Non-compliance with International Standards with Minor Impact
Definition of Basic Prices
SNA93 Rev.1 reaffirms the SNA93 treatment of basic prices. However, users, particularly those of Input-Output tables, have expressed a strong preference for moving back to the SNA68 definition of basic prices. SNA93 altered the definition of basic prices with regard to the treatment of transport. Essentially, under SNA93, transport which is not separately invoiced is to be included within the basic price, while that which is separately invoiced is not to be included in the basic price of the product being transported. This was a change from the SNA68 definition of basic price, which always excluded the transport component whether separately invoiced or not.
The ABS considers that the SNA68 definition provides more useful statistics for detailed analysis of the economy and intends to reapply this definition. This will result only in changes to estimates at the industry level, there will be no impact on GDP.
A repurchase agreement (repo) involves the sale of securities or other assets with a commitment to repurchase equivalent assets at a specified price. The right to on-selling of these securities has become almost universal. The SNA93 and the BPM5 treat repos similarly to collateralised loans, or as other deposits if repos involve liabilities classified under national measures of broad money. After considering whether the SNA93 treatment should be revised, it was decided that SNA93 Rev.1 would continue the current treatment (collateralised loan) and the issue be placed on the international long-term research agenda.
The collateralised loan treatment is not supported by ABS. The ABS maintains that the best statistical representation of a repo is that of a sale of securities, with the obligation to sell/buy-back similar securities recorded as a forward contract, that is a form of financial derivative. This treatment has the advantage of unduplicated recording of securities assets, whereas the collateralised loan approach requires recording of negative security assets to maintain equality between total securities asset holdings and total securities liabilities on issue. The ABS treatment impacts compositional aspects (e.g. securities vs loans, classification of asset holders) but has no impact on analytical aggregates (net assets, net lending/borrowing).
Recording of Interest on Debt Securities
SNA93 and BPM5 do not deal explicitly with the situation of changing interest rates and the measurement of income flows on tradeable securities. There are two schools of thought. The debtor approach records the interest accruing at the contractual rate agreed at the time of issue of the security. The creditor approach records the interest accruing at the current market interest rate. Proponents of the debtor approach argue that it records the legal liability of the debtor to the creditor. Proponents of the creditor approach argue that it is more consistent with the market valuation principle. SNA 93 Rev.1 and BPM6 recommend the debtor approach be applied for recording interest accruing on debt securities.
The ABS continues to strongly support the creditor approach as a better reflection of the market reality in terms of valuing the underlying instrument and the interest that accrues over the life of the instrument. The ABS intends to maintain consistency throughout the accounts by continuing the creditor approach for debt securities.
Ancillary Units (Holding companies)
Ancillary units are subsidiary units, wholly owned by a parent corporation, created to provide services to the parent corporation, or other corporations in the same group. SNA93 Rev.1 includes a number of changes and clarifications to the treatment of these units. The most significant of these recommends that ancillary units be recognised as separate establishments when they satisfy the conditions of an establishment and should be classified according to their predominant activity.
Holding Companies (a unit which holds the assets of subsidiary corporations but does not undertake any management activities) would receive the proposed sectoral classification of Captive financial institutions and money lenders.
This recommendation would be a departure from the current ABS practice for holding companies where, in Financial Accounts and International Investment, they receive an ancillary treatment and are merged into an existing enterprise. Following the recommendation would result in the creation of additional enterprises in situations where currently there are no financial intermediary enterprises in the group.
The ABS is proposing to maintain its current practice, which is in line with the spirit of the recommendations but deviates in the treatment of holding companies.
Financial Instrument Classification
A new financial instrument classification has been developed which includes more detailed breakdowns in a number of categories, which has significant implications for data collection and respondent burden. Consequently the ABS has adapted the classification with slight changes. The proposed classifications for international investment and national accounts statistics are shown below.
Reclassifications for Exchanges in International Positions
BPM6 states that domestic transactions resulting in a change in external asset positions should be recorded as a 'reclassification' in the international investment position. Similarly, transactions between two non-residents in a position issued by a resident would also be recorded as a reclassification.
The ABS considers that by issuing a tradeable instrument, the issuer is implicitly a counterpart to any secondary trading in the instrument and that a transaction should be recorded between the vendor and the issuer extinguishing the position, and a second transaction between the purchaser and the issuer creating the position. The ABS will therefore not treat the exchange as a reclassification.