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Nthabiseng Molemoeng
Seminar on Developing a Programme for the
Implementation of the 2008 SNA and supporting statistics
17-19 October 2012
Consumption of Fixed Capital and Capital
Stock
Outline
Definition
Method
Process of computation
2
Consumption of Fixed Capital
Consumption of Fixed Capital
3
Definition
The consumption of fixed capital can be defined as the decline in the current value of the stock of fixed assets as a result of physical deterioration
The consumption of fixed capital is derived from gross fixed capital formation
Estimates are based on PIM - straight-line method
Service lives for different assets4
Service Life Assumptions by Selected Countries
Country Dwellings Construction
Transport equipment
Other equipment
Australia 60 30-70 - 19
Belgium 60 30-80 7 15
Canada 75 25-70 10 22
Finland 50 10-70 10 15
France - 25-60 10 17
Germany 74 35-80 8 13
Italy - 13-40 - 16
Japan 75 - - 10
Sweden 75 25-80 3 25
UK 100 16-100 10 25
US 80 16-50 10 16
“Best practice”
75 35 8 15
5
Average service life – South Africa
6
Type of asset Sector Lifetime
Residential buildings 50 years
Non-residential buildings 50 years
Construction works Agriculture 80 years
Mining 30 years
General government 80 years
Other 50 years
Transport equipment 8 years
Computer equipment 5 years
Machinery & other equipment
Manufacturing 8 years
Mining & Electricity, gas and water
16 years
Other 10 years
Process of computation
Formula programmed
where X = Number of terms (i.e. service life) Y = GFCF
The results yield:CFC = (Y[t-X] + Y[t-(X-1)] + Y[t-(X-2)] + ... +
Y[t]) / X
Private business enterprisePublic corporationsGeneral governmentCurrent pricesConstant prices
7
Straight line method based on asset with 5-year service life
Years
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
GFCF
250
GFCF
500
GFCF
600
GFCF
700
GFCF
1000
Total
250 500 600 700 1000
Years
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
CFC 50 50 50 50 50
CFC 100 100 100 100 100
CFC 120 120 120 120 120
CFC 140 140 140 140 140
CFC 200 200 200 200 200
Total
50 150 270 410 610 560 460 340 200 0
8
Consumption of Fixed Capital
Capital Stock
9
Definition
Fixed capital stock is the accumulation of gross fixed capital formation over a particular period less consumption of fixed capital.
Valuation of fixed capital stock is essential for the balance sheet.
Estimates of capital stocks are used for the analysis of economic efficiency and productivity10
Process of computation
Formula programmed FCSt = FCSt-1 + GFCFt - CFCt
where FCS = Fixed capital stockGFCF = Gross fixed capital formationCFC = Consumption of fixed capital
formation
Private business enterprisePublic corporationsGeneral governmentCurrent pricesConstant prices
11
Method Years
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
GFCF
250
GFCF
500
GFCF
600
GFCF
700
GFCF
1000
Total
250 500 600 700 1000
Years
Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10
CFC 50 50 50 50 50
CFC 100 100 100 100 100
CFC 120 120 120 120 120
CFC 140 140 140 140 140
CFC 200 200 200 200 200
Total
50 150 270 410 610 560 460 340 200 0
FCS 200 550 880 1170
1560
100 540 200 200 0
12
Method – starting value
Years GFCF Depreciated value
Sum of depreciated value
Y1 100 = GFCF *(1-1)/5
0
Y2 150 = GFCF *(2-1)/5
30
Y3 200 = GFCF *(3-1)/5
80
Y4 250 = GFCF *(4-1)/5
150
Y5 300 = GFCF *(5-1)/5
240
Σ 50013
Results
Residential buildings
Non- Res
Construction
Transport
Computer equipment
Machinery
Total
Agric 266 252 730 1106 465 3878 6717
Mining 358 1575 5713 2117 1414 13104 24280
Manufacturing
8 2088 303 2634 484 61503 72015
Electricity 46 93 6218 713 138 2507 9716
Construction
- 77 - 2057 193 3827 6154
Trade - 1699 32 5812 3168 10608 21320
Transport 4 668 5755 20784 5752 13621 46582
Finance 8250 1649 145 8485 6621 2683 37213
Services 857 3892 4755 818 3253 9741 23315
Total12468
11992 23648 44548 26489 128170
247313
14
THANK YOU!
15