Generation and allocation of income accounts THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

..\Session 1A\Sequence of accounts.docx

Generation of income account Uses Resources Compensation of employees Other taxes on production (D.29) less Other subsidies on production (D.39) Operating surplus Value added

Allocation of primary income account Uses Resources Property income paid Balance of primary incomes Operating surplus Compensation of employees Property income received

Compensation of employees (D.1) Wages and salaries (D.11): - in cash - in kind

Compensation of employees (D.1) Wages and salaries in cash: All payments in cash to employees Excluding: reimbursements for expenses by employees necessary for work e.g. travel (but not to and from work) tools, clothing these are part of intermediate consumption

Compensation of employees (D.1) Wages and salaries in kind: - services of vehicles or other durables for personal use - housing services - transportation to/from work - goods and services from the employer’s own production (free travel, coal, etc.) - sports and recreation facilities - free meals and drinks

Compensation of employees (D.1) Employers social contributions (D.12): Employers’ actual social contributions (D.121) Employers imputed social contributions (D.122)

Compensation of employees (D.1) Employers’ actual social contributions (D.121) Contributions payable by employers to third parties which are responsible for the administration of social security schemes e.g. social security funds, insurance funds.

Compensation of employees (D.1) Employers imputed social contributions (D.122) When employers provide social benefits themselves without third party interference Estimation: - by looking at comparable schemes by other enterprises with actual contributions - by taking the actual payments Main example: government pensions in many countries

Taxes on production and imports (D.2) Compulsory, unrequited payments, in cash or in kind, which are levied by general government, or by the institutions of the European Union, in respect of the production and importation of goods and services, the employment of labour, the ownership or use of land, buildings or other assets used in production. (a) taxes on products (D.21); (b) other taxes on production (D.29).

Subsidies (D.3) Unrequited payments which general government or the institutions of the European Union make to resident producers. (a) subsidies on products (D.31): (b) other subsidies on production (D.39).

Property income (D.4) (a) interest (D.41); Property income (D.4) accrues when the owners of financial assets and natural resources put them at the disposal of other institutional units. Property income is the sum of investment income and rent. (a) interest (D.41); (b) distributed income of corporations (D.42): (1) dividends (D.421); (2) withdrawals from income of quasi-corporations (D.422); (c) reinvested earnings on foreign direct investment (D.43); (d) other investment income (D.44) (e) Rents (D.45)

Property income (D.4) Accrual recording of interest Accrues continuously over period that liability exists Amount of interest accrued in a period may differ from amount paid Accrued, but unpaid interest is added to the outstanding principal of underlying instrument Interest should be accrued From the debtor’s standpoint, according to rate determined when contract is established, except for index-linked securities (including floating rate notes) The same accrual recording method should be used for all interest-bearing instruments

Property income (D.4) Accrual recording of interest-example You have €100 in a saving account (F.2 asset) . The interest rate is 10%, added to your account at the end of each year After 6 months how much interest have you ‘earned’ (i.e. accrued)? How much interest have you been paid (i.e. cash)? ESA2010 records the interest as it accrues, rather than the cash as it is paid Show as a D.41 receivable, balanced as a reinvestment in the instrument (here add to your F.2 asset, as if a further deposit)

Thank you for your attention CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION