Institutional Sector Accounts Non-Financial and Financial 2015

Output (basic prices)
Output covers the value of all goods produced for sale, including unsold goods, and all receipts for services rendered. Output furthermore covers the market equivalent of goods and services produced for own use, such as own account capital formation, services of owner-occupied dwellings and agricultural products produced by farmers for own consumption. The output of such goods is estimated by valuing the quantities produced against the price that the producer would have received if these goods had been sold.

Output is valued at basic prices, defined as the price received by the producer excluding trade and transport margins and the balance of taxes and subsidies on products. This is the price the producer is ultimately left with.

Some special cases:

•    Distributive trade i.e. retail /wholesale trade in goods where no physical transformation occurs. The value of these services is the difference between the sales value and the purchase value of traded goods.
•    Real estate activities not only include services of non-residential buildings and rented dwellings, but also of owner-occupied dwellings. The latter are valued on the basis of rents of comparable rented dwellings.
•    Banking mainly deals with financial intermediation, i.e. the acquisition, transformation and issuing of financial assets. The compensation for these services is implicitly included in the interest paid to and received from banks. The value of these imputed bank services is calculated as the margin paid by banks on deposits and received by banks on loans.
•    Pension funding mainly transforms individual risk into collective risk. The value of these services is set as the difference between contributions and benefits. In the case of pension funds, corrections are made for changes in actuarial reserves.
•    Market output of government includes local authority rents valued at full unsubsidised prices. However, most government output is non-market and is valued as the sum of production costs, namely intermediate consumption, compensation of employees, consumption of fixed capital and other taxes on production paid by government itself.

Intermediate Consumption (purchasers’ prices)
Intermediate consumption includes all goods and services used up in the production process in the accounting period, regardless of the date of purchase. This includes for example fuel, raw materials, semi-manufactured goods, communication services, cleansing services and audits by accountants. Intermediate consumption is valued at purchasers' prices, excluding deductible VAT. For companies that do not need to charge VAT on their sales, the VAT paid on their purchases is non-deductible. It is therefore recorded as a component of intermediate consumption.

Not included in intermediate consumption are:

•    Purchases of goods by retail/wholesale enterprises, which are resold without undergoing any processing.
•    Purchases of goods used in the production process with a life span of more than one year. These purchases are recorded as fixed capital formation. The use of these goods is spread over their economic life span and recorded as consumption of fixed capital.

Value Added (basic prices)
Value added at basic prices by industry is equal to the difference between output (basic prices) and intermediate consumption (purchasers' prices).

Gross Domestic Product / Value Added (market prices)
Value added at market prices of the total economy (GDP) is calculated as follows:

Total value added at basic prices of industries
plus
Balance of taxes and subsidies on products
=
GDP (value added) at market prices

VAT, taxes on imports, and subsidies on re-exports, cannot be attributed to individual industries. Therefore, GDP at market prices cannot be broken down completely by sector. Value added can be valued gross (including consumption of fixed capital) or net (excluding consumption of fixed capital).

Consumption of Fixed Capital¹
Consumption of fixed capital represents the depreciation of the stock of produced fixed assets as a result of normal technical and economical ageing and insurable accidental damage. The consumption of fixed capital is the depreciation of the net stock of produced fixed assets during the year not caused by revaluations because of price changes, new fixed capital formation or discarding of fixed assets.

Compensation of Employees
Compensation of employees is the total remuneration paid by employers to their employees in return for work done. Employees are all residents and non-residents working in a paid job. Managing directors of limited companies are considered to be employees, therefore their salaries are also included in the compensation of employees. The same holds for people working in sheltered workshops. Compensation of employees includes both wages and salaries and employers' social contributions.

Taxes on Production and Imports
Taxes on production and imports are compulsory payments to the government and the European Union (EU), which are related to production, imports, and to the use of production factors. Taxes on production and imports are classified into taxes on products and other taxes on production.

Taxes on Products
Taxes on products are related to the value or the volume of products. They are levied on domestically produced or transacted products and on imported products. Taxes on products are classified into taxes on domestic products, taxes on imports, and VAT.

Other Taxes on Production
Other taxes on production include all taxes on production paid by producers not related to the value or volume of products produced or transacted. Examples are rates and refuse charges paid by producers.

Subsidies
Subsidies are current payments from the government or the EU to producers, with the objective to influence output prices, employment, or the remuneration of production factors. Subsidies are distinguished between subsidies on products and other subsidies on production.

Subsidies on Products
Subsidies on products are related to the value or the volume of products. They can be distinguished between subsidies on domestic products and subsidies on imports.

Subsidies on Domestic Products
Subsidies on domestic products are related to the value or the volume of domestically produced or transacted products. Examples are EU subsidies on food products and public transport subsidies.

Subsidies on Imports
Subsidies on imports are related to the value, or the volume, of imported products that are re-exported without undergoing any processing. These are mainly subsidies on the re-exports of dairy products. Subsidies on imports cannot be broken down by industry.

Other Subsidies on Production
Other subsidies on production include all subsidies on production paid to producers not related to the value or volume of products domestically produced or transacted. These are mainly wage subsidies.

Operating Surplus/Mixed Income
Gross operating surplus by industry is the balance that remains after deducting from the value added (basic prices) the compensation of employees and the balance of other taxes and subsidies on production. The operating surplus of the self-employed is called mixed income because it also contains compensation for work by the owners and their family members. Net operating surplus/mixed income remains after deducting consumption of fixed capital from gross operating surplus/mixed income.

Property Income 
Incomes that accrue from lending or renting financial or tangible non-produced assets, including land, are defined as property income.

Interest
Interest is accrued for the accounting period (i.e. the calendar year in these accounts) for which the underlying claim or liability has been in place. Actual payments or receipts of interest are adjusted to eliminate the margins that represent the implicit charges made by financial intermediaries, i.e. Financial Intermediation Services Indirectly Measured (FISIM). The amounts of interest paid by borrowers to financial intermediaries must be reduced by the estimated value of the charges payable and the amounts of interest receivable by depositors must be increased. The value of the charges is treated as payments for services rendered by financial intermediaries to their customers and not as payments of interest.

FISIM²
FISIM represents the margin which banks withhold for themselves in paying interest on deposits or charging interest on loans. In the case of household deposits with financial corporations, it is calculated as the difference between a reference rate and the average interest rate multiplied by the stock of deposits held by households. In the case of loans to households, it is calculated as the difference between the reference rate and the average loan rate multiplied by the stock of loans held by households.

In this edition (i.e. the ASA 2015 publication) the CSO has changed the methodology used to calculate FISIM to bring it into line with the European System of Accounts (ESA 2010) standards. This revised methodology has been applied to estimates from 2010 onwards. Up to now, the published Euro Interbank Offered Rates (Euribor) have been used as the basis for estimating the reference rate (i.e. the rate at which banks lend to each other) in the FISIM calculations. The estimates now use survey data, which provide details of loan and deposit principal amounts and their associated interest flows, to calculate both the reference rate and the loan and deposit rates charged/offered to customers.

Distributed Income of Corporations
Dividends are a form of property income received by owners of shares to which they become entitled as a result of placing funds at the disposal of corporations. Dividends are recorded gross, before deduction of dividend tax. This applies also for the taxes on dividends to and from the rest of the world. Dividends are recorded at the moment they are made payable.

Reinvested Earnings on Foreign Direct Investment
Reinvested earnings on foreign direct investment are calculated as follows:

Operating surplus of the foreign direct investment enterprise
plus
Property income and current transfers receivable
minus
Property income and current transfers payable, including dividends (actual remittances) to foreign direct investors and any current taxes payable on income and wealth of the foreign direct investment enterprise
=
Reinvested earnings on foreign direct investment

Other Investment Income
In the national accounts, pension and life insurance provisions are seen as a liability of insurance enterprises to policyholders. Therefore, the investment revenues on these provisions are booked as payments from insurance enterprises to households. Subsequently, households reinvest these revenues as imputed contributions to pension funds and life insurance companies. In the financial accounts, the latter transaction is recorded as a component of net equity in life insurance and pension funds reserves.

Rents
Rent on land refers to the rent received by a landowner from a tenant and does not include the rentals of buildings and of dwellings situated on it.

National Income/Primary Income
This includes factor income flows to the rest of the world, i.e. wages and salaries to non-resident employees, interest and dividends to non-resident investors, retained profits of foreign owned subsidiaries, and branch profits. Income earned abroad is attributed to Ireland. National income is the sum of GDP and net primary income from the rest of the world.

Current Taxes on Income and Wealth
Current taxes on income and wealth of corporations consist of corporation tax and dividend tax. These taxes are based on the profits of corporations. Current taxes on income and wealth of households include all taxes that are periodically imposed on income and wealth, such as income tax, capital gains taxes, and other taxes on the net wealth of individuals. Non-periodical levies, such as inheritance tax are defined as capital transfers.

Several types of taxes are simultaneously seen as taxes on production and imports when imposed on producers, and as taxes on income and wealth when imposed on consumers. For instance, motor vehicle tax is a tax on production when it is imposed on company cars and a tax on income and wealth when imposed on cars for private use. The treatment of dividend tax results from the recording of dividends. Because dividends are recorded gross, i.e. before deduction of dividend tax, dividend tax is in all cases recorded at the receiving sector. The same applies for the dividend tax to and from the rest of the world.

Social Contributions
Social contributions include social security contributions, private social contributions (i.e. contributions to pension schemes) and imputed social contributions. Employers, employees, self employed persons and non-active persons pay these contributions. Actually, the employers' part is paid directly to the insurers. However, in the national accounts, the employers' contributions are considered to be part of primary income of households (i.e. the income from direct participation in the production process). Therefore, in the first instance, these contributions are treated as payments by employers to households, as compensation of employees, who are deemed to pay them to the insurers in the income account.

•    Contributions to pension schemes are based on collective contracts with pension funds and life insurance companies. The contributions are calculated as follows:

Actual contributions to pension schemes (gross)
minus
Compensation of insurance services (part of consumption of households)
plus
Supplement from investment income
=
Contributions to pension schemes

The supplement from investment income is part of the property income attributed to insurance policyholders that relates to pensions.

•    Other private social contributions: These are contributions paid to private social schemes excluding pension schemes. The contributions to these schemes can be derived in the same way as the contributions to pension schemes.
•    Imputed social contributions: Imputed social contributions represent the counterpart to the 'unfunded employee social benefits' (less any employees’ social contributions) paid directly by employers to their (former) employees. It is necessary to introduce this imputation because the direct payments are recorded twice. Firstly they are recorded as employers’ social contributions (part of the compensation of employees). Secondly they are recorded as social benefits.

Social Benefits
Social benefits are transfers to households, intended to relieve them from the financial burden of a number of risks or needs, such as sickness, invalidity, disability, old age, dependants, and unemployment. Social benefits are classified as social security benefits, social assistance benefits, private social benefits (i.e. pension benefits) and unfunded employee social benefits.

Social security benefits: Social security benefits are paid by social security funds in the field of unemployment, disability, sickness, old age, etc.

Social assistance benefits: Social assistance benefits are payments of the central and local government to households, for which no quid pro quo by the beneficiary is expected.

Pension benefits: Pension benefits are private social benefits in the field of old age, survivors, or disability, paid by pension funds and life insurance companies.

Unfunded employee social benefits: These social benefits are directly paid by employers to their (former) employees, without involving any social security fund. Examples are some civil service pension provisions.

Non-Life Insurance Premiums
Non-life insurance premiums comprise both the actual premiums payable by policyholders to obtain insurance cover during the accounting period and the premium supplements payable out of the property income attributed to insurance policy holders, after deducting the compensation of insurance services. These premiums provide cover against damage as a result of fires, floods, crashes, collisions, theft, violence, accidents, sickness, etc.

As the compensation of insurance services of non-life insurance enterprises is calculated by subtracting the claims from the premiums (actual premiums and premium supplements), it follows that the total non-life insurance premiums must equal the total non-life insurance claims of the insurance enterprises.

Non-Life Insurance Claims
Non-life insurance claims represent the amounts which insurance enterprises are obliged to pay in settlement of injuries or damage as a result of fires, floods, crashes, collisions, theft, violence, accidents, sickness, etc.

Other Current Transfers 
This transaction includes all transactions not mentioned before, which do not have the character of a capital transfer. This concerns particularly the current transfers within general government.

Disposable Income
Disposable income is the balancing item of the secondary distribution of income account. It shows for each sector its disposable income, which remains after the redistribution of primary income by current transfers (compulsory or non-compulsory) between the sectors. Total disposable income of all resident units is called disposable national income, which is equal to national income plus net current transfers received from the rest of the world.

Final Consumption Expenditure
Final consumption expenditure consists of expenditure incurred by resident institutional units on goods and services that are used for the direct satisfaction of individual needs or wants, or the collective needs of members of the community. Final consumption expenditure may take place on the domestic territory or abroad. Final consumption expenditure exists only for households (incl. NPISH) and general government.

Final Consumption Expenditure by Households
Final consumption expenditure by households includes the following borderline cases:

Non cash expenditure arising from:
•    Income in kind, such as accommodation, food, clothing etc.
•    Services of dwellings, which are occupied by the owners themselves and without any actual rent payments. These services are valued by applying the rents of similar dwellings.

Goods and services produced for own use, as in agriculture. The value of these products is calculated by applying the market prices for similar products.

It also includes durable consumption goods such as private cars, household appliances, furniture, and clothing. However, the purchases of dwellings by households are not seen as final consumption, but as fixed capital formation by households. 

Final Consumption Expenditure by NPISH
Final consumption expenditure by NPISH consists of all the non-market output of this sector, excluding the own account capital formation.

Final Consumption Expenditure by General Government
Final consumption expenditure by general government results from the specific recording of government output. Only a small part of government output is actually sold (market output). The larger part of government output is paid out of public funds and provided free of charge to all sectors (non-market output).

The government is, by convention, considered to be the consumer of its own output, because the allocation of government output to different users is problematic. In the absence of market prices, output and final consumption expenditure by general government is calculated from the production costs as follows:

Intermediate consumption
plus
Compensation of employees
plus
Consumption of fixed capital
plus
Other taxes on production (paid by the Government)
minus
Other subsidies on production (received by the Government)
=
Output (basic prices)

Output (basic prices)
minus
Sales (= market output)
minus
Own-account capital formation
plus
Social benefits in kind via market producers
=
Final consumption expenditure by the Government

Actual Individual Consumption
Final consumption expenditure by households refers to expenditure on consumption goods and services by households. In contrast, actual individual consumption refers to the acquisition of consumption goods and services by individuals. The difference between these concepts lies in the treatment of certain goods and services financed by the Government or NPISH, but supplied to households as social transfers in kind. By convention, all final consumption expenditure by NPISH, households, and most of the final consumption expenditure by the government in the field of education, health, social security and welfare, sport and recreation and culture, are treated as individual consumption. So actual individual consumption is:

Final consumption expenditure by households
plus
Final consumption expenditure by NPISH
plus
Individual consumption by the government
=
Actual individual consumption

Actual Collective Consumption
Services for collective consumption (collective services) are provided simultaneously to all members of the community or all members of a particular section of the community. Actual collective consumption consists, in particular, of government expenditures on services in the field of:

•    Management and regulation of society
•    Security and defence
•    Law and order, legislation and regulation
•    Public health
•    Environment
•    Management of infrastructure and economic development.

Adjustment for the change in Pension Entitlements
Since households are treated in the financial accounts as owners of the pension funds reserves, an adjustment item is necessary to ensure that any excess of contributions to pension schemes over pension benefits does not affect household saving:

Contributions to pension schemes
minus
Pension benefits
=
Adjustment for the change in pension entitlements

Saving
Saving is the difference between disposable income and final consumption expenditure. In the national accounts, households are treated as owners of life insurance and pension funds reserves. Since contributions to pension schemes and pension benefits are recorded in the secondary distribution of income account, an adjustment item (adjustment for the change in pension entitlements) on the use of income account is necessary to ensure that any excess of contributions to pension schemes over pension benefits does not affect household saving.

Saving Ratio
The household saving ratio is gross household saving expressed as a percentage of total resources, i.e. the sum of gross household disposable income and the adjustment for the change in pension entitlements. Household saving represent that part of disposable income that is not spent on final consumption of goods and services. The use of this saving either for financial investment or debt reduction is recorded in the financial accounts.

Exports and Imports (merchandise)
Exports and imports are valued f.o.b. (free on board) for national accounts purposes. While imports are valued c.i.f. (cost, insurance and freight) in the official external trade statistics, adjustments are made to reflect an estimated f.o.b. valuation. These adjustments result from the application of different c.i.f./f.o.b. conversion ratios to the values of imports from within the European Union and from outside the European Union.

In addition, and in line with EU and ECB requirements, merchandise imports from within European Union member states are compiled on the basis of country of consignment rather than country of ultimate origin (as was the case formerly). Some adjustments are also made to the official merchandise trade statistics to conform to the balance of payments (BOP) change of ownership and market valuation principles.

In addition, certain exports sales of software licences are included in national accounts and BOP service exports and not in national accounts and BOP merchandise exports. The BOP merchandise figures now include the estimated values of (unrecorded) retail exports of fuel to Northern Ireland and of unrecorded imports of goods for personal consumption from Northern Ireland and elsewhere.

Exports and Imports of Services
Exports and imports include various categories of service types: transport, tourism and travel, communications, insurance services, financial services, computer services, royalties and licences, business services, etc. Some specific points of note are:

•    Because of the presentation of merchandise imports on a f.o.b. (rather than c.i.f.) basis, the freight element of the c.i.f. to f.o.b. adjustment is included in transport.
•    The value of insurance services provided to non-residents by resident insurers (credit) is estimated as the value of direct and supplementary premiums earned, less the value of claims payable less increases in the actuarial element of insurance technical reserves.
•    Exports and imports of computer software that is embedded in hardware or carried on other physical media are not included in computer services but under merchandise. Sales and purchases of software transmitted electronically, as well as exports of certain software licences, are recorded under computer services.

Current External Balance
The surplus/deficit on the current account of the balance of payments is equivalent to this item. It consists of:

•    Net exports, the difference between exports and imports of goods and services
•    Net primary income from the rest of the world: compensation of employees, taxes on production and imports, subsidies and property income, such as interest and dividends
•    Net current transfers from the rest of the world, such as dividend tax, social security benefits, and other current transfers.

Capital Transfers
Capital transfers are payments for which no quid pro quo by the beneficiary is expected. They burden the wealth of the payer, or are meant to finance fixed capital formation or other long-term expenditures of the receiver. Capital transfers can be classified into investment grants, capital taxes, other capital transfers and imputed capital transfers.

Investment Grants
Investment grants are capital transfers which are intended to finance fixed capital formation of other units.

Capital Taxes
Capital taxes are compulsory, non-periodical payments to the Government. They are based on the wealth of taxable persons. In practice, they only cover the inheritance tax. Taxes on net wealth of individuals are imposed periodically and are therefore recorded as taxes on income and wealth.

Other Capital Transfers
Other capital transfers are capital transfers that cannot be characterised as investment grants or as capital taxes.

Fixed Capital Formation
Fixed assets are produced tangible or intangible assets that are used in the production process for more than one year. Gross fixed capital formation consists of producers’ acquisitions less disposals of fixed assets:

Tangible fixed assets include the following:
°    Dwellings and non-residential buildings
°    Civil engineering works
°    Transport equipment
°    Machinery, equipment and computers
°    Cultivated assets (trees and livestock)
°    Missile systems and other military weapons.

Intangible fixed assets include the following:
°    Mineral exploration
°    Computer software
°    Research and Development
°    Entertainment, literary or artistic originals
°    Other intangible fixed assets.

Major improvements to land (reclamation, land consolidation and land preparing for building).

Fixed capital formation also includes:

•    Work in progress of construction, such as unfinished dwellings, non-residential buildings, and civil engineering works, recorded as fixed capital formation of the client.
•    Military structures and equipment, similar to those used by civilian producers, such as airfields and hospitals.
•    Improvements to existing fixed assets that go well beyond the requirements of ordinary maintenance and repairs.
•    Transfer costs of fixed assets, such as conveyance fees and costs made by real estate agents, architects and notaries.

Changes in Inventories
Inventories consist of all raw materials, semi-manufactured goods, work in progress and final products that producers have in stock at a certain moment, held both at home and abroad. Changes in work in progress are in general considered to be changes in inventories. However, work in progress in construction is seen as fixed capital formation of the client and not as changes in inventories of the construction industry. This concerns unfinished buildings and civil engineering works.

Increases in inventories occur when goods are produced (or purchased) but not yet sold (or used) in the year under review. Decreases in inventories occur when goods are withdrawn from existing inventories in order to be sold or used in the production process.

The assessment of the changes in inventories is done in such way that gains or losses on inventories caused by price changes are avoided. With this objective, the initial and final stock of each good is valued at the same price – namely, raw materials at the average purchase price in the period, final products at average sales price and work in progress at the average cost price. This valuation method prevents output, and subsequently value added, from being influenced by changes in prices of stocks during the period under review.

Acquisitions less Disposals of Valuables
This transaction consists of the acquisitions less disposals of precious stones, non-monetary gold, antiques, art objects, and jewellery that are acquired and held primarily as stores of value. In the national accounts this transaction is mostly combined with changes in inventories.

Acquisitions less Disposals of Non-Produced Assets 
Acquisitions less disposals of non-produced assets mainly consist of sales of land by landowners such as farmers to investors in dwellings and non-residential buildings. The valuation of sales and purchases of land is exclusive of VAT and transfer costs. These are included in fixed capital formation.

Net Lending (+) or Net Borrowing (-)
Net lending (+) or net borrowing (-) shows the amount a sector can lend/invest, or has to borrow, given the current and capital transactions in the sector accounts.

________________________________________
¹Consumption of fixed capital automatically becomes available as a by-product of the calculation of the stock of fixed assets, which are computed using Perpetual Inventory Method, see Estimates of the Capital Stock of Fixed Assets.
²A more detailed description of the FISIM methodology is available at National Income and Expenditure Annual Results 2015 FISIM Methodology