The NIPAs and the System of National Accounts

Survey of Current Business, Dec, 2004 by Charles Ian Mead, Karin E. Moses, Brent R. Moulton

THE increased integration of the world's monetary, fiscal, and trade policies has led to a growing need for the international harmonization of economic statistics. Accordingly, the System of National Accounts 1993 (SNA) was developed by the international community in order to facilitate international comparisons of national economic statistics and to serve as a guide for countries as they develop their economic accounting systems. (1) The Bureau of Economic Analysis (BEA) actively participated in preparing the 1993 revision of the SNA, and after the revision was approved by the United Nations Statistical Commission, BEA has moved its accounts toward improved consistency with the SNA, which now serves as the internationally accepted set of guidelines for the compilation of national accounts. (2)

The SNA provides a comprehensive framework for recording all of the stocks and flows that are defined as part of a nation's economy. Its accounts are organized to measure production, income, saving, investment, and financial and nonfinancial wealth; it also encompasses input-output tables, international transactions, financial accounts, and balance sheets. The SNA is designed to be an integrated system; that is, the accounts use consistent definitions, classifications, and accounting conventions. Furthermore, the SNA is almost completely harmonized with other international guidelines, such as the international Monetary Fund's Balance of Payments Manual (fifth edition).

Since 1993, BEA has continued to improve its national income and product accounts (NIPAs) and its other economic accounts to incorporate most of the major SNA guidelines that affect gross domestic product (GDP), investment, and saving.

* In the 1996 comprehensive NIPA revision, chain-type indexes were adopted for measuring changes in real GDP and prices, and government fixed investment was recognized.

* In the 1999 comprehensive revision, investment in software was recognized, the treatment of government employee retirement plans was changed, and certain transactions were reclassified as capital transfers.

* In the 2003 comprehensive revision, the implicit services provided by commercial banks to borrowers were recognized, the services produced by general government were explicitly recognized, the definition of national income was broadened to include all net income (net of consumption of fixed capital) earned in production, and the summary accounts, tables, and terminology were revised to more closely conform with the SNA.

BEA supports the goal of the international harmonization of its national accounts, and the NIPAs will continue to adopt the SNA guidelines to the extent that is feasible. However, some differences will persist because BEA has decided to retain several important NIPA aggregates, such as personal income and corporate profits, that do not appear in the SNA, and BEA must also consider the needs of the U.S. user community. Improving the consistency of the NIPAs with the SNA remains an important element of BEA's mission to produce accurate, relevant, and timely statistics, to respond to customers' needs, and to meet the challenges of measuring a changing economy.

BEA is also participating with other members of the international statistical community in the current review and update of the SNA that was recently authorized by the United Nations Statistical Commission. This review is considering revisions to the SNA that will address new issues that are emerging in the new economic environment, as well as some old issues that are increasing in economic significance or that may qualify for a different treatment as a result of advances in methodological research. A few of the changes that are being considered include treating research and development as part of fixed capital formation, recognizing a net return to government fixed assets, and using actuarial valuations to determine the liability and to allocate the net worth of employer-provided defined benefit plans between the employer and the employees.

For many years, BEA has prepared estimates on an SNA basis in response to a questionnaire used by the Organisation for Economic Co-operation and Development (OECD). (3) These estimates are published by the OECD and by other international organizations. The estimates are derived from the published NIPA estimates and are converted to the SNA basis in a series of reconciling adjustments that are based on underlying detail and related estimates. However, the adjustments do not deal with all the differences between the NIPAs and the SNA; for example, information is not available to cover illegal production, which according to SNA, should be included as part of the production measured by GDP.

In the first part of this article, the organization and major features of the SNA are compared with those of the NIPAs. In the second part, the set of estimates on an SNA basis that are provided to the OECD are presented, and these estimates are compared with the related NIPA estimates. In the third part, the current revision of the SNA is described.