Institution

Eurostat

Year

2014

Level

Advanced

Abstract

Chapter Four of the first edition of 2014 considers how to integrate financial transactions into the balance sheet and production accounts of a nonfinancial firm. The paper argues that the choice of a reference interest rate is just as important for nonfinancial firms as it is for financial firms and that the choice of the reference rate is tied to the firm’s financing decisions. The choice of the reference rate determines the interest rate that enters into the user cost of capital for the nonfinancial firm. The paper also argues that nonfinancial firms can also generate financial flows that are analogous to FISIM (Financial Services Indirectly Measured) flows. The present System of National Accounts restricts FISIM to financial firms. In order to minimize the role of imputations, the paper considers a firm that raises capital at the beginning of the accounting period, engages in some form of productive activity during the period and then distributes the initial capital and any profits back to the capitalists who financed the firm.