1993 SNA Update Information - AEG recommendations for issue:
Government owned assets
|Issue description in [English] | [French] | [Russian] | [Spanish]|
|When summing costs to measure non-market output, the 1993 SNA recommends that the value of the
services provided by a producer’s own non-financial assets should be measured as consumption of fixed
capital. This means that neither a return on capital to these assets nor, equivalently, an opportunity cost
of capital is recognized. This leads to an inconsistency with the rental that would have to be paid if the
assets were rented. Should the SNA recommendation be changed and the cost of consumption of fixed
capital be replaced with capital services (consumption of fixed capital, expected holding gains/ losses
and the capital or interest costs)?|
|Number of AEG recommendations for selected issue:||3|
| Corresponding meeting||Date posted||Recommendation|
| Jan-Feb 2006||4/7/2006||(a) The AEG agreed that the expected real rate of return on government bonds is an appropriate indicator. If necessary, it should be supplemented by other indicators of the cost of capital to government, particularly if a country has a thin bond market or a negative real rate of interest.|
(b)-(d) The AEG did not consider this breakdown of assets was helpful and preferred to say that by convention a return to capital should appear for all fixed assets and only fixed assets. This means that a rate of return should be calculated for computers, vehicles, etc used by employees and for roads and infrastructure and for city parks and historical monuments to the extent that they are included in fixed assets. By convention, no return to capital would be applied to other classes of assets.
(e) The AEG did not favour including a rate of return on “open land”. On balance, the AEG agreed that a rate of return should not be estimated on land under buildings. However, the AEG acknowledged that it may be difficult for some countries to exclude it, given their estimation methods. Therefore the AEG recommended that, by convention, it should be excluded but, in practice, it may be impossible to do so.
The AEG agreed that since land improvements should be included in fixed assets, a rate of return was appropriate for them.
| July 2005||9/12/2005||The AEG reaffirmed the principle to include a return to capital on non-financial assets used in non-market production.|
It was agreed to follow-up on a one-on-one basis the comments from the global and country consultations, including those comments on the scope, and report back to the next AEG Meeting in early 2006.
| December 2004||1/11/2005||There was strong support in principle for including a return to capital, viewed as an opportunity cost, in the measurement of non-market output. However, concerns were expressed about the rate of return to be chosen and availability of data for capital stock.|
In terms of the range of assets which could be covered, most participants favored including those assets in the generation of government output similar to those assets used in market production. A smaller number favored including roads and other infrastructure assets. Progressively fewer favored including assets such as city parks serving the community at large and land.