Post on 28-Dec-2015
transcript
Measurement of capital stocks for government in the UK
Nollaig GriffinWorking Party for National StatisticsOECD October 2005
Overview
• Current UK methodology (PIM)• Alternatives to the PIM• Whole of Government Accounts• Application to the National Accounts• Indicative data• Conclusions and future plans• Discussion points
Current UK Methodology
• Perpetual Inventory Method (PIM)• Inputs
– Gross fixed capital formation– Assumptions about asset lives– Other assumptions– Straight-line depreciation
• For central government, investment inputs are based on figures from HM Treasury (Dept. of Finance)
PIM: advantages and disadvantages
• Recommended “wherever direct information is missing” [ESA 95]
• Cheap and convenient• Used internationally• Generally predictable
BUT• Many assumptions• “probably less reliable than most other official
statistics” [OECD manual]
Alternatives to PIM
• Outlined in OECD (2001) Measuring Capital manual
• Statistical surveys– Expensive; quality dependent on respondents’ records
• Published company accounts– Valuation different for tax or other reasons
• Balance of fixed assets– Can be a “valid alternative to PIM”, but severe practical
difficulties
• Administrative records– Can be used for certain asset types; “usually preferred
to estimates based on the PIM”
Whole of Government Accounts (WGA): overview
• HM Treasury programme• Consolidated departmental resource accounts
– Assets and liabilities– Capital and reserves– Income and expenditure
• Based on UK Generally Accepted Accounting Practice (GAAP) with some modifications
• UK is the forerunner– USA, NZ, Australia, Canada, Sweden, Iceland produce
some form of WGA– Other countries taking steps in the same direction
WGA: Application to the national accounts
• May present a valid alternative the PIM for the central government sector,
• Will cover local government and public corporations in the future
• Issues to consider:– Valuation and depreciation– Coverage– Impairments
WGA and NA: Valuation and depreciation
• SNA 1993 requires replacement cost• WGA uses modified historic cost accounting
– Asset values are reviewed regularly – Indices used in the intervening periods
• Under SNA 1993, capital consumption must be calculated from values based on the remaining benefits to be derived from the use of the asset
• WGA depreciates stock by “allocating the cost…of the assets as fairly as possible to the periods expecting to benefit from their use”
WGA and NA: coverage
• Asset types are broadly consistent between the two frameworks
• WGA provides estimates of goodwill and single use military equipment which SNA 2008 will require
• Provides assets under construction separately• Treatment of development expenditure and
computer software will have to be agreed
WGA: Impairments
• WGA values assets according to the economic benefits they are expected to provide in the future
• Audits can prove previous estimates to have been incorrect, leading to an impairment
• Impairments resulting from “normal wear and tear and foreseeable obsolescence” apply to capital consumption
• Impairments resulting from market fluctuations do not apply
• Challenge is to identify appropriate figures; focus on getting this right at the macro level
Indicative data
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Dw ellings, excludingland
Other buildings andstructures
Other machinery andequipment
Transport equipment Intangible f ixedassets
All assets
£ billionONS (PIM) capital consumption WGA depreciation
Conclusions and future plans
• Reasons for using WGA data:– Government bodies can make better estimates of stock
and depreciation than the PIM does– Fully audited data– Asset valuation approximated replacement cost and is
over the operating life of the asset
• Future plans– Agree these concepts (comments welcome)– Work with HMT to quality assure data