Non-produced non-financial
assets

0 AF.1

Monetary gold and SDRs

AF

Financial assets/liabilities

0 AF.2Currency and deposits

K.6

Changes in classification

6 AF.3

Debt securities

K.61

Changes in sector classificationand structure

6 AF.4

Loans

AN.1

Produced non-financial assets

3 AF.5Equity and investment fundsharesAN.2

Non-produced non-financial
assets

1 AF.6

Insurance pension andstandardised guarantee schemes

AF

Financial assets/liabilities

2 AF.7

Financial derivatives andemployee stock options

K.62

Changes in classification of assets
and liabilities

0 AF.8Other accounts receivable/
payableAN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets0

AF

Financial assets/liabilities

0

Total other changes in volume

14

AN.1

Produced non-financial assets

–2

AN.11

Fixed assets

1

AN.12

Inventories

–3

AN.13

Valuables0

AN.2

Non-produced non-financial
assets14

AN.21

Natural resources

10

AN.22

Contracts, leases and licences

4

AN.23

Purchases less sales of goodwill
and marketing assets

0AF

Financial assets

2

AF.1

Monetary gold and SDRs

0

AF.2

Currency and deposits

0

AF.3

Debt securities

0

AF.4

Loans

0

AF.5

Equity and investment fundshares2

AF.6

Insurance pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

European system of accounts — ESA 2010

24

0

0

571

24

The accounts

Changes in assets
AF.8

Other accounts receivable/
payableChanges in liabilities and net worth0
B.102

Changes in net worth due toother changes in volume ofassets14

III.3.2: Revaluation account
Changes in assets

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/losses(–)

AN

Non-financial assets

144 AF

Liabilities

AN.1

Produced non-financial assets

63 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

58 AF.2

Currency and deposits

AN.12

Inventories

4 AF.3

Debt securities

AN.13

Valuables

1 AF.4

Loans

AN.2

Non-produced non-financial
assets81 AF.5

Equity and investment fundsharesAN.21

Natural resources

80 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

8

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

AF.3

Debt securities

AF.4

Loans

AF.5

Equity and investment fundshares

AF.6

Insurance, pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0

K.7

Nominal holding gains (–)/losses
(+)
18

1

17

3

5

B.103

Changes in net worth due tonominal holding gains/losses

134

III.3.2.1: Neutral holding gains/losses account
Changes in assets

572

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses(–)

AN

Non-financial assets

101 AF

Liabilities

AN.1

Produced non-financial assets

60 AF.1

Monetary gold and SDRs

K.71

Neutral holding gains (–)/losses(+)

European system of accounts — ESA 2010

37

The accounts

Changes in assets

24

Changes in liabilities and net worth

AN.11

Fixed assets

58 AF.2

Currency and deposits

1

AN.12

Inventories

1 AF.3

Debt securities

1

AN.13

Valuables

1 AF.4

Loans

18

AN.2

Non-produced non-financial
assets41 AF.5

Equity and investment fundshares14

AN.21

Natural resources

40 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable3

AF

Financial assets

18

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

8

AF.3

Debt securities

2

AF.4

Loans

1

AF.5

Equity and investment fundshares3

AF.6

Insurance, pension andstandardised guarantee schemes

1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable3
Changes in net worth due toneutral holding gains/losses

82

B.103

III.3.2.2: Real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

AN

Non-financial assets

43 AF

Liabilities

AN.1

Produced non-financial assets

3 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

0 AF.2Currency and deposits

–1

AN.12

Inventories

3 AF.3

Debt securities

0

AN.13

Valuables

0 AF.4

Loans

AN.2

Non-produced non-financial
assets40 AF.5

Equity and investment fundsharesAN.21

Natural resources

40 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable–3

AF

Financial assets

AF.1

Monetary gold and SDRs

European system of accounts — ESA 2010

Real holding gains (–)/losses (+)
–19

–18
3

–10

573

24

The accounts

Changes in assets

Changes in liabilities and net worth

AF.2

Currency and deposits

–8

AF.3

Debt securities

1

AF.4

Loans

–1

AF.5

Equity and investment fundshares2

AF.6

Insurance, pension andstandardised guarantee schemes

–1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable–3
B.1032

Changes in net worth due to realholding gains/losses

52

IV: Balance sheets
IV.1: Opening balance sheet
AssetsLiabilities and net worthANNon-financial assets

2 151 AF

Liabilities

AN.1

Produced non-financial assets

1 274 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

1 226 AF.2

Currency and deposits

40

AN.12

Inventories

43 AF.3

Debt securities

44

AN.13

Valuables

5 AF.4

Loans

897

AN.2

Non-produced non-financial
assets877 AF.5

Equity and investment fundsharesAN.21

Natural resources

864 AF.6

Insurance, pension andstandardised guarantee schemes

12

AN.22

Contracts, leases and licences

13 AF.7

Financial derivatives andemployee stock options

4

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable237

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

382

AF.3

Debt securities

90

AF.4

Loans

50

AF.5

Equity and investment fundshares280

AF.6

Insurance, pension andstandardised guarantee schemes

25

AF.7

Financial derivatives andemployee stock options

5

AF.8

Other accounts receivable/
payable150
Net worth

–88

1 987

982

B.90

574

3 221

European system of accounts — ESA 2010

The accounts

24

IV.2: Changes in balance sheet
AssetsLiabilities and net worth

Total changes in assets

Total changes in liabilities

AN

Non-financial assets

301 AF

Liabilities

157

AN.1

Produced non-financial assets

195 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

165 AF.2

Currency and deposits

0

AN.12

Inventories

27 AF.3

Debt securities

7

AN.13

Valuables

3 AF.4

Loans

21

AN.2

Non-produced non-financial
assets106 AF.5

Equity and investment fundshares100

AN.21

Natural resources

101 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

5 AF.7

Financial derivatives andemployee stock options

3

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable26

AF

Financial assets

93

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

39

AF.3

Debt securities

10

AF.4

Loans

19

AF.5

Equity and investment fundshares17

AF.6

Insurance, pension andstandardised guarantee schemes

1

AF.7

Financial derivatives andemployee stock options

3

AF.8

Other accounts receivable/
payable4
B.10

Changes in net worth

237

B.101

Changes in net worth due tosaving and capital transfers

88

B.102

Changes in net worth due toother changes in volume of assets

14

B.103

Changes in net worth due tonominal holding gains and losses

134

B.1031

Changes in net worth due toneutral holding gains and losses

82

B.1032

Changes in net worth due to realholding gains and losses

52

IV: Balance sheets
IV.3: Closing balance sheet
AssetsLiabilities and net worthANNon-financial assets

2 452 AF

Liabilities

AN.1

Produced non-financial assets

1 469 AF.1

Monetary gold and SDRs

European system of accounts — ESA 2010

3 378

575

24

The accounts

AssetsLiabilities and net worth

AN.11

Fixed assets

1 391 AF.2

Currency and deposits

40

AN.12

Inventories

70 AF.3

Debt securities

51

AN.13

Valuables

8 AF.4

Loans

918

AN.2

Non-produced non-financial
assets983 AF.5

Equity and investment fundsharesAN.21

Natural resources

965 AF.6

Insurance, pension andstandardised guarantee schemes

12

AN.22

Contracts, leases and licences

18 AF.7

Financial derivatives andemployee stock options

7

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable263

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

421

AF.3

Debt securities

100

AF.4

Loans

69

AF.5

Equity and investment fundshares297

AF.6

Insurance, pension andstandardised guarantee schemes

26

AF.7

Financial derivatives andemployee stock options

8

AF.8

Other accounts receivable/
payable154
Net worth

149

1 075

B.90

576

2 087

European system of accounts — ESA 2010

The accounts

24

Table 24.4 — Full sequence of accounts for financial corporations
I: Production account
Uses
P.2

Resources
Intermediate consumption

52 P.1

B.1g

Value added, gross

94

P.51c

Consumption of fixed capital

12

B.1n

Value added, net

82

Output146

P.11

Market output

146

P.12

Output for own final use

0

II: Distribution and use of income accounts
II.1: Primary distribution of income accountII.1.1: Generation of income account
Uses

Resources

D.1

Compensation of employees

44 B.1g

Value added, gross

94

D.11

Wages and salaries

29 B.1n

Value added, net

82

D.12

Employers’ social contributions

5

D.121

Employers’ actual social
contributions

4

D.1211

Employers’ actual pension
contributions

4

D.1212

Employers’ actual non-pension
contributions

0

D.122

Employers’ imputed social
contributions

1

D.1221

Employers’ imputed pension
contributions

1

D.1222

Employers’ imputed non-pension
contributions

0

D.29

Other taxes on production

4

D.39

Other subsidies on production

0

B.2g

Operating surplus, gross46

P.51c1

Consumption of fixed capital on
gross operating surplus

12

B.2n

Operating surplus, net

34II.1.2: Allocation of primary income account
Uses

Resources

D.4

Property income

168 B.2g

Operating surplus, gross

46

D.41

Interest

106 B.2nOperating surplus, net

34

D.42

Distributed income ofcorporations

15

D.421

Dividends

15 D.4

Property income

149

D.422

Withdrawals from income ofquasi-corporations

0 D.41

Interest

106European system of accounts — ESA 2010

577

24

The accounts

Uses

Resources

D.43

Reinvested earnings on foreign
direct investment

0 D.42Distributed income ofcorporations

25

D.44

Other investment income

47 D.421

Dividends

25

D.441

Investment income attributable
to insurance policy holders

Withdrawals from income ofquasi-corporations

0

Reinvested earnings on foreign
direct investment

7

Other investment income

8

D.422
25 D.43

D.442

Investment income payable on
pensionentitlements

D.443

D.45

holders0

Investment income attributable
to collective

14 D.443

Dividends attributable tocollective
investment fund shareholders

D.4432

Investment income attributable
to insurance policy

8 D.441

Investment income attributable
to collective
investment fund shareholders

D.4431

D.44

investment fund shareholders

8

Dividends attributable tocollective

6 D.4431

Retained earnings attributable tocollective

investment fund shareholders

3

investment fund shareholders

8 D.4432

Retained earnings attributable tocollective

Rent

0

investment fund shareholders

5

Rent

3

D.45
B.5g

Balance of primary incomes,
gross

27

B.5n

Balance of primary incomes, net

15II.1.2.1: Entrepreneurial income account
Uses

Resources

D.4

Property income

153 B.2g

Operating surplus, gross

46

D.41

Interest

106 B.2nOperating surplus, net

34

D.44

Other investment income

47

D.441

Investment income attributable
to insurance policy holders

25 D.4

Property income

149

D.442

Investment income payable on
pension

D.41

Interest

106

Distributed income ofcorporations

25

Dividends

25

entitlements
D.443

D.45

Investment income attributable
to collective

8 D.42
D.421

investment fund shareholders

14 D.422

Withdrawals from income ofquasi-corporations

0

Rent

0 D.43

Reinvested earnings on foreign
direct investment

7

Other investment income

8

D.44

578

European system of accounts — ESA 2010

The accounts

Uses

24

Resources

B.4g

Entrepreneurial income, gross

42

B.4n

Entrepreneurial income, net

30

D.441

Investment income attributable
to insurance policy holders

D.442

Investment income payable on
pension entitlements

D.443

Investment income attributable
to collective investment fundshareholders

8

D.45

Rent

3

0

II.1.2.2: Allocation of other primary income account
Uses

Resources

D.4

Property income

15 B.4g

Entrepreneurial income, gross

42

D.42

Distributed income ofcorporations

15 B.4n

Entrepreneurial income, net

30

D.421

Dividends

15

D.422

Withdrawals from income ofquasi-corporations

0

D.43

Reinvested earnings on foreign
direct investment

0

B.5g

Balance of primary incomes,
gross

27

B.5n

Balance of primary incomes, net

15277 B.5g

Balance of primary incomes,
gross

27

Balance of primary incomes, net

15

II.2: Secondary distribution of income account
Uses

Resources

Current transfers
D.5

Current taxes on income, wealth,etc.

10 B.5nD.51

Taxes on income

7

D.59

Other current taxes

3 Current transfers

275

D.61

Net social contributions

212

D.62

Social benefits other than socialtransfers in kind

205 D.611

Employers’ actual social
contributions

109

D.622

Other social insurance benefits

205 D.6111

Employers’ actual pension
contributions

104

D.6221Other social insurance pension
benefits

193 D.6112

Employers’ actual non-pension
contributions

5

D.6222Other social insurance nonpension benefits

12 D.612

Employers’ imputed social
contributions

2

Employers’ imputed pension
contributions

1

Employers’ imputed non-pension
contributions

1

D.6121
D.7

Other current transfers

European system of accounts — ESA 2010

62 D.6122

579

24

The accounts

Uses

Resources

D.71

Net non-life insurance premiums

13 D.613

Households’ actual social
contributions

94

D.711

Net non-life direct insurance
premiums

0 D.6131

Households’ actual pension
contributions

90

D.712

Net non-life reinsurance
premiums

13 D.6132

Households’ actual non-pension
contributions

4

D.72

Non-life insurance claims

48 D.614

Households’ social contribution
supplements

10

D.721

Non-life direct insurance claims

45 D.6141

Households’ pension contribution
supplements

8

D.722

Non-life reinsurance claims

3 D.6142

Households’ non-pension
contribution supplements

2

D.75

Miscellaneous current transfers

1 D.61SC

Social insurance scheme service
charges3

D.751

Current transfers to NPISHs

1

D.759

Other miscellaneous current
transfers

0 D.7

Other current transfers

62

D.71

Net non-life insurance premiums

47

D.711

Net non-life direct insurance
premiums

44

D.712

Net non-life reinsurance
premiums

3

D.72

Non-life insurance claims

15

D.722

Non-life reinsurance claims

15

D.75

Miscellaneous current transfers0

Disposable income, gross25

Disposable income, net

13

B.6g

Disposable income, gross

25

B.6n

Disposable income, net

13II.4: Use of income accountII.4.1: Use of disposable income account
Uses

Resources
B.6g

D.8

Adjustment for the change inpension entitlements

11 B.6n

B.8g

Saving, gross

14

B.8n

Saving, net

2

III: Accumulation accounts
III.1: Capital accountIII.1.1: Change in net worth due to saving and capital transfers account
Changes in assets
B.101

580

Changes in net worth due tosaving and capital transfers

Changes in liabilities and net worth
Saving, net

2

D.9r

Capital transfers, receivable

0

D.92r

Investment grants, receivable

0–5 B.8nEuropean system of accounts — ESA 2010

The accounts

Changes in assets

24

Changes in liabilities and net worth
D.99r

Other capital transfers, receivable

D.9p

Capital transfers, payable

–7

D.91p

Capital taxes, payable

0

D.99p

Other capital transfers, payable–7

III.1.2: Acquisition of non-financial assets account
Changes in assets

Changes in liabilities and net worth

P.5g

Gross capital formation

8 B.101

P.5n

Net capital formation

–4

P.51g

Gross fixed capital formation

8

P.511

Acquisitions less disposals of fixed
assets8

P.5111

Acquisitions of new fixed assets

8

P.5112Acquisitions of existing fixed
assets0P.5113

Disposal of existing fixed assets

0

P.512

Costs of ownership transfer on
non-produced assets

0

P.51c

Consumption of fixed capital

–12

P.52

Changes in inventories

0

P.53

Acquisitions less disposals ofvaluables

0NP

Acquisitions less disposals of nonproduced assets

0

NP.1

Acquisitions less disposals ofnatural resources

0

NP.2

Acquisitions less disposals ofcontracts, leases and licences

0

NP.3

Purchases less sales of goodwill
and marketing assets

0

B.9

Net lending (+)/net borrowing(–)–1

Changes in net worth due tosaving and capital transfers–5III.2: Financial account
Changes in assets

Changes in liabilities and net worth
B.9

Net lending (+)/net borrowing
(–)

–1

F

Net acquisition of financial assets

172 F

Net incurrence of liabilities

173

F.1

Monetary gold and SDRs

–1 F.1

Monetary gold and SDRs

0

F.11

Monetary gold

–1 F.11

Monetary gold

0

F.12

SDRs

0 F.12

SDRs

0

F.2

Currency and deposits

10 F.2Currency and deposits

65

F.21

Currency

15 F.21

Currency

European system of accounts — ESA 2010

581

24

The accounts

Changes in assets

582

Changes in liabilities and net worth

F.22

Transferable deposits–5 F.22

Transferable deposits

26

F.221

Inter-bank positions–5 F.221Inter-bank positions

–5

F.229

Other transferable deposits

0 F.229

Other transferable deposits

31

F.29

Other deposits

0 F.29Other deposits

39

F.3

Debt securities

66 F.3

Debt securities

30

F.31

Short-term

13 F.31

Short-term

18

F.32

Long-term

53 F.32

Long-term

12

F.4

Loans

53 F.4

Loans

0

F.41

Short-term

4 F.41

Short-term

0

F.42

Long-term

49 F.42

Long-term

0

F.5

Equity and investment fundshares28 F.5Equity and investment fundshares22

F.51

Equity25 F.51

Equity11

F.511

Listed shares

23 F.511

Listed shares

7

F.512

Unlisted shares

1 F.512

Unlisted shares

4

F.519

Other equity

1 F.519

Other equity

0

F.52

Investment fund shares/units

3 F.52

Investment fund shares/units

11

F.521

Money market fund shares/units

2 F.521

Money market fund shares/units

5

F.522

Non-MMF investment fundshares/units

1 F.522

Non-MMF investment fundshares/units

6

F.6

Insurance, pension andstandardised guarantee schemes

7 F.6

Insurance, pension andstandardised guarantee schemes

48

F.61

Non-life insurance technicalreserves

2 F.61

Non-life insurance technicalreserves

7

F.62

Life insurance and annuity
entitlements

0 F.62

Life insurance and annuity
entitlements

22

F.63

Pension entitlements

Pension entitlements

11

F.64

Claim of pension fund on pension
managers

Claim of pension fund on pension
managers

3

F.65

Entitlements to non-pension
benefits

Entitlements to non-pension
benefits

2

F.66

Provisions for calls understandardised guarantees

2 F.66

Provisions for calls understandardised guarantees

3

F.7

Financial derivatives andemployee stock options

8 F.7

Financial derivatives andemployee stock options

8

F.71

Financial derivatives

8 F.71

Financial derivatives

7

F.711

Options

3 F.711

Options2

F.712

Forwards

5 F.712Forwards

5

F.72

Employee stock options

0 F.72

Employee stock options

1

F.8

Other accounts receivable/
payable1 F.8

Other accounts receivable/
payable0

F.81

Trade credits and advances

F.81

Trade credits and advances

0

F.89

Other accounts receivable/
payable, excluding trade credits
and advances

Other accounts receivable/
payable, excluding trade credits
and advances

0

F.63
3 F.64F.65

1 F.89European system of accounts — ESA 2010

The accounts

24

III.3: Other changes in assets accounts
III.3.1: Other changes in volume of assets account
Changes in assets

Changes in liabilities and net worth

K.1

Economic appearance of assets

0 K.5

Other changes in volume n.e.c.

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets

0 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0 AF

Financial assets/liabilities

0

AN.22

Contracts, leases and licences

0 K.6

Changes in classification

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 K.61

Changes in sector classificationand structure0

K.2

Economic disappearance of nonproduced assets

0 AN.1

Produced non-financial assets

0

K.21

Depletion of natural resources

0 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0 AF

Financial assets/liabilities

0

K.22

Other economic disappearance of
non-produced assets

0 K.62

Changes in classification of assets
and liabilities

0

AN.21

Natural resources

0 AN.1

Produced non-financial assets

0

AN.22

Contracts, leases and licences

0 AN.2

Non-produced non-financial
assets0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF

Financial assets/liabilities

0

K.3

Catastrophic losses

0 Total other changes in volume

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

AN.2

Non-produced non-financial
assets

0 AN.11

Fixed assets

AF

Financial assets/liabilities

0 AN.12Inventories

K.4

Uncompensated seizures

0 AN.13

Valuables

AN.1

Produced non-financial assets

0 AN.2

Non-produced non-financial
assetsAN.2

Non-produced non-financial
assets

0 AN.21Natural resources

AF

Financial assets

0 AN.22

Contracts, leases and licences

K.5

Other changes in volume n.e.c.

1 AN.23

Purchases less sales of goodwill
and marketing assets

AN.1

Produced non-financial assets

0 AF

Financial assets

AN.2

Non-produced non-financial
assets

0 AF.1

Monetary gold and SDRs

AF

Financial assets/liabilities

1 AF.2Currency and deposits

K.6

Changes in classification–2 AF.3

Debt securities

K.61

Changes in sector classificationand structure

0 AF.4

Loans

AN.1

Produced non-financial assets

0 AF.5Equity and investment fundsharesAN.2

Non-produced non-financial
assets

0 AF.6

Insurance pension andstandardised guarantee schemes

European system of accounts — ESA 2010

0

0

583

24

The accounts

Changes in assets

Changes in liabilities and net worth

AF

Financial assets/liabilities

0 AF.7

Financial derivatives andemployee stock options

K.62

Changes in classification of assets
and liabilities–2 AF.8

Other accounts receivable/
payableAN.1

Produced non-financial assets

–2

AN.2

Non-produced non-financial
assets0

AF

Financial assets/liabilities

0

Total other changes in volume

–1

AN.1

Produced non-financial assets

–2

AN.11

Fixed assets

0

AN.12

Inventories

0

AN.13

Valuables

–2

AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

–2

AN.22

Contracts, leases and licences

0

AN.23

Purchases less sales of goodwill
and marketing assets

0AF

Financial assets

1

AF.1

Monetary gold and SDRs

0

AF.2

Currency and deposits

0

AF.3

Debt securities

0

AF.4

Loans

0

AF.5

Equity and investment fundshares0

AF.6

Insurance pension andstandardised guarantee schemes

1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
B.102

Changes in net worth due toother changes in volume ofassets–1

III.3.2: Revaluation account
Changes in assets

584

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/losses(–)

AN

Non-financial assets

4 AF

Liabilities

AN.1

Produced non-financial assets

2 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

2 AF.2Currency and deposits

AN.12

Inventories

0 AF.3

Debt securities

AN.13

Valuables

0 AF.4Loans

K.7

Nominal holding gains (–)/losses(+)

European system of accounts — ESA 2010

51

34

The accounts

Changes in assets

24

Changes in liabilities and net worth

AN.2

Non-produced non-financial
assets

2 AF.5Equity and investment fundsharesAN.21

Natural resources

1 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

57

AF.1

Monetary gold and SDRs

11

AF.2

Currency and deposits

AF.3

Debt securities

30

AF.4

Loans

0

AF.5

Equity and investment fundshares16

AF.6

Insurance, pension andstandardised guarantee schemes

0

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
Changes in net worth due tonominal holding gains/losses

10

B.103

17

III.3.2.1: Neutral holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses(–)

AN

Non-financial assets

3 AF

Liabilities

AN.1

Produced non-financial assets

2 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

2 AF.2Currency and deposits

26

AN.12

Inventories

0 AF.3

Debt securities

21

AN.13

Valuables

0 AF.4

Loans

0

AN.2

Non-produced non-financial
assets

1 AF.5Equity and investment fundshares14

AN.21

Natural resources

1 AF.6

Insurance, pension andstandardised guarantee schemes

7

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

71

AF.1

Monetary gold and SDRs

14

AF.2

Currency and deposits

0

AF.3

Debt securities

18

European system of accounts — ESA 2010

K.71

Neutral holding gains (–)/losses
(+)
68

585

24

The accounts

Changes in assets

Changes in liabilities and net worth

AF.4

Loans

24

AF.5

Equity and investment fundshares14

AF.6

Insurance, pension andstandardised guarantee schemes

1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
B.103

Changes in net worth due toneutral holding gains/losses

6

III.3.2.2: Real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

AN

Non-financial assets

1 AF

Liabilities

AN.1

Produced non-financial assets

0 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

0 AF.2Currency and deposits

–26

AN.12

Inventories

0 AF.3

Debt securities

13

AN.13

Valuables

0 AF.4

Loans

0

AN.2

Non-produced non-financial
assets

1 AF.5Equity and investment fundshares3

AN.21

Natural resources

0 AF.6

Insurance, pension andstandardised guarantee schemes

–7

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

–14

AF.1

Monetary gold and SDRs

–3

AF.2

Currency and deposits

0

AF.3

Debt securities

12

AF.4

Loans

–24

AF.5

Equity and investment fundshares2

AF.6

Insurance, pension andstandardised guarantee schemes

–1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
Changes in net worth due to realholding gains/losses

4

B.1032

586

Real holding gains (–)/losses (+)

European system of accounts — ESA 2010–17

The accounts

24

IV: Balance sheets
IV.1: Opening balance sheet
AssetsLiabilities and net worthANNon-financial assets

93 AF

Liabilities

AN.1

Produced non-financial assets

67 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

52 AF.2

Currency and deposits

1 281

AN.12

Inventories

0 AF.3

Debt securities

1 053

AN.13

Valuables

15 AF.4

Loans

AN.2

Non-produced non-financial
assets26 AF.5

Equity and investment fundshares765

AN.21

Natural resources

23 AF.6

Insurance, pension andstandardised guarantee schemes

435

AN.22

Contracts, leases and licences

3 AF.7

Financial derivatives andemployee stock options

10

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

3 421

AF.1

Monetary gold and SDRs

690

AF.2

Currency and deposits

AF.3

Debt securities

950

AF.4

Loans

1 187

AF.5

Equity and investment fundshares551

AF.6

Insurance, pension andstandardised guarantee schemes

30

AF.7

Financial derivatives andemployee stock options

13

AF.8

Other accounts receivable/
payable0
B.90

Net worth

3 544

–30

IV.2: Changes in balance sheet
AssetsLiabilities and net worth
Total changes in assets

Total changes in liabilities

AN

Non-financial assets–4 AF

Liabilities

AN.1

Produced non-financial assets–4 AF.1

Monetary gold and SDRs

AN.11

Fixed assets–2 AF.2

Currency and deposits

65

AN.12

Inventories

0 AF.3

Debt securities

64

AN.13

Valuables–2 AF.4

Loans

0

AN.2

Non-produced non-financial
assets

0 AF.5Equity and investment fundshares39

AN.21

Natural resources–1 AF.6

Insurance, pension andstandardised guarantee schemes

48

AN.22

Contracts, leases and licences

1 AF.7

Financial derivatives andemployee stock options

8

European system of accounts — ESA 2010

224

587

24

The accounts

AssetsLiabilities and net worth

AN.23

Purchases less sales of goodwill
and marketing assets

AF

Financial assets

230

AF.1

Monetary gold and SDRs

10

AF.2

Currency and deposits

10

AF.3

Debt securities

96

AF.4

Loans

53

AF.5

Equity and investment fundshares44

AF.6

Insurance, pension andstandardised guarantee schemes

8

AF.7

Financial derivatives andemployee stock options

8

AF.8

Other accounts receivable/
payable1

Other accounts receivable/
payable0

B.10

Changes in net worth

2

B.101

Changes in net worth due tosaving and capital transfers

–5

B.102

Changes in net worth due toother changes in volume of assets

–1

B.103

Changes in net worth due tonominal holding gains and losses

10

B.1031

Changes in net worth due toneutral holding gains and losses

6

B.1032

Changes in net worth due to realholding gains and losses

40 AF.8

IV: Balance sheets
IV.3: Closing balance sheet
Assets588

Liabilities and net worthANNon-financial assets

89 AF

Liabilities

AN.1

Produced non-financial assets

63 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

50 AF.2

Currency and deposits

1 346

AN.12

Inventories

0 AF.3

Debt securities

1 117

AN.13

Valuables

13 AF.4

Loans

AN.2

Non-produced non-financial
assets26 AF.5

Equity and investment fundshares804

AN.21

Natural resources

22 AF.6

Insurance, pension andstandardised guarantee schemes

483

AN.22

Contracts, leases and licences

4 AF.7

Financial derivatives andemployee stock options

18

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

3 651

AF.1

Monetary gold and SDRs

700

European system of accounts — ESA 2010

3 768

0

The accounts

Assets24

Liabilities and net worth

AF.2

Currency and deposits

10

AF.3

Debt securities

1 046

AF.4

Loans

1 240

AF.5

Equity and investment fundshares595

AF.6

Insurance, pension andstandardised guarantee schemes

38

AF.7

Financial derivatives andemployee stock options

21

AF.8

Other accounts receivable/
payable1
B.90

European system of accounts — ESA 2010

Net worth

–28

589

24

The accounts

Table 24.5 — Full sequence of accounts for general government
I: Production account
Uses
P.2

Resources
Intermediate consumption

222 P.1

B.1g

Value added, gross

126

P.51c

Consumption of fixed capital

27

B.1n

Value added, net

99

Output348

P.11

Market output

0

P.12

Output for own final use

0

P.13

Non-market output

348

II: Distribution and use of income accounts
II.1: Primary distribution of income accountII.1.1: Generation of income account
Uses

Resources

D.1

Compensation of employees

98 B.1g

Value added, gross

126

D.11

Wages and salaries

63 B.1n

Value added, net

99

D.12

Employers’ social contributions

55

D.121

Employers’ actual social
contributions

51

D.1211

Employers’ actual pension
contributions

48

D.1212

Employers’ actual non-pension
contributions

3

D.122

Employers’ imputed social
contributions

4

D.1221

Employers’ imputed pension
contributions

4

D.1222

Employers’ imputed non-pension
contributions

0

D.29

Other taxes on production

1

D.39

Other subsidies on production

0

B.2g

Operating surplus, gross27

P.51c1

Consumption of fixed capital on
gross operating surplus

27

B.2n

Operating surplus, net

0II.1.2: Allocation of primary income account
Uses

Resources

D.4

Property income

42 B.2g

Operating surplus, gross

27

D.41

Interest

35 B.2nOperating surplus, net

0

D.45

Rent

7
D.2

590

Taxes on production and imports

European system of accounts — ESA 2010

235

The accounts

Uses

24

Resources

B.5g

Balance of primary incomes,
gross

198

B.5n

Balance of primary incomes, net

171European system of accounts — ESA 2010

D.21

Taxes on products

141

D.211

Value added type taxes (VAT)

121

D.212

Taxes and duties on imports
excluding VAT

17

D.2121

Import duties

17

D.2122

Taxes on imports excluding VAT
and duties

0

D.214

Taxes on products except VAT andimport taxes

3

D.29

Other taxes on production

94

D.3

Subsidies

–44

D.31

Subsidies on products

–8

D.311

Import subsidies

0

D.319

Other subsidies on products

–8

D.39

Other subsidies on production

–36

D.4

Property income

22

D.41

Interest

14

D.42

Distributed income ofcorporations

7

D.421

Dividends

5

D.422

Withdrawals from income ofquasi-corporations

2

D.43

Reinvested earnings on foreign
direct investment

0

D.44

Other investment income

1

D.441

Investment income attributable
to insurance policy holders

0

D.442

Investment income payable on
pension entitlements

D.443

Investment income attributable
to collective investment fundshareholders

1

D.4431Dividends attributable tocollective investment fundshareholders

0D.4432Retained earnings attributable
to collective investment fundshareholders

1

D.45

Rent

0

591

24

The accounts

II.2: Secondary distribution of income account
Uses

Resources

Current transfers

248 B.5g

198

Balance of primary incomes, net

171

D.5

Current taxes on income, wealth,etc.

0 B.5nD.51

Taxes on income

0

D.59

Other current taxes

0 Current transfers
D.5

367

Current taxes on income, wealth,
etc.

213

D.62

Social benefits other than socialtransfers in kind

112 D.51

Taxes on income

204

D.621

Social security benefits in cash

53 D.59

Other current taxes

9

D.6211Social security pension benefits
in cash45

D.6212Social security non-pension
benefits in cash

8 D.61

Net social contributions

50

D.622

Other social insurance benefits

7 D.611

Employers’ actual social
contributions

38

D.6221Other social insurance pension
benefits

5 D.6111

Employers’ actual pension
contributions

35

D.6222Other social insurance nonpension benefits

2 D.6112

Employers’ actual non-pension
contributions

3

D.623

Social assistance benefits in cash

52 D.612

Employers’ imputed social
contributions

4

Employers’ imputed pension
contributions

4

Employers’ imputed non-pension
contributions

0

D.6121

592

Balance of primary incomes,
gross

D.7

Other current transfers

136 D.6122

D.71

Net non-life insurance premiums

4 D.613

Households’ actual social
contributions

9

D.711

Net non-life direct insurance
premiums

4 D.6131

Households’ actual pension
contributions

6

D.712

Net non-life reinsurance
premiums

D.6132

Households’ actual non-pension
contributions

3

D.72

Non-life insurance claims

D.721

Non-life direct insurance claims

D.7

Other current transfers

D.722

Non-life reinsurance claims

D.71

Net non-life insurance premiums

D.73

Current transfers within general
government

96 D.711

Net non-life direct insurance
premiums

D.74

Current international cooperation

22 D.712

Net non-life reinsurance
premiums

D.75

Miscellaneous current transfers

5 D.72Non-life insurance claims

1

D.751

Current transfers to NPISHs

5 D.721Non-life direct insurance claims

1

D.752

Current transfers between
households

D.722

D.759

Other miscellaneous current
transfers

0 D.73

104

Non-life reinsurance claims
Current transfers within general
government

European system of accounts — ESA 2010

96

The accounts

Uses
D.76

24

Resources
VAT- and GNI-based EU own
resources

9 D.74Current international cooperation

1

D.75

Miscellaneous current transfers

6

D.751

Current transfers to NPISHs

D.752

Current transfers between
households

D.759

Other miscellaneous current
transfers

6

B.6g

Disposable income, gross

317

B.6n

Disposable income, net

290

II.3: Redistribution of income in kind account
Uses

Resources

D.63

Social transfers in kind

184 B.6g

Disposable income, gross

317

D.631

Social transfers in kind — nonmarket production

180 B.6n

Disposable income, net

290

D.632

Social transfers in kind —purchased market production

4

B.7g

Adjusted disposable income,
gross

133

B.7n

Adjusted disposable income, net

106

Disposable income, gross

317

Disposable income, net

290

Adjusted disposable income,
gross

133

Adjusted disposable income, net

106

II.4: Use of income accountII.4.1: Use of disposable income account
Uses

Resources
B.6g

P.3

Final consumption expenditure

352 B.6n

P.31

Individual consumption
expenditure

184

P.32

Collective consumption
expenditure

168

D.8

Adjustment for the change inpension entitlements

B.8g

Saving, gross

–35

B.8n

Saving, net–620II.4.2: Use of adjusted disposable income account
Uses

Resources
B.7g

P.4

Actual final consumption

P.41

Actual individual consumption

European system of accounts — ESA 2010

168 B.7n593

24

The accounts

Uses

Resources

P.42

Actual collective consumption

168

D.8

Adjustment for the change inpension entitlements

0

B.8g

Saving, gross

–35

B.8n

Saving, net–62

III: Accumulation accounts
III.1: Capital accountIII.1.1: Change in net worth due to saving and capital transfers account
Changes in assets
B.101

Changes in net worth due tosaving and capital transfers

Changes in liabilities and net worth–90 B.8n

Saving, net

–62

D.9r

Capital transfers, receivable

6

D.91r

Capital taxes, receivable

2

D.92r

Investment grants, receivable

0

D.99r

Other capital transfers, receivable

4

D.9p

Capital transfers, payable

–34

D.91p

Capital taxes, payable

0

D.92p

Investment grants, payable

–27

D.99p

Other capital transfers, payable–7

III.1.2: Acquisition of non-financial assets account
Changes in assets

594

Changes in liabilities and net worth

P.5g

Gross capital formation

38 B.101

P.5n

Net capital formation

11

P.51g

Gross fixed capital formation

35

P.511

Acquisitions less disposals of fixed
assets35

P.5111

Acquisitions of new fixed assets

38

P.5112Acquisitions of existing fixed
assets0P.5113

Disposal of existing fixed assets

–3

P.512

Costs of ownership transfer on
non-produced assets

P.51c

Consumption of fixed capital

P.52

Changes in inventories

0

P.53

Acquisitions less disposals ofvaluables

3

NP

Acquisitions less disposals of nonproduced assets

2

NP.1

Acquisitions less disposals ofnatural resources

2

Changes in net worth due tosaving and capital transfers–27

European system of accounts — ESA 2010

–90

The accounts

Changes in assets
NP.2

Acquisitions less disposals ofcontracts, leases and licences

NP.3

Purchases less sales of goodwill
and marketing assets

B.9

Net lending (+)/net borrowing(–)

24

Changes in liabilities and net worth0–103

III.2: Financial account
Changes in assets

Changes in liabilities and net worth
B.9

F

Net acquisition of financial assets

F.1

Net lending (+)/net borrowing
(–)

–103

–10 F

Net incurrence of liabilities

Monetary gold and SDRs

F.1

Monetary gold and SDRs

F.11

Monetary gold

F.11

Monetary gold

F.12

SDRs

F.12

SDRs

F.2

Currency and deposits

F.21

Currency

F.22

Transferable deposits

F.221

Inter-bank positions

F.229

Other transferable deposits–27 F.229

Other transferable deposits

2

F.29

Other deposits–1 F.29

Other deposits

0

F.3

Debt securities

4 F.3

Debt securities

38

F.31

Short-term

1 F.31

Short-term

4

F.32

Long-term

3 F.32Long-term

34

F.4

Loans

3 F.4

Loans

9

F.41

Short-term

1 F.41

Short-term

3

F.42

Long-term

2 F.42Long-term

6

F.5

Equity and investment fundshares

3 F.5

Equity and investment fundsharesF.51

Equity3 F.51EquityF.511

Listed shares

1 F.511

Listed shares

F.512

Unlisted shares

1 F.512

Unlisted shares

F.519

Other equity

1 F.519

Other equity

F.52

Investment fund shares/units

0 F.52

Investment fund shares/units

F.521

Money market fund shares/units

0 F.521

Money market fund shares/units

F.522

Non-MMF investment fundshares/units

0 F.522

Non-MMF investment fundshares/units

F.6

Insurance, pension andstandardised guarantee schemes

1 F.6

Insurance, pension andstandardised guarantee schemes

F.61

Non-life insurance technicalreserves

0 F.61

Non-life insurance technicalreserves

F.62

Life insurance and annuity
entitlements

0 F.62

Life insurance and annuity
entitlements

European system of accounts — ESA 2010–26 F.2

93

Currency and deposits

37

Currency

35–27 F.22

Transferable deposits

2

F.221

Inter-bank positions

2 F.21

0

595

24

The accounts

Changes in assets

Changes in liabilities and net worth

F.63

Pension entitlements

F.63

Pension entitlements

F.64

Claim of pension fund on pension
managers

F.64

Claim of pension fund on pension
managers

F.65

Entitlements to non-pension
benefits

F.65

Entitlements to non-pension
benefits

F.66

Provisions for calls understandardised guarantees

1 F.66

Provisions for calls understandardised guarantees

0

F.7

Financial derivatives andemployee stock options

0 F.7

Financial derivatives andemployee stock options

0

F.71

Financial derivatives

0 F.71

Financial derivatives

0

F.711

Options

0 F.711

Options0

F.712

Forwards

0 F.712Forwards

0

F.72

Employee stock options

0 F.72

Employee stock options

0

F.8

Other accounts receivable/
payable5 F.8

Other accounts receivable/
payable9

F.81

Trade credits and advances

1 F.81

Trade credits and advances

6

F.89

Other accounts receivable/
payable, excluding trade credits
and advances

4 F.89Other accounts receivable/
payable, excluding trade credits
and advances3

III.3: Other changes in assets accounts
III.3.1: Other changes in volume of assets account
Changes in assets

596

Changes in liabilities and net worth

K.1

Economic appearance of assets

7 K.5

Other changes in volume n.e.c.

AN.1

Produced non-financial assets

3 AN.1

Produced non-financial assets

AN.2

Non-produced non-financial
assets

4 AN.2

Non-produced non-financial
assetsAN.21

Natural resources

4 AF

Financial assets/liabilities

0

AN.22

Contracts, leases and licences

0 K.6

Changes in classification

2

AN.23

Purchases less sales of goodwill
and marketing assets

0 K.61

Changes in sector classificationand structure2

K.2

Economic disappearance of nonproduced assets–2 AN.1

Produced non-financial assets

0

K.21

Depletion of natural resources–2 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources–2 AF

Financial assets/liabilities

2

K.22

Other economic disappearance of
non-produced assets

0 K.62

Changes in classification of assets
and liabilities

0

AN.21

Natural resources

0 AN.1

Produced non-financial assets

0

AN.22

Contracts, leases and licences

0 AN.2

Non-produced non-financial
assets0

AN.23

Purchases less sales of goodwill
and marketing assets

AF

Financial assets/liabilities

0

K.3

Catastrophic losses–6 Total other changes in volume

AN.1

Produced non-financial assets–4 AN.1

Produced non-financial assets

European system of accounts — ESA 2010

0

2

The accounts

Changes in assets

Changes in liabilities and net worth

AN.2

Non-produced non-financial
assets–2 AN.11

Fixed assets

AF

Financial assets/liabilities

0 AN.12Inventories

K.4

Uncompensated seizures

5 AN.13

Valuables

AN.1

Produced non-financial assets

1 AN.2

Non-produced non-financial
assetsAN.2

Non-produced non-financial
assets

4 AN.21Natural resources

AF

Financial assets

0 AN.22

Contracts, leases and licences

K.5

Other changes in volume n.e.c.

0 AN.23

Purchases less sales of goodwill
and marketing assets

AN.1

Produced non-financial assets

0 AF

Financial assets

AN.2

Non-produced non-financial
assets

0 AF.1

Monetary gold and SDRs

AF

Financial assets/liabilities

0 AF.2Currency and deposits

K.6

Changes in classification–4 AF.3

Debt securities

K.61

Changes in sector classificationand structure–4 AF.4

Loans

0

AN.1

Produced non-financial assets–3 AF.5

Equity and investment fundshares2

AN.2

Non-produced non-financial
assets

–1 AF.6

Insurance pension andstandardised guarantee schemes

AF

Financial assets/liabilities

0 AF.7

Financial derivatives andemployee stock options

K.62

Changes in classification of assets
and liabilities

0 AF.8Other accounts receivable/
payableAN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets0

AF

Financial assets/liabilities

0

Total other changes in volume

0

AN.1

Produced non-financial assets

–3

AN.11

Fixed assets

–3

AN.12

Inventories

0

AN.13

Valuables0

AN.2

Non-produced non-financial
assets3

AN.21

Natural resources

1

AN.22

Contracts, leases and licences

2

AN.23

Purchases less sales of goodwill
and marketing assets

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

European system of accounts — ESA 2010

24

2

0

597

24

The accounts

Changes in assets

Changes in liabilities and net worth

AF.3

Debt securities

AF.4

Loans

AF.5

Equity and investment fundshares

AF.6

Insurance pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
B.102

Changes in net worth due toother changes in volume ofassets–2

III.3.2: Revaluation account
Changes in assets

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/
losses(–)

AN

Non-financial assets

44 AF

Liabilities

7

AN.1

Produced non-financial assets

21 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

18 AF.2

Currency and deposits

0

AN.12

Inventories

1 AF.3

Debt securities

7

AN.13

Valuables

2 AF.4

Loans

0

AN.2

Non-produced non-financial
assets

23 AF.5

Equity and investment fundshares0

AN.21

Natural resources

23 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

1

AF.1

Monetary gold and SDRs

1

AF.2

Currency and deposits

0

AF.3

Debt securities

0

AF.4

Loans

0

AF.5

Equity and investment fundshares0

AF.6

Insurance, pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
Changes in net worth due tonominal holding gains/losses

38

K.7

B.103

598

Nominal holding gains(–)/
losses(+)

European system of accounts — ESA 2010

The accounts

24

III.3.2.1: Neutral holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses(–)

AN

Non-financial assets

32 AF

Liabilities

AN.1

Produced non-financial assets

20 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

18 AF.2

Currency and deposits

2

AN.12

Inventories

1 AF.3

Debt securities

4

AN.13

Valuables

1 AF.4

Loans

7

AN.2

Non-produced non-financial
assets12 AF.5

Equity and investment fundshares0

AN.21

Natural resources

12 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

AF.8

Other accounts receivable/
payable0

AF

Financial assets

8

AF.1

Monetary gold and SDRs

2

AF.2

Currency and deposits

3

AF.3

Debt securities

0

AF.4

Loans

3

AF.5

Equity and investment fundshares0

AF.6

Insurance, pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0B.1031

Changes in net worth due toneutral holding gains/losses

27

K.71

Neutral holding gains (–)/losses(+)
13

III.3.2.2: Real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

AN

Non-financial assets

12 AF

Liabilities

AN.1

Produced non-financial assets

1 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

0 AF.2Currency and deposits

–2

AN.12

Inventories

0 AF.3

Debt securities

3

AN.13

Valuables

1 AF.4

Loans

–7

AN.2

Non-produced non-financial
assets11 AF.5

Equity and investment fundshares0

AN.21

Natural resources

11 AF.6

Insurance, pension andstandardised guarantee schemes

European system of accounts — ESA 2010

Real holding gains (–)/losses (+)
–6

599

24

The accounts

Changes in assets

Changes in liabilities and net worth

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

AF.8

Other accounts receivable/
payable0

AF

Financial assets

–7

AF.1

Monetary gold and SDRs

–1

AF.2

Currency and deposits

–3

AF.3

Debt securities

0

AF.4

Loans

–3

AF.5

Equity and investment fundshares0

AF.6

Insurance, pension andstandardised guarantee schemes

0

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0B.1032

Changes in net worth due to realholding gains/losses

11

IV: Balance sheets
IV.1: Opening balance sheet
Assets600

Liabilities and net worthANNon-financial assets

789 AF

Liabilities

AN.1

Produced non-financial assets

497 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

467 AF.2

Currency and deposits

102

AN.12

Inventories

22 AF.3

Debt securities

212

AN.13

Valuables

8 AF.4

Loans

328

AN.2

Non-produced non-financial
assets292 AF.5

Equity and investment fundshares4

AN.21

Natural resources

286 AF.6

Insurance, pension andstandardised guarantee schemes

19

AN.22

Contracts, leases and licences

6 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

AF.8

Other accounts receivable/
payable22

AF

Financial assets

396

AF.1

Monetary gold and SDRs

80

AF.2

Currency and deposits

150

AF.3

Debt securities

AF.4

Loans

115

AF.5

Equity and investment fundshares12

AF.6

Insurance, pension andstandardised guarantee schemes

20

0European system of accounts — ESA 2010

687

The accounts

Assets24

Liabilities and net worth

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable19
B.90

Net worth498

IV.2: Changes in balance sheet
AssetsLiabilities and net worth
Total changes in assets

Total changes in liabilities

AN

Non-financial assets

57 AF

Liabilities

AN.1

Produced non-financial assets

29 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

23 AF.2

Currency and deposits

37

AN.12

Inventories

1 AF.3

Debt securities

45

AN.13

Valuables

5 AF.4

Loans

9

AN.2

Non-produced non-financial
assets28 AF.5

Equity and investment fundshares2

AN.21

Natural resources

26 AF.6

Insurance, pension andstandardised guarantee schemes

0

AN.22

Contracts, leases and licences

2 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

AF.8

Other accounts receivable/
payable9

AF

Financial assets

–9

AF.1

Monetary gold and SDRs

1

AF.2

Currency and deposits

–26

AF.3

Debt securities

4

AF.4

Loans

3

AF.5

Equity and investment fundshares3

AF.6

Insurance, pension andstandardised guarantee schemes

1

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable5
B.10

Changes in net worth

–54

B.101

Changes in net worth due tosaving and capital transfers

90

B.102

Changes in net worth due toother changes in volume of assets

–2

B.103

Changes in net worth due tonominal holding gains and losses

38

B.1031

Changes in net worth due toneutral holding gains and losses

27

B.1032

Changes in net worth due to realholding gains and losses

11

European system of accounts — ESA 2010

102

601

24

The accounts

IV: Balance sheets
IV.3: Closing balance sheet
AssetsLiabilities and net worthANNon-financial assets

846 AF

Liabilities

AN.1

Produced non-financial assets

526 AF.1

Monetary gold and SDRs

0

AN.11

Fixed assets

490 AF.2

Currency and deposits

139

AN.12

Inventories

23 AF.3

Debt securities

257

AN.13

Valuables

13 AF.4

Loans

337

AN.2

Non-produced non-financial
assets320 AF.5

Equity and investment fundshares6

AN.21

Natural resources

312 AF.6

Insurance, pension andstandardised guarantee schemes

19

AN.22

Contracts, leases and licences

8 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable31

AF

Financial assets

387

AF.1

Monetary gold and SDRs

81

AF.2

Currency and deposits

124

AF.3

Debt securities

AF.4

Loans

118

AF.5

Equity and investment fundshares15

AF.6

Insurance, pension andstandardised guarantee schemes

21

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable24
Net worth

444

4

B.90

602

789

European system of accounts — ESA 2010

The accounts

24

Table 24.6 — Full sequence of accounts for households
I: Production account
Uses
P.2

Resources
Intermediate consumption

115 P.1

B.1g

Value added, gross

155

P.51c

Consumption of fixed capital

23

B.1n

Value added, net

132

Output270

P.11

Market output

123

P.12

Output for own final use

147

II: Distribution and use of income accounts
II.1: Primary distribution of income accountII.1.1: Generation of income account
Uses

Resources

D.1

Compensation of employees

11 B.1g

Value added, gross

155

D.11

Wages and salaries

11 B.1n

Value added, net

132

D.12

Employers’ social contributions

0

D.121

Employers’ actual social
contributions

0

D.1211

Employers’ actual pension
contributions

0

D.1212

Employers’ actual non-pension
contributions

0

D.122

Employers’ imputed social
contributions

0

D.1221

Employers’ imputed pension
contributions

0

D.1222

Employers’ imputed non-pension
contributions

0

D.29

Other taxes on production

0

D.39

Other subsidies on production

–1

B.2g

Operating surplus, gross

84

B.3g

Mixed income, gross61

P.51c1

Consumption of fixed capital on
gross operating surplus

15

P.51c2

Consumption of fixed capital on
gross mixed income

8

B.2n

Operating surplus, net

69

B.3n

Mixed income, net

53II.1.2: Allocation of primary income account
Uses

Resources

D.4

Property income

41 B.2g

Operating surplus, gross

84

D.41

Interest

14 B.3g

Mixed income, gross

61

European system of accounts — ESA 2010

603

24

The accounts

Uses
D.45

604

Resources
Rent

Operating surplus, net

69

B.3n

Mixed income, net

53

D.1

Compensation of employees

1 154

D.11

Wages and salaries

954

D.12

Employers’ social contributions

200

D.121

Employers’ actual social
contributions

181

D.1211

Employers’ actual pension
contributions

168

D.1212

Employers’ actual non-pension
contributions

13

D.122

Employers’ imputed social
contributions

19

D.1221

Employers’ imputed pension
contributions

18

D.1222

Employers’ imputed non-pension
contributions

1

D.4

Property income

123

D.41

Interest

49

D.42

Distributed income ofcorporations

20

D.421

Dividends

13

D.422

Withdrawals from income ofquasi-corporations

7

D.43

Reinvested earnings on foreign
direct investment

3

D.44

Other investment income

30

D.441

Investment income attributable
to insurance policy holders

20

D.442

Investment income payable on
pension entitlements

8

D.443

Investment income attributable
to collective investment fundshareholders

2

D.4431Dividends attributable tocollective investment fundshareholders

2

D.4432Retained earnings attributable
to collective investment fundshareholders

0

D.45

Rent

21

27 B.2n

B.5g

Balance of primary incomes,
gross

1 381

B.5n

Balance of primary incomes, net

1 358

European system of accounts — ESA 2010

The accounts

24

II.2: Secondary distribution of income account
Uses

Resources

Current transfers

582 B.5g

Balance of primary incomes,
gross

1 381

Balance of primary incomes, net

1 358

D.5

Current taxes on income, wealth,etc.

178 B.5n

D.51

Taxes on income

176

D.59

Other current taxes

D.61

Net social contributions

333 D.61

Net social contributions

0

D.611

Employers’ actual social
contributions

181 D.611

Employers’ actual social
contributions

0

D.6111

Employers’ actual pension
contributions

168 D.6111

Employers’ actual pension
contributions

0

D.6112

Employers’ actual non-pension
contributions

13 D.6112

Employers’ actual non-pension
contributions

0

D.612

Employers’ imputed social
contributions

19 D.612

Employers’ imputed social
contributions

0

D.6121

Employers’ imputed pension
contributions

18 D.6121

Employers’ imputed pension
contributions

0

D.6122

Employers’ imputed non-pension
contributions

1 D.6122

Employers’ imputed non-pension
contributions

0

D.613

Households’ actual social
contributions

129 D.613

Households’ actual social
contributions

0

D.6131

Households’ actual pension
contributions

115 D.6131

Households’ actual pension
contributions

0

D.6132

Households’ actual non-pension
contributions

14 D.6132

Households’ actual non-pension
contributions

0

D.614

Households’ social contribution
supplements

10 D.614

Households’ social contribution
supplements

0D.6141

Households’ pension contribution
supplements

8 D.6141

Households’ pension contribution
supplements

0D.6142

Households’ non-pension
contribution supplements

2 D.6142

Households’ non-pension
contribution supplements

0D.61SC

Social insurance scheme service
charges–6 D.61SC

Social insurance scheme service
charges1

D.62

Social benefits other than socialtransfers in kind

0 D.62Social benefits other than socialtransfers in kind

384

D.622

Other social insurance benefits

0 D.621Social security benefits in cash

53

D.6221Other social insurance pension
benefits

0 D.6211

Social security pension benefits
in cash45

D.6222Other social insurance nonpension benefits

0 D.6212

Social security non-pension
benefits in cash

8

D.622

Other social insurance benefits279

2 Current transfers

420

D.7

Other current transfers

71 D.6221

Other social insurance pension
benefits

250

D.71

Net non-life insurance premiums

31 D.6222

Other social insurance nonpension benefits

29

European system of accounts — ESA 2010

605

24

The accounts

Uses

Resources

D.711

Net non-life direct insurance
premiums

31 D.623

Social assistance benefits in cash

52

D.75

Miscellaneous current transfers

40 D.7

Other current transfers

36

D.751

Current transfers to NPISHs

29 D.72

Non-life insurance claims

35

D.752

Current transfers between
households

7 D.721Non-life direct insurance claims

35

D.759

Other miscellaneous current
transfers

4 D.75

Miscellaneous current transfers

1

D.751

Current transfers to NPISHs

0

D.752

Current transfers between
households

1

D.759

Other miscellaneous current
transfers0

B.6g

Disposable income, gross

1 219

B.6n

Disposable income, net

1 196

D.63

Social transfers in kind

215

D.631

Social transfers in kind — nonmarket production

211

D.632

Social transfers in kind —purchased market production

4

B.6g

Disposable income, gross

1 219

B.6n

Disposable income, net

1 196

II.3: Redistribution of income in kind account
Uses

Resources

B.7g

Adjusted disposable income,
gross

1 434

B.7n

Adjusted disposable income, net

1 411

II.4: Use of income accountII.4.1: Use of disposable income account
Uses

Resources
B.6g

P.3

Final consumption expenditure

1 015 B.6n

P.31

Individual consumption
expenditure

1 015
D.8

606

B.8g

Saving, gross

215

B.8n

Saving, net

192

Disposable income, gross

1 219

Disposable income, net

1 196

Adjustment for the change inpension entitlements

European system of accounts — ESA 2010

11

The accounts

24

II.4.2: Use of adjusted disposable income account
Uses

Resources
B.7g

P.4

Actual final consumption

1 230 B.7n

P.41

Actual individual consumption

1 230
D.8

B.8g

Saving, gross

215

B.8n

Saving, net

192

Adjusted disposable income,
gross

1 434

Adjusted disposable income, net

1 411

Adjustment for the change inpension entitlements

11

III: Accumulation accounts
III.1: Capital accountIII.1.1: Change in net worth due to saving and capital transfers account
Changes in assets
B.101

Changes in net worth due tosaving and capital transfers

Changes in liabilities and net worth
Saving, net

192

D.9r

Capital transfers, receivable

23

D.92r

Investment grants, receivable

0

D.99r

Other capital transfers, receivable

23

D.9p

Capital transfers, payable

–5

D.91p

Capital taxes, payable

–2

D.92p

Investment grants, payable

D.99p

Other capital transfers, payable

210 B.8n–3

III.1.2: Acquisition of non-financial assets account
Changes in assets

Changes in liabilities and net worth

P.5g

Gross capital formation

P.5n

Net capital formation

32

P.51g

Gross fixed capital formation

48

P.511

Acquisitions less disposals of fixed
assets48

P.5111

Acquisitions of new fixed assets

45

P.5112Acquisitions of existing fixed
assets3

P.5113

Disposal of existing fixed assets

0

P.512

Costs of ownership transfer on
non-produced assets

0

P.51c

Consumption of fixed capital

–23

P.52

Changes in inventories

2

P.53

Acquisitions less disposals ofvaluables

5

European system of accounts — ESA 2010

55 B.101

Changes in net worth due tosaving and capital transfers

210

607

24

The accounts

Changes in assets

Changes in liabilities and net worthNP

Acquisitions less disposals of nonproduced assets

4

NP.1

Acquisitions less disposals ofnatural resources

3

NP.2

Acquisitions less disposals ofcontracts, leases and licences

1

NP.3

Purchases less sales of goodwill
and marketing assets

B.9

Net lending (+)/net borrowing
(–)

174

III.2: Financial account
Changes in assets

Changes in liabilities and net worth
B.9

174

F

Net acquisition of financial assets

189 F

Net incurrence of liabilities

15

F.2

Currency and deposits

64 F.3

Debt securities

0

F.21

Currency

10 F.31

Short-term

0

F.22

Transferable deposits

27 F.32

Long-term

0

F.229

Other transferable deposits

27

F.29

Other deposits

27 F.4

Loans

11

F.41

Short-term

2Long-term

9

Financial derivatives andemployee stock options

0

Financial derivatives

0

F.3

Debt securities

10 F.42

F.31

Short-term

3

F.32

Long-term

7 F.7
F.71

608

Net lending (+)/net borrowing
(–)

F.4

Loans

3 F.711

Options0

F.41

Short-term

3 F.712Forwards

0

F.42

Long-term

0 F.72

Employee stock options

0

F.5

Equity and investment fundshares66 F.8Other accounts receivable/
payable4

F.51

Equity53 F.81

Trade credits and advances

4

F.511

Listed shares

48 F.89

Other accounts receivable/
payable, excluding trade credits
and advances

0

F.512

Unlisted shares

2

F.519

Other equity

3

F.52

Investment fund shares/units

13

F.521

Money market fund shares/units

5

F.522

Non-MMF investment fundshares/units

8

F.6

Insurance, pension andstandardised guarantee schemes

39

European system of accounts — ESA 2010

The accounts

Changes in assets

24

Changes in liabilities and net worth

F.61

Non-life insurance technicalreserves

4

F.62

Life insurance and annuity
entitlements

22

F.63

Pension entitlements

11

F.64

Claim of pension fund on pension
managers

F.65

Entitlements to non-pension
benefits

2

F.66

Provisions for calls understandardised guarantees

0

F.7

Financial derivatives andemployee stock options

3

F.71

Financial derivatives

1

F.711

Options1

F.712

Forwards

0

F.72

Employee stock options

2

F.8

Other accounts receivable/
payable4

F.81

Trade credits and advances

3

F.89

Other accounts receivable/
payable, excluding trade credits
and advances

1

III.3: Other changes in assets accounts
III.3.1: Other changes in volume of assets account
Changes in assets

Changes in liabilities and net worth

K.1

Economic appearance of assets

0 K.5

Other changes in volume n.e.c.

1

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets

0 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0 AF

Financial assets/liabilities

1

AN.22

Contracts, leases and licences

0 K.6

Changes in classification

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 K.61

Changes in sector classificationand structure0

K.2

Economic disappearance of nonproduced assets

0 AN.1

Produced non-financial assets

0

K.21

Depletion of natural resources

0 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0 AF

Financial assets/liabilities

0

K.22

Other economic disappearance of
non-produced assets

0 K.62

Changes in classification of assets
and liabilities

0

AN.21

Natural resources

0 AN.1

Produced non-financial assets

0

AN.22

Contracts, leases and licences

0 AN.2

Non-produced non-financial
assets0European system of accounts — ESA 2010

609

24

The accounts

Changes in assets

610

Changes in liabilities and net worth

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF

K.3

Catastrophic losses

0 Total other changes in volume

1

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets

0 AN.11

Fixed assets

0AF

Financial assets/liabilities

0 AN.12Inventories

0

K.4

Uncompensated seizures

0 AN.13

Valuables0

AN.1

Produced non-financial assets

0 AN.2

Non-produced non-financial
assets0

AN.2

Non-produced non-financial
assets

0 AN.21Natural resources0

AF

Financial assets

0 AN.22

Contracts, leases and licences0

K.5

Other changes in volume n.e.c.

0 AN.23

Purchases less sales of goodwill
and marketing assets

0

AN.1

Produced non-financial assets

0 AF

Financial assets

1

AN.2

Non-produced non-financial
assets

0 AF.1

Monetary gold and SDRs

AF

Financial assets/liabilities

0 AF.2Currency and deposits

K.6

Changes in classification

0 AF.3

Debt securities

K.61

Changes in sector classificationand structure

0 AF.4

Loans

AN.1

Produced non-financial assets

0 AF.5Equity and investment fundsharesAN.2

Non-produced non-financial
assets

0 AF.6

Insurance pension andstandardised guarantee schemes

1

AF

Financial assets/liabilities

0 AF.7

Financial derivatives andemployee stock options

0

K.62

Changes in classification of assets
and liabilities

0 AF.8Other accounts receivable/
payable0

AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets0

AF

Financial assets/liabilities

0

Total other changes in volume

0

AN.1

Produced non-financial assets

0

AN.11

Fixed assets

0

AN.12

Inventories

0

AN.13

Valuables0

AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0

AN.22

Contracts, leases and licences

0

AN.23

Purchases less sales of goodwill
and marketing assets

0

Financial assets/liabilities

European system of accounts — ESA 2010

00

The accounts

Changes in assets

24

Changes in liabilities and net worth

AF

Financial assets

0

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

AF.3

Debt securities

AF.4

Loans

0

AF.5

Equity and investment fundshares0

AF.6

Insurance pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
B.102

Changes in net worth due toother changes in volume ofassets–1

III.3.2: Revaluation account
Changes in assets

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/
losses(–)

AN

Non-financial assets

80 AF

Liabilities

AN.1

Produced non-financial assets

35 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

28 AF.2

Currency and deposits

0

AN.12

Inventories

2 AF.3

Debt securities

0

AN.13

Valuables

5 AF.4

Loans

0

AN.2

Non-produced non-financial
assets45 AF.5

Equity and investment fundshares0

AN.21

Natural resources

45 AF.6

Insurance, pension andstandardised guarantee schemes

0

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

16

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

AF.3

Debt securities

6

AF.4

Loans

0

AF.5

Equity and investment fundshares10

AF.6

Insurance, pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

European system of accounts — ESA 2010

K.7

Nominal holding gains(–)/
losses(+)
0

0

611

24

The accounts

Changes in assets
AF.8

Other accounts receivable/
payableChanges in liabilities and net worth0
B.103

Changes in net worth due tonominal holding gains/losses

96

III.3.2.1: Neutral holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses(–)

AN

Non-financial assets

56 AF

Liabilities

AN.1

Produced non-financial assets

34 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

28 AF.2

Currency and deposits

0

AN.12

Inventories

2 AF.3

Debt securities

0

AN.13

Valuables

4 AF.4

Loans

3

AN.2

Non-produced non-financial
assets22 AF.5

Equity and investment fundshares0

AN.21

Natural resources

22 AF.6

Insurance, pension andstandardised guarantee schemes

0

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable2

AF

Financial assets

36

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

17

AF.3

Debt securities

4

AF.4

Loans

0

AF.5

Equity and investment fundshares9

AF.6

Insurance, pension andstandardised guarantee schemes

5

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable1
Changes in net worth due toneutral holding gains/losses

87

K.71

B.1031

Neutral holding gains (–)/losses(+)
5

III.3.2.2: Real holding gains/losses account612

Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

AN

Non-financial assets

24 AF

Liabilities

AN.1

Produced non-financial assets

1 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

0 AF.2Currency and deposits

Real holding gains (–)/losses (+)

European system of accounts — ESA 2010

–50

The accounts

Changes in assets

24

Changes in liabilities and net worth

AN.12

Inventories

0 AF.3

Debt securities

0

AN.13

Valuables

1 AF.4

Loans

–3

AN.2

Non-produced non-financial
assets

23 AF.5

Equity and investment fundshares0

AN.21

Natural resources

23 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable–2

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

AF.3

Debt securities

2

AF.4

Loans

0

AF.5

Equity and investment fundshares1

AF.6

Insurance, pension andstandardised guarantee schemes

–5

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable–1
Changes in net worth due to realholding gains/losses

9

–20
–17

B.1032

IV: Balance sheets
IV.1: Opening balance sheet
AssetsLiabilities and net worthANNon-financial assets

1 429 AF

Liabilities

AN.1

Produced non-financial assets

856 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

713 AF.2

Currency and deposits

10

AN.12

Inventories

48 AF.3

Debt securities

2

AN.13

Valuables

95 AF.4

Loans

AN.2

Non-produced non-financial
assets573 AF.5

Equity and investment fundsharesAN.21

Natural resources

573 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable8

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

European system of accounts — ESA 2010

189

169

3 260
840

613

24

The accounts

AssetsLiabilities and net worth

AF.3

Debt securities

198

AF.4

Loans

24

AF.5

Equity and investment fundshares

1 749

AF.6

Insurance, pension andstandardised guarantee schemes

391

AF.7

Financial derivatives andemployee stock options

3

AF.8

Other accounts receivable/
payable55
B.90

Net worth

4 500

IV.2: Changes in balance sheet
AssetsLiabilities and net worth
Total changes in assets

614

Total changes in liabilities

AN

Non-financial assets

115 AF

Liabilities

16

AN.1

Produced non-financial assets

67 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

53 AF.2

Currency and deposits

0

AN.12

Inventories

4 AF.3

Debt securities

0

AN.13

Valuables

10 AF.4

Loans

11

AN.2

Non-produced non-financial
assets48 AF.5

Equity and investment fundshares0

AN.21

Natural resources

48 AF.6

Insurance, pension andstandardised guarantee schemes

1

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable4

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

64

AF.3

Debt securities

16

AF.4

Loans

3

AF.5

Equity and investment fundshares76

AF.6

Insurance, pension andstandardised guarantee schemes

39

AF.7

Financial derivatives andemployee stock options

3

AF.8

Other accounts receivable/
payable

4

205

B.10

Changes in net worth

304

B.101

Changes in net worth due tosaving and capital transfers

210

European system of accounts — ESA 2010

The accounts

Assets24

Liabilities and net worth
B.102

Changes in net worth due toother changes in volume of assets

–1

B.103

Changes in net worth due tonominal holding gains and losses

96

B.1031

Changes in net worth due toneutral holding gains and losses

87

B.1032

Changes in net worth due to realholding gains and losses

9

IV: Balance sheets
IV.3: Closing balance sheet
AssetsLiabilities and net worthANNon-financial assets

1 544 AF

AN.1

Produced non-financial assets

923 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

766 AF.2

Currency and deposits

10

AN.12

Inventories

52 AF.3

Debt securities

2

AN.13

Valuables

105 AF.4

Loans

AN.2

Non-produced non-financial
assets621 AF.5

Equity and investment fundshares0

AN.21

Natural resources

621 AF.6

Insurance, pension andstandardised guarantee schemes

1

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable12

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

904

AF.3

Debt securities

214

AF.4

Loans

27

AF.5

Equity and investment fundshares

AF.6

Insurance, pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

6

AF.8

Other accounts receivable/
payable

59

205

180

3 465

1 825
430

B.90

European system of accounts — ESA 2010

Liabilities

Net worth

4 804

615

24

The accounts

Table 24.7 — Full sequence of accounts for non-profit institutions serving households
I: Production account
Uses
P.2

Resources
Intermediate consumption

17 P.1

B.1g

Value added, gross

15

P.51c

Consumption of fixed capital

3

B.1n

Value added, net

12

Output32

P.11

Market output

0

P.12

Output for own final use

0

P.13

Non-market output

32

II: Distribution and use of income accounts
II.1: Primary distribution of income accountII.1.1: Generation of income account
Uses

Resources

D.1

Compensation of employees

11 B.1g

Value added, gross

15

D.11

Wages and salaries

6 B.1nValue added, net

12

D.12

Employers’ social contributions

5

D.121

Employers’ actual social
contributions

4

D.1211

Employers’ actual pension
contributions

4

D.1212

Employers’ actual non-pension
contributions

0

D.122

Employers’ imputed social
contributions

1

D.1221

Employers’ imputed pension
contributions

1

D.1222

Employers’ imputed non-pension
contributions

0

D.29

Other taxes on production

1

D.39

Other subsidies on production

0

B.2g

Operating surplus, gross3

P.51c1

Consumption of fixed capital on
gross operating surplus

3

B.2n

Operating surplus, net

03

II.1.2: Allocation of primary income account
Uses

616

Resources

D.4

Property income

6 B.2gOperating surplus, gross

D.41

Interest

6 B.3gMixed income, gross

D.45

Rent

0 B.2nOperating surplus, net

B.3n

Mixed income, net

D.4

Property income

European system of accounts — ESA 2010

0
7

The accounts

Uses

24

Resources
D.41

Interest

7

D.42

Distributed income ofcorporations

0

D.421

Dividends

0

D.422

Withdrawals from income ofquasi-corporations

D.43

Reinvested earnings on foreign
direct investment

0

D.44

Other investment income

0

D.441

Investment income attributable
to insurance policy holders

0

D.442

Investment income payable on
pension entitlements

D.443

Investment income attributable
to collective investment fundshareholders

0D.4431Dividends attributable tocollective investment fundshareholders

0D.4432Retained earnings attributable
to collective investment fundshareholders

0

D.45

Rent

0

7 B.5gBalance of primary incomes,
gross

4

Balance of primary incomes, net

1

B.5g

Balance of primary incomes,
gross

4

B.5n

Balance of primary incomes, net

1

II.2: Secondary distribution of income account
Uses

Resources

Current transfers
D.5

Current taxes on income, wealth,etc.

0 B.5nD.51

Taxes on income

0

D.59

Other current taxes

0 Current transfers

40

D.61

Net social contributions

5

Employers’ actual social
contributions

3

D.62

Social benefits other than socialtransfers in kind

5 D.611

D.621

Social security benefits in cash

D.6111

Employers’ actual pension
contributions

2

D.6211Social security pension benefits
in cash

D.6112

Employers’ actual non-pension
contributions

1

D.6212Social security non-pension
benefits in cash

D.612

Employers’ imputed social
contributions

1

D.622

Other social insurance benefits

5 D.6121

Employers’ imputed pension
contributions

1

European system of accounts — ESA 2010

617

24

The accounts

Uses

Resources

D.6221Other social insurance pension
benefits

3 D.6122

Employers’ imputed non-pension
contributions

0

D.6222Other social insurance nonpension benefits

2 D.613

Households’ actual social
contributions

1

D.623

Social assistance benefits in cash

D.6131

Households’ actual pension
contributions

0

D.6132

Households’ actual non-pension
contributions

1

D.7

Other current transfers

2

D.71

Net non-life insurance premiums

0 D.7

Other current transfers

36

D.711

Net non-life direct insurance
premiums

0 D.72Non-life insurance claims

0

D.712

Net non-life reinsurance
premiums

D.721

Non-life direct insurance claims

0

D.72

Non-life insurance claims

D.722

Non-life reinsurance claims

D.721

Non-life direct insurance claims

D.73

Current transfers within general
government

D.722

Non-life reinsurance claims

D.74

Current international cooperation

D.73

Current transfers within general
government

D.75

Miscellaneous current transfers

36

D.74

Current international cooperation

D.751

Current transfers to NPISHs

36

D.75

Miscellaneous current transfers

2 D.752

Current transfers between
households

D.751

Current transfers to NPISHs

0 D.759

Other miscellaneous current
transfers

0

D.752

Current transfers between
households

D.759

Other miscellaneous current
transfers2

B.6g

Disposable income, gross

37

B.6n

Disposable income, net

34

II.3: Redistribution of income in kind account
Uses

618

Resources

D.63

Social transfers in kind

31 B.6g

Disposable income, gross

37

D.631

Social transfers in kind — nonmarket production

31 B.6n

Disposable income, net

34

D.632

Social transfers in kind —purchased market production

0

B.7g

Adjusted disposable income,
gross

6

B.7n

Adjusted disposable income, net

3European system of accounts — ESA 2010

The accounts

24

II.4: Use of income accountII.4.1: Use of disposable income account
Uses

Resources
B.6g

P.3

Final consumption expenditure

32 B.6n

P.31

Individual consumption
expenditure

31

P.32

Collective consumption
expenditure1

D.8

Adjustment for the change inpension entitlements

0

B.8g

Saving, gross

5

B.8n

Saving, net

2

Disposable income, gross37

Disposable income, net

34

Adjusted disposable income,
gross

6

Adjusted disposable income, net

3II.4.2: Use of adjusted disposable income account
Uses

Resources
B.7g

P.4

Actual final consumption

1 B.7nP.41

Actual individual consumption

P.42

Actual collective consumption

1

D.8

Adjustment for the change inpension entitlements

0

B.8g

Saving, gross

5

B.8n

Saving, net

2

III: Accumulation accounts
III.1: Capital accountIII.1.1: Change in net worth due to saving and capital transfers account
Changes in assets
B.101

Changes in net worth due tosaving and capital transfers

Changes in liabilities and net worth
Saving, net

2

D.9r

Capital transfers, receivable

0

D.92r

Investment grants, receivable

0

D.99r

Other capital transfers, receivable

0

D.9p

Capital transfers, payable

–3

D.91p

Capital taxes, payable

0

D.92p

Investment grants, payable

D.99p

Other capital transfers, payable–1 B.8n–3

III.1.2: Acquisition of non-financial assets account
Changes in assets

Changes in liabilities and net worth

P.5g

Gross capital formation

5 B.101

P.5n

Net capital formation2

European system of accounts — ESA 2010

Changes in net worth due tosaving and capital transfers

–1

619

24

The accounts

Changes in assets

Changes in liabilities and net worth

P.51g

Gross fixed capital formation

5

P.511

Acquisitions less disposals of fixed
assets5

P.5111

Acquisitions of new fixed assets

5

P.5112Acquisitions of existing fixed
assets1

P.5113

Disposal of existing fixed assets

–1

P.512

Costs of ownership transfer on
non-produced assets

0

P.51c

Consumption of fixed capital

–3

P.52

Changes in inventories

0

P.53

Acquisitions less disposals ofvaluables

0NP

Acquisitions less disposals of nonproduced assets

1

NP.1

Acquisitions less disposals ofnatural resources

1

NP.2

Acquisitions less disposals ofcontracts, leases and licences

0

NP.3

Purchases less sales of goodwill
and marketing assets

B.9

Net lending (+)/net borrowing(–)–4

III.2: Financial account
Changes in assets

Changes in liabilities and net worth
B.9

–4

F

Net acquisition of financial assets

2 F

Net incurrence of liabilities

6

F.2

Currency and deposits

2 F.3

Debt securities

0

F.21

Currency

1 F.31

Short-term

0

F.22

Transferable deposits

1 F.32Long-term

0

F.229

Other transferable deposits

1

F.29

Other deposits

0 F.4

Loans

6

F.41

Short-term

2Long-term

4

Financial derivatives andemployee stock options

0

Financial derivatives

0

F.3

Debt securities–1 F.42

F.31

Short-term

0

F.32

Long-term–1 F.7F.71

620

Net lending (+)/net borrowing
(–)

F.4

Loans

0 F.711

Options0

F.41

Short-term

0 F.712Forwards

0

F.42

Long-term

0 F.72

Employee stock options

0

European system of accounts — ESA 2010

The accounts

Changes in assets

24

Changes in liabilities and net worth

F.5

Equity and investment fundshares0 F.8

Other accounts receivable/
payable0

F.51

Equity0 F.81

Trade credits and advances

0

F.511

Listed shares

0 F.89Other accounts receivable/
payable, excluding trade credits
and advances

0

F.512

Unlisted shares

0

F.519

Other equity

0

F.52

Investment fund shares/units

0

F.521

Money market fund shares/units

0

F.522

Non-MMF investment fundshares/units

0

F.6

Insurance, pension andstandardised guarantee schemes

0

F.61

Non-life insurance technicalreserves

0

F.62

Life insurance and annuity
entitlements

0

F.63

Pension entitlements

F.64

Claim of pension fund on pension
managers

F.65

Entitlements to non-pension
benefits

F.66

Provisions for calls understandardised guarantees

0

F.7

Financial derivatives andemployee stock options

0

F.71

Financial derivatives

0

F.711

Options0

F.712

Forwards

0

F.72

Employee stock options

0

F.8

Other accounts receivable/
payable1

F.81

Trade credits and advances

F.89

Other accounts receivable/
payable, excluding trade credits
and advances

1

III.3: Other changes in assets accounts
III.3.1: Other changes in volume of assets account
Changes in assets

Changes in liabilities and net worth

K.1

Economic appearance of assets

0 K.5

Other changes in volume n.e.c.

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets

0 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0 AF

Financial assets/liabilities

0

European system of accounts — ESA 2010

621

24

The accounts

Changes in assets

622

Changes in liabilities and net worth

AN.22

Contracts, leases and licences

0 K.6

Changes in classification

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 K.61

Changes in sector classificationand structure0

K.2

Economic disappearance of nonproduced assets

0 AN.1

Produced non-financial assets

0

K.21

Depletion of natural resources

0 AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0 AF

Financial assets/liabilities

0

K.22

Other economic disappearance of
non-produced assets

0 K.62

Changes in classification of assets
and liabilities

0

AN.21

Natural resources

0 AN.1

Produced non-financial assets

0

AN.22

Contracts, leases and licences

0 AN.2

Non-produced non-financial
assets0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF

Financial assets/liabilities

0

K.3

Catastrophic losses

0 Total other changes in volume

0

AN.1

Produced non-financial assets

0 AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets

0 AN.11

Fixed assets

0AF

Financial assets/liabilities

0 AN.12Inventories

0

K.4

Uncompensated seizures

0 AN.13

Valuables0

AN.1

Produced non-financial assets

0 AN.2

Non-produced non-financial
assets0

AN.2

Non-produced non-financial
assets

0 AN.21Natural resources0

AF

Financial assets

0 AN.22

Contracts, leases and licences0

K.5

Other changes in volume n.e.c.

0 AN.23

Purchases less sales of goodwill
and marketing assets

0

AN.1

Produced non-financial assets

0 AF

Financial assets

0

AN.2

Non-produced non-financial
assets

0 AF.1

Monetary gold and SDRs

AF

Financial assets/liabilities

0 AF.2Currency and deposits

K.6

Changes in classification

0 AF.3

Debt securities

K.61

Changes in sector classificationand structure

0 AF.4

Loans

AN.1

Produced non-financial assets

0 AF.5Equity and investment fundsharesAN.2

Non-produced non-financial
assets

0 AF.6

Insurance pension andstandardised guarantee schemes

0AF

Financial assets/liabilities

0 AF.7

Financial derivatives andemployee stock options

0

K.62

Changes in classification of assets
and liabilities

0 AF.8Other accounts receivable/
payable0

AN.1

Produced non-financial assets

0

AN.2

Non-produced non-financial
assets0European system of accounts — ESA 20100

The accounts

Changes in assets
AF

Financial assets/liabilities

24

Changes in liabilities and net worth0

Total other changes in volume

0

AN.1

Produced non-financial assets

0

AN.11

Fixed assets

0

AN.12

Inventories

0

AN.13

Valuables0

AN.2

Non-produced non-financial
assets0

AN.21

Natural resources

0

AN.22

Contracts, leases and licences

0

AN.23

Purchases less sales of goodwill
and marketing assets

0AF

Financial assets

0

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

AF.3

Debt securities

AF.4

Loans

0

AF.5

Equity and investment fundshares0

AF.6

Insurance pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
B.102

Changes in net worth due toother changes in volume ofassets–1

III.3.2: Revaluation account
Changes in assets

Changes in liabilities and net worth

K.7

Nominal holding gains (+)/
losses(–)

AN

Non-financial assets

8 AF

Liabilities

AN.1

Produced non-financial assets

5 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

5 AF.2Currency and deposits

0

AN.12

Inventories

0 AF.3

Debt securities

0

AN.13

Valuables

0 AF.4

Loans

0

AN.2

Non-produced non-financial
assets

3 AF.5Equity and investment fundshares0

AN.21

Natural resources

3 AF.6

Insurance, pension andstandardised guarantee schemes

0

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

European system of accounts — ESA 2010

K.7

Nominal holding gains(–)/
losses(+)
0

623

24

The accounts

Changes in assets

Changes in liabilities and net worth

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8AF

Financial assets

2

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

AF.3

Debt securities

AF.4

Loans

AF.5

Equity and investment fundshares

AF.6

Insurance, pension andstandardised guarantee schemes

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0

Other accounts receivable/
payable0

Changes in net worth due tonominal holding gains/losses

10

1

1

B.103

III.3.2.1: Neutral holding gains/losses account
Changes in assets

624

Changes in liabilities and net worth

K.71

Neutral holding gains (+)/losses(–)

AN

Non-financial assets

6 AF

Liabilities

AN.1

Produced non-financial assets

5 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

5 AF.2Currency and deposits

1

AN.12

Inventories

0 AF.3

Debt securities

0

AN.13

Valuables

0 AF.4

Loans

1

AN.2

Non-produced non-financial
assets

1 AF.5Equity and investment fundshares0

AN.21

Natural resources

1 AF.6

Insurance, pension andstandardised guarantee schemes

0

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable1

AF

Financial assets

3

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

2

AF.3

Debt securities

1

AF.4

Loans

0

AF.5

Equity and investment fundshares0

AF.6

Insurance, pension andstandardised guarantee schemes

0

K.71

Neutral holding gains (–)/losses(+)

European system of accounts — ESA 2010

3

The accounts

Changes in assets

24

Changes in liabilities and net worth

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0B.1031

Changes in net worth due toneutral holding gains/losses

6

III.3.2.2: Real holding gains/losses account
Changes in assets

Changes in liabilities and net worth

K.72

Real holding gains (+)/losses (–)

K.72

AN

Non-financial assets

2 AF

Liabilities

AN.1

Produced non-financial assets

0 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

0 AF.2Currency and deposits

–1

AN.12

Inventories

0 AF.3

Debt securities

0

AN.13

Valuables

0 AF.4

Loans

–1

AN.2

Non-produced non-financial
assets

2 AF.5Equity and investment fundshares0

AN.21

Natural resources

2 AF.6

Insurance, pension andstandardised guarantee schemes

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable–1

AF

Financial assets

–1

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

–2

AF.3

Debt securities

0

AF.4

Loans

0

AF.5

Equity and investment fundshares1

AF.6

Insurance, pension andstandardised guarantee schemes

0

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable0
Changes in net worth due to realholding gains/losses

4

B.1032

Real holding gains (–)/losses (+)–3

IV: Balance sheets
IV.1: Opening balance sheet
AssetsLiabilities and net worthANNon-financial assets

159 AF

Liabilities

AN.1

Produced non-financial assets

124 AF.1

Monetary gold and SDRs

European system of accounts — ESA 2010

121

625

24

The accounts

AssetsLiabilities and net worth

AN.11

Fixed assets

121 AF.2

Currency and deposits

38

AN.12

Inventories

1 AF.3

Debt securities

0

AN.13

Valuables

2 AF.4

Loans

43

AN.2

Non-produced non-financial
assets35 AF.5

Equity and investment fundsharesAN.21

Natural resources

35 AF.6

Insurance, pension andstandardised guarantee schemes

5

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable35

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

110

AF.3

Debt securities

25

AF.4

Loans

8

AF.5

Equity and investment fundshares22

AF.6

Insurance, pension andstandardised guarantee schemes

4

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable3
Net worth

210

172

B.90
IV.2: Changes in balance sheet
AssetsLiabilities and net worth
Total changes in assets

626

Total changes in liabilities

AN

Non-financial assets

11 AF

Liabilities

AN.1

Produced non-financial assets

7 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

7 AF.2Currency and deposits

0

AN.12

Inventories

0 AF.3

Debt securities

0

AN.13

Valuables

0 AF.4

Loans

6

AN.2

Non-produced non-financial
assets

4 AF.5Equity and investment fundshares0

AN.21

Natural resources

4 AF.6

Insurance, pension andstandardised guarantee schemes

0

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable0

AF

Financial assets

4

AF.1

Monetary gold and SDRs

European system of accounts — ESA 2010

6

The accounts

Assets24

Liabilities and net worth

AF.2

Currency and deposits

2

AF.3

Debt securities

0

AF.4

Loans

0

AF.5

Equity and investment fundshares1

AF.6

Insurance, pension andstandardised guarantee schemes

0

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable1
B.10

Changes in net worth

9

B.101

Changes in net worth due tosaving and capital transfers

–1

B.102

Changes in net worth due toother changes in volume of assets

0

B.103

Changes in net worth due tonominal holding gains and losses

10

B.1031

Changes in net worth due toneutral holding gains and losses

6

B.1032

Changes in net worth due to realholding gains and losses

4

IV: Balance sheets
IV.3: Closing balance sheet
AssetsLiabilities and net worthANNon-financial assets

170 AF

Liabilities

AN.1

Produced non-financial assets

131 AF.1

Monetary gold and SDRs

AN.11

Fixed assets

128 AF.2

Currency and deposits

38

AN.12

Inventories

1 AF.3

Debt securities

0

AN.13

Valuables

2 AF.4

Loans

49

AN.2

Non-produced non-financial
assets39 AF.5

Equity and investment fundshares0

AN.21

Natural resources

39 AF.6

Insurance, pension andstandardised guarantee schemes

5

AN.22

Contracts, leases and licences

0 AF.7

Financial derivatives andemployee stock options

0

AN.23

Purchases less sales of goodwill
and marketing assets

0 AF.8Other accounts receivable/
payable35

AF

Financial assets

AF.1

Monetary gold and SDRs

AF.2

Currency and deposits

112

AF.3

Debt securities

25

AF.4

Loans

8

European system of accounts — ESA 2010

127

176

627

24

The accounts

AssetsLiabilities and net worth

AF.5

Equity and investment fundshares23

AF.6

Insurance, pension andstandardised guarantee schemes

4

AF.7

Financial derivatives andemployee stock options

0

AF.8

Other accounts receivable/
payable

4
B.90

628

Net worth

European system of accounts — ESA 2010219

Index﻿

Index
Abandonment of production facilities before use 6.13 d
Abnormal pension charges, payments 4.138 b
Absence from work, social benefits 4.104 a
Accidental damage to fixed assets 3.142
Accommodation services, wages and salaries 4.07 3
Accounts of European institutions 19.28–19.44
Accounts, sequence of Chapter 24
Accrual accounting for government accounts 20.171
Accrual accounting for government
taxes 20.172–20.175
Accrual basis of recording 1.101–1.105
Accumulated deficits of government units, capitaltransfers 4.165 c
Accumulation accounts 1.114, 8.04 b, 8.44–8.59,
8.72–8.76, Annex 7.2
Acquisition of non-financial assets account 8.49
Acquisitions less disposals of non-produced
assets 3.184–3.194
Acquisitions less disposals of valuables 3.154–3.157
Acquisitions less disposals of valuables, definition 3.154
Activity, definition 2.144–2.145
Acts of war, compensation payments bygovernment for capital goods 4.165 a
Actual contributions, pension entitlements
additions 5.182 a
Actual final consumption 3.100–3.121
Actual final consumption, definition 3.100
Actual final consumption, time of recording 3.118
Actual final consumption, valuation 3.119–3.121
Actual losses versus estimated consumption of
fixed capital 6.13 b
Actual premiums earned, life insurance
additions 5.177 a
Actual social contributions, voluntary payments 4.93
Actuarial assumptions in pension
schemes 17.162–17.164
Additions to work-in-progress, valuation 3.46
Adjusted claims, insurance 16.39, 16.89–16.90
Adjusted claims, non-life insurance 3.74 a
Adjusted disposable income 8.35
Adjustment for the change in household pension
entitlements 4.141–4.144, 17.97
Adjustment for the change in pension
entitlements, definition 4.141
Adjustment for the change in pension
entitlements, recording in accounts 4.144
Adjustment for the change in pension
entitlements, time of recording 4.143

European system of accounts — ESA 2010

Administrative data — use in production of ESA
accounts 1.25–1.26
Affiliated enterprises, imputed change ofownership for exports and imports 3.163
Aggregates of the ESA 1.130, 8.08, 8.88–8.100
Agricultural crops, work-in-progress 3.148
Agricultural product processing, own accountproduction 3.08 b 3
Agricultural products, output measurement 3.54
Agricultural products, own account production 3.08 b 2
Agricultural satellite account 22.56–22.59
Agriculture under-compensation of VAT 4.23 g
Aircraft 2.05
Allocation of primary income account 1.121, 8.21–8.25
Allocation of units to sectors 2.32
Amenities at work provided by employers for
employees 3.89 h 2
Amortisation of enterprise debts by government 4.155
Ancillary activities — recording of output 1.31
Ancillary activities in separate location 3.13
Ancillary activities, examples 3.12
Ancillary activities, inputs to 3.89 a
Ancillary activities, regional and national
accounts 13.23
Ancillary activity, definition 3.12
Ancillary government units 20.24
Ancillary inputs 3.12
Animal resources yielding repeat products,
definition Annex 7.1
Animals raised for slaughter 3.130 b 1
Annuities 16.70, 16.71, 16.86–16.89
Antiques and other art objects, definition Annex 7.1
Antiques, as valuables 3.155 b
Armoured vehicles, non-military 3.129 c
Arrears of tax, interest charged 4.28
Arrears of tax, interest payments 4.81
Art dealers’ acquisition of valuables 3.156 d
Artificial subsidiaries 2.24–2.26
Assessments as source for capital tax estimation 4.150 a
Assessments of tax, data source 4.82 a
Asset and liability boundary, exclusions 7.19
Asset-backed security
5.110
Asset-backed security (ABS) 20.260
Asset change in nature 6.21
Asset, definition 7.15
Assets and liabilities, categories 7.20–7.32
Assets denominated in foreign currency, holding
gains and losses 6.64

629

﻿

Index

Assets, economic benefits 7.16
Assets, economic owner versus legal owner 7.17
Asymmetries, European accounts 19.20
Auxiliary financial services 3.65
Bad debts, debt write-off, write-down andrepudiation 5.40, 20.233–20.235
Balance sheet entries, valuation price 7.33
Balance sheet entries, valuation principles 7.33–7.41
Balance sheet memorandum items 7.94–7.108
Balance sheet, definition 7.01
Balance sheet, valuation 7.02
Balance sheets 1.114, 1.127, 8.04c, 8.60–8.64
Balance sheets, European accounts 19.24–19.25
Balance sheets, opening and closing identity 7.12
Balance sheets, rest of the world 8.77, 18.60–18.62
Balancing items 1.112, 1.118
Bank interest, for FISIM 14.02
Barges 3.129 a
Basic price, definition 3.44
Benefits, life insurance 16.41
Betting tax 4.20 f
Bills, interest 4.45
Bonds, interest 4.46
Bonus payments for household savings, nonrecurring, by government 4.165 d
Bonus payments on saving, from government 4.138 dBonus shares, market value changes 5.158
Bonus shares, wages and salaries in kind 4.05 j
Bonuses, wages and salaries 4.03 d
Bottom-up methods, regional accounts 13.25–13.26
Branch, as used in international accounts of thebalance of payments 18.12–18.14
Breeding stock 3.129 d
Budget contributions to the EU, fourth resource 4.140
Budgetary central government, definition 20.60
Buffer stock organisation, goods transferred asimports and exports 3.165 h
Buildings and structures incomplete, valuation 3.48
Buildings other than dwellings, definition Annex 7.1
Business accounts, access 21.11
Business accounts, characteristics 21.01
Business accounts, conceptual adjustments 21.17
Business accounts, consistency adjustments 21.18
Business accounts, double entry 21.06
Business accounts, exhaustiveness adjustments 21.19
Business accounts, globalisation impact 21.23
Business accounts, holding gains/losses 21.20–21.22
Business accounts, income statement and balance
sheet 21.08–21.10
Business accounts, international standards 21.02
Business accounts, mergers and acquisitions 21.25

630

Business accounts, time of recording 21.05
Business accounts, valuation principle 21.07
Business licence payments 4.23 e
Business-related purchases abroad 3.176 aBusiness surveys 21.13
Calendar effect 12.41
Call option 5.202
Cancellation of government debt 4.38 f
Capital account 1.125, 8.46–8.49
Capital account, external accumulationaccounts 8.72–8.73
Capital expenditure, GFS 20.104
Capital gains redistributed 4.165 g
Capital gains, tax 4.78, 4.149
Capital grants by government to public
enterprises 4.157
Capital injection, rules for classifications 20.201–20.203
Capital injections 20.197–20.204
Capital injections in kind 20.203
Capital injections through debt cancellation 20.202
Capital injections, definition 20.198
Capital levies 4.149 b
Capital revenue, GFS 20.88
Capital shares 5.148 a
Capital spending, military 20.190
Capital taxes 4.148–4.151
Capital taxes, definition 4.148
Capital taxes, recording in accounts 4.151
Capital transfers 4.145–4.147
Capital transfers, definition 4.145
Capital transfers, international and supranationalorganisations 20.293 e
Capital transfers, tax 4.149 a
Captive financial institutions 2.21–2.23, 2.98–2.99
Car registration tax 4.20 d
Caravans 3.129 a
Cash receipts as source for capital tax
estimation 4.150 b
Cash receipts as source of tax data 4.27 b, 4.82 b
Catastrophe, insurance settlements 4.165 k
Catastrophic losses 6.08–6.09
Catastrophic losses on fixed assets 3.130 e
Catastrophic losses, insurance 16.91–16.92
Central bank
2.72–2.74, 20.311–20.313
Central bank non-market output as service tofinancial intermediaries 3.89 k
Central bank services 3.63 aCentral bank, output 3.63, 14.16
Central bank, transactions with government 20.217
Central framework of national accounts 22.03
Central government 2.114, 20.08

European system of accounts — ESA 2010

IndexCentral government sub-sector, definition 20.57–20.62
Centre of predominant economic interest 2.07
Chained indices, drawback 10.22
Chained indices, presentation policy 10.23
Chain-linked measures of price and volume
change 12.32–12.39
Chain-linked quarterly volume estimates, annual
overlap 12.36
Chain-linked quarterly volume estimates, onequarter overlap 12.37
Chain-linked quarterly volume estimates, overthe-year approach 12.38
Change in inventories, approximate methods of
estimation 3.153
Change in inventories, time of recording 3.149
Change in inventories, valuation 3.150–3.151
Change in net worth due to saving and capitaltransfers account 8.48
Change of ownership for imports and exports,
time of recording 3.167
Changes in balance sheet 8.62
Changes in inventories 3.146–3.153
Changes in inventories versus gross fixed capitalformation 3.130 b
Changes in inventories, definition 3.146
Charity donations 3.96 f, 4.126 bChildcare, wages and salaries in kind 4.05 h
CIF valuation 3.169
Claims of pension funds on pension managers,
definition Annex 7.1
Claims outstanding, non-life insurance 5.172
Claims, non-life insurance 16.34–16.40
Classification change 6.16
Classification of assets Chapter 23
Classification of balance sheet entries Chapter 23
Classification of balancing items and net
worth Chapter 23
Classification of Individual Consumption by
Purpose (Coicop) Chapter 23
Classification of industries (NACE) and products(CPA) Chapter 23
Classification of institutional sectors Chapter 23
Classification of outlays of producers by purpose(COPP) Chapter 23
Classification of supplementary items Chapter 23
Classification of the Functions of Government(COFOG) 3.104, Chapter 23
Classification of the purposes of NPISHs(COPNI) Chapter 23
Classification of transactions and otherflows Chapter 23

European system of accounts — ESA 2010﻿Classifications Chapter 23
Closing balance sheet 8.63–8.64
COFOG categories 22.16
COFOG, government expenditure byfunction 20.109–20.111, Chapter 23
Cohesion Fund 20.294
Coicop categories 22.13–22.15, Chapter 23
Coins not in circulation, as imports and exports ofgoods 3.165 c
Collection charges, tax recovery 4.28
Collection costs, third and fourth resource,
European accounts 19A.32
Collective consumption expenditure ofgovernment by COFOG 3.106
Collective services 3.102, 4.108
Commissions to estate agents, etc., fixed asset
ownership transfer costs 3.133 b
Community built assets where government
assumes responsibility for maintenance 4.165 lCompensation for non-insured damage, awarded
by courts 4.165 hCompensation of employees and intermediate
consumption, GFS 20.93–20.96
Compensation of employees, allocation by region 13.42
Compensation of employees, definition 4.02
Compensation of employees, price and volume
estimates 10.44
Compensation of employees, residence issues 4.13
Compensation of employees, time of recording 4.12
Compensation of employees, volume estimate 10.11
Compensation on imports 4.18 b 2Compensation to public units for losses,
subsidies 4.35 c
Computer programs, incomplete as work-inprogress 3.148 b 7Computer software as capital asset 3.132 c
Computer software, definition Annex 7.1
Computer software, valuation 3.136 b
Consignment goods, lost after frontier crossing
before change of ownership 3.166 f
Consistency of production, employment,
consumption 1.32
Consolidation levels, financial account 5.26–5.27
Consolidation of accounts 1.106–1.109
Consolidation, financial account, definition 5.25
Consolidation, government accounts 20.152–20.161
Constant prices and volume estimates 10.19–10.25
Construction work, output measurement 3.55
Construction, rest of the world 18.31
Consumer durables 3.95 dConsumer durables stock valuation 7.96

631

﻿

Index

Consumer durables, memorandum items,
definition 7.95
Consumption of fixed capital 3.139–3.145
Consumption of fixed capital, price and volume
indices 10.43
Consumption taxes 4.20 aContingent assets and contingent liabilities 7.31
Contingent assets and contingent liabilities,
definition 5.08
Contingent assets and contingent liabilities,
examples 5.09
Contingent assets and contingent liabilities,
exclusions 5.10
Contingent assets and contingent liabilities,
importance of 5.11
Contingent pension entitlements 5.184
Contracts, appearance of value 6.06 g
Contracts, definition 15.01
Contracts, leases and licences 3.190–3.191
Contracts, leases and licences as assets,
definition 7.55, Annex 7.1
Contracts, leases and licences, balance sheet
valuation 7.55–7.57
Contracts, leases and licences, fees for 3.89 dContracts, types 15.03
Contribution supplements, pension entitlement
additions 5.182 b
Control as a sector classification criterion 1.36,
2.35–2.39
Control by monetary authorities 5.59
Control of NPI 20.15
Control, government over corporation 2.38
Control, NPISHs 2.39
Convalescent homes, social benefits 4.104 e
Convertible bonds 5.96 g
Cooperatives, non-financial corporations 2.46 b
Copies of intellectual property products, services
output 3.86
COPNI categories 22.17, Chapter 23
COPP categories 22.18, Chapter 23
Corporate restructuring, changes in sector
classification 6.19–6.20
Cost, insurance and freight (CIF) price forimports
3.169
Costs of ownership transfer, balance sheet
treatment 7.45
Costs of ownership transfer, inclusion in asset
purchase price 3.127, 3.133, 3.135–3.138
Costs of ownership transfer, nominal holding
gains and losses 6.34

632

Costs of ownership transfer, written off as capitalconsumption 3.140
Counterpart liability to financial asset 7.30
Counterpart transactions to financialtransaction 5.33–5.35
Court decisions, time of recording of expenditureand revenue 20.189
Covered bonds 5.111
CPA 2008 (classification of products) Chapter 23
Credit default option 5.217
Credit default swap (CDS), definition 5.218
Credit default swaps 5.11, Box 5.1, 5.218–5.219
Credit derivatives 5.215–5.217
Credit derivatives, definition 5.215
Creditor approach, valuation of securities 20.179
Crops, balance sheet valuation 7.48
Cultivated biological resources, definition Annex 7.1
Currency and deposits, balance sheet
valuation 7.64–7.66
Currency and deposits, holding gains andlosses 6.49–6.53
Currency conversion for European accounts 19.06
Currency losses 6.14 a
Currency swap 5.213
Currency, definition 5.76, Annex 7.1
Currency, examples 5.77
Currency, exclusions 5.78
Currency, issued by the Eurosystem(euros) 5.76–5.77, Box 5.2
Current accounts 1.114, 8.04 a
Current external balance 8.97
Current international cooperation 4.121–4.124
Current international cooperation, definition 4.121
Current international cooperation, recording inaccounts 4.124
Current international cooperation, time ofrecording 4.123
Current taxes on income, wealth, etc., definition 4.77
Current taxes on income, wealth, etc., exclusions 4.80
Current taxes on income, wealth, etc., recordingin accounts 4.82
Current taxes on income, wealth, etc., time ofrecording 4.82
Current transfers between governments 4.122 c
Current transfers between households, definition 4.129
Current transfers between households, recordingin accounts 4.131
Current transfers between households, time ofrecording 4.130
Current transfers between parts of government 4.38 b

European system of accounts — ESA 2010

IndexCurrent transfers from general government tohouseholds as consumers 4.38 a
Current transfers to NPISHs 4.125–4.126
Current transfers to NPISHs, exclusions 4.126
Current transfers to NPISHs, recording inaccounts 4.128
Current transfers to NPISHs, time of recording 4.127
Current transfers within general
government 4.118–4.120
Current transfers within general government,
definition 4.118
Current transfers within general government,
recording in accounts 4.120
Current transfers within general government,time of recording 4.119
Current versus capital transfers, distinction
between 4.01
Customs and agricultural duties, European
accounts 19.30
Dairy cattle 3.129 d
Databases, definition Annex 7.1
Databases, large, as capital assets 3.132 c
Death duties 4.80 aDebentures, interest 4.46
Debt assumption 4.165 f, 5.36
Debt assumption and cancellation 20.222–20.232
Debt assumption as part of privatisation 5.39
Debt assumption by government from public
corporation 5.38
Debt cancellation 5.36
Debt cancellation by government of public
corporation to be privatised 4.165 f 3
Debt cancellation by government of public
corporation which disappears as unit 4.165 f 2
Debt cancellation by mutual agreement 6.15 b
Debt cancellation, counterpart transaction 4.165 f
Debt cancellation, owner of quasi-corporation 4.165 f 1
Debt guarantees 20.249–20.259
Debt guarantees, derivative type 20.252–20.253
Debt guarantees, standardised 20.254
Debt operations 20.221
Debt repudiation, unilateral cancellation of debt 6.15 c
Debt restructuring, other 20.236–20.238
Debt securities conversion to shares, transaction 6.25
Debt securities, balance sheet valuation 7.67–7.69
Debt securities, characteristics 5.90
Debt securities, classification by original maturity
and currency 5.92–5.94
Debt securities, classification by type of interest
rate 5.95
Debt securities, classifications 5.91

European system of accounts — ESA 2010

﻿Debt securities, definition 5.89, Annex 7.1
Debt securities, fixed interest rate 5.96–5.97
Debt securities, interest 4.44
Debt securities, price and volume changes 6.54–6.57
Debt write-offs/write-downs 20.233–20.235
Debt, purchase above market value 20.239–20.242
Debtor approach, valuation of securities 20.179–20.180
Debtor/creditor form of financial balance sheet 7.93
Debtor/creditor relationships in the financial
account 5.52–5.55
Declarations as source for capital tax estimation 4.150 a
Decommissioning costs, e.g. nuclear power
stations 3.129 h
Decoration, maintenance and repair of dwelling,
not typical of tenant 3.96 b 2
Deep-discounted bonds 5.96 c
Deep-discounted bonds, interest 4.46 b
Defeasance structures, sector classification 20.46
Defeasances and bailouts 20.243–20.248
Defined benefit pension scheme 4.69, 17.57–17.58
Defined benefit pension schemes,
transactions 17.102–17.120
Defined benefit scheme, social insurance 4.10 a
Defined benefit vis-à-vis defined contribution
pension schemes 17.65–17.71
Defined contribution pension scheme 4.69, 17.54–17.56
Defined contribution pension schemes,
transactions 17.90–17.101
Defined contribution scheme, social insurance 4.10 a
Defined contribution schemes, notional, andhybrid schemes 17.59–17.64
Degradation of fixed assets, not allowed for in
consumption estimates 6.13 c
Delisting of shares 5.150
Demographic assumptions in pension scheme
calculations 17.178–17.183
Depository receipts, definition 5.143
Deposits and loans, interest 4.43
Deposits, definition 5.79
Deposits, transferable 5.80–5.84
Deposit-taking corporations except the central
bank 2.75–2.78
Destroyed goods, after change of ownership but
before export 3.164 c
Development assistance 20.301–20.302
Diamonds, as valuables 3.155 a
Diamonds, imports and exports of goods 3.165 b
Direct insurance 16.08–16.15
Direct insurance, measurement of output 16.21
Direct investment income 18.48–18.50
Direct payment for financial services, examples 3.69

633

﻿

Index

Disaster payments by government 4.38 g
Disasters, compensation payments by government
for capital goods 4.165 a
Discount rate for pension scheme
calculations 17.165–17.168
Discounted bonds 20.186
Discounted debt securities 5.96 b
Discounted security, value of 20.179–20.181
Discoveries of sub-soil resources 6.06 c
Disposal of fixed assets, valuation 3.137
Disposals of fixed assets 3.125 b, 3.126
Distribution and use of income accounts 8.15–8.43
Distributive transactions, definition 4.01
Dividend shares 5.148 c
Dividends 5.46
Dividends attributable to collective investment
fund shareholders 4.70
Dividends, definition 4.53
Dividends, recording in accounts 4.57
Dividends, time of recording 4.57
Domestic staff, services 3.08 d
Donations between sectors 4.165 e
Double entry concept 1.91
Durable goods, consumer durables versus fixed
assets 7.97
Dwelling services by owner-occupiers 3.08 c
Dwellings, definition Annex 7.1
Economic appearance of assets 6.06
Economic disappearance of non-produced assets 6.07
Economic policy concepts 1.49
Economic territory 2.05–2.06, 18.06–18.07
Economic use, change in 6.06 f
Economically active population, definition 11.10
Economically significant prices 20.19–20.22
Economically significant prices, conditions for 20.23
Economically significant prices, definition 3.19
Economy, definition 2.01
Education allowance 4.104 b
Education and health services, market versus nonmarket output 3.85
Education services, expenditure by non-residents,
as export of service 3.173 j
EIB, EIF, ECB, Member State subscriptions to 19.36
Electricity, as import and export of goods 3.165 d
Employee benefit payments, wages and salaries 4.07 b
Employee expenditure on necessary personal
items for production 3.89 g
Employee labour input at constantcompensation 11.35–11.37
Employee stock options 4.168–4.178, 5.221–5.222
Employee stock options, definition 5.221, Annex 7.1

634

Employee stock options, IASB recommendations 4.170
Employee stock options, valuation 4.171, 5.223, 5.229
Employees, categories included 11.13
Employees, definition 11.12
Employees, sub-sector of households sector 2.123
Employers’ actual non-pension contributions 4.09
Employers’ actual pension contributions 4.09
Employers’ actual social contributions 4.92
Employers’ actual social contributions, definition 4.09
Employers’ actual social contributions, recordingin accounts 4.96
Employers’ actual social contributions, time ofrecording 4.94
Employers and own account workers, households
sector 2.122
Employers’ imputed non-pension contributions 4.10 b
Employers’ imputed pension contributions 4.10 a
Employers’ imputed social contributions,definition 4.10, 4.97
Employers’ imputed social contributions,recording in accounts 4.99
Employers’ imputed social contributions, time ofrecording 4.98
Employers’ social contributions, definition 4.08
Employment-related social insurance scheme 17.02
Employment-related social insurance schemes,
other 4.85 b
Employment, definition 11.11
Employment, regional estimates 13.41
Employment, residence 11.17–11.19
Entertainment expenses 3.89 h 1
Entertainment originals, as capital assets 3.132 d
Entertainment originals, valuation 3.136 c
Entertainment tax 4.20 eEntertainment, literary or artistic originals,
definition Annex 7.1
Entitlement to future goods and services on an
exclusive basis, definition Annex 7.1
Entitlements to non-pension benefits,
definition Annex 7.1
Entrepreneurial income account 8.26–8.29
Environmental satellite accounts 22.60–22.78
Equalisation provisions, role in calculating
adjusted claims 3.74 a
Equalisation reserves, non-life insurance 5.173
Equity and investment fund shares or units 5.139–5.145
Equity and investment fund shares or units,balance sheet valuation 7.71–7.79
Equity and investment fund shares or units,definition 5.139, Annex 7.1

European system of accounts — ESA 2010

IndexEquity and investment fund shares, nominal
holding gain 6.59
Equity investment 20.194–20.196
Equity investment in public corporations 20.193
Equity securities, examples of unlisted shares 5.148
Equity securities, exclusions 5.152
Equity transactions, valuation 5.155–5.159
Equity, definition 5.141
Equity, ownership evidence 5.142
Equity, valuation 5.159
ESA 2010 1.01–1.05
ESA 2010 compared to ESA 95 1.51–1.52
ESA 2010 compared to SNA 2008 1.50
ESA 95 1.02
ESA as a system 1.53
ESA as framework for analysis and policy 1.18–1.19
ESA compared to SNA 1.14
ESA concepts 1.20
ESA concepts — borderline issues 1.29
ESA difference in concepts from administrative
statistics 1.25
ESA examples of uses 1.11, 1.18–1.19
ESA GFS correspondence table 20.84
ESA GFS differences in Box 20.84
ESA interest, for FISIM 14.02
ESA international compatibility 1.21
ESA, consistency over time 1.27
ESA, pragmatic approach
1.28
Establishment trade, excluded from imports andexports 3.160 a
EU and national resident transactions 20.291–20.293
EU budget contributions for third and fourth
resource types 20.293 a 3
EU taxes, collected by national governments asagents 20.293 a 1
EU taxes, payable directly 20.293 a 1
EU VAT payments 20.293 a 3EU, as sub-sector of ROW 2.134
Euro area, economic territory 19.04
European accounts from national accounts 19.05
European accounts, consolidation 19.44
European accounts, rest of the world
account 19.15–19.18
European Agricultural Fund for Rural
Development (EAFRD), investment grant 4.152
European Agricultural Guarantee Fund (EAGF),
investment grant 4.152
European Development Fund contributions 19.35
European institution transfers to MS 19.39–19.42
European institutions 19.08–19.13
European Regional Development Fund 20.294

European system of accounts — ESA 2010﻿European Social Fund 20.294
European System of Regional and National
Accounts (ESA) 1.01
European Union, economic territory 19.03
Exceptional loss in inventories 6.13 e
Exchangeable bonds 5.96 h
Excise duties 4.18 b 3, 4.20 a
Exclusion of measures not observable in monetary
terms 1.44
Exclusive contracts 15.44
Exercise period, employee stock option 5.221
Exercise price of employee stock option 4.169
Existing goods, definition 3.180
Existing goods, examples 3.181
Existing goods, recording of transactions in theaccounts 3.182
Existing goods, timing and valuation 3.183
Expectation method, adjusted claims
measurement 3.74 a
Expenditure approach, GDP measure 8.89 b
Expenditure taxes 4.79 c
Expenditure, GFS 20.91–20.111
Expenditure, GFS components 20.91–20.92
Expenditure, GFS definition 20.70
Export credit guarantees 5.190
Export duties 4.20 k
Export subsidies 4.35 d
Exports and imports of goods 3.162–3.170
Exports and imports of goods and services 3.158–3.179
Exports and imports of goods and services,
exclusions 3.160
Exports and imports of goods, data sources 18.26
Exports and imports of services 3.171–3.177
Exports of goods and services, definition 3.158
Exports of goods without crossing frontiers 3.164
Exports of services, definition 3.171
Exports of services, examples 3.173
Exports, allocation of FISIM 14.11
External account for goods and services 8.68–
8.69, 18.23–18.31
External account of primary income 18.46–18.47
External account of primary incomes and current
transfers 8.70–8.71
External balance of goods and services 8.68
External capital account 18.55–18.56
External financial account and international
investment position (IIP) 18.57–18.59
External reference rate for FISIM 14.10
Extraordinary payments to social insurance
funds 4.38 d, 4.165 i
Extra-regio territory 13.11

635

﻿

Index

Family allowance 4.104 b
Fees for licences 4.133 b
Fifty per cent market output criterion 3.19
Film production, incomplete as work-inprogress 3.148 b 6
Films, originals as capital assets 3.132 d
Final consumption 3.93
Final consumption expenditure 3.94–3.99
Final consumption expenditure by government,
calculation 3.98, 3.117
Final consumption expenditure, definition 3.94
Final consumption expenditure, time ofrecording 3.110–3.112, 3.116
Final consumption expenditure, valuation 3.113–3.115
Financial account 1.126, 5.17, 8.50–8.51
Financial account, balancing item 5.18
Financial account, consolidation, definition 5.25
Financial account, external accumulation accounts 8.74
Financial assets and liabilities, balance sheetrecording 5.16
Financial assets and liabilities, classification 7.32
Financial assets and liabilities, definition 7.28,
Annex 7.1
Financial assets and liabilities, valuation 7.61–7.90
Financial assets, cross-border sale 3.160 c
Financial assets, definition 5.03–5.04
Financial auxiliaries 2.63, 2.95–2.97
Financial balance sheets 7.91–7.93
Financial balance sheets, non-consolidated versus
consolidated 7.92
Financial claim, definition 5.05
Financial corporations except MFI and ICPF 2.70
Financial corporations sector, units in 2.65
Financial corporations, sector 2.55
Financial corporations, sub-sector 2.66
Financial corporations, sub-sector into public,
private, foreign control 2.71
Financial derivatives and employee stock options,holding gains 6.62
Financial derivatives, categorisation 5.202
Financial derivatives, classification of settlement
payments 20.188
Financial derivatives, definition 5.199, Annex 7.1
Financial derivatives, exclusions 5.220
Financial derivatives, uses 5.200
Financial derivatives, valuation 5.201, 5.223–5.229
Financial instruments, denominated in foreign
currency 7.39
Financial instruments, use of term in monetaryand financial statistics 5.15
Financial intermediaries 2.57–2.62

636

Financial intermediation 2.57, 3.64, 14.01
Financial intermediation and the government
boundary 20.32–20.34
Financial intermediation services indirectly
measured (FISIM) 3.70–3.72
Financial lease, definition 5.134
Financial lease, distinction from other leases 5.135
Financial leases 15.04, 15.13–15.22
Financial leases, interest 4.48
Financial leasing 3.129 g
Financial leasing, time of recording of capitalformation 3.134 a
Financial services in pension schemes 17.161
Financial services, acquiring and disposing offinancial assets and liabilities 3.73
Financial services, as export of service 3.173 g
Financial services, components 3.63
Financial services, direct or indirect payment 3.68
Financial services, direct payment 3.69
Financial services, restriction to financial
institutions 3.67
Financial transaction with interest payment as
counterpart 5.43
Financial transaction with property income ascounterpart 5.41–5.48
Financial transaction with transfer
counterpart 5.36–5.40
Financial transactions, accounting rules 5.32–5.35
Financial transactions, classification Annex 5.1
Financial transactions, classified bycurrency 5A.1.18–20
Financial transactions, classified by income 5.A1.08
Financial transactions, classified by interest
rate 5.A1.09–5.A1.12
Financial transactions, classified by maturity 5.A1.13
Financial transactions, definition 5.01–5.02
Financial transactions, negotiability 5.A1.04–5.A1.06
Financial transactions, time of recording 5.49–5.51
Financial transactions, valuation 5.19–5.22
Financial vehicle corporations engaged insecuritisations (FVC) 2.90
Fines and penalties, definition 4.132
Fines and penalties, exclusions 4.133
Fines and penalties, time of recording 4.134
Finished goods, inventories of 3.148 c
Fiscal operations 20.204
Fisher index, spatial comparisons 10.03
Fishery products, international waters 3.164 a
Fishing boats 2.05
FISIM as intermediate consumption 3.89 j
FISIM in volume terms 14.14

European system of accounts — ESA 2010

IndexFISIM, allocation by region 13.40
FISIM, calculation 14.01, 14.11
FISIM, data requirements 14.07
FISIM, household consumption of 3.95 e
FISIM, impact on GDP 14.04
FISIM, imports and exports 18.44–18.45
FISIM, only for financial intermediaries 14.03
FISIM, producing sectors 14.06
FISIM, reference rate 3.72, 14.08
FISIM, sector allocation 14.11
FISIM, trade credits and advances 5.235
Fixed assets, definition Annex 7.1
Fixed assets, tax 4.23 b
Fixed assets, valuation 7.42
Flash estimates, quarterly accounts 12.21–12.22
Floating platforms 2.05
Flows 1.65
FOB valuation 3.168
FOB valuation, proxies 3.170
Footballer’s contracts, as non-produced assets 3.190 d
Foreclosures 6.11
Foreign controlled non-financial corporations 2.54
Foreign currency, holding gains and losses 6.51
Foreign direct investment (FDI), nature ofinvestment breakdown 7.98
Foreign direct investment enterprise 4.65
Foreign direct investment, provision of services
included 3.160 b
Foreign exchange swaps 5.212
Forward rate agreements (FRAs) 5.214
Forward rate agreements, payments 4.47
Forwards, definition 5.207
Founders’ shares 5.148 c
Free on board (FOB) valuation 3.168
From whom-to-whom’ matrices, European
accounts 19.26–19.27
From whom-to-whom’ financial account 5.52–5.55
Full-time equivalence 11.32–11.34
Functional classifications 22.11–22.12
Functional classifications and product groups 22.20
Functional satellite accounts 22.21–22.32
Funds set aside for future capital acquisition 3.130 f
Furniture, household own account production 3.08 b 5
Futures 5.208
Gambling tax 4.20 fGambling winnings, taxes 4.78
Gas, as import and export of goods 3.165 d
GDP components 1.134
GDP three approaches to measuring 1.133
General government expenditure and revenue 8.100
General government sector, defining 20.05–20.07

European system of accounts — ESA 2010﻿General government, sector 2.110–2.113
General government, sub-sectors 2.112, 20.56–20.67
General sales tax on imports 4.18 b 4
Generation of income account 1.120, 8.16–8.20
Geometric depreciation method for calculating
capital consumption 3.144
GFS framework 20.68–20.75
GFS presentation 20.72
GFS, additional accounts 20.73
Gifts between living persons, tax 4.80 a
Gifts of food, clothing, blankets, etc. to NPISHs 4.126 b
Gifts, small, as imports and exports 3.165 l
Globalisation — measurement issues for ESA 1.16–1.17
Gold accounts, allocated 5.62
Gold accounts, unallocated 5.63
Gold bullion 5.07, 5.61
Gold bullion, appearance and disappearance 6.22–6.24
Gold loans 5.67–5.68
Gold swaps 5.66, 5.133
Gold, diamonds held as inventories 3.148 a
Gold, monetisation and demonetisation 5.65
Goods and services account 1.116, Chapter 24
Goods and services account, rest of the world 8.78–8.82
Goods delivered to non-resident affiliates asexports 3.165 i
Goods for processing, imports andexports 18.27, 18.33–18.37
Goods for processing, no change of ownership,
excluded from trade 3.166 d
Goods for resale 3.148 d
Goods for resale, definition Annex 7.1
Goods in transit, excluded from imports andexports 3.166 a
Goods processed abroad, change in inventories 3.149
Goods received from non-resident affiliates, notfor processing, as imports 3.165 j
Goods shipped to embassies, military bases, etc.,
excluded from trade 3.166 b
Goodwill and marketing assets, balance sheet
valuation 7.59–7.60
Goodwill and marketing assets, change in value 6.06 h
Goodwill and marketing assets, definition 3.192
Goodwill, recording of 3.193
Government accounts, consolidation 20.152–20.161
Government accounts, economic reality over legal
form 20.164
Government accounts, GFS balancing
items 20.112–20.115
Government assistance to NPISHs 4.126 c
Government assumption of abnormal pension
charges for a public enterprise 4.38 i

637

﻿

Index

Government-backed pension schemes 17.77
Government balance sheets 20.142–20.151
Government bonds, valuation 20.182
Government change in net worth due to saving
and capital transfers 20.115–20.117
Government contributions to internationalorganisations 4.122 a
Government currency and deposits 20.119
Government current transfers to households, notsocial benefits 4.138 hGovernment debt 20.143
Government debt securities 20.120
Government equity and investment fund shares 20.122
Government expenditure by function(COFOG) 20.109–20.111
Government expenditure GFS, links to ESA
government final expenditure 20.105–20.108
Government exports 3.165 g
Government final consumption expenditure 20.106
Government final consumption expenditure, own
account production 3.98 a
Government finance statistics (GFS),
presentation 20.68–20.161
Government finance statistics (GFS), role of 20.03
Government financial transactions,valuation 20.125–20.128
Government goods and services, imports andexports 18.31
Government guarantees, non-life insurance 4.116
Government interest, recording of 20.176–20.183
Government liabilities transactions 20.129–20.134
Government loans 20.121
Government long-term trade credits 20.132
Government monetary gold and SDR holdings 20.124
Government net lending/borrowing,
GFS 20.112–20.114
Government net worth measure 20.146–20.148
Government other accounts receivable
20.123Government other changes in volume ofassets 20.140–20.141
Government output, measuring 20.107
Government payments for market goods provided
to households 4.38 j
Government permits 15.32–15.40
Government purchase of shares 4.38 h
Government purchases as social transfers in kind 3.98 b
Government receipt of payments frominternational organisations 4.122 b
Government revaluation account 20.136–20.139
Government suppliers, market or non-market
criteria 20.25–20.28

638

Government taxes, accrual accounting 20.172–20.175
Government transfers to corporations to coverlosses 4.38 e
Government units 20.05–20.07
Government units, borderline cases 20.35–20.55
Government units, classification by decision tree 20.17
Government units, identifying 20.08–20.12
Government, economic functions 20.02
Government, lump sum payments for pension
obligations 20.273–20.275
Government, role of 20.01
Grant date, employee stock option 4.169, 5.221
Grants for interest relief 4.156
Grants, GFS 20.89
Gross and net balancing items 8.06
Gross and net recording, allowing for capitalconsumption 3.145
Gross capital formation 3.122–3.157
Gross domestic product at market prices (GDP) 8.89
Gross fixed capital formation 3.124–3.138
Gross fixed capital formation, allocation toregions 13.33
Gross fixed capital formation, exclusions 3.130
Gross fixed capital formation, time of recording 3.134
Gross fixed capital formation, valuation 3.135
Gross national income at market prices (GNI) 8.94
Gross national income resource, European
accounts 19.34
Gross recording of financial transactions,definition 5.24
Gross value added by region 13.34–13.39
Groups of corporations 2.15, 2.16
Growing crops, work-in-progress 3.148 b 1
Guarantees, definition 5.09–5.10, Box 5.1
Guarantees, through financial derivatives 5.11, Box 5.1
GVA to GDP, for regions 13.43
Head offices 2.14
Head offices, non-financial corporations 2.46
Head offices, public 20.35–20.37
Health satellite accounts 22.79
Health services, expenditure by non-residents, as
export of service 3.173 j
Hire purchase 15.20–15.22
Historic monuments, recognition 6.06 a
Holding companies 2.14
Holding gain 6.28
Holding gains and losses 1.83–1.84
Holding gains and losses on fixed assets 3.130 d
Holding gains, taxes 4.78
Holding loss 6.28
Holiday homes, as export of service 3.173 k

European system of accounts — ESA 2010

IndexHoliday homes, output measurement 3.75
Homogeneous branch, grouping of homogeneousunits 2.154
Homogeneous production, units of 2.153
Homogeneous products 10.13–10.15
Hotels, restaurants, café output 3.63
Hours actually worked 11.28
Hours worked, definition 11.27
Houseboats 3.129 a
Household consumption of FISIM 3.95 e
Household final consumption expenditure,
exclusions 3.96
Household final expenditure on purchasesabroad 3.176 b
Household income accounts by region 13.49–13.55
Household own account production of goods in
ESA 3.08
Household production retained for
consumption 3.95 b 2
Household production satellite accounts
22.89–22.95
Household purchases funded by social transfers 4.109
Households’ acquisition and disposal ofvaluables 3.156 c
Households’ actual non-pension contributions 4.100 b
Households’ actual pension contributions 4.100 a
Households’ actual social contributions,definition 4.100
Households’ actual social contributions, recordingin accounts 4.100
Households’ actual social contributions, time ofrecording 4.100
Households’ non-pension contribution
supplements 4.101 b
Households’ pension contribution supplements 4.101 a
Households’ social contribution supplements,
definition 4.101
Households, allocation of FISIM use 14.12
Households, sector 2.118–2.119
Households, sub-sectors 2.120
Housing and accommodation services, wages andsalaries in kind 4.05 b
Hybrid pensions scheme 17.62
ICT equipment, definition Annex 7.1
Illegal transactions 1.79
Import duties 4.18 aImport subsidies, definition 4.34
Imports and exports of goods, examples 3.165
Imports and exports of goods, exclusions 3.166
Imports and exports of goods, on change ofownership 3.162
Imports and exports of goods, valuation 3.168

European system of accounts — ESA 2010﻿

Imports and exports of services, timing ofrecording 3.177
Imports and exports, valuation 8.69
Imports of goods and services, definition 3.159
Imports of goods, valuation in supply-use tables 3.168
Imports of services, definition 3.172
Imports of services, examples as mirror image ofexports examples 3.174
Imports, calculation of FISIM 14.13
Improvements to fixed assets beyond ordinary
repair and maintenance 3.129 f
Improvements to fixed assets, as new assets 3.131
Improvements to land 3.128
Incidental sales, GFS 20.81–20.82
Income approach, GDP measure 8.89 c
Income in kind, as household final consumption
expenditure 3.95 b
Income in retirement 17.40
Income measures, deflation 10.07
Income taxes 4.78
Index-linked debt securities 5.100, 20.187
Index-linked securities, interest 4.46 c
Indirect measurement, regional accounts 13.30
Individual consumption of goods and services,
definition 3.101
Individual consumption of government by
Coicop 3.105
Individual services 4.108
Industry by industry input-output tables 9.60
Industry classification 2.151
Industry, allocation of FISIM use 14.15
Industry, as a group of local KAUs 2.149
Inflation-linked bonds 5.100
Inheritance taxes 4.80 a
Initial public offering (IPO) 5.149
Input-output framework 1.136
Input-output tables use in analysis 9.62
Input-output tables, extensions for analysis 9.63
Input-output tables, symmetric 1.140–1.141
Installation charges, fixed asset ownership transfer
costs 3.133 a
Installation of equipment abroad, as export ofservice 3.173 f
Institutional unit 1.55, 1.57, 2.01
Institutional units, definition 2.12
Institutional units, examples 2.30
Institutional units, rest of the world 18.09–18.11
Insurance auxiliaries, output measurement 16.85
Insurance claims 16.14
Insurance corporations 2.100–2.104
Insurance corporations and pensions funds (ICPF) 2.69

639

﻿

Index

Insurance corporations, function 2.59
Insurance other than social insurance 16.03
Insurance output, definition 16.46–16.49
Insurance policies as social insurance 17.06
Insurance policy 16.05
Insurance policy, conditions to be part of social
insurance scheme 4.87
Insurance policy, parties involved 16.06
Insurance premium tax 4.20 g
Insurance premiums 16.14
Insurance services, as export of service 3.173 h
Insurance services, implicit service charge ashousehold consumption 3.95 f
Insurance technical reserves 4.68
Insurance technical reserves, definition 16.43
Insurance technical reserves, types in Europe 16.44
Insurance types 2.103 Box
Insurance, general definition 16.01
Insurance, institutional units 16.19
Insurance, investment income attributed to policy
holders 16.66
Insurance, pension and standardised guarantee
schemes 5.168–5.197
Insurance, pension and standardised guarantee
schemes, holding gains 6.60–6.61
Insurance, pension and standardised guarantee
schemes, valuation 7.80–7.85
Insurance, rest of the world 16.62–16.63
Insurance, tax on premiums 16.26
Integrated economic accounts 8.83–8.87
Integrated system of price and volume
indices 10.08–10.09
Intellectual property products (IPPs),valuation 3.136, 7.43–7.44
Intellectual property products, definition Annex 7.1
Intellectual property products, measurement of
production of 3.86
Intellectual property products, result of mineral
exploration 3.132 b
Intellectual property products, result of researchand development 3.132 a
Inter-bank FISIM 14.11
Inter-bank positions, definition Annex 7.1
Interest arrears 5.44
Interest charge loading, payment for financial
services 3.70
Interest on ECB loans 19.38
Interest on EIB loans 19.37
Interest rate swaps 5.211
Interest rate swaps, interest 4.47
Interest relief grants, subsidies 4.37 c

640Interest, adjustments for FISIM 4.51
Interest, definition 4.42
Interest, GFS expenditure 20.100–20.101
Interest, other 4.49
Interest, recording in accounts 4.52
Interest, time of recording 4.50–4.51
Interim dividends 20.207
Intermediate consumption 3.88–3.92
Intermediate consumption, definition 3.88
Intermediate consumption, exclusions 3.90
Intermediate consumption, recording inaccounts 3.91–3.92
Intermediate consumption, time of recording 3.91
Internal reference rate for FISIM 14.09
International Accounting Standards Board(IASB) 21.04
International Accounting Standards Committee(IASC) 21.02
International accounts of the balance of
payments 18.20–18.21
International and supranational organisations,capital transfers 20.293 e
International and supranational organisations,financial transactions 20.293 f
International and supranational organisations,transactions 20.291–20.300
International cooperation, current 20.293 d
International Financial Reporting Standards(IFRS) 21.02
International investment position (IIP) 7.06
International Public Sector Accounting Standards
Board (IPSASB) 21.04
International transactions, tax 4.23 d, 4.79e
International waters, goods produced as exports 3.164 a
Interspatial price and volume indices 10.48–10.56
Intra-EU deliveries, categorisation of imports andexports 3.161 a
Intrastat valuation of goods imported andexported 3.170 d
Intra-unit transactions 1.67–1.69
Inventories, definition Annex 7.1
Inventories, finished goods, definition Annex 7.1
Inventories, materials and supplies,
definition Annex 7.1
Inventories, other work-in-progress,
definition Annex 7.1
Inventories, valuation 7.46–7.47
Inventories, work-in-progress on cultivatedbiological assets, definition Annex 7.1
Inventories, work-in-progress, definition Annex 7.1

European system of accounts — ESA 2010

IndexInvestment fund shares or units other than MMF
shares or units, definition 5.165
Investment fund shares or units, balance sheet
valuation 7.79
Investment fund shares or units,definition 5.160, Annex 7.1
Investment funds 2.61
Investment grants 4.38 c, 4.152–4.163
Investment grants in kind 4.153
Investment grants to general government 4.159
Investment grants to household sector 4.158
Investment grants to NPISHs 4.160
Investment grants to rest of the world 4.161
Investment grants, definition 4.152
Investment grants, recording in accounts 4.163
Investment grants, time of recording 4.162
Investment income attributable to collective
investment fund shareholders 4.70
Investment income attributable to insurance
policy holders, definition 4.68
Investment income attributed to insurance policy
holders 5.48
Investment income payable on pension
entitlements 4.69
Investment trusts 5.161
Jewellers’ acquisition of valuables 3.156 d
Jewellery, as valuables 3.155 c
Jobs, definition 11.22
Jobs, residence 11.24–11.25
Joint ventures 20.319–20.320
Joint ventures, sector classification 20.49–20.52
Labour accounts and SAM 22.96–22.98
Land 3.187
Land and building overseas, net operating surplus
received by residents 4.60
Land improvements, balance sheet valuation 7.50
Land improvements, definition Annex 7.1
Land purchase by households 3.96 c
Land versus buildings classification 7.52
Land, balance sheet valuation 7.50–7.52
Land, buildings or other assets used in production,
tax 4.80 c
Land, cross-border sale 3.160 c
Land, definition Annex 7.1
Land, exclusions 3.188
Land, valuation 3.189
Landfill sites, clean-up costs 3.129 h
Large gifts between sectors 4.165 e
Laspeyres index 10.20
Leases, difference between operating, resource andfinancial leases 15.04

European system of accounts — ESA 2010

﻿Leases, transactions by type 15.05
Legacies between sectors 4.165 e
Legal forms of producer units, allocation tosectors 2.134–2.142
Leontief Inverse 9.58
Levies on imported agricultural products 4.18 b 1
Liabilities, definition 5.06
Licence fees for use of intellectual property rights,
as export of service 3.173 l
Licence payments by households 4.79 d
Licence payments by households, exclusions fromtaxes 4.80 dLicence, permit payments by households as
payments for services 3.95 hLife insurance 3.74 b
Life insurance and annuity entitlements, balance
sheet valuation 7.81
Life insurance and annuity entitlements,
definition 5.174, Annex 7.1
Life insurance output, calculation 16.52
Life insurance, annuity and pension entitlements,change in expectations 6.14 cLife insurance, definition 16.09
Life insurance, output measurement 3.74 b
Life insurance, transactions 16.68–16.72
Light weapons 3.129 c
Listed shares, balance sheet valuation 7.71–7.72
Listed shares, definition 5.146, Annex 7.1
Listing of shares 5.150
Livestock change 3.129 d
Livestock driven across frontiers, as imports andexports of goods 3.165 e
Livestock, balance sheet valuation 7.48
Loan, features of 5.113
Loans 5.112–5.133
Loans versus debt securities 5.120–5.123
Loans versus deposits 5.117–5.119
Loans versus trade credit and trade bills 5.124–5.125
Loans, balance sheet valuation 7.70
Loans, classification 5.115–5.116
Loans, definition 5.112, Annex 7.1
Loans, exclusions 5.138
Loans, holding gains and losses 6.58
Loans, low interest, wages and salaries in kind 4.05 k
Loans, other types 5.136–5.137
Loans, reclassified to debt securities 5.122
Loans, sub-categories 5.116
Local government 2.116
Local government, definition 20.65–20.66
Local KAUs as market producers 3.38
Local KAUs as non-market producers 3.39

641

﻿

Index

Local KAUs as producers for own final use 3.38
Local kind-of-activity units (local KAUs) 1.56,
1.58–1.60, 2.147–2.148
Long-term debt securities, definition Annex 7.1
Long-term loans 5.115 b
Long-term loans, definition Annex 7.1
Long-term maturity, definition 5.A1.14
Losses of enterprises accumulated over several
years, transfer from government 4.165 b
Losses on government trading organisations,subsidies 4.35 b
Losses to inventories, valuation 3.152
Lost goods, after change of ownership but before
export 3.164 c
Lotteries and gambling, definition 4.135
Lotteries and gambling, service charge 4.135
Lottery tax 4.20 f
Low frequency payments, quarterly
accounts 12.18–12.20
Machinery and equipment, definition Annex 7.1
Maintenance and repairs, ordinary 3.130 a 2Manuscripts, originals as capital assets 3.132 dMarginal calls in cash under a repurchaseagreement (repo) 5.132
Market/non-market criteria, definition of sales
and production costs 3.33
Market/non-market delineation 20.19–20.34
Market/non-market test 20.29–20.31
Market output by non-market producers,
valuation 3.52
Market output, definition 3.17
Market output, examples 3.18
Market producers, definition 3.24
Market regulatory agencies, sector
classification 20.53–20.54
Market research 3.89 f 3
Market valuation of financial instruments 7.38
Market versus non-market output 1.37
Market versus non-market, distinguishing
characteristics 3.32
Market, non-market and own final use producers,
distinction between 3.27
Marketable operating leases 15.43
Marketable operating leases, as assets 7.58
Marketable operating leases, definition as
assets Annex 7.1
Materials and supplies, inventories of 3.148 a
Maturing trees and livestock, work-inprogress 3.148 b 2
Meals and drinks, wages and salaries in kind 4.05 a
Medical services, social benefits 4.104 d

642

Medical treatment, social transfer in kind 4.110
Medicine, social transfer in kind 4.110
Memorandum item, consumer durables,
definition Annex 7.1
Memorandum item, foreign direct investment,
definition Annex 7.1
Memorandum item, non-performing loans,definition Annex 7.1
Memorandum items, balance sheets 7.94–7.108
Merchanting as exports and imports with nofrontier crossing 3.164 dMerchanting, rest of the world 18.38–18.43
Military equipment 3.129 b
Military expenditure 20.190–20.192
Military inventories, definition Annex 7.1
Military spending, long-term contracts 20.191
Mineral and energy reserves, balance sheet
valuation 7.53
Mineral and energy reserves, definition Annex 7.1
Mineral exploration and evaluation,
definition Annex 7.1
Mineral exploration, valuation 3.136 aMirror flows, European accounts 19.19
Miscellaneous current transfers 4.125–4.139
Miscellaneous current transfers, definition 4.125
Missing taxes not evidenced by tax assessments 4.82
Mixed income 8.19
Mixed interest rate debt securities 5.102
Mixed methods, regional accounts 13.28
Mobile homes 3.129 a
Monetary authorities 5.58
Monetary Financial Institutions (MFIs) 2.67
Monetary gold 5.60
Monetary gold and SDRs, holding gains andlosses 6.46–6.47
Monetary gold and special drawing rights, balance
sheet valuation 7.62–7.63
Monetary gold swaps 5.66
Monetary gold, definition 5.57, Annex 7.1
Monetary gold, transactions 5.64
Monetary versus non-monetary transactions 1.70
Money lenders 2.98
Money market fund shares or units,definition 5.164, Annex 7.1
Money market funds (MMFs) 2.60, 2.79–2.81
Monopoly imports by public enterprises 4.18 b 6
Monopoly profits of public enterprises,transferred to State 4.20 j
Movable equipment, as international trade 3.164 b
Multi-employer pension scheme 17.76

European system of accounts — ESA 2010

IndexMulti-employer social insurance scheme, output
measurement 3.74 d 4Multi-territory enterprises 18.17
Museum acquisition of valuables 3.156 e
Museum entrance fees, at not economicallysignificant prices 3.95 i
Mutual funds 5.161
NACE Rev.2 (Classification of industries) Chapter 23
National disposable income 8.95
National private non-financial corporations 2.53
National wealth 7.05
Nationalisation 20.214–20.216
Natural assets 7.26
Natural assets, other, valuation 7.54
Natural growth of forests, etc. 6.06 d
Natural resources 3.186
Natural resources, balance sheet valuation 7.50–7.54
Natural resources, definition Annex 7.1
Natural resources, transfer to economic
resources 6.06 e
Needs giving rise to social benefits 4.84
Negotiable financial instruments, balance sheet
valuation 7.61
Net domestic product at market prices (NDP) 8.90
Net financial assets 7.10
Net lending/borrowing for the economy 8.98
Net lending/net borrowing 5.17
Net non-life direct insurance premiums 4.112
Net non-life insurance premiums, definition 4.112
Net non-life insurance premiums, recording inaccounts 4.113
Net non-life insurance premiums, time ofrecording 4.113
Net non-life reinsurance premiums 4.112
Net recording of financial transactions, definition 5.23
Net recording, allowing for capital consumption 3.145
Net reinsurance claims 4.116
Net reinsurance premiums 4.116
Net social contributions, definition 4.91
Net worth 7.02
Net worth of the economy 8.99
Netting 1.110–1.111
Netting, financial account 5.28–5.31
Netting, financial account, definition 5.28
Neutral holding gains and losses account 8.57
Neutral holding gains and losses, definition 6.38
New products in price and volume
estimates 10.26–10.27
New shares, valuation 5.155
Nominal holding gains and losses, definition 6.27
Nominal valuation of financial instruments 7.39

European system of accounts — ESA 2010

﻿Nominal value versus market value, financial
instruments 7.39
Non-cultivated biological reserves, definition Annex 7.1
Non-financial assets 7.21
Non-financial assets, contract, leases and licences 7.27
Non-financial assets, definition Annex 7.1
Non-financial assets, own account, valuation 7.36
Non-financial corporations sector, definition 2.45
Non-financial corporations sector, units in 2.46
Non-financial corporations, sub-sectors 2.50
Non-financial quasi-corporations 2.47
Non-life insurance 16.12
Non-life insurance claims, definition 4.114
Non-life insurance claims, recording in accounts 4.117
Non-life insurance claims, time of recording 4.117
Non-life insurance output, calculation 16.51
Non-life insurance output, measurement 3.74 a
Non-life insurance service charges as intermediate
consumption 3.89 i
Non-life insurance technical reserves, balance
sheet valuation 7.80
Non-life insurance technical reserves,
definition 5.169, Annex 7.1
Non-life insurance, accounting entries 16.64–16.67
Non-life insurance, payment for 3.74 a
Non-life insurance, uses 16.58–16.61
Non-market output, definition 3.23
Non-market output, free 3.23
Non-market output, payments 3.23
Non-market output, reasons for 3.23
Non-market output, valuation 3.49
Non-market producer revenue 3.41
Non-market producers, definition 3.26
Non-MMF investment fund shares or units,definition Annex 7.1
Non-monetary gold, as valuables 3.155 a
Non-monetary gold, as valuables for central
bank 3.156 a
Non-monetary gold, imports and exports 3.165 a
Non-money market funds (non-MMF) 2.60, 2.83–2.86
Non-observed activities, wages and salaries inkind 4.05 m
Non-observed economy 11.26
Non-participating preference shares 5.97
Non-payable tax credits 4.81
Non-pension benefits, entitlements 5.187
Non-performing loans, balance sheet valuation 7.99
Non-performing loans, definition 7.101
Non-performing loans, memorandum
items 7.100–7.108
Non-performing loans, national conventions 7.102

643

﻿

Index

Non-performing loans, recording of 7.105–7.108
Non-produced assets, definition 3.184
Non-produced, non-financial assets 7.50–7.60
Non-produced, non-financial assets,
definition 7.24, Annex 7.1
Non-profit institutions serving households(NPISHs), sector 2.129–2.130
Non-residential buildings, output measurement 3.80
Notional defined contribution scheme 17.60–17.61
Notional resident unit 2.09, 2.29, 18.15–18.16
NPIs in government 20.13–20.16
NPIs serving business 3.35
NPISH final consumption expenditure 3.97
NPISHs to government current transfers 4.138 a
NPISHs to rest of the world, current transfers 4.138 f
NPISHs, non-financial corporations 2.46
Nuclear power stations, decommissioning costs 3.129 h
Off-market swaps, government accounts 20.133
Oil, produced in international waters 3.164 a
One-off guarantees 5.09 a, Box 5.1, 20.253–20.257
Opening balance sheet 8.61
Operating lease 3.130 a 3, 15.04, 15.08–15.12
Operating lease services, output measurement 3.81
Operating leases, marketable as non-produced
asset 3.190 a
Options versus forwards 5.209
Options, definition 5.203
Options, service charge recording 5.204
Original maturity 5.A1.15–5.A1.16
Other accounts receivable/payable 5.230–5.232
Other accounts receivable/payable, definition 5.230
Other accounts receivable/payable, excluding
trade credit and advances 5.240–5.244,
Annex 7.1
Other accounts receivable/payable, exclusions 5.244
Other accounts receivable/payable, holding gains
and losses 6.63
Other accounts receivable/payable, valuation 7.90
Other buildings and structures, definition Annex 7.1
Other capital transfers 4.164–4.167
Other capital transfers, definition 4.164
Other capital transfers, recording in accounts 4.167
Other capital transfers, time of recording 4.166
Other changes in assets 1.80
Other changes in assets account, external
accumulation accounts 8.75–8.76
Other changes in assets accounts 8.52–8.59
Other changes in the volume of assets andliabilities 1.81, 6.02–6.05
Other changes in the volume of assets andliabilities, categories 6.05

644

Other changes in volume account 1.129
Other changes in volume of assets account 8.53
Other current expenditure, GFS 20.102–20.103
Other current taxes 4.79
Other current transfers 4.112–4.140
Other deposits, definition 5.85, Annex 7.1
Other deposits, examples 5.86
Other deposits, exclusions 5.87
Other employment-related pensions schemes,
transactions 17.87–17.89
Other equity, balance sheet valuation 7.76–7.78
Other equity, definition Annex 7.1
Other equity, examples 5.154
Other financial intermediaries, apart from
ICPF 2.86–2.94
Other financial services 3.66
Other flows, definition 6.01
Other intellectual property products,
definition Annex 7.1
Other investment income 4.68–4.71
Other investment income, recording in accounts 4.71
Other machinery and equipment, definition Annex 7.1
Other miscellaneous current transfers 4.132–4.139
Other miscellaneous current transfers, recordingin accounts 4.139
Other miscellaneous current transfers, time ofrecording 4.139
Other monetary financial institutions 2.68
Other natural resources, definition Annex 7.1
Other revenue, GFS 20.85–20.90
Other social insurance benefits, definition 4.104
Other structures, definition Annex 7.1
Other subsidies on production, definition 4.36
Other subsidies on products 4.35
Other taxes and production subsidies, price andvolume estimates 10.42
Other taxes on production, definition 4.22
Other transferable deposits, definition Annex 7.1
Other unlisted investment fund shares or units
other than MMF 5.165–5.166
Other valuables, definition Annex 7.1
Output for own final use, definition 3.20
Output for own final use, valuation 3.45
Output of finished products 3.47
Output, definition 3.14
Output, time of recording 3.42
Output, valuation 3.16, 3.43
Outworker payments, piecework rates 4.07 e
Overcompensation of VAT 4.37 d
Overdraft on current accounts 5.136 b
Overdraft on transferable deposit account 5.136 a

European system of accounts — ESA 2010

IndexOverfunding of pension scheme 17.78
Own account capital formation 3.22
Own account construction of dwellings, byhouseholds 3.08 b 1
Own account gross fixed capital formation, timeof recording 3.134 b
Own account production 3.08
Own account research and development 3.22 e
Own funds, definition
7.07
Own production, wages and salaries in kind4.05 eOwner-occupied dwelling services, user cost
method 3.79
Owner-occupied dwellings services, stratification
method 3.76–3.78
Owner-occupied dwellings, service output,
measurement 3.75
Ownership of land and buildings, tax 4.23 a
Ownership principle (change of) as basis forrecording imports and exports 18.23–18.24
Ownership transfer costs 3.133
Ownership transfer costs of capital assets, taxes 3.133 c
Ownership, legal versus economic 1.90
Paasche price and Laspeyres volume indices,advantages 10.21
Paasche price index 10.20
Paintings, as valuables 3.155 b
Paper money not in circulation, as imports andexports of goods 3.165 c
Parallel markets for products 10.17
Parcel post, as imports and exports of goods 3.165 f
Participating preference shares 5.148 d
Partitioning transactions 1.76–1.78
Partnerships, non-financial corporations 2.46
Passenger transport, as import of service 3.175 dPassenger transportation, as export of service 3.173 d
Payable tax credits 4.81
Payments of compensation, definition 4.136
Payments of compensation, time of recording 4.137
Payroll subsidies 4.37 a
Payroll tax 4.23 c
Payroll tax, wages and salaries 4.07 d
Peat cutting 3.08 b 4
Pension administrator 17.74
Pension entitlements under social security, notshown in core accounts 17.80–17.81
Pension entitlements, defined benefit scheme,
valuation 7.83
Pension entitlements, defined contribution
scheme, valuation 7.84
Pension entitlements, definition 5.180, Annex 7.1

European system of accounts — ESA 2010

﻿Pension entitlements, households, adjustment forchange in 4.141
Pension fund claims on pension managers 5.185–5.186
Pension funding services, implicit service charge
to households 3.95 g
Pension funds 2.105–2.109
Pension funds, function 2.59
Pension funds, sector classification 2.105–2.110,
20.38–20.39
Pension manager 17.75
Pension obligations of government 20.272
Pension scheme reforms 17.150–17.157
Pension schemes, other
employment-related 17.49–17.53
Pension schemes, recording of flows andstocks 17.80–17.120
Pension schemes, types 17.41–17.42
Pensions vis-à-vis other forms of social
benefit 17.13–17.14
Pensions, social insurance, definition 17.40
Permits as assets, issued by government 15.37
Permits as assets, issued by private corporations 15.39
Permits for specific activities 15.31
Permits for use of natural resource 15.26–15.30
Permits to undertake specific activities 3.190 c
Permits to undertake specific activities, definitionas assets Annex 7.1
Permits to use natural resources, as non-produced
asset 3.190 b
Permits to use natural resources, definition as
assets Annex 7.1
Perpetual debt securities 5.96 f
Perpetual inventory method (PIM) 3.141
Plain debt securities 5.96 a
Poll taxes 4.79 b
Pollution reduction subsidy 4.37 b
Pollution tax 4.23 fPopulation, estimate of total 11.05–11.09
Portable pensions 17.147
Pottery, household own account production 3.08 b 5
PPP contracts, payments classification 20.131
Precious metals and stones, definition Annex 7.1
Precious stones, as valuables 3.155 a
Premium supplements 16.27–16.31
Premium supplements, life insurance 3.74 b
Premium supplements, life insurance additions 5.177 b
Premiums earned, insurance 16.22–16.26
Premiums written, insurance 16.22
Present value of future economic benefits,
valuation of assets 7.37

645

﻿

Index

Price and volume estimates, non-market
services 10.28–10.30
Price and volume indices, general principles 10.12
Price and volume indices, taxes and subsidies on
products and imports 10.36–10.41
Price and volume measures, European
accounts 19.22–19.23
Price discrimination 10.16
Primary distribution of income accounts 8.16–8.29
Principal activity, definition 3.10
Private non-profit institutions (NPIs), definition 3.31
Private NPIs, sector classification 3.31
Private placements 5.103
Privatisation 20.210–20.211
Privatisation agencies, sector classification 20.45
Privatisation, indirect 20.212–20.213
Processing and repair, as export of service 3.173 e
Produced non-financial assets 7.42–7.49
Produced non-financial assets, definition 7.22,
Annex 7.1
Producers for own final use, definition 3.25
Product by product input-output tables 9.60
Product transactions, recording in accounts 3.03
Product valuation 1.97
Production account 1.119, 8.10–8.14
Production approach, GDP measure 8.89 a
Production boundary 1.29–1.30
Production, definition 3.07
Production, exclusion of domestic personal
services 3.09
Productivity and growth accounts 22.99–22.107
Productivity measures 11.38
Products, definition 3.01
Products, transaction categories 3.02
Professional charges, fixed asset ownershiptransfer costs 3.133 b
Property income, definition 4.41
Provisions for bad debt 4.165
Provisions for calls under standardised guarantee
schemes, definition 5.188, Annex 7.1
Provisions for calls under standardisedguarantees 5.188–5.196
Provisions for calls under standardisedguarantees, valuation 7.85
Public corporations distributions 20.205–20.209
Public corporations, dividends versus withdrawalof equity 20.205–20.207
Public corporations, relations with government 20.193
Public corporations, restructures, mergers andreclassifications 20.218–20.220

646

Public corporations, taxes versus withdrawal ofequity 20.208–20.209
Public financial corporations, sub-sectors 20.303
Public non-financial corporations 2.51
Public–private partnerships (PPPs)
15.41,
20.276–20.290
Public–private partnerships, accounting
issues20.287–20.290
Public–private partnerships, economic
ownership
20.283–20.286
Public–private partnerships, measurement of
production
20.290Public producer 3.28
Public quasi-corporations 20.314–20.315
Public sector 20.303–20.320
Public sector accounts 20.303
Public sector and sub-sectors 20.303
Public sector, control 20.309–20.310
Public sector, definitions 20.303
Public special-purpose entities,
non-resident 20.316–20.318
Publisher’s rights, as non-produced assets 3.190 d
Purchase of small tools 3.130 a 1
Purchaser’s price 3.06
Purchases abroad 3.176
Purchases less sales of goodwill and marketing
assets, definition Annex 7.1
Purchasing power parities (PPPs) 10.49–10.56
Put option 5.203
Quadruple entry concept 1.91–1.93
Quadruple entry, financial transactions 5.32
Quality differences 10.18
Quality, price and homogeneous products 10.13–10.18
Quarterly national accounts 12.02
Quarterly national accounts versus short-term
indicators 12.11
Quarterly national accounts, balancing andbenchmarking 12.23–12.31
Quarterly national accounts, compilation issues 12.13
Quarterly national accounts, coverage 12.12
Quarterly national accounts, time ofrecording 12.14–12.15
Quarterly national accounts, use in annual
accounts 12.10
Quarterly versus annual national accounts 12.03–12.10
Quasi-corporations 2.13
Quasi-corporations, sector classification 20.40–20.43
Quasi-transit trade
18.28
Radio spectra, definition as asset Annex 7.1
Real holding gains and losses account 8.58–8.59
Real holding gains and losses, definition 6.42

European system of accounts — ESA 2010

IndexReal income measures 10.46–10.47
Realised holding gains and losses 6.29
Rearranged transactions 1.72
Recipients of other transfers, sub-sector ofhouseholds sector 2.126
Recipients of pensions, sub-sector of households
sector 2.125
Recipients of property income, sub-sector ofhouseholds sector 2.124
Reclassification of sector for institutional unit 6.17–6.20
Recurrent losses in inventories 3.147
Redeemed shares 5.148 b
Redistribution of income in kind account 1.124,
8.33–8.35
Re-exports 18.28
Refunds by households of expenditure by social
welfare organisations 4.138 e
Regional accounts, definition 13.02
Regional accounts, institutional units 13.14
Regional accounts, local KAU cases 13.17–13.21
Regional accounts, uses 13.06
Regional nomenclature, NUTS 13.12
Regional territory 13.09–13.11
Regionalisation methods 13.24–33
Reinsurance 16.16–16.18
Reinsurance, output calculation 16.55–16.56
Reinsurance, output measurement 3.74 c
Reinsurance, transactions 16.73–16.84
Reinvested earnings on foreign direct investment,
definition 4.64
Reinvested earnings on foreign direct investment,
recording in accounts 4.67
Reinvested earnings on foreign direct investment,time of recording 4.67
Remaining maturity 5.A1.17
Rent 4.72–4.76
Rent on land 4.72–4.73
Rent, definition 4.72
Rent, recording in accounts 4.76
Rent, time of recording 4.75
Rental of fixed assets 3.89 c
Rentals 15.11
Rents on sub-soil assets 4.74
Repair and maintenance 3.89 f 2
Repair and maintenance of consumer durables,
materials for 3.95 c 2
Repossession of assets 6.11
Requited transactions 1.71
Rerouting transactions 1.73–1.75
Research and development satellite
accounts 22.108–22.109

European system of accounts — ESA 2010﻿Research and development, as fixed capitalformation 3.89 f 4
Research and development, conditions forinclusion in ESA accounts 3.127 (7)Research and development, definition 3.82, Annex 7.1
Research and development, measurement of
output 3.83
Research for intellectual property products,
incomplete as work-in-progress 3.148 b 5
Residence 18.08
Residence, border workers 2.10
Residence, definition 2.04
Residence, households 2.10
Residence, seasonal workers 2.10
Residence, students 2.10
Resident units 1.61–1.63
Resource lease 15.05, 15.23–15.25
Rest of the world account, special character 18.01–18.02
Rest of the world accounts 1.117, 8.65–8.77
Rest of the world current accounts, balancing
items 18.22
Rest of the world sector vis-à-vis the domestic
economy 8.67
Rest of the world sector, units in 2.44
Rest of the world transactions, exceptions toresident/non-resident 2.132
Rest of the world, geographical breakdown 18.18–18.19
Rest of the world, sector 2.131–2.134
Rest of the world, sequence of accounts 18.03
Rest of the world, sub-sectors 2.133
Restructuring agencies, sector classification 20.44
Retained earnings attributable to collective
investment fund shareholders 4.70
Retained earnings, branches overseas 4.59
Retained earnings, foreign direct investment
enterprise 4.66
Retirement homes, social benefits 4.104 e
Revaluation accounts 1.129, 8.54–8.56
Revenue transaction, GFS, definition 20.76
Revenue, GFS components 20.76
Revenue, GFS definition 20.70
Revenue, GFS, description 20.76–20.90
Risks giving rise to social benefits 4.84
Royalties for use of intellectual property rights, as
export of service 3.173 l
Rules of accounting 1.88
Sale recognition criteria for
securitisation 20.260–20.266
Sales tax 4.20 (i)Sales, examples for hospital 3.34
Sales, GFS revenue item 20.80–20.84

647

﻿

Index

Salt mining, household own accountproduction 3.08 b 4
Satellite accounts, advantages 22.10
Satellite accounts, characteristics 22.06
Satellite accounts, design and compilation 22.46–22.54
Satellite accounts, examples 1.40
Satellite accounts, extra detail and supplementary
concepts 22.43–22.44
Satellite accounts, modelling and experimental
results 22.45
Satellite accounts, non-monetary data 22.42
Satellite accounts, purpose 1.41, 1.43
Satellite accounts, 2008 SNA and other examples 22.07
Satellite accounts, uses 22.04
Saving 8.96
Saving bonus payments by government 4.138 d
Scrip dividend shares, valuation 5.157
Sculptures, as valuables 3.155 b
Seasonal adjustment, outliers 12.44
Seasonal adjustment, pre-treatment 12.44
Seasonal and calendar adjustments, quarterly
estimates 12.40–12.51
Seasonal factors in production 3.58 b
Seasonal price change, as quality change 3.153
Seasonality, definition 12.40
Seasonally adjusted chain-liked volume series,
compilation sequence 12.45–12.51
Secondary activity, definition 3.11
Secondary distribution of income account 1.122,
8.30–8.32
Secondary income (current transfers) of BPM
6 18.51–18.54
Secondary market output by non-market
producers, valuation 3.51
Sector accounts, criteria for allocation to 1.35
Sectors 2.31
Securities lending versus securities repurchase 5.128
Securities lending, definition 5.126
Securities repurchase, definition 5.127
Securities, accrued interest recording 20.181
Securitisation 5.104–5.110, 20.258–20.269
Securitisation schemes 5.106
Securitisation, definition 5.104, 20.258
Securitisation, financial corporation, independent
versus controlled 5.109
Securitisation, recording of flows 20.269–20.271
Securitisation, sale recognition criteria 20.262–268
Self-employed persons, categories included 11.16
Self-employed persons, definition 11.15
Separate trading of registered interest andprincipal securities (Strips) 5.96 e

648

Sequence of accounts 1.113–1.115, 8.01–8.09
Sequence of accounts (diagram) 1.118
Service charge for investment fund management 4.70
Service concession contracts 15.42
Service tax, specific 4.20 h
Services for collective consumption, definition 3.102
Services of owner-occupied dwellings 3.95 aServices, breakdown in balance of payment
statistics 18.30
Settlement of non-life insurance claims 4.115
Severance allowances, social benefits 4.104 c
Share buyback 5.151
Shares in circulation, valuation 5.156
Sheep reared for wool 3.129 d
Ships and oil rigs, incomplete as work-inprogress 3.148 b 4
Short-term debt securities, definition Annex 7.1
Short-term liabilities 5.114
Short-term loans 5.115 a
Short-term loans, definition Annex 7.1
Short-term maturity, definition 5.A1.14
Significant household production, description 3.08
Silver bullion, imports and exports of goods 3.165 b
Sinking fund provision, debt securities 5.96 f
Small repairs and interior decoration of
dwellings 3.95 c 1
Smuggled goods, as imports and exports 3.165 k
Social accounting matrix (SAM), example ofsatellite account 1.42
Social assistance 4.85 c, 17.04–17.05
Social assistance benefits in cash, definition 4.105
Social benefits 17.08
Social benefits by non-government units 17.12
Social benefits expenditure, GFS 20.97–20.99
Social benefits from government 17.09–17.11
Social benefits in cash, recording in accounts 4.107
Social benefits in cash, time of recording 4.106
Social benefits other than social transfers inkind 4.102–4.107
Social benefits, exclusions 4.86
Social benefits, pension entitlement reductions 5.183
Social benefits, risks and needs giving rise to 4.84
Social contributions 8.32
Social contributions and benefits, definition 4.83
Social contributions to government, assessment
based 4.95 aSocial contributions to government, cash receipts
based 4.95 b
Social insurance 16.02
Social insurance benefits other thanpensions 17.15–17.16

European system of accounts — ESA 2010

IndexSocial insurance scheme by employer, output
measurement 3.74 d 2Social insurance scheme run by insurance
corporation, output 3.74 d 3Social insurance scheme, employment-related 4.89 b
Social insurance schemes, definition 4.88, 17.01
Social insurance schemes, examples 17.03
Social insurance schemes, other
employment-related 17.20–17.21
Social insurance schemes, other employmentrelated non-pension 17.29–17.39
Social protection satellite account 22.110–22.122
Social security benefits in cash, definition 4.103
Social security entitlements other than pension
entitlements 17.19
Social security funds 2.117, 20.12
Social security non-pension benefits in cash 4.103
Social security pension benefits in cash 4.103
Social security pension schemes 17.43–17.48
Social security schemes 4.85 a, 4.89 a, 17.02
Social security schemes other than pensions,definition 17.17–17.19
Social security schemes, not in core accounts 17.22
Social security schemes, output measurement 3.74 d 1
Social security schemes, purpose 3.74 d 1
Social security, definition 20.67
Social transfers in kind 4.108–4.111, 8.33–8.34
Social transfers in kind – government and NPISH
non-market production 4.109
Social transfers in kind – market production
purchased by government and NPISHs 4.109
Social transfers in kind reimbursed by social
security 3.96 a
Social transfers in kind, definition 4.108
Social transfers in kind, recording in accounts 4.111
Social transfers in kind, time of recording 4.111
Sound recordings, originals as capital assets 3.132 dSpecial drawing rights (SDRs) 5.69–5. 73
Special drawing rights (SDRs), definition 5.69,
Annex 7.1
Special drawing rights, creation andallocation 5.70–5.71
Special-purpose entities (SPEs) 2.17–2.20
Special-purpose entities (SPEs), classification of
non-resident 20.48
Special-purpose entities (SPEs), classification ofresident units 20.47
Special-purpose entities, non-resident government
controlled 20.48
Special-purpose units of government 2.27
Special sector satellite accounts 22.33–22.41

European system of accounts — ESA 2010

﻿SPEs, residence criteria 18.10
Sponsorship by corporations, not advertising orservices 4.138 g
Sports, recreation and holidays, wages and salaries
in kind 4.05 f
Staff training 3.89 f 3
Stamp tax 4.20 b
Standardised guarantee schemes, provisions forcalls 6.14 dStandardised guarantees 5.10, Box 5.1
Standardised guarantees versus one-off
guarantees 5.197
Standardised loan guarantee schemes, output
measurement 3.74 eStandardised loans 5.123
State government 2.115
State government, definition 20.63–20.64
Stepped debt securities 5.102 c
Stock of produced fixed assets and inventories,
price and volume estimates 10.45
Stock options, wages and salaries in kind 4.05 l
Stock repurchase 5.151
Storage services, output measurement 3.58
Straight line depreciation method for calculating
capital consumption 3.143
Strike price, employee stock option 4.169, 5.221
Structural Funds 20.294–20.295
Structured securities 5.A1.07
Structures, incomplete as work-in-progress 3.148 b 3
Student loan guarantees 5.190
Subscriptions to non-profit businessorganisations 3.89 e
Subscriptions to NPISHs by households 3.96 e
Subscriptions to trade unions, political, sporting
and religious organisations 4.126 a
Subsidies 20.197
Subsidies from supranational organisations 20.293 b
Subsidies on products, definition 4.33
Subsidies on products, specification of amount 4.33
Subsidies, definition 4.30
Subsidies, GFS 20.90
Subsidies, recording in accounts 4.40
Subsidies, time of recording 4.39
Sugar, isoglucose and inulin syrup, production
charges, European accounts 19.31
Super-dividends 4.55–4.56
Supplementary table for pension schemes in social
insurance 17.121–17.160
Supply and use framework as a consistency check 1.135
Supply and use tables 1.137–1.139
Supply and use tables, accounts flows 9.08

649

﻿

Index

Supply and use tables, balancing 9.51
Supply and use tables, basic prices to purchasers’
prices 9.33
Supply and use tables, basis for consistentestimates of GDP 9.15–9.17
Supply and use tables, classifications 9.20–9.29
Supply and use tables, data sources 9.50
Supply and use tables, description 9.03–9.05
Supply and use tables, estimation of national
accounts measures 9.18
Supply and use tables, imports and exports
classifications 9.29
Supply and use tables, imports valuation 9.46
Supply and use tables, industry and productclassifications 9.22
Supply and use tables, product classification 9.26
Supply and use tables, row and column identities 9.06
Supply and use tables, supplementary information 9.49
Supply and use tables, taxes less subsidies on
production and imports 9.40–9.45
Supply and use tables, trade and transport
margins 9.34–9.39
Supply and use tables, valuation 9.30–9.39
Supply and use tables, volume estimates 9.14, 9.18 e
Supranational authorities, sector classification 20.55
Surface water 3.187
Swaps 5.210–5.213
Swaps, definition 5.210
Symmetric input-output tables 9.09
Symmetric input-output tables, derived fromsupply-use tables 9.56–9.57
Synoptic presentation of accounts 8.08
Tax assessments as source of data 4.27 a
Tax authorities fines and penalties 4.133 a
Tax credits 4.81, 20.167–20.168
Tax data sources 4.82
Tax on capital, occasional 4.80 b
Tax revenue 20.165–20.170
Tax revenue, recording 20.171–20.175
Taxes and duties on imports excluding VAT,
definition 4.18
Taxes and social contributions, GFS 20.77–20.79
Taxes on capital, current 4.79 a
Taxes on financial and capital transactions 4.20 c
Taxes on income, definition 4.78
Taxes on ownership transfer of capital assets 3.133 c
Taxes on production and imports paid to theinstitutions of the EU 4.25
Taxes on production and imports, data
sources 4.27 a, b
Taxes on production and imports, definition 4.14

650

Taxes on production and imports, non-observed
activity 4.27
Taxes on production and imports, time ofrecording 4.26
Taxes on products, definition 4.16
Taxes on products, except VAT and import taxes,
definition 4.19
Taxes on specific imported services 4.18 b 5
Taxes unlikely to be collected 4.165 j, 6.15 dTechnical assistance experts to developing
countries, wages and salaries 4.122 d
Technical reserves, insurance 16.28
Technical reserves, life insurance 3.74 b
Technical reserves, non-life insurance 3.74 a
Temporary exit of goods, excluded from exports
and imports 3.166 e
Term insurance 16.13
Territorial enclaves 2.05
Timber, balance sheet valuation 7.48
Time-sharing apartments, output measurement 3.75
Tools, etc., wages and salaries in kind 4.07 a 5Tools, inexpensive, as intermediate
consumption 3.89 f 1
Top-down methods, regional accounts 13.27
Total return swaps 5.217
Tour operator services, output 3.61
Tourism satellite accounts 22.123–22.129
Tourist expenditure, as export of service 3.173 i
Trade bills 5.125
Trade credit 5.124–5.125
Trade credits and advances 5.233–5.239
Trade credits and advances, definition 5.233, Annex 7.1
Trade credits and advances, FISIM 5.235
Trade margin, definition 3.56
Transaction in existing goods 3.180–3.183
Transactions 1.66
Transferable deposits 5.80–5.84
Transferable deposits, definition 5.80, Annex 7.1
Transferable deposits, examples 5.81
Transferable deposits, overdraft facilities 5.82
Transit trade 18.28
Transport charges, fixed asset ownership transfer
costs 3.133 aTransport equipment, definition Annex 7.1
Transport import services, exclusion oftransportation of exported goods 3.175
Transport to work, wages and salaries in kind 4.05 g
Transportation equipment as international
trade 3.164 b
Transportation equipment leaving temporarily
with no change of ownership 3.166 c

European system of accounts — ESA 2010

IndexTransportation of exported goods 3.178
Transportation of exported goods, as export ofservice 3.173 a
Transportation of exported goods, as import ofservice 3.175 a
Transportation of goods not imported orexported, as export of service 3.173 c
Transportation of goods not imported orexported, as import of service 3.175 c
Transportation of imported goods 3.179
Transportation of imported goods, as export ofservice 3.173 b
Transportation of imported goods, as import ofservice 3.175 b
Transportation, output measurement 3.57
Travel agency services, output 3.60
Travel agency versus tour operator services 3.62
Travel, rest of the world 18.31
Travelling expenses 3.89 h 1
Travelling expenses, wages and salaries 4.07 a 1
Travelling fellowships and awards, payments 4.138 c
Trees cultivated long-term 3.129 e
Trees grown for timber 3.130 b 2
Uncompensated seizures 6.10
Under-funding of pension scheme 17.78
Undertakings for collective investment intransferable securities (UCITS) 5.161
Unearned premiums, non-life insurance 5.171
Unemployment, definition 11.20
Unexpected expenditure of government units,
capital transfers 4.165 c
Unforeseen obsolescence 6.13 a
Uniforms, wages and salaries in kind 4.05 c
Unincorporated enterprises owned by households 3.30
Unit trusts 5.161
Units and their groupings 1.54–1.63
Unlisted investment fund shares 5.162
Unlisted shares, balance sheet valuation 7.73–7.75
Unlisted shares, definition 5.147, Annex 7.1
Unrecorded shipments, as imports and exports 3.165 l
Unrequited transactions 1.71
Use of adjusted disposable income
account 1.124, 8.40–8.43
Use of disposable income account 1.123, 8.38–8.39
Use of income account 8.36–8.37
Valuables, definition Annex 7.1
Valuables, examples of 3.155
Valuables, household spending on 3.96 b 4
Valuables, recognition 6.06 b
Valuables, valuation 3.157
Valuation at constant prices 1.99–1.100

European system of accounts — ESA 2010

﻿

Valuation of financial transactions 5.19–5.22
Valuation of imports and exports of products 1.98
Valuation of international accounts entries 18.32
Valuation principles 1.94–1.96
Valuation, wages and salaries in kind 4.06
Value-added type taxes, definition 4.17
Value added, volume estimate 10.31–10.34
Variable interest rate debt securities 5.98–5.101
VAT and GNI-based EU own resources,
definition 4.140
VAT and GNI-based EU own resources, recordingin accounts 4.140
VAT and GNI-based EU own resources, time ofrecording 4.140
VAT resource, European accounts 19.33
VAT, net recording 4.17
VAT, supply and use tables 9.44
VAT, treatment in price and volume estimates 10.41
Vehicles and other durables, wages and salaries inkind 4.05 d
Vesting date, employee stock option 4.169, 5.221
Volume change, definition 10.01
Volume growth regional GVA 13.46–13.48
Voluntary contributions to NPISHs 4.126 b
Volunteer activities producing goods 3.08 e
Wage growth assumptions in pension scheme
calculations 17.169–17.177
Wages and salaries in cash 4.03
Wages and salaries in kind, definition 4.04
Wages and salaries, exclusions 4.07
War damage payments by government 4.38 g
Warrants 5.205–5.206
Water carrying 3.08 b 4
Water resources, definition Annex 7.1
Water, as import and export of goods 3.165 d
Weapons systems, definition Annex 7.1
Weaving, household own account production 3.08 b 5
Welfare, not measured through the ESA 1.46–1.47
Wholesale and retail trades, output measurement 3.56
Wine maturing, production 3.58 a
Withdrawals from equity, quasi-corporations 4.61
Withdrawals from income of quasi-corporations,time of recording 4.62
Withdrawals from the income of quasicorporations, definition 4.58
Withdrawals from the income of quasicorporations, exclusions 4.61
Withdrawals from the income of quasicorporations, recording in accounts 4.63
Work amenities, wages and salaries 4.07 a 2Work force subsidies 4.37 a

651

﻿

Index

Work-in-progress 3.148 b
Work-in-progress, quarterly accounts
Work-in-progress, valuation 3.47
Write-off of financial claims 6.14 b

652

12.16

Writing-off of debt 4.165
Zero-coupon bonds 5.96 d, 20.184–20.185
Zero-coupon bonds, interest 4.46 a

European system of accounts — ESA 2010

European Commission
European system of accounts — ESA 2010
Luxembourg: Publications Oﬃce of the European Union2013 — i–xxx, 1–652 pp. — 21 × 29.7 cm
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