Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community

10.51. Similarly, the amount of subsidies on products (D.31) is measured in terms of volume by applying to the quantities of products produced or imported the subsidy prices of the base-year or by applying to the value of output or imports, revalued at the prices of the base-year, the rates of subsidy of the base-year, taking into account different subsidy prices for different uses.

10.52. VAT on producs (D.211) is, both for the whole economy and for individual industries and other users, calculated on a net basis and refers only to non-deductible VAT. This is defined as the difference between VAT invoiced on the products and VAT deductible by the users of these products. Alternatively, it is also possible to define VAT on products as the sum of all non-deductible amounts which have to be paid by users. Non-deductible VAT at constant prices can be calculated by applying the VAT rates in force in the base-year to the flows expressed in the prices of the base-year. Any change in the rate of VAT for the current year will therefore be reflected in the price index and not in the volume index of non-deductible VAT. The fraction of deductible VAT in invoiced VAT and hence non-deductible VAT may change:

10.53. The calculation of volume measures of the consumption of fixed capital poses few problems when good data on the composition of the stock of fixed capital goods are available. The perpetual inventory method, used by most countries, already implies, for the estimation of the consumption of fixed capital at current prices, the need to pass via a calculation of the stock of fixed capital goods at constant prices. To go from a valuation at historic cost to one at replacement cost, it is first necessary to value capital goods acquired over a number of different periods on a homogeneous basis, i.e. base-year prices. The price and volume indices derived in the process can therefore be used to calculate the value of the consumption of fixed capital at constant prices and the associated price index. Where there is no perpetual inventory of the stock of fixed capital goods, the change in the consumption of fixed capital at constant prices can be obtained by deflating the current price data by price indices derived from data on gross fixed capital formation by product. Account has then to be taken of the age structure of the capital goods acquired.

10.54. For the purpose of measuring the volume of input from employee labour, the quantity unit for compensation of employees may be considered to be an hour's work of a given type and level of skill. As with goods and services, different qualities of work must be recognized and quantity relatives calculated for each separate type of work. The price associated with each type of work is the compensation paid per hour, which may vary, of course, between different types of work. A volume measure of work done may be calculated as a weighted average of the quantity relatives for different kinds of work, weighted by the values of compensation of employees in the previous year or fixed base year. Alternatively, a wage rate index may be calculated for work by calculating a weighted average of the proportionate changes in hourly rates of compensation for different types of work, again using compensation of employees as weights. If a Laspeyres-type volume index is calculated indirectly by deflating the changes in compensation of employees at current values by an index of the average change in hourly compensation, the latter should be a Paasche-type index.

10.55. For the purpose of measuring the real purchasing power of compensation of employees, this flow can be deflated by an index reflecting the uses made of these earnings. The price index normally chosen for this purpose is the implicit deflator for individual consumption expenditure or the consumer price index.

10.56. Constant-price data are needed both for stocks of produced fixed assets and for inventories. For the former, such data as are necessary for the calculation of capital output ratios are available if use is made of the perpetual inventory method. In other cases information on the values of stocks of assets may be collected from producers and deflation made by the price indices used for fixed capital formation, taking into account the age structure of stocks. Changes in inventories are measured by the value of entries into inventories less the value of withdrawals from inventories, and the value of any recurrent losses of goods held in inventories during a given period. Constant-price estimates can be derived by the deflation of these components. When changes in the volume and the prices of inventories are fairly regular, estimates of changes in inventories can also be obtained by multiplying the volume change of inventories by average prices for the current year or the base year. As a second alternative and as a cross-check, estimates of changes in inventories can also be obtained as the difference between stocks of inventories held at the end and the beginning of the period, respectively. For this purpose the value of inventories minus revaluation according to the accounts of producers has to be revalued and expressed at the average prices, either relating to the current year or to the base-year. If they refer to the current year, the value measures the volume changes in inventories at current prices. If the average prices refer to a base-year, the value corresponds to volume changes in inventories at base-year prices.

10.57. It is not possible to divide income flows into a price and a quantity component and for this reason price and volume measures cannot be defined in the same way as for the flows and stocks described earlier. Income flows can be measured in real terms only if one chooses some selected basket of goods and services on which the income is typically spent and uses the price index for this basket as a deflator of current incomes. The choice is always arbitrary in the sense that income is seldom spent specifically for purchases during the period in question. Some of it may be saved for purchases in later periods or, alternatively, the purchases during the period may be partly financed from savings made earlier.

10.58. Gross domestic product at constant prices measures the total production (less the intermediate consumption) in volume terms for the total economy. The total real income of residents is influenced not only by this volume of production but also by the rate at which exports can be traded against imports from the rest of the world. If the terms of trade improve, fewer exports are needed to pay for a given volume of imports, so that at a given level of domestic production goods and services can be reallocated from exports to consumption or capital formation.

10.59. The real gross domestic income can be derived by adding the so-called trading gain to volume figures on gross domestic product. The trading gain — or, as the case may be, loss — is defined as: i.e. the current balance of exports less imports, deflated by a price index P, less the difference between the deflated value of exports and the deflated value of imports. The choice of an appropriate deflator P for the current trade balances should be left to the statistical authorities in a country, taking account of the particular circumstances of that country. In the circumstances in which there is uncertainty about the choice of deflator an average of the import and the export price indices is likely to provide a suitable deflator.

10.60.	Various real income aggregates are identified and defined in the way shown in the following. Gross domestic product at constant prices plus the trading gain or loss from changes in the terms of trade equals real gross domestic income plus real primary incomes receivable from abroad minus real primary incomes payable to abroad equals real gross national income plus real current transfers receivable from abroad minus real current transfers payable to abroad equals real gross national disposable income minus consumption of fixed capital at constant prices equals real net national disposable income. To be able to express the various national income aggregates in real terms, it is recommended that receivables and payables of primary incomes and transfers from and to abroad should be deflated with an index of gross domestic final expenditure. Real national disposable income is to be expressed on a net basis by deducting from its gross value the consumption of fixed capital at constant prices.
Gross domestic product at constant prices
plus	the trading gain or loss from changes in the terms of trade
equals	real gross domestic income
plus	real primary incomes receivable from abroad
minus	real primary incomes payable to abroad
equals	real gross national income
plus	real current transfers receivable from abroad
minus	real current transfers payable to abroad
equals	real gross national disposable income
minus	consumption of fixed capital at constant prices
equals	real net national disposable income.

CHOICE OF INDEX NUMBER FORMULAE AND THE BASE YEAR

10.61. The construction of an integrated system of price and volume indices entails a deliberate choice as to the types of indices to be used.

10.62. The preferred measure of year-to-year changes in volume is a Fisher volume index which is defined as the geometric mean of the Laspeyres and the Paasche indices. Changes in volume over longer periods are obtained by chaining, i.e. by cumulating the year-to-year volume movements.

10.63. The preferred measure of year-to-year changes in prices is a Fisher price index. Price changes over long periods are obtained by chaining the year-to-year price movements.

10.64. Chain indices that use Laspeyres volume indices to measure changes in volume and Paasche price indices to measure year-to-year price movements provide acceptable alternatives to Fisher indices.

10.65. Although the preferred measure of volume and price is a chain index, it must be recognized that the lack of additive consistency can be a serious disadvantage for many types of analysis. An aggregate is defined as the sum of its components. Additivity requires this identity to be preserved when the values of both an aggregate and its components in some reference period are extrapolated over time using a set of volume index numbers.

10.66. It is therefore recommended that disaggregated constant price data, i.e. direct valuation of current quantities at base-year prices, are compiled in addition to the chain indices for the main aggregates. Estimating accounts data in constant prices has to be done at the finest level of detail possible if the data are to be consistent within the framework of an integrated system of price and volume measures. The supply and use tables form the central, conceptual and statistical framework for all the measures at constant prices. Additional data are found in supplementary tables. Constant price series have nevertheless to be rebased in the course of time. The ESA has adopted the principle of changing the base year every five years as from 1995. When the base year is changed it is customary to link the data on the old base to the date on the new base rather than to carry the rebasing backwards. When the base year is updated additivity is lost as a result of linking.

10.67. When base-year values are extrapolated by chain volume indices, it will have to be explained to users why there is no additivity in the tables. The non-additive ‘constant price’ data is published without any adjustment. This method is transparent and indicates to users the extent of the problem. This does not preclude the possibility that there may be circumstances in which compilers may judge it preferable to eliminate the discrepancies in order to improve the overall consistency of the data.

INTERSPATIAL PRICE AND VOLUME INDICES

10.68. Comparisons of prices and volumes between countries have to overcome the difficulty in comparing different national currencies. Since exchange rates are not sufficiently stable for this purpose and do not reflect differences in purchasing power in a correct way, it is necessary to use a methodology similar to the one used for intertemporal comparisons between different periods within a single country. Price and volume indices have therefore to be compiled between pairs of countries, applying the same kinds of index number formulae as when measuring changes between time periods. Either of the two countries A and B can be used to give the weights and, viewed from the angle of country A, a Laspeyres-type index with weights from country A can be calculated as well as a Paasche-type using weights from country B.

10.69. If the economies of the two countries differ much from one another, the spread between these two indices may be quite large and the results would depend too much on which one is chosen. For binary comparisons the ESA therefore requires an average between the two, in the form of a Fisher index.

10.70. Direct quantitative comparisons between economic situations that have little in common with each other are inherently difficult and the method of deflation of current values with price indices is therefore the best alternative. This applies even more in international than in intertemporal comparisons. By careful specification and identification of products, price relatives can be calculated from information collected in price surveys in each country. As prices are quoted in national currencies, the interpretation of the price relatives introduces the concept of purchasing power parity (PPP). For a given product the PPP between two currencies of countries A and B is defined as the number of units of country B's currency that are needed in country B to purchase the same quantity of the product as one unit of country A's currency will purchase in country A. PPPs for groups of products and successively higher levels of aggregation up to GDP are obtained by weighting PPPs for products by their share in expenditure. In order to arrive at a price level index between the two countries, the PPP index has to be divided by the current exchange rate between the two currencies concerned.

10.71. For non-market services, international comparisons face the same problem as intertemporal comparisons. This means that outputs are measured as the sum of inputs. The method used at present in interspatial comparisons is to obtain PPPs on the basis of price relatives for important elements in these inputs. This method, which implies volume comparisons of inputs, fails to take into account differences in productivity in non-market service production in the countries compared. It is important, therefore, to develop methods which instead lead to comparisons of the volume of output of non-market services. This should in principle be feasible for individual non-market services, in the same general way as when intertemporal comparisons are concerned.

10.72. The need to make international comparisons of prices and volumes between countries is recognized in the ESA. The main objective is volume comparisons of GDP and its uses and the condition of transitivity must be met. Transitivity means that the direct index for country C based on country A is equal to the indirect index obtained by multiplying the direct index for country B based on country A by the direct index for country C based on country B.

10.73. The approach adopted in the ESA to the calculation of a set of multilateral volume measures and PPPs is to start from binary comparisons between all possible pairs of countries considered. The Fisher indices used for this purpose are not transitive, but it is possible to derive from them a set of transitive indices that resemble the original Fisher indices as closely as possible, using the traditional criterion of least squares for this purpose. Minimising the deviations between the original Fisher indices and the desired transitive indices leads to the so-called EKS formula.

10.74. The EKS index utilizes all the indirect indices linking country i to country k as well as the direct index between them. Between countries i and k it is the geometric mean of the direct index between i and k and every possible indirect index connecting countries i and k. The direct index is given twice the weight of each indirect index. Transitivity is achieved by involving every other country in the EKS index for any given pair of countries.

CHAPTER 11

POPULATION AND LABOUR INPUTS

11.01. Certain comparisons between countries, or between industries or sectors within the same economy, become meaningful only when the aggregates in the national accounts (for example, gross domestic product, the final consumption of households, the value-added of an industry, compensation of employees) are considered in relation to the number of inhabitants and labour input variables. It is therefore necessary to have definitions of the total population, employment, jobs, total hours worked, full-time equivalence and employee labour input at constant compensation, which are closely linked to the concepts used in the national accounts.

11.02. These titles are defined in the system on the basis of the concepts of economic territory and centre of interest.

11.03. Labour inputs must be classified on the basis of the same statistical units as used for the analysis of production, namely the local kind-of-activity unit and the institutional unit.

11.04. The aggregates to which the figures for population and labour inputs are related are annual totals. Therefore, average population and labour inputs during the year should be used. When inquiries are conducted at several times during the course of the year, the figure taken is the average of the results obtained on these various dates. When a single inquiry is made, is is important to examine if the period used is fully representative; the last available information on variations throughout the year should be used in estimating data for the year as a whole. For example, when estimating the mean employment, some allowance should be made for the fact that certain people do not work throughout the whole year (casual and/or seasonal workers).

TOTAL POPULATION

11.05.	Definition: On a given date, the total population of a country consists of all persons, national or foreign, who are permanently settled in the economic territory of the country, even if they are temporarily absent from it. For some purposes, an annual average of head counts will provide an appropriate basis for estimating national accounts variables or for use as a denominator in comparisons.
Definition:	On a given date, the total population of a country consists of all persons, national or foreign, who are permanently settled in the economic territory of the country, even if they are temporarily absent from it. For some purposes, an annual average of head counts will provide an appropriate basis for estimating national accounts variables or for use as a denominator in comparisons.

11.06. Total population is defined for national accounts according to the concept of residence (see units and grouping of units chapter). A person who is staying, or intends to stay, on the economic territory of the country for a period of one year or more is regarded as permanently settled there. A person is regarded as being temporarily absent if he or she is permanently settled in the country but is staying, or intends to stay, in the rest of the world for a period of less than one year. All individuals who belong to the same household (¹⁰¹) are resident where the household has a centre of economic interest: this is where the household maintains a dwelling, or succession of dwellings, which members of the household treat, and use, as their principal residence. A member of a resident household continues to be a resident even if that individual makes frequent journeys outside the economic territory because its centre of economic interest remains in the economy in which the household is resident.

11.07. The total population of a country includes: By convention, the total population also includes the following, irrespective of the length of their stay outside the country:

11.08. Conversely, the total population of a country does not include: and also, by convention:

11.09. The definition given above differs from the present (or de facto) population, which consists of persons actually present on the geographic territory of a country at a given date.

ECONOMICALLY ACTIVE POPULATION

11.10.

Definition: The economically active population comprises all persons of either sex, and above a certain age, who furnish the supply of labour for the productive activities (falling in the production boundary of the system), during a specified time-reference period. It includes all persons who fulfil the requirements for inclusion among the employed (employees or self-employed) or the unemployed. The ‘employees’ and ‘self-employed’ are defined under the title ‘employment’. The ‘unemployed’ are defined under the title ‘unemployment’.

Definition:

The economically active population comprises all persons of either sex, and above a certain age, who furnish the supply of labour for the productive activities (falling in the production boundary of the system), during a specified time-reference period. It includes all persons who fulfil the requirements for inclusion among the employed (employees or self-employed) or the unemployed.

EMPLOYMENT

11.11.	Definition: Employment covers all persons — both employees and self-employed — engaged in some productive activity that falls within the production boundary of the system.
Definition:	Employment covers all persons — both employees and self-employed — engaged in some productive activity that falls within the production boundary of the system.
11.12.	Definition: Employees are defined as all persons who, by agreement, work for another resident institutional unit and receive a remuneration (recorded as D.1 compensation of employees). The relationship of employer to employee exists when there is an agreement, which may be formal or informal, between an enterprise and a person, normally entered into voluntarily by both parties, whereby the person works for the enterprise in return for remuneration in cash or in kind. Employees are classified here if they are not also in self-employment which constitutes their principal activity: in that case they are classified under self employed persons.
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Definition:	Employees are defined as all persons who, by agreement, work for another resident institutional unit and receive a remuneration (recorded as D.1 compensation of employees).

11.13. The following categories are included:

11.14. Persons temporarily not at work are also considered as employees provided they have a formal job attachment. This formal attachment should be determined according to one or more of the following criteria: This covers persons temporarily not at work because of illness or injury, holiday or vacation, strike or lockout, educational or training leave, maternity or parental leave, reduction in economic activity, temporary disorganization or suspension of work due to such reasons as bad weather, mechanical or electrical breakdown, or shortage of raw materials or fuels, or other temporary absence with or without leave.

11.15.

Definition: Self-employed persons are defined as persons who are the sole owners, or joint owners, of the unincorporated enterprises in which they work, excluding those unincorporated enterprises that are classified as quasi-corporations. Self-employed persons are classified here if they are not also in a paid employment which constitutes their principal activity: in that latter case they are classified as employees. They may be temporarily not at work during the reference period for any specific reason. The compensation for self-employment is mixed income.

Definition:

Self-employed persons are defined as persons who are the sole owners, or joint owners, of the unincorporated enterprises in which they work, excluding those unincorporated enterprises that are classified as quasi-corporations. Self-employed persons are classified here if they are not also in a paid employment which constitutes their principal activity: in that latter case they are classified as employees.

11.16. Self-employed persons also include the following categories: Unpaid voluntary workers are included with self-employed persons if their volunteer activities result in goods, for example the construction of a dwelling, church or other building. But if their volunteer activities result in services, for example care taking or cleaning without payment, they are not included with employment, because those volunteer services are excluded from production (see paragraph 3.08). There is no labour input into the production of the services of owner-occupied dwellings; the owner-occupiers of dwellings are not, as such, considered as self-employed persons.

11.17. The results of the activity of producer units can only be compared with employment if the latter includes both the residents and the non-residents who work for resident producer units. Employment therefore also includes the following categories:

11.18. On the other hand, the following are excluded from employment:

11.19. In order to be able to make the transition to the concepts generally used in labour force statistics (employment on a national basis), the ESA especially provides for the following items to be shown separately:

UNEMPLOYMENT

11.20.	Definition: In accordance with the norms established by the International Labour Organization (13th International Conference of Labour Statisticians), the ‘unemployed’ comprise all persons above a specified age who during the reference period were: (a) ‘without work’, i.e. not in paid employment or self-employment; (b) ‘currently available for work’, i.e. were available for paid employment or self-employment during the reference period; and (c) ‘seeking work’, i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment. The specific steps may include registration at a public or private employment exchange; application to employers; checking at worksites, farms, factory gates, market or other assembly places; placing or answering newspaper advertisements; seeking assistance of friends or relatives; looking for land, building, machinery or equipment to establish own enterprise; arranging for financial resources; applying for permits and licences, etc.
Definition:	In accordance with the norms established by the International Labour Organization (13th International Conference of Labour Statisticians), the ‘unemployed’ comprise all persons above a specified age who during the reference period were: (a) ‘without work’, i.e. not in paid employment or self-employment; (b) ‘currently available for work’, i.e. were available for paid employment or self-employment during the reference period; and (c) ‘seeking work’, i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment.
11.21.	Definition: Unemployment rates represent unemployed persons as a percentage of the economically active population. They are usually calculated for sex-age groups and sometimes further cross-classified by other demographic variables such as marital status, qualifications or nationality.
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Definition:	Unemployment rates represent unemployed persons as a percentage of the economically active population.

JOBS

11.22. Definition : A job is defined as an explicit or implicit contract (¹⁰⁵) between a person and a resident institutional unit to perform work (¹⁰⁶) in return for compensation (¹⁰⁷) for a defined period or until further notice. In that definition, both employee and self-employment jobs are covered: that is, an employee job if the person belongs to another institutional unit than the employer and a self-employment job if the person belongs to the same institutional unit as the employer.

11.23. The concept of jobs differs from the concept of employment as defined above:

11.24. A job in the economic territory of the country is an explicit or implicit contract between a person (who may be resident in another economic territory) and an institutional unit resident in the country. For measuring labour input into economic activity, only the residence of the producer institutional unit is relevant, because resident producers alone contribute to gross domestic product.

11.25. Moreover:

TOTAL HOURS WORKED

11.26.

Definition: Total hours worked represent the aggregate number of hours actually worked as an employee or self-employed during the accounting period, when their output is within the production boundary. Because of the broad definition of employees which covers persons temporarily not at work but with a formal attachment, and part-time workers, the ESA recommends that the appropriate measure for productivity calculation is not a head count but total hours worked. Total hours worked is the preferred measure of labour inputs for the system.

Definition:

Total hours worked represent the aggregate number of hours actually worked as an employee or self-employed during the accounting period, when their output is within the production boundary.

11.27. In accordance with the norms established by the International Labour Organization (10th International Conference of Labour Statisticians), total hours actually worked cover:

11.28. On the other hand, hours actually worked do not include:

11.29. Total hours worked is the aggregate number of hours actually worked during the accounting period in employee and self-employment jobs within the economic territory:

11.30. Many surveys of enterprises record hours paid not hours worked. In those cases, hours worked have to be estimated for each job group, using whatever information is available about paid leave etc.

11.31. For business cycle analysis, it may be useful to adjust total hours worked by adopting a standard number of working days per year.

FULL-TIME EQUIVALENCE

11.32.	Definition: Full-time equivalent employment, which equals the number of full-time equivalent jobs, is defined as total hours worked divided by the average annual number of hours worked in full-time jobs within the economic territory.
Definition:	Full-time equivalent employment, which equals the number of full-time equivalent jobs, is defined as total hours worked divided by the average annual number of hours worked in full-time jobs within the economic territory.

11.33. This definition does not necessarily describe how the concept is estimated: since the length of a full-time job has changed through time and differs between industries, methods which establish the average proportion and average hours of less than full-time jobs in each job group have to be used. A normal full time week must first be estimated in each job group. If possible, a job group can be defined, inside an industry, according to sex and (or) kind of work of people. Hours contractually agreed upon constitute, for employee jobs, the appropriate criteria for determining those figures. Full-time equivalent is calculated separately in each job group, then summed.

11.34. In spite of the fact that total hours worked are the best measure of labour inputs, there are some advantages in the full-time equivalence: it can be estimated more easily and this facilitates international comparisons with countries which can only estimate full-time equivalent employment.

EMPLOYEE LABOUR INPUT AT CONSTANT COMPENSATION

11.35.	Definition: Employee labour input at constant compensation measures current labour inputs valued at the levels of compensation of employee jobs ruling during a selected base period.
Definition:	Employee labour input at constant compensation measures current labour inputs valued at the levels of compensation of employee jobs ruling during a selected base period.

11.36. Compensation of employees at current prices divided by employee labour input at constant prices yields an implicit compensation price index comparable with the implicit price index of final uses.

11.37. The purpose of the concept of employee labour input at constant compensation is to express the changes in the composition of the work force, for example from lower paid to higher paid workers. To be effective, the analysis should be undertaken on an industry basis.

CHAPTER 12

QUARTERLY ECONOMIC ACCOUNTS

12.01. The quarterly economic accounts form an integral part of the system of national accounts and, among other uses, are very important for the analysis of the current year and calculation of provisional estimates for the last year. The quarterly economic accounts constitute a coherent set of transactions, accounts and balancing items, defined in both non-financial and financial domains, recorded on a quarterly basis. They adopt the same principles, definitions and structure as the annual accounts, subject to certain modifications, due to the period of time covered.

12.02. The importance of quarterly economic accounts derives essentially from the consideration that they are the only coherent set of indicators, available with a short time lag, able to provide a short term overall picture of both non-financial and financial economic activity.

12.03. The period of time to which the quarterly accounts relate and the need to have reliable information as quickly as possible determine certain typical features. These features include statistical methods of compiling accounts, seasonality and the treatment thereof, consistency of quarterly and annual accounts and some account particularities related to the reference period. These typical features will be extensively analysed in a handbook of quarterly accounts that Eurostat intends to publish before the application of this methodology.

12.04. The statistical methods used for compiling quarterly accounts may differ quite considerably from those used for the annual accounts. They can be classified in two major categories: direct procedures and indirect procedures. Direct procedures are based on the availability at quarterly intervals, with appropriate simplifications, of the similar sources as used to compile the annual accounts. On the other hand, indirect procedures are based on time disaggregation of the annual accounts data in accordance with mathematical or statistical methods using reference indicators which permit the extrapolation for the current year. The choice between the different indirect procedures must above all take into account the minimization of the forecast error for the current year, in order that the provisional annual estimates correspond as closely as possible to the final figures. The choice between these approaches depends, among other things, on the information available at quarterly level.

12.05. The quarterly accounts series quite often show very short-term variations due to weather, habits, legislation, etc., usually defined as seasonal fluctuations. Although seasonality is an integral part of quarterly data, it is often an impediment to the correct identification and analysis of the cycle-trend component. From this consideration follows the need to compile both raw and seasonally adjusted accounts. The accounting consistency of seasonally adjusted figures should be ensured. A closely related problem to seasonal adjustment is that of the working days correction, which needs further consideration in the Eurostat handbook.

12.06. Since quarterly accounts adopt the same framework as annual accounts they have to be consistent over time with them. This implies, in the case of flow variables, that the sum of the quarterly data is equal to the annual figures for each year. In principle there are no obstacles to this condition being met for previous years. However, for the current year there is a problem of time priority between quarterly and annual data as quarterly data are normally available earlier than the annual figures. This problem may be solved by agreeing that the provisional estimates of annual figures are obtained by the aggregation of quarterly figures. When new annual information becomes available resulting in a revision of the provisional figures, the quarterly data have to be modified accordingly. Within some systems, the annual accounts are a by-product of the quarter system and there is no separate annual calculation.

12.07. The time consistency must be ensured for raw data and, compatibly with the seasonally adjustment procedures, for adjusted figures too.

12.08. If, in principle, most of the operations and balancing items are distributed with a certain regularity on all the quarters, there are anyway some operations that appear concentrated in one or two quarters of the year. This is the case for taxes on income, dividends, interest, etc. The treatment of these cases depends essentially on the underlying generation process.

12.09. From a theoretical point of view there are no obstacles to the layout used for the quarterly accounts being the same as that used for the annual accounts. However, in practice, it is useful to simplify and aggregate this scheme in order to obtain reliable quarterly figures as quickly as possible (see programme of tables and data to be supplied in the framework of the 1955 ESA).

CHAPTER 13

REGIONAL ACCOUNTS

13.01. Regional accounts are a regional specification of the corresponding accounts of the total economy. The regional accounts make use of the concepts used for the accounts of the total economy unless indicated otherwise in this section.

13.02. A full set of accounts at the regional level implies treating each region as a separate economic entity. In this context, transactions with other regions become a kind of external transaction. External transactions of the region should of course, be distinguished according to transactions with other regions of the country and transactions with the rest of the world.

13.03. Conceptual difficulties (see paragraphs 13.10 to 13.14) partly explain why regional accounts are limited to recording production activities by industry and to accounts for some institutional sectors like households.

REGIONAL TERRITORY

13.04. The regional economy of a country is part of the total economy of that country. The total economy is defined in terms of institutional units. It consists of all the institutional units which have a centre of interest in the economic territory of a country (see paragraph 2.04). The economic territory, although consisting essentially of the geographic territory, does not coincide exactly (see paragraph 2.05). The economic territory of a country can be divided into regional territories and the ‘extraregio’ territory.

13.05. The regional territory includes:

13.06. The extraregio territory is made up of parts of the economic territory of a country which cannot be attached directly to a single region. It consists of:

13.07. The nomenclature of territorial units for statistics (NUTS) provides a single, uniform breakdown of the economic territory of the European Union. The NUTS is the territorial classification for the compilation of regional accounts.

UNITS AND RESIDENCE

13.08. Two types of unit are distinguished. First of all the local KAU for the analysis of flows occurring in the process of production and in the use of goods and services. Secondly the institutional unit to analyse flows affecting income, capital and financial transactions, other flows and balance sheets.

13.09. The local KAU is the part of a KAU which corresponds to a local unit. The local unit is an institutional unit producing goods and services or a part thereof situated in a geographically identified place (see paragraph 2.106). Therefore, in principle the regional residence of a local KAU can be unambiguously determined. Regarding the transactions with relation to the production activities, it is necessary to record flows between local KAUs, which belong to the same institutional unit and are located in different regions. The ESA recommends including deliveries between local KAUs in the definition of output and this is especially important in regional accounts.

13.10. In the case of institutional units two types of institutional units have to be considered in the context of regional accounts. First of all, there are uniregional units, the centre of economic interest of which is in one region and most of their activities take place in this region. Among uniregional units are households, corporations whose local KAUs are all located in the same region, local and State governments, at least part of social security and many NPIs serving households. Secondly, there are multiregional units, the centre of economic interest of which is in more than one region. Many corporations and a number of NPIs are in this situation. To a greater extent, this is also the case for institutional units whose activities span the whole country such as central government and a small number of corporations, generally in a monopolistic or quasi-monopolistic situation, like the national railway corporation or the national electricity corporation.

13.11. All transactions of the uniregional institutional units are allocated to the region in which they have their centre of economic interest. Regarding households, the centre of economic interest is the region where they live, not the region where they work. Other uniregional units have their centre of economic interest in the region where they are located.

13.12. Some of the transactions of multiregional units cannot, strictly speaking, be regionalized. This is the case for most distributive and financial transactions. Consequently, balancing items of multiregional units may not be unambiguously defined at the regional level for multiregional units.

13.13. One may think of allocating all transactions of multiregional units between regions according to some rules of thumb. However, this should not be considered simply as a practical approximation. It implies a conceptual adaptation of the ESA, since the reasons which prevent including a full sequence of accounts for local KAUs/industries in the central framework also forbid, in principle, completely distributing all institutional units and their accounts between regions; for this would mean, in principle, building up a full set of accounts for local KAUs.

13.14. Due to the abovementioned considerations, the system of regional accounts is limited to:

METHODS OF REGIONALIZATION

13.15. Regional accounts are based on the transactions of units that are resident in a regional territory. In general the regionalization can be done by using bottom-up methods, top-down methods or mixed methods. The methods may be described as follows:

13.16. In principle, the advantage of bottom-up methods is that they directly employ relevant sources at the regional level. An advantage of top-down methods is the guaranteed numerical consistency between national and regional accounts. A disadvantage is that the estimates are not produced with direct data but with a key that is supposedly correlated with the phenomenon to be measured.

13.17. Whenever possible regional values which directly correspond in concept with the national values should be estimated directly by means of the bottom-up methods. The top-down procedures do not lead to a solid, reliable data basis for judging the accuracy of the estimated values, whereas in the bottom-up methods attention is drawn to a possible divergence with the national totals.

AGGREGATES BY INDUSTRY

13.18. An industry for a region consists of a group of local KAUs engaged in the same, or similar, kind of activity (see paragraph 2.108). The local KAU is the unit on which the data related to production activities (output, intermediate consumption, etc.) are based.

13.19. As a general principle, aggregates on production activities should be allocated to the region where the unit carrying out the relevant transactions is resident. The residence of the local KAU is an essential criterion for the allocation of these aggregates to a particular region.

13.20. The general principle of allocating gross fixed capital formation by region is ownership, just as in the accounts of the total economy (see paragraph 2.05, footnote (1)). Fixed assets owned by a multiregional unit are allocated to the local KAUs where they are used. As in national accounts fixed assets obtained through operational leasing are recorded in the region of the owner and those obtained through financial leasing in the region of the user.

13.21. In practice, it may be that information is only available at the level of units which contain several local KAUs engaged in different activities and/or regions. In this case, available indicators (e.g. compensation of employees or employment per region) have to be used to regionalize the figures by industry.

13.22. When defining a local KAU three situations can be distinguished:

13.23. Ancillary activities are not isolated to form distinct entities or separated from the principal or secondary activities or entities they serve (see paragraph 2.104). Accordingly, ancillary activities should be integrated with the local KAUs they serve. Ancillary activities may be carried out in separate locations, located in another region than the local KAUs they serve. The strict application of the abovementioned rule for the geographical allocation of the ancillary activities would result in the underestimation of the aggregates in the regions where ancillary activities are concentrated. Therefore according to the principle of residence, they have to be allocated to the region where the ancillary activities are situated; they remain in the same industry as the local KAUs they serve.

13.24. For some industries, the methods for regionalization need some further clarification. The industries are:

13.25. For the construction industry, building sites should be treated as independent local KAUs when the activity is significant (see paragraph 2.09, footnote (4)). Given the mobility of some equipment, for example pile-drivers and cranes, between local units of the same KAU and the absence of information at site level, it is recommended that gross fixed capital formation of such equipment be allocated to the headquarters of the KAU.

13.26. For transport industries including pipeline transport it is essential to define the local KAUs to which the production and capital formation should be attached. For land transport industries (excluding railways) the production and capital formation should be attached to depots or similar local KAUs where the equipment is based. For water transport industries the production and mobile equipment should be allocated to the home base of the unit. Pipeline networks should be attached to the local KAU that exploits it. For rail and air transport industries top-down methods, breaking down the national aggregates into regions according to suitable indicators, should be used. Compensation of employees should be allocated to the region where the people are employed. The gross operating surplus should be allocated to the regions according to indicators relating to the activity of the train or air routes. Regarding communication industries, telephone boxes, telephone sets, telecommunication lines, etc. perform only a supporting role. Therefore, they do not form distinct entities and should be attributed to the local KAU responsible for managing them. The investment in infrastructure should also be allocated to these local units.

13.27. For financial intermediation industries, value-added should be allocated according to the income approach. Compensation of employees should be allocated to the local KAUs where the people are employed. Gross operating surplus of credit institutions should be distributed between local KAUs in proportion to the sum of loans and deposits, and gross operating surplus of insurance institutions in proportion to the premiums received. Gross fixed capital formation mainly consists of buildings; therefore, it should be allocated to the region where they are situated.

13.28. Output is to be valued at basic prices (see paragraph 3.47). Products used for intermediate consumption are to be valued at purchasers' prices at the time they enter the process of production (see paragraph 3.72). As a consequence gross value-added per industry is valued at basic prices. Gross fixed capital formation is valued at purchasers' prices including installation charges and other costs of ownership transfer. When produced on own-account it is valued at basic prices of similar fixed assets or at costs of production if such prices are not available (see paragraph 3.113).

13.29. The regional equivalent of GDP is GDPR (gross domestic product per region). GDPR is valued at market prices by adding the regionalized taxes less subsidies on products and imports to values added per region at basic prices. The sum of GDPR at market prices per region, including GDPR of the extraregio territory, equals GDP at market prices.

HOUSEHOLD ACCOUNTS

13.30. Gross domestic product per region is the result of the productive activities of the local KAUs resident in a region. The processes of distribution and redistribution of income result in other meaningful balancing items, namely primary income and disposable income. Due to the considerations mentioned in paragraphs 13.10 to 13.14, in regional accounts these income concepts are limited to households.

13.31. Regional accounts of households are a regional specification of the corresponding accounts at the national level. For practical reasons the accounts are limited to: In general terms, they aim at measuring primary income and disposable income of households which are resident in a region.

13.32. The regional household accounts are based on the households that are resident in a regional territory. For the definition of households as institutional units and for the definition of the institutional sector households, see paragraphs 2.13, 2.16, 2.75 and 2.76. The number of persons that are members of the resident households add up to the total resident population of the region.

13.33. In general the rules for determining the residence of households at national level also apply to the regional accounts of households. However, concerning the residence of students and long-term patients an exception is made when the host region is in the same country. In regional accounts, they are treated as resident of the host region if they stay there more than one year.

13.34. In the regional accounts of households, two considerations have to be made regarding households owning an unincorporated enterprise, land and/or a second dwelling in another region:

ANNEX I

CHANGES TO BE MADE IN THE ESA CHAPTERS IF FISIM IS TO BE ALLOCATED

Chapter 1

1.13, fifth paragraph, (d)	Delete after‘The ESA also contains many specific conventions, e.g.:’:‘recording the use of financial services indirectly measured as the intermediate consumption of a nominal sector or a nominal industry.’	Replace by:‘allocating the use of financial intermediation services indirectly measured (FISIM) to user sectors/industries.’
1.25, second paragraph		Add after the list of points introduced by‘Some of the major differences in concepts are:’the following point: ‘(i)  the use of financial intermediation services indirectly measured (FISIM) is now allocated to user sectors/industries instead of to a nominal sector (industry). As a consequence, the use of FISIM is not anymore by convention recorded entirely as intermediate consumption, but can also be final consumption and exports. This implies then that imports of FISIM can also occur.’

Chapter 3

3.63	Delete all the text from the beginning until‘… is valued on the basis of the fees of commissions charged’ included, at the end of the fourth paragraph.	Replace by: ‘J.  Financial intermediation services (this includes insurance services and pension funds services) Financial intermediation services (excluded insurance services and pension funding services) consist in: (a)  financial intermediation services directly charged by financial intermediaries to their clients and measured as the sum of fees and commission charged. Financial intermediaries can charge explicitly for the intermediation services which they provide. The output of such services is valued on the basis of fees and commissions charged; (b)  financial intermediation services indirectly charged and indirectly measured (FISIM). Financial intermediaries provide services for which they do not charge explicitly fees and commissions. They pay lower rates of interest than would otherwise be the case to those who lend them money and charge higher rates of interest to those who borrow from them. Consequently, FISIM output is generated by the management by financial intermediaries of loans and deposits whose rates they control; in contrast, there is no intermediation service for securities other than shares. The output of the subsectors S122 (other financial institutions) and S123 (other financial intermediaries excluding insurance corporations and pension funds), except investment funds is valued on the basis of the difference between the actual rates of interest payable and receivable and a ‘reference’ rate of interest. For those to whom the intermediaries lend funds, both resident and non-resident, it is measured by the difference between the effective interest charged on loans and the amount that would be paid if a reference rate were used. For those from whom the intermediaries borrow funds, both resident and non-resident, it is measured by the difference between the interest they would receive if a reference rate were used and the effective interest they actually receive; (c)  financial intermediation services provided by the central bank. The central bank must not be included in the calculation of FISIM: its output is measured as the sum of costs.’
3.70(j)	Delete:‘only for the total economy: all financial intermediation services indirectly measured (FISIM) provided by resident producers.’	Replace by:‘the use of financial intermediation services indirectly measured by resident producers.’
3.70.		Add: ‘(k)  By convention, the central bank output should be entirely allocated to the intermediate consumption of other financial intermediaries (subsectors S122 — S123).’
3.76(e)		Add to‘financial services directly charged;’:‘and the part of financial intermediation services indirectly measured used for final consumption purposes by households;’
3.142(h)		Add immediately after‘financial services by the amount of the explicit commissions and fees;’ the phrase:‘and the part of financial intermediation services indirectly measured used by non-residents;’

Chapter 4

4.51, second paragraph	Delete:‘The value of the services provided by financial intermediaries not being allocated among different customers, the actual payments or receipts of interest to or from financial intermediaries are not adjusted to eliminate the margins that represent the implicit charges made by financial intermediaries. An adjustment item is needed in the allocation of primary income account of financial intermediaries and of a nominal industry to which, by convention, the whole output of financial intermediaries is allocated as intermediate consumption.’	Replace by:‘The value of the services provided by financial intermediaries being allocated among different customers, the actual payments or receipts of interest to or from financial intermediaries need to be adjusted to eliminate the margins that represent the implicit charges made by financial intermediaries. The amounts of interest paid by borrowers to financial intermediaries must be reduced by the estimated values of the charges payable, while the amounts of interest receivable by depositors must be similarly increased. The values of the charges are treated as payments for services rendered by financial intermediaries to their customers and not as payments of interest.’

Chapter 8

8.09.		EXPLANATORY NOTE Add to figures presented: Tables A.I.1 and A.I.2, to show the consequences of allocation of FISIM on figures presented in the chapter 8, ‘Sequence of accounts and balancing items’ (numerical example).
8.14.	Delete:‘As financial intermediation services indirectly measured (FISIM) are not allocated to user sectors, the whole of the value of the output of FISIM is treated as the intermediate consumption of a nominal sector with zero output and negative value added equal in size but opposite in sign to intermediate consumption. In this way, the value added of all sectors and industries together is reduced in total by this amount. To lighten the presentation of accounts, it is possible not to insert a supplementary column for the nominal sector, but instead to take into account the corresponding figure in the column total economy.’	Replace by:‘As financial intermediation services indirectly measured (FISIM) are allocated to user sectors, certain parts of interest payments are reclassified as payments of services. This reclassification has consequences for the values of output and intermediate consumption (as well as for the values of imports, exports and final consumption).’
8.24.	Delete:‘As financial intermediation services indirectly measured (FISIM) are not allocated to user sectors, the entries shown for interest are those for actual interest payable and receivable. An adjustment is made to resources in the column financial corporations (with a negative sign) and in the column nominal sector (with a positive sign). To lighten the presentation of accounts, it is possible not to insert a supplementary column for the nominal sector, but instead to present the corresponding figure in the column total economy.’	Replace by:‘As financial intermediation services (FISIM) are alloced to user sectors, the item ‘interest’ in the allocation of primary income account corresponds to interest payable and receivable after FISIM has been deducted from actual payables by borrowers and added to actual receivables by lenders.’

Chapter 9

9.25(a)	Delete:‘the intermediate consumption by industry includes the use of financial intermediation services indirectly measures that are recorded in a nominal industry (see paragraph 9.33);’
9.25(b)	Delete:‘minus the use of financial intermediation services indirectly measured (recorded in a nominal industry, see paragraph 9.33.)’
9.33.	Delete:‘Throughout the supply and use tables, the  NACE Rev. 2 industry classification is extended with a nominal industry for the use of financial intermediation services indirectly measured. In the supply table, no transactions are recorded at all for this industry. In the use table, that total use of financial intermediation services indirectly measured is recorded as the intermediate consumption of this nominal industry. As this nominal industry does not have any other transactions, its net operating surplus is negative by the amount of its intermediate consumption; all other components of its value added are zero. As a consequence, its total gross value added is equal to its (negative) net operating surplus.’
Uses	Resources
---	---	---
Accounts	Total	Goods and services (res.)
Rest of the world	Total economy	NPISHs
I.Production account/external account	2	2
4		4
27
30		- 2
II.1.1.Generation of income account	30
II.1.2.Allocation of primary income account	230
22
II.2.Secondary distribution of income account	22
II.4.Use of income account	28
		6
Uses	Resources
---	---	---
Accounts	Total	Goods and services (res.)
Rest of the world	Total economy	PISHs
I.Production account
48
II.1.1.Generation of income account
II.1.2.Allocation of primary income account	222
II.2.Secondary distribution of income account
II.4.Use of income account

ANNEX II

DEFINITIONS

Leasing

Operating leasing

Units engaged in operating leasing possess expert knowledge about the kinds of durable goods they hire. They keep stocks of these goods to be able to hire them on demand or at short notice. Usually they offer a variety of models to choose from. In order to keep their durable goods in good working order, lessors must carry out maintenance and repair services on goods awaiting hire. Lessors also normally assume responsibility for repair and maintenance of a good, as well as replacement in case of a breakdown, while the good is hired to a lessee. Operating leasing does not cover situations where the owner of equipment also provides staff to operate the equipment, or the hiring of non-produced assets, as these activities are classified elsewhere (see paragraph 7).

Financial leasing

The ESA recognizes the economic reality behind financial leasing by recording it as follows: the lessor provides the lessee with a loan enabling the lessee to purchase a durable good, of which the lessee becomes the de facto owner. Thus, the system treats the durable good as if owned by the lessee from the beginning of the leasing period. Rentals actually paid by the lessee to the lessor have to be subdivided into repayments of principal and interest payments related to the imputed loan.

Hire purchase

TREATMENT IN THE ACCOUNTS

Operating leasing

Rental payments received by a lessor are shown in his production account as output (P.1) of leasing services. If the lessee is a producer, rental payments are part of his intermediate consumption (P.2). When the lessee is a household acting as a final consumer, rental payments are part of his final consumption expenditure (P.3).

. Operating leasing does not comprise the renting of machinery or equipment with operating staff, which is classified according to the services provided by the equipment and staff. For example, the hiring of a lorry with driver is classified in  class 49.41 ‘Freight transport by road’. Institutionally, operating leasing corporations are classified in sector S.11 ‘Non-financial corporations’, but operating lessors may also be found in sector S.14 ‘Households’. If the lessor is resident while the lessee is non-resident, rental payments are shown as exports of services (P.62). As the leased good remains on the balance sheet of a resident unit (the lessor), the good does not appear in any of the rest of the world accounts. If the lessor is non-resident while the lessee is resident, rental payments are recorded as imports of services (P.72). In this case the good itself is not considered to enter the economic territory (only its services are). Thus the leased good appears neither in the rest of the world accounts nor in any other account.

Financial leasing

A loan (F.4) is imputed from lessor to lessee. The principal of this loan is the purchaser's price of the leased good plus transfer costs (if any). The outstanding imputed loan (AF.4) is shown in the lessor's and lessee's balance sheets as a financial asset and liability, respectively. Payments of rental are considered to comprise two elements, repayment of principal (F.4) and interest (D.41), with the final repayment coinciding with the termination of the financial lease.

(¹⁰⁹). Some financial lessors incur liabilities to other independent units when interest payable is observable and the calculation of Fisim is straightforward. Other financial lessors incur liabilities only to their parent companies when interest payable may be difficult to observe. In the latter case it may be necessary to estimate the amount of interest payable by using an appropriate interest rate. Financial leasing corporations are classified in the institutional subsector S.123 ‘Other financial intermediaries except insurance corporations and pension funds’. The activity classification is  NACE Rev. 2 class 64.91 ‘Financial leasing’.

If the lessor is resident while the lessee is not, a loan (F.4/AF.4) is imputed from a resident unit (the lessor) to a non-resident unit (the lessee). If the lessor is non-resident and the lessee is resident, a loan is imputed from a non-resident unit (the lessor) to a resident unit (the lessee). As in the case of leasing transactions between residents, rental payments are broken down into interest (D.41) and repayments of principal (F.4).

Hire purchase

The productive activity carried out by financiers of hire purchase contracts is financial intermediation. As they do not usually charge explicitly for their services, their entire output is financial intermediation services indirectly measured (Fisim), calculated as property income receivable less interest payable, excluding any property income receivable from own funds. As in the case of financial leasing, the amount of interest payable may be difficult to observe and must therefore be estimated.

‘Other credit granting’. Hire purchase corporations are classified in institutional subsector S.123 ‘Other financial intermediaries except insurance corporations and pension funds’, but financiers of hire purchase contracts may also be encountered in sector S.14 ‘Households’. If the purchaser is non-resident while the financier is resident, the good is treated as exported (P.61) when the purchaser takes possession of it. In this case, the financier provides a non-resident unit (the purchaser) with a loan (F.4/AF.4). If the purchaser is a resident unit while the financier is not, the good is recorded as imported (P.71) when delivered to the purchaser, who at the same time obtains a loan (F.4/AF.4) from the non-resident financier. Repayments of principal (F.4) and interest payments (D.41) are treated in the same way as for financial leasing involving non-resident units.

ANNEX III

INTRODUCTION

Social insurance may be subdivided into Other insurance may be subdivided into Reinsurance and insurance auxiliaries are treated in separate sections of this Annex. These topics relate mainly to other insurance, but they may also relate to social insurance.

DEFINITIONS

Social insurance

It should be noted that social insurance schemes organized by government units for their own employees are not classified as social security schemes, but as private funded or unfunded social insurance schemes.

Other insurance

Other insurance policies held by households may cover the same risks or needs as those covered by social insurance schemes. However, other insurance policies held by households are distinguished from social insurance policies by the fact that they are taken out on the individual household's own initiative and for their own benefit, independently of their employers or government.

A life insurance claim may be paid as a lump sum or as an annuity. The claim may be fixed or may vary to reflect the income earned from the investment of premiums during the period for which the policy operates (‘with-profit’ policies). A special kind of with-profit policy is a unit-linked policy, where the claim varies according to the value of a segregated fund.

Reinsurance

Both life and non-life insurers are involved in reinsurance transactions. Insurance enterprises that accept reinsurance may engage in both reinsurance and insurance with policyholders, or they may be specialist reinsurers.

Insurance auxiliaries

TREATMENT IN THE ACCOUNTS

Social insurance

Employers' contributions to government social security schemes (D.121) are treated as part of employees' compensation, shown as payable by the employer's sector in the generation of income account and receivable by the household sector in the allocation of primary income account. Employers' contributions reappear in the secondary distribution of income account as part of employers' actual social contributions (D.6111), payable by the household sector and receivable by government. Employees' contributions (D.6112) and contributions by self-employed and non-employed persons (D.6113) are also recorded in the secondary distribution of income account as payable by the household sector and receivable by government. Social security benefits in cash (D.621) are shown in the secondary distribution of income account as payable by government and receivable by households, while social security benefits in kind are shown as item D.6311 and D.6312, payable by government and receivable by households in the redistribution of income in kind account.

‘Compulsory social security activities’. When a resident works for a non-resident employer, the employer's contributions are shown as payable by the rest of the world in the external account of primary incomes and current transfers. If the employee also participates in a social security scheme run by a non-resident government, all receivables and payables normally concerning the government sector are receivable or payable by the rest of the world, recorded in the external account of primary incomes and current transfers. However, in the ESA social transfers in kind occur only between resident units. Any benefits from non-resident social security schemes to residents are therefore by definition social benefits other than social transfers in kind (D.62). When a non-resident works for a resident employer, the employer's contributions are recorded as receivable by the rest of the world in the external account of primary incomes and current transfers. If the non-resident employee is covered by a resident social security scheme, the transactions between the employee and the government sector are recorded in the external account of primary incomes and current transfers. By definition, any benefits to non-resident employees are social benefits other than social transfers in kind (D.62). An example of the flows recorded for social security schemes of government is shown in Table A.III.1.

15.	Schemes financed by autonomous funds are treated differently from schemes financed by non-autonomous funds. For autonomous funds, a service charge is calculated as (A): total actual contributions earned plus total contribution supplements less benefits due less increases (plus decreases) in pension fund reserves.
	total actual contributions earned
plus	total contribution supplements
less	benefits due
less	increases (plus decreases) in pension fund reserves.

For non-autonomous funds no service charge is calculated. The costs of managing these funds are included with the other elements of costs in the employers' production account.

‘Pension funding’.

In the use of disposable income account, an adjustment for change in net equity of households in pension funds reserves (D.8) is recorded as receivable by households and payable by funds. This entry equals the second element of the entry in the financial account. Employers and general government occasionally make extraordinary payments to private social insurance funds in order to increase the reserves of these funds. Such payments are recorded in the capital account as other capital transfers (D.99), payable by the employer's sector or the government sector and receivable by the fund's sector. As social insurance funds' reserves are treated as if owned by the household sector, an accompanying adjustment between the fund's sector and the household sector is required. This adjustment is recorded as other capital transfers (D.99), payable by the fund's sector and receivable by the household sector.

Especially when non-resident units are involved, all the requisite data are not always available. The calculations of some of the items to be recorded sometimes have to be based on assumptions. An example of the flows recorded for private funded social insurance schemes is shown in Table A.III.2.

As unfunded social insurance schemes do not form separate institutional units from the employers operating them, all transactions are between the employer's sector and the household sector.