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# Table 2 United Nations Definitions of Value Added

# General Definition

"Value added is the increment to the value of commodities and services that is contributed by the producing establishment, that is, the value created by the establishment. Aggregated for all establishments in a given industry, value added is the incremental value of goods and services attributable to that industry". "Value added avoids the duplication in the value of shipments (or production) which results from the inclusion of shipments of establishments producing materials and components together with the shipments of establishment! producing finished products. Therefore, value added is considered to be the best value measure for comparing the relative economic importance of different industries and geographical areas".

# Census Concept of Value Added

"Respondents do not report value added but rather the items required for the calculation of value added. Value added, in the census concept, is defined as the value of output less the cost of matc.ials and industrial services used. The calculation of value added is made by the national statistical organisation in the processing of the establishment data".

# National Accounts Concept of Value Added

"Value added, defined in the above manner, is not net value created in relation to the economy as a whole but is net only in terms of the agricultural and industrial sectors of the economy. To derive a wholly net value added, it is necessary to exclude, in addition to the cost of materials and purchased industrial services, the purchases of non-industrial services, and to include non-industrial receipts. This additional calculation moves towards value added in the national accounting sense. The national income concept in the national accounts also excludes depreciation charges, that is, the consumption of fixed capital".

"The collection of data on the cost of non-industrial services at the establishment level is, however, fraught with difficulty in the case of multi-unit enterprises. In such enterprises, data are only available at that level for certain non-industrial services, such as communication costs and rental payments. Other non-industrial services, such as advertising or legal, accounting and other professional services, are charged at the enterprise or divisional level. Such charges might be allocated back to the individual establishment of the enterprise, either according to the proportion of total enterprise wages and salaries or value added represented by each establishment, or by assigning to each establishment of the multi-unit enterprise estimated costs for the specified service as reported by singleunit enterprises of similar size and in the same type of industry. Alternatively, total payments for non- ndustrial services might be estimated by the national accounts staff. To some extent, the same situ'ation exists in relation to the collection of deta on receipts for non-industrial services, and corresponding solutions should be attempted".

Source: Abstract of paras. 162-7 of United Nations, Statistical Pa ers, Series M No. 71 (Part 1), Recommendations for the 1983 World Programme of Industrial Statistics, Part One, General Statistical Objectives, New York, 1981.