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 (Text with EEA relevance)
Date: 2003-12-05
Institutions: Council of the European Union, European Parliament
Subjects: European accounting system, common agricultural policy, disclosure of information, economic accounts for agriculture

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I

(Acts whose publication is obligatory)

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

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 285(1) thereof,

Having regard to the proposal from the Commission,

sufficiently achieved by the Member States and can
therefore, by reason of the scale of the action, be better
the Community may
achieved at Community level,
in accordance with the principle of
adopt measures,
subsidiarity as set out in Article 5 of the Treaty.
In
accordance with the principle of proportionality, as set
out in that Article, this Regulation does not go beyond
what is necessary in order to achieve that objective.

Acting in accordance with the procedure laid down in Article
251 of the Treaty (1),

Whereas:

and evaluation of

The monitoring
common
agricultural policy requires comparable, up-to-date and
reliable information on the economic situation of
agriculture,
in
agricultural income.

specifically on changes

and more

the

(6)

(7)

The measures necessary for the implementation of this
Regulation should be adopted in accordance with
Council Decision 1999/468/EC of 28 June 1999 laying
down the procedures for the exercise of implementing
powers conferred on the Commission (4).

The Standing Committee on Agricultural Statistics and
the
been
informed,

Programme Committee have

Statistical

Agricultural accounts are a basic tool for analysing the
economic situation of a country's agriculture, provided
that they are drawn up on the basis of a single set of
principles. Agricultural accounts also make a valuable
contribution to the calculation of the national accounts.

The economic accounts for agriculture are compiled in
accordance with the basic concepts and rules of Council
Regulation (EC) No 2223/96 of 25 June 1996 on the
European system of national and regional accounts in
the Community (2).

Council Regulation (EC) No 322/97 of 17 February
1997 on Community statistics (3) provides a reference
framework for this Regulation.

Since the objective of the proposed action, namely the
creation of common statistical standards which will
allow the production of harmonised data, cannot be

HAVE ADOPTED THIS REGULATION:

Article 1

Subject matter

1.
for
This Regulation sets up the economic accounts
agriculture in the Community (hereinafter referred to as ‘EAA'),
by providing for:

(a) an EAA methodology (common standards, definitions,
classifications and accounting rules),
intended to be used
the
for compiling accounts on comparable bases
purposes of the Community, and for the transmission of
data in accordance with Article 3;

for

(1) Opinion of the European Parliament of 3 September 2003 (not yet
Journal), and Council Decision of

published in the Official
17 November 2003.

(2) OJ L 310, 30.11.1996, p. 1. Regulation as last amended by
Regulation (EC) No 1267/2003 of the European Parliament and of
the Council (OJ L 180, 18.7.2003, p. 1).

(3) OJ L 52, 22.2.1997, p. 1.

(b) time

limits

accounts
methodology.

the

for
compiled

transmission of
in

the
accordance with

agricultural
EAA
the

(4) OJ L 184, 17.7.1999, p. 23.

(1)

(2)

(3)

(4)

(5)

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This Regulation shall not oblige any Member State to use
2.
the EAA methodology in compiling agricultural accounts for
its own purposes.

Article 2

Methodology

The EAA methodology referred to in Article 1(1)(a) is set

1.
out in Annex I.

The EAA methodology shall be updated in accordance

2.
with the procedure referred to in Article 4(2).

Article 3

Transmission to the Commission

The list of variables and the time limits

the
3.
transmission of data set out in Annex II shall be updated in
accordance with the procedure referred to in Article 4(2).

for

Article 4

Committee pocedure

The Commission shall be assisted by the Standing

1.
Committee on Agricultural Statistics.

2. Where reference is made to this paragraph, Articles 4
and 7 of Decision 1999/468/EC shall apply, having regard to
the provisions of Article 8 thereof.

The period laid down in Article 4(3) of Decision 1999/468/EC
shall be set at three months.

3.

The Committee shall adopt its Rules of Procedure.

1.
The Member States shall transmit to the Commission
(Eurostat) the data set out in Annex II within the time limits
specified for each table.

Article 5

Final provision

The first

2.
November 2003.

transmission of data shall

take place in

This Regulation shall enter
into force on the 20th day
following that of its publication in the Official Journal of the
European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 5 December 2003.

For the European Parliament

The President

P. COX

For the Council

The President

P. LUNARDI

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ANNEX I

ECONOMIC ACCOUNTS FOR AGRICULTURE

(EAA)

CONTENTS

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I. General features of the accounts

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. The basic unit and the agricultural industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Basic unit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Agricultural industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

Inseparable non-agricultural secondary activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Measurement of output

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D. Sequence of accounts

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2.

Sequence of accounts as provided for in the ESA 95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sequence of accounts of the EAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

E.

Sources of data and methods of calculation for compiling the EAA . . . . . . . . . . . . . . . . . . . . . . . . .

F. The classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. General

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Definition of the characteristic activities of agriculture

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Definition of the characteristic units of agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Observations concerning various items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Discrepancy between the EAA agricultural

industry and the agricultural branch of the central
framework of the national accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II. Transactions in products

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. General rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Reference period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Time of recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Output

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. General comments on the concepts of output in the ESA 95 and EAA . . . . . . . . . . . . . . . . . . .

2. Output of agricultural activity: quantities

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Output of inseparable non-agricultural secondary activities

. . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Output of the agricultural industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Valuation of output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C.

Intermediate consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

Elements of intermediate consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Valuation of intermediate consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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15

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21

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22

22

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25

26

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32

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D. Gross capital formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Gross fixed capital formation (GFCF)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Change in stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Recording of livestock as ‘GFCF' or ‘changes in stocks'

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III. Distributive transactions and other flows

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. General rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Reference period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Time of recording distributive transactions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. General remarks concerning value added . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Compensation of employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D. Taxes on production and imports

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Taxes on products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Treatment of value added tax VAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Other taxes on production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

E.

Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

Subsidies on products

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Other subsidies on production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F.

Property income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

Interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Rents (on land and underground deposits) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

Property income attributed to insurance policy holders (not covered by the EAA)

. . . . . . . . . . . .

G. Capital transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

Investment grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Other capital transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

H. Consumption of fixed capital

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IV. Agricultural labour input

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

V. Agricultural income indicators

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Definition of income and balancing items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Treatment of the income of units organised on a corporate basis

. . . . . . . . . . . . . . . . . . . . . . . . . .

C. Definition of the agricultural income indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D. Aggregation of income indicators for the European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

E. Deflation of income indicators

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

VI. Valuation of EAA at constant prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Price and volume measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B.

Principles and method for compiling EAA at constant prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Choice of index formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Base year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

Presenting series in relation to a reference year

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Calculation of value added at constant prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Breakdown of taxes and subsidies on products into volume and price components

. . . . . . . . . . .

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FOREWORD

The revision of the European system of accounts (ESA 1995) in 1995 (1) and the need to adapt to economic and
structural developments in agriculture have led to a new basic methodology used for the EAA. The amendments made
to the basic EAA methodology had to satisfy two, often conflicting, demands: on the one hand, methodological
consistency was needed with the ESA to allow harmonisation of the EAA both between Member States and with the
central framework of the national accounts; and on the other hand, the legislator had to ensure that the changes to be
made were feasible. This manual has been drawn up with these considerations in mind as, in addition to the concepts,
principles and basic rules for compiling the EAA, it also refers to any adaptations to specific characteristics in the field
of agriculture.

I.

GENERAL FEATURES OF THE ACCOUNTS

A.

INTRODUCTION

1.01.

1.02.

1.03.

1.04.

A system of integrated economic accounts should provide an overview of economic activities which is
systematic, comparable and as complete as possible, to serve as a basis for analyses, forecasts and political
measures. The vast number and variety of economic transactions and units covered by the system therefore
have to be classified according to general criteria and set out clearly and simply in a coherent system of
accounts and tables.

The European system of integrated economic accounts, which is derived from the United Nations revised
system of national accounts (SNA 93) (2), was created in response to the specific needs of the European
Union. It lays down concepts, definitions, accounting rules and uniform classifications to be used by the EU
Member States.

The economy of a country is the sum of the activities of a very large number of units engaged in many
different types of transaction with a view to producing, financing, insuring, distributing and consuming.
Units and groups of units considered in the context of a system of national accounts have to be defined in
terms of the economic models under examination. The ESA 95 is characterised by the use of three types of
unit and two distinct ways of breaking down the national economy.

In order to analyse flows involving income, capital, financial transactions and assets, it is essential to select
units which depict the interaction between economic operators (institutional units). In order to analyse the
production process,
to select units which illustrate technico-economic relationships (i.e.
kind-of-activity units at local level and units of homogeneous production).

is crucial

it

1.05.

Thus, the economy may be broken down in two different ways:

(i)

into institutional sectors or subsectors, which represent groups of institutional units;

(ii)

into industries, which comprise groups of kind-of-activity units at local
homogeneous production (homogeneous branch).

level (industry) or units of

The main purpose of the EAA is to analyse the production process and primary income generated by it. The
accounts are therefore based on the industry concept.

The EAA are a satellite account providing complementary information and concepts adapted to the
industry. Although their structure very closely matches that of the
particular nature of the agricultural
national accounts, their compilation requires the formulation of appropriate rules and methods.

A distinction needs to be made between the income generated by agricultural production and the income of
income from
agricultural households, the latter including, apart from income from agricultural activity,
other sources (from property, social transfers, etc.) that agricultural households may have. These two types

1.06.

1.07.

1.08.

(1) Statistical Office of the European Communities, European System of Accounts — ESA 1995, Luxembourg 1996.
(2) System of National Accounts, 1993. Joint publication by the United Nations, International Monetary Fund, Commission of the

European Communities, OECD and World Bank.

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of income (income generated by agricultural production and the income of agricultural households) are
measured for two distinct purposes, which require two distinct methods of breaking down the economy: the
first, for the EAA, is based on production units; which are defined by reference to an activity branch, the
second is based on households (i.e.
institutional units) whose main source of income is independent
agricultural activity (1).

B.

THE BASIC UNIT AND THE AGRICULTURAL INDUSTRY

1.

Basic unit

1.09.

1.10.

1.11.

1.12.

1.13.

In order to analyse flows generated by the production process and the use of goods and services, it is
necessary to select units which emphasise relationships of a technico-economic kind. This requirement
means that as a rule institutional units must be broken-down into smaller and more homogeneous units
with regard to the kind of production. Local kind-of-activity units (local KAUs) are intended to meet this
requirement as a first but practically oriented operational approach (ESA 95, 2.105) (2).

The local KAU is defined as the part of a KAU which corresponds to a local unit. The KAU groups all the
parts of an institutional unit in its capacity as producer contributing to the performance of an activity at
class level (four digits) in NACE Rev. 1 (the reference classification for economic activities, cf. 1.55) and
corresponds to one 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
output, intermediate consumption, compensation of employees, the operating surplus and employment and
GFCF (ESA 95, 2.106).

Although a local KAU may correspond to an institutional unit or part of an institutional unit in its capacity
as a producer, it can never belong to two distinct institutional units. Since, in practice, most institutional
units producing goods and services are involved in a number of different activities at once (a principal
activity and one or more secondary activities), they can be broken down into the same number of local
KAUs. Ancillary activities (purchases, sales, marketing, accounting, transport, warehousing, maintenance,
etc.; cf. 1.27), however, cannot lead to the creation of a local KAU.

Basically, as many local KAUs should be recorded as there are secondary activities, but it can happen that
statistical (accounting) information does not make it possible to separate a local KAU's secondary activities
or parts of those activities from its principal activities. Thus, a local KAU may carry out one or more
secondary activities alongside its principal activity (ESA 95, 2.107).

An activity can be said to take place when resources such as equipment, 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 (goods and services), a production process and an output of
products (ESA 95, 2.103). The principal activity of a local KAU is the activity whose value added is greater
than that of any other activity carried out within the unit. The classification of the principal activity is
determined with reference to NACE Rev. 1, first at the highest level of the classification and then at more
detailed levels (ESA 95, 3.10).

(1) Recognising differing needs of analysts, the FAO has recommended the use of three types of unit as basic units for describing the
economic accounts for food and agriculture, i.e. institutional units (including households), establishments (which are equivalent to the
local KAUs referred to in the ESA) and products as recommended by the 1993 SNA (equivalent to the local KAUs referred to in the
ESA) (cf. FAO (1996) System of Economic Accounts for Food and Agriculture, United Nations, Rome).

(2) It should be pointed out that, although the ESA gives preeminence to local KAUs, the unit best suited to analyses of the production
process is the unit of homogeneous production (UHP). This unit is used to analyse inputs and outputs, since it corresponds exactly to
a type of activity. Institutional units are thus divided into as many UHPs as there are activities (other than ancillary). By grouping
these UHPs it is possible to break down the economy into ‘pure' (homogeneous) branches. A UHP cannot, as a rule, be directly
observed. Therefore, the accounts of homogeneous branches cannot be compiled on the basis of groups of UHPs. The ESA describes
a method for compiling these accounts. It involves attributing secondary production and the corresponding costs of activity branches
to the appropriate homogeneous branches (ESA, 9.53 to 9.61).

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2.

Agricultural industry

1.14.

1.15.

By grouping all local KAUs engaged in the same type of activity, it is possible to establish an industry. This
makes it possible to break down the economy by industry. The classification of these industries depends on
the principal activity of the units thus grouped together. At the most detailed level of classification, an
industry includes all local KAUs in the same class (four digit level) of NACE Rev. 1 and therefore engaged in
the same activity as that defined in NACE Rev. 1.

Although the agricultural industry was formerly defined as a grouping of units of homogeneous agricultural
production, the local KAU was chosen as the basic unit of description for the EAA so as (i) to approach the
EAA from the economic situation of agriculture,
to take the existence of certain inseparable
non-agricultural secondary activities into full account when measuring the total productive activity of
agricultural units and (ii) to remain consistent with the rest of the national accounts. This represents a shift
from an analytical approach based on the concept of
the unit of homogeneous production and
homogeneous branch to a statistical approach based on the concept of the KAU at local level and industry.

i.e.

1.16.

Inseparable, non-agricultural secondary activities are activities whose costs cannot be observed separately
from those of the agricultural activity. Examples are the processing of farm products on the farm, forestry,
logging, tourism. The output of the agricultural industry thus results from two kinds of activity:

(i)

agricultural activities (main or secondary) performed by agricultural units;

(ii) non-agricultural secondary activities of agricultural units.

1.17.

1.18.

The agricultural holding, which is the unit currently used for statistical studies of agriculture (censuses,
surveys of the structure of agricultural holdings), is the local KAU most appropriate to the agricultural
industry (even though certain other units, such as wine or olive oil cooperatives, or units performing
contract work, etc., have to be included in it). Nevertheless, it should be pointed out that the variety of
agricultural activities that can be performed on agricultural holdings makes them a special type of local
KAU. The strict application of the ESA rule to units and their group should in fact result in a division of the
agricultural holding into several separate local KAUs in cases where several activities of the NACE Rev. 1
four-digit class are performed on the same holding. The adoption of the agricultural holding as the local
KAU of the agricultural industry in the national accounts and EAA is based on a statistical approach.

industry are essentially similar to the accounts of agricultural
Thus, the accounts for the agricultural
holdings (production and generation of income accounts). In order to avoid any ambiguity, however,
it
should be pointed out that the agricultural accounts are not accounts of enterprises whose principal activity
is agricultural: firstly, they do not include all of these holdings' non-agricultural activities (those which can
be separated from agricultural activities are excluded). Moreover, they include the agricultural activities of
enterprises whose principal activity is not agricultural. Consequently, the adoption of the agricultural
holding as the base unit for the EAA does not alter the fact that the agricultural accounts are agricultural
industry accounts.

1.19.

Since an industry comprises a group of units which carry out the same or similar types of activity, the
definition of the agricultural industry in the EAA depends on the identification of the characteristic activities
and units in that industry. The resultant selection of characteristic agricultural activities and units may lead
to some differences between the EAA agricultural industry accounts and the national accounts (cf. 1.93).

1.20.

The agricultural industry is treated as a grouping of all KAUs at local level which perform the following
economic activities (cf. 1.60 to 1.66 for the precise definition of the agricultural industry):

— crop growing; market gardening; horticulture (including the production of wine and olive oil from

grapes and olives grown by the same unit),

— farming of animals,

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— crop production associated with animal husbandry,

— agricultural contract work,

— hunting, trapping and game propagation, including related service activities.

1.21.

1.22.

1.23.

1.24.

In addition to agricultural holdings,
industry comprises units made up of groups of
producers (e.g. cooperatives) which produce wine and olive oil and specialised units which provide
machines, material and labour for the performance of contract work.

the agricultural

Specialised units which provide machines, equipment and personnel for the performance of contract work
at the agricultural production stage (commercial enterprises engaged in contract work or agricultural holders
providing services as contractors) are treated as part of
industry. Under a stricter
interpretation, these units, which must be included in the agricultural industry, must perform work which
(a) is part of the agricultural production process, (b) is linked to the production of agricultural products, (c)
is customarily performed by the agricultural holdings and (d) is actually performed entirely by specialist
units providing machines, material and labour.

the agricultural

If, however, the contract work is not performed entirely by specialised units (e.g.
if the holder hires
machines but employs his own workers) this activity must be recorded in Division 71 of NACE Rev. 1
(renting of machinery and equipment without operator); in this case, amounts paid to enterprises working
under contract by the holders must be recorded as ‘other goods and services' under ‘intermediate
consumption' (cf. 2.108).

Since the purpose of the EAA is to measure, describe and analyse the formation of income from agricultural
economic activity (which,
it was
decided to exclude units for which the agricultural activity represents solely a leisure activity. In contrast,
units engaged in subsistence farming are included in the EAA. It should be pointed out that agricultural
output for own final consumption by agricultural holdings must be recorded in the EAA.

in the EU Member States, is almost exclusively a commercial activity),

3.

Inseparable non-agricultural secondary activities

1.25.

The use of the local KAU as the basic unit for the agricultural industry entails recording non-agricultural
secondary activities where they cannot be distinguished from the main agricultural activity.

1.26.

Inseparable non-agricultural secondary activities of local agricultural KAUs are defined as activities closely
linked to agricultural production for which information on any of output,
intermediate consumption,
compensation of employees,
labour input or GFCF cannot be separated from information on the main
agricultural activity during the period of statistical observation.

1.27.

The main characteristics of these inseparable non-agricultural secondary activities are as follows:

— they must be intended for sale or barter (during the accounting period or later, after storage), own final

use by the producer or as payment in kind (including compensation in kind paid to employees),

— they must not be ancillary activities. The latter are supplementary activities (e.g. sales, marketing,
warehousing, transport for own account; see ESA 95, 3.12 and 3.13, and SNA 93, 5.9 to 5.16) carried
out by an enterprise in order to create the conditions for conducting the main or secondary activities.
Typically, the output of ancillary activities appears as input in the different types of productive activity,

— by convention, they may not include activities involving GFCF of non-agricultural products (such as
buildings or machines) for own account. This production for own final consumption is presumed to be
a separable activity and is recorded as the production of an identifiable local KAU. Accommodation
services made available to employees as remuneration in kind must be treated in a similar manner (they
are recorded as remuneration in kind in the generation of income account),

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— they must be characteristic of agricultural holdings,

i.e.

they must be of significant economic

importance for a significant number of holdings,

— agricultural

‘contract work'

is not a non-agricultural activity since it

is a characteristic activity

(agricultural services) of the agricultural industry.

1.28.

Only that part of a specific non-agricultural secondary activity which is inseparable must be included. As a
consequence, a given non-agricultural activity will be included in the agricultural industry if it is impossible
to separate it from the main agricultural activity of a local KAU, but will be excluded if it can be separated
from the main agricultural activity, in which case the secondary activity gives rise to a non-agricultural local
KAU. The selection criterion for inseparable non-agricultural secondary activities is not so much the nature
of the product as the type of activity (1). For example, agro-tourism services provided by a farm must only
be included if they cannot be separated from its agricultural activities. This would probably not be the case
when these activities become important. Thus, non-agricultural products accounted for in the production of
the agricultural industry may vary geographically and over time.

1.29.

Two main types of inseparable non-agricultural secondary activity may be distinguished:

— Activities which represent a continuation of agricultural activity and which use agricultural products.
This type of activity can be found in most of the EU Member States. The processing of agricultural
products is the typical activity of this group:

Processing of agricultural products

— milk into butter, cream, cheeses, yoghurts and other dairy products,

— fruit and vegetables into fruit juices, tinned foods, alcoholic beverages and other products,

— grapes, must and wine into alcoholic products (e.g. sparkling wine, such as Champagne, and spirits,

such as Cognac),

— plaiting of vegetable material/textiles/wool,

— production of pâtés, foie gras and other processed meat products,

— processing of other agricultural products,

Grading and packaging of agricultural products, e.g. eggs and potatoes.

— Activities involving the agricultural holding and its means of agricultural production (equipment,

installations, buildings, workforce). These activities are basically the following:

— agro-tourism — camping, catering, hotels, various kinds of accommodation, etc.,

— farm shops — retail trade activities concerning products other than those from the holding. Direct
the products

sales of agricultural products, raw or processed, are recorded in the output of
concerned,

— sports and rural recreation — the use of land for activities such as golf, horse-riding, hunting,

fishing, etc.,

— services for third parties — e.g. the renting and repair of agricultural machinery, irrigation projects,
agricultural advisory services, product storage, maintenance of farm buildings, commercial services
relating to agricultural products, transport of agricultural products, etc. These services are recorded
as secondary activities, only if they are performed for a third party. When performed for own
account, they are ancillary activities, which are not recorded in the accounts (cf. 1.27),

(1) Note however that some secondary activities are always considered separable from agricultural activity e.g. renting out of buildings

or dwellings.

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— landscaping services — grass-mowing, hedge-trimming, snow-clearing,

laying out, planting and

maintenance of green areas and the like,

— fish-farming,

— other activities involving the use of the land and the means of agricultural production.

1.30.

1.31.

1.32.

The list of non-agricultural secondary activities (cf. 1.29) is however given by way of illustration and does
not apply in every country. On the contrary, each country has to compile its own list of inseparable
non-agricultural secondary activities, depending on the characteristics of its agriculture. The list must be
drawn up in collaboration with the national accounts departments so as to ensure that
the EAA is
compatible with the agricultural branch accounts and the accounts for these non-agricultural activities as
compiled for national accounts purposes (i.e. to ensure that no activity is omitted or double-counted).

The agricultural secondary activities of non-agricultural units are negligible and are recorded as zero by
convention. Agricultural production carried out by a non-agricultural unit is in fact considered to be always
separable, in terms of accounting data, because of the specific features of the products and the means of
agricultural production as well as the data sources and methods used for drawing up the resulting EAA (cf.
section E of chapter I and sections B and C of chapter II). In order to base the EAA on the industry concept,
the output of all agricultural products, excluding those products arising from the secondary activities of
non-agricultural
local KAUs, has to be measured. As these by convention are deemed to be zero, all
agricultural output is recorded (with the exception of the output of units for which the agricultural activity
represents solely a leisure activity; cf. 1.24).

Non-agricultural goods and services produced by agricultural holdings are not included in the EAA unless
if units include several vertically
they are the result of inseparable secondary activities. For example,
integrated production processes (e.g. enterprises engaged in slaughtering, packing and vacuum-packing fowl,
grading, washing and pre-packaging potatoes or other vegetables, sorting, preparing and selling seeds;
cooperatives providing storage space and selling the products, etc.), the agricultural industry includes only
the part of their activity which is related to agricultural production as defined in 1.62 and 1.63, and to the
inseparable non-agricultural secondary activities.

C.

MEASUREMENT OF OUTPUT

1.33.

According to the ESA 95, the output of the industry represents all of the products produced over the
accounting period in question by all the units of the industry except for goods and services produced and
consumed over the same accounting period by the same unit. The measurement of agricultural output is
based (1) on an adaptation of this ESA rule, with the inclusion in agricultural output of part of the output
consumed by the agricultural units themselves (cf. 2.032 to 2.036). Thus in the EAA, agricultural output
represents the sum of output by all units in the industry (excluding output for intermediate consumption by
the same unit), plus output used as intermediate consumption by the same unit, provided this output
concerns two different basic activities (such as crop products intended for use as animal feedingstuffs) and it
meets certain criteria (set out in 2.055).

1.34.

The ESA rule has been adapted because of the special nature of the agricultural industry:

— the amount of agricultural output used in the same unit as intermediate consumption is greater in

agriculture than in other economic sectors,

— the agricultural holding includes a great variety of agricultural activities which are closely linked to one
another (one activity being a basis for or continuation of another activity, such as cereal and fodder
production for animal feedingstuffs; close links in the use of production factors such as equipment and

(1) The measurement of output was previously based on the concept of the ‘national farm', a unique, notional agricultural holding
performing all the agricultural production in a national economy, agricultural output being the sum of all products leaving the
national farm. It was decided to discard the concept of the national farm because of improvements in (i) economic analysis of the
agricultural accounts (technical coefficients and rates of value added), (ii) the consistency between the production accounts and the
generation of income accounts, (iii) the comparison of technical coefficients and rates of value added between sub-branches and
Member States, and (iv) consistency with the ESA and its principles.

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machinery). The varied content of
the agricultural holding, without putting into question its
characterisation as a local KAU, makes it a very special case as compared to local KAUs in other parts
of the economy (cf. 1.17). The aim of the accounts in subdividing the economy into industries is, in
part, to reflect the flows within the production process: creation, transformation, trade and transfer of
economic value. The different activities carried out on an agricultural holding would not be fully taken
into account by solely measuring the output leaving the holding.

1.35.

This adaptation of the ESA rule calls for special treatment for certain products such as agricultural products
intended for use as feedingstuffs on the holding, grapes used for wine production and olives used for olive
oil production, and agricultural products intended for use as intermediate consumption for inseparable
non-agricultural secondary activities.

1.36.

Trade in live animals between agricultural holdings and imports of live animals are the subject of special
treatment as they are considered work-in-progress (cf. chapter II).

D.

1.

1.37.

1.38.

1.39.

SEQUENCE OF ACCOUNTS

Sequence of accounts as provided for in the ESA 95

The EAA are based on a sequence of inter-related accounts. In the ESA 95, the full sequence of accounts
includes current accounts, accumulation accounts and balance sheets. These different accounts make it
possible to record transactions and other flows linked to specific aspects of the economic cycle (for example,
production) in an ordered framework. These transactions range from the generation of income through
income accumulation in the form of assets, to its distribution and redistribution. The balancing items which
are deducted from them are then used as aggregates for measuring economic performance.

The current accounts deal with the production, distribution and redistribution of income and its use in the
form of final consumption; they make it possible to calculate ‘savings', which is the essential component of
accumulation. Accumulation accounts analyse the various components of changes in the assets and liabilities
of units and make it possible to record changes in net worth (the difference between assets and liabilities).
The balance sheets show the total assets and liabilities of the various units at the beginning and end of the
accounting period, together with their net worth. The flows for each asset and liability item recorded in the
accumulation accounts are seen again in the ‘changes in balance sheets' account (ESA 95, 8.04).

The full sequence of accounts referred to above applies only to institutional units, sectors and subsectors.
The ESA 95 assumes that there is no point in compiling a full sequence of accounts for a local KAU and an
industry because such units rarely have the capacity to retain goods or assets in their own name or to
receive and distribute income.

2.

Sequence of accounts of the EAA

1.40.

As the EAA are based on the industry concept, the sequence of accounts in accordance with the ESA 95 has
to be limited to the first accounts of the current accounts:

— the production account and

— the generation-of-income account

whose balancing items are value added and operating surplus respectively (cf. tables 1 and 2 below).

1.41.

Nevertheless, it is thought that, given the specific features of agriculture, it should be possible to compile
other accounts, at least in part,
in so far as the relevant flows can be clearly attributed to them. The
accounts in question (cf. tables 3 and 4 below) are the following:

— the entrepreneurial income account (one of the current accounts) and

— the capital account (one of the accumulation accounts).

1.42.

Consideration is being given to extending this sequence of accounts to include certain items (flows) in the
account ‘other changes in assets' in the accumulation accounts (i.e. certain headings under ‘other changes in
the volume of assets' and the revaluation account) and the balance sheet.

1.43.

On the basis of the tables and accounting structure in the ESA 95, the sequence of accounts of the EAA can
be depicted as shown in tables 1 to 4.

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A. Current accounts

Table 1: Production account

Resources

P.1

Output

100

Intermediate consumption

Gross value added

Consumption of fixed capital

Net value added

50

50

10

40

Table 2: Generation-of-income account

Compensation of employees

Other taxes on production

Other subsidies on production

B.2n/B.3n Net operating surplus/net
mixed income

Resources

B.1n

Net value added

40

10

5

–10

35

Uses

P.2

B.1b

K.1

B.1n

Uses

D.1

D.29

D.39

Uses

D.4

D.41

D.45

Table 3: Entrepreneurial income account

Resources

Property income

10

B.2n/B.3n Net operating surplus/net mixed

35

Interest

Rent

5

5

D.4

D.41

D.42

D.43

D.44

income

Property income

Interest

Distributed income of corporations

Reinvested earnings on direct foreign
investment

Property income attributed to
insurance policy holders

1

1

D.45

Rents on land and subsoil assets

B.4n

Net entrepreneurial income

26

B. Accumulation accounts

Table 4: Capital account

Changes in assets

B.10.1

Change in net worth due to saving
and capital transfers

Changes in liabilities and net worth

B.8n

Saving, net

D.9

D.92

D.99

D.9

D.91

D.99

Capital transfers, receivable

Investment grants

Other capital transfers

10

5

5

Capital transfers, payable

Capital taxes

Other capital transfers

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Changes in assets

Changes in liabilities and net worth

100

B.10.1

Changes in net worth due to saving
and capital transfers

85

10

15

20

20

20

10

5

4

1

10

5

P.51

P.511

Gross fixed capital formation
(GFCF)

Acquisitions less disposals of
tangible fixed assets

P.511a

GFCF in plantations

P.511b

GFCF in livestock

P.511c

GFCF in machines and equipment

P.511d

GFCF in transport equipment

P.511e

GFCF in farm buildings

P.511f

P.512

P.513

GFCF in other works except land
improvements (other buildings,
structures, etc.)

Acquisitions less disposals of
intangible fixed assets (software
etc.)

Additions to the value of
non-produced non-financial
assets

P.513a

Major land improvements

P.513b

Costs of transferring ownership
of land and production rights

K.1

Consumption of fixed capital

P.52

Changes in inventories

P.53

K.2

K.21

K.22

Acquisitions less disposals of
valuables

Acquisitions less disposals of
non-produced non-financial assets

Acquisitions less disposals of land
and other tangible non-produced
assets

Acquisitions less disposals of
intangible non-produced assets
(production rights, etc.)

B.9

Net lending(+)/Net borrowing(-)

1.44.

It should be borne in mind that transactions and stocks set out in italics in tables 3 and 4 are items which:

— are not relevant for the EAA because the industry concept is used and the sequence of accounts is
incomplete. The headings concerned are headings D.42 Distributed income of corporations, D.43
Reinvested earnings on direct foreign investment, D.44 Property income attributed to insurance policy
holders and D.45 Rent under Resources of Table 3 and headings B.8n Net saving, B.10.1 Changes in net
value due to saving and capital transfers and B.9 Net lending(+)/Net borrowing(–) in Table 4 or

— are not recorded, either for lack of reliable information or because they are currently of limited interest
for EAA purposes. The headings in question are D.9 Capital transfers, payable, D.91 Capital taxes and
D.99 Other capital transfers, P.53 Acquisitions less disposals of valuables, K.2 Acquisitions less disposals
of non-produced non-financial assets, K.21 Acquisitions less disposals of
land and other tangible
non-produced assets and K.22 Acquisitions less disposals of intangible non-produced assets (production
rights, etc.) in Table 4. Some of these (e.g. D.91, K.2, K.21 and K.22) may be recorded in the EAA at
some later date.

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1.45.

1.46.

The production account records transactions relating to the production process. It includes output under
the balancing item, may be
‘Resources' and intermediate consumption under ‘Uses'. Value added,
calculated either before or after consumption of fixed capital (gross or net value added). As output is valued
at the basic price and intermediate consumption at purchaser price, the value added includes subsidies less
taxes on products.

i.e.

The generation of income account is concerned with the formation of income resulting from the production
process and its attribution to the ‘labour' production factor and general government (in the form of taxes
and subsidies). The operating surplus, i.e. the balancing item, corresponds to the income which the units
generate by using their production assets. In the case of unincorporated enterprises in the households sector,
the balancing item of this account implicitly contains an element corresponding to remuneration for work
carried out by the owner or members of his family which cannot be distinguished from his profits as an
entrepreneur. This is referred to as ‘mixed income' (ESA 95, 8.19).

1.47.

The entrepreneurial income account makes it possible to measure income which is similar to the concept of
current profit before distribution and taxes on income, as customarily used in business accounting.

1.48.

The capital account makes it possible to determine the extent to which acquisitions less disposals of
non-financial assets have been financed from saving and capital transfers. It shows lending or borrowing. It
is not possible to compile a complete capital account for agriculture because, although certain flows may be
clearly attributable to this industry, other items (e.g. net saving, the balance of the sequence of the current
accounts) cannot be calculated on an industry basis. Nevertheless, by recording as much as possible of the
changes in the value of non-financial assets in the industry (due to acquisitions, disposals and the
consumption of fixed capital) and capital transfers received by the industry, valuable information is obtained
on its economic and balance-sheet situation (plus information on the income generated by the production
process).

E.

SOURCES OF DATA AND METHODS OF CALCULATION FOR COMPILING THE EAA

1.49.

1.50.

formula when
One of the main characteristics of the EAA is the adoption of the ‘quantity x price'
measuring the output of the large majority of products. This approach was prompted mainly by the
difficulty of compiling agricultural accounts based on representative samples of business accounts.

The evaluation of crop output can normally be based on resources, i.e. the estimate of quantities produced
(harvested) based on estimates of areas under crops and yields, or on uses, i.e. on estimates of purchases by
the user branches of agricultural products, exports net of imports, to which should be added certain
quantities used for intermediate consumption by the agricultural industry, changes in producer stocks and
use for own account (much of which is own final consumption). The latter approach can prove highly
appropriate in cases where the buyers of these agricultural products are readily identifiable and the four
other components of uses are limited (for example, products requiring preliminary processing before they
can be used, such as sugar beet, tobacco, etc.). Nevertheless, a physical balance sheet is necessary in order to
verify the consistency and reliability of the data.

1.51.

Statistics on slaughterings, exports/imports of live animals and the size of herds are the main sources of
data for measuring the output of animals. The output of animal products (mainly milk)
is generally
estimated using sales to user branches (dairies, packers) because of the specific uses to which they are put.

1.52.

A more detailed description of the methods of calculation is given in chapter II.

1.53.

Most intermediate goods can basically only be used in agriculture (seeds and planting stock, fertilisers,
pesticides, etc.). In this case purchases by agriculture are based on the data relating to sales by branches
which supply these intermediate goods (after inclusion of external trade).

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1.54.

F.

1.

1.55.

1.56.

Applying this rule is not without certain risks, however. In actual fact, sales by producers of intermediate
consumption goods, which are mainly used in agriculture, do not necessarily correspond to the purchases of
those goods by the agricultural sector, because fertilisers, pesticides, etc. may also be bought for other
purposes (stocks of commercial units, consumption of other units such as public parks and households etc.).

THE CLASSIFICATION

General

The EAA are an integral part of the European system of accounts and therefore for their compilation use is
made of Eurostat's general classification of economic activities, NACE Rev. 1. NACE Rev. 1 is a four-level
nomenclature of activities which was compiled in 1990. It is in fact a revision of the general industrial
classification of economic activities within the European Communities, or NACE, which was first published
by Eurostat in 1970.

NACE Rev. 1 is a more detailed version of ISIC Rev. 3 (1), adapted to specifically European circumstances.
NACE Rev. 1 is also directly linked to the statistical classification of products by activity (CPA) within the
European Economic Community, which in turn is based on the United Nations' central product classification
(CPC).

1.57.

NACE Rev. 1 is a classification of activities which is used for defining industries in the national accounts. It
is based on the four-level coding system described below:

— a preliminary level, containing headings identified by an alphabetical code denoting ‘sections',

— an intermediate level, containing headings identified by a two-letter alphabetical code denoting

‘subsections',

— a second level, containing headings identified by a two-digit numerical code denoting ‘divisions',

— a third level, containing headings identified by a three-digit numerical code denoting ‘groups',

— a fourth level, containing headings identified by a four-digit numerical code denoting ‘classes'.

1.58.

1.59.

Each level in a classification of economic activities can usually be defined by its characteristic goods or
services. Thus, the CPA is used to describe in detail the various economic activities in the agricultural
industry with an additional two-digit differentiation providing a more detailed definition of the headings.

The industry corresponds to the group of local KAUs engaged in the same or similar economic activity. At
the most detailed level of classification, an industry includes all local KAUs in the same class (four digits) of
NACE Rev. 1 and which are therefore engaged in the same activity as defined in this nomenclature (ESA 95,
2.108). A definition of the field of the agricultural industry therefore requires a precise statement of:

— its characteristic activities,

— the characteristic units of the EAA.

2.

Definition of the characteristic activities of agriculture

1.60.

The agricultural industry, as described in the EAA, corresponds to Division 01 in NACE Rev. 1.

1.61.

The EAA are a satellite account in the framework of the national accounts, whose basic concepts, principles
and rules are based on the ESA 95. However, the latter only provides a general framework for the economy

(1) ISIC Rev. 3: United Nations international standard industrial classification of all economic activities.

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as a whole, and has to be adapted to the specific requirements of agriculture. These particular requirements
derive mainly from the specific purposes of the EAA, the availability of data sources and the special
character of agricultural units and their economic activities. The specific nature of the satellite accounts
necessitates the compilation of a list of characteristic agricultural activities of the EAA, which obviously has
to be based on NACE Rev. 1.

1.62.

For national accounts purposes the agricultural industry is defined as all units performing, either solely or
together with other secondary economic activities, activities which come under Division 01 of NACE Rev. 1
‘Agriculture, hunting and related service activities'. Division 01 comprises (1):

— Group 01.1: Growing of crops; market gardening; horticulture;

— Group 01.2: Farming of animals;

— Group 01.3: Growing of crops combined with farming of animals (mixed farming);

— Group 01.4: Agricultural and animal husbandry service activities, except veterinary activities;

— Group 01.5: Hunting, trapping and game propagation, including related service activities.

1.63.

The list of characteristic agricultural activities of the EAA corresponds to these five groups of activities (01.1
to 01.5), but with the following differences:

— inclusion of the production of wine and olive oil (exclusively using grapes and olives grown by the
same holding), the growing of vegetable materials used for plaiting, Christmas trees, fruit trees, vines
and ornamental nursery trees (which come under Division 02, Forestry),

— exclusion of

the activities

relating to the production of

seeds upstream and downstream of
multiplication and certain activities which, in NACE Rev. 1, are considered as agricultural services (i.e.
the operation of irrigation systems, the design, planting and maintenance of gardens, parks and green
areas for sports facilities and the like, tree pruning and hedge trimming; only agricultural contract work
is taken into account here).

3.

Definition of the characteristic units of agriculture

1.64.

All units which perform characteristic activities of the agricultural industry of the EAA must be included.
The units in question perform the activities included in the following groups in NACE Rev. 1:

— group 01.1: Growing of crops; market gardening; horticulture

— production of seeds: only the units engaged in seed multiplication,

— production of wine (olive oil): only those units engaged in this type of production from grapes

(olives) grown by the same units and groups of producers (e.g. cooperatives) (2),

— group 01.2: Farming of animals,

— group 01.3: Growing of crops combined with farming of animals (mixed farming),

— group 01.4: Agricultural and animal husbandry service activities, except veterinary activities

— excluding units which perform agricultural service activities other than contract work (i.e. units
which operate irrigation systems or perform services relating to the design, planting and
maintenance of gardens, parks and green areas for sports facilities and the like, and tree pruning
and hedge trimming),

— group 01.5: Hunting, trapping and game propagation, including related service activities.

(1) See also chapter 4 ‘Explanatory notes' in: Eurostat: NACE Rev. 1, Statistical classification of economic activities in the European Community,

Theme 2, Series E, Luxembourg, 1996.

(2) A distinction is therefore made between the three types of unit producing wine: food businesses, groupings of agricultural producers

and agricultural holdings.

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1.65.

The list under 1.64 should be extended to include units producing Christmas trees, fruit trees, vines and
ornamental nursery trees and production units producing vegetable materials used for plaiting.

1.66.

It can be seen from the list that, apart from agricultural holdings, the other characteristic units of agriculture
are: groupings of producers producing wine and olive oil and specialist units performing agricultural
contract work (cf. 1.20 and 1.21). It should be remembered that units for which the agricultural activity
represents solely a leisure activity are not included among the characteristic units of agriculture (cf. 1.24).

4.

Observations concerning various items

(a) Group 01.1: Growing of crops; market gardening; horticulture

1.67.

Group 01.1, ‘Crops', is a systematic breakdown making it possible to classify all crop production activities in
the EU Member States plus harvesting activities (plants or wild fruit).

1.68.

In order to be recorded, the production of fodder crops must be part of an economic activity.

1.69.

1.70.

1.71.

Unlike in NACE Rev. 1, which attributes the production of nursery trees to forestry, this activity is treated as
an agricultural activity in so far as it relates to the production of tree saplings and fruit-bearing shrubs,
vines and ornamental shrubs, whereas the production of forest plants is treated as a forestry activity if the
plants are intended for use in the production of forest trees (1). The production of Christmas trees is also
treated as an agricultural activity if the trees are grown in nurseries with specifically ornamental purposes in
mind, but if for instance, the Christmas trees are the result of lopping or thinning of forest trees, then this is
considered as forestry production.

In the nomenclature of the EAA, agricultural seeds are grouped under the heading ‘Seeds', the exceptions
being seed for cereals (including rice), oilseeds, protein crops and potatoes, which are entered respectively
under the individual cereal and oilseeds varieties, protein crops and potatoes (2). The production of seeds in
fact covers several types of production activity: research (i.e. production of first-generation seed prototypes),
multiplication (done by agricultural holdings under contract) and certification (i.e. grading and packing by
specialist production units). Only the multiplication of seeds is a characteristic agricultural activity since
research and certification activities are done by research and production institutes and are not part of
traditional agricultural activity (i.e. the exploitation of natural resources with a view to producing plants and
animals). As a result, the production of seeds in the EAA only concerns the production of multiplied seeds.
The intermediate consumption of seeds corresponds to (i) first-generation seeds purchased with a view to
multiplication and (ii) certified seeds purchased by agricultural producers with a view to crop production.

Production of grape must, wine and olive oil: the CPA treats wine and olive oil as food products. NACE Rev.
1 classifies the production of wine and olive oil under subsection DA ‘Agri-food industries' (Classes 15.93
‘Manufacture of wines' and 15.41 ‘Manufacture of crude oils and fats'). Only the production of wine grapes
and olives comes under agriculture (Class 01.13 ‘Growing of fruit, nuts, beverage and spice crops'). However,
following the convention adopted by NACE Rev. 1, when wine (olive oil) is produced from grapes (olives)
grown by the same unit of production, it is attributed to agriculture (Class 01.13). This convention makes it
unnecessary to distinguish between the unit which grows the grapes and the unit which produces the wine.
As a result, all wine (olive oil) production from grapes (olives) by the same agricultural holding forms part
of characteristic agricultural activities.

(1) There are some discrepancies between the NACE definitions in the individual languages. According to the German and English NACE
versions, only the operation of forest tree nurseries is part of NACE 02.01 (forestry and logging). The inclusion of nurseries
producing fruit trees, vines and ornamental nursery trees in the agricultural branch would thus not represent a deviation from
NACE.

(2) The reason for this deviation from the general rule is that in these special cases a considerable part of the seed is obtained from the
normal output of the corresponding cereal, oilseed, protein crop or potato harvest, whereas in other cases it is produced in
specialised holdings.

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1.72.

1.73.

1.74.

The production of wine by units closely linked to agricultural holdings is also treated as a characteristic
agricultural activity in the EAA. Units with strong links to agricultural holdings include groups of producers
(e.g. vine-growers' cooperatives). Their inclusion in the agricultural industry is dictated by the nature of
these organisations, which have historically represented an ‘extension' of agricultural holdings (on mutual
grounds relating to production and marketing) and which are usually owned by them. By contrast, the
production of wine (olive oil) by agri-food businesses is excluded from the EAA (since it is clearly industrial
by nature).

The production of grape must features together with the production of wine in the list of characteristic
activities since grape must can be sold or exported in its raw state or added to stocks prior to being sold or
exported, either for consumption or to be made into wine, in a subsequent reference period.

Since wine, olive oil and grape must (the latter only in so far as it is not vinified during the reference
period) result from agricultural production in the form of the processing of grapes and olives grown by the
same unit, neither grapes intended for the manufacture of grape must and wine nor olives intended for the
manufacture of olive oil (i.e. the basic products) should be included under output. They are treated as
intra-unit consumption which is not measured as industry output (cf. 2.052). Grape must which is not
vinified during the reference period should be included in the period's output. During the vinification
period,
it should be recorded as intermediate consumption (intra-industry consumption) balancing a
corresponding stock decline. The wine resulting from the processing of the must should be recorded as a
component of output.

1.75.

Plantations (e.g. vineyards and orchards) are fixed capital goods, and their establishment has to be recorded
under output. The establishment of plantations for own account constitutes ‘Own-account produced fixed
capital goods'. When the establishment of plantations is carried out by specialised units on contract basis,
the corresponding value is considered as ‘Sales'.

(b) Group 01.2: Farming of animals

1.76.

As with crop-growing activities (cf. 1.67), this group comprises a systematic breakdown of all the livestock
and animal products produced in the EU Member States.

1.77.

In the CPA, hatching eggs are classified together with eggs in one subcategory. However, by convention,
they are treated, in the EAA, as semi-finished output of poultry production (1).

1.78.

1.79.

Horse breeding is a characteristic activity of the EAA whatever the final destination of the animal may be
(breeding, meat production or services). It should be noted, however, that the management of racehorse
stables and riding schools is not a characteristic agricultural activity (it is a recreational, cultural and
sporting activity: Division 92) (cf. 2.210). Therefore, income accruing to farmers from such activities must
be excluded from the EAA. In addition, the keeping of racehorses or saddle horses which are not part of the
agricultural production process is excluded from the EAA. A similar treatment is applied to bulls bred for
bullfights.

In the economic accounts, by-products (2) which automatically result
from the production of certain
agricultural products are not recorded under the same headings as the product itself. They appear separately
at the end of each group of production activities, broken down by species. In crop production, for example,
examples include straw, beet leaves and cabbage leaves, pea and bean pods, etc.; in vinification, lees and
argols; in the manufacture of olive oil, waste, such as oilseed cakes; and, in the case of animal production,
hides, hair and the fur of dead game, and wax, manure and slurry. Generally speaking, none of these
products is the prime objective of production, which explains why it is so rare for statistical data on them

(1) The reason for this deviation is that, in practice, the process of production of hatching eggs and of eggs for consumption is quite
different, and there is not one single output ‘eggs' for which the destination could be decided after its production. From the start of
the production process, hatching eggs are destined for the production of poultry. They are thus treated, in the EAA, in the same way
as piglets which are considered as semi-finished output of pig production.

(2) A secondary product is a product which is technically linked to the production of other products. It may be exclusive when linked to
other products of the same group but whose production is exclusive to this group, or ordinary when linked to other products, but
whose production is not peculiar to one group.

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to be reliable. In agriculture itself, these products are used mainly as animal feedingstuffs or soil improvers.
Occasionally, however, these by-products are sold to economic sectors other than agriculture, in which case
the value of output should be shown in the EAA.

(c) Group 01.4: Agricultural and animal husbandry service activities, except veterinary activities

1.80.

The activities in group 01.4 can be divided into two categories:

1.81.

1.82.

— agricultural services in the form of contract work at the production stage (i.e. agricultural contract

work),

— ‘other' agricultural services (the operation of irrigation systems; the design, planting and maintenance of
gardens, parks, and green areas for sports facilities and the like; tree pruning and hedge trimming, etc.).

Agricultural service activities in the second category are not treated as characteristic EAA activities (even
the national accounts), since they are not
though they are recorded in the agricultural accounts of
traditional or typical agricultural activities. They may, however, be recorded as inseparable non-agricultural
secondary activities (within the meaning of the EAA). The traditional approach,
in which agriculture is
described as the cultivation of the soil, includes, by extension, all work designed to use and exploit natural
resources for crop and animal production of benefit
to mankind. Despite their growing economic
importance, it was felt that taking account of services related to the environment would amount to an
unacceptable widening of the traditional approach described above.

Agricultural contract work

As part of the process of economic specialisation, agricultural holdings and households have long since
ceased to perform certain functions, which have been taken up by a growing number of specialist
professions with their own production units. This division of functions mainly concerns the processing of
agricultural products (slaughtering and meat processing, the milling of cereals, the manufacture of bread,
butter and cheese and the processing of seeds by new sectors), and, at a later stage, certain marketing
transactions. This is especially the case in the context of the major structural changes affecting agriculture,
the growing use of
large machines and agricultural activities which make a direct contribution to the
production of crop products and animal husbandry and which have increasingly been outsourced to
specialised units.

1.83.

Notable among these activities are manuring,
protection, hay harvesting, threshing and the shearing of sheep.

liming, ploughing, sowing, weeding, pest control, plant

1.84.

A characteristic feature of all these activities is that they are generally necessary as part of the production
process for agricultural products and are linked to the production of these products.

1.85.

1.86.

Activities which are not directly related to the production of agricultural products, i.e. which do not take
place at the agricultural production stage (transport for account of third parties and deliveries of milk to
dairies are examples of a non-agricultural activity constituting part of a different industry) should not feature
in the EAA (unless they are activities which are inseparable from the principal agricultural activity; cf. 1.12).

It should be borne in mind that this classification applies only on so far as the activities in question are
exclusively for account of the specialised units. If, on the other hand, the farmer hires machines without
operators or with only some of the operators which they require, with the result that he/she continues to
carry out the activity as such, with the help of the machines, this activity comes under Division 71 of NACE
Rev. 1. This situation mainly occurs with simple machines requiring relatively few repairs, and mainly
during peak periods, when the machines are in greatest demand (cf. 1.23).

1.87.

Contract work performed during the agricultural production stage mainly involves the use of expensive
machines and equipment. Such work may be performed by:

(a)

specialist contractors for whom these are the principal activities (contractors in the true sense);

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(b) agricultural holdings

Contract work by holders usually takes the following forms:

— as far as farmers' supplementary income is concerned, the most flexible form is occasional aid
given to neighbours. This category also includes the provision of accommodation for livestock and,
mainly for pigs and poultry, animal husbandry on a fee basis (especially fattening). Accommodation
may be provided for livestock owned by another farmer or the livestock may be the property of an
industrial enterprise, usually a supplier (e.g. a manufacturer of/trader in fodder crops) or a
purchaser (e.g. an abattoir),

— in the form of a more or less autonomous machine pool which represents a systematised form of
mutual aid between neighbours. The high cost of machinery and its low rate of utilisation by an
individual holding lead holdings which possess such machines to form machine pools which are
placed at the disposal of other holdings, complete with the necessary personnel.
Increasingly,
farmers are deriving their main agricultural income from contract work on account of persons for
whom agriculture is no more than a secondary activity and who in some cases are merely the
owners of the land,

— agricultural machine cooperatives (1). These are large cooperatives with paid employees;

they

resemble specialist contractors;

(c) enterprises involved in a subsequent production stage which harvest fruit or vegetables and then

process themselves (e.g. tinning factories tinning peas under contract);

(d) enterprises involved in a previous production stage. These include traders in agricultural machinery who
perform contract work. Although other cases may, from the point of view of the EAA, seem highly
unlikely, it is theoretically possible for a manufacturer of pesticides to apply the product himself. If this
is done using the most modern techniques, however,
the
agricultural production stage, and certainly not if the work is not regularly carried out by the farmer
(e.g. aerial spraying of parasites).

is not necessarily contract work at

it

1.88.

1.89.

1.90.

1.91.

In cases where it has to be decided if an activity should be treated as contract work (i.e. work which, in the
context of the agricultural production process, would normally be performed by agricultural holdings
themselves), it should be borne in mind that not only the nature of the activity, but also the specific context
in which it is performed, i.e. the ‘agricultural production process' is important.

Animal husbandry performed on farms for remuneration (the provision of land for livestock) is agricultural
contract work since it is part of the agricultural production process. This heading does not, however,
include the private rearing and care of saddle horses, since these activities do not constitute the production
of goods but a genuine service within the meaning of the ESA 95 (section O of NACE Rev. 1). By the same
token, work linked to the creation and maintenance of parks, gardens, golf courses and roadside plantations
must not be treated as an agricultural production process.

The type of compensation paid to the persons performing contract work is unimportant. It does not in any
way have to be fixed remuneration (i.e. a wage in the strict sense); the compensation can perfectly well take
the form of profit-sharing or a mixed formula (for example, a farmer who fattens calves in return for
compensation generally receives a fixed amount for each animal plus a share in net profit). Compensation
can also take the form of a specified share of the output.

Nevertheless, the work must always be performed by independent enterprises: work performed by the
holding's paid employees does not
the holding,
remuneration for such work (for example, work done by a paid herdsman) is a wage cost and appears under
the heading ‘compensation of employees'. By contrast, work performed by an enterprise which carried out
milking on a contract basis for other agricultural holdings is recorded in the EAA both as output (sales of
services), from the point of view of the contractor, and as intermediate consumption (purchase of services),
from the point of view of the agricultural holding.

into this category. From the point of view of

fall

(1) The equipment and machines belong to the cooperative, unlike with pools of machines, where they are generally the property of

individual holdings.

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(d) Group 01.5: Hunting, trapping and game propagation, including related service activities

1.92.

This group of activities comprises the following activities: (i) the hunting and trapping of animals for food,
for their pelt or hide, for research purposes, zoos, or for use as pets; (ii) the production of furrieries, skins
of reptiles or birds originating from hunting or trapping activities; (iii) restocking with game; (iv) services to
promote hunting and trapping for commercial purposes. It should be noted that the production of hide and
leather from slaughterhouses and hunting performed as a sports or recreation activity are not included as
characteristic activities of the agricultural industry. Additionally, the ‘hunting' group does not comprise the
breeding of game on holdings, which should be recorded as part of the class ‘Farming of other live animals'.

5.

Discrepancy between the EAA agricultural
framework of the national accounts

industry and the agricultural branch of the central

1.93.

The EAA agricultural industry, as defined in Sections 1.62 to 1.66, differs in some respects from the branch
as defined for national accounts purposes. The differences relate to the definition of both characteristic
activities and units. They can be summarised as follows:

EAA agricultural industry

= NA agricultural branch

+ Wine and olive oil production units (groupings of producers, cooperatives,

etc.)

+ Production units producing material for plaiting

+ Production units producing, in nurseries, Christmas trees, fruit trees, vines

and ornamental trees

– Units engaged in seed production (for research or certification)

– Production units providing associated agricultural services other than
agricultural contract work (i.e. the operation of irrigation systems,
designing, planting and maintaining gardens, parks and green areas for
sports facilities and the like; tree pruning and hedge trimming)

– units for which the agricultural activity represents solely a leisure activity

II.

TRANSACTIONS IN PRODUCTS

2.001.

2.002.

Transactions in products provide an account of the origin and use of products. Products are goods and
services created within the production boundary. The main categories of transactions in products defined by
the ESA 95 are: output, intermediate consumption, final consumption expenditure, actual final consumption,
gross capital formation, exports of goods and services and imports of goods and services.

As mentioned in 1.40 and 1.41, only output, intermediate consumption and gross capital formation are
taken into account in the EAA. Output is recorded as a resource and intermediate consumption as a use in
the production account. Gross capital formation is recorded as a use (a change in assets) in the capital
account.

A.

GENERAL RULES

1.

Reference period

2.003.

For the EAA, the reference period is the calendar year.

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2.

Units

(a) Quantities

2.004.

Quantities should generally be shown in 1 000 t, (in 10 000 hl, for grape must and wine) to one decimal
place. For animals, live weight is used.

(b)

Prices

2.005.

In the EAA, prices should be shown per tonne (per 10 hl for wine and grape must).

2.006.

In the EAA, prices should be recorded either to the nearest whole number or correct to one or two decimal
places, depending on the statistical reliability of the price data available.

(c) Values

2.007.

Values should be shown in millions of units of national currency.

3.

Time of recording

2.008.

The ESA 95 (1.57) 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.

(a) Output

2.009.

Output should be valued and recorded at the time it is generated. It is therefore to be recorded when
produced and not when paid for by the purchaser.

2.010.

2.011.

2.012.

In the ESA 95, 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 95 (3.58), the output of agricultural products should be recorded as if it is produced
continuously over the entire production period (and not simply when the crops are harvested or animals
slaughtered). Growing crops and stocks of fish or animals reared for the purposes of human consumption
should be treated as stocks of work in progress during the production process, and transformed into stocks
of finished products when the process is completed.

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) (1).

However, for farm products whose production cycle is shorter than the accounting period, it would be
unnecessary to record the output as work in progress. The recording of output at the finished product stage,
i.e. at the harvest (for crop production), in fact allows an adequate degree of consistency between it and the
production costs to be maintained. This is the situation for most agricultural output whose production cycle
lasts less than a year. It is not necessary, either, to record as work-in-progress short-cycle crop production
whose production process overlaps into a second calendar year (cf. 2.172.). In these cases, growing crops are
not considered to be stocks of work in progress.

(1) Cf. 6.72 to 6.79 and 6.94 to 6.100 of the SNA.

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2.013.

2.014.

2.015.

2.016.

2.017.

In practice, only products with a long production cycle are concerned by the method of recording in the
form of work in progress. Such products are in particular livestock, crop products such as wine (whose
ageing is an integral part of the production process) and plantations. The normal trend in prices in the
European Union is in fact generally not very marked and should not be a reason for recording certain
products as work in progress (although this could happen in exceptional cases, cf. 2.172).

When products with a long production cycle which have been recorded as work in progress are harvested
(crop production) or slaughtered (animals), the production process is completed and the work in progress is
transformed into stocks of finished products ready to be sold or used for other purposes. During the
production process, the value to be recorded each year as output under work in progress can be obtained by
distributing the value of the finished product in proportion to the costs incurred each period (SNA 93,
6.96).

Animals: animal production normally requires a period of time, possibly spanning several accounting
periods before the process is completed. From the time of birth, it is possible and also appropriate to record
an entry for each phase of production,
i.e. for each age group of individual animals (the part of the
production process preceding the birth, however, cannot be recorded because it cannot be isolated from the
services consumed in rearing the parent animal).

The production process for draught animals is formally completed at their birth; from that time on, they are
recorded as capital assets. The animals are, of course, not then ready for their intended use, but the
individual variations are such that any selection of a fixed age for all cases would be highly arbitrary. The
moment of birth has been selected for practical reasons, particularly since the subsequent use to which they
will be put is already determined at this stage.

This is not always the case for cattle, pigs, sheep and other livestock which may be reared for breeding
purposes or for slaughter. 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 i.e. they are considered as work in progress and their growth is registered as
output, cf. ESA 95, 3.112). Otherwise, animals are included in stocks as work in progress until they become
for breeding or other
mature and are used themselves as factors of production (e.g. as dairy cows,
productive purposes such as wool production). They are then recorded under fixed capital. Animals which
have been removed from breeding herds before being slaughtered should also be recorded as stocks and not
capital assets.

2.018.

Chick production is given special treatment if it spans two reference periods. Eggs hatching in incubators at
the end of a period are regarded as output of chicks and recorded in the EAA under poultry output (in the
form of work in progress) (cf. 2.048).

2.019.

Wine: output should be recorded as work in progress since its ageing forms part of the production process
and can last over several accounting periods. Similarly, fermenting grape must, which, though no longer raw
must, is not yet wine, is treated at the end of an accounting period in the same way as eggs hatching in
incubators and shown in the EAA as wine in the form of work in progress.

2.020.

Assets cultivated in plantations: goods intended for own-account GFCF (other than livestock) such as
plantations yielding repeat products should be recorded as GFCF at the time of production of the assets
concerned.

(b)

Intermediate consumption

2.021.

Goods and services should be recorded at the time they enter the production process, i.e. when they are
actually consumed and not when they are purchased or taken into storage.

2.022.

The consumption of goods for a given reference period in practice corresponds to purchases or acquisitions
of goods plus the initial stocks and minus the final stocks at the end of the period (1).

(1) Cf. 2.029 to 2.031 for the time at which stocks are recorded.

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2.023.

Services are recorded at the time of purchase. Since services cannot be stored, the time of purchase is also
the time of consumption.

2.024.

The following services are an exception to this rule:

— services connected with the purchase of goods, such as trade and transport services, are recorded as

intermediate consumption at the time the goods in question are consumed (cf. 2.111),

— services considered to be permanent, such as insurance services. These are recorded on a pro-rata basis
at the end of the reference period according to the proportion of the payment due for the year, or
part-year,
the amounts recorded do not necessarily correspond to the
insurance premiums paid within the period concerned.

in question. Accordingly,

(c) Gross fixed capital formation

2.025.

GFCF is recorded at the time of transfer of ownership of the fixed assets concerned to a unit intending to
use them for production purposes. Nevertheless, there are two exceptions to this principle: first, assets
acquired through financial leasing are recorded as if the user became the owner when the goods became
available to him for use (cf. 2.122). Secondly, own-account GFCF is recorded at the time of production of
the assets concerned (except cattle, pigs, sheep and other livestock, the future use of which cannot be clearly
defined since these animals are included in stocks as work in progress, cf. 2.017).

2.026.

Correspondingly, in the case of the establishment of orchards and vineyards (fixed capital goods produced
on own account), if not all the necessary work has been completed by the end of the accounting period, the
value of the materials consumed and services rendered over the reference year is recorded as GFCF at the
end of the period.

2.027.

Land purchases and sales as well as associated costs are recorded at the time of transfer of ownership.
However, the net acquisition of land is not included in GFCF since the land is a non-produced asset. The net
acquisition of land (and other non-produced tangible assets) is recorded in the capital account (acquisitions
of non-financial assets account).

(d) Changes in stocks

2.028.

Changes in stocks correspond to the difference between goods entering and goods withdrawn from stocks
over the reference period.

2.029.

Goods entering stocks are either goods intended for consumption in the production process later (input
stocks), in which case they are recorded at the time of transfer of ownership, or else they are goods from
the industry itself to be put to future use, e.g. by sale or by transfer to the unit's fixed capital (output
stocks), in which case they are recorded as stocks when their production is completed.

2.030.

2.031.

In the case of unfinished products from the industry (recorded as work in progress), the value of the
materials consumed and the services rendered over a reference period is also recorded as stocks at the end
of that period (except for short-cycle standing crops, cf. 2.012; as a result, part of the materials consumed
and services rendered during a reference period will have been consumed without an offsetting increase in
the value of the stocks).

Goods withdrawn from stocks are, in the case of input stocks, goods entering the production process or, in
the case of output stocks, goods leaving the industry to be sold or to serve some other use. In the first case,
the goods are deducted from the industry stocks at the time of their actual intermediate consumption in the
production process; in the second case, they are deducted from the stocks at the time of their sale or other
use.

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B.

OUTPUT

(cf. ESA 95, 3.07 to 3.58)

1.

General comments on the concepts of output in the ESA 95 and EAA

2.032.

In the ESA 95, the term ‘production' denotes the process and the term ‘output' denotes the resulting goods
and services; it is important to bear this distinction clearly in mind. According to the ESA 95 (3.14), output
covers all products manufactured during the accounting period.

2.033.

2.034.

According to the ESA 95, output also includes (i) goods and services supplied by one local KAU to another
belonging to the same institutional unit, (ii) goods produced by one local KAU and still in the stocks at the
end of
the accounting period in which they were produced, whatever use they are intended for
subsequently. However, goods or services produced and consumed during the same accounting period by
the same local KAU are not recorded separately. They are therefore recorded neither as output nor as
intermediate consumption of the unit.

The concept of output used in the EAA which is related to the concept of ‘total output' is based on an
adaptation of the ESA 95, since some agricultural goods and services produced and consumed during the
same accounting period within the same agricultural unit are recorded in the output of overall agricultural
activity. The criteria for identifying these goods and services for inclusion in the agricultural industry output
are set out in 2.055. The difference between the ESA 95 and the method adopted in the EAA is represented
by these elements of intra-unit consumption whose value is included in both output and intermediate
consumption. The value added thus remains identical, whichever method is used.

2.035.

As mentioned in 1.34, this modification of the ESA rule is based on the special nature of the agricultural
activity and the agricultural holding (as a local KAU). Furthermore, it makes it possible to:

— improve the economic analysis of agricultural accounts, especially the definition of technical coefficients

and value added rates (the ratio between output and intermediate consumption),

— improve the comparison of

technical coefficients and value added rates between subbranches of
economic activity and countries. In actual fact, the output consumed within a unit is mainly limited to
a few specific products (such as cereals, protein and oleaginous products, forage crops and milk for
livestock feeding) and rates of intra-unit consumption vary considerably depending on the economic
branch and country.

the necessary

— strengthen consistency between the production, generation of
consistency between transactions

income
accounts:
intermediate
consumption, etc.) and distributive transactions (compensation of employees, subsidies, taxes, rents,
interest, etc.) has been strengthened since the reform of the common agricultural policy in 1992 in that
subsidies (some of which concern products subject to intra-branch consumption) currently play an
important role in the formation and development of agricultural income.

income and entrepreneurial
in products

(output,

2.036.

Although it is not proposed by the ESA 95, the rule adopted in the EAA is provided for by the SNA (cf.
SNA 93, Annex I, 15) because of the special nature of agriculture, and by the FAO methodological
manual (1). Finally, it allows the difference between the measurements of output stemming from the choice
of basic unit (local KAU or unit of homogeneous production) to be reduced substantially.

(1) FAO (1996) System of economic accounts for food and agriculture, United Nations, Rome.

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2.

Output of agricultural activity: quantities

2.037.

In the compilation of the EAA, output is progressively broken down in quantity terms.

Schematic representation of resources and uses of agricultural products

Gross output (1q)

Losses (2q)

Usable output (3q)

Initial
stocks (IS)
(4q)

Total available resources (5q)

Intra-unit
consump-
tion (6q)

Processing
by pro-
ducers (7q)

Own final
consump-
tion (8q)

Total Sales
(9q)

S (*) (10q)

Final stocks (FS) (11q)

FS-IS (**)
(12q)

(*) S = Own-account produced fixed capital goods.
(**) FS-IS = Change in stocks. In the above diagram, the final stocks are assumed to be greater than the initial stocks.

2.038.

The starting point for this progressive calculation is either:

— gross output (1q), or

— usable output (3q),

depending on whether the reference harvest figures include field, harvest and farm losses or not.

(a) Gross output

Gross output: (1q)

2.039.

This is the starting point for countries whose official harvest statistics include losses. In accordance with the
industry concept, all the products of the agricultural activities of agricultural units within the industry (as
mentioned in 1.62 and 1.63) need to be measured. In line with the convention adopted in 1.31 (that the
output of
the secondary agricultural activities of non-agricultural units is non-existent because all
agricultural activities are assumed to be separable and therefore form the main activity of their own local
agricultural KAU), all agricultural output needs to be recorded except that produced by units for which the
agricultural activity represents solely a leisure activity (cf. 1.24).

(b)

Losses

Losses: (2q)

2.040.

This item refers to recurrent losses of goods in inventories (cf. 2.041). These include field, harvesting and
other losses on farms (due to the perishable nature of the products, weather influences, such as frost,
drought, etc.). Losses occurring during the various marketing stages, i.e. during transport from the farm,
during storage with dealers and during processing or treatment in the processing industry should not be
included here. In contrast, products offered for sale by producers but remaining unsold and therefore spoiled
(particularly fruit and vegetables) should also be included here.

Types of losses

2.041.

Following ESA 95, there are three types of losses that can be incurred by producers: recurrent losses in
inventories (ESA 95, 3.117 and 3.118), exceptional losses in inventories (ESA 95, 6.25.e) and catastrophic
losses (ESA 95, 6.22 and 6.23.b).

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Recording of the three types of losses

2.042.

2.043.

2.044.

2.045.

For recording losses of goods in inventories, a distinction needs to be made between recurrent losses, on the
one hand, and exceptional and catastrophic losses, on the other. But the recording of losses also depends on
the method of calculation of output and the type of basic statistical material of each country.

When output is calculated from data on initial and final stocks, sales and possibly other uses (such as
own-account produced fixed capital goods), recurrent losses are already deducted from the changes in
stocks, and recording of them a further time under the item ‘losses' would lead to double-counting. In
contrast, where the calculation of output is not based on stocks data but instead on a well-founded
calculation such as actual birth figures, recurrent losses during production in the reference period concerned
should be recorded, as well as losses of animals imported for rearing or fattening or born during previous
periods.

Exceptional and catastrophic losses of goods in inventories have to be recorded in the accumulation
accounts, namely in the ‘other changes in the volume of assets' account. Output therefore includes the full
value of these losses.

Losses (whether recurrent, exceptional or catastrophic) of fixed assets (such as dairy cows, breeding animals,
etc.) should be recorded in ‘other changes in the volume of assets' account. They have no impact on the
value of output. It should be stressed that losses affecting plantations which are already producing have to
be recorded either as ‘fixed capital consumption' or as ‘other changes in the volume of assets', depending on
the type of loss.

(c) Usable output

Usable output: (3q) = (1q) minus (2q) = gross output minus losses (at the producer stage)

2.046.

This is the first item to be entered by countries whose reference harvest statistics do not include losses. It
constitutes the disposable production of the reference period which will be either marketed, used as a means
of production, processed by the producer himself, consumed in his household, put into storage, or possibly,
used as own-account produced fixed capital goods.

(d)

Initial stocks

Initial stocks: (4q)

2.047.

These constitute the finished or semi-finished stocks of own products existing on the agricultural holdings
(i.e. held by producers) at the beginning of the reference year. Stocks at the different marketing stages and
intervention stocks should therefore not be entered here (cf. 2.201 and following regarding the treatment of
livestock).

2.048.

The initial stocks of ‘poultry' should also include eggs hatching in incubators at the start of the reference
period since they are regarded as semi-finished poultry products (cf. 2.018).

(e) Total available resources

Total available resources: (5q) = usable output plus initial stocks (3q plus 4q)

(f)

Intra-unit consumption

Intra-unit consumption: (6q)

2.049.

Under the heading of intra-unit consumption recorded are products produced within the agricultural unit
(local KAU) and used by the unit as inputs into the production process within the same accounting period.

2.050.

All agricultural products (except livestock; cf. 2.067 and 2.208) sold by an agricultural unit to other
producing agricultural units must be recorded as sales and then as intermediate consumption. These include
goods subjected to treatment and processing and their by-products (e.g. the return of skimmed milk, bran,
oilcake and sugar beet pulp and tops, as well as the return of seeds after treatment).

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Classification of intra-unit consumption

2.051.

Intra-unit consumption can be broken down according to the use of the products concerned:

2.052.

Products consumed within the industry by the same agricultural activity (i.e. the same class of activity, at
NACE Rev. 1 four-digit level):

— seed (for cereals, vegetables, flowers, etc.): reused for the same crop;

— wine grapes and grape must: used in wine production;

— olives: used in olive oil production;

— milk: used in livestock feed.

2.053.

Products consumed within the industry by a different agricultural activity (i.e. a different class of activity, at
NACE Rev. 1 four-digit level).

These are mainly crop products used in animal feed, but also animal by-products used in the production
process of another activity (slurry and manure used as fertilising elements for crop production). Crop
products used in animal feed can be classed according to the degree to which they are normally marketed
(which is estimated in general):

— normally marketable animal feed products: cereals (wheat, rye, barley, oats, maize, sorghum, rice and
other cereal grain); protein crops; potatoes; oilseeds (rape seed, sunflower seed, soya beans and other
oilseeds),

— normally unmarketable animal feed products:

— annual fodder products: root crops (sugar beet, fodder beet, swedes, fodder turnips, fodder carrots,
fodder kale/curly kale and other root crops); fodder maize and other green fodder (green, dried or
preserved),

— perennial fodder products: permanent and temporary fodder products derived from an economic

activity (green, dried or preserved),

— fodder by-products (straw, chaff, plant leaves and ends and other fodder by-products).

Definition of intra-unit consumption to be included in the industry's output

2.054.

Agricultural products undergoing intra-unit consumption are not included in the measurement of the output
of the industry unless they meet certain criteria. The setting of restrictive criteria for recording intra-unit
consumption meets two requirements: first, a methodological one since, after deviating from the letter of the
ESA rule, there was a need to follow it in spirit (by involving two separate activities); secondly, a practical
one, since the criteria to be developed were to serve as a precise and comparable framework for defining
which intra-unit consumption had to be recorded, to make this method of measuring output feasible.

2.055.

These criteria are as follows:

1. The two activities exercised should come under different four-digit levels of NACE Rev. 1 (Division 01:
Agriculture, hunting and related service activities). The application of this criterion thus precludes, for
example, the valuation of milk used for livestock feed and seed produced and used on the same holding
for crop production (during the same accounting period);

2. The agricultural product should have a significant economic value for a significant number of farmers.

3. Data on prices and quantities must be available without too much difficulty. This criterion is difficult to

meet for some unmarketable products.

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2.056.

In line with the definition of the selection criteria for including intra-unit consumption products in the
measurement of output (cf. 2.055), only crop products used in animal feed (marketable or not) are to be
recorded in the agricultural output of the industry.

2.057.

When these products are recorded in the industry's output, they must also be recorded as intermediate
consumption, thereby respecting the principle that total quantities produced and then used for a different
production activity during the reference year are taken into account (cf. 2.055). When the change from
output
then the
corresponding quantities of output should be recorded as ‘final stocks' of the product concerned during the
reference year.

to intermediate consumption takes

than the reference year

in question,

longer

2.058.

Animal by-products are excluded from intra-unit consumption because of
unavailability of data on quantities and especially prices.

the practical difficulties of

(g)

Processing by producers

Processing by producers: (7q)

2.059.

2.060.

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. Products resulting from processing by the producer will naturally be
indicated in the output of the ‘agriculture' subsector in the national accounts (cf. 1.04 and 1.05).

Where these processing activities are inseparable non-agricultural activities, the product of these processing
activities is recorded in the value of the output of the agricultural industry (cf. 1.25). Basic agricultural
products used as intermediate consumption by these processing activities are not recorded as either output
or intermediate consumption. This rule stems from the fact that the two activities (the production of
agricultural products and the processing of such products) cannot be distinguished on the basis of
accounting documents. Accordingly, the costs of these two types of activity are entered together and their
output is assessed as the output of processed products.

(h) Own final consumption

Own final consumption: (8q)

2.061.

This includes:

(i) products consumed by the farmers' households which produced them;

(ii) products stemming from the agricultural unit (holding) and used for payment in kind in the form of

remuneration paid to holding workers or exchanged for other goods.

2.062.

Agricultural products processed by the agricultural unit in a separable way (i.e. giving rise to the formation
of a local non-agricultural KAU) and consumed by farmers' households are recorded in the output of the
‘Manufacture of food products, beverages and tobacco' industries (subsection DA of NACE Rev. 1), as own
final consumption. By contrast, agricultural household consumption of agricultural products processed in an
inseparable way (i.e. the output of inseparable non-agricultural processing activities), is recorded as own final
consumption of these activities (cf. 2.080) and included in the output of the agricultural industry.

2.063.

The imputed rental value of the owner-occupied housing unit is not recorded here but in the branch ‘letting
of own property' (Class 70.20 of NACE Rev. 1). Letting of accommodation is a non-agricultural activity
which is always considered to be separable from agricultural activity.

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(i)

Sales

Sales: (9q)

2.064.

This heading covers sales of agricultural products made by agricultural units to other units (agricultural or
those of other branches), including sales to storage and intervention centres, with the exception of disposals
of
is broken down into domestic sales outside the industry, domestic sales to other
It
agricultural units and sales abroad.

fixed assets.

2.065.

Consequently, for a given unit, sales correspond to the turnover obtained from the marketing of its output.
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. Animals classed as fixed assets and taken out of the productive
herd are transferred into stocks before their sale, but the sales of these animals (slaughterings or exports)
appear in the accounts as destocking, seen only in the capital account. The corresponding output had
already been imputed as a part of own-account produced fixed capital goods (1) then recorded in the
production account.

2.066.

Livestock considered to be stocks: the disposal of livestock considered to be stocks to another holding
constitutes a sale in accordance with the definition given in 2.064. This sale may be offset by a removal
from stocks if the livestock is recorded as stocks at the start of the reference period (otherwise, only sales
are recorded).

2.067.

The acquisition of livestock is a stock entry if the products are not resold during the reference period.
Acquired livestock, however, cannot be treated as intermediate consumption because, by definition,
intermediate consumption goods are destined to disappear (or at least undergo substantial transformation)
during the production process. These animals are regarded as work in progress since the livestock
production process is not fully terminated (the production process finishes at the time of slaughter).
Acquisitions are therefore recorded as stock entries of work (products) in progress and thus recorded as
‘negative' sales and not as intermediate consumption. In the case of trading between resident holdings, sales
and the corresponding purchases offset each other (except for the costs of transferring ownership) (2). In
view of this special treatment of trade in live animals between agricultural units, there is no intermediate
consumption under ‘livestock and animal products' (3).

2.068.

Livestock classed as fixed assets: trade in fixed-asset livestock between agricultural units is not recorded in
sales as defined above but as trade in assets (recorded in the capital account as GFCF of agriculture). In the
case of trading between resident holdings, sales and corresponding purchases offset each other (except for
the transfer costs).

2.069.

2.070.

Recording of imports of live animals (not intended for immediate slaughter): as in the case of trade between
resident holdings, livestock treated as stocks (other than animals for immediate slaughter) and imported
during the reference period by agricultural units are recorded as stock entries of work in progress and are
therefore deducted from sales. On the other hand, livestock classed as fixed assets (such as breeding animals)
and imported as such, should not be deducted from sales.

Nevertheless, as it is often difficult, in practice, to make relevant distinctions between the different categories
of animals on the basis of available sources of EU data (between animals classed as fixed assets and those
classed as stocks), all imports are considered to be of animals intended for building up stocks and the value
of all imported animals (except those intended for immediate slaughter) is deducted from the value of sales.
This method of recording guarantees treatment of external trade in live animals similar to that adopted for
calculating gross indigenous production in animal production statistics.

(1) Output for these animals is calculated by adding own-account produced fixed capital goods (= entries less disposals of assets) and

sales (= disposals).

(2) When valuing trade, the costs involved in the transfer of ownership (trade margins and transport costs) are included in the value of
the acquisition. In the case of trading between resident holdings, sales and purchases offset each other except for the transfer costs
which are treated, in the calculation of output, as a ‘negative sale'.

(3) An identical treatment applies to other agricultural products having the character of stocks.

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(j) Own-account produced fixed capital goods

Own-account produced fixed capital goods: (10q)

2.071.

These only include:

— work done by agricultural units (e.g. use of labour, machines and other means of production, including
planting stock) for the own-account establishment of plantations such as orchards, vineyards, soft fruit
plantations and hop-fields. In general, own-account work on planting orchards and vineyards, etc., is
made up of a large number of individual work operations which cannot be added up into specific
quantities,

— animals produced in agricultural units and transferred to their fixed capital (cf. 2.161). These are animals
reared for the output which they supply on a regular basis (mainly breeding livestock, dairy livestock,
draught animals, sheep and other animals reared for their wool; cf. 2.202).

(k)

Final stocks

Final stocks: (11q)

2.072.

These are stocks of finished products or work in progress on the holdings of the industry (i.e. held by
producers) at the end of the reference year. Stocks at different marketing stages (especially reserves held by
dealers and processing firms) as well as intervention stocks should not be listed here.

2.073.

Products which are only temporarily stocked and are consumed in a later period within the industry (e.g.
cereals for feed, seed and planting stock, etc) should also be entered here since the final use of the product is
not known at the time of their entry in stocks.

(l) Total uses

Total uses: (12q) (not including intra-unit consumption) = (7q) + (8q) + (9q) + (10q) + (11q) = processing by
producers plus own final consumption plus sales plus own-account produced fixed capital goods plus final
stocks.

2.074.

This entry is the sum of columns 7q to 11q.

(m) Change in stocks

Change in stocks: (12q) = (11q) minus (4q) = additions to stocks (A) minus withdrawals from stocks (W)

2.075.

The change in stocks in the industry (excluding stocks at the various marketing stages) during the reference
year is measured by calculating the difference between stock entries and withdrawals, or the difference
between final and initial stocks. In the latter case other changes in volume and holding gains (net of losses)
are to be deducted in the calculation of values (cf. 2.179 and following).

(n) Output of agricultural activities

Output of agricultural activities = (6q, animal feedingstuffs) + (7q) + (8q) + (9q) + (10q) + (12q)

2.076.

In accordance with the concept of output and the rules for recording intra-unit consumption (cf. 2.049 and
following), processing of agricultural products (cf. 2.059 and 2.060), and own final consumption (cf. 2.061,
2.062, 2.063), the output of agricultural activities can be depicted as follows:

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Resources

Uses

Agricultural output of
the agricultural industry

Gross output

Sales (total, excluding trade in animals between
agricultural holdings)

– Losses

Change in stocks (with producers)

Own-account produced fixed capital goods
(plantations yielding repeat products, productive
animals)

Own final consumption (of agricultural products)

= Usable output

Processing by producers (of agricultural products,
separable activities)

Intra-unit consumption:

— for the same activity: (seeds, milk for livestock
feed, wine grapes, olives for olive oil, hatching
eggs)

— for a separate activity:

crop products used in animal feed (cereals,
oilseeds, fodder crops, marketable or not, etc.)

animal by-products used in crop production
(slurry, manure)

X

X

X

X

X

X

2.077.

Compared with the former ‘final output' concept on which the EAA used to be based, the new 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).

3.

Output of inseperable non-agricultural secondary activities

2.078.

A distinction is made between two types of ‘inseparable non-agricultural secondary activities' (cf. 1.29):

— ‘processing of agricultural products': this group covers activities which are an extension of agricultural
activity and in which agricultural products are employed. The processing of agricultural products is the
typical activity of this first group,

— ‘other inseparable non-agricultural secondary activities':

this group covers activities which use the

agricultural holding and its means of agricultural production. It is less uniform than the first group.

2.079.

In general, these activities include a variety of products (goods and services) whose quantities cannot be
added together.

2.080.

The product of these activities is either intended for sale, barter, payment in kind, own final consumption
(cf. 2.062) or kept in stocks.

4.

Output of the agricultural industry

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).

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5.

Valuation of output

2.082.

2.083.

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 payable on that unit as a
consequence of its production or sale (i.e. taxes on products) plus any subsidy receivable on that unit as a
consequence of its production or sale (i.e. subsidies on products). The basic price excludes any transport
charges invoiced separately by the producer. However, it includes any transport margins charged by the
producer on the same invoice, even if they are included as a separate item on the invoice (cf. ESA 95, 3.48).

Components of output such as sales, payments in kind, additions to stocks and intra-unit consumed
products should be valued at the basic price. Similarly, output for own final use (i.e. own-account fixed
capital goods and own final consumption) should be valued at the basic price of similar products sold on
the market. Work in progress and additions to it are valued proportionally to the current basic price of the
finished product. If the latter has to be assessed in advance, the calculation should be based on the actual
costs incurred plus an amount corresponding to the anticipated operating surplus or mixed income.

2.084.

When establishing the EAA according to the ‘net' recording system (cf. 3.033 and 3.035 to 3.043), the VAT
invoiced by the producer is not included when establishing the basic price.

2.085.

2.086.

2.087.

The price obtained by the producer corresponds to the producer price (not including invoiced VAT) as
defined in the SNA 93 (i.e. the ex-farm price). The basic price can be obtained from the producer price by
adding subsidies less taxes (other than VAT) on products. When problems of allocating a tax or subsidy on
products to a specific product make it difficult to calculate the basic price, output can be calculated direct at
the basic price. In this case it is obtained direct from the value of the producer price (exclusive of invoiced
VAT), minus the value of taxes on products (other than VAT) and plus the value of subsidies on products.

The valuation of output at the basic price makes it necessary to distinguish between taxes (other than VAT)
on products and subsidies on products (cf. 3.027 and 3.053), on the one hand, and other taxes and
subsidies on production (cf. 3.044 and 3.058), on the other. Taxes and subsidies on products are not
recorded in the generation of income account of the industry (this account only includes other taxes on
production and other subsidies on production, cf. 3.055).

The price of a given item received by producers is not necessarily always the same; it may vary, inter alia,
according to the type of delivery. For example, the structure, in terms of quality, of goods exported directly
by the producer can be different from the structure of the sales intended for national consumption or of
domestic sales to other agricultural units. These goods would consequently have a different price. It should
be noted that when a producing unit directly exports its output, the receipt or payment of monetary
compensatory amounts for the exports must be taken into account in the EAA.

2.088.

These general principles of valuation require specific applications for certain products such as seasonal
products and wine. These are explained in the section treating the valuation of changes in stocks (cf. 2.185
to 2.200).

C.

INTERMEDIATE CONSUMPTION

(cf. ESA 95, 3.69 to 3.73)

1.

Definition

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 95, 3.69). 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).

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

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agricultural fixed assets such as plantations and productive animals. The acquisition of non-produced assets
such as land is likewise excluded from intermediate consumption. Tools and other durable goods (saws,
hammers, screwdrivers, etc.) are recorded as intermediate consumption when their purchase value does not
exceed the EUR 500 threshold (at 1995 prices) per item (or for total purchases,
if obtained in large
quantities). Beyond this threshold, purchases of these durable capital goods are recorded in GFCF (cf. ESA
95, 3.70).

Intermediate consumption includes goods and services consumed in ancillary activities (e.g. administration
of purchases and sales, marketing, accounting, transport, storage, maintenance, etc.). The consumption of
these goods and services should not be distinguished from that of goods and services consumed in the
course of the main (or secondary) activity of a local KAU.

Intermediate consumption also includes all expenditure on goods and services which, while benefiting
employees, are nonetheless mainly for the benefit of the employer (1) (e.g. reimbursement of employees for
travel, separation, removal and entertainment expenses incurred in the course of their duties; expenditure on
providing amenities at the workplace).

2.091.

2.092.

2.093.

In view of the adoption of the concept of industry and local KAU as the basic unit of the EAA, intermediate
consumption of the industry includes goods and services provided by one local KAU to another local KAU
(for production purposes), even if these units belong to the same institutional unit.

2.094.

Trade in livestock, which is similar to stocks of work in progress (such as piglets and eggs for hatching, cf.
1.77) 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).

2.095.

2.096.

Goods and services produced and consumed within the same agricultural unit (i.e. produced and used in the
same reference period for agricultural production purposes) are not recorded as intermediate consumption
unless they also appear in the output of the industry (i.e. crop products used in animal feed, cf. 2.049 to
2.057; 2.060).

It should be noted that in accordance with the provisional convention of the ESA 95, all indirectly measured
financial intermediation services (FISIM) supplied by resident producers are recorded in the intermediate
consumption of the overall economy. In the event that it is decided in the ESA 95 to make a breakdown of
indirectly measured financial intermediation services by user sector and user industry, the FISIM used by the
agricultural industry should be recorded as intermediate consumption of the agricultural industry (cf. ESA
95, Annex I).

2.

Elements of intermediate consumption

(a)

Seeds and planting stock

2.097.

This heading covers the total consumption of bought-in domestic and imported seed and planting stock for
current production and maintaining stocks in vineyards, orchards, and Christmas tree plantations. It includes
in particular direct purchases of seed and planting stock from other farmers. However, seed produced and
consumed within the same unit in the same reference period is not recorded under this heading (cf. 2.052).

2.098.

It should be noted that intermediate consumption of field crop and vegetable seed mainly corresponds to (i)
first generation seed purchased by producers for propagation and (ii) certified seed bought by agricultural
holders for crop production.

(b)

Energy; lubricants

2.099.

This heading covers electricity, gas and all other solid and liquid fuels and propellants. It should be noted
that only the consumption of energy on agricultural holdings is to be shown, and not consumption in
farmers' households.

(1) This is generally the case if production is promoted, and in some cases only made possible, by this expenditure by the employer.

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(c)

Fertilisers and soil improvers

2.100.

Soil improvers include, for example, lime, peat, sludge, sand and synthetic foams.

(d)

Plant protection products and pesticides

2.101.

These include herbicides, fungicides, pesticides and other similar inorganic and organic substances (e.g.
poisoned bait).

(e) Veterinary expenses

2.102.

Medicines which are invoiced separately from the veterinary surgeon's fee should be recorded here
(medicines administered directly by the veterinary surgeon are recorded with his fee) and veterinary costs.

(f) Animal feedingstuffs

2.103.

This heading covers all bought-in domestic and imported feedingstuffs, whether processed or not, including
those obtained direct from other farmers. Crop products used in animal feed produced and used in the same
reference period on the same agricultural holding are also recorded and entered under a subheading of the
‘animal feedingstuffs' heading as intra-unit consumption (cf. 2.057). They are also recorded in output.

2.104.

The costs incurred in the preparation and preservation of feedingstuffs (e.g. energy costs and costs for
chemical preservatives, etc.) must be broken down by type of cost and not combined with the feedingstuffs
themselves.

(g) Maintenance of materials

2.105.

This heading includes:

— purchases of goods and services for maintenance (i.e. regular replacement of individual damaged or

broken parts) and repairs required to keep capital goods in usable condition (cf. 2.127 to 2.129),

— purchases of crop protection equipment (excluding preparations for plant protection and pest control,

cf. 2.101), such as detonators, anti-hail protection, anti-frost smoke, etc.

(h) Maintenance of buildings

2.106.

This heading covers purchases of materials (cement, bricks, etc.), labour costs or overall costs incurred by
farmers for maintaining agricultural buildings or other structures (except housing structures) (cf. 2.127 to
2.129).

(i) Agricultural services

2.107.

These agricultural services (which constitute the hire of machines and equipment with the corresponding
labour) are an integral part of agriculture (cf. 1.82 to 1.91) and are recorded as intermediate consumption
and also entered under ‘output'.

(j) Other goods and services

2.108.

These other goods and services include:

(a)

rent 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);

(b)

fees for workers' medical examinations;

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(c)

fees for agricultural consultants, surveyors, accountants, tax consultants, lawyers, etc.;

(d) purchases of services of scientific research, market research and advertising, expenditure on staff

training and similar services;

(e) expenditure on transport services: this includes reimbursement of employees for travel, separation and
removal costs incurred in the course of their duties, primarily for the employer's benefit, and the
amounts paid by the employer to independent enterprises which provide transport for employees
(except for transport between home and the place of work; cf. 2.092, 2.109(b) and 3.016) as well as the
transport of goods for fairs and exhibitions. If, on the other hand, transport is provided by the staff and
the employer's own transport, the costs should be recorded under appropriate headings.

Since purchases of goods are to be valued at the purchaser price and sales at the basic price (cf. 2.110
and 2.111, 2.082), the cost of transport of goods is not normally indicated separately. Transport costs
included in sales are considered to be invoiced separately. In the case where the producer engages a
third party to transport the goods to the purchaser, the transport costs appear as neither intermediate
consumption, nor output in the EAA. In the case where the producer transports the goods himself, this
is considered a non-agricultural activity, for which the costs should be recorded appropriately, if the
activity is inseparable. Finally,
this heading includes expenditure incurred under non-agricultural
secondary activities concerning transport, trade and warehousing for third parties;

(f) postal and telecommunications costs;

(g)

remuneration for services contained in gross premiums of insurance taken out to provide the enterprise
with coverage for risks such as the loss of livestock, damage by hail, frost, fire and gales, etc. The
remainder, i.e. the net premium, is the component of the gross premium paid which is available to
insurance companies for settling claims.

An accurate breakdown of the gross premiums into the two components can only be done for the
national economy as a whole, as is done for the national accounts. The allocation of the service
component between production branches is generally done using adequate breakdown keys,
in
connection with the construction of input-output tables. Reference should therefore be made to national
accounts when completing this item in the EAA (for the recording of subsidies related to insurance
services see 3.063, footnote 48);

(h) stud fees;

(i) billed bank charges (but not interest for bank loans) in all cases and indirectly measured financial
intermediation services only when these are broken down by user sector/user industry (cf. 2.096;
3.079);

(j)

subscriptions,
chambers of commerce and agricultural trade unions;

fees for membership of professional associations such as chambers of agriculture,

(k)

subscriptions to agricultural cooperatives;

(l)

costs of dairy tests, shows and entries in pedigree registers;

(m) expenditure on artificial insemination and castration;

(n) payments for the use of non-produced intangible assets such as patented assets, trade marks, copyright,
milk quotas or other production rights, etc. Purchases of these non-produced intangible assets, on the
other hand, are recorded in the capital account;

(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 95, 4.80(d));

(p) purchases of small tools, working clothing, spare parts and durable equipment of low value (less than

EUR 500 at 1995 prices) or with a normal service life of less than one year (cf. 2.125);

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(q) purchases of tools, equipment and working clothing by employees with a special allowance provided for

this purpose or withheld from their wages and salaries by contractual agreements.

(k)

Items not included in intermediate consumption

2.109.

Intermediate consumption, does not include:

(a) goods and market services which production units provide to their employees at no cost or at a reduced
rate, in so far as this expenditure is clearly and primarily for the benefit of the employees. The value of
these goods and services forms part of compensation of employees (cf. 3.018);

(b)

travel allowances paid by the employer in cash to his employees; these are regarded as an element of
compensation of employees (the employee then uses this money to pay for transport between his home
and place of work)
(cf. 3.018(c)). Likewise, payments made by the employer direct to a transport
enterprise for the collective transport of workers (for travel between home and the place of work) count
as compensation of employees. These services such as transport from home to work or parking facilities
have some of the characteristics of intermediate consumption. 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. SNA 93, 7.41);

(c) purchases of farm buildings and movable property (i.e. capital goods whose normal period of use is

over one year); these acquisitions are considered to be GFCF (cf. 2.162);

(d)

financial leasing payments made for the use of fixed assets for agriculture do not constitute purchases of
services but transactions to be entered partly under interest (in the entrepreneurial income account) and
partly as reimbursement of the capital (in the financial account) (cf. 2.122);

(e) expenditure on restoration (for maintenance, cf. 2.105 and 2.106) of fixed capital goods (restoration of
roofs, gutters, electrical and heating installations
in farm buildings) and expenditure on the
improvement and repair of capital goods, which are intended to extend their normal service life or
increase their productivity; this expenditure is regarded as GFCF since it goes well beyond what is
necessary to maintain fixed assets in working order (cf. 2.127 to 2.129);

(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 95, 3.111). This is regarded as forming part of GFCF (cf. 2.132
and 2.133);

(g) goods and services produced and consumed within the same unit in the same reference period (except
for certain products, cf. 2.056, 2.103, 2.107). These goods and services are not recorded as output
either;

(h)

rent paid for the use of land listed under ‘rent' (cf. 3.080);

(i)

expenditure on the use of dwellings; this is final consumption (accounts for households) and is not
shown in the EAA;

(j) wear of capital goods, which comes under consumption of fixed capital (cf. 3.099);

(k) net insurance premiums (cf. 2.108(g));

(l)

insurance premiums for personal injury and contributions to sickness and working accident insurance
schemes;
these are divided between distributive transactions and final consumption (accounts for
households);

(m) water rates paid purely as a tax and unrelated to the quantities of water consumed;

(n)

the purchase of services from public bodies under certain circumstances (cf. 3.048(e)).

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3.

Valuation of intermediate consumption

2.110.

Products used for intermediate consumption should be valued at the purchaser prices for similar goods and
services applicable at the time of their insertion in the production process.

2.111.

2.112.

The purchaser price is the price the purchaser actually pays for the products, at the time of purchase. It
includes taxes less subsidies on products (but excluding deductible taxes like VAT on the products). 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 95, 3.06).

Unlike in other branches of the economy, subsidies relating to intermediate consumption are important in
agriculture. Their purpose is to reduce the cost of intermediate consumption. When these subsidies are
classed as subsidies on (non-agricultural) products, they reduce the value of intermediate consumption,
which is recorded at the purchaser price (whether they are paid to intermediate consumption suppliers or
agricultural producers).

2.113.

If goods or services are imported direct by production units, the purchaser price used should include all
import duties, non-deductible VAT, and monetary compensatory amounts (receipts or payments).

2.114.

Intermediate consumption is valued exclusive of deductible VAT. Deductible VAT is calculated for all
purchases made by agricultural units, whether subject to VAT under the standard or the flat-rate system. The
difference between the deductible VAT which agricultural units under the flat-rate system could have
deducted, if they had been subject to the standard VAT scheme, and the flat-rate compensation represents
VAT over-compensation or under-compensation. This is recorded under other subsidies on production or
other taxes on production respectively (cf. 3.041 and 3.042).

D.

GROSS CAPITAL FORMATION

(cf. ESA 95 3.100 to 3.116)

2.115.

Gross capital formation comprises:

— GFCF,

— changes in stocks,

— acquisitions less disposals of items of value.

2.116.

Since the EAA are accounts drawn up in order to depict flows generated by units within their production
function, only GFCF and changes in stocks are dealt with below.

2.117.

Gross capital formation means gross of fixed capital consumption. Net capital formation is obtained by
deducting fixed capital consumption 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).

1.

GFCF

(a) Definition

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 stemming from the productive activity of producer or
institutional units. Fixed assets are tangible or intangible assets produced as outputs from production
processes that are themselves used repeatedly, or continuously, in other production processes for more than
one year (cf. ESA 95, 3.102).

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(b) Considerations for the national economy as a whole

2.119.

2.120.

The GFCF of a national economy is understood to mean the proportion of the gross domestic product
(GDP) produced during the reference year which is intended to be used for a period of more than one year
as a means of production in the production process (as distinct from the final consumption of private or
public households, exports and changes in stocks). Consequently, goods which, although produced sometime
in the past and therefore included in the national product, are put to a different use in the reference period,
are not included in the GFCF of a national economy. A change of use or ownership does not imply that
such goods become part of the domestic product a second time and in no way changes the total mass of
fixed capital of the national economy as a whole. The inclusion of such transactions is, however, important
in analyses by homogenous branch, industry or sector.

the national economy. The commonest

If a change in ownership results in a different use (i.e. no longer as capital assets), there is a reduction in the
capital assets of
this are motor vehicles which
households buy secondhand from producer units, shipping vessels which are sold secondhand to other
countries, and also capital goods which have been broken up and put to some intermediate use. Since the
new use in these cases forms part of the national product (final consumption, export or any other use
depending on the type of goods produced from the scrap), the GFCF must be reduced as a result. This is
why the ESA 95 uses the concept of net acquisitions of existing produced goods for calculating GFCF: this
heading allows capital disposals, i.e. reductions in fixed capital to be taken into account.

instances of

2.121.

It is possible for net acquisitions of existing goods to be positive, in other words, to represent increases in
the capital assets of the economy as a whole. This is the case, for example, when secondhand vehicles which
have already been listed as final consumption in the national product are bought for use as fixed capital.
Since sales of existing investment goods exceed purchases, net acquisitions are negative for the national
economy as a whole. If, however, the GFCF is broken down by user branch, net acquisitions can be positive
for some branches.

(c) Transfer of ownership criterion

2.122.

2.123.

The determination of the GFCF of sectors or branches of the economy is based on the criterion of transfer
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 he is a
producer) and not of the lessor, who keeps a financial asset equivalent to a notional claim (cf. 2.109(d) and
Annex II of the ESA 95 on the distinction between the different forms of hire of durable goods) (1).

Application of the criterion of transfer of ownership depends on the statistical system on the basis of which
the GFCF is calculated. If it is data from purchasers, there will in theory be no difficulties (apart from the
practical difficulty of recording all the investors). Often, however, (and this is particularly true of agriculture),
it is information from producers of capital goods on their output or sales that is used as the basis for
calculations. Apart from those cases where it is not clear whether a product belongs under the capital goods
heading or not, it is also difficult to determine the actual purchaser since the nature of the capital goods
gives only an indication of who the user is. In agriculture, therefore, there is the risk that capital goods will
also be recorded which have not been acquired by agricultural holdings but by commercial enterprises for
the purpose of hiring without operating staff.

(d) Acquisitions

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

(1) Leasing differs from simple hiring in that the risks and advantages of ownership in leasing are transferred de facto, but not de jure,
from the lessor to the lessee (the user of the asset). The ESA takes account of the economic situation of leasing by considering, for
its recording, that the lessor provides a credit to the lessee which allows the latter to purchase a durable good and to become its de
facto owner. Leasing is thus regarded as a special form of investment financing.

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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 95, 3.103(a)).

2.125.

It should be remembered that in order to qualify for recording as GFCF, acquired durable goods have to
have a unit value (or total value if they have been obtained in large quantities) of over EUR 500 at 1995
prices (cf. 2.090).

2.126.

2.127.

2.128.

The same applies to the purchase or production for own account of a set of durable goods needed for an
initial installation. The stock of bottles of a brewery or wine-producing enterprise (excluding non-returnable
bottles) for example, constitutes a mass of goods to be recorded as assets, although the value of each bottle
is negligible. The same applies to seats and tables, crockery and cutlery of restaurants and the tools of an
enterprise. The initial installation of these goods constitutes fixed capital formation: nevertheless, no fixed
capital consumption is calculated in these cases because it is assumed that once this installation has been
made, it will always keep the same value as a result of constant purchases of replacement items to make up
for those which have been lost or become unusable. Current replacement purchases are recorded as
intermediate consumption. This rule, which in theory is clear, is sometimes difficult to apply in practice as
statistical data on production or sales do not give a clear idea of whether the goods in question have been
bought for an initial installation or to replace existing items.

Goods and services incorporated into existing fixed capital goods for the purpose of improving them,
rebuilding or reconstructing them, prolonging their useful life or increasing their productivity, are recorded
with the capital goods into which they are incorporated. This work is considered to be acquisition of new
fixed assets. In principle, this heading includes all goods and services incorporated into fixed capital goods
which go well beyond the scope of current maintenance and repair. Current maintenance is taken to mean
all services which, in comparison with the normal lifetime of the capital goods, must be repeatedly provided
at relatively short intervals in order to maintain the goods in serviceable condition. It covers, for example,
the replacement of fast-wearing components of capital goods, external and internal painting, etc.

The size of the sums spent on this maintenance is in no way a criterion for determining whether a service
creates an asset or represents current maintenance, since in the case of high-value capital
items, even
services for current maintenance may be very costly (cf. 2.109(e)). Strictly speaking, the allocation of services
performed on existing fixed capital goods either to the ‘current maintenance' or ‘GFCF' category should be
determined by the interval which will elapse before the service has to be repeated, e.g. the replacement of
parts which normally wear out within one year, such as the tyres of a truck, counts as current maintenance,
whereas the replacement of an engine constitutes fixed capital formation, not because the value is higher
but because an engine does not normally have to be replaced annually but only after several years.
Recording a service of this kind under the assets heading (i.e. treatment as fixed capital formation and not
as current maintenance) makes it possible to distribute the value uniformly over the entire period of use
through the device of fixed capital consumption.

2.129.

The SNA 93 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. SNA 93, 10.49).

(e) Disposals

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 95, 3.103(b) and 3.104). 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. SNA 93, 10.35 and 10.39). 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.

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(f) Valuation of gross fixed capital formation

2.131.

GFCF is valued at purchaser prices (including the costs of transferring ownership, installation and other
transfer charges) or, when produced on own account, it is valued at the basic prices of similar fixed assets
(the basic price can be obtained from the sum of the costs incurred). Disposals should be recorded at the
sales price, which should correspond to the purchaser price less the costs incurred in the transfer of
ownership of assets, installation and transfer charges (cf. 2.130).

(g) Costs of transfer of ownership

2.132.

2.133.

The costs of transfer of ownership of assets constitute GFCF by the acquirer, even if some of the costs are
paid by the seller. They comprise the expenditure incurred in order to take possession of the assets
(installation and transport charges, etc.), fees and commissions of intermediaries (solicitors, experts, etc.) and
taxes to be paid on intermediary services used in the transfer of ownership of assets.

The GFCF of the acquirer comprises the value of the goods acquired (exclusive of transfer costs) plus the
total transfer costs involved in the acquisition. Conversely, the GFCF of the seller only includes the value of
the goods sold (exclusive of transfer costs) (1). In the case of non-produced assets (such as land, or patented
assets such as production rights) which are not included in GFCF, these costs must be separated from the
acquisition/disposal of these assets and recorded under a different heading as GFCF of the acquirer.

(h) GFCF and change in the value of assets

2.134.

The balance sheet, which provides an itemised list of the values of the assets held and commitments entered
into, provides information on the different components of the change in the value of assets. As defined in
the balance sheets (cf. ESA 95, 7.08) the change in the value of an asset between the end and beginning of
an accounting period can be described as follows:

Value of assets at the end of
the accounting period

– Value of assets at the
beginning of the
accounting period =

GFCF

– Consumption of fixed capital

+ Other volume changes

+ Nominal holding gains (net of losses)

2.135.

2.136.

Nominal holding gains (net of losses) correspond to holding gains (net of losses) accumulated during the
period considered and resulting from a change in the price of the asset whose economic and physical
(quantitative and qualitative) characteristics remain unchanged over the period concerned. These changes are
recorded in the revaluation account.

The other changes in the volume of assets are flows which make it possible to record the discovery,
deterioration or depletion of natural assets as well as the consequences of exceptional events which may
modify the benefit drawn from assets. As far as the assets of the agricultural
industry are concerned,
changes in volume may be put into three main categories:

— exceptional losses or catastrophic losses (earthquakes, wars, drought, epidemics, etc.),

— the margin between the anticipated depreciation of the assets (measured by the consumption of fixed
capital) and the depreciation actually determined (due to unforeseen obsolescence, damage, deterioration
and accidental events leading to higher depreciation than anticipated),

(1) As a direct consequence of this method, the costs associated with trade in ‘fixed assets' livestock between units should be recorded

under the GFCF of the acquirer.

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— 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 1) or agricultural
buildings which have been altered for private or other economic use.

2.137.

GFCF and consumption of fixed capital (cf. 3.098 to 3.106) are therefore not the only elements to take into
account when analysing the change in the value of assets.

(i)

Elements of GFCF

2.138.

The ESA 95 distinguishes between four types of elements which should be recorded as GFCF (cf. ESA 95,
3.105):

— acquisitions less disposals of new or existing tangible fixed assets (dwellings, other buildings and

structures, machines and equipment, cultivated assets),

— acquisitions less disposals of new or existing intangible fixed assets (mineral exploration, computer

software, artists' and other works),

— major improvements to tangible non-produced assets, including land,

— costs associated with the transfer of ownership of non-produced assets such as land and patented assets.

2.139.

For the EAA, a distinction is made between five types of elements of GFCF:

— plantations yielding repeat products,

— livestock,

— tangible and intangible fixed 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.),

— land improvement,

— costs associated with the transfer of ownership of non-produced assets such as land and production

rights.

2.140.

GFCF in agricultural assets concerns two types of assets (plantations and animals) which are used repeatedly
and continually for the production of products such as fruit, rubber, milk, etc.: fruit trees, vines, hop fields,
soft fruit plantations and asparagus beds. Christmas tree plantations (which only provide a finished product
once) are not fixed assets, just as cereals and vegetables are not. Animals which serve as fixed assets include,
for example, breeding animals, dairy cattle, sheep reared for their wool and draught animals (animals for
slaughter, including poultry, are not fixed assets).

(j)

Plantations

2.141.

According to ESA 95 (3.103) 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.

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2.142.

This definition of GFCF corresponds to:

— expenditure on new plantations (new or renewed) during the accounting period, including amounts
spent on maintaining young plantations during the accounting period (during the first three years),

— the increase in the intrinsic value of plantations up to their maturity,

— the costs associated with transfer of ownership in exchanges, between agricultural units, of plantations

which have reached maturity.

2.143.

The first two elements of GFCF in plantations represent own-account agricultural output of GFCF.

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 before the
end of their normal growing life. 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.

2.145.

Consequently, in the majority of cases (i.e. except in the second case set out in 2.144), the value of the
grubbings must not be deducted from the value of the investments in plantations. Investments intended for
renewing existing plantations should be treated as investments and not as routine maintenance costs.

2.146.

The treatment of grubbings of plantations should be analysed in relation to the calculation of consumption
of fixed capital. In accordance with the ESA 95, there is consumption of fixed capital
in the case of
plantations corresponding to the depreciation of
the plantations when they have reached maturity.
Plantation grubbings (2) should therefore be interpreted as follows:

— grubbings carried out at the end of the normal growing life of plantations correspond to plantations
withdrawn from assets. These grubbings are taken into account in the consumption of fixed capital
throughout the productive life of the plantations,

— ‘exceptional' grubbings are grubbings carried out before the end of

the normal growing life of
plantations for various (economic, strategic, etc.) reasons. They should be interpreted as the difference
between the real (effective) depreciation and normal depreciation measured by the consumption of fixed
capital. This depreciation surplus should be recorded in the ‘other changes in volume of assets' account
(accumulation accounts) which is not included in EAA.

2.147.

The change in the value of plantations over the accounting period therefore comprises the following four
components (cf. 2.134):

— GFCF, which corresponds to the difference in value between acquisitions and disposals during the

reference period, as defined in 2.141 to 2.145,

— consumption of fixed capital, which measures the depreciation of plantations, as defined in 2.146,

— other changes in ‘volume' which take account of the effects of unforeseen events on plantations (such as
exceptional grubbings) and which are recorded in the ‘other changes in volume of assets' account (cf.
the definition in 2.136 and 2.146),

— holding gains (net of losses), which measure the changes in value due to changes in price during the
accounting period and which are recorded in the revaluation account of the ESA 95 accumulation
accounts (cf. the definition in 2.135).

(1) In this case, the activity of felling the plantation and selling the timber come under forestry activity.
(2) It should be noted that the cost of the grubbing service which may be invoiced by a grubbing company constitutes intermediate

consumption of a service.

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2.148.

Investments in cultivated crop assets, i.e. plantations, are 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).

In the case of own-account plantation output, the following should be recorded:

(a)

for calculating the value of output: for own-account produced fixed capital goods in plantations, either
the value of similar plantations valued using the basic price and pro rata production costs incurred over
the period, or the value of the materials consumed (including nursery plants) and services rendered over
the period;

(b)

in the calculation of intermediate consumption, the values of the different intermediate consumption
goods used (including nursery plants);

(c)

for GFCF, under the ‘plantations' heading, the value obtained by adding up the value of own-account
produced fixed capital goods in plantations (i.e. the entry mentioned in (a)) and the plantation output of
units specialising in such kind of contract work.

(k)

Fixed asset livestock

2.149.

GFCF for livestock corresponds to the following elements:

— the annual growth of livestock (until they reach maturity);

— livestock acquisitions (imports) less disposals (slaughterings (1) and exports);

— the costs associated with the transfer of ownership incurred in trade between agricultural units (2).

2.150.

In accordance with the ESA 95, GFCF for livestock is a measure of the difference between livestock
acquisitions (natural growth and imports) over the year,
including those resulting from own-account
production, and livestock disposals (for slaughter (3), export or any other final use), to which is added the
cost of transfer of ownership (4). GFCF for livestock occurs throughout the animal's life. To begin with, the
GFCF mainly consists of the natural growth of the animal. When it reaches the age of maturity, the GFCF is
mainly measured by way of disposals (sales for slaughter or export). Imports, exports and costs associated
with the transfer of ownership are components of GFCF for livestock which are likely to occur throughout
the animal's useful
the GFCF as a whole) constitutes
own-account agricultural production of fixed assets in livestock.

life. The natural growth of

livestock (and not

2.151.

As shown in 2.134, 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 three
conditions are met:

— no nominal holding gains or losses (i.e. a regular trend in prices and livestock population numbers),

(1) The treatment of sales of livestock for slaughter (i.e. by abattoirs or the farmer, including all sales to non-agricultural units for
economic uses other than slaughter) as disposals of fixed assets constitutes a simplification of the accounting procedure for recording
the disposal of fixed assets whose economic use has changed. ‘Fixed asset' livestock are in fact converted into stocks by recording a
flow entitled ‘other change in volume' (cf. 2.136) entered in the ‘other changes in volume of assets' account. They are only sold in
the form of stocks, the sale then constituting a withdrawal from stocks and not a disposal of assets.

(2) In as much as the sale and purchase occurred during the same accounting period. Otherwise, a disposal (for the period in which the

sale occurred) and an acquisition (for the period in which the purchase occurred) are recorded.

(3) Including slaughterings for own final consumption or payment in kind.
(4) Trade in breeding livestock between farmers is not recorded in the accounts. This is also the case if the trading is carried out via
agents (if the purchase and sale occurred in the same period). However, the cost of transfer of ownership (agents' services, trade
margins, transport costs, etc) must be included in the value of the GFCF for livestock.

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— no other changes in volume (i.e. no losses due to natural disasters and no changes in classification, etc.),

— no consumption of fixed capital (i.e. no foreseeable depreciation in the value of livestock).

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.

As a general rule, therefore, GFCF for livestock cannot be measured via the difference between the livestock
values at the end and beginning of the accounting period. The rule for calculating the GFCF for livestock
depends directly on the method adopted for recording and measuring the three elements of the change in
the value of livestock (other than GFCF), and in particular the consumption of fixed capital element.

In theory, consumption of fixed capital should be calculated for livestock (1). 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
(the definition of the calculation parameters are very complex, cf. 3.105 and 3.106), no
fixed capital
consumption of fixed capital should be calculated for productive livestock.

GFCF for livestock may be measured by various methods. By using the perpetual inventory method, each of
the GFCF elements defined in 2.149 (natural growth of livestock, imports, sales for slaughter and exports,
costs associated with the transfer of ownership) can be valued very strictly. Nevertheless,
it requires
numerous data (such as the prices of productive livestock throughout their useful life). The same is true of
methods based on the livestock production cycle. A simpler method therefore needs to be adopted, even if it
is less strict.

2.152.

2.153.

2.154.

2.155.

The recommended method employs an indirect calculation approach (2). It is based on calculating the
change in the number of livestock and on the following two assumptions:

— livestock prices are regular and normally predictable, so that the average annual price can be used for

valuing quantities whilst excluding from them holding gains/losses,

— exceptional losses can be estimated (in quantities and prices).

2.156.

The measurement of GFCF is made up of the sum of the following elements:

GFCF =

Change in the number of livestock between the end and beginning of the accounting period
valued at the average annual price P

+ Culling discount

+ Other productive livestock losses

+ Costs associated with the transfer of ownership

2.157.

The term ‘culling discount' refers to the difference, at the time of their withdrawal from productive livestock,
between the value of the livestock valued as productive animals (at what could be called a ‘capital' price) and
the value of the same livestock valued as animals intended for slaughter (i.e. at the slaughterhouse selling
price).

2.158.

The term ‘other losses of productive livestock' comprises two types of losses:

— exceptional losses in productive livestock which have become mature,

— the value of livestock kept in production until the end of their life (natural death).

(1) The SNA 93 (6.185), unlike the ESA 95 (6.03), considers that consumption of fixed capital should be calculated for livestock.
(2) Any other method leading to equivalent results may be used.

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2.159.

2.160.

The value of losses to be recorded in the calculation of GFCF corresponds to the difference between the
value of livestock at the price prevailing at the start of the period and the disposal value of the animals.
These disposals are valued at the selling price of animals which are slaughtered (i.e. for sale or own final
consumption) or can have a zero value if they have no economic use (e.g. if they are disposed of, etc.).

The terms ‘other losses of productive livestock' and ‘culling discount' correspond to flows which are
recorded in the ‘other changes in the volume of assets' account of the balance sheet. They provide a link
between the different components of the change in the value of assets and the GFCF, and ensure conformity
with the ESA 95. Ignoring them would result in the real level of GFCF for livestock being underestimated.

2.161.

The estimation of own-account production of fixed capital in livestock, which corresponds to the natural
growth of animals, is derived from the definition of the GFCF for livestock set out in 2.149 applied to
categories of animals which are not yet fully mature:

Own-account production = GFCF + disposals (slaughterings and exports) — acquisitions (imports) (1) —
(cost of transfer of ownership).

(l) Tangible and intangible fixed assets (other than agricultural assets)

2.162.

Tangible and intangible 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 (computer software, etc.).

2.163.

2.164.

GFCF corresponds to the acquisition of these assets (new assets produced or imported during the accounting
period, or existing assets) less transfers to other units (of the agricultural industry or other industries). It
should be recalled that if this transaction concerns two units of the agricultural industry during the same
accounting period, the two flows cancel each other out and only the costs associated with the transfer of
ownership are recorded under the corresponding fixed asset heading.

In the case of construction or capital goods (intended for sale) whose production is spread over several
periods, the value of the work performed in the period of production is to be recorded in the change of
stocks of the producer in the form of work in progress. These goods (whether movable or immovable) are
not recorded in GFCF until the ownership has been transferred. By contrast, when this production is
own-account, this work is recorded as GFCF during the entire production period (cf. 2.025).

2.165.

Assets whose economic use changes without any change in ownership taking place (e.g. when a farm
building is used for purposes other than an agricultural production activity) are not recorded as disposals of
assets. These changes are recorded in the ‘other changes in the volume of assets' account.

(m)

Land improvement

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. Since land acquisitions and withdrawals are not recorded as GFCF (being
non-produced assets), investments in land improvement are listed separately under a special GFCF heading.

(1) This deduction corresponds to the theoretical case where the imports of productive animals are recorded as GFCF. In practice all

animals imported by the agricultural industry are treated as changes in stocks (cf. 2.205).

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2.167.

These investments correspond to expenditure on the improvement of land and its preparation for other
productive uses, with the exception of expenditure on routine maintenance (cf. 2.127 to 2.129). This
expenditure has to be made by holders or the result of this expenditure has to become their property. This
concerns in particular expenditure on infrastructure works such as clearance, levelling, drainage, irrigation
and consolidation (cf. ESA 95, 3.106 and SNA 93, 10.51 to 10.54).

(n) Costs associated with the transfer of ownership of non-produced assets

2.168.

Costs associated with the transfer of ownership of non-produced assets refer to acquisitions of land and
non-produced intangible assets (such as patented assets, production rights, etc.) by agricultural units. These
acquisitions are not recorded as GFCF (but under another heading of the capital account, because they are
non-produced assets) and only the costs associated with the transfer of ownership are recorded as GFCF (for
the acquirer, but not for the seller).

(o) Goods and services excluded from GFCF

2.169.

The following goods and services are not included in GFCF:

(a)

small tools, working clothes, spare parts and equipment of a low value (less than EUR 500 at 1995
prices), even if these goods have a normal useful life of over one year (cf., however, 2.125 and 2.126);
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);

(b) ongoing maintenance and repairs (cf. 2.127 to 2.129) are classed as intermediate consumption);

(c)

services of scientific research, advertising, market research, etc. Purchases of these services are included
in intermediate consumption (cf. 2.108(d));

(d) durable goods acquired by households to satisfy their domestic needs; as these goods are not used for

production purposes, they are treated as final consumption;

(e) animals which serve as stocks: fattening animals reared for slaughter, including poultry;

(f) holding gains and losses on fixed assets (to be recorded in the revaluation account, cf. 2.135);

(g)

losses of fixed assets due to catastrophic events (cattle diseases, etc.) or force majeure (floods, gales, etc.)
(cf. 2.045 and 2.136).

2.170.

The value of fixed capital goods used simultaneously for professional and private purposes (motor vehicles,
for example) is recorded in accordance with their two possible types of use; partly as GFCF and partly, as
final consumption.

2.

Change in stocks

(a) Definition of stocks and change in stocks

2.171.

Stocks comprise all goods which do not form part of fixed capital and are held by producer units at a given
moment. A distinction is made between two types of stocks: input stocks and output stocks:

— Input stocks are made up of raw materials and supplies which will be used at a later date as
intermediate inputs in production processes. Normally, the consumption of these products is calculated
by offsetting purchases (or other forms of acquisitions) with a change in stocks in the course of the
reference period (cf. 2.021).

— Output stocks represent the stocks of finished products and work in progress of the producer. They are

taken into account in the calculation of output. Output stocks comprise:

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— finished products from the industry: these are goods which producers have no intention of further
processing before sending them for other economic purposes. In the case of agriculture, they
include crop products, olive oil, grape must,
livestock products and non-agricultural goods
produced in inseparable secondary activities,

— work in progress: this is output which is not quite finished. For the EAA, it includes wine, livestock
for slaughter, all chickens and other poultry (including breeding poultry) and other animals except
those regarded as fixed capital. It should be noted that growing crops (cf. 2.012) are not regarded as
work in progress stocks in the annual economic accounts.

2.172.

Not recording growing crops as work in progress is justified for European agriculture by the fact that a very
large majority of crops have a production cycle which is shorter than an accounting period. It is also felt
that recording them at the time of harvesting allows sufficient consistency with production costs to be
maintained in the analysis of income from the activity (cf. 2.012). When the harvest, soil preparation and
sowing operations are carried out in different accounting periods, the accounts of the period in which the
costs occurred show an accounting loss and those of
the harvest period an accounting profit. This
accounting method may, however, be accepted because if the conditions remain the same from one year to
another an approximate balance is established in that expenditure is offset in the same period by the profit
from the sale of the previous harvest. Only in the event of a substantial change in production or in cases of
very poor harvests does this compensation not occur. Under such circumstances, the recording of output as
work in progress might be indicated (see also 2.013).

2.173.

It should be noted that services are not entered as stocks except for those included in the purchase value of
goods placed into stock.

2.174.

According to the ESA 95, changes in stocks are measured by deducting from the value of stock entries the
value of stock withdrawals and any recurrent losses of goods in stock.

(b) Time of recording and valuation of changes in stocks

2.175.

Stock entries should be valued at the date of entry into stock and withdrawals should be valued at the prices
prevailing when withdrawn from stocks. The time of recording (and valuation) of stock entries and
withdrawals should be consistent with that of other transactions in products (output and intermediate
consumption).

2.176.

2.177.

The basic price is the price to be used for valuing changes in stocks (entries, withdrawals or recurrent losses
of finished products or work in progress). As regards entries of work in progress, the price used should be
estimated by applying the fraction of the total production cost incurred by the end of the period to the
basic price of a similar finished product. 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 95, 3.51 and 3.52).

The method recommended in the ESA 95 for recording stock entries and withdrawals is the perpetual
inventory method. However, this solution is not generally applicable in view of the difficulty in obtaining
information on entries and withdrawals. In an attempt to get into line with the perpetual inventory method,
the ESA 95 recommends a ‘quantitative' method which consists in measuring changes in stocks as the
difference in volume between the stocks at the opening and closing of the accounting period, valued at the
average prices in force during the period concerned. However, this method is only applicable if prices
remain stable over the period under consideration or if the prices and quantities stocked increase or decline
at a constant rate during the accounting period.

2.178.

This ‘quantitative method' cannot be applied to crop production because of the fluctuation in prices and
quantities resulting from the production process and the structure of supply and demand. This problem
which is specific to agriculture is recognised by the ESA 95 (cf. 3.124 (c)).

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2.179.

It should also be considered that a change in stocks, as defined in 2.174, is only one of the components of
the change in the value of stocks between the start and end of the accounting period. There is in fact a
basic accounting equation which connects the opening and closing figures for stock assets:

Value of closing stocks at
the prices applicable at the
end of the accounting
period

– Value of opening stocks
at the prices applicable
at the start of the
accounting period =

Change in stocks (entries – withdrawals – recurrent losses)

+ nominal holding gains (net of losses)

+ other changes in volume

2.180.

These nominal holding gains and losses and other changes in volume (1) should not be included in the
in the revaluation
measurement of output, but in the account of other changes in assets (respectively,
account and in the other changes in the volume of assets account).

2.181.

The main difficulty in valuing the change in stocks in the EAA concerns crop products. These products are
in fact seasonal products whose entries into stocks only occur after the harvest and whose withdrawals are
spread over several months after the harvest and often continues into the next accounting year. Their price
may also be subject to substantial fluctuations from one period to another, or even within the same period.

(c) Change in stocks of livestock and animal products

2.182.

2.183.

When valuing changes in stocks of livestock, it is not very important whether the animals were reared from
birth within the country or were imported when young and then reared and fattened in the country. When
the imported animals are taken over by the holding which continues rearing them on the national territory,
the animals are ‘nationalised' and consequently assimilated to domestic production.

To evaluate changes in the herd at the end of the reference period, a distinction has to be drawn between
the ‘stocks' herd and the ‘fixed assets' herd (cf. 2.140 and 2.202). The value at basic prices for the first
category of animal should be considered to be the sum of the production costs throughout the life of the
average animal in the different livestock classes up to and including the reference year, plus a mark-up for
the estimated operating surplus or an estimate of mixed income (cf. 2.176). If an animal was originally
imported before its period in the national territory, the purchaser price at the time of import can be
regarded as representing the sum of the production costs up to that date.

2.184.

Because of the generally regular changes in the prices of animals, it is possible to evaluate the change in
livestock stocks by a simple approximation method which excludes nominal holding gains (net of losses).
For each category of animal, the change in population between the end and the start of the accounting year
is multiplied by the average price observed over the reference period.

(d) Change in stocks of seasonal products

2.185.

Seasonal products (cf. 2.178 and 2.181) are products for which the quantitative method does not constitute
a good approximation of the perpetual inventory in view of the irregular change in prices and quantities.
The application of the quantitative method could lead to the inclusion of nominal holding gains or losses in
the measurement of the change in stocks. One solution could consist in measuring the change in stocks
over shorter periods than the reference period (for example, each quarter), subperiods which would have
more even price and quantity trends. Nevertheless, this type of method is often difficult to apply because of
a lack of basic data.

(1) Other changes in volume are generally understood to be stocks of goods destroyed in the wake of exceptional events (such as natural

disasters). Current losses are included in withdrawals from stocks.

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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 (SNA 93, 6.105):

— 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,

— there may be factors such as general inflation or other general factors which may lead to a change in

price even though its physical or economic characteristics are not changed over time.

2.187.

2.188.

2.189.

The difference between the price at which products are put into stock and the price at which they are
withdrawn, in the first two cases, should reflect the additional output value produced during storage (SNA
93, 6.106), 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 (SNA 93, 12.70).

On the basis of the different components of the change in the value of stocks and factors determining
changes in the prices of products held in stock, and in view of the difficulty in fully excluding the recording
of holding gains or losses from the valuation of seasonal output, two methods are recommended. They
differ in their interpretation of the storage activity and the time for recording the change in the value of the
goods resulting from their stay in stocks. The first method constitutes the reference method to be applied in
valuing output and changes in stocks of seasonal agricultural production. The second method may be used
for more specific cases (mainly products whose prices are difficult to predict).

The reference method consists in determining the change in stocks as the difference between the value of
output for the year and the value of sales (and other uses) for the same year (1). It is founded on the
assumption that there are no stocks left over at the end of the marketing year (the end of the first half of
the following calendar year). It involves directly evaluating total output harvested during year n using the
weighted average price for the marketing year (n/n + 1) and deducting from this the value of all sales (and
other uses) made during calendar year n corresponding to the year of harvest (2) at the prices applicable at
the time of sale (or other uses).

2.190.

The reference method treats the storage activity as a factor for raising the prices of goods during storage. It
thus makes a distinction between the storage activity and its effects on product prices. The increase in value
resulting from the stay in storage is ‘anticipated' since it is allocated to the output of year n (i.e. the year of
harvest, even though the sales are spread over two calendar years), it being possible to anticipate price
trends without too much uncertainty because they result from fairly regular and predictable changes (cf.
2.186).

2.191.

The application of this method makes it possible to minimise the inclusion of holding gains or losses in the
measurement of output. It ensures consistency between the calculations of output in value and quantity and
avoids the recording of output on the basis of work in progress (requiring data on the level of stocks at the
start and end of the calendar year, with corresponding prices). It also facilitates the elaboration of accounts
in constant prices.

2.192.

A second method is recommended in the specific case of products whose prices are difficult to predict (such
as fruit, vegetables, potatoes and olive oil) and whose storage on agricultural holdings reaches economically

(1) Use is made of the breakdown of output into sales (and other uses) and stock changes.
(2) A similar result may be obtained by recording sales on a half-yearly basis and calculating the output of reference year n by adding

together the sales of the second half of year n and those of the first half of year n + 1.

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significant levels. This method is less strict than the reference method in excluding holding gains and losses
from the measurement of output; it considers the storage activity to be an extension of the production
process in time. The inclusion of the increase in prices of stored goods is delayed and allocated to the year
in which the storage took place.

2.193.

By this second method, seasonal output is calculated directly as the sum of sales, other uses and changes in
stocks. Stock changes are estimated by valuing the stocks at the end and start of the accounting period on
the basis of their current prices.

2.194.

It should be noted that these two methods differ in the way they measure the change in stocks but not in
the valuation of sales (which are valued at the basic prices applicable on withdrawal from stocks).

(e) Changes in stocks of wine (from grapes produced by the same holding)

2.195.

Wine is a product which is generally stocked for several years for ageing and maturing. During this storage
period, the quality changes. This storage activity at the holding can be regarded as an extension of the wine
production process since the wine leaving storage is different from the wine which entered. Stored wine
should therefore be treated as work in progress and the increase in value which is then determined should
be regarded as an increase in output to be measured continuously over time.

2.196.

The change in the value of wine may result from three factors: the change in its quality, changes in the
structure of supply and demand (i.e. relative prices between young and aged wines), and a general increase
in prices. Whilst the change in the value of wine due to the first two factors should be included in the
measurement of output, any increase in the price of wine due to a general increase in wine prices should
not be reflected in the value of output but treated as a holding gain (recorded in the revaluation account).

2.197.

2.198.

2.199.

Recording the increase in the value of wine in the value of output should be done throughout the course of
the ageing process. However, this would mean having a large amount of data available on the structure of
wine stocks based on their production year, quality and production area, as well as on the development of
their respective prices. As these data are not generally available in the Member States, two practical methods
have been developed which allow the increase in the value of wine due to ageing to be calculated
approximately for the EAA. Although not so strict from the conceptual point of view, these two methods
nonetheless appear to be acceptable in the current situation regarding availability of data. The choice of each
Member State will depend on the structure of its wine-growing industry and statistical system.

Anticipation of the increase in value from wine-ageing: the first method is to value stock entries of wines to
be aged by the producer, using the selling prices of wines which have already been aged, as observed in the
second half of the year. The expected increase in value is anticipated in the output of the year of harvest.
This increase is only partial since these wines are not valued at their real selling prices but at the prices of
other wines of the same type but older. The difference between their real selling price and that used for
evaluating stock entries is not counted in the value of output, since it is interpreted as holding gain (NB: this
difference includes the effects of inflation). Since it makes no distinction depending on the harvest year of
the stocked or sold wine, it assumes that the quality wine market is even in terms of age of the wine.

Delay in taking into account wine ageing: the second method is to value stock entries at the price of
‘unaged' wines at the time of harvesting and not to record an addition to the wine work in progress (i.e. the
increase in price due to ageing, irrespective of the effect of the general change in the price of wine) until the
aged wine is sold. Since sales are valued at the average price for the year, any increase in value between the
harvest year and the year of sale is recorded in the output of the year of sale (and is therefore not
distributed over time). This method requires more data on the structure of wine stocks as it assumes that
it can
the distribution of stocks (and stock withdrawals)
provide a more accurate idea of sales and stocks of different vintages.

is known for each harvest year. Nevertheless,

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2.200.

Neither of these two practical methods allows the increase in the value of wine from ageing to be
distributed over time: one records it in advance and the other after a delay. This disadvantage can be
regarded as a relatively minor one in both cases if it is assumed that there is a certain stability over time in
the production of ‘aged' wine. The first method appears to be preferable when the average ageing period is
short.

3.

Recording of livestock as ‘GFCF' or ‘changes in stocks'

2.201.

As mentioned in 2.140 and 2.151, changes in the number of livestock (for agricultural statistical purposes)
are entered either as GFCF or as changes in stocks depending on the type of animal.

(a) Definition

2.202.

i.e.

livestock concerns animals,

GFCF of
fixed assets, used repeatedly and continuously in production
processes. They are reared for the output they regularly provide and include, for example, breeding livestock,
dairy livestock, draught animals, sheep and other animals reared for their wool. By contrast, animals serving
as stocks are animals produced during the current or a previous period which are kept in order to be sold
or used for other production purposes at a later date. These include animals reared for their meat such as
animals for slaughter and poultry.

(b) Recording of animal imports

1. Animals identifiable as fixed assets:

2.203.

If, at the time of import, the animals were able to be clearly identified as a fixed asset, they would be
recorded exclusively as acquisitions in the GFCF (cf. 2.149 and 2.150). Of course, only animals bought by
the agricultural industry are to be recorded as GFCF of agriculture, and therefore not, for example, saddle
horses for private use or animals acquired for other purposes.

2. Animals identifiable as stocks:

2.204.

By contrast, if at the time of import the animals were able to be clearly identified as stocks (e.g. animals for
slaughter) their import would be considered as an entry into stocks of work in progress and therefore,
deducted from sales (negative sales) in the calculation of output (cf. 2.069).

3. Treatment to be adopted:

2.205.

It is often difficult, on the basis of the sources of data available, to draw pertinent distinctions between these
two different categories of animals. This is why the value of all imported animals (animals classed as fixed
assets or stocks, but with the exception of those imported animals for immediate slaughter) should be
deducted from sales in the output calculation. If at any time they are transferred to the herd of productive
livestock (i.e. fixed assets), they will be recorded as own-account produced fixed capital goods during the
reference period when the transfer takes place (as for animals which are produced and reared in the country
and which are then transferred to herds of productive livestock) (cf. 2.069 and 2.070).

2.206.

It should be noted that animals imported for immediate slaughter are entered as imports of the national
abattoirs and are not recorded in the EAA since the latter are restricted to depicting the output of national
agriculture.

(c) Recording of livestock trade between agricultural units

2.207.

Animals classed as fixed assets: trade in these animals is recorded in GFCF as acquisitions and disposals of
fixed assets (services associated with the transfer of ownership are recorded in the purchaser price). When
sales and purchases occur in the same accounting period, these flows offset each other and only services
associated with the transfer of ownership are recorded as GFCF (cf. 2.068).

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2.208.

Animals classed as stocks: these sales and purchases are only recorded if they occur in two different
accounting periods. Services associated with this trade, which are included in the purchaser price, should be
deducted from the output total when trade occurs in the same accounting period (cf. 2.067).

2.209.

Because of the special treatment of livestock trade between agricultural units and imports, there is no
intermediate consumption for ‘Livestock and animal products'.

(d) Non-agricultural animals

2.210.

The rearing of race-horses, saddle horses, dogs, cats, cage birds, zoo and circus animals and bulls for
bullfights is included in the activities defining the agricultural industry, whether it is for breeding, meat
production, recreation or sports events (cf. 1.78). The use of these animals for service activities is included
in the agricultural industry, only when such activities are performed by agricultural units as inseparable
secondary activities. The rearing of non-agricultural animals by units for which the agricultural activity
represents solely a leisure activity is not considered as part of the EAA (cf. 1.24).

2.211.

Such animals may be sold to:

— households: in which case any subsequent operations involving these animals are of no concern to the

EAA,

— other branches: a guard dog, circus animal or racing horse, for example; these form part of the

formation of fixed capital of the purchasing branch.

III.

DISTRIBUTIVE TRANSACTIONS AND OTHER FLOWS

A.

DEFINITION

3.001.

Distributive transactions are transactions:

— which distribute value added generated by production among the workforce, capital and general

government,

— which involve the redistribution of income and wealth.

3.002.

The ESA 95 distinguishes between current
redistribution of saving or wealth rather than of income.

transfers and capital

transfers,

the latter

representing a

3.003.

Given that the EAA are the accounts for an industry, only certain distributive transactions will be described
in this chapter. The most important ones are those recorded in the primary income distribution accounts,
particularly the generation of income account and entrepreneurial income account (cf. EAA sequence of
accounts, 1.38 to 1.48). In the case of the generation of income account, these distributive transactions
relate to other taxes on production, other subsidies on production and the compensation of employees. For
the entrepreneurial income account, they correspond to certain types of property income (mainly land rents,
interest and property income attributed to insurance policy holders). The account also records distributive
transactions corresponding to aid for investment and other capital transfers in the capital account.

3.004.

They do not include some distributive transactions relating to certain property income (mainly dividends
and other income distributed by corporations), current taxes on income and wealth, etc. Recording these
transactions is only statistically feasible and meaningful if groupings of institutional units, i.e. sectors and
subsectors, are taken into account (cf. 1.06).

B.

1.

GENERAL RULES

Reference period

3.005.

The reference period for the EAA is the calendar year.

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2.

Units

3.006.

The values should be expressed in millions of units of the national currency.

3.

Time of recording distributive transactions

3.007.

As was explained in 2.008, the ESA 95 records distributive transactions on an accrual basis, i.e. at the time
an economic value, amount due or claim is created, transformed or cancelled or ceases to exist, and not at
the moment when payment is actually made. This recording principle (based on rights and obligations) is
applied to all flows, irrespective of whether they are monetary flows, or whether they occur between units
or within a single unit. However, certain exceptions might be justified for practical reasons.

3.008.

The times of recording the various types of distributive transaction are as follows:

(a) Compensation of employees

3.009.

Gross wages and salaries and actual social contributions (for account of employers) are recorded during the
period in which the work was performed, although premiums and other exceptional payments are recorded
at the time they become due (cf. ESA 95, 4.12).

(b) Taxes and subsidies on production

3.010.

Taxes on production are recorded at the time when the activities, transactions or other events giving rise to
a fiscal obligation take place (cf. ESA 95, 4.26). Similarly, subsidies on production are recorded at the time
when the transaction or other event (production, sale, import, etc.) to which they relate takes place (cf. ESA
95, 4.39).

(c)

Property income

3.011.

Interest is recorded during the accounting period in which it is due, irrespective of whether it is actually
paid (cf. ESA 95, 4.50 and following). This is done continuously for the amount of capital in question.
Rents are also recorded for the period in which they are due (cf. ESA 95, 4.75).

(d) Capital transfers

3.012.

Capital transfers (investment grants or other transfers) are recorded at the time when payment is due (or, in
the case of transfers in kind, when ownership of the asset is transferred or when the debt is cancelled) (cf.
ESA 95, 4.162 and 4.166).

4.

General remarks concerning value added

3.013.

Value added is the balancing item of the production account. It is the difference between the value of output
and the value of intermediate consumption (irrespective of the output concept used, since intermediate
consumption changes accordingly).
It is a key item in measuring the productivity of an economy or
industry. It can be accounted for on a gross basis (gross value added) or on a net basis (net value added), i.e.
before or after the deduction of the consumption of fixed capital. Net value added is the only resource in
the generation of income account. In line with the method for valuing output (basic price) and intermediate
consumption (purchaser prices) net value added is measured at basic prices.

3.014.

By deducting other taxes on production from the value added at basic prices, and adding other subsidies on
production, the value added at factor cost is obtained. Net value added at factor cost constitutes the income
of the factors of production.

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C.

COMPENSATION OF EMPLOYEES

(cf. ESA 95, 4.02 to 4.13)

3.015.

The compensation of employees is defined as total remuneration, cash/kind, payable by an employer to an
employee in return for work done by the latter during the accounting period (cf. ESA 95, 4.02). It includes:

— gross wages and salaries (cash/kind),

— employers' social contributions (actual and imputed).

3.016.

Gross wages and salaries in cash comprise the following components:

(a) direct basic wages and salaries (payable at regular intervals);

(b) enhanced rates for overtime, night or weekend work, work of a particularly arduous nature, etc.;

(c) cost of living and accommodation allowances;

(d) wage benefits such as Christmas, end-of-year, holiday or productivity bonuses and allowances for higher

grades;

(e)

(e) allowances for transport to and from work (1);

(f)

compensation for days not actually worked, paid holidays;

(g) commissions, tips, attendance fees;

(h) other allowances or occasional payments linked to overall company results as part of profit-sharing

schemes;

(i) payments made by employers contributing to asset formation by employees;

(j) one-off payments to employees when they leave the enterprise, in so far as the payments are not made

under a collective agreement;

(k) housing allowances payable in cash by employers to their employees.

3.017.

3.018.

It should be stressed that the data to be entered are gross wages and salaries, including wage and salary
taxes and any higher rates of these taxes and employees' social security contributions. In cases where net
wages and salaries are paid by employers to their employees, therefore, they should be increased by the
value of these items.

Gross wages and salaries in kind comprise goods and services made available by employers to their
employees free of charge or at reduced prices for use by the employees and their families, as and when they
wish, to satisfy their needs. They do not necessarily figure in the production process. Their value is the
value of the benefit which they represent: the value of the goods if they are provided free of charge, or the
difference between the latter value and the payments to the employees if they are provided at reduced prices
These items, which are of considerable significance in the EAA, include the following components:

(a) agricultural products made available to employees free of charge or at reduced prices, by way of

remuneration (2);

(b) accommodation services produced for own account and provided to employees free of charge or at

reduced prices (3);

(1) This category must not include payments made primarily in the employer's interest. Such payments are part of intermediate

consumption (cf. 2.108 (e)).

(2) Agricultural products provided to employees are output of the agricultural branch.
(3) Accommodation services are treated as a separable non-agricultural activity, with the result that they only appear as compensation of
employees and in the form of a deduction from the operating surplus of the agricultural industry. If they were an inseparable
non-agricultural activity, they would be recorded as a component of production and a form of compensation of employees.

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(c) goods and services purchased by employers, provided that these purchases fulfil the definition of wages
in kind (i.e. when they do not constitute intermediate consumption). In particular, the transport of
employees between their place of work and home is part of their wages in kind, unless the journeys
take place during the employer's time. This category includes purchased accommodation services and
children's crèches, etc. (cf. ESA 95, 4.05).

3.019.

Wages and salaries in kind should be valued at their basic price or at the purchaser price (depending on
whether the items are produced by the unit or purchased from outside).

3.020.

Gross wages and salaries, by contrast, do not include expenditure by employers which is to their own
inter alia: allowances
benefit and incurred in the interest of the enterprise. The items in question are,
towards/reimbursements of expenditure on travel, separation or removal
incurred by employees in the
course of their duties, entertainment expenses incurred by employees on behalf of the enterprise and
expenditure on providing amenities at the place of work (e.g. sports and recreational facilities). Similarly,
cash payments by employers to their employees for the purchase of tools or special clothing (including
amounts which employees are contractually obliged to devote to such purposes) are not part of gross wages
and salaries included under this heading. All these items are recorded in the intermediate consumption of
employers (cf. ESA 95, 4.07).

3.021.

Employers' social contributions include the value of social contributions paid by employers to ensure that
their employees are covered by social welfare provisions (except employees' social contributions deducted at
source from gross wages or salaries (cf. 3.017). These contributions may be actual or imputed.

3.022.

3.023.

3.024.

Actual social contributions represent the payments made by employers, including statutory, contractual and
voluntary contributions by way of insurance against risks and social hardship. These social contributions are
paid to insurers (social security administrations or private insurers). Although paid directly to insurers, they
are treated as a component of compensation of employees since the latter are deemed to receive the
contributions and then pay them to insurance enterprises.

to their employees or

to unfunded social benefits, paid directly by
Imputed social contributions represent
employers
involving an insurance enterprise or
autonomous pension fund (1) (cf. ESA 95, 4.10). These contributions are recorded during the period in
which the work is performed (if they are the counterpart of compulsory social benefits) or when the
benefits are provided (if they are the counterpart of voluntary social benefits).

former employees without

the counterpart

It must be stressed that, in the EAA, if the production units are individual enterprises, the compensation of
employees does not include the remuneration for work carried out on the holding by the holder or
non-salaried members of his family; these persons share in the mixed income, which is the balance of the
generation of income account for individual enterprises. If, however, the production units are part of a
corporation (cf. 5.09 and 5.10), all remuneration has to be recorded as compensation of employees.

D.

TAXES ON PRODUCTION AND IMPORTS

(cf. ESA 95, 4.14 to 4.29)

3.025.

Taxes on production and imports are compulsory, unrequited payments, in cash 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 of labour, the ownership or use of land, buildings or
other assets used in production. These taxes are payable whether or not profits are made (cf. ESA 95, 4.14).

(1) They correspond in particular to wages and salaries which employers continue to pay on a provisional basis to their employees in
the event of illness, maternity, accidents at the workplace, invalidity or redundancy, in so far as the amounts concerned can be
separately identified.

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3.026.

Taxes on production are divided into:

— taxes on products:

— VAT-type taxes,

— taxes and duties on imports other than VAT, and

— taxes on products other than VAT and import taxes

— other taxes on production.

1.

Taxes on products

3.027.

Taxes on products are taxes payable per unit of produced or traded good or service. They may be equivalent
to a monetary amount determined per unit of the good or service or calculated ad valorem as a fixed
percentage of the unit price or value of the good or service (cf. ESA 95, 4.16).

3.028.

VAT-type taxes are taxes on goods and services collected in stages by enterprises and ultimately charged in
full to the final purchaser. They include VAT and other deductible taxes applied under rules similar to those
governing VAT (1).

3.029.

Taxes and duties on imports excluding VAT comprise compulsory payments levied by general government,
or by 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 to resident units by non-resident units.

3.030.

They include import duties and other taxes such as levies on imported agricultural products, monetary
compensatory amounts levied on imports, excise duties, etc.
(cf. ESA 95, 4.18). They are payable by
importers and are normally passed on to the holder who purchases the products, i.e. they become part of
the purchaser price of the goods and services. In cases where means of production are imported directly by
agricultural producer units, the import duties, non-deductible VAT and monetary compensatory amounts
(receipts or payments) should also appear in the purchaser price used for EAA purposes.

3.031.

Taxes on products, except VAT and import taxes, consist of taxes on goods and services produced by
resident enterprises and 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 final consumption or own capital formation (cf.
ESA 95, 4.19).

3.032.

In the case of agriculture, the taxes in question are:

— taxes on sugar beet,

— penalties for exceeding milk quotas,

— co-responsibility levies formerly applying to milk and cereals.

3.033.

As output is recorded at basic prices, taxes on products are recorded within the production account (cf.
2.082 to 2.086) and do not appear in the generation of income account. They should be recorded when the
activities, transactions or other events which give rise to the payment take place. Since the EAA record these
items net of deductible VAT, the only turnover tax recorded in them is non-deductible VAT. This is why no
VAT is recorded in the accounts, except in the special case of under-compensation of VAT included under
‘other taxes on production' (cf. 3.048(g)).

(1) Turnover is the most important taxable item. All EU Member States raise turnover tax in the form of VAT. The rates of this tax vary
from one Member State to another and indeed within individual Member States. Generally speaking, agricultural products are subject
to a lower rate of tax than the standard rate.

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3.034.

Taxes on products (other than VAT) which affect certain products of agricultural intermediate consumption
should be included in the purchaser price of intermediate consumption in the production account (cf. 2.110
to 2.113). Such cases include, for example, taxes on sugar and alcohol used for wine-making which are
levied in some EU Member States. These taxes, which constitute taxes on products of
the agri-food
industries, should be added to the value of intermediate consumption of the agricultural industry.

2.

Treatment of VAT

3.035.

The description in the ESA 95 (4.17) refers to the standard VAT system under which each enterprise is
allowed to deduct from the amount of VAT due on its own sales the amount of tax it has paid on its
purchases of intermediate inputs or capital goods. However, in addition to the standard VAT regulations,
there are special regulations for agriculture (VAT flat rate systems) which differ in form from one EU
Member State to another.

3.036.

The flat-rate systems used in the EU Member States can be grouped into two main types of compensation
for VAT paid on purchases:

— via price. In this case, farmers subject to the flat-rate system sell their products at a price increased by
the VAT flat rate percentage but do not pay the invoiced VAT to the financial authorities since the VAT
they invoice and retain is calculated to compensate as exactly as possible for the VAT which they have
paid on their purchases,

— as a refund. Under this system, farmers sell their products exclusive of VAT. On application to the
financial authorities, they later receive a refund calculated as a flat-rate percentage (1) applied to their
sales in compensation for the VAT which they have paid on their purchases.

(a) Definitions

3.037.

The following concepts for the standard VAT system apply also to the flat-rate systems:

(a) VAT invoiced by the producer: this is the VAT which the producer calculates at the rate applying to the

product sold and which he charges on his invoice to each domestic purchaser;

(b) VAT invoiced to the producer on intermediate consumption: this is the VAT calculated at the rate
applying to each product bought and which the producer has paid on his intermediate inputs; this is
called deductible (2) VAT on intermediate consumption;

(c) VAT invoiced to the producer on purchases of fixed capital goods: this is called deductible VAT on

purchases of capital goods;

(d) VAT payable by the producer on his current transactions: this is the difference between the VAT
invoiced by the producer and the VAT invoiced to the producer on his intermediate consumption
purchases (a–b);

(e) Total VAT paid by the producer: this is the difference between the VAT invoiced by the producer and
the total VAT invoiced to the producer on his intermediate consumption purchases and on his
purchases of capital goods (a–b–c).

3.038.

The provisions of the ESA 95 lay down a single method of recording VAT. This is the ‘net' system, whereby
output and input prices are recorded exclusive of deductible VAT.

(1) The percentage rate may vary according to the type of product and channel of distribution.
(2) The variations between Member States in the VAT systems which they operate sometimes produce situations in which VAT paid by
farmers on their purchases cannot be recovered or compensated for. Such VAT payments represent (i) non-deductible VAT, i.e. VAT
paid on purchases which farmers, irrespective of the system to which they are subject, may not deduct from the VAT invoiced on
sales and for which there is thus no compensation; (ii) and/or VAT other than that mentioned under (i), paid on purchases for which
farmers subject to the flat-rate system are not fully compensated via the selling price or via reimbursement.

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3.039.

In tax law, VAT is treated as a ‘transitory item' for producers, so that the deductible VAT which a producer
has to pay on his purchases does not represent a true cost component for his own calculations and can be
regarded merely as an advance instalment of the VAT which he has to calculate on his own turnover, thus
leaving him only the difference to pay to the tax office. Since, in general, it is only the final consumer who
has to pay the VAT levied on that product, the producer (together with the producers of the intermediate
consumption goods required) acts effectively as an agent of the tax office. Conversely, where it is not
possible for the producer to deduct (or reclaim) tax paid on purchases (non-deductible VAT), the VAT in
these cases should be regarded as a cost component.

(b) Operation of the net recording method

3.040.

For farmers subject to the standard system there is no accounting difficulty; VAT invoiced on products sold,
is ignored in the EAA and should not appear in any output price used for
or otherwise disposed of,
evaluating final output, while deductible VAT paid on purchases of items of intermediate consumption and
fixed capital goods is also excluded from the relevant prices when calculating expenditures for the EAA.

3.041.

to the flat-rate systems, however,

there are accounting problems (cf. 3.035 and
For farmers subject
following). As is obvious, the compensation allowed to individual farmers will only rarely be exactly equal to
the VAT which they have paid on their purchases. In the case of the flat-rate systems, the method of
recording VAT will be identical to that used for the standard system, i.e. exclusive of VAT for the individual
items of final output and exclusive of deductible VAT for the individual items of intermediate consumption
and GFCF.

The difference between the flat-rate compensation granted to farmers who are subject to the flat-rate
systems and the VAT which they would have been able to deduct if they had been subject to the standard
VAT system represents over- or under-compensation. Any over- or under-compensation must be entered
separately in the EAA.

3.042.

The method of recording over- or under-compensation of VAT under flat-rate systems is as follows:

— over-compensation of VAT on purchases is recorded under ‘Other subsidies on production',

— under-compensation of VAT on purchases is recorded under ‘Other taxes on production'.

‘VAT on purchases' is the VAT which farmers who are subject to the flat-rate system would have been able
to deduct had they been subject to the standard VAT system.

3.043.

This recording method offers the advantage of being conducive to uniform treatment of agricultural output,
intermediate consumption and GFCF, irrespective of the VAT system to which farmers are subject. Moreover,
it makes for symmetrical
treatment of over- or under-compensation of VAT compared with gross
value-added at basic prices. This enables gross value-added at basic prices to be calculated regardless of the
VAT system adopted, which favours harmonisation and comparability of the EAA of the Member States (cf.
3.033).

3.

Other taxes on production

3.044.

Other taxes on production comprise all taxes that enterprises incur as a result of engaging in production,
independently of the quantity or value of the goods and services produced or sold (cf. ESA 95, 4.22). They
may be payable on land, fixed capital goods or the labour employed.

3.045.

Other taxes on production are the only taxes to be recorded in the generation of income account for the
industry. They appear in the accounts of the branches or sectors which pay them (payment criterion).

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3.046.

The taxes to be recorded in the generation of income account for agriculture must be:

(a) compulsory;

(b) paid direct by the agricultural industry;

(c) paid to general government or the institutions of the European Union;

(d) within the definition of other taxes on production (see 3.044).

3.047.

Owing to the disparate historic developments of public finances in the various EU Member States, there is a
very wide range of taxes on production throughout the EU. In agriculture, there are two other fairly
important types of tax on production: property tax and motor vehicle tax.

3.048.

For agriculture, the most important other taxes on production are:

(a) property taxes and other taxes on the use of

land and buildings used for production purposes

(irrespective of whether the agricultural units own or hire them);

(b)

taxes on the use in production of fixed capital goods such as motor vehicles, machines or other
equipment (irrespective of whether the agricultural units own or hire them);

(c) wage-bill taxes paid by the employer;

(d)

taxes on pollution resulting from production activities;

(e)

taxes on licences/permits to engage in commercial or professional activities, on condition that the
licences/permits are granted automatically once the amounts due have been paid.
If a regulatory
function attaches to these payments (e.g. checks on the applicant's competence or qualifications), they
should be treated as purchases of services from general government and be recorded as intermediate
consumption (unless they are completely out of proportion to the cost of providing the services in
question) (cf. 2.108(o));

(f) water rates which are paid as flat-rate taxes and not proportional to the quantity of water consumed;

(g) under-compensation of VAT resulting from the application of the flat-rate VAT systems (cf. 3.041 and

3.042).

3.049.

In line with the accrual principle, taxes on production are recorded at the time when a fiscal obligation is
incurred. In the case of under-compensation of VAT, this is the time of purchase of goods and services of
intermediate consumption and the GFCF which gives rise to it (not the time of reimbursement).

3.050.

Other taxes on production do not include:

(a)

statutory payments which are made direct by the agricultural industry but whose recipients are neither
general government nor institutions of the European Union. These payments are regarded as purchases
of market services from recipients of transfers and therefore included in the intermediate consumption
of agriculture;

(b)

fines and penalties and the costs imposed in connection with collection and recovery should not be
recorded with the taxes to which they relate, unless they cannot be distinguished from them (cf. ESA
95, 4.133);

(c) compulsory taxes not raised by general government or the institutions of the European Union and
which, although borne by agriculture, are settled by a client branch. These payments should be
accounted for in the intermediate consumption of the user branch;

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(d)

taxes normally levied on profit or wealth, such as equalisation taxes, income tax, corporation tax and
in the secondary
wealth tax. These should be included as current
distribution of income account;

taxes on income, assets, etc.

(e)

taxes on inheritance and gifts and special wealth taxes. These should be included as capital taxes in the
capital account;

(f) water rates whose amount is linked directly or indirectly to the quantity of water consumed.

E.

SUBSIDIES

(cf. ESA 95, 4.30 to 4.40)

3.051.

Subsidies are current unrequited payments which general government or the institutions of the European
Union make to resident producers, with the objective of influencing their levels of production, their prices
or the remuneration of the factors of production. Other non-market producers can receive other subsidies
on production only if those payments depend on general regulations applicable to market and non-market
producers as well. By convention, subsidies on products are not recorded on other non-market output (cf.
ESA 95, 4.30).

3.052.

Subsidies are classified into:

— subsidies on products:

— import subsidies,

— other subsidies on products, and

— other subsidies on production.

1.

Subsidies on products

3.053.

3.054.

3.055.

Subsidies on products are subsidies payable per unit of a good or service produced or imported. The
subsidy may be a specific amount of money per unit of a good or service, or it may be calculated ad valorem
as a specified percentage of the price per unit. A subsidy may also be calculated as the difference between a
specified target price and the market price actually paid by a buyer. A subsidy on a product usually becomes
payable when the good is produced, sold or imported. By convention, subsidies on products can only
pertain to market output or to output for own final use (cf. ESA 95, 4.33).

Import subsidies consist of subsidies on goods and services that become payable when the goods cross the
frontier for use in the economic territory or when the services are delivered to resident institutional units.
They may 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 resell them at lower
prices to residents (cf. ESA 95, 4.34).

Subsidies on products are accounted for in the basic price (cf. 2.082 to 2.086) at the time of the valuation
of output and therefore do not appear in the industry's generation of income account. Subsidies on products
which relate to the acquisition (i.e. imports or others) of intermediate consumption products or fixed capital
goods, and which lead to a reduction in the purchaser prices of these goods, are taken into account by
using purchaser prices in the valuation of
intermediate consumption or GFCF (cf. 2.110 to 2.113);
correspondingly, this leads to a reduction of the costs of these products or goods.

3.056.

The method of valuation of output at basic prices requires a fundamental distinction between subsidies on
products and other subsidies on production. In line with their definition, subsidies on agricultural products
include in particular the following grants (with an indication of the corresponding budget item in the
general budget of the European Union):

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(a) Subsidies on agricultural products paid to agricultural producers

— certain grants introduced with the reform of

the common agricultural policy. The grants in
question are compensatory aid for arable crops (cereals, protein crops and oilseeds) (B1-104 and
B1-1050 to B1-1055) and premiums for cattle (for suckler cows and special premiums; B1-2120 to
B1-2122, B1-2127). This classification is based on the following three considerations:

— the concept of subsidies on products has been enlarged in the ESA 95 to include subsidies in
the form of ‘deficiency payments'. Compensatory payments for arable crops are similar in
application to forms of deficiency payments. Moreover, the amounts of these payments are
strictly linked to the quantities produced (at macroeconomic level),

— the working and economic effects of the CAP reform: these grants are part of a policy which
has always been aimed at products, combining market
support and direct aid, and
accompanied by measures to curb production. This policy has been maintained despite a
degree of ‘decoupling' between the level of grants and agricultural production or the level of
use of the means of agricultural production (only the breakdown of the various types of
support (aid in the form of export subsidies, intervention aid and direct aid) has been changed),

— the price-based part of the premium for cattle adopted under the CAP reform is a form of
compensatory aid for declines in cattle intervention prices.
It is classified as subsidies on
products, in line with compensatory payments for arable crops. Despite the more complicated
treatment of the premiums prior to the CAP reform, it has been agreed not to divide them into
two, in order to provide a degree of consistency with the compensatory payments for arable
crops.

— grants for olive oil production (B1-1210),

— grants for the production of textile crops (fibre flax and hemp; B1-140),

— grants for silkworm production (B1-1420),

— grants for banana production (B1-1508, only the part relating to compensatory aid),

— grants for dried grape production (B1-1513),

— grants for seed production (B1-180),

— grants for hop production (B1-181),

— premiums for ewes and she-goats (B1-2220),

— any subsidy in the form of a deficiency payment to holders (i.e. in cases where general government
pays the producers of agricultural products the difference between the average market prices and
the guarantee prices of agricultural products).

(b) Subsidies on agricultural products paid to other economic operators

— refunds for the export of cereals (B1-100), fresh fruit and vegetables (B1-1500) etc.,

— grants for the production of oleaginous products (before 1992), protein products and flax (before

1993),

— grants for potato starch production (B1-1021),

— grants for dried fodder production (B1-130),

— grants for cotton production (B1-141),

— grants for the use of musts (B1-163),

— premiums on tobacco production (B1-171).

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All the abovementioned subsidies constitute subsidies on agricultural products. However, only grants paid to
agricultural producers (i.e. the first group) are added to the market price received by producers to obtain the
basic price. Subsidies on agricultural products paid to economic operators other than agricultural producers
(i.e. the second group) are not entered in the EAA. When the agricultural products concerned constitute
intermediate consumption of
the aid is deducted from the
intermediate consumption of the agri-food industries.

the agri-food industries,

the amount of

3.057.

Subsidies on products should be recorded at the time when the transactions or events which give rise to
them (production, sale, import, etc.) take place, so as to preserve the consistency with the other accounts
(i.e. the measurement of output at basic prices). Thus, compensatory aid for arable crops should be recorded
at the time of harvest whereas special premiums for cattle and suckler cows and premiums for ewes are
recorded at the time the animals are kept and/or the date of the grant application.

2.

Other subsidies on production

3.058.

Other subsidies on production consist of subsidies other than subsidies on products, from which resident
producer units can benefit as a consequence of engaging in production. For their other non-market output,
other non-market producers can receive other subsidies on production only if these payments from general
government depend on general regulations applicable to both market and non-market producers (cf. ESA
95, 4.36). The ESA 95 refers to four other subsidies on production (cf. ESA 95, 4.37): subsidies on payroll
or workforce, subsidies to reduce pollution, grants for interest relief, and over-compensation of VAT. These
payments relate mainly to the assumption of production costs or support for changes in the method of
production.

3.059.

Since output is valued at basic prices, only other subsidies on production are recorded in the generation of
income account (as negative uses).

(a) Type of beneficiary

3.060.

Beneficiaries of subsidies must normally produce market goods and services or goods and services for own
final use. Market goods and services are all the goods and services which are released or intended for release
on the market. They include products sold, bartered, used for payment in kind or stored prior to being put
to one or more of the above uses at a later date. Production for own final use involves products which are
preserved for purposes of final consumption or GFCF by the same unit. Nevertheless, non-market producers
may benefit from other subsidies on production if they are payable under general regulations applicable to
market and non-market producers alike.

3.061.

The production of market services also includes commercial and storage services. Subsidies can therefore
also be granted to the trade and market-regulating agencies whose function is to buy, store and resell
agricultural products (cf. 3.068 and 3.069 on market-regulating agencies).

(b)

Purposes of other subsidies on production

3.062.

Other subsidies on production can, under the ESA 95, be granted in cases where their impact on selling
prices or adequate remuneration of the factors of production are not necessarily the main purpose of the
subsidies. For example, financial aid may be granted to agricultural production in order to safeguard the
cultural and natural heritage, promote tourism in a particular region or to protect the soil against erosion,
regulate the natural water balance or influence the climate.

(c)

Payment criterion

3.063.

With the exception of interest-rate subsidies, which are a special type of subsidy, other subsidies on
production are attributed to the generation of income account of the production branches or the sectors to
which they are paid. As a result of this method of attributing subsidies, the EAA do not account for all

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grants made to agriculture. Apart from direct aid, agricultural production units benefit from subsidies
(within the meaning of the ESA 95) paid to up- and downstream production branches and, especially,
market-regulating agencies (1).

3.064.

In the case of agriculture, the most important types of other subsidy linked to production are:

— wage and payroll subsidies,

— grants for interest relief (cf. ESA 95, 4.37(c)) made to resident producer units, even when they are
intended to encourage capital formation (2). In effect, these are current transfers designed to reduce
producers' operating costs. They are treated in the accounts as subsidies to the producers benefiting
from them, even when the difference in the interest is, in practice, paid directly by the government to
the credit institution making the loan (by way of derogation from the payment criterion),

— over-compensation of VAT resulting from the application of the flat-rate systems (cf. 3.041 and 3.042),

— the assumption of social security contributions and real-estate taxes,

— the assumption of other costs such as private storage aid for wine and grape must and the re-storage of

table wines (B1-1610) (in so far as the stocks are owned by an agricultural unit),

— various other subsidies on production:

— grants

for

land set-aside (compulsory set-aside linked to acreage-based grants which were

introduced as part of the CAP reform, B1-1060, and five-year set-aside, B1-1062),

— financial compensation for withdrawals of fresh market fruit and vegetables (B1-1501). These
payments are often made to groups of market producers, and should be treated as subsidies to
agriculture, since they are direct compensation for loss of production,

— cattle premiums for seasonal adjustment
extensification (B1-2123 to B1-2125),

(‘deseasonalisation'), processing of male calves and

— grants for agricultural production in less-favoured and/or mountainous areas,

— other grants intended to influence methods of production (extensification, techniques designed to

reduce pollution, etc.),

— amounts paid to holders as compensation for recurrent losses of goods in inventories such as crop
or livestock products which are considered to be work in progress and plantations in so far as they
are still in their growth period (cf. 2.040 to 2.045). By contrast, compensatory transfers for losses
of goods in inventories and/or plantations used as factors of production are recorded as other
capital transfers in the capital account.

3.065.

Applying the accrual principle to the recording of other subsidies on production can be a delicate matter.
As it is difficult to draw up a general rule, this principle should be applied with consistency, flexibility and
pragmatism. Because a large number of subsidies to agriculture are linked to production and the factors of
production (acreage, herd, etc.), these subsidies should usually be recorded at the time of production or
when the factors of production are acquired (especially in the case of land and livestock). In the case of
subsidies which are not directly linked to production or the factors of production, it is difficult to determine
the time of the transaction which gives rise to them and to distinguish it from the time when the subsidies
are paid. In this particular case, subsidies are recorded when they are received.

(1) An important example are subsidies paid to non-life insurance companies which enable these companies to charge lower (gross)
premiums from the insurance policy holders (e.g. agricultural enterprises taking out insurance to cover risks such as damage by hail,
frost etc.). As these subsidies are subsidies on products, the product being the insurance service, they are not recorded in the
generation of income account of the policy holder (and thus not, in the above example, in the EAA). However, in as much as these
subsidies reduce the costs of the insurance services (to the insurance policy holder), their effect is reflected in the production account
(by a lower value of intermediate consumption, cf. 2.108(g)) of the insurance policy holder.

(2) However, when a grant serves the dual purpose of financing both the amortisation of the debt and the payment of interest on it, and

when it is not possible to apportion it between the two elements, the whole of the grant is treated as an investment grant.

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3.066.

The following special treatments are recommended:

— compensatory payments for arable land which is set aside: at the time when the area to be set aside is

stated,

— withdrawals of products (fruit/vegetables): at the same time as the physical withdrawal during the crop
year and not the calendar year, in order to ensure consistency between the estimation of output, less
withdrawals during the crop year, and the recording of subsidies (as negative uses) in the generation of
income account,

— grants for cattle production (extensification premium, etc.): the moment when the animals are acquired

by the holders and the date of the grant application,

— assumption of costs (including interest relief): the time when the expenditure and interest are due,

— compensation for recurrent losses affecting output (crops, livestock and plantations which are still in
their growth period, cf. 3.064): at the moment when the output is recorded in the EAA (if the exact
amount of the compensation is known with certainty),

— other subsidies not directly on products or factors of production (direct

income support, aid to
less-favoured areas, etc.):
it is recommended that the criterion depending on the time of payment
continues to be used, because it is difficult to determine when the application for compensation was
filed and whether the amounts in question are accurate.

3.067.

The EAA does not treat the following as subsidies:

— current transfers which, although they are subsidies within the meaning of the EAA, are not paid to
agricultural production units. Most of these transfers are subsidies paid to market-regulating agencies.
Although the amounts paid can affect the selling prices of agricultural products and therefore constitute
a stimulus to agriculture, they should be recorded according to the payment criterion under the heading
devoted to the branch of production which receives them,

— current transfers to agricultural producer units by a market-regulating agency. These should be recorded
as components of output of the product in respect of which the transfer is paid insofar as the
market-regulating agency is involved only in the purchase, sale or storage of the goods. If, however, the
agency is involved only in paying subsidies, then current transfers to producer units should be recorded
as subsidies (cf. 3.068 and 3.069),

— exceptional transfers by professional bodies to agricultural production units. These transfers cannot

constitute subsidies since professional bodies are not general government,

— current transfers by general government to households in their capacity as consumers. They are treated
either as social benefits or as miscellaneous current transfers. The former include certain public grants
for structural change, such as financial aid for the vocational retraining of holders,

— capital transfers: these are different from current transfers in that they involve the acquisition or
disposal of an asset or assets by at least one of the parties to the transaction. Whether made in cash or
in kind, they should result in a commensurate change in the financial, or non-financial, assets shown in
the balance sheets of one or both parties to the transaction (cf. ESA 95, 4.145). Capital transfers cover
capital taxes, investment grants and other capital transfers (cf. ESA 95, 4.147). They are recorded in the
capital account of the sector/industry as changes in liabilities and net value. Some types of aid to
agriculture are capital transfers. The most important of these are:

— grants for converting orchards/vineyards (not subject to a replanting obligation), which constitute

other capital transfers,

— grants

for
investment grants,

restructuring orchards/vineyards

(subject

to a replanting obligation), which are

— grants for the cessation of or reduction in milk production: these are recorded as other capital

transfers in so far as they have an explicit or implicit impact on the value of quotas,

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— transfers by general government to agricultural corporations and quasi-corporations intended to cover
losses due to factors beyond the

losses accumulated during several
enterprise's control. These transfers should be classified as other capital transfers,

financial years or exceptional

— compensation paid by general government or the rest of the world (i.e. from abroad and/or by the
institutions of the European Union) to the owners of fixed capital goods engaged in the production of
agricultural products, as a result of exceptional and catastrophic losses such as the destruction of or
damage to these goods caused by acts of war, other political events or natural disasters (cf. 2.045).
These payments should be classified as other capital transfers (cf. 3.096),

— cancellations of debts which the producers of agricultural products have contracted with general
government (e.g. advances from general government to a producer enterprise which has accumulated
operating losses over several financial years). The ESA 95 states that these transactions should also be
classified as capital transfers,

— the abatement or lowering of taxes on production, income or wealth is not explicitly stated in the ESA

95 or, consequently, in the EAA, since only taxes which are actually levied are accounted for,

— shares and participating interests held by general government in the capital of agricultural corporations

and quasi-corporations. These are recorded as shares and other participating interests.

(d) Market-regulating agencies

3.068.

Market-regulating agencies

— concerned exclusively with the purchase, sale or storage of goods, are assigned in a breakdown of the

economy by:

— industries, to trade; this activity is deemed by convention to be the output of non-financial market

services,

— sectors,

to non-financial corporate and quasi-corporate enterprises,

these market-regulating
agencies are considered as institutional units within the meaning of the ESA 95, and if not, to the
sector to which the larger unit belongs,

if

— concerned exclusively with the payment of subsidies, are assigned in a breakdown of the economy by:

— industries, to the branches of non-market output of general government, since only the government
(apart from institutions of the European Union) can pay subsidies according to ESA 95 ruling,

— sectors, to the sector general government (cf. preceding indent),

— concerned with both purchase, sale and storage of goods and the payment of subsidies, are assigned in

a breakdown of the economy by:

— industry, to the branch trade, as regards their units of production (of the local KAU type) which
buy, sell or store goods, and to the branches of non-market output of general government, together
with its production units,

— sectors,

to the sector general government, since only general government can pay subsidies.
Assignment to another sector would mean that the subsidies paid by the market-regulating agency
no longer constituted subsidies within the meaning of the ESA 95.

3.069.

A consequence of the strict application of the payment criterion is that various subsidies within the
meaning of the ESA 95 do not appear in the EAA, since they are recorded under the branches and sectors
to which the subsidies are paid. In particular, if market-regulating agencies are assigned to the sector general
government, subsidies paid to the agencies in connection with market-regulating processes (purchase,
storage and resale) appear as ‘Uses' but also as ‘Resources' in the sector general government. Consequently,
to other general
subsidies (i.e. other subsidies on production) may be made by general government
government agencies.

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F.

PROPERTY INCOME

(cf. ESA 95, 4.41 to 4.76)

1.

Definition

3.070.

Property income is the income receivable by the owner of a financial asset or tangible non-produced asset
in return for providing funds to, or putting the tangible non-produced asset at the disposal of, another
institutional unit (ESA 95, 4.41).

3.071.

The ESA 95 classifies property incomes in the following way:

— interest,

— distributed incomes of corporations (dividends and withdrawals from income of quasi-corporations),

— reinvested earnings on direct foreign investment,

— property income attributed to insurance policy holders,

— rents (on land and subsoil assets).

3.072.

The EAA are concerned only with property income accounted for in the entrepreneurial income account (cf.
sequence of accounts, 1.38 to 1.48). This account records on the resources side income received by units as
their direct participation in the production process (operating surplus/mixed income) and
a result of
It records on the uses side payable property income linked to
receivable property income received.
agricultural activities
the
entrepreneurial
income account can only be calculated for the institutional sectors, although it may be
calculated for an industry if certain property income can be attributed to local KAUs.

secondary activities). Generally speaking,

(and inseparable non-agricultural

3.073.

Only three types of property income can be of relevance to the EAA: interest, rents and property income
attributed to insurance policy holders.

2.

Interest

3.074.

3.075.

3.076.

3.077.

Interest is the charges payable on a capital loan. It includes payments to be made at intervals, fixed in
advance, of a percentage (fixed or otherwise) of the value of the loan. In the EAA, interest is the counterpart
of loans granted to meet the needs of agricultural holdings (for example, with a view to acquiring land,
buildings, machines, vehicles or other equipment, even if these are used in the context of inseparable
non-agricultural secondary activities).

Interest also includes payments relating to leasing of fixed capital goods for their use in agriculture (possibly
including land). Only the rent part (treated as an imputed loan granted by the lessor to the lessee) paid by
the lessee is included under payment of interest (the capital part is recorded in the financial account).

It should be noted that notional interest on fixed equity capital in agricultural holdings is not recorded
it appears as a component of the income of the agricultural enterprise (cf. 5.06).
under this heading;
Similarly, the amount to be recorded as interest payable includes interest-rate subsidies to agriculture.

Interest received in connection with agricultural activities by units belonging to corporate agricultural
enterprises should also be recorded. Interest received by individual enterprises is excluded from the measure
of entrepreneurial income of the agricultural industry, since it was felt that the majority of interest-bearing
assets are not linked to the agricultural activity of the units and because it is very difficult to distinguish
family assets from assets used in production (1).

3.078.

Interest is recorded in line with the accrual principle, i.e. as accrued interest (not as interest paid).

(1) Interest received corresponds to ‘Other accounts receivable' (F.7) in the financial account. This category includes all transactions
coming under Other accounts receivable, i.e. all financial assets created as a counterpart to financial or non-financial transactions,
insofar as there is a time difference between the time when the transaction takes place and the time when the corresponding
payment is made.

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3.079.

If the ESA 95 has a breakdown of uses of indirectly measured financial intermediation services by user
sectors and user industries, actual payments or receipts of interest to or from financial intermediaries should
be adjusted to eliminate the margins that represent the implicit charges for services rendered. The estimated
value of these costs should be subtracted from the interest paid by borrowers to financial intermediaries and
added to the interest received by depositors. The costs are regarded as remuneration for services rendered by
financial intermediaries to their clients and not as an interest payment (cf. 2.108 (i); ESA 95, Appendix I,
4.51).

3.

Rents (on land and underground deposits)

3.080.

Rents correspond to payments made to the owner of non-produced tangible assets (land and underground
deposits) in return for making assets available to another unit. In the EAA, this item corresponds mainly to
rents paid on land by holders to the landowners (1).

3.081.

3.082.

Where the owner pays certain charges directly linked to agricultural activity (property tax, the cost of
maintaining land, etc.), the rents to be recorded should be reduced accordingly. These charges are accounted
for as other taxes on production (in the case of property tax) or intermediate consumption (in the case of
land maintenance).

Rents on land do not include the rentals of buildings or dwellings situated on it; those rentals are treated as
the payment for a market service provided by the owner to the tenant of the building or dwelling, and are
to be recorded in the accounts as the intermediate consumption of services or as final consumption
expenditure (household accounts), depending on the type of tenant unit. 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 is to be recorded as rent on land. This rule is an adapted version of the ESA recommendation (cf.
ESA 95, 4.73) (2).

3.083.

All rent on land should be recorded under this heading whether the land is rented for less or more than one
year.

3.084.

Rents do not include:

— the rental value of dwellings contained in these buildings; this is remuneration for a market service
which is a component of private consumption (i.e. the occupant pays the rent from his net residual
income),

— rents paid for the professional use of non-residential buildings (cf. 2.108(a)),

— depreciation of buildings,

— current maintenance expenditure on buildings (cf. 2.106),

— property tax (cf. 3.048(a)),

— expenses relating to buildings insurance (cf. 2.108(g)).

3.085.

In the case of land and buildings used by the owner, there is no need to account for notional rents. The
rents corresponding to non-produced intangible assets such as patented assets and production rights (milk
quotas), should be recorded as intermediate consumption (cf. 2.108(n)).

4.

Property income attributed to insurance policy holders (not covered by the EAA)

3.086.

Property income attributed to insurance policy holders corresponds to total primary incomes received from
the investment of insurance technical reserves and pension funds (cf. ESA 95, 4.68). These technical reserves
are treated as assets belonging to the insured. The ESA 95 provides for the calculation of entrepreneurial

(1) Note that rents received are not relevant to the EAA due to the use of the agricultural industry concept (cf. 1.44).
(2) The ESA 95 proposes that the full amount be recorded as rent on land if the value of the land is thought to be higher than that of

the building, and as rent on buildings if the opposite is the case.

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income to include, as resources, incomes received from the investment of insurance technical reserves. This
income is attributed to the insured as property income attributed to insurance policy holders. The latter is
treated as being paid back to the insurance enterprises in the form of additional premiums, since,
in
practice, the income is retained by them (cf. ESA 95, 4.69).

3.087.

Property income attributed to insurance policy holders is not covered by the EAA. In fact, in order to be
meaningful, a measure for the income of agricultural activity should:

— include all flows related to non-life insurance (value of the service,

income attributed to insurance
policy holders, net premiums and claims): in this case, the income measured appears after description of
all
transactions of redistribution (between insurance policy holders and insurance enterprises and
between periods) linked to non-life insurance, or

— only take into account the value of the service (which is definitely acquired from the insurance
enterprise) (cf. 2.108. (g)): in this case, the income measured appears before description of all these
transactions of redistribution.

The EAA have opted for the second solution.

G.

CAPITAL TRANSFERS

(cf. ESA 95, 4.145 to 4.167)

3.088.

The only capital transfers recorded in the EAA are receivable capital transfers, i.e. investment grants and
other capital transfers. These distributive transactions are recorded in the capital account (cf. 1.41 and 1.48).

1.

Investment grants

3.089.

Investment grants are capital transfers, in cash or kind, effected by general government or the rest of the
world to other resident or non-resident institutional units with the aim of financing, in part or in full, the
cost of acquiring fixed capital goods (cf. ESA 95, 4.152). Investment grants from the rest of the world
comprise those granted directly by the institutions of the European Union via the European Agricultural
Guidance and Guarantee Fund (EAGGF) Guidance Section.

3.090.

Interest subsidies are not included under investment grants (cf. 3.064), even if they are intended to facilitate
investment transactions. It should be remembered, however, that if a grant also contributes to financing debt
retirement and the payment of interest on the capital and if it is not possible to separate it from these two
components, then the grant should be recorded in its entirety as an investment grant.

3.091.

The most important types of other grant made by the EAGGF Guidance Section and investment grants for
agriculture are:

— grants for restructuring orchards or vineyards, in so far as they are the subject of a replanting obligation

(cf. 3.067),

— reimbursement, for account of general government, of loans contracted by production units to finance

their investment,

— start-up grants to young farmers to help them finance the acquisition of assets.

3.092.

Investment grants should be recorded when payment is due (cf. ESA 95, 4.162).

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2.

Other capital transfers

3.093.

transfers cover transfers other than investment grants and capital

Other capital
taxes 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 (ESA 95, 4.164).

3.094.

Other capital transfers differ from investment grants in two aspects:

— only general government may pay out investment grants whereas all institutional units may pay out

other capital transfers,

— investment grants are limited to payments associated with the acquisition of a fixed asset whereas other

capital transfers can be linked to any form of transfer of saving or assets between units.

3.095.

Other capital transfers may take the form of compensation, by general government or by the rest of the
world, to owners of capital goods that had been destroyed by acts of war or natural disasters, such as
floods, etc. They also include transfers from general government to cover losses accumulated over several
financial years or exceptional losses from causes beyond the control of the enterprise (cf. ESA 95, 4.165).

3.096.

In the case of agriculture, other capital transfers also include:

— grants for the permanent abandonment of orchards or vineyards,

— grants for the cessation or reduction of milk production (in so far as they affect, explicitly or implicitly,

the value of quotas),

— compensation for exceptional and catastrophic losses of fixed capital goods used in the production of

agricultural goods (e.g. animals and equipment) (cf. 2.045 and 3.067),

— start-up grants to young farmers for purposes other than financing the acquisition of assets,

— grants to compensate for reductions in the value of assets or to reduce debts.

3.097.

Other capital transfers in cash are recorded when payment is due (and, in the case of transfers in kind, when
ownership of the asset is transferred or when the debt is cancelled by the creditor).

H.

CONSUMPTION OF FIXED CAPITAL

(cf. ESA 95, 6.02 to 6.05)

3.098.

3.099.

The foreseeable wear and tear and obsolescence of fixed capital goods over the accounting period represent
a charge which is implicit so long as the item is not replaced by a new acquisition. This wear and tear and
obsolescence are measured by fixed capital consumption. Its inclusion under ‘uses' in the production account
allows expenditure on fixed capital formation to be distributed over the entire period of use.

If the economic life of the means of production is more than one year, the consumption of fixed capital
represents the amount of fixed capital used up in the production process during the accounting period as a
result of normal wear and tear and foreseeable obsolescence (1).
If, on the other hand, the means of
production used have an economic life of less than one year, the wear and tear is recorded as intermediate
consumption.

(1) Including a provision for losses of fixed capital goods as a result of accidental damage which can be insured against. The value of

these provisions to be recorded is the value of the net premiums paid in respect of insured fixed capital goods.

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3.100.

All fixed capital goods (i.e. products) are the subject of consumption of fixed capital
(although some
flexibility is required in specific cases; cf. 3.105). This includes tangible and intangible fixed assets, major
improvements to non-produced assets and the costs associated with the transfer of ownership. The
consumption of fixed capital is not calculated for either stocks or work in progress, or for non-produced
assets such as land, underground deposits and patented assets.

3.101.

The consumption of fixed capital is only one component of the change in the value of assets (together with
GFCF, other changes in volume and nominal holding gains (net of losses); cf. 2.134). In particular, the
consumption of fixed capital does not include other changes in the volume of assets (other than those due
to GFCF):

— exceptional losses due to disasters (earthquakes, war, drought, epidemics, etc.),

— unforeseeable obsolescence, which is the difference between provisions made in the consumption of
fixed capital for normal wear and tear and actual losses, accidental events causing depreciation greater
than that accounted for on the basis of the anticipated consumption of fixed capital,

— changes in the classification of fixed assets, i.e. changes in their economic use, as in the case of farming

land or buildings converted for private use or a different economic use.

3.102.

3.103.

The consumption of fixed capital, which has to be distinguished from depreciation calculated for fiscal
purposes and that appearing in the company accounts, should be evaluated on the basis of stocks of fixed
capital goods and the (average) probable economic life of the various categories of goods in question. If no
information on the stock of fixed capital goods is available, it is recommended that it be calculated using the
inventory method and that its acquisition price in the reference period be evaluated (i.e. the
perpetual
replacement value of
the assets during the reference year, not on the basis of historic values). The
replacement value is ascertained from the prices which holders have to pay, during any given reference
period, to replace a fixed capital good by a new one which resembles it as closely as possible. It is necessary
to proceed in this manner in order to calculate net domestic product correctly.

The consumption of fixed capital is calculated using the linear depreciation method, i.e. by attributing the
value of the fixed capital good in question evenly throughout the period in which it is used. The rate of
depreciation is defined by the formula 100/n, where ‘n' represents the probable economic life of this
category in years (‘n' may vary from one country to another and over time). The rate of depreciation can, in
certain cases, be geometric. In view of the use of the current replacement price and the fixed rate of
consumption of fixed capital, the consumption of fixed capital varies from year to year unless the purchaser
prices remain unchanged throughout the entire normal economic life of the asset.

3.104.

The consumption of fixed capital in the form of the costs associated with the transfer of the ownership of
produced tangible and intangible assets should be calculated on the basis of an average economic life,
conventionally put at one year.

3.105.

The consumption of fixed capital in animals corresponds to the anticipated decline in the productivity of
animals if they are used for production purposes (milk, wool, etc.), which is reflected in the current value of
future income obtainable form these animals. As the value of future income from productive animals
declines over time, the animals will have to become the object of consumption of fixed capital. Given the
practical difficulties of calculating the consumption of fixed capital for this type of asset, however, it was felt
that the consumption of fixed capital should not be calculated for productive animals. The decision to
exclude animals from this calculation was based on the following considerations:

— depreciation in terms of productivity and economic value is linked to age but is not a direct, regular

and continuous function of it, as is otherwise implicitly the case for depreciation,

— the withdrawal of animals from the productive herd may be a function of the economic environment
(changes in the prices obtainable for slaughtered animals and the prices of animal feedingstuffs, etc.).

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3.106.

Although these considerations are not a hindrance to calculating the consumption of fixed capital for
livestock, they do make such calculations very complicated in terms of adequate definitions of average life
and rates of consumption of fixed capital. Otherwise, it would be difficult to ensure consistency between
forecast and actual average depreciation of animals. This treatment also ensures compatibility between the
EAA and the ESA 95 (cf. ESA 95, 6.03) and microeconomic accounts of the farm accountancy data network
and obviates the need to distinguish between livestock having the character of fixed capital goods and
livestock having the character of stock.

IV.

AGRICULTURAL LABOUR INPUT

4.01.

Agricultural employment covers all persons — both employees and self-employed — providing salaried and
non-salaried labour
(agricultural and
to the resident units performing characteristic activities
inseparable non-agricultural secondary activities) of the agricultural industry of the EAA.

input

All persons of retiring age who continue to work on the holding are included in agricultural employment.

Persons having not reached school-leaving age are not included.

4.02.

4.03.

4.04.

Employees are defined as all persons who, by agreement, work for another resident institutional unit (which
is an agricultural unit) and receive a remuneration (recorded as compensation of employees, cf. Section C of
Chapter III). The labour input provided by employees is referred to as salaried labour input. By convention,
labour of non-family workers is classified as salaried labour input. When an agricultural unit is organised as
a conventional company (cf. 5.09), all the labour input performed is classified as salaried labour input.

Self-employed persons are defined as persons who are the sole owners, or
the
unincorporated enterprises in which they work. The labour input provided by self-employed persons is
referred to as non-salaried labour input. Members of the holder's family who do not receive a compensation
which is predefined and calculated according to their actual work are classified as self-employed.

joint owners, of

In the case of specific companies (cf. Section B of Chapter V), the labour input of workers is treated in the
same manner as in unincorporated enterprises (sole proprietorships). The directors/shareholders share in the
(non-salaried labour input), whilst their employees receive a remuneration
mixed income of
(salaried labour input).

the unit

4.05.

Total hours worked represent
self-employed for resident agricultural units, during the accounting period.

the aggregate number of hours actually worked as an employee or

4.06.

A description of what total hours worked include and exclude can be found in ESA 95 (11.27 and 11.28).
Total hours worked do not cover work for the private household of the holder or manager.

4.07.

Annual work units (AWUs) are defined as full-time equivalent employment (corresponding to the number of
full-time equivalent jobs), i.e. as total hours worked divided by the average annual number of hours worked
in full-time jobs within the economic territory.

4.08.

One person cannot represent more than one AWU. This constraint holds even if someone is working in the
agricultural industry for more than the number of hours defining full time.

4.09.

4.10.

The agricultural labour input of persons who work less than full time on agricultural holdings is calculated
as the quotient of the number of hours actually worked (per week or per year) and the number of hours
actually worked (per week or per year) in a full-time job.

The number of hours actually worked in a full-time job is not necessarily the same for all categories of
labour. It is possible that the number of hours comprising a full-time job used for self-employed persons is
greater than that used for employees. For in the latter case, the maximum number of hours to be worked
are laid down in a contract.

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4.11.

4.12.

The number of hours worked by a person is not to be adjusted by some coefficient because of age (i.e.
under 16 or over 65) or gender. Equality must be applied. ‘Full-time' is determined by the number of hours
worked and not as an evaluation of an amount and/or a quality produced.

the AWU representing full-time work in
Unless there are reasons for preferring alternative sources,
agriculture should be based on the current definition in the Community surveys on the structure of
agricultural holdings, as the minimum hours required by the national provisions governing contracts of
employment. If these do not indicate the number of annual hours then 1 800 hours is to be taken as the
minimum figure (225 working days of eight hours per day).

V.

AGRICULTURAL INCOME INDICATORS

5.01.

One of the principal objectives of the EAA is to measure agricultural income and changes therein.

A.

DEFINITION OF INCOME AND BALANCING ITEMS

5.02.

5.03.

Income can be defined as the maximum amount which the beneficiary can consume over a given period
without reducing the volume of his/her assets. It can also be defined as being the total of the consumption
and change in value of assets held over a given period, all other things being equal, as income represents
what could have been consumed. The distinction made in the ESA 95 between current accounts and the
capital account enables maximum potential consumption to be studied using the measure of consumption
and saving in the current accounts and that of the change in the value of assets in the capital account.

The sequence of accounts (cf. 1.43) of the agricultural industry makes it possible to calculate three balancing
items which can be used as an income aggregate for the agricultural industry: net value added, net operating
surplus (net mixed income) and net entrepreneurial income. The relationship between these items is set out
in the following:

Production account

Generation of income account

Entrepreneurial income account

P.1

Output

B.1n

Net value added

B.2n
B.3n

Net operating
surplus/net mixed
income

P.2

–

Intermediate consump-
tion

D.1

– Compensation of

D.41 + Interest received (*)

employees

K.1

– Consumption of fixed

D.29 – Other taxes on

D.41 –

Interest paid

capital

production

D.39 + Other subsidies on

D.45 – Rent paid

production

B.2n
B.3n

= Net operating

surplus/net mixed
income

B.4n = ‘Net entrepreneurial
income'

B.1n

= Net value added

D.29 – Other taxes on

production

D.39 + Other subsidies on

production

= Net value added at
factor cost/factor
income

(*) Only interest received by agricultural units organised as companies.

5.04.

Net value added of the industry measures the value created by all the agricultural LKAUs, after the
consumption of fixed capital. Given that output is valued at basic prices and intermediate consumption is
valued at purchaser prices, net value added contains subsidies on products less taxes on products. Net value

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5.05.

5.06.

5.07.

5.08.

added at factor cost (defined as net value added at basic prices less other taxes on production plus other
subsidies on production) measures the remuneration of all factors of production (land, capital, labour) and
can be termed ‘factor income', as it represents all the value generated by a unit engaged in a production
activity.

Net operating surplus measures the yield from land, capital and non-salaried labour. It is the balance of the
generation of income account which indicates the distribution of income between the factors of production
and the general government sector. The net value added and net operating surplus are calculated for the
industries.

Net entrepreneurial
income, obtained by adding the interest received by agricultural units organised as
companies to the net operating surplus and then deducting rent (i.e. farm and land rents) and interest
payments, measures the compensation of non-salaried labour, remuneration from land belonging to units
and the yield arising from the use of capital. It is similar to the corporate-accounting concept of current
profit before distribution and taxes on income. Although net entrepreneurial income is not always calculated
for industries, it can generally be evaluated for the agricultural industry as it is possible to determine the
part of interest and rents linked exclusively to agricultural activity (and to secondary, non-agricultural
activities).

In the case of sole proprietorships, entrepreneurial income represents, on the one hand, the compensation
of the work performed by the agricultural holder (and the work of non-salaried family members) and, on
the other hand, the income remaining with the enterprise, without it being possible to separate these two
components (the term ‘holder' as used here naturally refers to all persons who run sole proprietorships in
this industry). It is, therefore, a mixed income. Like any other industry, however, the agricultural industry
institutional units: companies and sole
comprises production units that belong to different
proprietorships. There is a difference between entrepreneurial income generated by sole proprietorships and
that generated by units organised as companies. In the latter case, it represents ‘straight' entrepreneurial
income as it excludes any labour income (compensation of work has to be regarded as compensation of
paid labour even if it relates to the administrators and shareholders of the company).

types of

It has to be borne in mind that the income aggregates, obtained as balancing items of the sequence of
accounts of the industry, are not indicators of total income or of the disposable income of households
employed in agriculture, because the latter, in addition to their purely agricultural incomes, may also have
income from other sources (non-agricultural activities, remuneration, social benefits, income from property).
In other words, agricultural income must not be regarded as farmers' income. Moreover, this measure of
income relates to the income generated by agricultural activities (as well as inseparable non-agricultural
secondary activities) over a given accounting period, even though in certain cases the corresponding
revenues will not be received until a later date. It does not, therefore, constitute the income effectively
received in the course of the accounting period itself.

B.

TREATMENT OF THE INCOME OF UNITS ORGANISED ON A CORPORATE BASIS

5.09.

Sole proprietorships (or family holdings) are the most common form of agricultural units in the European
Union. However, some agricultural production units may be organised on a corporate basis and may take
the form either of conventional companies (i.e. their organisational set-up is similar to that of companies
which exist in other sectors of the economy) or of companies having more specific characteristics (as, for
for tax reasons, creates a specific separate company for the
example,
commercial part of his economic activity, or of a group of farmers who form an association with the aim of
pooling land and labour within the framework of certain types of cooperatives).

in the case of a farmer who,

5.10.

The net entrepreneurial
components:

income of

the agricultural

industry is thus made up of

the following three

— the ‘mixed' entrepreneurial income of sole proprietorships (unincorporated enterprises),

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— the ‘straight' (pure) entrepreneurial income of ‘conventional' companies,

— the ‘mixed' entrepreneurial income of companies specific to the agricultural industry.

These three components are set out in the chart under 5.11.

5.11.

‘Straight' entrepreneurial income must exclude any compensation of employees as well as any rents paid
prior to the distribution of profits. For most companies specific to agriculture, however, it is difficult to
separate the remuneration of shareholders,
It is
recommended, therefore, that the yardstick for measuring agricultural entrepreneurial income should refer
to ‘mixed'
it should include the compensation of
shareholder employees for their work as well as rents. Remuneration and rents should not, therefore, be
deducted from the calculation of entrepreneurial income in the case of these specific companies. For the
calculation of entrepreneurial income they are thus assimilated to a group of sole proprietorships. On the
other hand,
‘conventional' companies the distinction between remuneration and profit
distribution must be made clearly.

income for this type of agricultural unit,

for land and labour inputs,

from profit distribution.

in the case of

that

i.e.

C.

DEFINITION OF THE AGRICULTURAL INCOME INDICATORS

5.12.

The three agricultural income indicators can be described as follows:

— indicator A: index of the real income of factors in agriculture per AWU

This yardstick corresponds to the real net value added at factor cost of agriculture per total AWU (1).

— indicator B: index of real net agricultural entrepreneurial income, per non-salaried AWU

This indicator presents the changes in net entrepreneurial
income over time, per non-salaried AWU.
Converted into the form of an index for each Member State, it provides information on trends rather than

(1) In order to take into account part-time and seasonal work, agricultural employment or changes therein are measured in AWUs (see
Chapter IV for more details). A distinction is drawn between non-salaried and salaried AWUs, which together make up total AWUs.

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on income levels. It is most useful in those countries where agriculture is organised in the form of sole
proprietorships. On the other hand, in view of the existence of ‘conventional' companies which generate
entrepreneurial
indicator B is overestimated in comparison with a
notion of individual income. This drawback may prevent a comparison of income levels between Member
States if the proportions of ‘conventional' companies differ very much,

income exclusively with paid labour,

— indicator C: net entrepreneurial income of agriculture

This income aggregate is presented as an absolute value (1) (or in the form of an index in real terms). It
allows comparability over time of the income of the agricultural industry between Member States.

D.

AGGREGATION OF INCOME INDICATORS FOR THE EUROPEAN UNION

5.13.

5.14.

5.15.

5.16.

Indices and rates of change for the European Union as a whole can be calculated either as weighted averages
of the national indices or rates of change, or directly on the basis of EU aggregates obtained by converting
national data into euro or into purchasing power standards (PPS). In both cases, a base year has to be
chosen; either the year used to determine the shares included from the various countries in the calculation
of the Community averages, or the year whose exchange rates were used to calculate the aggregates.

Slightly different methods and different base years are used depending on whether the calculations represent
an analysis of a short-term trend (changes in year ‘n' compared with year ‘n-1') or of a long-term trend
(generally from 1980 to year n).

For the analysis of a short-term trend, the rates of change of the nominal or real income indicators of the
the
European Union for year n compared with year n-1 are calculated as weighted averages of
corresponding rates of change estimated in the Member States, the weighting coefficients being calculated
on the basis of the income aggregates for year n-1, converted into euro at the exchange rates of year n-1;
these coefficients are naturally specific for each aggregate. This method based on year n-1 appears the most
appropriate for a short-term analysis, and is the one that is most consistent with that used by individual
Member States.

For analysis of the long-term trend, the indices and rates of change of the income indicators for the
European Union are calculated on the basis of the EU aggregates expressed in euro at constant 1995
exchange rates: for values expressed in real terms (i.e. after deduction of the effect of the average rise in
prices), the deflators used are also based on 1995 = 100. This method based on 1995 appears to be the
most adequate one for describing and analysing the trends over the whole of the period from 1980 to year
n.

E.

DEFLATION OF INCOME INDICATORS

5.17.

For each Member State, the indices and the changes, in real terms, of the values of the income indicators are
obtained by deflating the corresponding nominal data with the implicit price index of GDP.

5.18.

Important factors such as reliability and comparability are points in favour of using this deflator. The
implicit price index of GDP is a general price indicator for all goods, products and services throughout the
economy. The price index of national final uses also comes into consideration as a deflator. Unlike the GDP
price index, it takes the effect of external trade equally and directly into account and thus reflects more
quickly and clearly any charges in the prices of imports (e.g. energy price movements). Nevertheless, in
order to safeguard comparability with other statistics compiled by the European Commission, it was decided
not to introduce a new deflator.

(1) This measure of income corresponds to the former measure ‘net income from family agricultural activity' for sole proprietorships.

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5.19.

Real income aggregates for the European Union as a whole are obtained by first deflating the nominal
values (at current prices) recorded in the various Member States, applying the implicit price index of GDP of
the particular Member State concerned, and then converting them into EURO (at 1995 exchange rates for
long-term analysis and at those of year n-1 for the short-term trend, as indicated above). The results are
thus added up so as to obtain the real values for the European Union. It is on the basis of these aggregates
in real terms that the indices and rates of change for the European Union are calculated, which means that
an ‘EU deflator' is never explicitly involved.

VI.

VALUATION OF EAA AT CONSTANT PRICES

A.

PRICE AND VOLUME MEASURES

(cf. ESA 95, Chapter 10)

6.01.

6.02.

6.03.

6.04.

6.05.

For the purposes of economic analysis, when looking at how values change,
it is useful to distinguish
between those value changes due to changes in volume and those due to changes in price. The ESA 95
(10.15 to 10.23) clearly states that the price component should only include changes relating to prices and
that all other changes should be included in the volume component. Thus, differences in quality between
products (physical characteristics, types of retail outlet, etc.) are to be taken into account as volume and not
price changes.

For many goods and services there exist several variations which differ in quality. The ESA 95 defines
several factors which give rise to differences in quality, but the most important for the EAA is that linked to
physical characteristics. This recognises that within the definition of a given product, there may be physical
differences which imply that the physical units (e.g. one tonne) are not identical in an economic sense. An
example of this is with two tonnes of grain sold in two consecutive years. In year one all the grain is of
milling quality, in year two, less than half is of milling quality, the rest is sold for feed. This means that the
average quality of the grain has fallen. The other difference in quality, important for the EAA, is that of a
shift in sales of a product between two differently priced markets, e.g. domestic and external, industrial use
and sales to consumers (cf. ESA 95, 10.15 to 10.18).

The indicators of volume and price used to compile data at constant prices have to take account of changes
in quality. It is therefore recommended that work is conducted at the greatest level of detail in order to get
as close as possible to entirely homogeneous elementary products. If the elementary products are entirely
homogeneous, changes in volume can be estimated on the basis of changes in quantity.

However, statistical information is often only available at a more aggregated level and therefore no longer
concerns strictly homogeneous products. In this case, the ESA 95 (10.32) states that it is preferable to
deflate the value for the current year by a suitable price index to estimate changes in volume.

The level of detail for which the index used is assumed to be an elementary index (the product under
investigation is thus considered as homogeneous) is called the elementary level of aggregation. In the EAA,
the elementary level of aggregation corresponds at least to the most disaggregated level of the nomenclature
within the data transmission table. A greater level of detail is, however, desirable for compiling price indices.

6.06.

For each aggregate of goods and services shown in the accounts, price and quantity measures have to be
constructed so that

value index = price index × volume index

This means that each and every change in the value of a given flow must be attributed to either a price
change or a change in volume or a combination of the two (cf. ESA 95, 10.13).

6.07.

The systematic breakdown of the changes in current value into the components ‘changes in price' and
‘changes in volume' is restricted to flows representing transactions of goods and services and to elements
concerned in the valuation of these transactions (output, intermediate consumption, consumption of fixed
capital, gross value added, net value added, GFCF, change in stocks, taxes and subsidies on products).

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B.

1.

6.08.

PRINCIPLES AND METHOD FOR COMPILING EAA AT CONSTANT PRICES

Choice of index formula

The ESA 95 (10.62) expresses a preference for using Fischer indices. These indices present a certain number
of disadvantages, however, including the fact that they are non-additive and that they demand a considerable
quantity of basic data. For this reason,
the ESA 95 grants that an acceptable method is to use a
Laspeyres-type index of volume and a Paasche-type index of prices.

6.09.

In accordance with the recommendations of the ESA 95, in the EAA, changes in volume are measured using
Laspeyres-type indices and changes in price are measured using Paasche-type indices.

Laspeyres volume index:

P p0qn
P p0q0

=

qn
P p0q0
q0
P p0q0

qn
P V0
q0
P V0

=

LðqÞ =

Paasche price index:

P qnpn
P qnp0

=

pn
P p0qn
p0
P p0qn

PðpÞ =

For each elementary product:

— p0: represents the price recorded in the base year 0,

— pn: represents price recorded in year n,

— q0: represents the quantity recorded in the base year 0,

— qn: represents the quantity recorded in year n,

— V0: represents the value recorded in the base year 0: (V0 = p0q0).

2.

Base year

6.10.

Changes in volume are measured using Laspeyres-type indices: changes in the quantities of elementary series
are therefore weighted by the value in the base year. Changes in price are measured using Paasche-type
indices: changes in the prices of elementary series are therefore weighted by the value in the current year at
the prices for the base year.

6.11.

The base year is the year from which the prices are used to compile the weighting scheme.

6.12.

The most accurate way to measure changes in volume from one year to another is to use the most recent
base year available. This approach guarantees that weightings are relatively up-to-date and avoids problems
linked to weighting products that are no longer produced and new products that have emerged. It is for this
reason that the EAA measures changes in volume using the weightings for the preceding year.

3.

Presenting series in relation to a reference year

6.13.

6.14.

6.15.

The year used for submitting and presenting data at constant prices may be different from the base year; it
is called the reference year. In a series of indices, the reference year is the one that takes the value 100.

Series of volume indices in the prices of a reference year are obtained by chaining indices calculated in the
prices of the preceding year (cf. ESA 95, 10.64).

It is important that a change of reference year has no effect on the changes in volume with respect to the
preceding year. It is for this reason that EAA data are presented in relation to a fixed reference year by
re-referencing each variable separately, regardless of whether these are aggregates or elementary indices.

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6.16.

Example:

Let us consider two homogeneous elementary products, A and B. The following series are based on the
price structure for the preceding year:

The volume and price indices for the whole (A+B) depend on the weighting given to each product, A and B.

90P90

90-91 vol-
ume index

91P90

A

B

Total

100

300

400

105,0

110,0

108,8

105

330

435

90-91
price
index

110,0

95,0

98,6

91P91

115

314

429

91-92
volume
index

102,0

90,0

93,2

92P91

117

283

400

92-91
price
index

108,0

105,0

105,8

92P92

126

297

423

If these series are expressed in relation to a fixed reference year (e.g. 1990), the only way to retain the same
n/n-1 volume indices is to chain the indices separately. This gives the following series (base equal to 100 in
1990):

1990

1991

1992

A

B

Total

100

100

100

105,0

107,1

110,0

99,0

108,8

101,4

(101,4 = 108,8*93,2/100)

The values at constant prices expressed in relation to the reference year 1990 are:

1990

1991

1992

A

B

Total

100

300

400

105

330

435

107,1

297,0

405,6

(405,6 = 400*101,4/100)

As a result, the account is no longer additive. Adding the values at constant prices for A and B gives the
following series:

1990

400

1991

435

1992

404,1

A + B

Other than in the year following the reference year, the re-referenced series are not additive.

6.17.

According to ESA 95 (10.67), the non-additive constant price data are published without any adjustment (1).
This is also the approach taken by the EAA. It is to be explained to users, however, that the tables are not
additive.

4.

Calculation of value added at constant prices

6.18.

Value added constitutes the balancing item of the production account. As such, it is not possible to split
value added directly into a price component and a volume component. The theoretically correct method for
calculating value added at constant prices is to carry out ‘double deflation' (cf. ESA 95, 10.27 – 10.28).

(1) This does not preclude the possibility that there may be circumstances in which compilers may judge it preferable to eliminate the

discrepancies in order to improve the overall consistency of the data.

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6.19.

Gross value added expressed in the prices of the preceding year is therefore defined as the difference
between output measured in the prices of the preceding year and intermediate consumption measured in
the prices of the preceding year. Net value added in the prices of the preceding year is defined as the
difference between gross value added in the prices of the preceding year and consumption of fixed capital in
the prices of the preceding year. The value added in prices of a fixed reference year is obtained by
re-referencing.

6.20.

Example:

A series of current values and values in the prices of the preceding year (volumes) concerning output and
intermediate consumption is set out below:

95P95

96P95

96P96

97P96

97P97

Output

Intermediate consumption

150

40

160

30

170

35

180

40

200

45

The value added in volume terms is obtained by deducting the volume of intermediate consumption from
the volume of output. The following series is derived:

Gross value added

110

130

135

140

155

95P95

96P95

96P96

97P96

97P97

In this way, the following volume indices in the prices of the preceding year are obtained:

Gross value added

1996

118,2

1997

103,7

(118,2 = 130/110*100) (103,7 = 140/135*100)

The gross value added of year n in 1995 prices is derived by multiplying the current value for 1995 by the
volume chain index.

VA 96 (in 1995 prices) = 110*1,182 = 130

VA 97 (in 1996 prices) = 110*1,182*1,037 = 135

5.

Breakdown of taxes and subsidies on products into volume and price components

6.21.

6.22.

6.23.

The breakdown of valuations at basic price into respective volume and price components presupposes that
this breakdown also applies to the taxes and subsidies on products. The choice made in the EAA is the
following one:

The volume index of the subsidy (or the tax) on product is identical to the volume index of the output at
the producer price. In this case, the volume index of the output is the same whether expressed in the
producer price or in the basic price.

This solution has another advantage:
the method of valuation.
Consequently, the interpretation of the price and volume indices at the basic price, is straightforward: for a
perfectly homogeneous basic product, the volume index is identical to the quantity index; the price index
reflects the change in the average basic price.

the volume index is independent of

6.24.

Example:

For a given product, the value of output at the producer price in year n is 1 000; the value of output in year
n+1 is 900. The volume index of output is 102.

This product is subsidised. The value of the subsidy for year n is 100; the value of the subsidy for year n+1
is 150.

5.2.2004

EN

Official Journal of the European Union

L 33/81

The volume/price breakdown of the subsidy is carried out in the following way:

Output at producer prices

Subsidy on products

Output at basic prices

Value n

1 000

100

1 100

n+1/n vol-
ume index

Volume n+1

n+1/n price
index

Value n+1

102,0

102,0

102,0

1 020

102

1 122

88,2

147,0

93,6

900

150

1 050

The volume index of the subsidy is the same as that of the output at the producer price.

L 33/82

EN

Official Journal of the European Union

5.2.2004

ANNEX II

TRANSMISSION PROGRAMME OF EAA DATA

For each of the output items (items 01 to 18, including sub-items), the value at basic prices as well as its components
(value at producer prices, subsidies on products and taxes on products) have to be transmitted.

The data for production account and for GFCF have to be transmitted at both current and constant prices.

All values should be expressed in millions of units of the national currency. Labour input should be expressed in 1 000
AWUs.

1. Production account

Item

List of variables

01

01.1

Cereals (including seeds)

Wheat and spelt

01.1/1

Soft wheat and spelt

01.1/2

Durum wheat

01.2

01.3

01.4

01.5

01.6

01.7

02

02.1

Rye and meslin

Barley

Oats and summer cereal mixtures

Grain maize

Rice

Other cereals

Industrial crops

Oil seeds and oleaginous fruits (including seeds)

02.1/1

Rape and turnip rape seed

02.1/2

Sunflower

02.1/3

Soya

02.1/4

Other oleaginous products

02.2

02.3

02.4

02.5

Protein crops (including seeds)

Raw tobacco

Sugar beet

Other industrial crops

02.5/1

Fibre plants

02.5/2

Hops

02.5/3

Other industrial crops: others

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

X

X

—

—

X

X

X

X

X

X

X

X

—

—

—

—

X

X

X

X

—

—

—

X

X

—

—

X

X

X

X

X

X

X

X

—

—

—

—

X

X

X

X

—

—

—

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

5.2.2004

EN

Official Journal of the European Union

L 33/83

Item

List of variables

03

03.1

03.2

03.3

04

04.1

Forage plants

Fodder maize

Fodder root crops (including forage beet)

Other forage plants

Vegetables and horticultural products

Fresh vegetables

04.1/1

Cauliflower

04.1/2

Tomatoes

04.1/3

Other fresh vegetables

04.2

Plants and flowers

04.2/1

Nursery plants

04.2/2

Ornamental plants and flowers (including
Christmas trees)

04.2/3

Plantations

05

06

Potatoes (including seeds)

Fruits

06.1

Fresh fruit

06.1/1

Dessert apples

06.1/2

Dessert pears

06.1/3

Peaches

06.1/4

Other fresh fruit

06.2

Citrus fruits

06.2/1

Sweet oranges

06.2/2

Mandarins

06.2/3

Lemons

06.2/4

Other citrus fruits

06.3

06.4

Tropical fruit

Grapes

06.4/1

Dessert grapes

06.4/2

Other grapes

06.5

Olives

06.5/1

Table olives

06.5/2

Other olives

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

X

—

—

—

X

X

—

—

—

X

—

—

—

X

X

X

—

—

—

—

X

—

—

—

—

X

X

—

—

X

—

—

X

—

—

—

X

X

—

—

—

X

—

—

—

X

X

X

—

—

—

—

X

—

—

—

—

X

X

—

—

X

—

—

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

L 33/84

EN

Official Journal of the European Union

5.2.2004

Item

List of variables

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

07

07.1

07.2

08

09

09.1

09.2

09.3

10

11

11.1

11.2

11.3

11.4

11.5

11.6

12

12.1

12.2

12.3

Wine

Table wine

Quality wine

Olive oil

Other crop products

Vegetable materials used primarily for plaiting

Seeds

Other crop products: others

Crop output (01 to 09)

Animals

Cattle

Pigs

Equines

Sheep and goats

Poultry

Other animals

Animal products

Milk

Eggs

Other animal products

12.3/1

Raw wool

12.3/2

Silkworm cocoons

12.3/3

Other animal products: others

13

14

15

15.1

15.2

Animal output (11+12)

Agricultural goods output (10+13)

Agricultural services output

Agricultural services

Renting of milk quota

X

—

—

X

X

—

—

—

X

X

X

X

X

X

X

X

X

X

X

X

—

—

—

X

X

X

—

—

X

—

—

X

X

—

—

—

X

X

X

X

X

X

X

X

X

X

X

X

—

—

—

X

X

X

—

—

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

5.2.2004

EN

Official Journal of the European Union

L 33/85

Item

List of variables

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

16

17

Agricultural output (14+15)

Non-agricultural secondary activities (inseparable)

17.1

Processing of agricultural products

17.2

Other inseparable secondary activities (goods and
services)

18

19

Output of the agricultural industry (16+17)

Total intermediate consumption

19.01

Seeds and planting stock

19.02

Energy; lubricants

19.02/1

— electricity

19.02/2

— gas

19.02/3

— other fuels and propellants

19.02/4

— other

19.03

Fertilisers and soil improvers

19.04

Plant protection products and pesticides

19.05

Veterinary expenses

19.06

Animal feedingstuffs

19.06/1

— feedingstuffs supplied by other agricultural

holdings

19.06/2

— feedingstuffs purchased from outside the

agricultural industry

19.06/3

— feedingstuffs produced and consumed by the

same holding

19.07

Maintenance of materials

19.08

Maintenance of buildings

19.09

Agricultural services

19.10

Other goods and services

X

X

X

X

X

X

X

X

—

—

—

—

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

—

—

—

—

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

L 33/86

EN

Official Journal of the European Union

5.2.2004

Item

List of variables

20

Gross value added at basic prices (18-19)

21

21.1

21.2

21.3

21.4

Fixed capital consumption

Equipment

Buildings

Plantations

Others

22

Net value added at basic prices (20-21)

2. Generation of income account

Item

List of variables

23

24

25

26

27

Compensation of employees

Other taxes on production

Other subsidies on production

Factor income (22–24+25)

Operating surplus/mixed income (22-23-24+25)

3. Entrepreneurial income account

Item

List of variables

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

X

X

—

—

—

—

X

X

X

—

—

—

—

X

X

X

X

X

X

X

X

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

28

29

30

31

Rents and other real estate rental charges to be
paid

Interest paid

Interest received

Entrepreneurial income (27-28-29+30)

X

X

X

X

X

X

X

X

X

X

X

X

5.2.2004

EN

Official Journal of the European Union

L 33/87

4. Elements of the capital account

Item

List of variables

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

32

32.1

32.2

33

33.1

33.2

33.3

34

35

36

37

37.1

37.2

GFCF in agricultural products

GFCF in plantations

GFCF in animals

GFCF in non-agricultural products

GFCF in materials

GFCF in buildings

Other GFCF

Gross fixed capital formation (excluding
deductible VAT) (32+33)

Net fixed capital formation (excluding deductible
VAT) (34-21)

Changes in stocks

Capital transfers

Investment grants

Other capital transfers

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

X

X

X

X

X

X

X

X

X

X

X

X

X

5. Agricultural labour input

Item

List of variables

Transmission concerning reference year n

November
year n
(estimates)

January
year n+1
(estimates)

September
year n+1

38

38.1

38.2

Total agricultural labour input

Non-salaried agricultural labour input

Salaried agricultural labour input

X

X

X

X

X

X

X

X

X