Annual National Accounts Methodology

The item codes in the European System of Accounts are displayed in the second column of tables in the main GDP by Incomes (Tables 3.1-3.7), GDP by Producers (Tables 6.1-6.2), and GDP by Expenditures (Tables 8.1-8.6) chapters. The ESA 2010 presentation is being used in the CSO releases on institutional sector accounts and is also used by Eurostat in their releases and publications on national accounts. The inclusion of the ESA 2010 codes here makes comparisons with these publications more explicit. A full list of all the codes in the ESA 2010 system can be found in Chapter 23 of the ESA 2010 manual¹. A list of the ESA 2010 codes for the variables reported in this document is given at the end of this section.

Some important aspects of the coding system are described in the following paragraphs.

Value Added and Domestic Product

The ESA2010 recognises two valuations of the aggregate ‘value added’: at basic prices (Code B.1) and at market prices (Code B.1*). A previous edition of the system of accounts (ESA79) also used a third measure of value added, namely valuation at factor cost. It has been retained in this release for reasons of continuity of the series. Since it does not have a formal code in the ESA 2010 system it is shown as a combination of the codes of its constituents.

A further variant is the recording of the aggregates gross or net of depreciation (labelled Consumption of Fixed Capital in the ESA system). The two versions are distinguished by appending the letter “g” or “n” to the code. For example, Gross Value Added at Market Prices is coded B.1*g, and Net Value Added at Basic Prices is B.1n.

In the general sense, value added is defined as the value of the goods and services produced (output) less the cost of goods and services (not including labour costs) used in the production process (intermediate consumption). The concept of value added can relate to a specific sector or branch of the economy, or to the whole economy. When used of the whole economy at the market price valuation, the term domestic product is more often used.

The differences between the three valuation approaches (factor cost, basic prices and market prices) relate to the treatment of taxes and subsidies on production (not to be confused with taxes on income or wealth, which are not relevant in this context).

To understand the links, it is necessary to note that production taxes and subsidies are divided into two categories in the ESA 2010, namely product taxes/subsidies and other taxes/subsidies on production. The term product is used when the tax or subsidy is proportional to the quantity or value of product on which it is levied or granted (such as VAT or excise duties) and the term other is used otherwise.

In the valuation at factor cost product taxes (e.g. VAT, excise duties etc.) are not included in the value of output while other production taxes (e.g. rates on business premises) are deducted from output in the same way as intermediate consumption. On the other hand the value of all production subsidies (product and other) is added to output.

In the valuation at basic prices product taxes (e.g. VAT, excise duties) are not included in output and other production taxes (e.g. rates on business premises) are not deducted from output in deriving value added as is done at factor cost. Product subsidies are added to the value of output but other production subsidies are not added to output.

In the valuation at market prices (which is technically referred to as GDP) product taxes (e.g. VAT, excise duties) are included in output while other production taxes (e.g. rates) are not deducted. None of the production subsidies (neither product nor other production subsidies) are added to output.

The link between the three versions of value added (VA) can be seen most clearly between Table 3.3 and 3.4 of the Annual National Accounts. It can be summarised as follows:

Adding other taxes on production to and subtracting other subsidies on production from the aggregate of the (sectoral) value added at factor cost gives the (economy-wide) value added at basic prices.
Adding product taxes to and subtracting product subsidies from value added at basic prices gives domestic product.

In Table 3.4, the valuations are Gross (i.e. inclusive of depreciation). In Table 3.1, and in the first part of Table 3.3, all valuations (of profits and rents, for example) are Net.

Final Expenditure

In the national presentation, (Tables 8.1 and 8.3 of this report, for example) three categories of final expenditure have traditionally been distinguished: Personal consumption of goods and services; Net expenditure by central and local government on current goods and services; and Gross domestic fixed capital formation. The ESA 2010 system uses three related but slightly different categories: Final consumption expenditure of households and non-profit institutions serving households; Final consumption expenditure of government; and Gross capital formation. The detail in Table 8.1 (at current prices) and Table 8.3 (at constant prices) in this report has been expanded to clarify the relationship between the two systems.

The national concept of personal consumption of goods and services includes a certain amount of consumption for which the expense is borne by the government and not directly by the household. Examples are electricity and other fuels that the government provides free of charge to some households, free travel availed of by senior citizens and others, GP services provided to households and free medicines provided to holders of medical cards. These items are treated in the national system as if the government provided the money to households to purchase them. The expenditure, therefore, appears as household expenditure (Items 79(b) and 92(b) in Tables 8.1 and 8.3 respectively), rather than as government expenditure. The ESA 2010 system is more straightforward. Expenditure on the items provided free to households is included in Government final expenditure. Thus, Table 8.1 shows that ‘Personal consumption of goods and services’ (i.e. the national concept) in current prices is the total of item 79 in Table 8.1. The ESA2010 concept ‘Final consumption of households and non profit institutions serving households’, is the total of item 79(a) and is lower by the amount of the value of these goods and services provided by government to households (i.e. the amount of item 79(b) in Table 8.1). The national and ESA versions of government expenditure are of course also different, for the same reason: ‘Net expenditure by central and local government on current goods and services’ (the national concept), is the total of item 80 in Table 8.1 and is lower than the ESA 2010 category of ‘Final expenditure of government’, by the same amount (i.e. the amount of item 79(b) in Table 8.1).

Treatment of Government pensions and imputed pension contributions

Most public sector workers in Ireland benefit from unfunded ‘pay as you go’ pension schemes. In line with international accounting conventions, the wages of these workers are increased by an estimate of the amount that the employer would have to contribute if these pensions were being funded. This is calculated as the difference between an estimated actuarial value of the pension entitlements accrued by employees in respect of their year’s work and pension contributions paid by these employees.

In ESA 2010, employers’ imputed social contributions are included in D122pay, while pensions to current pensioners are included in D62pay, and imputed pension contributions are included in D611rec and D612rec respectively.

¹The ESA 2010 manual is Regulation (EU) No 549/2013 in the European system of national and regional accounts in the EU Community. Chapter 23 (Classifications) of the manual begins at page 511.