III. FLOWS, STOCKS AND ACCOUNTING RULES
H. Aggregation, netting, consolidation
1. Aggregation
| 3.114. | The immense number of individual transactions, other flows and assets within the scope of the SNA have to be arranged in a manageable number of analytically useful groups. In the System, such groups are constructed by crossing two or more classifications. As a minimum, a combination of the "who" and "what" questions asked in chapter II is made, i.e., a classification of institutional sectors or industries is crossed with the classification of transactions, other accumulation entries or assets. Additionally, resources must be distinguished from uses and assets from liabilities. In order to accommodate more detailed analysis, the classes thus generated may be further subdivided: examples are specifications of "in what" (kind of product or asset), of "why" (function) and of "with whom" (transaction partners). |
| 3.115. | Since the classifications in the System contain a number of levels made explicit in the codes, corresponding levels of aggregation may be distinguished. |
| 3.116. | Although conceptually the value for each aggregate is the sum of the values for all elementary items in the relevant category, in practice other estimation methods are frequently used. First, information on elementary transactions, other flows and assets may be incomplete or even non-existent. Secondly, the data obtained from different primary sources are usually not fully consistent due to deviating definitions and varying coverage, and adjustments at aggregate level are necessary to reconcile them. The practical techniques for estimating and balancing national accounts data are to be extensively discussed in handbooks which are planned for publication by organizations of the Inter-Secretariat Working Group on National Accounts. |
2. Netting
| 3.117. | Individual units or sectors may have the same kind of transaction both as a use and as a resource (e.g., they both pay and receive interest) and the same kind of financial instrument both as an asset and as a liability. Combinations in which all elementary items are shown for their full values are called gross recordings. Combinations whereby the values of some elementary items are offset against items on the other side of the account or which have an opposite sign are called net recordings. |
| 3.118. | The System recommends gross recording apart from the degree of netting which is inherent in the classifications themselves. In fact, netting is already a feature of many of the System's recommendations. It mostly serves to highlight an economically important property which is not apparent from gross data. |
| 3.119. | Netting is implicit in various transaction categories, the most outstanding example being "changes in inventories", which underlines the analytically significant aspect of overall capital formation rather than tracking daily additions and withdrawals. Similarly, with few exceptions, the financial account and other changes in assets accounts record increases in assets and in liabilities on a net basis, bringing out the final consequences of these types of flows at the end of the accounting period. Of course, all balancing items involve netting as well. To avoid confusion, the System uses the words "gross" and "net" in a very restrictive sense. Apart from a few headings ("net premiums", "net equity of households on life insurance reserves and pension funds", "net worth and net lending/net borrowing") the System's classifications employ the word "net" exclusively to indicate the value of variables after deduction of consumption of fixed capital. |
| 3.120. | The System defines one situation in which exactly the opposite of netting should be applied. A grossing up is recommended in respect of processing to order vis-a-vis the rest of the world. In agreement with external trade statistics, this type of processing is not recorded "net" as a service item. Instead, the movement of goods before and after processing is registered as imports and exports for their full value as if they were purchased and subsequently sold back. |
3. Consolidation
| 3.121. | Consolidation is a special kind of cancelling out of flows and stocks which should be distinguished from other kinds of netting. It involves the elimination of those transactions or debtor/creditor relationships which occur between two transactors belonging to the same institutional sector or sub-sector. Consolidation should not be seen as a sheer loss of information; it entails an elementary specification by the transaction partner. Consolidation may be most relevant for monetary institutions and general government. For certain kinds of analysis, information on the transactions of these (sub)sectors with other sectors and the corresponding "external" financial position is more significant than overall gross figures. As a rule, however, the entries in the System are not consolidated. |
| 3.122. | The rule of non-consolidation takes a special form regarding the transaction categories "output" and "intermediate consumption". These transactions are to be recorded throughout at the level of establishments. This implies specifically that the accounts for institutional sectors and for industries should not be consolidated in respect of output delivered between establishments belonging to the same institutional unit. |
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