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About
SNA News and Notes
SNA News and Notes
Issue 5, January 1997
Revision of the functional classifications
In chapter 18 the 1993 System of National Accounts outlines four functional
classifications of expenditure:
- the classification of the functions of government (COFOG)
- the classification of individual consumption by purpose (COICOP)
- the classification of the purposes of non-profit institutions serving
households (COPNI)
- the classification of outlays of producers by purpose (COPP)
All four functional classifications (which are also called classifications
of expenditures by purpose) are currently being revised under the lead of
OECD and UNSD. The revised formats will be discussed at the next joint OECD/Eurostat/ECE
national accounts meeting mid 1997. It is expected that the revision process
will be completed in the second half of 1997. It is proposed that both organizations
prepare a publication on all functional classifications which will be submitted
to the Statistical Commission in 1999.
The following article gives an update on the status of the revision
process. The section on COFOG, COICOP and COPNI has been prepared by OECD
whereas the section on COPP was contributed by UNSD.
COFOG, COICOP and COPNI
There is a distinct overlap between the three classifications COFOG, COICOP
and COPNI because COICOP covers the expenditures of non-profit institutions
serving households (NPISHs) and the individual consumption expenditures
of government as well as expenditures of households.
The OECD has produced drafts of both COICOP (which also includes COPNI)
and COFOG, and they have been presented for comments to the Eurostat Working
Group on National Accounts. In addition, the first draft of COICOP has
been widely circulated by UNSD, extending the involvement in the revision
process to all United Nations member states, including developing countries.
Comments were received from about forty national statistical offices and
were taken into account at later stages of the revision by the OECD. Similar
arrangements are in place to obtain the views of the widest possible circle
of countries for the revision of COFOG as well.
COICOP consists of 14 divisions. Divisions 01 to 12 cover the individual
consumption expenditures of households; division 13 covers the individual
consumption expenditures of NPISHs; and division 14 covers the individual
consumption expenditures of government. The disaggregations defined for
division 13 are, in effect, COPNI in its entirety. The disaggregations
defined in division 14 are a subset of those defined for COFOG, and they
relate to those groups and classes of COFOG which SNA93 defines as individual
(rather than collective) expenditures.
Divisions 01 to 12 are considered final by the OECD and Eurostat, but
divisions 13 and 14 cannot be finalised until COFOG is completed because
of the close links between these three classifications. Work on establishing
links between COICOP and the Central Product Classification (CPC) has
progressed significantly but is not yet final.
COFOG is being drafted so that government expenditures on individual
services and applied research and development (R&D) are clearly identified
by function. A new division on expenditures on environmental protection
is being considered, although an alternative is also being investigated
for such expenditures is to identify them in a sub-category under each
of the other divisions (similar to the treatment proposed for R&D). In
this way, total expenditures on the environment can be identified as well
as the amounts spent on the environment within each major category of
government.
COPP
UNSD is revising the fourth classification of the "family" of the functional
classifications which is the Classification of Outlays of Producers by Purpose
(COPP). A paper which describes criteria to structure the new COPP was circulated
to the members of ISWGNA. A revised version of the current UNSD paper will
be soon circulated to a larger audience for comments.
In the first place, it is proposed that COPP reflect purposes of expenditures
in support of the production process such as research and development,
sales promotion, etc. An effort will also be made to harmonize COPP with
the main divisions of the other functional classifications, in particular
when the latter reflect concerns responded to by government and households
that are also addressed by enterprises. This applies for instance to health,
education and environmental protection. In particular COPP may be used
to identify production related data of ancillary activities of enterprises
which are not treated as establishments in the traditional SNA analysis,
but which need to be identified as separate units in satellite accounts
dealing with issues such as R&D, human resources, environmental protection,
etc. Consequently, COPP will also be harmonized with classifications of
economic activities and products such as ISIC and CPC.
Implementation of the 1993 SNA in Canada
by Mr. Kishori Lal, Director General, System of National Accounts Branch,
Statistics Canada
Statistics Canada has just completed a project detailing a comprehensive
plan for the historical revision of the Canadian system of national accounts
and the implementation of the 1993 SNA. This is documented in the Detailed
Record of Issues, Discussion Notes and Decisions released by the System
of National Accounts Branch of Statistics Canada. It must be considered
as work in progress; as we implement the decisions, changes may be required
and these will be incorporated in the final document to be issued at the
completion of the historical revision in the fall of 1997.
We have made some 150 decisions, a number much higher than was expected
at the beginning of the excercise last year. More than 50 professionals,
mostly from the SNA Branch, have been involved in this project. The involvement
of so many professionals may appear cumbersome but this mode was deliberately
chosen so that the decisions would be "owned" by the very person who will
implement them. A very important feature of the excercise is the harmonization
and reconciliation of the data series developed according to SNA conventions
and those of the Financial Management System (FMS is the Canadian version
of the IMF's Government Financial Statistics manual, GFS) for government
sector statistics. Last year, the Auditor General of Canada expressed
concern regarding the difficulties faced by the users in understanding
the different definitions and conventions in the public accounts, the
SNA and the FMS on such subjects as deficit or public debt of the federal
government. Some 70 decisions, in the two chapters on the public sector
universe and the FMS/SNA harmonization, when implemented, will harmonize
or reconcile the statistical series in the three accounting systems. Changes
developed in these two chapters should, we hope, prove useful to those
at the IMF responsible for the preparation of the revised GFS manual to
more closely align with the 1993 SNA.
Copies of the Record of Decisions on the SNA implementation (in electronic,
printed or diskette form) or additional details are available upon request
to my office:
System of National Accounts,
Statistics Canada, Ottawa, Ontario, Canada K1A OT6,
fax +613-951-9031,
e-mail: lalkish@statcan.ca
Microcomputing package for national accounts compilation
by Michel Séruzier, National Accounts consultant at INSEE and Eurostat
With the new SNA many countries have started an effort to modernize
their national accounts. This is all the more important as the demand
for high quality macroeconomic information from both national economic
agents and from the international level is increasing due to the progressing
globalization of the world economy. In most cases this modernization effort
starts with a computerization of the compilation processes. This has the
advantage of simultaneously satisfying the demand for higher transparency
with regard to the compilation procedures employed.
France has a longstanding tradition of responding to requests for technical
cooperation in the field of national accounts. The expertise acquired
over the years was reflected in various publications. The demand for cooperation
has evolved over time and so have the means to respond to it. Not only
more attention is given to the needs for computerization, but also to
the need for greater efficiency in the transfer of technology.
This is the reason why the French Ministry of Cooperation and Eurostat
decided to join forces for a pilot project under the leadership of INSEE
in order to develop a micro-computing product, which did not only incorporate
the relevant experiences, but which was also adapted to the framework
of the new SNA. This product was developed in cooperation with three French
speaking African countries (Central African Republic, Cameroon, and Cote
d'Ivoire), countries which in the meantime use the new system for the
compilation of their accounts. A general commercial version in French
will be released shortly. The completion of this product was possible
because of a close cooperation between a national accounts expert and
a team of professional programmers.
Features of 'ERETES'
The 'ERETES' software is structured around a relational data base. It is
portable and permits to distinguish separate sub-modules. Each country decides
upon the appropriate classifications to be used and chooses among a certain
number of methodological tools.
ERETES is based on team work of a more or less significant number of
national accountants. A PC-type server permits to control the entire compilation
process. It also supports the reconciliation phase. The work is distributed
for certain phases over various work stations. Every expert is responsible
for a data subset, which is processed according to a pre-specified manner
suggested by the software.
The overall compilation process is organized in three phases:
- data collection
- analytical work (balancing of supply and use, of the industry accounts
and of the transaction matrices)
- cross-sectional tasks related to the analytical work
For the most frequent tasks, special tools are being offered, which ensure
an automatic interface with the data base. It is for instance possible to
download certain data into a spreadsheet. No automatic reconciliation of
statistical discrepancies is suggested, leaving the responsibility of making
certain adjustments entirely to the national accountant. Finally, the software
offers the following features to facilitate the work of the accounting team:
- a control screen, in order to follow the various tasks being executed
- a note pad, in order to store information on decisions taken or difficulties
encountered
- an on-line help function, which is linked to the different screens,
offering all relevant information related to a specific task
The proposed methodology is an integrated one: A statistical source is fed
to all users in a unique pre-specified manner. Furthermore, the proposed
method allows to indirectly estimate data items, which are often not covered
by the statistics. The informal or hidden economy, insufficient basic information
or various forms of fraud. This requires of course a well coordinated procedure
of working with the given data base and the establishment of a clear iterative
process leading progressively to the final reconciliation. At that point,
tools are being offered, which permit to organize publication of the results
and to transfer the accounts into the data base to be used for the compilation
of subsequent years.
In its present form the software offers a coherent instrument for the
annual compilation of the supply and use table and the industry accounts
at constant prices. It does not yet provide the same infrastructure for
the elaboration of institutional sector accounts, however, the data base
certainly constitutes an excellent starting point for such efforts.
IMF Expert Group raises issues on financial elements
of SNA
by Kevin O'Connor, Assistant Director, Statistics Department, IMF
The IMF is well advanced in producing a new Manual on Monetary and Financial
Statistics. As part of the final stages of review, an Expert Group on
Monetary and Financial Statistics was convened at IMF headquarters in
November 1996. The Expert Group consisted of representatives of each of
the member constituencies of the IMF, and representatives of international
statistical organizations and regional central banks.
The objectives of the Manual include providing standard concepts and
definitions to facilitate the compilation and presentation of comprehensive,
timely, and useful monetary and financial statistics. A key objective
is harmonization with the 1993 SNA. In this regard, the Group recommended
several changes to the SNA methodology, and indicated that several other
issues raised key methodology questions that should be further reviewed.
As with all such recommendations, changes to the SNA can only be made
by the ISWGNA and only when there is very substantial support for such
changes.
Recommendation 1: Settlement payments on interest rate swaps, FRAs,
and similar instruments
The Expert Group agreed that settlement payments on interest rate swaps,
forward rate agreements (FRAs), and similar instruments should be treated
as financial transactions rather than as property income payments (interest)
as recommended in the present SNA standards (§ 11.34). This has been a contentious
issue, but based on the strength of the views expressed in favor of the
change, and changes in position by some experts, the Expert Group came to
a recommendation that the SNA standards should be changed. The recommendation
for change was based primarily on evidence of changes in market practice
since the SNA standard was developed. Originally, it was believed that many
or most transactions in these financial derivatives were matched with lending
transactions and by their nature affected the actual effective interest
cost of the borrowing. Such practices continue, and are explicitly recognized
in financial accounting standards. However, it was felt that a significant
change had occurred in market practices and that at present the vast majority
of transactions in these instruments is related to market positioning and
trading between banks and other financial institutions. These transactions
are basically financial in nature. It was also argued that it is not possible
within the SNA framework to have property income payments without property,
which also creates difficulties in measurement and in interpretation.
This is a significant change in methodology that will directly affect
recorded interest flows with the rest of the world and with other sectors
of the economy and will also affect recorded transactions in securities.
Also, to the degree that the settlement payments related to these financial
derivatives are used to hedge volatility in actual interest flows, a change
in methodology may result in increases in recorded volatility of interest
flows. It should be noted that some compilers are seeking relatively quick
resolution of this issue because of the need to design new data collection
surveys for financial derivatives. If this change is adopted, it will
also be reflected in the Fund's balance of payments methodology.
Recommendation 2: Classification of institutional units that regulate
financial institutions
The Expert Group was in general agreement that separate institutional units,
including public bodies, that are primarily involved in regulating financial
institutions be classified as financial auxiliaries rather than as part
of the central bank subsector as recommended in 1993 SNA. In many countries,
the central bank acts as the regulator or supervisor of banks and other
financial institutions, but there was agreement that separate units that
act as regulators or supervisors of the financial sector should be classified
as auxiliaries because they are not intermediaries by nature. This is in
accordance with the standards adopted in the ESA.
Issue for consideration: Treatment of headquarters offices of regional
central banks
An issue left unresolved by the Expert Group was whether the assets and
liabilities of the central office of a regional central bank are allocated
to the member countries, or whether it is nonresident to its membership
and thereby holds it own assets and liabilities. Two regional central banks,
Banque des Etats de l'Afrique Centrale (BEAC) and Eastern Caribbean Central
Bank (ECCB), indicated that they were following the current SNA treatment
(i.e. apportioning all transactions and balances to member states), but
the European Monetary Institute (EMI) indicated that it had only recently
begun to review the issue and was not yet in a position to indicate a preference
for either treatment.
It is possible that significant differences exist between the structure
and practices of regional central banks and that different treatments
may be appropriate. The regional banks that existed when the present SNA
standards were developed tended to have unified structures, but it appears
that the national and regional central banks under the prospective system
in Europe might legitimately be viewed as separate institutional units.
The Group noted that on this issue the analytical needs of the banks themselves
should receive priority in deciding on the methodology. The treatment
of this issue may also affect the balance of payments and international
investment position.
Issue for consideration: Full Accrual Accounting of Interest
There was also a suggestion to clarify the treatment in the 1993 SNA of
interest accruals on tradable debt securities by applying current market
interest rates, rather than the interest rates at time of issue, to calculate
interest flows. It was argued that this methodology was consistent with
the requirements to use current valuations within the accounts, prevented
discrepancies between the positions and transactions of creditors and debtors,
and was needed to properly balance transactions and positions within the
accounts.
The Chairman of the Expert Group indicated that the proposal raised
substantial questions, and indicated that the SNA 1993 implicitly uses
the debtor's viewpoint in order to derive measures of interest accruals.
The Expert Group itself did not discuss the issue at length, nor did it
take any position on its merits, but the Chair indicated that the ISWGNA
would be notified in the hope that further discussions would clarify the
SNA position. The Chair also noted that government interest transactions
and fiscal balances might be affected.
Clarification: Offsetability on the market as a criterion for establishing
the value of financial derivatives
The Expert Group agreed that "offsetability on the market" is applicable
under the existing SNA standards as evidence of value for the purpose of
establishing the asset boundary for financial derivatives (§ 11.28, 11.34).
Offsetability is the ability to close out positions by entering into matching
positions in the market in closely related instruments. The ability to do
so is taken as evidence that the financial derivative has a measurable value.
The values are commonly used by market participants, and are also used under
financial accounting standards.
There was consensus on this issue. The European System of Accounts (ESA)
also explicitly recognizes offsetability. This was considered by the Expert
Group to be a point of clarification of the SNA standards and no change
in the basic standards is implied. Notification to compilers is appropriate.
As a practical matter, this clarification results in inclusion of a fairly
broad range of financial derivatives within the financial asset boundary,
but some financial derivatives remain outside the financial asset boundary.
More technical work remains to determine precisely which practices constitute
offsetability.
Update: SNA 1993 on CD-ROM
As announced in the previous SNA News and Notes the SNA 1993 on CD-ROM was
published in July 1996. Users have expressed their satisfaction and emphasize
the usefulness of features such as full-text searches, indices, hyperlinks
and bookmarks. As any new product the SNA 1993 CD-ROM is not entirely 'bug-free':
So far, two minor problems have been discovered referring to chapter printing
and the index. Here are the solutions:
1. When selecting any of the 'Print Chapter' options from the file menu,
a message will appear, saying that the "PRMANY.DLL" file cannot be found.
This file is actually missing on the CD. Please, contact UNSD via E-mail,
so that we can send you the "PRMANY.DLL" file. Copying it into the /windows/system/
directory will solve the problem. You can download it from here.
DOWNLOAD PRMANY.DLL FILE . We also made this file available on our
UNSD homepage under SNA News and Notes for downloading. Please note that
the print topic command works properly.
2. The link to the "H" entries is inadvertently missing in the SNA-CD
book index. These entries can be accessed as follows: On the main SNA-CD
screen click on "Search"; type in "handbook" on the search line; click
on "Selected topics groups" in the lower left-hand column of the search
window and "book index" in the right-hand list of "topic groups", then
ENTER; "Index H" will come up in the Search Result window; selecting it
with ENTER will bring up the "H" list.
Some users have experienced difficulties in viewing the SNA tables.
This is due to incorrect installation of the CD-ROM: Page 2 (column 2)
of the SNA-CD booklet describes in detail how the table view function
has to be activated in a separate step by specifying the working directory.
Training activities in the field of national accounts
Many institutions are offering a variety of training programmes related
to the new SNA. Two of these programmes are presented in the following:
Statistical Institute for Asia and the Pacific (SIAP):
SIAP was established in Tokyo in 1970 as an international centre to bring
about regional co-operation in training government statisticians from
developing countries of the region. The centre piece of the Institute's
training programme is the Group Training Course in Practical Statistics.
It is a 6 months course which focusses on the practical aspects of statistics
relating to the work of relatively new official statisticians. In the
last 3 months of the course the participants have the option to specialize
in one topic, national accounts being one of the choices.
A national accounts module is also included in other training courses
of SIAP such as the Special Group Training Course in Analysis and Interpretation
of Statistics for middle-level statisticians, and the Country Courses
on special issues. The duration of the former course is 2 months.
Further information can be obtained from the
United Nations Statistical Institute for Asia and the Pacific (SIAP),
Economic Cooperation Centre Bldg., Annex 2F,
42 Honmura-cho, Ichigaya, Shinjuku-ku, Tokyo 162, Japan,
tel. +81-3-3357-8351,
fax +81-3-3341-1298 or +81-3-3356-8305; or by
e-mail: unsiap@po.iijnet.or.jp.
Bureau of Economic Analysis (BEA): The BEA presents
seminar programs for international income accountants. Training courses
include programs in evaluation, planning, and promoting economic growth
and social improvement. The following courses are held in English:
New System of National Accounts 1993, January 21-March 7, 1997; U.S.
National Income and Product Accounting, March 10-May 2, 1997; Prices and
Constant-Price Accounting, May 5-June 27, 1997; Economic and Social Indicators,
June 30-August 22, 1997; Input-Output Accounting, August 25-October 17,
1997; Capital and Financial Accounts, Balance Sheets, and International
Transactions, October 20-December 12, 1997.
Nominations are being accepted. Further inquiries should be directed
to BEA, U.S. Department of Commerce, tel. +202-606-9728, fax+202-606-5322.
Meetings and seminars
The next joint OECD/ECE/Eurostat Meeting on national accounts
will take place in Paris/France mid 1997.
ESCWA will hold a training workshop on the 1993 SNA implementation
for Arab countries in co-operation with the Arab Monetary Fund
in June 1997.
UNSD will hold jointly with ESCAP and ILO a Workshop on informal
sector statistics for the Asian and Pacific region in Bangkok/Thailand
from 12-16 May 1997.
Manuals and handbooks
Since September 1996 the UN has made available 1993 SNA in Chinese.
OECD has recently released Inflation accounting: A manual on
national accounting under conditions of high inflation. Orders
to OECD Paris (fax 331-4910-4299) or OECD centers in Mexico (fax: +525-606-1307)
and Washington, D.C./USA (fax: +202-785-0350).
FAO has recently published A system of economic accounts for
food and agriculture (SEAFA). The system has been formulated
using the concepts recommended by the 1993 SNA. SEAFA can be viewed as
a specific application of the 1993 SNA to meet the requirements of analysts,
policy-makers and planners dealing with various economic activities relating
to food and agriculture.
Eurostat has now made available The European system of national
accounts (ESA 1995) in the eleven Community languages. Although
ESA 1995 is broadly consistent with the 1993 SNA with regard to definitions,
accounting rules and classifications, it incorporates also certain differences
which make it more in line with use in the European Union (EU). ESA 1995
is a major improvement on the previous version, which dates from 1979,
with considerable progress made in the harmonization of methodology and
accuracy. ESA 1995 may be ordered from the Publication section of the
EU in Luxembourg, tel. +352-2929-42027. The paper version [catalogue number
CA-15-96-001-**-C (**=DA, DE, EN, ES, FI, FR, GR, IT, NL, PT, SV)] costs
ECU 50. A multilingual CD-ROM (catalogue number CA-15-96-002-1F-Z) is
available at a price of ECU 80.
Editorial note
SNA News and Notes is a biannual information service of the Inter-Secretariat
Working Group on National Accounts (ISWGNA) prepared by the Statistics Division
of the United Nations. The member organizations that constitute the ISWGNA
are:
SNA News and Notes does not necessarily express the official position
of any of the members of the ISWGNA. For further details on the agenda
of ISWGNA and the spirit of the newsletter
see issue 1 of SNA News and Notes. For any further information
on SNA News and Notes contact:
Statistics Division
Economic Statistics Branch
United Nations
Room DC2-1720
New York, NY 10017, U.S.A.
Fax: +1-212-963-1374
E-mail: sna@un.org
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