4. Industrial classifications, such as ISIC -
identify a group of manufacturing industries
Manufacturing industries
Produce goods such as machinery
Produce industrial services such as machinery repair
and installation
Both goods and services produced should be included
in the Manufacturing output
5. Principal activity
The activity whose value added exceeds that of any other
activity carried out within the same unit
Secondary activities
Activities carried out within a single producer unit in addition to
the principal activity and whose output, like that of the principal
activity, must be suitable for delivery outside the producer unit
Ancillary activities
Incidental to the main activity of an enterprise
Facilitate the efficient running of the enterprise but does not
normally result in goods and services that can be marketed
Determines
where the unit
will be classified
6. Ancillary activity – a productive activity
undertaken with the sole purpose of
producing services for IC within the same
enterprise
1993 SNA – ancillary activities are integrated with the
establishments they support
Depict the production process as it is performed
Ancillary unit is not recognized by its own activity
Structural decomposition of GDP by economic activity is
not depicted correctly
Regional GDP can not be compiled accurately
2008 SNA - units undertaking ancillary activities to be
treated as an establishment in certain cases
7. When an ancillary activity is recognized as a
separate establishment?
An enterprise in which different kinds of activities
undertaken are either horizontally or vertically integrated
An establishment undertaking ancillary activities is
statistically observable, i.e. records of its transactions are
readily available
The ancillary units are in a geographical location different
from the establishments they serve
Ancillary establishment should be allocated to the
industrial classification corresponding to its own
principal activity
Statisticians should not make extraordinary efforts
to create separate establishments for these
activities artificially in the absence of suitable basic
data being available
8. Output of ancillary establishment
Should be derived on a sum of cost basis, i.e. all cost
of production incl. the cost of capital used
Output is deemed to be market when the parent
enterprise is a market producer and non-market
otherwise
Output is treated as intermediate consumption of the
establishments it serves and should be allocated using
appropriate indicator (VA, output, employment)
9. Case 1. An enterprise with 2 establishments and a headquarter (ancillary unit)
Establishment 1 Establishment 2 Headquarter
IC = 100 IC = 30 IC = 30
VA = 100 VA = 70 VA = 15
Output 1 = 200 Output 2 = 100 Output 3 (imputed) = 45
Case 2. Treatment of the headquarter (ancillary unit) as an establishment
Establishment 1 Establishment 2 Headquarter
IC = 100 IC = 30
2/3 output 3 = 30 2/3 output 3 = 15
IC = 30
VA = 70 VA = 55 VA = 15
Output 1 = 200 Output 2 = 100 Output 3 (imputed) = 45
VA=VA1+VA2+VA3 =
= 140
VA=O1+O2–(IC1+IC2+IC3) =
= 140
10. Basic Price
Basic price
Factor costs
+ Other taxes
on production
- Other subsidies
on production
Factor costs
+ Taxes on
products
(excl. VAT and
other deductible
taxes)
- Subsidies on
products
Producers’ Price
Producers’ price
+ Any transport
and trade margins
invoiced separately
to the purchaser
to take delivery
Purchasers’ Price
Output
and VA
IC
11. Total VA at basic prices =
GO at basic prices – IC at purchasers' prices
If taxes and subsidies on products and
production cannot be segregated
Total VA at factor cost =
GO at factor cost - IC at purchasers' prices
13. Since 1950s, UN has published international
recommendations to establish a coherent and
uniform measurement of industrial activities –
1953, 1960, 1968 and 1983
IRIS 2008 adopted by the 39th session of the
UN Statistical Commission
14. Revision of the 2008 SNA
Revision of the ISIC, Rev.4, and CPC, Ver.2
Efforts of countries to minimize the difference
between the concepts of “census value added” and
“national accounts value added”
Change in the valuation of industrial output to
basic prices in accordance with SNA principles
Consistency with concepts, definitions and
terminology used in statistical publications and
regulations of other international organizations
(IMF, OECD, ILO, Eurostat)
Need for Revision of IRIS
15. Economic activities included in terms of ISIC or a
national classification compatible with ISIC:
Mining and quarrying (Section B)
Manufacturing (Section C)
Electricity, gas, steam and air conditioning supply (Section D)
Water supply; sewerage, waste management and remediation
activities (Section E)
Industrial activities in international waters, such as
the operation of petroleum and natural gas wells,
should be included if they are subject to the laws,
regulations and control of the country concerned
ISIC, Rev.4
16. In conformity with the 2008 SNA production
boundary all units engaged in economic
activities within the scope of industrial sector
should be covered
Units of all sizes and types of ownership, including:
Household unincorporated enterprises as well as goods
produced by households engaging in industrial activities for
own final consumption
Departments, establishments and similar units of General
Government should be included if they are mainly engaged in
industrial activities within the scope and are identifiable by
accounting records kept by them
Government units operating for profit
Government units providing goods and services to
themselves – printing, publishing, ammunitions
factories, etc.
17. Establishment - appropriate for production
and employment analysis by economic
activities
Enhance homogeneity in the measurement of the
economic activity and more accurate presentation of
regional economic reality
Allow grouping into similar kind of industries (ISIC)
Enterprise – appropriate for financial analysis
by institutional sectors
Corporation
Non-profit Institution serving industrial businesses
Unincorporated enterprise
18. Outsourcing of production - when the principal unit
contracts another productive unit to carry out specific
aspects of the production activity of the principal, in whole
or in part in the production of a good or a service
Activity classification of the contractor – straightforward,
does not change with the outsourcing
Activity classification of the principal - affected by the
nature and extent of the outsourcing, requires conventions
for a consistent treatment
Recommendation: the criterion on where to classify the
principal should be based on the ownership of the physical
input materials by the principal only
19. Outsourcing of support functions - the principal carries out the
production of goods or services, but outsources certain support
functions, such as accounting or computer services, to the
contractor
Principal remains classified to the respective ISIC class that represents
the core production process
Contractor is classified to the specific support activity it is carrying out,
e.g. ISIC class 6920 or 6202
Outsourcing parts of the production process - the principal
outsources a part of the production process, but not the whole
process, to the contractor as the principal owns the material
inputs to be transformed by the contractor and thereby has
ownership over the final outputs
Principal is classified in the appropriate class of ISIC as if it were
carrying out the complete production process
Contractor is classified according to the portion of the production
process he is undertaking
20. Outsourcing of complete production process
Outsourcing of service producing activities, including
construction
Both the principal and the contractor are classified as if they
were carrying out the complete service activity support
functions
Outsourcing of manufacturing activities to contractor,
when the principal does not physically transform the
goods at the location of its unit
Principal owns the material inputs and thereby has economic
ownership of the outputs, but has the production done by
others - he is classified to section C (Manufacturing)
Principal has the production done by others, but does not
own the material inputs - should be classified to section G
(Distributive trade)
Contractor is classified always to section C (Manufacturing)
21. IRIS 2008 provides summary definitions of data items
for collection in industrial statistics
13 groups of data items, incl. data items in quantity and
environmental protection expenditures
Employment
Employees engaged in own account production of fixed
assets and intellectual property products (software and
database development, R&D, mineral exploration and
evaluation, entertainment, literary and artistic originals)
should be distinguished separately for the purpose of
calculating output and capital formation
Compensation of employees
Employee stock options are considered income in kind
22. Other expenditures (part of IC calculation)
Purchases of goods and services
Raw materials, parts and supplies – purchased from other
enterprises and delivered by other establishments of the same
enterprise
Gas, fuels and electricity purchased
Water and sewerage services
Services except rentals
Cost of industrial services purchased and also delivered by
other establishments of the same enterprise – maintenance,
repair, installation, contract and commission work
Cost of non-industrial services – transport, communication,
advertising
Purchase of good and services for resale in the same condition as
received
Rental payments
Non-life insurance premiums payable on establishment property
Remember
this item
23. Sales (turnover), shipments and other
revenues
Market sales to other enterprises, incl. transfers to
other establishments of the same enterprise and barter
Sales of goods and services purchased for resale in the
same condition as received
Receipts for industrial work done or industrial services
rendered – contract and commission works,
maintenance and repair, R&D from industrial nature
Other non-industrial service revenues (may not be
ascertain at the establishment level) – revenues from
operating cafeterias, hostels, storage, transportation
E-commerce sales
Value of own account fixed assets Remember
this item
24. Inventories and capital formation
Changes in inventories - important for the calculation
of industrial output and intermediate consumption,
valuation
Do not forget the new classification of non-financial
assets
Intellectual property products – their output should be
capitalized; if done on own account - the output should
be valued at cost
Computer software and database
Research and development
Mineral exploration and evaluation
Entertainment, literary and artistic originals
Others
25. Gross output at basic prices =
+ Value of sales (turnover), shipments and other
revenues
- Purchases of goods and services for resale in the
same condition as received (usually from a
secondary trade activity)
+ Change in work-in-progress
+ Change of inventories of finished goods
+ Change in inventories of goods purchased for
resale in the same condition as received
Census output – recommended to be
discontinued
Census output = Cross output – Other non-
industrial service revenues
26. Intermediate consumption at purchasers’ prices =
+ Purchases of raw materials and supplies
+ Purchases of gas, fuel and electricity
+ Purchases of water and sewerage services
+ Purchases of services except rentals
+ Rental payments
+ Changes in inventories of materials, fuels and
supplies
Census input at purchasers prices – not
recommended
Census input = Intermediate consumption – Cost of
non-industrial services
Revalue to
current prices
and adjusts the
purchases to
uses
27. IRIS 2008 makes the concept of Industry Value Added
as close as possible to the concept of National
Accounts Value Added
However
Depending on the organization of the country some
adjustments would still be needed to get to the
National Accounts concept
FISIM - the cost is included in the interest paid and interest
received
Insurance service charge - the cost is included in the
premium