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

• 1.39. A transaction that appears to the units involved as taking place directly between units A and C may be recorded as taking place indirectly through a third unit B. Thus, the single transaction between A and C is recorded as two transactions: one between A and B, and one between B and C. In this case the transaction is rerouted.

As well-known example of a rerouting is employers' social contributions paid directly by employers to social insurance funds. The system records these payments as two transactions: employers pay employer's social contributions to their employees, and employees pay the same contributions to social insurance funds. As with all reroutings, the purpose of rerouting employers' social contributions is to bring out the economic substance behind the transaction. In this case this means to show employer's social contributions as contributions paid for the benefit of employees.

Another type of rerouting is that of transactions recorded as taking place between two or more institutional units, although according to the parties involved no transaction takes place at all. An example is the treatment of property income earned on certain insurance funds, which is retained by insurance enterprises. The system records this property income as being paid by insurance enterprises to policy holders, who then pay the same amount back to the insurance enterprises as premium supplements.

Partitioning

• 1.40. When a transaction appearing to the parties involved as a single transaction is recorded as two or more differently classified transactions, the transaction is partitioned. Partitioning does usually not imply involving additional units in the transactions.

The payment of non-life insurance premiums is a typical partitioned transaction. Although policy holders and insurers regard these payments as one transaction, the system divides them into two quite different transactions: payments in return for non-life insurance services provided, and net non-life insurance premiums. The recording of trade margins is another important case of partitioning.

Recognizing the principal party to a transaction

• 1.41. When a unit carries out a transaction on behalf of another unit, the transaction is recorded exclusively in the accounts of the principal. As a rule, one should not go beyond this principle and try, for instance, to allocate taxes or subsidies to ultimate payers or ultimate beneficiaries under the adoption of assumptions.

Borderline cases

• 1.42. The definition of a transaction stipulates that an interaction between institutional units be by mutual agreement. When a transaction is undertaken by mutual agreement, the prior knowledge and consent of the institutional units is implied. However, this does not mean that all units necessarily enter a transaction voluntarily, because some transactions are imposed by law. This applies mainly to certain distributive transactions, such as payments of taxes, fines and penalties. However, uncompensated seizure of assets is not regarded as a transaction, even when imposed by law.

Illegal economic actions are transactions only when all units involved enter the actions voluntarily. Thus, purchases, sales or barters of illegal drugs or stolen property are transactions, while theft is not.

Other changes in assets

• 1.43. Other changes in assets record changes that are not the result of transactions ([^E0025]). They are either:

• (a) other changes in the volume of assets and liabilities; or

• (b) holding gains and losses.

Other changes in the volume of assets and liabilities

• 1.44. These changes can be roughly divided into three main categories:

• (a) normal appearance and disappearance of assets other than by transactions;

• (b) changes in assets and liabilities due to exceptional, unanticipated events;

• (c) changes in classification and structure.

• 1.45. Examples of changes within category (a) are discovery or depletion of subsoil assets, and natural growth of non-cultivated biological resources. Category (b) comprises changes (normally losses) in assets due to natural disasters, war or severe acts of crime ([^E0026]). Unilateral cancellation of debt and uncompensated seizure of assets also belong to category (b). Category (c) consists of changes as a consequence of reclassification and restructuring of institutional units or of assets and liabilities.

Holding gains and losses

• 1.46. Holding gains and losses result from changes in the prices of assets. They occur on all kinds of financial and non-financial assets, and on liabilities. Holding gains and losses accrue to the owners of assets and liabilities purely as a result of holding the assets or liabilities over time, without transforming them in any way.

Holding gains and losses measured on the basis of current market prices are called nominal holding gains and losses. These may be decomposed into neutral holding gains and losses, reflecting changes in the general price level, and real holding gains and losses, reflecting changes in the relative prices of assets.

Stocks

• 1.47. Stocks are holdings of assets and liabilities at a point in time. Stocks are recorded at the beginning and end of each accounting period. The accounts that show stocks are called balance sheets ([^E0027]).

Stocks are also recorded for population and employment. However, these stocks are recorded as mean values over the accounting period.

Stocks are recorded for all assets within the system's boundaries; that is, for financial assets and liabilities and for non-financial assets, both produced and non-produced. However, the coverage is limited to those assets that are used in economic activity and that are subject to ownership rights. Thus, stocks are not recorded for assets such as human capital and natural resources that are not owned.

Within its boundaries, the system is exhaustive in respect of both flows and stocks. This implies that all changes in stocks can be fully explained by recorded flows.

THE SYSTEM OF ACCOUNTS AND THE AGGREGATES ([^E0028])

Rules of accounting

• 1.48. An account is a means of recording, for a given aspect of economic life, the uses and resources or the changes in assets and the changes in liabilities during the accounting period, or the stock of assets and liabilities existing at the beginning or at the end of this period.

Terminology for the two sides of the accounts

• 1.49. The system employs the term ‘resources’ for the right side of the current accounts where transactions appear which add to the amount of economic value of a unit or a sector. The left side of the accounts, which relates to transactions that reduce the amount of economic value of a unit or sector, is termed ‘uses’.

The right side of the accumulation accounts is called ‘changes in liabilities and net worth’ and their left side is called ‘changes in assets’.

Balance sheets are presented with ‘liabilities and net worth’ (the difference between assets and liabilities) on the right side and ‘assets’ on the left. Comparison of two successive balance sheets shows changes in liabilities and net worth and changes in assets.

Double entry/quadruple entry

• 1.50. For a unit or sector, national accounting is based on the principle of double entry. Each transaction must be recorded twice, once as a resource (or a change in liabilities) and once as a use (or a change in assets). The total of transactions recorded as resources or changes in liabilities and the total of transactions recorded as uses or changes in assets must be equal, thus permitting a check on the consistency of the accounts.

In practice though, national accounts — with all units and all sectors — are based on a principle of quadruple entry, since most transactions involve two institutional units. Each transaction of this type must be recorded twice by the two transactors involved. For example, a social benefit in cash paid by a government unit to a household is recorded in the accounts of government as a use under transfers and a negative acquisition of assets under currency and deposits; in the accounts of the household sector it is recorded as a resource under transfers and an acquisition of assets under currency and deposits.

On the other hand, transactions within a single unit (such as the consumption of output by the same unit that produced it) require only two entries, whose values have to be estimated.

Valuation

• 1.51. With the exception of some variables concerning population and labour, the system shows all flows and stocks in monetary terms. The system does not attempt to determine the utility of flows and stocks. Instead, flows and stocks are measured according to their exchange value, i.e. the value at which flows and stocks are in fact, or could be, exchanged for cash. Market prices are thus ESA's basic reference for valuation.

• 1.52. In the case of monetary transactions and cash holdings and liabilities, the values required are directly available. In most other cases, the preferred method of valuation is by reference to market prices for analogous goods, services or assets. This method is used for e.g. barter and the services of owner-occupied dwellings. When no market prices for analogous products are available, for instance in the case of non-market services produced by government, valuation should be made according to production costs. If neither of these two methods are feasible, flows and stocks may be valued at the discounted present value of expected future returns. However, due to the great uncertainty involved, this last method is only recommended as a last resort.

• 1.53. Stocks should be valued at current prices at the time to which the balance sheet relates, not at the time of production or acquisition of the goods or assets that form the stocks. It is sometimes necessary to value stocks at their estimated written-down current acquisition values or production costs.

Special valuations concerning products ([^E0029])

• 1.54. Because of transport costs, trade margins and taxes less subsidies on products, the producer and the user of a given product usually perceive its value differently. In order to keep as close as possible to the views of the transactors, the system records all uses at purchaser's prices, which include transport costs, trade margins and taxes less subsidies on products, while output is recorded at basic prices, which exclude these elements.

• 1.55. Imports and exports of products are recorded at border values. Total imports and exports are valued at the exporter's customs frontier, or free on board (fob). Foreign transport and insurance services between the importer's and the exporter's frontiers are not included in the value of goods but are recorded under services. As it may not be possible to obtain fob values for detailed product breakdowns, the tables containing details on foreign trade show imports valued at the importer's customs frontier (cif value). All transport and insurance services to the importer's frontier are included in the value of imported goods. As far as these services concern domestic services a global fob/cif adjustment is made in this presentation.

Valuation at constant prices ([^E0030])

• 1.56. Valuation at constant prices means valuing the flows and stocks in an accounting period at the prices of a previous period. The purpose of valuation at constant prices is to decompose changes over time in the values of flows and stocks into changes in price and changes in volume. Flows and stocks at constant prices are said to be in volume terms.

Many flows and stocks, e.g. income, do not have price and quantity dimensions of their own. However, the purchasing power of these variables can be obtained by deflating the current values with a suitable price index, e.g. the price index for final national uses, excluding changes in inventories. Deflated flows and stocks are said to be in real terms. An example is real disposable income.

Time of recording

• 1.57. The system records flows on an accrual basis; that is, when economic value is created, transformed or extinguished, or when claims and obligations arise, are transformed or are cancelled.

Thus, output is recorded when produced, not when paid for by a purchaser, and the sale of an asset is recorded when the asset changes hands, not when the corresponding payment is made. Interest is recorded in the accounting period when it accrues, regardless of whether or not it is actually paid in that period. Recording on an accrual basis applies to all flows, monetary as well as non-monetary and intra-unit a well as between units.

However, in some cases it is necessary to show flexibility as regards time of recording. This applies in particular to taxes and other flows concerning general government, which are often recorded on a cash basis in government accounts. It is sometimes difficult to carry out an exact transformation of these flows from cash basis to accrual basis. In these cases it might therefore be necessary to use approximations. Additional to this flexibility as regards time of recording, it was necessary for practical reasons linked to the excessive deficit procedure to define a particular recording of taxes and social contributions payable to the government sector, so that net lending/borrowing of general government (and of counterpart sectors) shall not include amounts of taxes and social contributions unlikely to be collected. By derogation to the general principle of recording transactions, taxes and social contributions payable to the general government can either be recorded net of the part unlikely to be collected or, if this part is included, it should be neutralised in the same accounting period by a capital transfer from the general government to the relevant sectors.

Any flow should be recorded at the same point of time for all institutional units involved and in all accounts in question. This principle may seem simple, but its implementation is not. Institutional units do not always apply the same accounting rules. Even when they do, differences in actual recording may occur for practical reasons such as delays in communication. Consequently, transactions may be recorded at different times by the transactors involved. These discrepancies must be eliminated by adjustments.

Consolidation and netting

Consolidation

• 1.58. Consolidation refers to the elimination, from both uses and resources, of transactions which occur between units when the latter are grouped, and to the elimination of reciprocal financial assets and liabilities.

For subsectors or sectors, flows and stocks between constituent units are not consolidated between constituent units as a matter of principle.

However, consolidated accounts may be built up for complementary presentations and analyses. For certain kinds of analysis, information on the transactions of these (sub)sectors with other sectors and the corresponding ‘external’ financial position is more significant than overall gross figures.

Moreover, the accounts and tables showing the creditor/debitor relationship provide a detailed picture of financing of the economy and are considered very useful for understanding the channels through which the financing surpluses move from final lenders to final borrowers.

Netting

• 1.59. Individual units or sectors may have the same kind of transaction both as a use and as a resource (e.g. they both pay and receive interest) and the same kind of financial instrument both as an asset and as a liability.

The system recommends gross recording, apart from the degree of netting which is inherent in the classifications themselves.

In fact, netting is implicit in various transaction categories, the most outstanding example being ‘changes in inventories’, which underlines the analytically significant aspect of overall capital formation rather than tracking daily additions and withdrawals.

Similarly, with few exceptions, the financial account and other changes in assets accounts record increases in assets and in liabilities on a net basis, bringing out the final consequences of these types of flows at the end of the accounting period.

Accounts, balancing items and aggregates

• 1.60. For units (institutional units; local kind-of-activity units) or groups of units (institutional sectors and, by extension, the rest of the world; industries), different sub-accounts record the transactions or other flows which are connected to some specific aspect of economic life (for instance, production). Such a set of transactions usually does not balance; the total amounts recorded as receivable and payable usually differ. Therefore, a balancing item must be introduced. Usually, a balancing item must also be introduced between the total of assets and the total of liabilities of an institutional unit or sector. Balancing items are meaningful measures of economic performance in themselves. When summed for the whole economy, they constitute significant aggregates.

The sequence of accounts

• 1.61. The system is built around a sequence of inter-connected accounts.

The full sequence of accounts for the institutional units and sectors is composed of current accounts, accumulation accounts and balance sheets.

Current accounts deal with the production, generation, distribution and redistribution of income and the use of this income in the form of final consumption. Accumulation accounts cover changes in assets and liabilities and changes in net worth (the difference for any institutional unit or group of units between its assets and liabilities). Balance sheets present stocks of assets and liabilities and net worth.

• 1.62. It is not possible to envisage a complete set of accounts, including balance sheets, being compiled for a local KAU, because generally such an entity is not capable of owning goods or assets in its own right or capable of receiving or disbursing income. The sequence of accounts for local kind-of-activity units and industries is shortened to the first current accounts: production account and generation of income account, the balancing item of which is the operating surplus.

The goods and services account

• 1.63. The goods and services account shows, for the economy as a whole or for groups of products, the total resources (output and imports) and uses of goods and services (intermediate consumption, final consumption, changes in inventories, gross fixed capital formation, acquisitions less disposals of valuables, and exports).

The Rest of the World account

• 1.64. The Rest of the World account covers transactions between resident and non-resident institutional units and the related stocks of assets and liabilities when relevant.

As the rest of the world plays a role in the accounting structure similar to that of an institutional sector, the Rest of the World account is established from the point of view of the rest of the world. A resource for the rest of the world is a use for the total economy and vice versa. If a balancing item is positive, it means a surplus of the rest of the world and a deficit of the total economy, and vice versa if the balancing item is negative.

Balancing items

• 1.65. A balancing item is an accounting construct obtained by subtracting the total value of the entries on one side of an account from the total value on the other side. It cannot be measured independently of the other entries; as a derived entry, it reflects the application of the general accounting rules to the specific entries on the two sides of the account.

Balancing items are not only devices introduced to ensure that accounts balance. They encapsulate a great deal of information and include some of the most important entries in the accounts, as can be seen from the following examples of balancing items: value added, operating surplus, disposable income, saving, net lending/net borrowing.

Aggregates

• 1.66. The aggregates are composite values which measure the result of the activity of the total economy considered from a particular point of view; for example, output, value added, disposable income, final consumption, saving, capital formation, etc. Although the calculation of the aggregates is neither its sole nor its main purpose, the system does recognize their importance as summary indicators and key magnitudes for purposes of macro-economic analysis and comparisons over time and space.

Two types of aggregates can be distinguished:

• (a) aggregates which refer directly to transactions in the system, such as the output of goods and services, actual final consumption, gross fixed capital formation, compensation of employees, etc.;

• (b) aggregates which represent balancing items in the accounts, such as gross domestic product at market prices (GDP), operating surplus of the total economy, national income, national disposable income, saving, current external balance, net worth of the total economy (national wealth).

• 1.67. A dimension is added to the usefulness of a number of national accounts figures by calculating these figures per head. For broad aggregates such as GDP or national income or household final consumption, the denominator commonly used is the total (resident) population. When subsectoring the accounts or part of the accounts of the household sector, data on the number of households and the number of persons belonging to each subsector are also necessary ([^E0031]).

THE INPUT-OUTPUT FRAMEWORK ([^E0032])

• 1.68. The input-output framework consists of supply and use tables by industry, tables linking the supply and use tables to the sector accounts and symmetric input-output tables by homogeneous branch (product).

• 1.69. Supply and use tables are matrices (rows of products, columns of industries), showing how the output of industries is broken down by type of products and how the domestic and imported supply of goods and services is allocated between various intermediate or final uses, including exports. The use table also shows by industry the structure of production costs and the income generated.

The supply and use tables are the coordinating framework for all tables by industry and (or) by product, which include data on labour inputs, gross fixed capital formation, stocks of fixed assets, detailed price indices and thus describe in detail cost structure, income generated, employment, labour productivity, capital intensity.

• 1.70. It is possible to link the supply and use tables to the sector accounts by cross-classifying output, intermediate consumption and the components of value added by sector and by industry.

CHAPTER 2

UNITS AND GROUPINGS OF UNITS

• 2.01. The economy of a country is the outcome of the activity of a very large number of units which carry out numerous transactions of various kinds for purposes of production, finance, insurance, redistribution and consumption.

• 2.02. The units and groupings of units used in national accounts must be defined with reference to the kind of economic analysis for which they are intended, and not in terms of the types of unit usually employed in statistical inquiries. These latter units (enterprises, holding companies, kind-of-activity units, local units, government departments, non-profit institutions, households, etc.) may not always be satisfactory for the purposes of national accounts, since they are generally based on traditional criteria of a legal, administrative or accounting nature.

Statisticians should take into account the definitions of units of analysis used in the ESA, in order to ensure that in the surveys in which actual data are collected all the elements of information needed to compile data based on the units of analysis used in the ESA are gradually introduced.

• 2.03. A feature of the system is the use of three types of unit corresponding to two very different ways of subdividing the economy. To analyse the process of production, it is essential to select units which bring out relationships of a technico-economic nature; to analyse flows affecting income, capital and financial transactions and balance sheets, it is essential to select units which make it possible to study behavioural relationships among economic agents.

Given these two objectives, institutional units appropriate for the analysis of economic behaviour, local kind-of-activity units and units of homogeneous production appropriate for the analysis of technico-economic relationships are defined later in this chapter. In practice, these three types of unit are formed by combining or subdividing the basic units of statistical inquiries or sometimes received directly from statistical inquiries. Before giving precise definitions of these three types of unit used in the ESA, it is necessary to define the limits of the national economy.

THE LIMITS OF THE NATIONAL ECONOMY

• 2.04. The units, whether institutional, local kind-of-activity or of homogeneous production, which constitute the economy of a country and whose transactions are recorded in the ESA, are those which have a centre of economic interest on the economic territory of that country. These units, known as resident units, may or may not have the nationality of that country, may or may not be legal entities, and may or may not be present on the economic territory of the country at the time they carry out a transaction. Having thus defined the limits of the national economy in terms of resident units, it is necessary to define the meaning of the terms economic territory and centre of economic interest.

• 2.05. The term economic territory means:

• (a) the geographic territory administered by a government within which persons, goods, services and capital move freely;

• (b) any free zones, including bonded warehouses and factories under customs control;

• (c) the national air-space, territorial waters and the continental shelf lying in international waters, over which the country enjoys exclusive rights ([^E0033]);

• (d) territorial enclaves (i.e. geographic territories situated in the rest of the world and used, under international treaties or agreements between States, by general government agencies of the country (embassies, consulates, military bases, scientific bases, etc.));

• (e) deposits of oil, natural gas, etc. in international waters outside the continental shelf of the country, worked by units resident in the territory as defined in the preceding subparagraphs.

• 2.06. The economic territory does not include extraterritorial enclaves (i.e. the parts of the country's own geographic territory used by general government agencies of other countries, by the institutions of the European Union or by international organizations under international treaties or agreements between States ([^E0034])).

• 2.07. The term centre of economic interest indicates the fact there exists some location within the economic territory on, or from, which a unit engages, and intends to continue to engage, in economic activities and transactions on a significant scale, either indefinitely or over a finite but long period of time (a year or more). It follows that a unit which carries out such transactions on the economic territory of several countries is deemed to have a centre of economic interest in each of them. The ownership of land and buildings within the economic territory is deemed to be sufficient in itself for the owner to have a centre of economic interest there.

• 2.08. On the basis of these definitions, units deemed to be residents of a country can be sub-divided into:

• (a) units which are principally engaged in production, finance, insurance or redistribution, in respect of all their transactions except those relating to ownership of land and buildings;

• (b) units which are principally engaged in consumption ([^E0035]), in respect of all their transactions except those relating to ownership of land and buildings;

• (c) all units in their capacity as owners of land and buildings with the exception of owners of extraterritorial enclaves which are part of the economic territory of other countries or are States sui generis (see paragraph 2.06.).

• 2.09. In the case of units which are principally engaged in production, finance, insurance or redistribution, in respect of all their transactions except those relating to ownership of land and buildings, the following two cases may be distinguished:

• (a) activity conducted exclusively on the economic territory of the country: units which carry out such activity are resident units of the country;

• (b) activity conducted for a year or more on the economic territories of several countries: only that part of the unit which has a centre of economic interest on the economic territory of the country is deemed to be a resident unit. It may be:
• 1. either an institutional resident unit (see paragraph 2.12.), whose activities conducted for a year or more in the rest of the world are excluded and treated separately ([^E0036]) or
• 1. a notional resident unit (see paragraph 2.15.), in respect of the activity conducted in the country for a year or more by a unit which is resident in another country. (36)

• 2.10. In the case of units which are principally engaged in consumption, except in their capacity as owners of land and buildings, households which have a centre of economic interest in the country are deemed to be resident units, even if they go abroad for short periods (less than a year). They include, in particular, the following:

• (a) border workers, i.e. people who cross the frontier daily to work in a neighbouring country;

• (b) seasonal workers, i.e. people who leave the country for several months, but less than a year, to work in another country in sectors in which additional manpower is needed periodically;

• (c) tourists, patients, students ([^E0037]), visiting officials, businessmen, salesmen, artists and crew members who travel abroad;

• (d) locally recruited staff working in the extraterritorial enclaves of foreign governments;

• (e) the staff of the institutions of the European Union and of civilian or military international organizations which have their headquarters in extraterritorial enclaves;

• (f) the official, civilian or military representatives of the government of the country (including their households) established in territorial enclaves.

• 2.11. All units in their capacity as owners of land and/or buildings which form part of the economic territory are deemed to be resident units or notional resident units (see paragraph 2.15.) of the country in which the land or buildings in question are located.

THE INSTITUTIONAL UNITS

• 2.12. | | | | --- | --- | | Definition: | The institutional unit is an elementary economic decision-making centre characterized by uniformity of behaviour and decision-making autonomy in the exercise of its principal function. A resident unit is regarded as constituting an institutional unit if it has decision-making autonomy in respect of its principal function and either keeps a complete set of accounts or it would be possible and meaningful, from both an economic and legal viewpoint, to compile a complete set of accounts if they were required. |

In order to be said to have autonomy of decision in respect of its principal function, a unit must:

• (a) be entitled to own goods or assets in its own right; it will therefore be able to exchange the ownership of goods or assets in transactions with other institutional units;

• (b) be able to take economic decisions and engage in economic activities for which it is itself held to be directly responsible and accountable at law;

• (c) be able to incur liabilites on its own behalf, to take on other obligations or further commitments and to enter into contracts.

In order to be said to keep a complete set of accounts, a unit must keep accounting records covering all its economic and financial transactions carried out during the accounting period, as well as a balance sheet of assets and liabilities.

• 2.13. The following principles apply whenever entities do not clearly possess both the characteristics of an institutional unit:

• (a) households always enjoy autonomy of decision in respect of their principal function and must therefore be institutional units, even though they do not keep a complete set of accounts;

• (b) entities which do not keep a complete set of accounts, and for which it would not be possible or meaningful to compile a complete set of accounts if required, are combined with the institutional units into whose accounts their partial accounts are integrated;

• (c) entities which, while keeping a complete set of accounts, have no autonomy of decision in the exercise of their principal function are combined with the units which control them;

• (d) entities which satisfy the definition of an institutional unit are treated as such even if they do not publish their accounts;

• (e) entities forming part of a group of units engaged in production and keeping a complete set of accounts are deemed to be institutional units even if they have partially surrendered their autonomy of decision to the central body (the holding corporation) responsible for the general direction of the group; the holding corporation itself is deemed to be an institutional unit distinct from the units which it controls, unless (b) is applicable;

• (f) quasi-corporations keep a complete set of accounts and have no independent legal status. However, they have an economic and financial behaviour that is different from that of their owners and similar to that of corporations. Therefore they are deemed to have autonomy of decision and are considered as distinct institutional units.

• 2.14. Holding corporations are institutional units whose main function is to control and direct a group of subsidiaries.

• 2.15. Notional resident units are defined as:

• (a) those parts of non-resident units which have a centre of economic interest (that is in most cases which engage in economic transactions for a year or more or which carry out a construction activity for a period of less than a year if the output constitutes gross fixed capital formation) on the economic territory of the country;

• (b) non-resident units in their capacity as owners of land or buildings on the economic territory of the country, but only in respect of transactions affecting such land or buildings.

Notional resident units, even if they keep only partial accounts and may not always enjoy autonomy of decision, are treated as institutional units.

• 2.16. In conclusion, the following are deemed to be institutional units:

• (a) units which have a complete set of accounts and autonomy of decision:
• 1. private and public corporations;
• 1. cooperatives or partnerships recognized as independent legal entities;
• 1. public producers which by virtue of special legislation are recognized as independent legal entities;
• 1. non-profit institutions recognized as independent legal entities;
• 1. agencies of general government;

• (b) units which have a complete set of accounts and which are deemed to have autonomy of decision: quasi-corporations (see paragraph 2.13. f);

• (c) units which do not necessarily keep a complete set of accounts, but which by convention are deemed to have autonomy of decision:
• 1. households;
• 1. notional resident units (see paragraph 2.15.).

THE INSTITUTIONAL SECTORS

• 2.17. The need for aggregation means that it is impossible to consider individual institutional units separately; they must be combined into groups called institutional sectors or simply sectors, some of which are divided into subsectors.

Table 2.1 — Sectors and subsectors

Sectors and subsectors	Sectors and subsectors	Public	National private	Foreign controlled
Non-financial corporations	S.11	S.11001	S.11002	S.11003
Financial corporations	S.12
Central Bank	S.121
Other monetary financial institutions	S.122	S.12201	S.12202	S.12203
Other financial intermediaries, except insurance corporations and pension funds	S.123	S.12301	S.12302	S.12303
Financial auxiliaries	S.124	S.12401	S.12402	S.12403
Insurance corporations and pension funds	S.125	S.12501	S.12502	S.12503
General government	S.13
Central government	S.1311
State government	S.1312
Local government	S.1313
Social security funds	S.1314
Households	S.14
Employers (including own-account workers)	S.141 + S.142
Employees	S.143
Recipients of property incomes	S.1441
Recipients of pensions	S.1442
Recipients of other transfer incomes	S.1443
Others	S.145
Non-profit institutions serving households	S.15
Rest of the world	S.2
The European Union	S.21
The member countries of the EU	S.211
The institutions of the EU	S.212
Third countries and international organizations	S.22

• 2.18. Each of the sectors and subsectors groups together the institutional units which have a similar type of economic behaviour.

The institutional units are grouped into sectors on the basis of the type of producer they are and depending on their principal activity and function, which are considered to be indicative of their economic behaviour.

A sector is divided into subsectors according to the criteria relevant to that sector; this permits a more precise description of the economic behaviour of the units.

The accounts for sectors and subsectors record all the activities, whether principal or secondary, of the institutional units covered.

Each institutional unit belongs to only one sector or subsector.

• 2.19. When the principal function of the institutional unit is to produce goods and services, it is necessary in deciding the sector to which it should be allocated — to distinguish first of all the type of producer it is belonging to.

Three types of producers are distinguished in the ESA:

• (a) private and public market producers (see paragraph 3.24 and table 3.1 of chapter 3);

• (b) private producers for own final use (see paragraph 3.25 and table 3.1 of chapter 3);

• (c) private and public other non-market producers (see paragraph 3.26 and table 3.1 of chapter 3).

Institutional units which are market producers are classified in the sectors non-financial corporations (S.11), financial corporations (S.12) or households (S.14).

Institutional units which are private producers for own final use are classified in the households sector (S.14) together with the unincorporated enterprises owned by households (see paragraph 3.30).

Institutional units which are other non-market producers are classified in the sector general government (S.13) or non-profit institutions serving households (S.15).

• 2.20. Table 2.2 shows the type of producer, the principal activities and functions which are characteristic of each sector:

Table 2.2 — The type of producer, the principal activities and functions classified by sector

Sector	Type of producer	Principal activity and function
Non-financial corporations (S.11) (see paragraph 2.21)	Market producer	Production of market goods and non-financial services
Financial corporations (S.12) (see paragraph 2.32)	Market producer	Financial intermediation including insurance Auxiliary financial activities
General government (S.13) (see paragraph 2.68)	Public other non-market producer	Production and supply of other non-market output for collective and individual consumption and carrying out transactions intended to redistribute national income and wealth
Households (S.14)	Households (S.14)	Households (S.14)
— as consumers		Consumption
— as entrepreneurs (see paragraph 2.75)	Market producer or private producer for own final use	Production of market output and output for own final use
Non-profit institutions serving households (S.15) (see paragraph 2.87)	Private other non-market producer	Production and supply of other non-market output for individual consumption

The rest of the world (S.2) is a grouping of institutional units (see paragraph 2.89) which is not characterized by similar objectives and types of behaviour; it groups together non-resident institutional units insofar as they carry out transactions with resident institutional units.

NON-FINANCIAL CORPORATIONS (S.11)

• 2.21. Definition : The sector non-financial corporations (S.11) consists of institutional units whose distributive and financial transactions are distinct from those of their owners and which are market producers (see paragraphs 3.31, 3.32 and 3.37), whose principal activity is the production of goods and non-financial services ([^E0038])

• 2.22. The sector non-financial corporations also includes non-financial quasi-corporations.

• 2.23. The term ‘non-financial corporations’ denotes all bodies recognized as independent legal entities which are market producers and whose principal activity is the production of goods and non-financial services.

The institutional units covered are the following:

• (a) private and public corporations which are market producers principally engaged in the production of goods and non-financial services;

• (b) cooperatives and partnerships recognized as independent legal entities which are market producers principally engaged in the production of goods and non-financial services;

• (c) public producers which by virtue of special legislation are recognized as independent legal entities and which are market producers principally engaged in the production of goods and non-financial services;

• (d) non-profit institutions or associations serving non-financial corporations, which are recognized as independent legal entities and which are market producers principally engaged in the production of goods and non-financial services ([^E0039]);

• (e) holding corporations controlling (see paragraph 2.26) a group of corporations which are market producers, if the preponderant type of activity of the group of corporations as a whole — measured on the basis of value added — is the production of goods and non-financial services;

• (f) private and public quasi-corporations which are market producers principally engaged in the production of goods and non-financial services.

• 2.24. The term ‘non-financial quasi-corporations’ denotes all bodies without independent legal status which are market producers principally engaged in the production of goods and non-financial services and meet the conditions qualifying them as quasi-corporations (see paragraph 2.13. f).

Quasi-corporations must keep a complete set of accounts and are operated as if they were corporations. The de facto relationship to their owner is that of a corporation to their shareholders.

Thus non-financial quasi-corporations owned by households, government units or non-profit institutions are grouped with non-financial corporations in the non-financial corporations sector.

The existence of a complete set of accounts, including balance sheets, is not a sufficient condition for market producers to be treated as quasi-corporations. Therefore, partnerships and public producers, other than those included under 2.23. a, b, c and f and sole proprietorships — even if they keep a complete set of accounts — are in general not distinct institutional units because they do not enjoy autonomy of decision, their management being under the control of the households, non-profit institutions or governments which own them.

• 2.25. The sector non-financial corporations also includes all notional resident units (see paragraph 2.15) which, by convention, are treated as if they were quasi-corporations.

• 2.26. Control over a corporation is defined as the ability to determine general corporate policy by choosing appropriate directors, if necessary.

A single institutional unit (another corporation, a household or a government unit) secures control over a corporation by owning more than half the voting shares or otherwise controlling more than half the shareholders' voting power.

In addition, government secures control over a corporation as a result of special legislation decree or regulation which empowers the government to determine corporate policy or to appoint the directors.

In order to control more than half the shareholders' voting power, an institutional unit need not own any of the voting shares itself. A corporation C could be a subsidiary of another corporation B in which a third corporation A owns a majority of the voting shares.

Corporation C is said to be subsidiary of corporation B when: either corporation B controls more than half of the shareholders' voting power in corporation C or corporation B is a shareholder in C with the right to appoint or remove a majority of the directors of C.

• 2.27. The sector non-financial corporations is divided into three subsectors:

• (a) public non-financial corporations (S.11001);

• (b) national private non-financial corporations (S.11002);

• (c) foreign controlled non-financial corporations (S.11003).

Subsector: Public non-financial corporations (S.11001)

• 2.28. | | | | --- | --- | | Definition: | The sub-sector public non-financial corporations consists of all non-financial corporations and quasi-corporations that are subject to control (see paragraph 2.26) by government units. |

• 2.29. Public quasi-corporations are quasi-corporations owned directly by government units.

Subsector: National private non-financial corporations (S.11002)

• 2.30. | | | | --- | --- | | Definition: | The subsector national private non-financial corporations consists of all non-financial corporations and quasi-corporations that are not controlled by government or by non-resident institutional units. This subsector includes all the non-profit institutions which are included in the non-financial corporate sector (see paragraph 2.23. d). |

This subsector includes corporate and quasi-corporate direct foreign investment enterprises (see paragraph 4.65) not classified in the subsector foreign controlled non-financial corporations (S.11003).

Subsector: Foreign controlled non-financial corporations (S.11003)

• 2.31. | | | | --- | --- | | Definition: | The subsector foreign controlled non-financial corporations consists of all non-financial corporations and quasi-corporations that are controlled (see paragraph 2.26) by non-resident institutional units. |

This subsector includes:

• (a) all subsidiaries of non-resident corporations;

• (b) all corporations controlled by a non-resident institutional unit that is not itself a corporation: for example, a corporation which is controlled by a foreign government; it includes corporations controlled by a group of non-resident units acting in concert;

• (c) all branches or other unincorporated agencies of non-resident corporations or unincorporated producers which are notional resident units to be treated as non-financial quasi-corporations (see paragraph 2.25).

FINANCIAL CORPORATIONS (S.12)

• 2.32. | | | | | --- | --- | --- | | Definition | : | The sector financial corporations (S.12) consists of all corporations and quasi-corporations which are principally engaged in financial intermediation (financial intermediaries) and/or in auxiliary financial activities (financial auxiliaries) ([^E0040]) Financial intermediation is the activity in which an institutional unit acquires financial assets and at the same time incurs liabilites (see paragraph 2.34) on its own account (see paragraph 2.33) by engaging in financial transactions on the market (see paragraphs 2.37 to 2.38). The assets and liabilities of the financial intermediaries have different characteristics, involving that the funds are transformed or repackaged with respect to maturity, scale, risk and the like in the financial intermediation process. Auxiliary financial activities are activities closely related to financial intermediation but which are not financial intermediation themselves (see paragraph 2.39). |

• 2.33. Through the financial intermediation process, funds are channelled between third parties with a surplus on one side and those with a lack of funds on the other. A financial intermediary does not simply act as an agent for these other institutional units but places itself at risk by acquiring financial assets and incurring liabilities on its own account.

• 2.34. In the financial intermediation process, all categories of liabilities may be involved with the exception of the category other accounts payable (AF.7).

The financial assets involved in the financial intermediation process may be classified in any category with the exception of the category insurance technical reserves (AF.6) but including the category other accounts receivable (factoring). In addition, financial intermediaries may invest their funds in non-financial assets including real estate. However, in order to be considered as a financial intermediary, a corporation should, in addition, incur liabilities on the market and transform funds. Therefore, real estate corporations ( NACE Rev. 2 division 68) are excluded.

• 2.35. The primary function of insurance corporations and pension funds consists of the pooling of risks. The main liabilities of these institutions are insurance technical reserves (AF.6). The counterparts of the reserves are investments by the insurance corporations and pension funds, which, therefore, act as financial intermediaries.

• 2.36. Mutual funds primarily incur liabilities through the issue of shares (AF.52). They transform these funds by acquiring financial assets and/or real estate. Therefore, mutual funds are classified as financial intermediaries. As with other corporations, any change in the value of their assets and liabilities other than their own shares is reflected in their own funds (see paragraph 7.05). Because the amount of own funds normally equals the value of the mutual fund's shares, any change in the value of the fund's assets and liabilities will be reflected in the market value of these shares.

Mutual funds investing solely in real estate are also regarded as financial intermediaries.

• 2.37. Financial intermediation, generally, is limited to financial transactions on the market. In other words, acquiring assets and incurring liabilities should be with the general public or specified and relatively large sub-groups thereof. Where the activity is limited to small groups of persons or families, generally, no financial intermediation takes place. In particular, financial intermediation does not include institutional units providing treasury services to a company group. These institutional units are allocated to a sector according to the predominant function of the company group within the economic territory. However, in cases where the institutional unit providing the treasury services is subject to financial supervision, it is classified in the financial corporations sector by convention.

• 2.38. Exceptions to the general limitation of financial intermediation to financial transactions on the market may exist. Examples are municipal credit and savings-banks, which rely heavily on the municipality involved, or financial lease corporations depending on a parent group of companies in acquiring funds or in investing funds. However, their lending or their acceptance of savings should be independent of the municipality involved or the parent group, respectively, in classifying them as financial intermediaries.

• 2.39. Auxiliary financial activities comprise auxiliary activities for realizing transactions in financial assets and liabilities or the transformation or repackaging of funds. Financial auxiliaries do not set themselves at risk by acquiring financial assets or incurring liabilities. They only facilitate financial intermediation.

• 2.40. The institutional units included in the sector financial corporations (S.12) are the following:

• a) private or public corporations which are principally engaged in financial intermediation and/or in auxiliary financial activities;

• b) cooperatives and partnerships recognized as independent legal entities which are principally engaged in financial intermediation and/or in auxiliary financial activities;

• c) public producers, which by virtue of special legislation are recognized as independent legal entities, which are principally engaged in financial intermediation and/or in auxiliary financial activities;

• d) non-profit institutions recognized as independent legal entities which are principally engaged in financial intermediation and/or in auxiliary financial activities, or which are serving financial corporations;

• e) holding corporations (see paragraph 2.14) if the group of subsidiaries within the economic territory as a whole is principally engaged in financial intermediation and/or in auxiliary financial activities;

• f) unincorporated mutual funds comprising investment portfolios owned by the group of participants, and whose management is undertaken, in general, by other financial corporations. These funds are institutional units by convention, separate from the managing financial corporation;

• g) financial quasi-corporations:
• 1. unincorporated units principally engaged in financial intermediation and subject to regulation and supervision (in most cases classified in the other monetary financial institutions subsector or the insurance corporations and pension funds subsector) are deemed to enjoy autonomy of decision and to have autonomous management independent of their owners. Their economic and financial behaviour is similar to that of financial corporations. Therefore, they are treated as separate institutional units. Examples are branches of non-resident financial corporations;
• 1. other unincorporated units principally engaged in financial intermediation but not subject to regulation and supervision are only considered as financial quasi-corporations if they meet the conditions qualifying them as quasi-corporations (see paragraph 2.13. f);
• 1. unincorporated units principally engaged in auxiliary financial activities are only considered as financial quasi-corporations if they meet the conditions qualifying them as quasi-corporations (see paragraph 2.13. f).

• 2.41. The financial corporations sector is subdivided into five subsectors:

• (a) the central bank (S.121);

• (b) other monetary financial institutions (S.122);

• (c) other financial intermediaries, except insurance corporations and pension funds (S.123);

• (d) financial auxiliaries (S.124);

• (e) insurance corporations and pension funds (S.125).

The other monetary financial institutions subsector is regarded as equivalent to the other depository corporations subsector as defined in the 1993 SNA 4.88—4.94. While the definition of the other monetary financial institutions subsector (see paragraph 2.48) is intended to cover those financial intermediaries through which the effects of the monetary policy of the central bank are transmitted to the other entities of the economy, the other depository corporations subsector is defined in the 1993 SNA with reference to measures of broad money. The combined subsectors S.121 and S.122 coincide with the monetary financial institutions for statistical purposes as defined by the EMI (see paragraph 2.49).

• 2.42. With the exception of subsector S.121, each subsector may be further subdivided into:

• (a) public financial corporations;

• (b) national private financial corporations;

• (c) foreign controlled financial corporations.

The criteria for this subdivision are the same as for non-financial corporations (see paragraphs 2.26 to 2.31).

• 2.43. Holding corporations which only control and direct a group of subsidiaries principally engaged in financial intermediation and/or in auxiliary financial activities are classified in the subsector other financial intermediaries except insurance corporations and pension funds (S.123) ([^E0041]). However, holding corporations which are financial corporations themselves are to be allocated to the subsectors according to the main type of financial activity.

• 2.44. Non-profit institutions recognized as independent legal entities serving financial corporations, but not engaged in financial intermediation or auxiliary financial activities, are classified in the subsector financial auxiliaries (S.124).

Subsector: The central bank (S.121)

• 2.45. | | | | --- | --- | | Definition: | The subsector the central bank (S.121) consists of all financial corporations and quasi-corporations whose principal function is to issue currency, to maintain the internal and external value of the currency and to hold all or part of the international reserves of the country. |

• 2.46. The following financial intermediaries are classified in subsector S.121:

• (a) the national central bank, also in the case where it is part of a European System of Central Banks;

• (b) central monetary agencies of essentially public origin (e.g. agencies managing foreign exchange or issuing currency) which keep a complete set of accounts and enjoy autonomy of decision in relation to central government. Mostly these activities are performed either within central government or within the central bank. In these cases no separate institutional units exist.

• 2.47. Subsector S.121 does not include agencies and bodies, other than the central bank, which regulate or supervise financial corporations or financial markets. They are classified in subsector S.124 (see paragraph 2.58 (g) ([^E0042]).

Subsector: Other monetary financial institutions (S.122)

• 2.48. | | | | --- | --- | | Definition: | The subsector other monetary financial institutions (S.122) consists of all financial corporations and quasi-corporations, except those classified in the central bank subsector, which are principally engaged in financial intermediation and whose business is to receive deposits and/or close substitutes for deposits from institutional units other than monetary financial institutions, and, for their own account, to grant loans and/or to make investments in securities. |

• 2.49. The monetary financial institutions (MFIs) comprise the subsector the central bank (S.121) and the subsector other monetary financial institutions (S.122), and coincide with the monetary financial institutions for statistical purposes as defined by the EMI (see paragraph 2.41).

• 2.50. MFIs cannot be described simply as ‘banks’, because they may possibly include some financial corporations which may not call themselves banks, and some which may not be permitted to do so in some countries, while some other financial corporations describing themselves as banks may not in fact be MFIs. In general, the following financial intermediaries are classified in subsector S.122:

• (a) commercial banks, ‘universal’ banks, ‘all-purpose’ banks;

• (b) savings banks (including trustee savings banks and savings banks and loan associations);

• (c) post office giro institutions, post banks, giro banks;

• (d) rural credit banks, agricultural credit banks;

• (e) cooperative credit banks, credit unions;

• (f) specialized banks (e.g. merchant banks, issuing houses, private banks).

• 2.51. The following financial intermediaries may also be classified in subsector S.122 where it is their business to receive repayable funds from the public whether in the form of deposits or in other forms such as the continuing issue of bonds and other comparable securities. Otherwise, they should be classified in subsector S.123:

• (a) corporations engaged in granting mortgages (including building societies, mortgage banks and mortgage credit institutions);

• (b) mutual funds (including investment trusts, unit trusts and other collective investment schemes, e.g. undertakings for collective investment in transferable securities-UCITS);

• (c) municipal credit institutions.

• 2.52. Subsector S.122 does not include:

• (a) holding corporations which only control and direct a group consisting predominantly of other monetary financial institutions, but which are not other monetary financial institutions themselves. They are classified in subsector S.123 (see paragraph 2.43);

• (b) non-profit institutions recognized as independent legal entities serving other monetary financial institutions, but not engaged in financial intermediation. They are classified in subsector S.124 (see paragraph 2.44).

Subsector: Other financial intermediaries, except insurance corporations and pension funds (S.123)

• 2.53. | | | | --- | --- | | Definition: | The subsector other financial intermediaries except insurance corporations and pension funds (S.123) consists of all financial corporations and quasi-corporations which are principally engaged in financial intermediation by incurring liabilities in forms other than currency, deposits and/or close substitutes for deposits from institutional units other than monetary financial institutions, or insurance technical reserves. |

• 2.54. Subsector S.123 includes various types of financial intermediaries especially those which are predominantly engaged in long-term financing. In most cases this predominant maturity forms the basis of a distinction from the other monetary financial institutions subsector. Based on the non-existence of liabilities in the form of insurance technical reserves, the borderline with the insurance corporations and pension funds subsector can be determined.

• 2.55. In particular, the following financial corporations and quasi-corporations are classified in subsector S.123 unless they are MFIs:

• (a) corporations engaged in financial leasing;

• (b) corporations engaged in hire purchase and the provision of personal or commercial finance;

• (c) corporations engaged in factoring;

• (d) security and derivative dealers (on own account);

• (e) specialized financial corporations such as venture and development capital companies, export/import financing companies;

• (f) financial vehicle corporations, created to be holders of securitized assets;

• (g) financial intermediaries which receive deposits and/or close substitutes for deposits from MFIs only;

• (h) holding corporations which only control and direct a group of subsidiaries principally engaged in financial intermediation and/or in auxiliary financial activities, but which are not financial corporations themselves (see paragraph 2.43).

• 2.56. Subsector S.123 does not include non-profit institutions recognized as independent legal entities serving other financial intermediaries except insurance corporations and pension funds, but not engaged in financial intermediation. They are classified in subsector S.124 (see paragraph 2.44).

Subsector: Financial auxiliaries (S.124)

• 2.57. | | | | --- | --- | | Definition: | The subsector financial auxiliaries (S.124) consists of all financial corporations and quasi-corporations which are principally engaged in auxiliary financial activities, that is to say activities closely related to financial intermediation but which are not financial intermediation themselves (see paragraph 2.39). |

• 2.58. In particular, the following financial corporations and quasi-corporations are classified in subsector S.124:

• (a) insurance brokers, salvage and average administrators, insurance and pension consultants, etc.;

• (b) loan brokers, securities brokers, investment advisers, etc.;

• (c) flotation corporations that manage the issue of securities;

• (d) corporations whose principal function is to guarantee, by endorsement, bills and similar instruments;

• (e) corporations which arrange derivative and hedging instruments, such as swaps, options and futures (without issuing them);

• (f) corporations providing infrastructure for financial markets;

• (g) central supervisory authorities of financial intermediaries and financial markets when they are separate institutional units;

• (h) managers of pension funds, mutual funds, etc.;

• (i) corporations providing stock exchange and insurance exchange;

• (j) non-profit institutions recognized as independent legal entities serving financial corporations, but not engaged in financial intermediation or auxiliary financial activities (see paragraph 2.44).

• 2.59. Subsector S.124 does not include holding corporations which only control and direct a group of subsidiaries principally engaged in auxiliary financial activities, but which are not financial auxiliaries themselves. They are classified in subsector S.123 (see paragraph 2.43).

Subsector: Insurance corporations and pension funds (S.125)

• 2.60. | | | | --- | --- | | Definition: | The subsector insurance corporations and pension funds (S.125) consists of all financial corporations and quasi-corporations which are principally engaged in financial intermediation as the consequence of the pooling of risks (see paragraph 2.35). |

• 2.61. The insurance contracts administered might relate to individuals and/or groups, whether or not participation results from a general obligation imposed by government. Furthermore, social insurance contracts (see paragraphs 4.83 to 4.91) are sometimes a considerable part of the contracts administered.

• 2.62. Subsector S.125 includes both captive insurance corporations and reinsurance corporations.

• 2.63. Subsector S.125 does not include:

• (a) institutional units which fulfil each of the two criteria listed in paragraph 2.74. They are classified in subsector S.1314;

• (b) holding corporations which only control and direct a group consisting predominantly of insurance corporations and pension funds, but which are not insurance corporations and pension funds themselves. They are classified in subsector S.123 (see paragraph 2.43);

• (c) non-profit institutions recognized as independent legal entities serving insurance corporations and pension funds, but not engaged in financial intermediation. They are classified in subsector S.124 (see paragraph 2.44).

• 2.64. The subsector insurance corporations and pension funds may be subdivided into:

• (a) insurance corporations;

• (b) (autonomous) pension funds.

Autonomous pension funds are pension funds which have autonomy of decision and keep a complete set of accounts. They are therefore institutional units. Non-autonomous pension funds are not institutional units and remain part of the institutional unit that sets them up.

• 2.65. Risks concerning individuals or groups could both be included in the activities of life and non-life insurance corporations. Some insurance corporations might limit their activities to group contracts only. These corporations are allowed to insure every group.

• 2.66. Pension funds can be described as institutions which insure group risks relating to social risks and needs (see paragraph 4.84) of the insured persons. The typical groups of participants in such policies include employees of a single enterprise or a group of enterprises, employees of a branch or industry, and persons having the same profession. The benefits included in the insurance contract might encompass benefits which are paid after death of the insured to the widow(er) and children (mainly death in service), benefits which are paid after retirement and benefits which are paid after the insured became disabled.

• 2.67. In some countries all these types of risks could be insured equally well by life insurance corporations as by pension funds. In other countries some of these classes of risks have to be insured through life insurance corporations. In contrast to life insurance corporations, pension funds are restricted (by law) to specified groups of employees and self-employed.

GENERAL GOVERNMENT (S.13)

• 2.68. | | | | --- | --- | | Definition: | The sector general government (S.13) includes all institutional units which are other non-market producers (see paragraph 3.26) whose output is intended for individual and collective consumption, and mainly financed by compulsory payments made by units belonging to other sectors, and/or all institutional units principally engaged in the redistribution of national income and wealth. |

• 2.69. The institutional units included in sector S.13 are the following:

• (a) general government entities (excluding public producers organized as public corporations or, by virtue of special legislation, recognized as independent legal entities, or quasi-corporations, when any of these are classified in the non-financial or financial sectors) which administer and finance a group of activities, principally providing non-market goods and services, intended for the benefit of the community ([^E0043]);

• (b) non-profit institutions recognized as independent legal entities which are other non-market producers and which are controlled and mainly financed by general government;

• (c) autonomous pension funds if the two requirements of paragraph 2.74 are met.

• 2.70. The general government sector is divided into four subsectors:

• (a) central government (S.1311);

• (b) State government (S.1312);

• (c) local government (S.1313);

• (d) social security funds (S.1314).

Subsector: Central government (S.1311)

• 2.71. | | | | --- | --- | | Definition: | The subsector central government includes all administrative departments of the State and other central agencies whose competence extends normally over the whole economic territory, except for the administration of social security funds. |

Included in subsector S.1311 are those non-profit institutions which are controlled and mainly financed by central government and whose competence extends over the whole economic territory.

Subsector: State government (S.1312)