(5)

Section II is amended as follows: (a) paragraph 2.008 is replaced by the following: ‘2.008. The ESA 2010 (1.101-1.105) records flows (especially transactions in products and distributive transactions) on an accrual basis, in other words, at the time when an economic value, amount due or claim is created, transformed, cancelled or ceases to exist, and not at the time when payment is actually made.’; (b) paragraph 2.010 is replaced by the following: ‘2.010. In the ESA 2010, production is treated as a continuous process in which goods and services are converted into other goods and services. This process may take place over different periods depending on the products, and the periods may exceed an accounting period. This characterisation of production, combined with the accrual principle, therefore results in the recording of output in the form of work in progress. Thus, according to the ESA 2010 (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 fish or animals reared for the purposes of food are treated as inventories of work-in-progress during the production process and transformed into inventories of finished products when the process is completed. Output excludes any changes in uncultivated biological resources, e.g. growth of animals, birds, fish living in the wild or uncultivated growth of forests, but it includes catches of animals, birds, fish living in the wild.’; (c) paragraph 2.011 is replaced by the following: ‘2.011. Recording output as work in progress is both desirable and necessary for economic analysis when the production process occurs over a period exceeding the accounting period. This allows consistency to be maintained between the recording of costs and that of output in order to obtain meaningful data on value added. Since the EAA are based on the calendar year, the recording of work in progress can be assumed to apply only to products whose production process was not completed at the end of the calendar year (but also in cases where the general price level undergoes very rapid changes during the accounting period).’; (d) in paragraph 2.014 the last sentence is replaced by the following: ‘During the production process, the value to be recorded each year as output under work in progress can be obtained by distributing the expected value of the finished product in proportion to the costs incurred each period (2008 SNA, 6.112).’; (e) in paragraph 2.017 the second sentence is replaced by the following: ‘When it is possible to differentiate between young animals according to their future use, animals intended for use as factors of production should be recorded as GFCF right from their birth (own-account GFCF, which is recorded when it is produced) i.e. they are considered as work in progress and their growth is registered as output, cf. ESA 2010, 3.134).’; (f) in the heading to part B ‘(cf. ESA 95, 3.07 to 3.58)’ is replaced by ‘(cf ESA 2010, 3.07 to 3.54)’; (g) paragraph 2.032 is replaced by the following: ‘2.032. Output is the total of products created during the accounting period (ESA 2010, 3.14). It is important to keep the distinction between the term “output” and the term “production”, while output denotes the resulting goods and services, production denotes the process.’; (h) in paragraph 2.033 the last sentence is replaced by the following: ‘They are therefore not recorded as part of the output or as intermediate consumption of that local KAU.’; (i) in paragraph 2.036 the first sentence is replaced by the following: ‘Although it is not proposed by the ESA 2010, the rule adopted in the EAA is provided for by the SNA because of the special nature of agriculture, and by the FAO methodological manual (1).’; (j) paragraph 2.041 is replaced by the following: ‘2.041. Following ESA 2010, there are three types of losses that can be incurred by producers: recurrent losses in inventories (ESA 2010, 3.147), exceptional losses in inventories (ESA 2010, 6.13.e) and catastrophic losses (ESA 2010, 6.08 and 6.09).’; (k) paragraph 2.059 is replaced by the following: ‘2.059. Under the heading of processing by producers recorded are quantities produced for further processing by agricultural producers (e.g. milk processed to make butter or cheese, apples processed to make apple must or cider) but only in the framework of processing activities which are separable from the main agricultural activity (on the basis of accounting documents, cf. 1.26). Only the raw products (e.g. raw milk, apples) should be recorded and not the processed products manufactured from them (e.g. butter, apple must and cider). In other words, the work incorporated in the processing of agricultural products is not taken into consideration under this heading.’; (l) in paragraph 2.065 the second sentence is replaced by the following: ‘It should be noted that sales of animals classed as fixed assets, which are taken out of the productive herd (exports or slaughterings) are not recorded as sales.’; (m) paragraph 2.077 is replaced by the following: ‘2.077. The “total output” concept for measuring the output of agricultural activity includes trade in agricultural goods and services between agricultural units as well as intra-unit consumption of livestock feed products (marketable or not).’; (n) a new paragraph 2.080.1 is inserted: ‘2.080.1 According to ESA 2010, 3.82 Research and development (R & D) is creative work undertaken on a systematic basis to increase the stock of knowledge, and use of this stock of knowledge for the purpose of discovering or developing new products, including improved versions or developing new products, including improved versions or qualities of existing products, or discovering or developing new or more efficient processes of production. R & D of a significant size relative to the principal activity is recorded as secondary activity of a local KAU. A separate local KAU is distinguished for R & D where possible, which is not allocated to agricultural industry. For units having also R & D activities, if they cannot be allocated to a separate local KAU and if it is possible to estimate R & D expenditure on agricultural activities, these estimations should be recorded as agricultural output as “other inseparable non-agricultural secondary activities” (own account production) and as GFCF.’; (o) paragraph 2.081 is replaced by the following: ‘2.081. In accordance with the definition of the output of the agricultural industry (cf. 1.16), the output of the agricultural industry is made up of the sum of the output of agricultural products (cf. 2.076 to 2.077) and of the goods and services produced in inseparable non-agricultural secondary activities (cf. 2.078 to 2.080.1).’; (p) paragraph 2.082 is replaced by the following: ‘2.082. Output is to be valued at the basic price. The basic price is the price receivable by the producers from the purchaser for a unit of a good or service produced as output minus any tax (i.e. taxes on products) payable on that unit as a consequence 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. The basic price excludes any transport charges invoiced separately by the producer. It also excludes holding gains and losses on financial and non-financial assets (cf. ESA 2010, 3.44).’; (q) in paragraph 2.085 the first sentence is replaced by the following: ‘The price obtained by the producer corresponds to the producer price (not including invoiced VAT) as defined in the 2008 SNA, 6.51 to 6.54 (i.e. the ex-farm price).’; (r) in the heading to part C ‘(cf. ESA 95, 3.69 to 3.73)’ is replaced by the following: ‘(cf. ESA 2010, 3.88 to 3.92)’; (s) paragraph 2.089 is replaced by the following: ‘2.089. Intermediate consumption represents the value of all goods and services used as inputs in the production process, excluding fixed assets whose consumption is recorded as fixed capital consumption. The goods and services concerned are either transformed or used up in the production process (cf. ESA 2010, 3.88). In a detailed classification by different categories of items, intermediate consumption shows the interlocking of agriculture with other branches of the economy brought about by inputs. Intermediate consumption is also used as an entry in the calculation of factor intensities (i.e. the ratio of two factors of production, for example of intermediate consumption and labour input).’; (t) paragraph 2.090 is replaced by the following: ‘2.090. Intermediate consumption excludes new or existing acquired fixed assets which have been produced in the economy or imported: they are recorded as GFCF (cf. 2.109 (c) to (f)). This concerns items which are non-agricultural fixed assets, such as buildings or other structures, machines and equipment, as well as agricultural fixed assets such as plantations and productive animals. The acquisition of non-produced assets such as land is likewise excluded from intermediate consumption. Inexpensive tools used for common operations such as saws, hammers, screwdrivers, spanners, wrenches and other hand tools, small devices such as pocket calculators are recorded as intermediate consumption.’; (u) paragraph 2.094 is replaced by the following: ‘2.094. Trade in livestock, which is similar to stocks of work in progress (such as piglets and eggs for hatching) and is carried out between agricultural units, and imports of livestock, are not recorded as intermediate consumption (or as any type of output) (cf. 2.066 to 2.070).’; (v) paragraph 2.107.1 is replaced by the following: ‘2.107.1. In accordance with the convention of ESA 2010, the value of financial intermediation services indirectly measured (FISIM) used by the agricultural industry should be recorded as intermediate consumption of the agricultural industry (cf. ESA 2010, Chapter 14).’; (w) paragraph 2.108 is amended is follows: (i) point (a) is replaced by the following: ‘(a) rental paid, either directly or as a component of a tenancy agreement, for use of non-residential buildings and other capital assets (whether tangible or intangible) such as the hire of machines and equipment without operating staff (cf. 1.23) or computer software. However, if no distinction can be made between the renting of non-residential buildings by a local agricultural KAU and the renting of land, the whole item is recorded as renting of land in the enterprise's income account (cf. 3.082);’; (ii) point (d) is replaced by the following: ‘(d) purchases of services of market research and advertising, expenditure on staff training and similar services;’; (iii) point (o) is replaced by the following: ‘(o) payments made to public bodies for the purpose of obtaining licences or permits to carry out commercial or professional activities, if the permits are subject to a thorough scrutiny for regulatory purposes (unless the charges are disproportionate to the benefits of the services concerned, cf. 3.048(e), and ESA 2010, 4.80(d));’; (iv) point (p) is replaced by the following: ‘(p) purchases of inexpensive small tools, working clothing, spare parts and durable equipment used to perform relatively simple operations (ESA 2010 3.89 (f) (1) and 2008 SNA, 6.225);’; (v) point (q) is replaced by the following: ‘(q) fees for short-term contracts, leases and licences recorded as non-produced assets; this excludes the outright purchase of such non-produced assets.’; (x) paragraph 2.109 is amended as follows: (i) in point (b) the last sentence is replaced by the following: ‘Nonetheless, employers are considered to need this type of service to attract and keep their employees (which they would normally have to pay for themselves anyway) and not due to the needs of the production process itself (cf. 2008 SNA, 7.51);’; (ii) in point (f) the first sentence is replaced by the following: ‘(f) purchases of services connected with the acquisition of ownership of land, buildings and other existing fixed capital goods, such as fees for intermediaries, solicitors, surveyors, engineers, etc. as well as fees for entries in the land register (cf. ESA 2010, 3.133).’; (y) in paragraph 2.111 the last sentence is replaced by the following: ‘The purchaser price also includes any transport charges paid separately by the purchaser to take delivery at the required time and place; after deductions for any discounts for bulk or off-peak purchases from standard prices or charges; excluding interest or service charges added under credit arrangements; excluding any extra charges incurred as a result of failing to pay within the period stated at the time the purchases were made (ESA 2010, 3.06).’; (aa) in the heading of Section D ‘(cf. ESA 95 3.100 to 3.116)’ is replaced by ‘(cf. ESA 2010 3.122 to 3.157)’; (bb) paragraph 2.115 is replaced by the following: ‘2.115. Gross capital formation comprises: — GFCF (P.51g), — changes in inventories (P.52), — acquisitions less disposals of valuables (P.53).’; (cc) paragraph 2.117 is replaced by the following: ‘2.117. Gross capital formation is measured gross of consumption of fixed capital (P.51c). Net capital formation (P.51n) is obtained by deducting consumption of fixed capital from gross capital formation. Fixed capital consumption is the value of the depreciation of fixed capital goods as a result of normal wear and tear in the course of the production process (cf. 3.099).’; (dd) in Section D, the subheading ‘1. GFCF’ is replaced by the following: ‘1. Gross fixed capital formation (GFCF)’; (ee) paragraph 2.118 is replaced by the following: ‘2.118. GFCF consists of resident producers' acquisitions, less disposals, 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 (ESA 2010 3.125 to 3.129). Fixed assets are produced assets used in production for more than one year (cf. ESA 2010, 3.124 and Annex 7.1).’; (ff) paragraph 2.122 is replaced by the following: ‘2.122. The determination of the GFCF of sectors or branches of the economy is based on the criterion of ownership (acquisition, disposal) and not on that of the use of the goods. It should be noted that fixed assets acquired by financial leasing (but not those simply on hire) are treated as assets of the lessee if the lessee is a producer) and not of the lessor, who keeps a financial asset equivalent to a notional claim (cf. 2.109(d) and Chapter 15 of the ESA 2010 on the distinction between the different forms of hire of durable goods) ( 1 ).’; (gg) in paragraph 2.123 the first sentence is replaced by the following: ‘Application of the ownership criterion depends on the statistical system on the basis of which the GFCF is calculated.’; (hh) paragraph 2.124 is replaced by the following: ‘2.124. Acquisitions of fixed assets comprise new or existing fixed assets which have been acquired (purchased, acquired in barter transactions, received as capital transfers in kind or acquired as a financial lease), fixed assets produced and retained for the producer's own use, major improvements to fixed assets and to non-produced tangible assets, natural growth in agricultural assets (livestock and plantations) and costs associated with the transfer of ownership of non-produced assets (cf. ESA 2010, 3.125 (a)).’; (ii) paragraph 2.125 is deleted. (jj) in paragraph 2.126 the first sentence is replaced by the following: ‘The purchase or production for own account of a set of durable goods needed for an initial installation constitutes fixed capital formation.’; (kk) paragraph 2.129 is replaced by the following: ‘2.129. The 2008 SNA specifies that improvements made to fixed assets should be determined either by the magnitude of the changes in the characteristics of the fixed assets — i.e. by major changes in their size, shape, performance, capacity or anticipated service life — or by the fact that improvements are not the kinds of changes that are observed to take place routinely in other fixed assets of the same kind, as part of ordinary maintenance and repair programmes (cf. 2008 SNA,10.43 and 10.46).’; (ll) paragraph 2.130 is replaced by the following: ‘2.130. Disposals of fixed assets comprise the sale, demolition, scrapping or destruction of fixed assets by their owner, or their surrender in barter or as capital transfers in kind (cf. ESA 2010, 3.125 (b) and 3.126). These disposals should normally lead to a change in ownership and have a direct economic purpose (therefore fixed assets which are demolished, scrapped or destroyed by their owner in order to be put to no further economic use are not included in these disposals) (cf. 2008 SNA, 10.38). However, some disposals may be kept within the same institutional unit, as in the case of animals slaughtered by a farmer and consumed by his family.’; (mm) in paragraph 2.134 the second sentence is replaced by the following: ‘As defined in the balance sheets (cf. ESA 2010, 7.12 and 7.13) the change in the value of an asset between the end and beginning of an accounting period can be described as follows:’; (nn) in paragraph 2.136 the last indent is replaced by the following: ‘— changes in classification or structure of fixed assets: e.g. changes in the economic purpose of agricultural land, dairy livestock intended for meat production (cf. 2.149, footnote 2) or agricultural buildings which have been altered for private or other economic use.’; (oo) paragraph 2.138 is replaced by the following: ‘2.138. The ESA 2010 distinguishes between several elements which should be recorded as GFCF (cf. ESA 2010, 3.127): — dwellings, — other buildings and structures including major improvements to land, — machinery and equipment, such as ships, cars and computers — weapons systems, — cultivated biological resources, e.g. trees and livestock — costs of ownership transfer of non-produced assets like land, contracts, leases and licences, — R & D, including the production of freely available R & D, — mineral exploration and evaluation, — computer software and databases, — entertainment and literary or artistic originals, — other intellectual property rights.’; (pp) paragraph 2.139 is replaced by the following: ‘2.139. For the EAA, a distinction is made between the following types of elements of GFCF: — plantations yielding repeat products, — fixed asset livestock, — fixed assets other than agricultural assets: — machines and other capital goods, — transport equipment, — farm buildings (non-residential), — other structures with the exception of land improvement (other buildings and structures, etc.), — other (computer software, etc.), — major improvements to land, — costs associated with the transfer of ownership of non-produced assets such as land and production rights, — R & D, covering research and development from specialised units and research and development for own production.’; (qq) point (j) is replaced by the following: ‘(j) Plantations yielding repeat products’; (rr) paragraph 2.141 is replaced by the following: ‘2.141. According to ESA 2010 (3.125) GFCF in plantations corresponds to the value of acquisitions less disposals of natural assets yielding repeat products (such as fruit trees) which have reached maturity, plus the natural growth of such natural assets until they reach maturity (i.e. generate a product), during the accounting period concerned.’; (ss) paragraph 2.144 is replaced by the following: ‘2.144. Disposals of plantations (recorded as negative GFCF) may take two forms: they may be sales of standing plantations to other (agricultural) units, in which case only the costs associated with the transfer of ownership are entered in the EAA. The other possibility is for the plantations to have been felled. In this case, however, according to the general definition of disposals, felled plantations must have a direct economic use; in other words, a counter-entry is required in the form of a use in goods and services (such as a sale to an enterprise specialising in the sale of timber ( 1 )). In this second case, disposals of plantations to be recorded as negative GFCF should represent a modest amount.’; (tt) paragraph 2.148 is replaced by the following: ‘2.148. Work in cultivated crop assets, i.e. plantations, is recorded either as sales, by enterprises specialising in such kind of agricultural contract work (with soil preparation, supply of machines, plant, labour, etc.), or as output of own-account produced fixed capital goods (cf. 1.75).’; (uu) paragraph 2.151 is replaced by the following: ‘2.151. Measuring the GFCF for livestock only constitutes one element of the change in the value of assets. In fact, GFCF for livestock can only be measured via the change in the number of livestock valued at the average price for the calendar year for each livestock category (quantitative method), if the following conditions are met: — no nominal holding gains or losses (i.e. a regular trend in prices and livestock population numbers), — no other changes in volume (i.e. no losses due to natural disasters and no changes in classification, etc.), Another method of calculation (direct method) consists of measuring the flows of entries and withdrawals for each livestock category, at the corresponding prices: apart from acquisitions and disposals, this method has to take into account entries (in particular births) and withdrawals on the holdings.’; (vv) in paragraph 2.152 the following sentence is added at the end of the paragraph: ‘This is a deviation from the ESA 2010.’; (ww) paragraph 2.153 is replaced by the following: ‘2.153. In the SNA, theoretically, consumption of fixed capital should be calculated for livestock ( *4 ) . In actual fact, consumption of fixed capital for livestock corresponds to a measurement of the anticipated decline in productivity of livestock when used for production purposes, a reduction which in turn is reflected in the updated value of future income from this livestock. However, in view of the practical difficulties in evaluating consumption of fixed capital (the definition of the calculation parameters are very complex, cf. 3.105 and 3.106), no consumption of fixed capital should be calculated for productive livestock. (*4) The 2008 SNA (10.94), unlike the ESA 2010 (3.140), considers that consumption of fixed capital should be calculated for livestock.’;" (xx) point (l) is replaced by the following: ‘(l) Fixed assets other than agricultural assets’; (yy) paragraph 2.162 is replaced by the following: ‘2.162. Fixed assets other than agricultural assets (plantations and livestock) comprise the following elements: — machines and other capital goods, — transport equipment, — farm buildings (non-residential), — other (other buildings and structure, computer software, etc.),’; (zz) point (m) is replaced by the following: ‘(m) Major improvements to land’; (aaa) paragraph 2.166 is replaced by the following: ‘2.166. Major improvements in non-produced tangible assets correspond mainly to land improvement (better quality of land and higher yield through irrigation, drainage and flood prevention measures, etc.) and should be treated like any other GFCF (ESA 2010, 3.128).’; (bbb) in paragraph 2.167 the last sentence is replaced by the following: ‘This concerns in particular expenditure on infrastructure works such as clearance, levelling, drainage, irrigation and consolidation (cf. ESA 2010, 3.128 and 2008 SNA, 10.79 to 10.81).’; (ccc) the following paragraph 2.168.1 is inserted: ‘(o) Research and development 2.168.1. Research and development consists of the value of expenditure on creative work undertaken on a systematic basis in order to increase the stock of knowledge, and use of this stock of knowledge to devise new applications. 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 (cf. ESA 2010 Annex 7.1).’; (ddd) paragraph 2.169 is amended as follows: (i) point (a) is replaced by the following: ‘(a) small tools, working clothes, spare parts and equipment, even if these goods have a normal useful life of over one year; because they are renewed regularly, and to conform with business accounting practice, these purchases of goods are considered to be intermediate consumption (cf. 2.105 and 2.106);’; (ii) point (c) is replaced by the following: ‘(c) services of advertising, market research, etc. Purchases of these services are included in intermediate consumption (cf. 2.108(d));’; (eee) in paragraph 2.176 the last sentence is replaced by the following: ‘Alternatively, the value of the entries of work in progress can be estimated by the value of the production cost with a mark-up for expected operating surplus or (estimated) mixed income (cf. ESA 2010, 3.47 and 3.48).’; (fff) in paragraph 2.178 the last sentence is replaced by the following: ‘This problem which is specific to agriculture is recognised by the ESA 2010 (cf. 3.153 (c)).’; (ggg) paragraph 2.186 is replaced by the following: ‘2.186. Another method of evaluating stocks of seasonal products is that of examining the trend in the prices of stocked goods. The price of a good may change during storage for at least three reasons (2008 SNA, 6.143): — the production process is sufficiently long that discounting factors should be applied to work put in place significantly long before delivery, — its physical qualities may improve or deteriorate with time, — there may be seasonal factors influencing its supply or demand, thus resulting in regular and predictable changes in its price over the year, even though its physical qualities may not otherwise change,’; (hhh) paragraph 2.187 is replaced by the following: ‘2.187. The difference between the price at which products are put into stock and the price at which they are withdrawn should reflect the additional output value produced during storage (2008 SNA, 6.143), since products withdrawn from storage several months after harvest are different, in economic terms, from those which have been stored. This type of increase in the value of products should not be counted as a nominal holding gain.’.