Flows and stocks Martin Kellaway National Accounts in Practice – Advanced course Luxembourg, 2-11 October 2017 THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

Overview Reminder on flows and stocks Detailed transaction categories

Flows and stocks Flows refer to actions and economic effects of events that take place within a given time period Stocks refer to positions at a point of time

Flows and stocks Flows (ESA 2010 1.65) reflect the creation, transformation, exchange, transfer or extinction of economic value. They involve changes in the value of an institutional unit's assets or liabilities Economic flows are of two kinds: transactions, and other changes in assets Transactions appear in most of the accounts and tables of the system

Transactions Occur by mutual agreement 4 types: Transactions in products Distributive transactions Financial transactions Other transactions (NP)

Transactions in products Transactions in Products are all goods and services created within the production boundary Includes goods and services created in a productive process Includes own account production of agricultural products Includes own account construction of dwellings Excludes unmanaged growth of forests or fish stocks Excludes you cleaning your own house

Transactions in products P.1 Output P.2 Intermediate consumption P.3 Final consumption expenditure P.4 Actual final consumption P.5 Gross capital formation P.6 Export of goods and services P.7 Import of goods and services

Transactions in products Output: recorded and valued when it is generated by the production process Intermediate consumption: recorded and valued when goods & services enter the production process Final consumption expenditure: includes expenditures by HH, NPISH and GG recorded at the time of change of ownership, or delivery of service

Transactions in products Gross capital formation- acquisition less disposal of fixed assets (e.g. buildings, machinery, cultivated trees & livestock, R&D, mineral exploration, computer software, land improvements, artistic originals) Gross fixed capital formation (P.51): when ownership transfers Consumption of fixed capital (P.51c), net fixed capital formation (P.51n) …

Transactions in products Gross capital formation- Change in inventories (P.52)- materials & supplies, work in progress, finished goods, goods for resale: values of goods entering inventories less goods withdrawn Acquisition less disposal of valuables (P.53) - recorded when ownership transfers

Distributive transactions D.1 Compensation of employees D.2 Taxes on production and imports D.3 Subsidies D.4 Property income D.5 Current taxes on income, wealth, etc. D.6 Social contributions and benefits D.7 Other current transfers D.8 Adjustment for the change in pension entitlements D.9 Capital transfers

Transactions in non-produced assets Non-produced assets (NP)- acquisition less disposal of assets not produced within the production boundary that may be used in production (ESA 2010 3.184) Natural resources (NP.1): acquisition less disposal of e.g. land, mineral & energy reserves, and radio spectra when ownership transfers …

Transactions in non-produced assets Non-produced assets (NP) Contracts leases & licenses (NP.2): acquisition less disposal of e.g. marketable operating leases, permits to operate taxis Goodwill & marketing assets (NP.3): acquisition less disposal of e.g. goodwill evidenced by sale of a corporation

GFS /EDP course chapter 3.4 – 3.6: Flows and stocks Financial account Net acquisition of financial assets Net acquisition of financial liabilities F.1 Monetary gold & SDRs F.2 Cash & deposits F.2 Cash and deposits F.3 Debt securities F.4 Loans F.5 Equity etc. F.6 Insurance pensions etc. F.7 Financial derivatives etc. F.7 Financial derivatives F.8 Accounts receivable F.8 Accounts payable Net lending/borrowing (assets minus liabilities) Chapter 3.4 –3.6 Flows and stocks

Other flows Changes in prices (holding gains or losses) or Changes in volume

Other Flows Financial account III.3. Other Changes in Assets Accounts III.3.1 Other Changes in Volume Assets Account Financial account Changes in assets Changes in liabilities & Net Worth Financial Assets -> AF.1-AF.8 Non-Financial Assets -> AN.1- AN.2 - Financial Liabilities -> AF.1-AF.8 Changes in Net Worth due to OCVA (B.102)

Other Flows Financial account III.3. Other Changes in Assets Accounts III.3.2. Revaluation Account Financial account Changes in assets Changes in liabilities & Net Worth Financial Assets -> AF.1-AF.8 Non-Financial Assets -> AN.1- AN.2 - Financial Liabilities -> AF.1-AF.8 Changes in Net Worth due to Nominal Holding Gains/Losses (B.103)

Stocks Stocks (ESA 1.85) are holdings of assets and liabilities at a point in time, form a balance sheet Stocks are recorded within the boundaries of ESA 2010 system – not for human capital and natural resources not economically owned All changes in stocks can be fully explained by recorded flows: transactions and/or other flows

Stocks

Stocks Balance sheets IV. Balance Sheet Assets Liabilities and Net Worth AF.1 – AF.8 Produced Non-Financial (AN.1) Non-Produced Non-Financial (AN.2) Net worth (B.90)

Non-financial balance sheet Stocks Non-financial balance sheet Balance sheets AN.1 Produced non-financial assets AN.11 Fixed assets AN.12 Inventories AN.13 Valuables AN.2 non-produced non-financial assets AN.21 Natural resources AN.22 Contracts, leases & licences AN.23 Purchases less sales of goodwill and marketing assets

Non-financial balance sheet Stocks Non-financial balance sheet Balance sheets AN.111 Dwellings AN.1123 Land improvements AN.114 Weapons systems AN.1171 Research & development Financial stocks’ categories same as financial account