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5216.0 - Australian National Accounts: Concepts, Sources and Methods, 2000  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 15/11/2000   
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Contents >> Chapter 6: Producing units and industries

Introduction

6.1 The previous chapter describes the institutional units operating in the economy, and the way in which institutional units with similar functions are grouped into institutional sectors. However, the production activities of institutional units can be diverse and heterogeneous with respect to the types of production processes and goods and services produced by the producing units belonging to institutional units. For analyses of production, analysts prefer to work with groups of producing units that are engaged in essentially the same kind of production. Such groups are called 'industries'. Therefore, although institutional units can be allocated to industries, for the compilation of statistics classified by industry the units of interest are the producing units owned by institutional units. Producing units are sufficiently homogeneous, in terms of their range of activities, to enable them to be classified to industry at the required level of industry detail, based on their predominant activity. This chapter describes the SNA93 guidelines for the delineation of producing units and the ABS application of the guidelines.


The SNA93 concept of producing units and industries

6.2 In SNA93, institutional units in their capacity as producers are described as enterprises (however the SNA93 enterprise unit should not be confused with the ASNA's enterprise unit described in Chapter 5). SNA93 notes that enterprises can be allocated to industries in accordance with the types of productive activities in which they engage. However, as explained below, an enterprise may engage in both principal and secondary types of productive activity, and large corporations may be involved in many different kinds of productive activity simultaneously, encompassing a wide range of goods and services. Therefore, for the analysis of production classified by industry, SNA93 recommends partitioning of enterprises into units that are more homogeneous in terms of the range of productive activities in which they engage.

6.3 The principal activity of a producing unit is the activity with value added that exceeds the value added of any other activity carried out by the same unit. In this context, activities are the kinds of production (based on outputs, inputs, production techniques or output uses) that are defined as the principal activities of each industry in the International Standard Industrial Classification of All Economic Activities, Revision 3 (ISIC Rev. 3), published by the United Nations. A secondary activity is an activity with value added less than that of the principal activity. To be considered as either principal or secondary activities, the outputs from the activities must be goods or services that are capable of being delivered to other units even though they may be used for own consumption or for own capital formation.

6.4 The output of ancillary activity is not intended for use outside the enterprise. Ancillary activity is undertaken within an enterprise to support the principal or secondary activities. Activities which may be classified as ancillary include record keeping; electronic or other forms of communication; purchasing of materials and equipment; personnel management; warehousing; transportation; sales promotion; cleaning, repairs and maintenance; security and surveillance.

6.5 For national accounting purposes, the output of an ancillary activity is not explicitly recognised or recorded, and all inputs to ancillary activities are treated as inputs to the principal or secondary activities that they support. If an ancillary activity grows to the point that it has the capacity to provide services outside an enterprise, it is treated as a secondary activity.

Producing units

6.6 SNA93 discusses three types of units into which enterprises can be partitioned for the purpose of industry statistics. The kind-of-activity unit is defined as an enterprise, or part of an enterprise, which engages in only one kind of (non-ancillary) productive activity, or in which the principal productive activity accounts for most of the value added. The local unit is an enterprise or part of an enterprise that engages in productive activity at, or from, one location. The establishment is a combination of the kind-of-activity and local units and is defined as a unit engaging significantly in one principal kind of activity at, or from, a single location (however, the SNA93 establishment unit should not be confused with the ASNA's establishment unit described below and in Chapter 5). Although establishments can engage in secondary activities, SNA93 recommends that if the secondary activity is significant it should be treated as part of another establishment. Examples of establishments are individual farms, mines, quarries, factories, shops, construction sites and airports.

6.7 If an enterprise comprises only a single establishment, the two units coincide and the production account for the establishment is the same as for the enterprise. However, establishments are conceptually distinct from enterprises, in that an establishment does not engage in transactions on its own account, or incur liabilities, enter contracts and so on. The enterprise which owns the establishment is the unit which engages in these types of activities, and makes the decisions concerning the productive activities of the establishment.

6.8 The establishment is designed to facilitate industry analysis, which is concerned with the outputs and inputs to the production processes of enterprises. Information about establishments is used (i) to value commodities produced and goods and services used in production; (ii) to measure industry employment, compensation of employees, operating surplus, changes in inventories and gross fixed capital formation; and (iii) to derive estimates of productivity. The enterprise provides information on the broader functions of an institutional unit engaged in production, enabling production to be classified to institutional sectors.

6.9 In SNA93, ancillary activities related to an individual establishment are treated as an integral part of the costs of the establishment's principal or secondary activities. An enterprise may include central ancillary units that carry out ancillary activities for all establishments of the same enterprise. SNA93 recommends that the costs of such ancillary activities be distributed across the establishments served by the ancillary unit.

Industries

6.10 An industry is defined in paragraph 5.40 of SNA93 as:

        "a group of establishments engaged in the same, or similar, kinds of activity".
As noted in paragraph 6.3 above, the international standard for the classification of industries is the ISIC, a four-level hierarchical classification, which includes in the same industry grouping all establishments with the same principal activity.


The ASNA equivalent of producing units

6.11 The units model underlying the ASNA was partly described in Chapter 5, where the units in the model corresponding to SNA93 institutional unit were described. The producing units in the ASNA's units model are the management unit and the establishment. Locations from which producing units operate are also identified in the model.

6.12 The management unit is the highest-level accounting unit within a business, having regard for industry homogeneity, for which accounts are maintained; in nearly all cases it coincides with the legal entity owning the business (i.e. company, partnership, trust, sole operator, etc). In the case of large diversified businesses, however, there may be more than one management unit, each coinciding with a 'division' or 'line of business'. A division or line of business is recognised where separate and comprehensive accounts are compiled for it. Management units consist, in turn, of one or more establishments. The management unit is the statistical unit that is used in most ABS economic surveys that provide industry or production data.

6.13 The establishment is the smallest accounting unit of a business, within a State or Territory, controlling its productive activities and maintaining a specified range of detailed data including data enabling value added to be calculated. In general an establishment covers all operations at a physical location, but may consist of a group of locations provided they are within the same State or Territory. The majority of establishments operate at one location only. Establishments may coincide with individual management units, although in many businesses more than one establishment may be present within a management unit. Ancillary units are not specifically recognised in the ABS statistical units model. Units which engage in ancillary activities, and for which accounting data are available, are treated as establishments in their own right; otherwise they are subsumed in the data for the establishments that they serve.

6.14 The location is a site, occupied by an establishment, at or from which the establishment engages in productive activity on a relatively permanent basis. An establishment may operate from one or more locations.


Industries in the ASNA

6.15 Establishments are classified to industries according to the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 (Cat. no. 1292.0 ). The ANZSIC has been developed by the ABS and Statistics New Zealand for use in both countries for the compilation and analysis of industry statistics. To ensure international comparability, the ANZSIC is aligned as closely as possible with the ISIC.

6.16 The ANZSIC comprises four levels, namely Divisions (the broadest level), Subdivisions, Groups and Classes (the lowest level). Establishments are defined to be homogeneous at the class level, whereas management units are defined to be homogeneous at the subdivision level.

6.17 Industry statistics in the ASNA are presented on a basis that is consistent with the ANZSIC. Value added is presented on an ANZSIC industry basis at the Division level, and also at the Subdivision level for the Agriculture, forestry and fishing, Mining, Manufacturing, Electricity, gas and water supply and Transport and storage industries. A number of income components of the ASNA are also presented on an ANZSIC industry basis. Industry data in the input-output tables are classified according to the Input-Output Industry Classification (IOIC), which is based on the ANZSIC. While some of the input-output industries correspond to a single ANZSIC industry class, most IOIC industries constitute a grouping of similar ANZSIC industries. These groupings are formed to enable the input-output tables to present a balanced picture of the structure of the economy while maintaining comparability between the latest published tables and earlier ones. More information on the ANZSIC and the IOIC is contained in Appendix I.

6.18 In the ASNA, statistics classified by industry are sometimes referred to broadly in terms of 'industry sector'. That term refers to a high level of aggregation of industries, usually at the Division (e.g. Manufacturing) or Subdivision (e.g. Machinery and equipment manufacturing) level of the ANZSIC.

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