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8772.0 - Private Sector Construction Industry, Australia, 2011-12 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 27/06/2013   
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GLOSSARY

Data presented in this publication have been compiled from the standard financial accounts of businesses. Therefore, the definition of each reported item aligns closely with that adopted in standard business accounting practice. Included in the glossary are published data items and components used to calculate derived items.

Alterations, additions, renovations and improvements (income from)

This item refers to income from trade services, building and construction work which adds to the capital value of existing assets and/or prolongs the effective life of existing assets. It excludes repairs and maintenance of an existing asset.

Business

A business is generally considered to be a person, partnership or corporation engaged in business or commerce.

In this publication, the term represents the ABN unit or type of activity unit (TAU), which are the two standard statistical units for the 2011-12 EAS collections. For details, see Explanatory Notes paragraphs 12-15.

Capital expenditure

Total (gross) expenditure on acquiring fixed tangible and intangible assets, before deduction of trade-in allowances, and including expenses (except capitalised interest) incurred during the year in acquiring such assets. Fixed tangible assets include land, dwellings, other buildings and structures, plant, machinery and equipment (including motor vehicles). Intangible assets include capitalised exploration expenditure, patents, licences and goodwill.

Disposal of assets

Proceeds from the sale of tangible assets (plant, machinery, equipment, land, dwellings, other buildings and structures) and intangible assets (such as patents, licences and goodwill).

Earnings before interest, tax, depreciation and amortisation (EBITDA)

Profit prior to the deduction of net interest (interest income minus interest expenses), income tax, depreciation and amortisation.

Employment at end June

Number of persons working for Construction businesses during the last pay period ending in June of the given year. Includes working proprietors and partners, employees absent on paid or prepaid leave, employees on workers' compensation who continue to be paid through the payroll, and contract workers paid through the payroll. Excludes persons paid by commission only, non-salaried directors, volunteers and self-employed persons such as consultants and contractors.

Income from trade services, building and construction

Refers to both subcontracting and primary contracting income earned for trade services, building or construction work.

Industry class

The structure of ANZSIC comprises four levels, ranging from industry division (broadest level) to industry class (finest level). Activities are narrowly defined within the industry class level, which is identified by a four-digit code, e.g. Industry Class 3241 Plastering and ceiling services. Usually, an activity is primarily defined to one class. However, some activities may be primary to more than one class.

Industry division

The structure of ANZSIC comprises four levels, ranging from industry division (broadest level) to industry class (finest level). The main purpose of the industry division level is to provide a limited number of categories which give a broad overall picture of the economy. There are 19 divisions within ANZSIC, each identified by an alphabetical letter that is; 'A' for Agriculture, forestry and fishing , 'E' for Construction etc.

Industry subdivision

This is the broadest level category within each industry division of ANZSIC and is identified by a two-digit code, e.g. Industry Subdivision 31 for Heavy and civil engineering construction. Industry subdivisions are built up from industry groups which, in turn, are built up from industry classes.

Industry value added (IVA)

IVA is an estimate of the difference between the market value of the output of an industry and the purchases of materials and expenses incurred in the production of that output.

The derivation of IVA for individual businesses depends on whether they are classified as market or non-market producers. Non-market producers are those institutions which provide goods or services either free or at prices that are not economically significant. In other words, their prices are not significantly influenced by the amounts that producers are willing to supply, nor the amounts that users are willing to pay to purchase the goods or services being provided. Conversely, market producers provide goods and services at prices that are economically significant.

For market producers, the derivation of IVA is as follows:

Sales and service income

plus Funding from federal, state and/or local government for operational costs

Capital work done for own use

Closing inventories

less Opening inventories

Purchases of goods and materials

Other intermediate input expenses

equals IVA

However, it should be noted that IVA is a measure of economic activity and is not equivalent to operating profit before tax (OPBT). Wage and salary expenses and most other labour costs are not taken into account in the calculation for market producers, neither are interest expenses, depreciation or a number of lesser expenses. On the income side, OPBT includes total income, whereas IVA only includes sales and service income and government funding for operational costs.

As a principle, the output of non-market production is valued at cost, including intermediate input expenses. As shown in the above derivation, purchases and other intermediate input expenses are deducted from output in order to arrive at IVA.

Accordingly, the derivation of IVA for non-market producers can be described as follow:

Selected labour costs

plus Depreciation and amortisation

equals IVA

Estimates of industry value added are obtained by summing the contributions of businesses classified to that industry, both market and (if any) non-market producers. Market producers predominate in most industries.

Industry value added is related to, but different from, the national accounting variable gross value added. For national accounts purposes, gross value added is calculated by adjusting IVA to include General government units and also to account for some other effects.Labour costs

Comprises wages and salaries (including salary sacrificed earnings paid on behalf of employees and employee share based payments and stock options), employer contributions into superannuation, workers' compensation premiums/costs, fringe benefits tax and payroll tax.

Net capital expenditure

The value of total capital expenditure less proceeds received from the disposal of selected assets.

New construction work

The item refers to income from trade services, building and construction work which creates value in the form of new assets.

New work and improvements

This item refers to income from trade services, building and construction work which adds to the capital value of assets either by creating a new asset or improving an existing asset. It excludes repairs and maintenance of an existing asset.

Non-residential building

This item refers to a building not intended for long-term residential use. Examples include factories, warehouses and other industrial buildings; commercial buildings such as offices, shops and restaurants; hotels, motels, boarding houses, hostels, holiday apartment buildings and other premises offering short-term accommodation; hospitals; nursing homes; entertainment and recreational facilities; educational facilities; farm buildings; defence buildings; prisons; and religious buildings.

Operating profit before tax (OPBT)

Profit before extraordinary items are brought to account and prior to the deduction of income tax and appropriations to owners (e.g. dividends paid), i.e. total income less total expenses plus change in inventories.

Operating profit margin

The percentage of sales and service income available as operating profit before tax (OPBT), i.e. (OPBT divided by sales and service income) multiplied by 100.

Other construction related fees and services

Includes builders and other licence fees, payments for architectural, surveying, security and technical services, real estate agent commissions and fees, building development and approval charges.

Other expenses

Expenditure items not separately itemised. Examples include bad and doubtful debts, natural resource royalty expenses, land tax and rates, computer software expenses, freight, other royalties expenses, payments to employment agencies for staff and other operating expenses.

Other income

Income from sources not separately itemised. Examples include dividend income, funding from government for specific capital items, net profit or loss on share trading, asset sales, variations in exchange rates or resulting from the revaluation of assets in accordance with the Australian International Financial Reporting Standards (AIFRS).

Payments to other businesses for trade services, building and construction work

Refers to payments made to other businesses and self-employed persons, for trade services, building or construction work done. Such payments are either payments to subcontractors or payments to head contractors/construction project managers.

Primary contracting income from trade services, building and construction

This item refers to income earned by a trade service or Construction business where it acts as a head contractor/construction project manager, irrespective of whether the business is the property owner. It also includes income from trade services provided directly to non-construction businesses and householders.Purchases

This item refers to the costs of goods and services used in the production of the final output of a business. This item includes construction, trade and building materials, petroleum products, fuel expenses for off-road vehicles (e.g. fork-lifts, mobile plant and quarry dump trucks), electricity, gas and water.

Road and bridge construction

Includes aerodrome runways, asphalt surfacing and road construction and sealing, elevated highways and overpasses, viaducts and bridges (for any purpose).

Sales of goods and other services

This item refers to income from sales of goods and services other than income from trade services, building and construction work. It includes income from non-construction services, sales from property development and other sales of goods.

Subcontracting income from trade services, building and construction

Subcontracting income is earned by a trade services or Construction business where it is contracted and/or paid by the head contractor/construction project manager or any other construction contractor.

Total expenses

The sum of all expense components.

Total income

Comprises contracting and subcontracting income from trade services, building and Construction, sales of goods and other services and other income. For details, see the entries for these items.

Wages and salaries

The gross wages and salaries (including capitalised wages and salaries) of all employees of the business. The item includes severance, termination and redundancy payments, salaries and fees of directors and executives, retainers and commissions of persons who received a retainer, bonuses, and annual and other types of leave. Provision expenses for employee entitlements (e.g. provisions for annual leave and leave bonus, long service leave, sick leave, and severance, termination and redundancy payments) are also included, as are salary sacrificed earnings and remuneration of employees in the form of share based payments and stock options.

Payments related to self-employed persons such as consultants, contractors and persons paid solely by commission without a retainer are excluded. The drawings of working proprietors and partners are also excluded.

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