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5 The population frame for the EAS statistics consisted of all business units in the Australian economy except for:
6 The business unit about which information is collected and published for the EAS is termed the management unit. This is the highest level unit within a business, for which a set of management accounts are maintained. In most cases it coincides with the legal entity owning the business (i.e. company, partnership, trust, sole operator, etc.). However, in the case of large diversified businesses there are often a number of management units, 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.
7 The ABS Business Register provided the population frame from which management units were selected for inclusion in the EAS.
8 Approximately 20,000 management units were selected for the EAS-based collection using stratified random sampling techniques. All management units with employment of 200 or more persons were automatically selected in the sample.
9 Data in this product have been adjusted to allow for lags in processing new businesses to the ABS business register, and the omission of some businesses from the register.
10 Since the beginning of the survey, 'surprise outliering' has been used as the methodology to identify and reduce the impact on the estimates of businesses whose response to the survey was significantly different to those of its peers. Where the extreme values have been confirmed as correct, the sample weight that had originally been applied to the business is reduced to 1. That is, the business represents itself and not others. In the vast majority of cases surprise outliering has the effect of reducing the estimates by more than they should. To compensate for this, the methodology has been changed for the 1999-2000 reference period by the introduction of 'winsorised outliering'.
11 Winsorising reduces the harsh impact of surprise outliering by moderating the impact of businesses who perform differently to their peers. The improved methodology, which does not rely on a subjective judgement, will provide for more stable time series estimates.
12 An analysis of the 1998-99 estimates was undertaken to identify the impact on the estimates of the change in methodology. At the all industries level the impact of the change is minimal. However for some data items in some industries there is an impact on the estimates. A detailed table showing the impact of the changed methodology is available by contacting the inquiries officer listed on the front page of this publication.
IMPROVEMENTS TO COVERAGE
13 Revision to the Standard Economic Sector Classification of Australia in 1998, has meant the reclassification of state government borrowing authorities from the general government sector to the financial corporations sector. Note that some local government entities (i.e. those that provide the water and sewerage undertakings) classified as Public Trading Enterprises, should have been classified to the general government sector. In analysing the impact of the change in treatment, it was discovered that for the four year period from 1994-95 to 1997-98 data for some general government entities were also included in the estimates. The estimates have now been revised and are incorporated in this publication.
14 Central borrowing authorities are institutions established by each State and Territory Government primarily to provide finance for public corporations and quasi-corporations and other units owned or controlled by those governments, and to arrange investment of the units’ surplus funds. To decrease the impact these businesses would have on estimates in the Finance and insurance sector, they have been phased in over several years commencing with 1994-95.
CLASSIFICATION BY INDUSTRY
15 This product presents statistics classified according to the Australian and New Zealand Standard Industrial Classification, 1993 (Cat. no. 1292.0). Each business unit is classified to a single industry. The industry allocated is based on an estimate of the primary activity of the management unit irrespective of whether a range of activities or a single activity is undertaken by the unit. For example, a management unit which derives most of its income from construction activities would have all operations included in the aggregates and ratios for the Construction industry division, even if significant secondary activities (e.g.quarrying) were undertaken. This is different from the approach that might be taken to the collection of statistics on an activity basis.
CLASSIFICATION BY SIZE
16 This publication presents statistics broken into two categories, defined as follows:
17 Size dissections can be made available on request.
18 Where figures have been rounded, discrepancies may occur between the sums of the component items and totals. Published percentages are calculated prior to rounding of figures and therefore some discrepancy may occur between those percentages and those that could be calculated from rounded figures.
LIMITATIONS OF FINANCIAL DATA ANALYSIS
19 This product presents a wide range of data that can be used to analyse business and industry performance. It is important that any analysis be based upon a range of data presented rather than focusing on one variable.
20 Differences in accounting policy and practices across businesses and industries also lead to some inconsistencies in the data input to the statistics. While much of the accounting process is subject to standards, there is still a great deal of flexibility left to managers and accountants in the accounting policy and practices they adopt. For example, acceptable methods of asset valuation include historical cost, replacement cost and current market value. The timing of asset revaluations also varies considerably across businesses. The way profit is measured is affected by management policy on such things as depreciation rates, bad debt provisions and write off and goodwill write off. The varying degree to which businesses consolidate their accounts may also affect the ratios calculated.
21 Those ratios compiled from a combination of flow and level items need to be treated with additional caution. The information contained in balance sheets indicates the level of assets and liabilities at a point in time. Information contained in profit and loss statements summarises the flows (or transactions) which have taken place during the past financial year. Ratios which include both level and flow items in their derivation may be volatile due to the timing differences involved.
22 The above limitations are not meant to imply that analysis based on this data should be avoided, only that they should be borne in mind when interpreting the data presented in this publication.
23 The counts of operating businesses included in this product should be used with some caution. Over and above the sampling error associated with these estimates, they are more affected than are other estimates presented by such things as internal restructuring of businesses (e.g. changes in divisional structure), mergers, takeovers and changes in the quality of the ABS Business Register. Because of these influences, estimates of the number of businesses have been smoothed, using a three-year moving average. This technique reduces the effect the above influences have on movements in the number of operating businesses across the years. Having applied this technique, the estimates are then considered suitable for use in analysing changes in the relative composition of industries and the generation of business averages. (NB a two-year average is applied to the most recent year's estimate, incorporating the current year's estimate with that of the previous year). These management unit counts exclude management units which were part year operators i.e. operating at the beginning of the reference period but not at the end.
RELIABILITY OF ESTIMATES
24 Since the estimates in this product are based on information obtained from a sample drawn from units in the surveyed population, the estimates are subject to sampling variability; that is, they may differ from the figures that would have been produced if all the units had been included in the survey. One measure of the likely difference is given by the standard error (SE), which indicates the extent to which an estimate might have varied by chance because only a sample of units was included. The relative standard error (RSE) is a useful measure in that it provides an immediate indication of the percentage errors likely to have occurred due to sampling, and this avoids the need to refer also to the size of the estimate. Table 11 provides the relative standard errors for a selection of estimates presented in this publication.
25 The size of the RSE may be a misleading indicator of the reliability of some of the estimates for operating profit before tax and industry value added. This situation may occur where an estimate may legitimately include positive and negative values reflecting the financial positions of different businesses. In these cases the aggregate estimate can be small relative to the contribution of individual businesses resulting in a SE which is large relative to the estimate.
26 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.
27 A number of ABS products provide a range of related data to that presented in this publication. These include:
28 Another source of industry performance data is the ABS product Industry Concentration Statistics, (Cat.no.8140.0.40.001). This product shows the proportions of sales, persons employed and industry value added that are concentrated among the 20 largest enterprise groups operating in each industry. The 'largest 20' are further subdivided by groups of four, grouping the first four enterprise groups, the second four and so on.
29 Both Summary of Industry Performance and Industry Concentration Statistics can either be purchased separately as a product, or accessed through the ABS web based information service, AusStats. AusStats is a subscription service, providing access to a comprehensive range of ABS material. It is available on-line, via the World Wide Web, and is a part of the ABS web site where both free and charged data are integrated.
ABS DATA AVAILABLE ON REQUEST
30 Additionally, a considerable amount of data is available on request and output specifically tailored to meet the needs of clients can be generated from this source. A charge is made for providing tailored information. Please contact the National Information Service on 1300 135 070 or Joe Whelan on Canberra 02 6252 5288
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