CHAPTER 5 ONGOING RESEARCH AND DIVERGENCE ISSUES
The ABS will implement as far as possible the statistical standards provided by the System of National Accounts 2008 (SNA08) and the Balance of Payments and International Investment Position Manual sixth edition (BPM6), but there are a small number of areas where this will not be possible, due to unavailability of data or lack of relevance to the Australian economy. In addition, the ABS has decided to diverge from the standards in a small number of instances because of disagreement with the standards.
The ABS is continuing to investigate the implementation of SNA08 and BPM6 in the areas listed below.
Purchased goodwill and marketing assets
As mentioned in chapter 2, the treatment of goodwill assets in SNA08 was reviewed as part of the revision process but the System of National Accounts 1993 (SNA93) treatment was mostly retained by SNA08. For reasons of reliability of measurement, the ABS will continue to only measure goodwill where it is evidenced by the sale of a business (hence 'purchased' goodwill) and it is still to be regarded as a 'non-produced asset'. The ABS will investigate the possibility of estimating the value of goodwill and other non-produced assets as is consistent with SNA08.
Employee stock options
Under BPM6, employee stock options (ESO is identified separately in the international accounts as an optional item under the derivatives position. In Australia, the ABS has found that collecting ESO data for the international accounts is very difficult. A further complication is that in many cases, the companies granting stock options are subsidiaries that grant stock options of parent companies abroad. ESO data is currently collected for Australian System of National Accounts (ASNA) purposes, however ESO information in relation to the international accounts will not be collected at this stage. The ABS will investigate the possibility of collecting ESO data for the international accounts.
DIVERGENCES FROM INTERNATIONAL STANDARDS
The small number of instances where the ABS will diverge from SNA08 and BPM6 are listed below. These instances will not have a significant impact on Gross Domestic Product or the Current Account.
A repurchase agreement (repo) involves the sale of securities or other assets with a commitment to repurchase equivalent assets at a specified date. The buyer to on-sell these securities. SNA93 and Balance of Payments fifth edition (BPM5) treat repos as 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 to treat repos as security trades rather than loans, the international community decided that SNA08 would continue the SNA93 treatment (collateralised loan) and the issue would be placed on the international long-term research agenda.
The collateralised loan treatment is not supported by the 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 (SNA08) requires recording of negative security assets to maintain equality between total securities' asset holdings and total securities' liabilities on issue. The ABS treatment will impact on compositional aspects (e.g. securities versus loans, classification of asset holders) but will have no impact on analytical aggregates (net assets, net lending/borrowing).
Recording of interest on debt securities
SNA93 and BPM5 did 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 on this topic. 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 consistent with the market valuation principle. SNA08 and BPM6 recommend the debtor approach be applied for recording interest accruing on debt securities. This approach leads to complications as interest rates change after the date of issue of variable interest rate instruments.
The ABS applies the creditor approach as the best 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 will maintain consistency throughout the accounts by applying the creditor approach for debt securities.
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. For example, when a resident exchanges a financial asset offshore. This differs from the ABS interpretation of SNA08. 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 counterparty 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. There will be no impacts on key aggregates arising from the different treatment.
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 under both SNA08 and BPM6.
This recommendation would be a departure from the current ABS practice for holding companies where, in financial accounts and international investment, they receive a sector classification that reflects the major economic activities of the controlled entities. Following the recommendation would result in the creation of additional enterprises in situations where currently there are no financial intermediary enterprises in the group. Given this, the ABS will maintain its current practice regarding the treatment of holding companies.
Definition of basic prices
SNA08 reaffirms the SNA93 treatment of basic prices. Analysts who use input-output tables however, have expressed a strong preference for the SNA68 definition of basic prices. SNA93 altered the definition of basic prices with regard to the treatment of transport. Under SNA93, transport which is not separately invoiced is included in the basic price, while that which is separately invoiced is not included in the basic price of the product being transported. This was a change from the SNA68 definition of basic price which 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 apply this definition. This has been implemented in the input-output tables and is being considered for implementation in supply use benchmarks and producer price indexes. This will result only in changes to estimates of output and intermediate consumption by industry for series at basic prices, with no impact on gross value added or GDP or series at purchasers' prices.