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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. Definitions of particular terms, as used in this publication, are also included.

ABN unit

The statistical unit used by the ABS to represent businesses, and for which statistics are reported, in most cases. The ABN unit is the business unit which has registered for an ABN, and thus appears on the ATO administered Australian Business Register. In most cases, the ABN unit represents the legal entity. This unit is suitable for ABS statistical needs when the business is simple in structure. For more significant and diverse businesses where the ABN unit is not suitable for ABS statistical needs, the statistical unit used is the type of activity unit (TAU).

Bad and doubtful debts

Represents the amount of bad and doubtful debts written-off, net of bad and doubtful debts previously written-off but recovered.

Billion

One thousand million.

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 2004-05 EAS collections (these two units are explained under separate entries). For details, see Explanatory Notes paragraphs 5-9.

Business Activity Statement (BAS) total sales

Represented by the form item G1 Total sales on businesses' Business Activity Statements, supplied by them to the ATO. This item comprises all payments and other consideration (including GST) received during the nominated tax period for supplies made in the course of business.

Business averages

The relevant item divided by the number of operating businesses.

Business profitability

Business profitability refers to the proportion of businesses operating at the end of June that made a profit or loss, or broke even. Broke even is defined as those businesses incurring a profit or loss of less than $500, including zero.

Business size

For the purposes of table 2.1, businesses are categorised as:

• employing businesses, which are shown in three groups:
  • large businesses, with employment of 200 or more persons
  • medium businesses, with employment of 20 to less than 200 persons
  • small businesses, with employment of less than 20 persons
• non-employing businesses.

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.

Capital work done for own use

Capitalised work done by the employees or proprietors of a business in manufacturing, constructing, installing or repairing assets, in mineral and petroleum exploration activities, and the in-house development of computer software, for use by the business or for rental or lease. This work is valued at the capitalised costs of the materials and the wages and salaries involved.

Capitalised purchases

Goods drawn from inventories for use as fixed tangible assets in capital work done by the employees or proprietors of a business for use by the business or for rental or lease.

Capitalised wages and salaries

Capitalised payments for work done by own employees in manufacturing, constructing, installing or repairing assets, mineral and petroleum exploration activities or in developing computer software in-house for use by the business or for rental or lease.

Chain volume measures

Annually-reweighted chain Laspeyres volume indexes referenced to the current price values in a chosen reference year (i.e. the year when the quarterly chain volume measures sum to the current price annual values). Chain Laspeyres volume measures are compiled by linking together (compounding) movements in volumes, calculated using the average prices of the previous financial year, and applying the compounded movements to the current price estimates of the reference year. Quarterly chain volume estimates are benchmarked to annual chain volume estimates, so that the quarterly estimates for a financial year sum to the corresponding annual estimate.

Generally, chain volume measures are not additive. In other words, component chain volume measures do not sum to a total in the way original current price components do. In order to minimize the impact of this property, the ABS uses the latest base year as the reference year. A change in reference year changes levels but not growth rates, although some revision to recent growth rates can be expected because of the introduction of a more recent base year (and revisions to the current price estimates underlying the chain volume measures).

For details, see Australian National Accounts: National Income, Expenditure and Product, June Quarter 2006 (cat. no. 5206.0).

Change in inventories

The value of total closing inventories less total opening inventories.

Closing inventories

The value of all inventories of finished goods (including inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels and containers at the end of the reporting period.

Contract, subcontract and commission expenses

Payments to other businesses and self-employed persons for work done or sales made on a contract or commission basis. Payments to persons paid by commission without a retainer are also included. Excludes commissions paid to persons who receive a retainer and commissions paid to the business' own employees.

Cost of sales

The sum of purchases, selected expenses and opening inventories less closing inventories. Any capitalised purchases or capitalised wages and salaries are excluded.

Current prices

Estimates at current prices are valued at the prices of the period to which the observation relates. For example, estimates for 2004-05 are valued using 2004-05 prices. This contrasts to chain volume measures, where the prices used in valuation refer to the prices of a previous period.

Depreciation and amortisation

Depreciation/amortisation allowed on tangible and intangible assets. Includes, for lessees only, depreciation/amortisation in respect of finance leases.

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 and tax (EBIT)

Profit prior to the deduction of interest expenses and income tax.

Employer contributions into superannuation

Includes salary sacrifice. Also includes all employer contributions to superannuation funds (including the employer productivity contribution) and provisions for employer contributions to superannuation funds. Employee contributions are excluded.

Employing business

See the entry for business size.

Employment at end of June

Number of persons working for 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.

For details of how employment estimates have been derived, see Appendix 1.

Enterprise

An institutional unit comprising:

• a single legal entity or business entity; or
• more than one legal entity or business entity within the same enterprise group and in the same institutional sub-sector (i.e. they are all classified to a single Standard Institutional Sector Classification of Australia (SISCA) sub-sector).

A unit covering all the operations in Australia of one or more legal entities under common ownership and/or control. It covers all the operations in Australia of legal entities which are related in terms of the current Corporations Law (as amended by the Corporations Legislation Amendment Act 1991), including legal entities such as companies, trusts and partnerships. Majority ownership is not required for control to be exercised.

Expenses

See total expenses.

Freight and cartage expenses

Excludes the cost of delivery by own vehicles and employees, as well as overseas freight and cartage on goods exported, and payments to couriers.

Funding from government for operational costs

Funding from federal, state and/or local government for operational costs (e.g. wages and salaries, rent, food). Includes bounties, subsidies, export grants, apprenticeship and traineeship schemes, community service obligations, and amounts reimbursed under the Australian Government's Energy Grants (Credit) Scheme.

Funding from government for specific capital items

Includes capital grants, and low interest or interest free loans made by government to businesses to encourage expenditure on specific equipment (e.g. environmental protection equipment).

Gross fixed capital formation (GFCF)

Gross fixed capital formation is measured by the total value of a producer's acquisitions, less disposals, of fixed assets during the reference period, plus certain additions to the value of non-produced assets realised by the productive activity of institutional units.

Fixed assets are tangible or intangible assets produced as outputs from processes of production that are themselves used repeatedly or continuously in other processes of production for more than one year.

The derivation of GFCF is as follows:

The value of output at basic prices minus the value of intermediate consumption at purchasers' prices. The term is used to describe gross product by industry and by institutional sector. Basic prices valuation of output removes the distortion caused by variations in the incidence of commodity taxes and subsidies across the output of individual industries. For details, please refer to Australian National Accounts: National Income, Expenditure and Product, June Quarter 2006 (cat. no. 5206.0).

Income

See the entries for sales and service income, interest income, and other selected income.

Income from services

See the entry for sales and service income.

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 2331 Pulp, paper and paperboard manufacturing. 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 17 divisions within ANZSIC, each identified by an alphabetical letter, that is, 'A' for Agriculture, forestry and fishing, 'B' for Mining, 'C' for Manufacturing, etc.

Industry group

This is the intermediate level within each industry division of ANZSIC and is identified by a three-digit code, e.g. Industry Group 233 for Paper and paper product manufacturing. It gives more detail than the industry subdivision, and is created in a way that groups like industry classes together.

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 23 for Wood and paper product manufacturing. Industry subdivisions are built up from industry groups which, in turn, are built up from industry classes.

Industry value added (IVA)

IVA represents the value added by an industry to the intermediate inputs used by the industry. IVA is the measure of the contribution by businesses, in the selected industry, to gross domestic product.

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:

As a principle, the output of non-market production is valued at cost, including intermediate input expenses. As shown in the above derivation, 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 follows:

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 industry value added to include General government units and also to account for some other effects.

Industry value added per person employed

IVA of businesses which operated in a given industry during the given year ended 30 June, divided by the number of persons employed by businesses in that industry during the last pay period ending in June of that same year.

Insurance premiums

Premiums for fire, general, accident, public liability, optional third-party and comprehensive motor vehicle insurance, professional indemnity insurance, and common law liability. Excludes workers' compensation insurance premiums/costs (included in labour costs) and compulsory third party motor vehicle insurance premiums (included in motor vehicle running expenses).

Interest coverage

The number of times that businesses can meet their interest expenses from their earnings before interest and tax, i.e. earnings before interest and tax / interest expenses.

Interest expenses

Includes interest paid on loans from banks, finance companies, partners, and related or unrelated businesses, and in respect of finance leases. Also includes interest equivalents such as hedging costs and expenses associated with discounted bills. Excludes bank charges other than interest, and capital repayments.

Interest income

Includes interest received from deposits in banks and non-bank financial institutions, loans, advances, finance leases and earnings on discounted bills. Excludes capital payments received.

Intermediate input expenses

See the entry for total expenses.

Intermediate inputs

Intermediate inputs consist of materials and certain services which are used up in the production process.

The calculation is:

The value of all inventories of finished goods (including inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels, and containers, at the beginning and end of the reporting period, respectively.

Investment rate (value added)

The proportion of industry value added (IVA) used to acquire capital, i.e. ( capital expenditure / IVA ) x 100.

Large business

See the entry for business size.

Medium business

See the entry for business size.

Motor vehicle running expenses

Includes expenditure on registration fees, compulsory third-party insurance premiums, fuel, and repair and maintenance expenses. Excludes expenses for off-road motor vehicles (e.g. fork lifts, mobile plant), and lease payments, optional third party and comprehensive motor vehicle insurance premiums, and depreciation.

Natural resource royalties expenses

Includes payments under mineral lease arrangements, and resource rent taxes and royalties. Excludes payments for royalties from intellectual property (e.g. patents and copyrights) and computer software licence fees (both of which are included under other operating expenses), and capitalised computer software licence fees (included under capital expenditure). Gold tax payments are also excluded. See the entry for total expenses for the definition of other operating expenses.

Net capital expenditure

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

Non-employing business

See the entry for business size.

Opening inventories

The value of all inventories of finished goods (including inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels and containers at the beginning of the reporting period.

Operating business

Any ABN unit / TAU which is still in existence at the end of the reference period.

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 - total expenses + change in inventories.

Other intermediate input expenses

Comprises intermediate input expenses less current purchases of goods and materials used in production (i.e. excludes any capitalised purchases). Further detail is included in the entry for total expenses.

Other operating expenses

See the entry for total expenses.

Other selected expenses

Includes expenditure on management fees/charges paid to related and unrelated businesses, bank charges other than interest, audit and other accounting expenses, legal fees, advertising expenses, postal and telecommunication expenses, office supplies and printing expenses, travelling, accommodation and entertainment expenses, staff training, payments for royalties from intellectual property (e.g. patents, copyrights), payments to employment agencies for staff, payroll tax, fringe benefits tax, land tax and land rates, and computer software expenses not capitalised. Some of these expense items are treated as intermediate input expenses in the calculation of industry value added. For details, see the entry for total expenses.

Other selected income

Includes natural resource royalties income, dividend income and other income such as net profit (or loss) on the sale of fixed tangible assets, net profit (or loss) resulting from variations in foreign exchange rates/transactions, and funding from federal, state and/or local government for both operational costs and specific capital items. It excludes extraordinary profits or losses, i.e. those not associated with the normal operations of the business and of a non-recurring nature.

Payroll tax

A tax levied by state and territory governments on the amount of wages and salaries paid by a business. Excludes pay-as-you-go withholding tax.

Production volumes

See the entry for chain volume measures.

Profit margin

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

Proration

See Technical Note 1 paragraphs 15-17 and Technical Note 2 paragraphs 5-7.

Purchases and selected expenses

Purchases of goods and materials, rent, leasing and hiring expenses, freight and cartage expenses, motor vehicle running expenses, repair and maintenance expenses, contract, subcontract and commission expenses, and other selected expenses.

Purchases of goods and materials

Purchases of materials, components, containers, packaging materials, fuels, electricity and water, and purchases of finished goods for resale. Also includes capitalised purchases. Excludes purchases of parts and fuels for motor vehicles, but includes fuels for off-road vehicles, such as forklifts and mobile plant.

Reference period

For each collection year, businesses are asked to report data for the financial year ended 30 June. However, if a business has a different financial year, it is asked to report (apart from employment) for the 12 month period which ends between 1 October of the previous year and 30 September of the current year. This period is then used as a substitute for the financial year ended 30 June. For example, for the 2004-05 collection, a business may have reported data for the year ended 31 December 2004.

Rent, leasing and hiring expenses

Payments for the rent, leasing and hiring of land, dwellings, other buildings and structures, motor vehicles, plant, machinery and other equipment (including telecommunication equipment). Includes operating lease payments; excludes finance lease payments.

Rent, leasing and hiring income

See the entry for sales and service income.

Repair and maintenance expenses

Includes repair and maintenance of computer and communication software and hardware, and repair and maintenance of off-road motor vehicles. Excludes wages and salaries of own employees and the repair and maintenance costs of on-road motor vehicles.

Sales and service income

Includes:

Sales of goods

• whether or not produced by the business (including goods produced for the business on a commission basis). Includes export sales, sales or transfers to related businesses or to overseas branches of the business, progress payments relating to long term contracts if they are billed in the period, delivery charges not separately invoiced to customers, sales of goods produced by the business from crude materials purchased, and income from 'specific' rates (e.g., water, sewerage, irrigation and drainage rates). Excludes excise and duties received on behalf of the government (e.g. the petroleum production excise duty), sales of assets, natural resource royalties income, interest income, and delivery charges separately invoiced to customers. Exports are valued free on board (f.o.b.), i.e. export freight charges are excluded.

• includes income from consulting services, repair, maintenance and service income and fees, contract, subcontract and commission income, management fees/charges from related and unrelated businesses, installation charges, delivery charges separately invoiced to customers and royalties from intellectual property (e.g. patents and copyrights). Excludes natural resource royalties income, interest income, and delivery charges not separately invoiced to customers. Under current international standards, rent, leasing and hiring income (except from finance leases) is also classified as service income, but is published separately in table 2.2.

• derived from the ownership of land, dwellings, buildings and other structures, motor vehicles, plant, machinery and other equipment. Excludes royalties from mineral leases, income from finance leases and payments received under hire purchase arrangements.

Sales and service income per person employed

The value of sales and service income of businesses which operated in a given industry during the given year end 30 June, divided by the number of persons employed by businesses in that industry during the last pay period ending June of that same year.

Sales of goods

See the entry for sales and service income.

Selected expenses

See the entry for purchases and selected expenses.

Selected industries

Selected industries comprises data for all ANZSIC divisions, excluding ANZSIC Divisions A Agriculture, Forestry and fishing, K Finance and insurance and M Government administration and defence. Because data are available for Division A for 2002-03 and later years but not for 2001-02, estimates are provided at the Selected industries level to enable comparison over the entire four-year period. For a detailed discussion of the scope of the estimates, see Explanatory Notes paragraphs 10-17.

Selected labour costs

See the entry for total expenses.

Small business

See the entry for business size.

Standard Institutional Sector Classification of Australia (SISCA)

The SISCA is the central classification among ABS Standard Economic Sector Classifications. It is based on the System of National Accounts 1993 (SNA93) institutional sector classification, and comprises the sectors: non-financial corporations, financial corporations, general government, households, non-profit institutions serving households, and rest of the world (which includes only non-resident units, these being excluded from all other sectors). For more information, please refer to the Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0).

Statistical infrastructure

See Explanatory Notes paragraphs 5-9.

Stream

For the purpose of compiling the estimates in this publication, data for businesses as recorded on the ABS Business Register (ABSBR) contribute via one of three categories (or 'streams') in accordance with significance and collection-related characteristics. For definitions of Streams D, B and T, see Technical Note 1 paragraphs 11-19.

Superannuation

See the entry for employer contributions into superannuation.

Total...

For most total items, see the particular Glossary entry; e.g. for total capital expenditure, see capital expenditure.

Total expenses

For the purposes of calculating economic and accounting variables, expenses incurred by businesses are divided into several categories. However, some expenses are excluded entirely from all such calculations: excluded are capital repayments, costs associated with the transfer of real estate, dividends, donations, export freight charges, extraordinary losses, foreign exchange losses, goods and services tax (GST), excise and duties payable to governments, income tax and other direct taxes, losses on asset sales, and unrealised gains/losses from revaluations of assets.

Those expenses used for calculations are categorised as follows:

Intermediate input expenses
This category covers the major expenses incurred by businesses in producing and distributing goods and services (except labour costs), and comprises two sub-categories of operating expenses:

Purchases of goods, materials and services used in production, which include:

• purchases of materials, components, containers and packaging materials, electricity, fuels and water
• purchases of goods for resale (without any further processing or assembly)
• motor vehicle running expenses
• freight and cartage expenses
• repair and maintenance expenses
• rent, leasing and hiring expenses (excluding finance lease payments)
• contract, subcontract and commission expenses.

• management fees/charges paid to related and unrelated businesses
• bank charges other than interest
• audit and other accounting expenses
• legal fees
• advertising expenses
• postal and telecommunication expenses
• office supplies and printing expenses
• travelling, accommodation and entertainment expenses
• staff training
• payments for royalties from intellectual property (e.g. patents and copyrights)
• payments to employment agencies for staff.

Selected labour costs

• wages and salaries (excluding any capitalised component; including provisions for employee entitlements)
• employer contributions into superannuation (including salary sacrifice)
• workers' compensation premiums/costs.

These expense items are included in table 2.2 as:

• individually listed items:
  • depreciation and amortisation
  • interest expenses
• part of cost of sales:
  • computer software expenses not capitalised by businesses
  • land tax and land rates
  • mineral/petroleum exploration expenses not capitalised by businesses
  • other expenses not capitalised by businesses
  • payroll tax and fringe benefits tax
• part of other operating expenses:
  • insurance premiums (except workers' compensation and compulsory third party motor vehicle insurance premiums)
  • natural resource royalties expenses
  • bad and doubtful debts.

That part of the cost of producing the gross domestic product which consists of gross payments to factors of production (labour and capital). It represents the value added by these factors in the process of production, and is equivalent to gross domestic product less taxes plus subsidies on production and imports. For details, please refer to Australian National Accounts: State Accounts, 2004-05 (cat. no. 5220.0).

Total income

Comprises sales and service income, interest income and other selected income (for details, see the entries for these items).

Total selected industries

Total selected industries comprises data for all ANZSIC divisions, excluding ANZSIC Divisions K Finance and insurance and M Government administration and defence. For a detailed discussion of the scope of the estimates, see Explanatory Notes paragraphs 10-17. Units classified to the General government institutional sector are excluded from the scope of estimates for most industries that comprise Total selected industries. This can result in the exclusion of an entire ANZSIC division (Government administration and defence) or limit coverage to private sector entities only (in the Education and Health and community services divisions).

Type of activity unit (TAU)

The TAU is the statistical unit used by the ABS to represent businesses, and for which statistics are reported, in cases where the ABN unit is not suitable for ABS statistical needs.

The TAU comprises one or more business entities, sub-entities or branches of a business entity within an enterprise group that can report production and employment data for similar economic activities. When a minimum set of data items are available, a TAU is created which covers all the operations within an industry subdivision (and the TAU is classified to the relevant subdivision of the ANZSIC). Where a business cannot supply adequate data for each industry, a TAU is formed which contains activity in more than one industry subdivision.

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. Payments related to salary sacrifice and payments 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. (Note that wages and salaries excluding any capitalised component is a component of selected labour costs; for details, see the entry for total expenses.)

Wages and salaries per person employed

The wages and salaries paid by businesses which operated in a given industry during the given year ended 30 June, divided by the number of persons employed by businesses in that industry during the last pay period ending in June of the same year.

Wages and salaries to sales and service income ratio

The wages and salaries paid by businesses which operated during the year ended 30 June as a proportion of the sales and service income of businesses which operated during the same year.

Workers' compensation premiums/costs

Workers' compensation is a compulsory insurance cover to be taken out by all employers, except for self-insured workers, according to legislative schemes to cover employees suffering injury or disease in the course of or arising out of employment.