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E.2.  Value added

15.68.        Value added, in services production, is also a variable of interest for analysing the impact of mode 3 services supply. The 2008 SNA defines the gross value added of an establishment, enterprise, industry or sector as the amount by which the value of the outputs produced exceeds the value of the intermediate inputs consumed. A related concept—net value added—is defined as gross value added less the consumption of fixed capital.[1] Gross value added can provide information about the contribution of foreign affiliates to the gross domestic product of a host country, both in the aggregate and in specific industries. Gross value added receives higher priority than net value added and is often easier to compute because it does not require estimation of capital consumption.

15.69.        Value added cannot be directly observed from accounting records. Two ways are available to derive value added.  First, as gross output (revenue) less its intermediate inputs or consumption (purchased goods and services used in production). The valuation of value added is linked to the gross output.  Second, value added can be derived as the costs incurred (except for intermediate inputs) and profits earned in production. Costs generally fall into four categories: compensation of employees, net interest paid, taxes on production and imports and the costs of capital consumed in production. Alternatively, it can be calculated from gross operating surplus by adding personnel costs. The choice of one or the other method of computation is dependent on the availability of data, as well as the method used to compute value added in national business statistics. For inward FATS, value added is often easily derived from information available from regular industrial or enterprise surveys, but for outward FATS, value added often must be derived from various variables collected in FATS (or FDI) surveys.

15.70.        The valuation of value added is dependent upon the valuation of output (basic prices or producer prices), while intermediate inputs are always valued at purchaser prices.  Alternatively, value added can be valued at factor cost. (For more information, see 2008 SNA, para. 2.65.)

 

Next: E.3. Trade variables



[1] 2008 SNA, para. 6.74.