ÿWPC* Ò j¹äâ’/Êž},¯5›ÁU“IŽ: dHsìzjþeÝ¢¨iH•bÀ¯ªÎÇÆ?wH9x­²7c}š¤8)g0øÂR›nNÇŸu·W• ¥u”ÿJ¸,ùzê¡·$ySöjÄ'nàÀoí½ Uõ¹$D‚®§OèÎS{ƒË‚»O^H¥*ëÅYƒÂ1ÎÝ•ÑSµ¾ÈÛ *Ùçùœ¨!ÂûÖ¬óZ:³¾ÖªÎýÝUÊ6òº#d8ð¼êEÁ×pöV[³ÒÇ©Õø ¿¢É›¾Ó‘C…ƒ4~ú=tªMØØ?/8!œÕóøV±ÝqŸì§ÒêG5pÊ£`‹cc-âì°h|KFñûuß‹H²96×ëþUÖ±æ*b¯˜8üŒ]ýy ÐMEASUREMENT,€CANBERRA,€10„14€MARCH€1997Ìó óÌSubmitted€by€the€Australian€Bureau€of€Statisticsñtñ׃×ñtññtñ׃×ñtñÝ ƒÿÿÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×Ð  F ÐÌÌÌÐ Ç  ЇÌÖ€ÈÖÓ  ÓÓC€  ÿÿ$#%CÓñrñÑÅÝ ÑÑ¥Ý ÑñrñÔ€ïÑô ïôô’®ÔԀ ï ïïÑôÔò òPREAMBLEó óÐ  ÐÌÔ2ÿÿÔÚ  Ú1Ú  Ú.Ô3  Ôà á àThe€issue€of€capital€stock€measurement€was€one€of€15€so-called€criticalÐ óÖ Ðproblems€in€economic€statistics€as€recognised€by€the€18th€meeting€of€the€UnitedÏNations€Statistical€Commission's€Working€Group€on€International€StatisticalÏProgrammes€and€Coordination€which€met€in€New€York€in€April€1996.€The€AustralianÏBureau€of€Statistics€(ABS)€had€volunteered€to€host€a€conference€on€the€issue.ÌÌÔ2ÿÿÔÚ  Ú2Ú  Ú.Ô3  Ôà á àThe€agenda€for€the€meeting€had€been€developed€after€informal€canvassingÐ u X Ðof€the€issues€among€a€number€of€prospective€participants.€Invitations€toÏparticipate€had€been€sent€to€8€international€agencies€and€38€countries,Ïrepresenting€a€wide€geographic€coverage€and€diversity€in€statisticalÏdevelopment.€ÌÌò òITEM€1:€OFFICIAL€WELCOMEó óÐ ÷Ú  ÐÌÔ2ÿÿÔÚ  Ú3Ú  Ú.Ô3  Ôà á àIn€his€opening€remarks,€during€which€he€welcomed€all€participants€to€theРͰ Ðinternational€conference€on€capital€stock€statistics,€the€AustralianÏStatistician,€Mr€Bill€McLennan,€also€provided€some€background€on€the€broadÏcontext€for€the€conference.€ÌÌÔ2ÿÿÔÚ  Ú4Ú  Ú.Ô3  Ôà á àMr€McLennan€noted€that€copies€of€the€papers€and€proceedings€of€thisÐ dG Ðconference€will€be€made€available€to€the€United€Nations€Statistical€DivisionÏfor€wide€distribution€within€the€international€statistical€community.€HeÏemphasised€the€importance€of€a€wide€cross-section€of€countries€being€given€anÏopportunity€to€contribute€to€statistical€developments,€including€ensuring€thatÏRegional€Commissions€were€able€to€deliberate€on€the€outcomes€of€the€variousÏinformal€groups€now€in€existence.ÌÌÔ2ÿÿÔÚ  Ú5Ú  Ú.Ô3  Ôà á àMr€McLennan€noted€that€one€of€the€issues€to€be€decided€by€the€conferenceÐ ¼Ÿ Ðwas€how€further€work€on€capital€stock€statistics€should€be€advanced.€TheÏestablishment€of€an€appropriate€working€group€could€be€useful,€but€only€if€itÏhad€realistic€and€finite€terms€of€reference€and€if€participants€were€preparedÏto€commit€themselves€to€undertake€the€necessary€research€and€development€workÏbetween€group€meetings.€If€the€definite€prospect€of€such€commitment€emergedÏduring€the€conference,€it€would€be€necessary€for€a€country€or€internationalÏagency€to€volunteer€to€host€a€further€meeting.ÌÌò òITEM€2:€ADMINISTRATIVE€ARRANGEMENTSó óÐ ÿ'â"& ÐÌÔ2ÿÿÔÚ  Ú6Ú  Ú.Ô3  Ôà á àDennis€Trewin,€Deputy€Australian€Statistician,€ABS,€chaired€the€meeting.Ð Õ)¸$( ÐThe€ABS€had€undertaken€to€prepare€a€draft€report€of€the€meeting€which€would€beÏcleared€with€conference€participants€before€being€finalised€for€submission€toÏthe€United€Nations€Statistical€Division€for€wider€circulation.Ì€Ìò òITEM€3:€TOUR€DE€TABLE€-€REVIEW€OF€COUNTRY€PRACTICESó óÐ l.O)- ÐÐ W/:*. ÐÔ2ÿÿÔÚ  Ú7Ú  Ú.Ô3  Ôà á àThe€item€consisted€of€a€'tour€de€table',€with€each€country€making€a€briefÐ  Ðpresentation€on€the€broad€methodology€it€used,€or€was€proposing,€for€theÏcompilation€of€capital€stock€statistics.€The€meeting€discussed€theseÏmethodologies,€the€problems€associated€with€them,€and,€broadly,€possible€futureÏinitiatives.€While€there€was€some€degree€of€consistency€between€methodologies,Ïno€two€countries€were€approaching€the€valuation€of€capital€stock€in€exactly€theÏsame€way.€The€consistencies€included€a€general€reliance€on€the€perpetualÏinventory€method€(PIM)€(with€a€lesser€use€of€direct€measurement);€extensive€useÏof€Laspeyres€price€indexes€(albeit€at€a€fine€level€of€disaggregation)€andÏfixed-weighted€volume€indexes;€and€straight€line€depreciation€assumptions.€ForÏmore€detailed€information,€reference€should€be€made€to€the€individual€countryÏpapers.ÌÌÔ2ÿÿÔÚ  Ú8Ú  Ú.Ô3  Ôà á àSimilar€broad€asset€types€were€used€by€most€countries,€with€the€mainÐ  ï  Ðdifferences€being€in€the€treatment€of€some€agricultural€assets€(such€asÏbreeding€stock)€and€the€degree€of€detail€in€which€assets€were€reported.€TheÏinstitutional€sector€classification€used€was€also€similar€for€most€countries,Ïalthough€the€reporting€of€data€varied€substantially,€particularly€concerningÏthe€coverage€of€both€the€government€and€the€household€sectors.€While€industryÏ(branch)€classifications€were€also€similar,€the€degree€of€detail€in€which€theseÏwere€reported€varied€substantially.€It€was€acknowledged€by€a€number€ofÏcountries€that€valuation€of€capital€stock€for€service€industries€was€of€poorerÏquality€than€for€other€industry€groups.ÌÌÔ2ÿÿÔÚ  Ú9Ú  Ú.Ô3  Ôà á àThere€was€a€significant€degree€of€commonality€in€the€problems€reported€byÐ % Ðcountries€concerning€their€current€systems€for€deriving€capital€stockÏestimates.€These€problems€included:Ìà0 á à„à09 áÿ#áÿ#àlack€of€empirical€data€directly€relevant€to€individual€countries€onÐ æÉ Ðasset€service€lives€for€different€types€of€assets;Ð 9 ÿ#9 ÿ# Ðà á à„à0 9 àinadequate€dissection€of€estimates€by€type€of€equipment;мŸ9 ÿ#9 ÿ# Ðà0 á à„à09 áÿ#áÿ#àprivatisation€-€difficulty€of€satisfactorily€implementingÐ § Š Ðinter-sectoral€capital€stock€adjustments;Ð 9 ÿ#9 ÿ# Ðà0 á à„à09 áÿ#áÿ#àdifficulties€in€redistributing€capital€stock€acquired€throughÐ }"`  Ðfinancial€leases€to€industry€of€use;Ð 9 ÿ#9 ÿ# Ðà á à„à0 9 àlack€of€data€on€second-hand€transactions;€andÐS$6"9 ÿ#9 ÿ# Ðà0 á à„à09 áÿ#áÿ#àinadequate€treatment€of€extraordinary€events€and€unforeseenÐ >%! # Ðobsolescence.Ð 9 ÿ#9 ÿ# ÐÌÔ2ÿÿ ÔÚ  Ú10Ú  Ú.Ô3  Ôà á àConference€participants€confirmed€that€the€main€problem€in€valuingÐ ÿ'â"& Ðcapital€stock€was€in€determining€asset€service€lives,€which€were€the€keyÏparameter€affecting€the€growth€of€capital€stock.€A€number€of€other€parametersÏwere€seen€as€affecting€the€level€of€capital€stock,€such€as€the€type€of€survivalÏfunction€used.ÌÌÔ2ÿÿ ÔÚ  Ú11Ú  Ú.Ô3  Ôà á àDifficulties€in€determining€asset€lives€centred€around€the€high€cost€andÐ -d(, Ðrespondent€load€associated€with€obtaining€and€maintaining€good€measures.€TheÏconference€recognised€that€this€was€further€complicated€by€significantÐ W/:*. Ðdifferences€between€countries€affecting€asset€service€lives,€such€as€climateÏand€culture,€necessitating€each€country€individually€determining€asset€livesÏappropriate€for€its€own€environment.€Concern€was€expressed€about€the€increasingÏreliance€on€OECD€estimates€which,€in€turn,€were€largely€dependent€onÏ'second-hand'€estimation€methods€used€(and€reported)€by€individual€memberÏcountries.€This€inevitably€affected€the€accuracy€of€the€estimates€of€capitalÏstock.ÌÌÔ2ÿÿ ÔÚ  Ú12Ú  Ú.Ô3  Ôà á àA€number€of€countries€indicated€that€they€were€currently€measuringÐ u X Ðdeclining€asset€service€lives.€The€meeting's€attention€was€drawn€to€theÏimportance€of€being€able€to€distinguish€between€actual€decline€in€asset€serviceÏlife€for€individual€types€of€assets€and€the€decline€of€average€service€livesÏcaused€by€the€changing€composition€of€assets€in€order€to€accurately€estimateÏcapital€growth.€Apart€from€the€standard€factors€affecting€asset€service€lives,Ïsuch€as€durability€and€obsolescence,€new€factors€were€increasingly€likely€toÏimpact,€such€as€environmental€legislation,€which€could€effectively€accelerateÏthe€obsolescence€of€some€asset€types.€Research€in€determining€the€cause€ofÏdeclining€average€asset€service€lives€was€not€yet€extensive.ÌÌÔ2ÿÿ ÔÚ  Ú13Ú  Ú.Ô3  Ôà á àIt€was€suggested€that€a€suitable€alternative€to€obtaining€asset€serviceÐ Žq Ðlives€directly€was€to€use€age-price€profiles€to€estimate€them.€A€collectionÏstrategy€would€need€to€be€developed€to€pursue€this€approach.ÌÌÔ2ÿÿ ÔÚ  Ú14Ú  Ú.Ô3  Ôà á àThe€OECD€provided€the€meeting€with€background€on€its€use€of€capital€stockÐ : Ðestimates,€particularly€the€use€in€comparisons€of€performance€and€capitalÏoutput€ratios€between€countries.€As€such,€the€OECD€was€encouragingÏcomparability€between€capital€stock€estimates,€indicating€that€accuracy€ofÏestimates,€rather€than€standardisation€of€methodologies€was€the€priority€in€theÏshort€term.€Several€delegates€commented€on€the€problems€that€were€arising€as€aÏresult€of€international€comparisons€being€based€on€country€estimates€derivedÏfrom€differing€methodologies,€and€stated€that€these€issues€could€not€beÏdiscounted.ÌÌÔ2ÿÿÔÚ  Ú15Ú  Ú.Ô3  Ôà á àSeveral€countries€reported€future€developments€under€consideration€aimedÐ h#K! Ðat€improving€the€quality€of€their€capital€stock€series.€There€was€wideÏrecognition€of€the€need€for€a€firmer€basis€to€underpin€the€assumptions€on€assetÏservice€lives€and€active€consideration€was€being€given€by€a€number€of€countriesÏto€the€development€of€direct€surveys€of€businesses€to€obtain€relevant€dataÏwhich€would€provide€reliable€benchmarks.€Other€future€developments€reportedÏincluded€extension€of€the€asset€types€covered€and€the€adoption€of€chain€volumeÏindexes.Ì€Ìò òITEM€4:€CONCEPTS€OF€CAPITALó óÐ «+Ž&* ÐÌÔ2ÿÿÔÚ  Ú16Ú  Ú.Ô3  Ôà á àThis€session€of€the€conference€was€devoted€to€a€discussion€of€alternativeÐ -d(, Ðconcepts€of€capital€stock€and€their€relationships€to€the€flows€of€servicesÏcontributed€by€fixed€capital€assets€to€production.€The€discussion€was€centredÐ W/:*. Ðon€four€papers:€namely,€those€by€Peter€Hill,€Jack€Triplett,€Michael€Harper€andÏDerek€Blades.€This€section€of€the€report€is€intended€to€provide€a€synthesis€ofÏthe€main€points€emerging€from€the€papers€and€the€discussion.Ì€Ìò òCapital€Stock€Concepts€in€National€Accounts€and€Productivity€Analysisó óРɬ ÐÌÔ2ÿÿÔÚ  Ú17Ú  Ú.Ô3  Ôà á àAlthough€there€may€appear€to€be€some€conflict€between€the€concepts€ofÐ Ÿ ‚ Ðcapital€required€by€different€users€of€capital€stock€data,€it€became€clear€fromÏthe€papers€and€subsequent€discussions€that€this€conflict€is€largely€illusory€asÏthe€various€concepts€of€capital€needed€for€productivity€analysis€and€nationalÏaccounts€are€fully€consistent€with€each€other€from€the€point€of€view€ofÏeconomic€theory€and€can€all€be€linked€to€each€other€within€a€common€theoreticalÏframework.€However,€the€nature€of€the€theoretical€interrelationships€betweenÏthe€various€concepts€does€not€seem€to€be€widely€understood€by€many€compilersÏand€users€of€capital€stock€data.€This€may€give€rise€to€unnecessary€disputesÏover€the€validity€of€the€various€concepts.ÌÌÔ2ÿÿÔÚ  Ú18Ú  Ú.Ô3  Ôà á àA€consensus€was€reached€that€the€best€way€in€which€to€address€theseÐ ¸› Ðissues€is€to€start€with€the€flows€of€services€contributed€by€fixed€assets€toÏproduction€and€then€to€examine€how€measures€of€capital€stock€and€capitalÏconsumption,€or€depreciation,€are€related€to€these€flows.€The€papers€byÏTriplett,€Harper,€Hill€and€Blades€all€adopt€this€same€basic€approach€althoughÏthey€emphasise€different€aspects€of€the€underlying€relationships.€The€sameÏapproach€is€also€used€in€the€1993€SNA.ÌÌò òFlows€of€capital€servicesó óÐ ó ÐÌÔ2ÿÿÔÚ  Ú19Ú  Ú.Ô3  Ôà á àA€'capital€service'€is€to€be€understood€as€the€input€into€a€process€ofÐ æÉ Ðproduction€provided€by€a€fixed€capital€asset.€It€is€the€contribution€that€theÏasset€makes€to€the€production.€Fixed€assets€may€be€viewed€as€providing€flows€ofÏthese€services€during€a€given€accounting€period.€In€practice,€however,€it€isÏdifficult€to€observe€and€measure€the€quantities€of€these€services€directly.ÌÌÔ2ÿÿÔÚ  Ú20Ú  Ú.Ô3  Ôà á àIt€is€also€not€easy€to€value€the€flow€of€services€directly.€In€the€usualÐ h#K! Ðcase€in€which€the€producer€who€uses€the€asset€is€also€its€owner€there€are€noÏtransactions€in€the€services€and€therefore€no€values€to€be€recorded,€theÏservices€being,€in€effect,€produced€for€own€consumption.ÌÌÔ2ÿÿÔÚ  Ú21Ú  Ú.Ô3  Ôà á àFixed€assets€may€be€rented€or€leased€on€the€market,€however,€so€thatÐ ÿ'â"& Ðmarket€rentals€should€provide€information€about€the€value€of€the€capitalÏservices.€After€deducting€the€operating€costs€incurred€by€the€lessor,€theÏresulting€'pure'€rentals€should€provide€estimates€of€the€values€of€the€capitalÏservices€consumed€by€the€lessee€who€uses€the€asset€in€production.€The€pureÏrentals€need€to€be€sufficient€to€cover€not€only€the€economic€depreciation€(orÏcapital€consumption)€on€the€asset€but€also€the€lessor's€interest€(or€capital)Ïcosts.€(The€measurement€of€economic€depreciation€will€be€explained€later.)ÌÐ W/:*. ÐÔ2ÿÿÔÚ  Ú22Ú  Ú.Ô3  Ôà á àPutting€on€one€side€for€the€moment€the€practical€difficulties€ofÐ  Ðestimation,€the€basic€ideas€up€to€this€point€may€be€summarised€by€introducingÏthe€following€notation:ÌÓ-‰1‚X„ Ï é–X°œX-Óà á àLet€qòòtóó€=à Ï àthe€quantity€of€the€capital€service€provided€by€an€asset€in€Ð ÞÁ Ðà á àà „ àà Ï àa€given€period,Ì€€€€€€€€€€pòòtóó€=à Ï àthe€price€of€the€capital€service,Ð ´ — Ѐ€€€€€€€€€fòòtóó€=à Ï àthe€value€of€the€service€€€=€€€pòòtóóqòòtóó€€€à ¡ à(1)Ð Ÿ ‚ ÐÌÔ2ÿÿÔÚ  Ú23Ú  Ú.Ô3  Ôà á àIn€a€production€function€relating€the€quantity€of€output€to€theÐ u X Ðquantities€of€inputs€of€various€kinds€--€intermediate€inputs,€labour€andÏcapital€goods€--€qòòtóó€measures€the€capital€input€by€definition.€It€is€a€flow€andÐ K.  Ðnot€a€stock€variable.€The€asset€itself€is€not€the€input.€The€distinctionÏbetween€the€quantity€of€an€asset€and€the€quantity€of€the€capital€serviceÏprovided€by€that€asset€is€fundamental€for€productivity€analysis.€This€point€isÏstressed€in€the€papers€by€Triplett€and€Harper.€As€just€noted,€pòòtóó,€the€price€ofÐ ÷Ú  Ðthe€capital€service€can€be€equated€with€pure€rental€price€in€a€competitiveÏmarket.€As€will€be€shown€later,€the€f's,€the€values€of€the€services,€provideÏthe€basis€for€calculating€the€values€of€the€capital€stock€figures€required€inÏnational€accounts.€The€next€step€is€to€examine€how€the€q's€may€be€expected€toÏbehave€over€the€life€of€a€capital€good€or€fixed€asset.ÌÌò òRate€of€decline€in€the€efficiency€of€an€assetó óÐ dG ÐÌÔ2ÿÿÔÚ  Ú24Ú  Ú.Ô3  Ôà á àIn€general,€the€quantity€of€services€provided€by€an€asset€may€be€expectedÐ : Ðeither€to€remain€constant€from€period€to€period€or€to€decline€as€the€asset€getsÏolder.€The€service€falls€to€zero€when€the€asset€is€retired€or€scrapped.€TheÏsequence€of€quantities€of€services€provided€by€the€asset€over€its€service€lifeÏshows€the€rate€at€which€the€efficiency€of€the€asset€declines.€It€is€oftenÏdescribed€as€the€'age€efficiency€profile'.€The€shapes€of€these€profiles€areÏextremely€important.ÌÌÔ2ÿÿÔÚ  Ú25Ú  Ú.Ô3  Ôà á àThere€are€various€possibilities:€for€example,Ð ’!u ÐÓ~[‰1‰ái ‘ éA™ñI¡ùQ©!$Y&±( +a-¹/2i4Á69q;É=!@yB‰1‚X„ Ï é–X~Óà0 á à„à i àthe€flow€of€services€remains€constant€until€the€asset€disintegrates;Ð}"` áÿ#áÿ# Ѐ€€€€à á à„à i àthe€flow€of€services€declines€at€a€constant€linear€rate;Ð h#K! Ѐ€€€€à á à„à i àthe€flow€of€services€declines€at€a€constant€geometric€rate;Ð S$6" Ðà0 á à„à i àthe€flow€of€services€declines€slowly€at€first€and€then€at€an€Ð>%! #áÿ#áÿ# Ðà á àà i àaccelerating€rate.ÌÌÔ2ÿÿÔÚ  Ú26Ú  Ú.Ô3  Ôà á àOne€of€the€main€conclusions€of€the€conference€was€that€much€moreÐ ÿ'â"& Ðinformation€is€needed€on€rates€of€decline€in€efficiency€for€different€kinds€ofÏassets€as€they€are€crucial€both€for€productivity€analysis€and€capital€stockÏmeasurement.€These€points€are€elaborated€in€the€papers€by€Triplett€and€Harper.ÌÌÔ2ÿÿÔÚ  Ú27Ú  Ú.Ô3  Ô€€€In€order€to€know€the€total€quantity€of€services€provided€by€an€asset€overÏits€working€life€it€is€obviously€not€sufficient€simply€to€know€the€length€ofÏlife€of€the€asset€as€the€shape€of€the€age€efficiency€profile€is€equallyÏimportant.€This€information€is€also€essential€for€the€correct€measurement€ofÐ W/:*. Ðthe€capital€stock€in€national€accounts.ÌÌÔ2ÿÿÔÚ  Ú28Ú  Ú.Ô3  Ôà á à€For€simplicity,€it€will€now€be€assumed€that€prices€of€the€servicesÐ óÖ Ðremain€constant€in€the€future€so€that€for€any€given€asset€the€profile€of€theÏvalues€of€the€service€flows,€i.e.,€the€f's€as€defined€above,€is€the€same€asÏthat€for€the€quantities€of€services,€the€q's.€In€other€words,€the€values€of€theÏservices€decline€at€the€same€rates€as€the€quantities.ÌÌò òValuation€of€fixed€assetsó óÐ u X ÐÌÔ2ÿÿÔÚ  Ú29Ú  Ú.Ô3  Ôà á àThe€value€of€a€fixed€asset€is€determined€by€its€usefulness€in€production:Ð K.  Ðthat€is,€by€the€value€of€the€flow€of€capital€services€it€provides.€MoreÏprecisely,€the€value€of€a€fixed€asset€at€any€given€moment€of€time€is€given€byÏthe€present€(i.e.,€discounted)€value€of€the€flow€of€remaining€services€that€theÏasset€will€provide€over€the€rest€of€its€remaining€service€life.€This€method€ofÏvaluation,€based€on€standard€economic€principles,€is€used€in€all€four€papersÏreferred€to€above.€It€is€also€used€in€the€SNA.ÌÌÔ2ÿÿÔÚ  Ú30Ú  Ú.Ô3  Ôà á àLet€vòòtóó€denote€the€value€of€a€fixed€asset€at€the€start€of€period€t.€Ô‡&ïù ï ïïYÃÔÔ‡&ò I ò ï&ïùÔThen,Ð £† ÐÓÌÌ33ÓÓ9‰1ƒX  » A•X‰1‚Xi ‘ —X9Óà á àà 9 àà   àà » àòònóóÐ ’u ÐÓ33ÌÌÓÓ?‰1‰÷   » é–X‰1ƒX  » A•X?Óà ÷ àvòòtóóà   à=€€ðð€(pòòióóqòòióó)/(1+r)òòi„t+1óóÐ ðÓ ÐÓ€33Óà ÷ àà   àà » àòòi€=€tóóÐ ß ÐÓÌÌ€ÓÌà ÷ àà   àà » àòònóóÐ ¹œ ÐÓ33ÌÌÓà ÷ àà   à=€€ðð€fòòióó/(1+r)òòi„t+1óóà ™ àà ñ àà I àà ¡ à(2)Ð ú Ðà ÷ àà   àà » àòòi€=€tóóÐ é ÐÔ#†ò Óò ò&ò IuR#ÔÔ#†ïYà ïòò Ó”R#ÔÌwhere€r€is€the€rate€of€interest.€This€fundamental€capital€theory€equation€showsÏexplicitly€the€links€between€the€flows€of€capital€services€needed€forÏproductivity€analysis€and€the€values€of€the€associated€assets€that€are€used€inÏnational€accounts.€The€vòòtóó's€are€the€appropriate€values€to€be€recorded€in€theÐ ?" Ðbalance€sheets€of€the€SNA€(see€paras.€6.181€to€6.183€of€the€1993€SNA).ÌÌò òDepreciation,€or€consumption€of€fixed€capitaló óÐ !ã! ÐÌÔ2ÿÿÔÚ  Ú31Ú  Ú.Ô3  Ôà ÷ àCapital€consumption€in€national€accounts€is€the€same€as€economicÐ Ö"¹# Ðdepreciation.€It€is€defined€as€the€decline€in€the€value€of€the€asset€over€theÏaccounting€period€as€a€result€of€its€use€in€production,€assuming€the€asset€isÏvalued€at€any€moment€of€time€by€the€present€value€of€the€remaining€stream€ofÏservices.€The€decline€in€the€value€of€the€asset€can€be€deduced€from€equationÏ(2)€above€as€follows:ÓÌÌ33ÓÓ[‰1‰ïU   eAæñ\¡ùQ©!$Y&±( +a-¹/2i4Á69q;É=!@yB‰1‰÷   » é–XÓÌÌ€€€€à ï àà U à€€€fòòtóó€€+€€€fòòt+1€óó€€+€€fòòt+2€óó€€+€...òò€€€€€€€óó€à \ à€Ð ¥(ˆ#* ÐÓ[‰1‰ïU q eAæñ\¡ùQ©!$Y&±( +a-¹/2i4Á69q;É=!@yB‰ 1‰‚f  eAæñ\¡‘XÓ€€€€€€€vòòtóó€€€€=à q à___€€à e à____€à A à€____à ñ àà \ à(3)òò€óóÐ A)$$+ Ѐ€€€€€€€€€€€€€à q à1+r€€à e à(1+r)òò2óóà A à(1+r)òò3óóÐ Ý)À$, ÐÌà ï à€€à U àà q àfòòt+1€óó€+€à e àfòòt+2€óó€€+€...òò€€€€€€€ó󀀀Р+ø%. Ѐ€€€€€€vòòt+1óóà U à=à q à____€à e à____Ð ±+”&/ Ѐ€€€€€€€€€€€€€à q à1+r€€à e à(1+r)òò2óóà A àÐ M,0'0 ÐÌÌà ï à€€€à U àà q àfòòtóó€€€+€€vòòt+1€óó€€òò€€€€€óó€€à ñ àà \ à€Ð !.)3 Ѐ€€€€€€vòòtóóà U à=à q à___€€à e à___€à A àà æ àà ñ àà \ à(4)òò€óóà ¡ àÐ ½. )4 Ѐ€€€€€€€€€€€€€à q à1+r€€à e à1+rÐ Y/<*5 ЇÌà ï à€dòòtóóà U à=€€vòòtó󀀄€€vòòt+1€óó€€=€€fòòt€óó„€rvòòt€€€€€€€à ñ àà \ àóó(5)òò€óó€Ð ¹œ Ѐ€€€€€€€€€€€€à q àÓ33ÌÌÓÐ U8 ÐÔ2ÿÿÔÚ  Ú32Ú  Ú.Ô3  Ôà ï àIt€follows€that€economic€depreciation,€dòòtóó,€is€equal€to€fòòtóó,€the€value€ofÐ @# Ðthe€capital€services€provided€by€the€asset€during€period€t,€minus€the€term€rvòòtóó.Ð + ÐThis€is€one€point€on€which€there€is€often€confusion.€Depreciation€is€not€theÏsame€as€the€value€of€the€capital€services€contributed€to€production€during€theÏperiod€in€question.€It€is€always€less€than€the€value€of€the€capital€services.ÌÌÔ2ÿÿ ÔÚ  Ú33Ú  Ú.Ô3  Ôà ï àThe€term€rvòòtóó€measures€the€return€to€the€owner€of€the€asset.€It€alsoÐ  ¥  Ðequals€the€interest€(or€capital)€cost€of€holding€the€asset.€Thus,€the€value€ofÏthe€service€has€not€only€to€cover€depreciation€but€provide€a€return€to€theÏowner€of€the€asset€sufficient€to€cover€the€interest€cost.€This€is€exactly€whatÏthe€pure€rental€must€do€in€a€market€situation.ÌÌÔ2ÿÿ!ÔÚ  Ú34Ú  Ú.Ô3  Ôà ï àThe€advantage€of€(5)€is€that€it€shows€explicitly€the€relationship€betweenÐ D'  Ðdepreciation€and€the€value€of€the€service€flow.€In€particular,€it€can€be€usedÏto€deduce€how€depreciation€varies€over€the€life€of€the€asset€in€relation€to€theÏvariation€in€the€flow€of€services.€Just€as€depreciation€is€not€equal€to€theÏvalue€of€service€in€any€given€period,€so€the€rate€at€which€the€value€of€theÏasset€declines€(which€determines€depreciation)€is€not€the€same€as€the€rate€atÏwhich€the€efficiency€of€the€asset€declines.€There€is€probably€more€confusion€onÏthis€point€than€any€other.ÌÌÔ2ÿÿ"ÔÚ  Ú35Ú  Ú.Ô3  Ôà ï àIt€is€useful€to€clarify€how€depreciation€behaves€in€the€case€of€each€ofÐ ‡j Ðthe€four€possible€rates€of€decline€in€efficiency€considered€above.ÌÌà0 ï à„à0U ïÿ#ïÿ#àA€constant€flow€of€services€implies€that€depreciation€is€increasingÐ H+ Ðover€the€life€of€the€asset.€If€fòòtóó€in€(5)€is€constant€from€period€toÐ 3 Ðperiod,€depreciation€increases€from€period€to€period€as€the€valueÏof€the€asset,€vòòtóó,€and€hence€the€term€rvòòtóó€,€gradually€decreases€overÐ  ì Ðthe€life€of€the€asset.€(The€famous€"one-hoss€shay"€case€impliesÏincreasing€and€not€constant€depreciation.× ƒ! ×Ý ƒ ÿÿÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×)Ðß! U ÿ#U ÿ# ÐÌà0 ï à„à0U ïÿ#ïÿ#àLinearly€declining€flows€of€services€may€be€consistent€with€eitherÐ µ#˜" Ðincreasing€or€decreasing€depreciation.€To€obtain€constant,€i.e.Ïstraight„line€depreciation,€it€can€be€deduced€from€(5)€that€theÏservice€flows€must€decline€at€a€linear€rate€up€to€some€point€whenÏthe€asset€disintegrates:€the€services€stop€before€they€decline€toÏzero.Ð U ÿ#U ÿ# ÐÌÓ[‰1‰ï9 ‘ éA™ñI¡ùQ©!$Y&±( +a-¹/2i4Á69q;É=!@yB‰ 1‰‚fq eAæñ\¡‘XÓà0 ï à„à09 ïÿ#ïÿ#àIf€the€service€flows€decline€geometrically€at€a€constant€rate,€sayÐ "*%) Ðx%€per€period,€it€can€be€shown€that€the€value€of€the€asset€and€theÏvalue€of€depreciation€also€decline€at€x%€and€that€depreciation€inÏeach€period€is€also€equal€to€x%€of€the€value€of€the€asset€at€theÏbeginning€of€that€period.€This€is€very€convenient€mathematicallyÏbut€not€necessarily€always€very€realistic.€Notice€also€thatÐ ¹.œ). Ðdepreciation€is€not€equal€to€the€value€of€the€service€flow,€even€inÏthis€special€case.Ð 9 ÿ#9 ÿ# ÐÌà0 ï à„à09 ïÿ#ïÿ#àIf€the€services€decline€slowly€at€first€and€then€decline€at€anÐ ÞÁ Ðaccelerating€rate,€depreciation€may€sometimes€be€not€very€differentÏfrom€straight„line€but€the€exact€profile€of€depreciation€depends€onÏthe€exact€profile€of€the€services.Ð 9 ÿ#9 ÿ# ÐÌÔ2ÿÿ#ÔÚ  Ú36Ú  Ú.Ô3  Ôà ï àThe€main€conclusion€to€be€emphasised€at€this€point€is€that€the€rate€atÐ u X Ðwhich€the€value€of€an€asset€declines€over€its€lifetime€is€not€the€same€as€theÏrate€of€decline€in€efficiency€even€though€the€rate€of€decline€in€the€assetÏvalue€obviously€depends€on€the€rate€of€decline€of€efficiency.€As€just€noted,Ïhowever,€the€two€rates€can€coincide€in€the€special€case€in€which€the€rate€ofÏdecline€in€efficiency€is€geometric,€or€exponential.€This€coincidence,€whileÏconvenient€for€some€economic€purposes,€may€perhaps€have€led€to€some€confusionÏin€so€far€as€it€may€have€led€some€people€to€conclude€that€the€two€rates€areÏalways€the€same,€or€at€least€that€there€will€not€be€much€difference€betweenÏthem.€In€practice,€the€two€rates€may€diverge€substantially.€ÌÌò òAlternative€Capital€Stock€Measuresó óÐ Žq ÐÌÔ2ÿÿ$ÔÚ  Ú37Ú  Ú.Ô3  Ôà ï àAfter€the€issues€discussed€above€had€been€clarified,€the€conferenceÐ dG Ðrecognised€that€three€measures€of€capital€stock€could€be€distinguished€and€notÏjust€the€traditional€gross€and€net€capital€stock€measures€compiled€in€nationalÏaccounts.ÌÌò òGross€Capital€Stockó óÐ ûÞ ÐÌÔ2ÿÿ%ÔÚ  Ú38Ú  Ú.Ô3  Ôà ï àThis€is€conceptually€the€easiest€to€understand€and€may€be€a€necessaryÐ Ñ´ Ðfirst€step€in€the€calculation€of€the€other€two€capital€stock€measures.€TheÏgross€capital€stock€is€obtained€by€valuing€each€asset€still€in€use€at€theÏcurrent€price€of€a€new€asset€of€the€same€type,€irrespective€of€the€age€of€theÏasset.€All€assets€of€the€same€type€are€valued€equally€as€if€they€were€all€new,Ïno€matter€how€many€years€they€have€been€used.€The€gross€capital€stock€seems€toÏbe€the€least€useful€of€the€three€stock€measures€for€analytic€purposes.ÌÌÔ2ÿÿ&ÔÚ  Ú39Ú  Ú.Ô3  Ôà ï àHaving€valued€all€assets€at€their€estimated€current€prices€if€they€wereÐ )& !$ Ðnew,€there€are€two€ways€to€proceed,€one€of€which€leads€to€the€productiveÏcapital€stock€and€the€other€to€the€net€capital€stock.ÌÌò òÌÌProductive€Capital€Stockó óÐ «+Ž&* ÐÌÔ2ÿÿ'ÔÚ  Ú40Ú  Ú.Ô3  Ôà ï àSuppose€all€fixed€assets€still€in€use€in€production€are€valued€as€new€atÐ -d(, Ðtheir€current€prices€in€the€way€just€indicated.€(It€is€not€being€suggested€thatÏthis€is€easy,€of€course,€but€it€is€necessary€to€focus€on€conceptual€rather€thanÐ W/:*. Ðpractical€issues€here.)€If€we€are€interested€in€their€productive€potential,€asÏreflected€by€the€capital€services€that€they€provide€to€production,€the€value€ofÏeach€asset€should€be€written€down€as€it€gets€older€in€accordance€with€the€rateÏof€decline€in€its€efficiency.€For€example,€if€an€asset€provides€a€constant€flowÏof€services€until€it€disintegrates€its€productive€value€does€not€get€writtenÏdown€at€all€until€it€disintegrates.€If€the€services€decline€at€a€constant€rateÏthroughout€its€life,€then€halfway€through€its€life€its€productive€value€is€halfÏthat€of€a€new€asset.€(At€the€risk€of€some€repetition,€it€is€worth€noting€thatÏthis€case€is€not€the€straight„line€depreciation.)ÌÌÔ2ÿÿ(ÔÚ  Ú41Ú  Ú.Ô3  Ôà ï àThe€productive€capital€stock€is€obtained€by€summing€the€productive€valuesÐ K.  Ðof€all€the€assets€in€the€stock€calculated€in€the€way€just€described.€TheÏresulting€aggregate€is€appropriate€for€productivity€analysis.€Except€for€assetsÏof€theò ò€ó ó"one-hoss€shay"€type,€the€productive€value€of€an€asset€will€tend€toÐ  ï  Ðdecline€over€its€life€so€that€the€aggregate€value€of€the€productive€capitalÏstock€may€be€substantially€lower€than€that€of€the€gross€capital€stock.€This€isÏanother€point€on€which€there€may€be€some€confusion€as€the€gross€stock€may€beÏmistaken€for€the€productive€stock€by€some€analysts.€Of€course,€if€all€theÏassets€in€existence€were€one-hoss€shays,€the€value€of€the€productive€stockÏwould€be€equal€to€the€value€of€the€gross€stock,€but€most€assets€are€patentlyÏnot€one-hoss€shays€in€practice.ÌÌò òNet€Capital€Stockó óÐ O2 ÐÌÔ2ÿÿ)ÔÚ  Ú42Ú  Ú.Ô3  Ôà ï àThe€first€step,€as€before,€is€to€value€all€fixed€assets€still€in€use€inÐ % Ðproduction€as€if€new€at€their€current€prices.€The€value€of€each€asset€is€thenÏwritten€off€as€it€ages€according€to€the€rate€at€which€its€value€(notÏefficiency)€depreciates.€The€value€of€each€asset€is€reduced€by€the€accumulatedÏdepreciation€up€to€that€point€in€its€life.€This€is€equivalent€to€simply€valuingÏeach€asset€on€the€basis€of€the€present€value€of€its€remaining€service€flows,Ïbearing€in€mind€that€economic€depreciation€is€defined€as€the€decline€in€theÏpresent€value€between€the€beginning€and€end€of€each€accounting€period.€As€theÏvalue€of€an€asset€does€not€decline€at€the€same€rate€as€its€efficiency€declines,Ïthe€net€stock€is€not€equal€to€the€productive€stock.ÌÌÔ2ÿÿ*ÔÚ  Ú43Ú  Ú.Ô3  Ôà ï àIf€markets€function€efficiently,€the€net€stock€measures€the€currentÐ >%! # Ðmarket€values€of€the€assets€to€their€owners.€These€values€are€recorded€in€theirÏbalance€sheets.€The€net€stock€is€essentially€a€measure€of€wealth€rather€than€aÏmeasure€of€productive€capacity.ÌÌò òDistinction€between€the€three€measuresó óÐ Õ)¸$( ÐÌÔ2ÿÿ+ÔÚ  Ú44Ú  Ú.Ô3  Ôà ï àThe€conference€concluded€that€the€distinction€between€the€productiveÐ «+Ž&* Ðcapital€stock€and€the€gross€and€net€capital€stock€measures,€which€emerged€veryÏclearly€from€the€four€papers€and€discussions,€was€an€important€clarification.ÏAs€this€distinction€does€not€seem€to€be€widely€understood,€it€was€felt€that€itÏshould€be€widely€disseminated€for€the€benefit€of€both€compilers€and€users€ofÐ W/:*. Ðcapital€stock€data.€Another€point€on€which€further€work€may€be€needed€is€whatÏimplications€there€may€be€for€the€production€account€of€the€SNA,€a€pointÏtouched€upon€in€two€of€the€papers.Ì€Ìò òAdditional€Comments€on€Individual€Papersó óРɬ ÐÌÔ2ÿÿ,ÔÚ  Ú45Ú  Ú.Ô3  Ôà ï à€In€introducing€his€paper,€Concepts€of€Capital€for€Production€AccountsÐ Ÿ ‚ Ðand€for€Wealth€Accounts:€The€Implications€for€Statistical€Programs,€JackÏTriplett€(US€Bureau€of€Economic€Analysis)€referred€to€debate€on€the€measurementÏof€the€cost€of€capital,€particularly€the€interpretation€of€depreciation,€orÏcapital€consumption.€On€the€one€hand,€there€were€the€national€accounts€concernsÏwith€the€consumption€of€fixed€capital€in€national€accounts€and€on€the€otherÏhand€the€productivity€analysis€concerns€with€measuring€the€cost€of€capitalÏservices€in€productivity€analysis.€He€suggested€that€at€the€core€of€this€debateÏwas€the€issue€of€the€definition€of€'capital€used€up'.€He€explained€that€theÏvaluation€of€capital€used€up€in€production€was€equivalent€to€capitalÏconsumption,€but€that€this€did€not€equate€to€a€measure€of€the€flow€of€servicesÏfor€the€purposes€of€production€accounting.ÌÌÔ2ÿÿ-ÔÚ  Ú46Ú  Ú.Ô3  Ôà ï àEstimates€of€change€in€multifactor€productivity€could€be€derived€eitherÐ Žq Ðby€using€parametric€methods€or€non-parametric€methods.€The€latter,€based€onÏfairly€recent€developments€in€index€theory,€had€become€the€most€common.€TheÏnon-parametric€approach€was€to€form€an€index€of€the€outputs€and€an€index€of€theÏinputs€and€divide€the€latter€into€the€former.ÌÌÔ2ÿÿ.ÔÚ  Ú47Ú  Ú.Ô3  Ôà ï àAn€example€of€a€truck€company€managing€a€fleet€of€trucks€was€cited€toÐ ó Ðdemonstrate€the€concepts.€The€company€would€purchase€a€number€of€identicalÏtrucks€each€year€for€three€years.€Over€time,€the€trucks€would€become€lessÏefficient€(perhaps€they€would€haul€less€per€hour€of€use);€he€referred€to€thisÏconcept€as€'output€decay'.€He€defined€'input€decay'€as€the€increasedÏmaintenance€that€the€vehicles€would€require€as€they€aged.€This€loss€ofÏefficiency€over€time€(input€and€output€decay€combined€with€retirements€from€theÏfleet)€was€termed€'deterioration'.ÌÌÔ2ÿÿ/ÔÚ  Ú48Ú  Ú.Ô3  Ôà ï àIt€was€pointed€out€that€there€was€a€compatible€set€of€needs€for€bothÐ S$6" Ðproduction€and€wealth€accounting.€As€a€result,€it€was€important€to€measure€bothÏthe€decline€in€efficiency€and€the€decline€in€value€of€capital€stock€in€order€toÏenable€full€accounting€for€production.ÌÌÔ2ÿÿ0ÔÚ  Ú49Ú  Ú.Ô3  Ôà ï àConference€was€reminded€that€although€there€was€wide€recognition€of€theÐ ê(Í#' Ðneed€to€construct€reliable€estimates€of€wealth€stock€and€productive€stock,Ïlittle€'hard'€data€were€currently€available€of€either€actual€stock€levels€orÏthe€service€lives€and€depreciation€rates€(for€wealth€stock)€or€deteriorationÏrates€(for€productive€stock)€required€for€the€PIM.€It€was€suggested€that€thisÏunsatisfactory€situation€could€only€be€rectified€by€a€determined€effort€toÏcollect€reliable€data.ÌÐ W/:*. ÐÔ2ÿÿ1ÔÚ  Ú50Ú  Ú.Ô3  Ôà ï àIn€discussing€the€deterioration€of€productive€capital€stock,€aÐ  Ðdistinction€was€made€between€"output€decay",€where€a€capital€asset€no€longerÏperformed€its€tasks€as€efficiently€in€quality€terms€as€it€did€when€new,€andÏ"input€decay",€where€more€inputs€were€needed€in€the€form€of€maintenance€etc,€toÏmaintain€the€useful€life€of€the€asset.€It€was€pointed€out€that€if€the€flow€ofÏservices€from€the€capital€stock€declined€geometrically€over€time,€thenÏconsumption€of€fixed€capital€(i.e.€depreciation)€and€both€the€wealth€andÏproductive€capital€stocks€declined€at€the€same€geometric€rate.€It€was€suggestedÏthat€if€there€was€no€information€to€the€contrary,€geometric€decline€would€be€anÏattractive€option€as€compilers€would€then€only€need€to€produce€one€set€ofÏcapital€stock€statistics.ÌÌÔ2ÿÿ2ÔÚ  Ú51Ú  Ú.Ô3  Ôà ï àIn€presenting€his€paper,€Depreciation€in€the€National€Accounts,€DerekÐ !  ÐBlades€(OECD)€explained€that€it€attempted€to€resolve€whether€theÏ"straight-line"€or€the€"geometric"€method€was€the€most€appropriate€forÏmeasuring€depreciation.€He€strongly€advocated€use€of€the€"straight-line"Ïmethod,€using€several€tables€and€figures€from€his€paper€to€support€hisÏargument.€He€concluded€that,€on€the€basis€of€his€analysis€of€the€comparisonÏbetween€the€two€methods,€it€was€unlikely€that€the€"geometric"€method€would€giveÏestimates€of€the€consumption€of€fixed€capital€that€were€superior€to€thoseÏderived€by€the€"straight-line"€method.ÌÌÔ2ÿÿ3ÔÚ  Ú52Ú  Ú.Ô3  Ôà ï àA€number€of€conference€participants€were€not€convinced€that€thisÐ O2 Ðconclusion€could€be€clearly€demonstrated€to€be€valid€and€it€was€pointed€outÏthat€other€statistical€analysis,€using€Box-Cox€transformations,€had€concludedÏthat€neither€of€the€methods€were€entirely€appropriate.€However,€of€the€two,€theÏ"geometric"€method€had€proved€to€be€better.€It€was€suggested€that€thisÏstatistical€analysis€should€be€re-examined.ÌÌÔ2ÿÿ4ÔÚ  Ú53Ú  Ú.Ô3  Ôà ï àThe€discussion€then€centred€on€the€merits€of€gross€capital€stock€measuresÐ ¼Ÿ Ðas€against€those€of€net€capital€stock€and€there€was€general€agreement€thatÏgross€capital€stock€estimates€had€limited€value€in€themselves;€their€mainÏpurpose€was€to€provide€a€basis€for€the€calculation€of€consumption€of€fixedÏcapital,€of€net€capital€stock€and€of€the€"productive€stock"€which€was€derivedÏfrom€the€gross€capital€stock€through€the€use€of€some€kind€of€age-efficiencyÏfunction.€However,€it€was€also€agreed€that€many€apparently€sophisticatedÏanalysts€misinterpreted€the€respective€merits€of€these€measures€and€thatÏclarification€of€the€issues€involved€would€be€beneficial€for€users.ÌÌÔ2ÿÿ5ÔÚ  Ú54Ú  Ú.Ô3  Ôà ï àIn€presenting€his€paper,€From€Pleioscene€to€Plasticine€-€The€Age€ofÐ ê(Í#' ÐCapital€Measurement,€Michael€Ward€(World€Bank)€addressed€the€fundamentalÏreasons€why€it€was€necessary€to€measure€capital€stock.€Capital€stock€estimatesÏwere€needed€for:€€ÌÓ9‰1‰ï ‘ —X‰1‰ï9 ˜X9ÓÓ<‰1‰ï: ‘ —X‰1‰ï ‘ —X<Ó€€€€€„€€€factor€substitution;Ì€€€€€„€€€€total€factor€productivity€analysis,€i.e.€for€measuring€changes€in€€€€€Ï€€€à ï àà : àthe€ratio€of€output€to€relative€contributions€of€factor€inputs;Ð l.O)- Ѐ€€€€„€€€€multifactor€productivity€analysis,€for€identifying€the€'quantum'€€€€€€Ð W/:*. Ѐ€€€à ï àà : à(exogenous)€and€'quality'€(embodied€or€endogenous)€components€of€€€€€€Ð  Ѐ€€€à ï àà : àfactor€contributions€to€output;Ð ë Ѐ€€€€„€€€€gross€output€and€gross€capital€estimates,€both€economy€wide€and€€€€€€€Ï€€€à ï àà : àby€sector€and€industry€related€to€employment;€andÐ ÞÁ Ѐ€€€€„à : àIncremental€Capital€:€Output€(ICOR)€measures,€for€growth€analysis€€€€€Ð ɬ Ѐ€€€€à ï àà : àmodels€and€simple€GDP€projections.Ð ´ — ÐÓ@‰1‰ï ‘ —X‰1‰ï: ‘ —XŸ@ÓÌÔ2ÿÿ6ÔÚ  Ú55Ú  Ú.Ô3  Ôà ï àHe€also€described€those€aspects€of€output€and€productivity€change€whichÐ Š m Ðwere€of€major€interest.€These€included:ÌÓ<‰1‰ï: ‘ —X‰1‰ï ‘ —X<Ó€€€€€„€€€€technical€efficiency€change,€by€type€of€asset;ÌÓ@‰1‰ï ‘ —X‰1‰ï: ‘ —XŒ¤@ÓÓ<‰1‰ïi ‘ —X‰1‰ï ‘ —X<Ó€€€€€„€€€€allocative€(factor€shares)€efficiency€change,€to€identify€the€€€€€€€€€Ïà ï àà i àsignificance€of€higher€quality€in€both€labour€and€capital€inputs;Ì€€€€€„€€€€economic€efficiency€(costs);€andÌ€€€€€„€€€€scale€economies€related€to€output€(and€input)€levels.ÌÌÔ2ÿÿ7ÔÚ  Ú56Ú  Ú.Ô3  Ôà ï àAfter€reminding€conference€of€the€distinction€between€the€concepts€ofÐ âÅ  Ðstocks€and€flows,€various€methods€of€measuring€capital€input€flows€wereÏdiscussed.€One€was€the€development€of€annualised€capital€values,€approximatedÏby€depreciation;€another€was€the€use€of€energy€consumption€as€a€proxy.€However,Ïwhile€the€latter€had€some€attraction€in€terms€of€data€availability,€it€ignoredÏenvironmental€differences€(e.g.€climate)€and€was€really€only€useful€forÏmanufacturing€and€other€power-using€activities;€not€for€infrastructure€likeÏroads€and€bridges.€Performance€indicators,€such€as€vehicle€carrying€capacityÏfor€roads€and€occupancy€for€buildings,€to€identify€the€real€level€of€servicesÏprovided,€could€be€developed€to€accommodate€these€types€of€asset.ÌÌÔ2ÿÿ8ÔÚ  Ú57Ú  Ú.Ô3  Ôà ï àIt€was€further€pointed€out€that,€in€pursuing€conventional€approaches€toÐ ûÞ ÐTotal€Factor€Productivity€(TFP)/Multi-factor€Productivity€(MFP)€measurement,Ïlabour€and€capital€were€treated€similarly€but€that,€in€fact,€they€were€quiteÏdifferent€variables;€the€first€was€clearly€a€real€quantity€measure€reflectingÏannual€levels€of€labour€but€the€latter€was€essentially€a€value€conceptÏreflecting€cumulative€capital€outlays.€In€this€sense,€using€a€rate€of€returnÏvector€(for€different€components€of€capital)€introduced€an€undesirable€elementÏof€"circularity".ÌÌÔ2ÿÿ9ÔÚ  Ú58Ú  Ú.Ô3  Ôà ï àIn€discussing€the€issue€of€leasing€of€assets€and€its€treatment€in€theÐ >%! # ÐNational€Accounts,€it€was€pointed€out€that€owners€(lessors)€provided€a€service,Ïthe€price€for€which€was€a€form€of€rental€which€was€treated€in€the€NationalÏAccounts€as€a€purchase€of€services€in€intermediate€consumption.€Hence,€theÏgross€value€added€of€the€user€(lessee)€was€less€than€it€would€be€if€the€assetÏwere€owned€by€the€user.€In€the€"real€world",€with€increasing€functionalÏspecialisation,€leasing€arrangements€were€becoming€more€common.€Some€repair€andÏmaintenance€costs€showed€up€in€intermediate€consumption€but€others€did€not.€ItÏcould€be€argued€that€since€the€asset€owners€were€in€the€business€of€providingÏthe€asset€services€themselves€these€costs€should€be€attributed€to€them.€ThereÏwas€a€market€element€in€leasing;€the€price€of€rental€was€not€simply€the€priceÏof€capital€services€-€it€also€covered€interest€charges,€maintenance€expensesÐ W/:*. Ðand€profit.€On€the€other€hand,€rented€or€leased€equipment€might€be€used€moreÏintensively€and€thus€effectively€"purchased"€by€the€lessee€more€cheaply€thanÏwould€be€the€case€if€the€ownership€option€were€adopted.ÌÌÔ2ÿÿ:ÔÚ  Ú59Ú  Ú.Ô3  Ôà ï àThe€Chairman€said€that€the€Conference€had€taken€a€big€step€forward€inРɬ Ðaddressing€several€interdependent€complex€conceptual€issues.€Further€openÏdiscussion€was€needed€to€draw€the€related€conceptual€issues€into€a€coherentÏframework.€This€would€ultimately€lead€to€an€improvement€in€the€interpretationÏof€the€measures€used€and€provide€a€firmer€basis€for€the€compilation€of€capitalÏstock€estimates.Ì€Ìò òITEM€5:€PIM€-€PRACTICE€AND€PROBLEMSó óÐ 6  ÐÌò òMortality€and€survival€functionsó óÐ  ï  ÐÌÔ2ÿÿ;ÔÚ  Ú60Ú  Ú.Ô3  Ô€€Derek€Blades€(OECD)€presented€the€paper,€Mortality€and€Survival€Functions,Ïoriginally€published€as€Chapter€3€of€'Methods€Used€by€OECD€Countries€to€MeasureÏStocks€of€Fixed€Capital'.€He€described€four€main€types€of€mortality€andÏsurvival€functions€-€linear,€delayed€linear,€bell€shaped€and€simultaneous€exit.ÌÌÔ2ÿÿ<ÔÚ  Ú61Ú  Ú.Ô3  Ôà ï àThe€simplest€survival€function€was€the€simultaneous€exit,€(i.e.€where€allÐ y\ Ðassets€of€a€given€age€were€removed€from€capital€stock€at€the€end€of€the€averageÏasset€service€life).€Few€countries€currently€used€this€method.ÌÌÔ2ÿÿ=ÔÚ  Ú62Ú  Ú.Ô3  Ôà ï àThe€linear€survival€function€represented€a€constant€removal€of€assetsÐ % Ðfrom€the€capital€stock€starting€immediately€after€installation.€Delayed€linearÏsurvival€differed€in€that€removal€was€delayed,€(e.g.€commencing€five€yearsÏfollowing€installation).ÌÌÔ2ÿÿ>ÔÚ  Ú63Ú  Ú.Ô3  Ôà ï àThe€final€survival€function€was€the€bell€shaped€function€which€assumedÐ ¼Ÿ Ðthat€asset€retirements€occurred€at€a€slow€rate€initially€and€gradually€speededÏup,€reaching€a€peak€at€the€mean€service€life.€The€retirement€rate€then€slowedÏgradually.€The€Winfrey€S3€curve€was€an€example€of€a€bell€shaped€function.ÌÌÔ2ÿÿ?ÔÚ  Ú64Ú  Ú.Ô3  Ôà ï àDuring€discussion€it€was€suggested€that€there€was€a€fifth€survivalÐ S$6" Ðfunction,€geometric.€However,€it€was€pointed€out€that€while€this€function€hadÏoccasionally€been€used€on€an€experimental€basis,€it€was€not€currently€used€byÏany€OECD€country€for€its€capital€stock€estimates.€It€was€suggested€that€useÏcould€be€made€of€installation€dates€collected€in€surveys€in€estimating€both€theÏtype€of€survival€distribution€and€the€asset€service€life.€It€was€also€pointedÏout€that€if€the€PIM€estimates€could€be€matched€with€data€directly€collected,Ïexact€service€lives€could€be€determined.ÌÌÔ2ÿÿ@ÔÚ  Ú65Ú  Ú.Ô3  Ôà ï àConference€was€advised€that€the€OECD€was€encouraging€countries€to€improveÐ –,y'+ Ðestimates€of€asset€service€lives.€Either€the€bell€shaped€or€delayed€linearÏsurvival€functions€appeared€to€be€the€most€plausible€assumptions€to€be€used.€AsÏfinal€capital€stock€estimates€compiled€using€PIM€were€relatively€insensitive€toÐ W/:*. Ðeither€of€these€functions,€there€was€little€to€be€gained€from€conductingÏfurther€empirical€research€in€this€area.€One€option€to€improve€asset€serviceÏlife€estimates€would€be€to€collect€more€information€from€producers€of€assetsÏthan€was€currently€the€case,€rather€than€concentrating€entirely€on€obtainingÏdata€from€owners/users€of€assets.ÌÌÔ2ÿÿAÔÚ  Ú66Ú  Ú.Ô3  Ôà ï àFinally,€the€impact€of€increased€utilisation€of€assets€on€asset€serviceÐ Ÿ ‚ Ðlives€was€discussed.€An€example€was€given€of€implementation€of€twenty-four€hourÏshifts.€The€conference€agreed€that€this€was€an€important€issue€on€which€littleÏempirical€research€had€been€undertaken€to€date,€and€that€more€could€be€done€onÏthis€topic.ÌÌò òPractices€and€problems€with€the€PIM€method€in€the€United€Kingdomó óÐ !  ÐÌÔ2ÿÿBÔÚ  Ú67Ú  Ú.Ô3  Ôà ï àIn€his€presentation€of€the€paper,€The€Use€of€the€Perpetual€InventoryÐ ÷Ú  ÐMethod€in€the€UK;€Practices€and€Problems,€Graham€Jenkinson€(UK€Office€forÏNational€Statistics)€concentrated€on€key€developments€shortly€to€be€made€in€theÏUK's€use€of€PIM,€following€recent€investigations€into€a€number€of€apparentÏproblems€associated€with€its€use.€In€particular€it€was€felt€that€the€reasonsÏfor€apparently€falling€asset€service€lives€were€being€misunderstood.€ArbitraryÏcuts,€of€25%€to€asset€service€lives€(except€for€motor€vehicles)€had€been€madeÏin€the€mid€1970's€(phased€in€over€20€years)€in€a€crude€attempt€to€address€theÏproblem.€This€had€since€been€seen€as€an€over€simple€procedure€attempting€toÏaccount€for€a€number€of€changes€to€the€structure€of€capital€that€were€betterÏtaken€account€of€in€other€ways.€Also€the€phased€reduction€in€asset€lives€hadÏthe€effect€of€depressing€the€growth€in€capital€stock.ÌÌÔ2ÿÿCÔÚ  Ú68Ú  Ú.Ô3  Ôà ï àThe€investigations€indicated€a€need€to€allow€for€special€treatment€ofÐ æÉ Ðassets€held€by€insolvent€businesses,€an€increasing€phenomenon€in€recent€years.ÏAs€a€result€it€would€be€assumed€in€future€that,€upon€liquidation,€50%€of€plantÏand€equipment€in€manufacturing€industries€would€be€scrapped,€with€the€remainingÏ50%€sold€on€the€second€hand€market.€For€non-manufacturing€industries€25%€wouldÏbe€scrapped.€All€motor€vehicles€and€buildings€would€be€assumed€to€be€sold.€TheÏresearch€also€indicated€a€need€to€create€two€new€asset€categories€to€cope€withÏthe€shorter€asset€lives€of€computers€(4€years€in€future)€and€computerÏcontrolled€equipment.ÌÌÔ2ÿÿDÔÚ  Ú69Ú  Ú.Ô3  Ôà ï àIt€was€envisaged€that€adoption€of€these€measures€would€initially€reduceÐ '÷!% Ðoverall€capital€stock€estimates€by€about€4%€(up€to€20%€for€some€manufacturingÏindustries)€but€that€the€extent€of€this€reduction€would€become€more€significantÏas€goods€in€the€new€asset€types€reached€the€end€of€their€service€lives.ÌÌÔ2ÿÿEÔÚ  Ú70Ú  Ú.Ô3  Ôà ï àWhile€these€improvements€had€been€introduced€in€response€to€criticisms€ofÐ «+Ž&* Ðthe€effectiveness€of€PIM€they€were€not€seen€as€a€permanent€solution.€PIMÏdepended€on€assumptions€which,€to€be€valid,€needed€to€be€responsive€to€theÏoperating€environment.€The€UK€was€considering€selective€direct€collection€ofÏdata€to€support€PIM.Ð W/:*. ЇÔ2ÿÿFÔÚ  Ú71Ú  Ú.Ô3  Ôà ï àConference€participants€discussed€other€reasons€for€premature€retirement,Ð  Ðapart€from€insolvency.€However,€it€appeared€that€lack€of€data€was€a€problem€inÏadequately€incorporating€them€in€any€model.€The€adjustments€based€on€insolvencyÏrates€could€be€considered€to€be€a€proxy€for€all€premature€scrapping€caused€byÏthe€economic€cycle.ÌÌÔ2ÿÿGÔÚ  Ú72Ú  Ú.Ô3  Ôà ï àIn€considering€the€distribution€of€prematurely€retired€assets€theÐ Ÿ ‚ Ðquestion€of€the€adequacy€of€the€current€treatment€of€installation€costs€wasÏraised.€This€led€to€a€general€discussion€of€the€treatment€of€transfer€costs,Ïsuch€as€real€estate€transfer€expenses,€which€did€not€enhance€the€value€of€anÏasset€(e.g.€agents'€fees,€taxes).€Some€reservations€were€expressed€about€theirÏcurrent€treatment€(as€gross€fixed€capital€formation)€in€the€SNA€as€it€wasÏdifficult€to€view€such€expenses€as€assets€in€the€balance€sheet.ÌÌÔ2ÿÿHÔÚ  Ú73Ú  Ú.Ô3  Ôà ï àIt€was€also€pointed€out€that€transfers€from€the€business€to€the€householdÐ ÷Ú  Ðsector€were€frequently€involved€in€the€case€of€disposals€of€assets€fromÏcompanies€liquidated.€Some€doubt€was€expressed€about€the€adequacy€of€theÏtreatment€of€such€inter-sectoral€transfers.ÌÌò òComputer€prices€adjusted€for€quality€changeó óÐ Žq ÐÌÔ2ÿÿIÔÚ  Ú74Ú  Ú.Ô3  Ôà ï àIn€presenting€his€paper,€Computer€Prices:€How€Good€is€the€QualityÐ dG ÐAdjustment?,€Paul€McCarthy€(OECD)€said€that€its€purpose€was€to€stimulate€theÏinterest€of€those€with€appropriate€experience€to€empirically€investigate€theÏvariety€of€issues€introduced.€Compiling€a€reliable€price€index€for€computersÏhad€for€many€years€been€a€very€difficult€task€because€of€large€falls€in€theÏprices€of€computers€in€conjunction€with€large€improvements€in€their€quality.ÏThe€traditional€"matched€model"€method€of€adjusting€price€indexes€for€qualityÏchange€involved€pricing€the€old€and€new€models€in€the€same€period€and€assumingÏthat€any€difference€in€price€reflected€different€quality€levels.€For€computersÏthis€method€was€inappropriate€because,€typically,€new€models€were€bothÏsignificantly€cheaper€and€of€higher€quality.ÌÌÔ2ÿÿJÔÚ  Ú75Ú  Ú.Ô3  Ôà ï àFor€motor€vehicles,€where€a€similar€situation€existed€but€to€a€lesserÐ h#K! Ðdegree,€adjustments€could€be€made€on€the€basis€of€price€data€from€manufacturersÏon€the€quality€effects€of€change€between€models,€but€this€practice€was€onlyÏacceptable€where€quality€changes€were€not€large€over€time.€A€different€methodÏwas€needed€for€computers.ÌÌÔ2ÿÿKÔÚ  Ú76Ú  Ú.Ô3  Ôà ï àIn€the€mid€1980's€BEA€and€IBM€produced€hedonic€price€indexes€forÐ ê(Í#' Ðcomputers,€based€on€their€major€characteristics€(such€as€speed,€memory€and€hardÏdisk€capacity).€Use€of€these€indexes€revealed€rapid€and€significant€price€fallsÏ(halving€within€6€years).€These€indexes€(adjusted€for€changes€in€the€$A/$USÏexchange€rate)€were€introduced€into€the€Australian€National€Accounts€(ANA)€inÏ1988€as€the€deflators€used€to€obtain€constant€price€estimates€of€computers.ÏWhile€they€did€not€necessarily€ensure€absolute€accuracy,€the€results€from€thisÏprocess€were€considered€to€be€much€better€than€previously.€The€effect€on€theÐ W/:*. ÐANA€had€been€significant.€However,€in€more€recent€years€concerns€had€arisenÏwithin€the€ABS€about€the€way€in€which€computers€had€driven€investment€growthÏand€the€question€of€the€need€for€further€refinement€had€been€raised.ÌÌÔ2ÿÿLÔÚ  Ú77Ú  Ú.Ô3  Ôà ï àGiven€that€software€prices€were€not€explicitly€taken€into€account€in€theРɬ Ðhedonic€approach€to€pricing€computers,€the€implication€is€that€software€pricesÏand€quality€were€assumed€to€have€changed€in€line€with€those€for€hardware.€InÏthe€1970s€and€1980s,€when€software€development€occurred€rapidly,€this€may€haveÏbeen€a€reasonable€assumption€but€it€was€felt€that€this€was€no€longer€the€caseÏbecause€software€developments€during€the€past€6€years€had€probably€been€moreÏmarginal€in€terms€of€quality€improvement.€Indeed,€some€of€the€changes€had€theÏeffect€of€occupying€much€of€the€increased€capacity€of€the€hardware€(e.g.€speed,Ïmemory).€Another€point€to€consider€was€the€extent€to€which€software€upgradesÏwere€being€used€as€a€marketing€strategy€to€stimulate€demand.€The€implication€ofÏthis€was€that€the€quality-adjusted€falls€in€computer€prices€had€overstated€theÏreal€situation€for€the€hardware/software€package€(leading€to€overstatement€inÏthe€Capital€Stock€estimates).€However,€the€impact€of€completely€new€softwareÏ(as€distinct€from€upgrades)€could€well€be€more€like€that€of€hardware.€ThisÏwould€require€empirical€investigation.ÌÌÔ2ÿÿMÔÚ  Ú78Ú  Ú.Ô3  Ôà ï àThe€impact€of€computer€quality€adjustment€would€differ€between€countriesÐ y\ Ðdepending€on€the€extent€to€which€they€were€producers€or€importers€of€computerÏequipment.€The€impact€in€Australia€(described€in€paras€22-29€of€the€McCarthyÏpaper)€was€non-trivial,€particularly€since€1990€when€most€divergence€betweenÏhardware€and€software€prices€was€likely€to€have€occurred.ÌÌÔ2ÿÿNÔÚ  Ú79Ú  Ú.Ô3  Ôà ï àSeveral€issues€were€raised€in€the€discussion€of€this€topic,€including€theÐ ûÞ Ðextent€to€which€the€consumption€by€complex€software€of€a€large€proportion€ofÏthe€increased€growth€of€hardware€capacity€was€perceived€to€be€an€overallÏquality€improvement€(e.g.€in€terms€of€user-friendliness)€or€of€little€(orÏnegative)€benefit€(e.g.€slower€response€times)€and€the€reasons€why€manyÏpurchasers€chose€to€upgrade€with€new€equipment€(often€with€features€they€wouldÏnot€use),€before€they€needed€to€(e.g.€to€guard€against€premature€obsolescenceÏand€to€maintain€contact€with€other€purchasers€of€the€latest€models).ÌÌÔ2ÿÿOÔÚ  Ú80Ú  Ú.Ô3  Ôà ï àIt€was€suggested€that€future€investigations€would€need€to€look€beyondÐ >%! # Ðcomputers€and€address€other€features€of€rapidly€changing€technology€such€asÏScanners,€World€Wide€Web,€Internet,€and€a€large€array€of€telecommunicationsÏequipment.€Another€suggestion€was€that€the€total€cost€of€computation€(includingÏall€forms€of€associated€hardware,€software€communications€features€and€people)Ïshould€be€examined.€It€was€also€suggested€that€there€could€well€be€merit€inÏsubjecting€other€kinds€of€capital€undergoing€rapid€technological€change€(e.g.Ïspecialised€mining€equipment)€to€similar€intensive€scrutiny.ÌÌÔ2ÿÿPÔÚ  Ú81Ú  Ú.Ô3  Ôà ï àFurther,€in€recognition€of€the€extension€of€the€SNA€capital€boundary€toÐ -d(, Ðinclude€computer€software,€it€was€noted€that€software€price€indexes€would€needÏto€be€developed€and€applied€by€countries€in€the€course€of€implementing€the€1993Ð W/:*. ÐSNA.Ì€Ìò òITEM€6:€ALTERNATIVE€APPROACHESó óÐ óÖ ÐÌò òThe€Netherlands'€direct€collection€experienceó óРɬ ÐÌÔ2ÿÿQÔÚ  Ú82Ú  Ú.Ô3  Ôà ï àIn€his€presentation,€which€referred€to€three€papers€prepared€byÐ Ÿ ‚ ÐStatistics€Netherlands€(How€to€Measure€Tangible€Capital€Stock;€Disinvestments;Ïand€Statistics€on€Tangible€Capital€Stock€-€Direct€Observations€at€StatisticsÏNetherlands),€Bert€Verlinden€described€the€direct€collection€methods€currentlyÏused€in€the€Netherlands€to€obtain€data€on€Capital€Stock€in€the€manufacturingÏindustry.€Three€related€surveys€of€enterprises€were€involved;€the€annualÏInvestment€and€Disinvestment€Surveys€and€the€quinquennial€(from€the€respondentsÏviewpoint)€Survey€on€Tangible€Capital€Stock.€The€first€two€of€these€were€mailÏsurveys,€but€interviewers€(using€lap-top€computers)€were€needed€for€the€third.ÏAbout€1,500€enterprises€with€100€or€more€employees€were€interviewed€once€everyÏfive€years€to€obtain€data€not€only€on€capital€stock,€but€also€on€investment€andÏdisposals€in€the€preceding€year.€Between€the€five€yearly€interviews€the€dataÏwere€updated€annually€using€the€benchmark€capital€stock€data€and€adding€theÏinvestments€data€and€subtracting€the€disposals.€Employment€size€was€used€as€aÏbasis€for€raising€the€data€on€non-responding€units€and€for€smaller€enterprisesÏnot€included€in€the€surveys.ÌÌÔ2ÿÿRÔÚ  Ú83Ú  Ú.Ô3  Ôà ï àOne€feature€of€the€Investment€Survey€was€that,€in€addition€to€data€onÐ : Ðpurchases€of€capital€goods,€it€collected€information€on€the€acquisition€ofÏcapital€through€leasing€and€rental€arrangements€(financial€leases€were€treatedÏthe€same€way€as€ownership).€In€the€Disinvestment€Survey€respondents€had€toÏreport€the€purchase€price€and€year€of€purchase€(including€for€goods€obtainedÏsecond-hand)€for€each€asset€disposal.ÌÌÔ2ÿÿSÔÚ  Ú84Ú  Ú.Ô3  Ôà ï àIn€the€Survey€on€Tangible€Capital€Stock,€data€were€obtained€for€eightÐ § Š Ðcategories€of€capital.€Adjustments€were€made€for€inter-industry€transfers.ÏThree€full-time€interviewers€were€needed€for€the€survey,€involving€visits€toÏabout€300€enterprises€each€year.€The€total€annual€cost€of€this€survey€was€aboutÏ650,000€Dutch€guilders.ÌÌÔ2ÿÿTÔÚ  Ú85Ú  Ú.Ô3  Ôà ï àA€case€study€of€the€paper€and€paper€board€industry€compared€data€derivedÐ )& !$ Ðby€updating€the€previous€benchmark€capital€stock,€using€investment€andÏdisposals€data,€with€those€obtained€by€direct€collection.€Although,€in€the€caseÏstudy,€there€was€little€difference€in€the€results€obtained€by€the€two€methods,Ïit€was€pointed€out€that€this€could€be€a€coincidence.€To€prove€the€reliabilityÏof€the€method€of€actualising€data,€more€analysis€was€needed€in€the€coming€yearsÏwhen€more€benchmark€data€became€available.ÌÌÔ2ÿÿUÔÚ  Ú86Ú  Ú.Ô3  Ôà ï àDuring€the€discussion€which€followed,€the€question€was€raised€as€toÐ -d(, Ðwhether€the€PIM€methodology€used€in€other€countries€(i.e.€investment€flows,Ïestimated€service€lives€etc)€could€be€simulated€on€the€Netherlands'€data€andÐ W/:*. Ðcompared€with€the€1996€benchmark€data.€It€was€pointed€out€that€if€this€could€beÏdone€analysts€would€be€in€a€position€to€say€which€improvements€contributed,€andÏto€what€extent,€to€the€improved€accuracy€of€Netherlands€data€compared€withÏearlier€years€(e.g.€the€relative€contribution€to€improved€accuracy€of€theÏDisinvestment€Survey).€Such€a€study€would€provide€useful€guidance€to€otherÏcountries€on€what€approaches€to€adopt€to€improve€their€own€measures.ÌÌò òSimplifying€calculations€in€Swedenó óÐ Š m ÐÌÔ2ÿÿVÔÚ  Ú87Ú  Ú.Ô3  Ôà ï àMichael€Wolf€presented€the€Statistics€Sweden€paper,€Suggestions€forÐ ` C  ÐSimplified€Fixed€Capital€Stock€Calculations€at€Statistics€Sweden.€He€explainedÏthat€with€the€implementation€of€SNA93,€more€focus€was€now€being€given€toÏmeasures€of€the€wealth€value€of€capital€stock€and€that€the€current€PIM€used€byÏStatistics€Sweden€did€not€adequately€measure€the€level€of€fixed€capital€stock.ÏUsers€in€Sweden€were€demanding€measures€of€both€net€and€gross€stock.€ThisÏimplied€more€effort€on€improving€age-price€profiles€and€asset€service€lifeÏestimates.ÌÌÔ2ÿÿWÔÚ  Ú88Ú  Ú.Ô3  Ôà ï àOne€of€the€main€problems€not€addressed€by€the€current€framework€wasÐ £† Ðcapital€transfers€between€sectors€and€activities.€A€possible€solution,€if€onlyÏthe€value€of€net€stock€were€known,€was€to€estimate€the€value€of€gross€stock€forÏthe€remaining€life€span€of€the€stock.€Another€option€would€be€to€construct€theÏgross€and€net€stock€to€be€added€and€withdrawn€from€the€sector€or€activity.€BothÏoptions€would€require€reclassifications€for€each€year€of€the€remaining€lifeÏspan.ÌÌÔ2ÿÿXÔÚ  Ú89Ú  Ú.Ô3  Ôà ï àMichael€Wolf€detailed€several€methods€of€calculating€capital€stock.€HeÐ ûÞ Ðexplained€their€advantages€and€disadvantages,€emphasising€that€only€one€methodÏcould€be€used€as€swapping€between€methods€was€not€feasible.€He€mentioned€theÏimportance€of€incorporating€changes€in€capital.€For€this€reason€discard€ratesÏand€average€growth€rates€were€important€to€the€formula.€The€impact€of€growthÏrates€in€relating€the€value€of€new€investment€to€the€value€of€discarded€stockÏcaused€both€some€underestimation€and€some€overestimation.ÌÌÔ2ÿÿYÔÚ  Ú90Ú  Ú.Ô3  Ôà ï àHe€urged€caution€in€relating€gross€and€net€stock€to€each€other,€as€heÐ S$6" Ðbelieved€that€they€were€not€strongly€related€and€any€view€that€they€were€shouldÏnot€be€encouraged.€The€difference€between€gross€and€net€stock€was€in€factÏcapital€consumption.ÌÌÔ2ÿÿZÔÚ  Ú91Ú  Ú.Ô3  Ôà ï àThe€impact€of€both€depreciation€and€pricing€on€the€calculations€made€atÐ ê(Í#' ÐStatistics€Sweden€was€raised,€with€the€suggestion€that€these€issues€needed€toÏbe€pursued€further€and€not€only€in€relation€to€this€approach.€A€view€was€alsoÏexpressed€that€many€users€did€not€understand€the€concepts€of€gross€and€netÏstock,€and€were€therefore€using€gross€stock€estimates€inappropriately.€It€wasÏdifficult€to€think€of€legitimate€uses€of€gross€stock€alone€but€it€was€notedÏthat€gross€stock€was€required€to€calculate€consumption€of€fixed€capital€asÏrequired€by€the€SNA.Ð W/:*. Їò òThe€United€Kingdom's€direct€collection€experienceó óÐ  ÐÌÔ2ÿÿ[ÔÚ  Ú92Ú  Ú.Ô3  Ôà ï àIn€introducing€the€paper,€An€Account€of€the€UK's€Research€into€DirectÐ óÖ ÐCollection€as€an€Alternative€to€the€Perpetual€Inventory€Method,€GrahamÏJenkinson€(UK€Office€for€National€Statistics)€mentioned€that€the€rationale€forÏseriously€investigating€this€approach€was€the€UK€experience€with€PIM.€Since€itsÏintroduction€in€the€1950s,€major€amendments€to€it€had€been€required€at€about€10Ïyearly€intervals.€A€pattern€of€periodic€failure€to€meet€user€expectationsÏappeared€to€have€developed.ÌÌÔ2ÿÿ\ÔÚ  Ú93Ú  Ú.Ô3  Ôà ï àIt€was€therefore€decided€to€test€the€feasibility€of€direct€collectionÐ K.  Ðfrom€companies'€asset€registers€which,€in€the€UK,€were€generally€kept€as€aÏseparate€part€of€business€accounting€systems.€Over€a€period€of€6€months,€212Ïvisits€were€made€to€enterprises€of€various€sizes€in€most€industries.€While€theÏconclusions€of€this€study€revealed€that€asset€registers€contained€the€necessaryÏinformation€(i.e.€asset€description,€date€and€cost€of€acquisition)€it€was€foundÏthat€there€was€little€information€kept€on€disposals€(only€15€out€of€212Ïbusinesses)€and€that€the€registers€of€smaller€companies€were€generally€lessÏwell€organised.€Other€problems€included€the€use€of€varying€value€thresholds€forÏadmission€to€the€register€and€the€tendency€to€overwrite€the€old€entry€in€theÏcase€of€revaluations€of€buildings€(in€which€case€the€information€recorded€didÏnot€refer€to€the€whole€life€of€the€asset).ÌÌÔ2ÿÿ]ÔÚ  Ú94Ú  Ú.Ô3  Ôà ï àFollowing€this€test€and€discussions€with€providers€of€asset€registerÐ : Ðsoftware,€which€revealed€that€all€such€software€packages€could€produce€reportsÏof€assets,€totalled€by€year€of€acquisition€and€broad€asset€type,€a€mail/phoneÏpilot€survey€was€conducted,€involving€the€despatch€of€diskettes€to€65Ïbusinesses,€together€with€a€request€to€provide€a€summary€of€their€assetÏregister€(or,€failing€that,€an€ordered€list€of€it€or€a€copy€of€the€registerÏitself).€While€this€pilot€test€was€voluntary€and€only€45%€response€wasÏachieved,€its€results€indicated€that€mail€collection€of€capital€stock€data€wasÏfeasible.ÌÌÔ2ÿÿ^ÔÚ  Ú95Ú  Ú.Ô3  Ôà ï àSeveral€detailed€questions€concerning€the€data€obtained€in€the€UK'sÐ h#K! Ðfeasibility€studies€were€raised€during€discussion,€many€of€which€could€not€beÏauthoritatively€answered€because€of€the€small€sample€sizes€involved.€TheseÏincluded€whether€the€asset€lives€obtained€by€this€method€had€proved€to€beÏsignificantly€lower€than€those€used€by€PIM€(they€were€not);€whether€assetsÏacquired€second-hand€could€be€identified;€and€whether€there€was€a€commonly€usedÏthreshold€below€which€assets€were€not€included€on€registers€(€?500€and€?1,000Ïwere€said€to€be€popular€figures).Ì€Ìò òITEM€7:€EXPERIENCE€WITH€MULTI€FACTOR€PRODUCTIVITYó óÐ «+Ž&* ÐÌò òUnited€States€estimation€experienceó óÐ -d(, ÐÌÔ2ÿÿ_ÔÚ  Ú96Ú  Ú.Ô3  Ôà ï àIn€introducing€his€paper,€Estimating€Capital€Inputs€for€ProductivityÐ W/:*. ÐMeasurement:€An€Overview€of€Concepts€and€Methods,€Michael€Harper€(US€Bureau€ofÏLabor€Statistics€(BLS))€said€that€he€recognised€the€confusion€caused€byÏdifferences€in€the€terminology€used€in€the€capital€concepts€field€and€that€hisÏpaper€was€an€attempt€to€spell€out€very€complicated€technical€equations.€The€BLSÏapproach€in€measuring€multi€factor€productivity€(MFP)€conformed€closely€withÏthe€neoclassical€production€model€which€dealt€with€the€treatment€of€capitalÏservices€in€a€production€function.€Several€diagrams€were€used€to€illustrate€theÏconcepts€used€by€BLS€to€measure€capital€and€how€they€helped€to€determine€theÏchoices€made€on€practical€issues€of€empirical€implementation.ÌÌÔ2ÿÿ`ÔÚ  Ú97Ú  Ú.Ô3  Ôà ï àIn€drawing€the€attention€of€Conference€to€a€diagram€depicting€both€wealthÐ K.  Ðand€production€accounts,€and€showing€the€relationship€of€productivity€in€theÏprocess,€Michael€Harper€stated€that€the€real€interest€was€in€the€service€flows,Ïbut€that€not€enough€emphasis€had€been€given€to€this€issue.ÌÌÔ2ÿÿaÔÚ  Ú98Ú  Ú.Ô3  Ôà ï àIncome€issues€were€also€discussed,€particularly€property€income€andÐ âÅ  Ðrental€prices€(which€in€some€circumstances€were€equal).€He€explained€the€roleÏof€rental€prices€as€weights€in€multi€factor€productivity€calculations€andÏdiscussed€a€rental€price€formula€that€could€be€used.€He€further€explained€thatÏthis€rental€price€formula€was€an€ex-post€formula.ÌÌÔ2ÿÿbÔÚ  Ú99Ú  Ú.Ô3  Ôà ï àConference€agreed€that€it€was€important€to€reach€a€common€understandingÐ dG Ðamong€countries€on€a€number€of€concepts€relating€to€capital€stock,€includingÏdeterioration€and€productive€capital€stock.€The€discussion€returned€to€theÏdifferences€between€gross€and€net€capital€stock.€The€importance€of€discountÏrates€and€investment€weights,€using€geometric€or€hyperbolic€functions€was€alsoÏdiscussed€at€some€length.ÌÌÔ2ÿÿcÔÚ  Ú100Ú  Ú.Ô3  Ôà ï àThe€'lemon€theory'€suggested€that€goods€on€the€second€hand€market€were€ofÐ Ñ´ Ða€lower€standard€(and€therefore€of€lower€productivity€and€value)€thanÏequivalent€goods€still€in€use,€and€therefore€did€not€provide€a€good€measure€ofÏthe€productivity€and€value€of€the€goods€still€in€use.ÌÌÔ2ÿÿdÔÚ  Ú101Ú  Ú.Ô3  Ôà ï àIt€was€stated€that€longitudinal€data€could€assist€in€determiningÐ h#K! Ðage-efficiency€functions.€Collecting€data€from€manufacturers€of€assets€couldÏalso€assist.€In€further€discussing€age-price€profiles,€it€was€queried€whetherÏthe€fall€in€price€in€the€first€year€of€asset€life€was€consistent€with€priceÏchanges€during€the€remainder€of€the€asset€life.€It€was€agreed€that€moreÏresearch€was€needed€on€this€issue.ÌÌò òUse€of€level€or€flow€variablesó óÐ Õ)¸$( ÐÌÔ2ÿÿeÔÚ  Ú102Ú  Ú.Ô3  Ôà ï àIn€presenting€his€paper,€How€Should€Capital€be€Represented€in€Studies€ofÐ «+Ž&* ÐTotal€Factor€Productivity,€Derek€Blades€(OECD)€provided€background€on€someÏusage€of€capital€stock€level€data€in€multi€factor€productivity€studies€inÏconjunction€with€flow€data€(gross€domestic€product€and€labour).€A€moreÏappropriate€capital€measure€would€be€either€consumption€of€fixed€capital€orÐ W/:*. Ðcapital€services.€In€discussing€the€advantages€and€disadvantages€of€each€of€theÏalternatives,€the€best€option€was€considered€to€be€capital€services.ÌÌò òSingapore's€experienceó óÐ ÞÁ ÐÌÔ2ÿÿfÔÚ  Ú103Ú  Ú.Ô3  Ôà ï àIn€introducing€his€paper,€Total€Factor€Productivity€Growth€in€Singapore:Ð ´ — ÐMethodology€and€Trends,€Soon€Teck€Wong€(Department€of€Statistics,€Singapore)Ïemphasised€that€his€Department€had€only€recently€become€involved€in€this€fieldÏand€that€the€work€it€had€undertaken€to€date€was€very€preliminary.€SimpleÏestimates€of€capital€stock€and€labour€input€were€used€to€compile€TFP€inÏSingapore€without€any€adjustments€for€quality.€The€quality€of€factor€inputs€wasÏknown€to€be€a€significant€feature€in€the€growth€of€the€Singapore€economy€andÏfuture€work€would€attempt€to€estimate€TFP€growth€by€removing€the€effects€ofÏchanges€in€factor€input€quality.€The€asset€service€lives€hitherto€used€wereÏconsidered€to€be€too€high.€Three€alternative€assumptions€for€service€lives€wereÏused€to€simulate€the€impact€of€asset€service€lives€on€TFP€estimates.€TheseÏsimulations€suggested€that€the€estimates€were€not€very€sensitive€to€the€changesÏin€asset€lives.ÌÌÔ2ÿÿgÔÚ  Ú104Ú  Ú.Ô3  Ôà ï àDuring€the€discussion€of€this€paper€it€was€suggested€that,€in€view€of€theÐ Žq Ðfact€that€financial€and€other€services€industries€(which€were€large€users€ofÏcomputers€and€other€electronic€equipment)€were€very€important€to€the€SingaporeÏeconomy,€significant€improvements€in€the€quality€of€the€estimates€were€likelyÏto€result€if€machinery€and€equipment€could€be€disaggregated€so€that€electronicÏequipment€with€short€service€lives€could€be€properly€taken€into€account.ÌÌÔ2ÿÿhÔÚ  Ú105Ú  Ú.Ô3  Ôà ï àThe€discussion€revealed€that€the€government€sector€was€included€in€theÐ ûÞ Ðestimates,€unlike€the€situation€in€many€other€countries.€This€led€to€a€debateÏon€the€main€components€of€the€government€sector,€how€it€should€be€treated€andÏwhat€the€effects€of€its€inclusion€or€exclusion€would€be.ÌÌò òAn€economic€policy€perspective€in€Australiaó óÐ ’!u ÐÌÔ2ÿÿiÔÚ  Ú106Ú  Ú.Ô3  Ôà ï àIn€introducing€his€paper,€Australian€Capital€Stock€Estimates€as€InputÐ h#K! Ðinto€Multi-factor€Productivity€Analysis:€a€'Wages€Policy'€Perspective,€OwenÏCovick€(Flinders€University,€Australia)€pointed€out€that€it€was€ratherÏdifferent€from€the€other€papers€on€multi-factor€productivity€because€it€hadÏbeen€prepared,€not€from€the€perspective€of€the€compiler€of€statistics,€but€fromÏthat€of€the€user€who€was€concerned€with€economic€policy€development€issues.ÌÌÔ2ÿÿjÔÚ  Ú107Ú  Ú.Ô3  Ôà ï àIn€particular,€Owen€Covick€addressed€the€key€policy€question€of€whatÐ Õ)¸$( Ðdegree€of€wages€growth€was€warranted€on€the€basis€of€productivity€growth,€andÏwhat€concepts€and€measures€of€productivity€were€most€appropriate€for€resolvingÏthat€question.€"Average€labour€productivity"€had€been€used€during€the€AccordÏperiod€but,€now€that€the€Australian€Government€had€turned€away€from€any€attemptÏto€centrally€coordinate€wages€growth,€and€the€inflation€target€of€the€ReserveÏBank€of€Australia€was€seen€as€a€prime€determinant€for€economic€policy,€itÐ W/:*. Ðseemed€clear€that€a€multi-factor€productivity€concept€would€be€more€appropriateÏto€address€the€important€relationship€between€wages€growth€and€productivityÏgrowth.ÌÌÔ2ÿÿkÔÚ  Ú108Ú  Ú.Ô3  Ôà ï àA€number€of€key€issues€in€the€construction€of€a€multi-factor€productivityРɬ Ðindicator€were€raised,€including€the€deterioration€of€capital€in€use,€price€andÏquality€changes,€and€the€contribution€of€the€unincorporated€sector.€Owen€CovickÏargued€that€the€appropriateness€of€any€measure€that€was€developed€dependedÏcrucially€on€the€purpose€for€which€it€was€used.ÌÌÔ2ÿÿlÔÚ  Ú109Ú  Ú.Ô3  Ôà ï àIn€the€discussion€which€followed€it€was€suggested€that€the€issue€ofÐ K.  Ðaccounting€for€quality€change€was€sufficiently€important€to€deserve€a€separateÏsession€at€any€subsequent€meeting€on€capital€stock€measurement.€Other€issuesÏdiscussed€included€the€difficulties€associated€with€inclusion€of€theÏunincorporated€sector,€the€treatment€of€inter€sector€transfers€and€theÏadvantages€and€disadvantages€of€including€elements€of€the€public€sector.Ì€Ìò òITEM€8:€BALANCE€SHEETSó óÐ ¸› ÐÌÔ2ÿÿmÔÚ  Ú110Ú  Ú.Ô3  Ôà ï àPressure€of€other€business€prevented€other€than€a€brief€discussion€ofÐ Žq Ðthis€item€for€which€the€agenda€paper€was€the€ABS€Occasional€Paper,€AustralianÏNational€Accounts:€National€Balance€Sheet,€30€June€1995€(ABS€Cat.€No.€5241.0).ÏJohn€Joisce€(ABS)€introduced€the€paper€and€subsequent€discussion€covered€theÏtreatment€of€two€types€of€produced€asset:€real€estate€transfer€costs,€where€itÏwas€agreed€that€their€inclusion€in€the€balance€sheet€needed€reconsideration;Ïand€sub-soil€assets,€about€which€most€of€the€discussion€was€concentrated.ÌÌÔ2ÿÿnÔÚ  Ú111Ú  Ú.Ô3  Ôà ï àThe€difficulty€of€calculating€reasonable€values€for€sub-soil€assets,€manyÐ æÉ Ðof€which€were€subject€to€significant€price€fluctuations€and€varying€marketÏconditions,€was€widely€acknowledged.€A€further€significant€factor€was€theÏtendency€for€mining€companies€to€effectively€manage€the€timing€of€proving€ofÏnew€reserves€so€that€they€were€available€to€maintain€stable€production€levels.ÏIt€was€agreed€that€any€valuations€attributed€to€sub-soil€assets€needed€to€beÏinterpreted€very€carefully€and€that€a€good€appreciation€of€physical€measures€ofÏthe€resources€involved€was€also€required.Ì€Ìò òITEM€9:€NEW€MEASURES€OF€CAPITALó óÐ )& !$ ÐÌÔ2ÿÿoÔÚ  Ú112Ú  Ú.Ô3  Ôà ï àBarbara€Dunlop€(ABS)€introduced€a€set€of€ABS€working€papers,€AustralianÐ ÿ'â"& ÐNational€Accounts:€Implementation€of€SNA93€Changes€to€Gross€Fixed€CapitalÏFormation€and€the€Asset€Boundary,€the€components€of€which€were€presented€byÏseveral€ABS€officers.€These€papers€related€to€produced€fixed€tangible€assetsÏ(livestock,€speculative€construction,€defence€expenditure€and€monuments);Ïproduced€fixed€intangible€assets€(mineral€exploration,€computer€software€andÏfilm€originals);€valuables€(gold);€and€non-produced€intangible€assets.€TheÏprimary€concern€of€the€papers€was€with€the€implementation€of€SNA93Ïrecommendations€in€the€Australian€National€Accounts,€particularly€with€theÐ W/:*. Ðtreatment€of€gross€fixed€capital€formation€and€the€capital€boundary.€TheÏchanges€to€the€Australian€National€Accounts€as€a€result€of€SNA93€were€expectedÏto€be€implemented€by€late€1998.ÌÌÔ2ÿÿpÔÚ  Ú113Ú  Ú.Ô3  Ôà ï àConference€participants€noted€that€the€working€papers€raised€interestingРɬ Ðmeasurement€issues.€Insufficient€time€was€available€for€extensive€discussion,Ïbut€issues€raised€in€relation€to€particular€asset€types€are€set€out€below.Ì€Ìò òMineral€Explorationó óÐ u X ÐÌÔ2ÿÿqÔÚ  Ú114Ú  Ú.Ô3  Ôà ï àConference€was€advised€that€Australia€would€implement€the€SNA93Ð K.  Ðrecommendation€to€treat€mineral€exploration€(including€unsuccessful€mineralÏexploration)€as€gross€fixed€capital€formation.€Several€conference€participantsÏreported€the€treatment€of€mineral€exploration€in€the€accounts€for€their€ownÏcountries,€with€treatment€varying€widely.€A€number€intended€to€bring€theirÏtreatment€in€line€with€the€recommendations€of€SNA93,€although€the€practicalÏdifficulties€of€doing€so€were€recognised.€It€was€generally€agreed€that€the€mostÏpractical€approach€was€to€collect€what€was€reported€in€business€accounts,€andÏthat€varying€from€this€would€cause€data€quality€problems.€It€was€also€agreedÏthat€unsuccessful€exploration€should€be€capitalised€and€then€written€off€inÏaccordance€with€the€business€accounts,€as€for€other€unsuccessful€capitalÏinvestment.€A€one-year€asset€life€for€unsuccessful€mineral€exploration€was€seenÏas€a€useful€expedient.Ì€Ìò òComputer€Softwareó óÐ % ÐÌÔ2ÿÿrÔÚ  Ú115Ú  Ú.Ô3  Ôà ï àSome€of€the€problems€of€treating€software€as€an€intangible€fixed€assetÐ ûÞ Ðwere€mentioned,€including€differentiating€between€hardware€and€software€andÏdata€collection€difficulties.€Another€issue€was€whether€software€should€moreÏappropriately€be€classed€as€an€intangible€produced€asset€or€as€a€tangibleÏproduced€asset.€It€was€suggested€that€software€was€definitely€an€intangible€-Ïthe€value€of€the€software€was€in€the€development,€rather€than€in€the€actualÏdistribution€of€it€in€the€market.ÌÌÔ2ÿÿsÔÚ  Ú116Ú  Ú.Ô3  Ôà ï àThe€issue€of€upgrades€was€discussed€and€it€was€suggested€that€theseÐ S$6" Ðshould€be€capitalised.Ì€Ìò òDefence€Expenditureó óÐ '÷!% ÐÌÔ2ÿÿtÔÚ  Ú117Ú  Ú.Ô3  Ôà ï àConference€participants€were€reminded€that€the€SNA93€recommendation€wasÐ ê(Í#' Ðthat€certain€types€of€defence€expenditure,€for€example€construction€ofÏbuildings,€roads,€airfields,€docks,€transport€equipment€and€other€equipmentÏsimilar€to€that€used€by€civilians,€were€to€be€included€in€gross€fixed€capitalÏformation.€However,€expenditure€on€combat€hardware,€including€weapons,€weaponÏdelivery€systems,€ships,€aircraft€and€tanks,€was€to€be€treated€as€intermediateÏconsumption.ÌÐ W/:*. ÐÔ2ÿÿuÔÚ  Ú118Ú  Ú.Ô3  Ôà ï àWhile€Australia€intended€to€implement€this€recommendation€it€had€someÐ  Ðreservations€about€doing€so;€Australia's€preferred€treatment€would€have€beenÏfor€all€defence€hardware€to€be€capitalised,€including€combat€hardware.€While€itÏcould€be€argued€that€some€items€had€a€single€use€and€were€not€used€forÏproduction€but€for€destruction€(e.g.€missiles),€it€was€clear€that€combatÏhardware€generally€had€a€service€life€greater€than€one€year,€was€continuouslyÏused€in€times€of€peace€to€provide€a€stream€of€services€by€way€of€deterrence€andÏwas€productive€by€definition€(i.e.€it€contributed€to€general€government€outputÏand€GDP).€In€addition,€to€counter€the€'single€use/destruction'€argument€it€wasÏpointed€out€that€in€times€of€war€there€was€inconsistency€in€the€decision€toÏcapitalise€items€such€as€airfields€and€docks€when€they€could€have€very€shortÏlife€spans.ÌÌÔ2ÿÿvÔÚ  Ú119Ú  Ú.Ô3  Ôà ï àDuring€discussion€of€this€topic€considerable€support€was€expressed€forÐ  ï  Ðthe€treatment€preferred€by€Australia.€However,€it€was€recognised€that€theÏdecision€to€capitalise€at€least€part€of€defence€expenditure€represented€a€stepÏforward.€It€was€suggested€that€the€issue€should€be€raised€for€consideration€atÏthe€Joint€UNECE/Eurostat/OECD€meeting€on€national€accounts€in€June.ÌÌò òSpeculative€Constructionó óÐ Žq ÐÌÔ2ÿÿwÔÚ  Ú120Ú  Ú.Ô3  Ôà ï àAt€present€Australia€treated€all€building€and€construction€activity,Ð dG Ðincluding€speculative,€as€gross€fixed€capital€formation.€However,€SNA93Ïrecommended€that€speculative€construction€be€treated€as€work-in-progress€(i.e.Ïan€addition€to€inventories)€of€the€producer.€Australia€would€continue€itsÏpresent€treatment€and€not€implement€this€recommendation€mainly€because€of€theÏlack€of€relevant€data.€However,€because€of€the€short-term€nature€of€mostÏspeculative€activity€in€Australia,€this€was€considered€to€be€only€a€minorÏdeparture€from€the€spirit€of€SNA93.ÌÌÔ2ÿÿxÔÚ  Ú121Ú  Ú.Ô3  Ôà ï àDuring€the€discussion€it€was€generally€acknowledged€that€the€treatment€ofÐ § Š Ðunfinished€structures€was€a€difficult€"grey"€area€to€address,€both€conceptuallyÏand€practically.€While€it€was€clear€that€gross€fixed€capital€formation€occurredÏwhen€the€user€acquired€the€asset,€this€was€based€on€the€presumption€that€theÏasset€could€be€used€when€acquired.€In€practice,€there€were€a€variety€ofÏcontractual€and€financial€arrangements€where€this€was€not€the€case€and€this€wasÏfurther€complicated€when€the€original€intentions€of€the€parties€concernedÏchanged.€The€treatment€of€long€term€projects€and€partial€use€of€assets€beforeÏtheir€completion€were€seen€as€additional€complicating€factors.ÌÌÔ2ÿÿyÔÚ  Ú122Ú  Ú.Ô3  Ô€While€many€Conference€participants€supported€the€Australian€position€onÏthis€recommendation,€in€the€absence€of€a€clear,€unambiguous€solution€to€theÏhost€of€difficulties€in€this€area,€there€was€general€agreement€that€there€wasÏno€pressing€need€to€seek€to€change€the€SNA93€recommendation.Ì€Ìò òIntangible€Non-Produced€Assetsó óÐ l.O)- ÐÐ W/:*. ÐÔ2ÿÿzÔÚ  Ú123Ú  Ú.Ô3  Ô€€It€was€pointed€out€that€the€area€of€intangible€assets,€both€produced€andÏnon-produced,€had€raised€several€complex€conceptual€issues€which€had€not€beenÏfully€resolved€by€SNA93€recommendations.€One€of€these€issues€was€the€apparentÏblurring€of€the€distinction€between€produced€and€non-produced€intangibles;Ïwhile€SNA93€classified€entertainment€originals€as€"produced"€and€patents€asÏ"non-produced",€there€was€in€fact€little€difference€in€the€processes€thatÏcreated€them.€There€could€also€be€problems€in€the€valuation€of€both€types€ofÏintangible€asset.€For€example,€an€artistic€original€(a€produced€intangible)€andÏthe€rights€to€distribute€it€(a€non-produced€intangible)€were€treated€separatelyÏby€SNA93€although€each€would€in€practice€be€virtually€worthless€without€theÏother.€In€addition,€if€both€were€to€be€valued€at€the€discounted€future€streamÏof€income,€there€was€potential€for€double-counting.ÌÌÔ2ÿÿ{ÔÚ  Ú124Ú  Ú.Ô3  Ôà ï àOther€issues€raised€concerned€difficulties€in€the€valuation€of€differentÐ  ï  Ðtypes€of€internally€generated€non-produced€intangibles€(e.g.€goodwill€andÏtrademarks)€and€the€lack€of€a€recognised€accounting€standard€on€intangible,Ïnon-produced€assets.ÌÌÔ2ÿÿ|ÔÚ  Ú125Ú  Ú.Ô3  Ôà ï àDuring€the€discussion€it€was€suggested€that€the€double-counting€issueÐ £† Ðneeded€to€be€addressed€but€that€a€practical€way€of€avoiding€it€would€be€toÏvalue€non-produced€intangibles€at€their€cost.ÌÌÔ2ÿÿ}ÔÚ  Ú126Ú  Ú.Ô3  Ôà ï àIt€was€pointed€out€that€the€so-called€intangible€economy€was€one€of€15Ð O2 Ðissues€recently€identified€as€a€critical€problem€in€economic€statistics€by€theÏUnited€Nations€Statistical€Commission€(UNSC)€and€that€the€UK€had€agreed€toÏcollaborate€with€countries€in€the€elaboration€of€the€issues.Ì€Ìò òFilm€Originals,€Own€Account€Productionó óÐ æÉ ÐÌÔ2ÿÿ~ÔÚ  Ú127Ú  Ú.Ô3  Ôà ï àSince,€under€SNA93,€artistic€originals€were€classified€as€intangibleÐ ¼Ÿ Ðproduced€assets,€their€production€was€to€be€capitalised€and€reflected€as€anÏacquisition€of€produced€assets.€Australia€intended€to€implement€thisÏrecommendation€using€a€net€present€value€(rather€than€a€production€cost)Ïapproach.€However,€although€the€necessary€data€were€available,€this€approachÏraised€a€number€of€issues€which€needed€to€be€resolved€in€respect€of€filmÏproduction€on€own€account,€the€largest€area€of€production€of€artistic€originalsÏin€Australia.ÌÌÔ2ÿÿÔÚ  Ú128Ú  Ú.Ô3  Ôà ï àUnder€the€present€value€approach€the€future€income€generated€from€filmsÐ ÿ'â"& Ðwas€calculated€and€then€discounted€to€obtain€the€present€value€of€film€incomeÏin€any€given€year.€Three€charts€showing€the€use€of€this€method€in€respect€ofÏthe€value€and€consumption€of€fixed€capital€over€a€5€year€period€for€an€averageÏfilm,€a€"blockbuster"€and€a€"flop"€were€presented€for€consideration€byÏConference€participants.ÌÌÔ2ÿÿ€ÔÚ  Ú129Ú  Ú.Ô3  Ôà ï àMuch€of€the€discussion€focused€on€the€diagram€illustrating€theÐ l.O)- Ðperformance€of€a€"blockbuster",€which€showed€an€initial€period€of€negativeÐ W/:*. Ðconsumption€of€fixed€capital.€Many€Conference€participants€expressed€seriousÏreservations€about€the€concept€of€negative€consumption€of€capital,€pointing€outÏthat€it€made€no€practical€sense.€Reservations€were€also€expressed€about€theÏtreatment€of€the€problem€on€an€individual€film€basis;€it€was€argued€that€if€itÏwere€approached€on€the€basis€of€all€activities€of€film€producing€businessesÏmany€of€the€difficulties€would€be€avoided.€It€was€pointed€out€that€in€the€realÏworld€accounting€practices€in€the€film€industry€were€notoriously€suspect€andÏthat€this,€together€with€the€difficulties€inherent€in€predicting€theÏperformance€of€individual€films,€was€the€root€of€the€problem,€which€wouldÏremain€regardless€of€the€SNA93€recommendation.€There€was€support€for€theÏsuggestion€that€the€topic€be€raised€at€the€Joint€UNECE/Eurostat/OECD€meeting€onÏnational€accounts€in€June.Ì€Ìò òLivestockó óÐ  ï  ÐÌÔ2ÿÿÔÚ  Ú130Ú  Ú.Ô3  Ôà ï àConference€participants€were€reminded€that€SNA93€recommended€theÐ âÅ  Ðcalculation€of€gross€fixed€capital€formation€and€work€in€progress€forÏlivestock,€a€treatment€which€differed€from€the€current€Australian€approachÏwhich€did€not€bring€livestock€to€account€in€the€production€account€until€theirÏslaughter€or€export.€However,€Australia€intended€to€implement€the€SNA93Ïrecommendation,€which€would€effectively€move€the€recognition€of€farm€animals€inÏthe€accounts€from€the€time€of€their€disposal€to€their€birth€and€would€increaseÏGDP€to€the€extent€that€some€animals€(e.g.€dairy€cows)€would€have€an€acquisitionÏvalue€above€their€slaughter€value.ÌÌÔ2ÿÿ‚ÔÚ  Ú131Ú  Ú.Ô3  Ôà ï àA€major€problem€in€valuing€livestock€was€the€significant€extent€of€ownÐ ó Ðaccount€production€and€the€scarcity€of€reliable€data€on€acquisition€prices.€AÏfuture€economic€returns€approach€to€valuation€was€proposed,€where€the€returnsÏincluded€a€disposal€price.€An€acquisition€price€was€then€established€as€aÏfunction€of€the€current€disposal€price.€This€function€was€described€by€aÏcapital€factor,€the€decline€of€which€over€time€would€be€used€to€measureÏconsumption€of€fixed€capital.€A€chart€was€presented€to€illustrate€this€approachÏusing€the€valuation€of€a€dairy€cow€as€an€example.ÌÌÔ2ÿÿƒÔÚ  Ú132Ú  Ú.Ô3  Ôà ï àIn€practice€there€were€many€risks€and€uncertainties€associated€withÐ S$6" Ðlivestock€production,€brought€about€by€environmental€and€market€conditions.ÏThese€affected€the€quality€and€marketability€of€livestock€and€livestockÏproducts€and€the€intentions€of€producers€often€changed€as€a€result.€Much€of€theÏdiscussion€centred€on€these€difficulties€and€a€number€of€assumptions€on€theÏvaluations€adopted€at€different€stages€of€the€life-cycle€of€various€types€ofÏlivestock€were€challenged.€It€was€agreed€that€further€consideration€of€thisÏmatter€was€warranted.Ì€Ìò òITEM€10:€FUTURE€DIRECTIONS€AND€PROPOSED€FUTURE€WORKó óÐ –,y'+ ÐÌÔ2ÿÿ„ÔÚ  Ú133Ú  Ú.Ô3  Ôà ï àConference€participants€agreed€that€this€Conference€had€addressedÐ l.O)- Ðsignificant€issues€and€had€advanced€the€understanding€of€capital€stockÐ W/:*. Ðconcepts.€Participants€discussed€the€need€for€further€conference(s)€to€discussÏcapital€stock€issues.€The€opening€remarks€by€Mr.€McLennan€were€endorsed,Ïparticularly€that€a€clearly€defined€purpose€and€work€program€were€required€toÏjustify€further€meetings.ÌÌÔ2ÿÿ…ÔÚ  Ú134Ú  Ú.Ô3  Ôà ï àThere€was€general€agreement€that€there€was€a€significant€work€programÐ ´ — Ðrequired€to€address€outstanding€and€emerging€capital€stock€issues.€It€wasÏagreed€that€the€results€of€this€work€could€usefully€be€incorporated€into€aÏhandbook€on€capital€stock€measurement€which€would€cover€both€conceptual€issuesÏand€suggested€best€practices€in€compilation€of€capital€stock€statistics.€TheÏIntersecretariat€Working€Group€on€National€Accounts€could€be€encouraged€toÏpublish€such€a€handbook€as€part€of€its€reference€documentation€on€nationalÏaccounts€issues.€It€was€further€agreed€that€a€deadline€of€(perhaps)€end€1999Ïshould€be€set€for€completion€of€such€work,€with€publication€of€the€handbook€asÏsoon€as€possible€thereafter.€As€a€by-product€of€this€work,€valuable€suggestionsÏfor€revisions€to,€and€the€further€elaboration€and€development€of,€SNA93€mightÏresult.ÌÌÔ2ÿÿ†ÔÚ  Ú135Ú  Ú.Ô3  Ôà ï àIt€was€agreed€that€focussing€on€the€development€of€such€a€handbook€wouldÐ £† Ðdefine€the€purpose€and€agenda€for€two€further€conferences€of€the€group.€DerekÏBlades,€on€behalf€of€the€OECD,€offered€to€provide€a€venue€and€administrativeÏsupport€for€a€further€Conference€in€about€August€or€September€1998.€HeÏindicated€that€invitations€would€be€extended€to€both€OECD€member€and€non-memberÏcountries,€but€that€facilities€would€limit€the€number€of€attendees€to€no€moreÏthan€fifty€people.€It€was€further€agreed€that,€dependent€on€the€final€agenda,Ïthe€organising€committee€should€aim€for€a€three€day€duration.€An€informalÏorganising€committee,€comprising€representatives€of€the€OECD,€the€AustralianÏBureau€of€Statistics,€Statistics€Canada,€the€United€States€Bureau€of€LabourÏStatistics,€the€Department€of€Statistics€Singapore€and€the€Central€Bureau€ofÏStatistics€Indonesia,€was€agreed.ÌÌÔ2ÿÿ‡ÔÚ  Ú136Ú  Ú.Ô3  Ôà ï àThe€Russian€representatives€offered€St.€Petersburg€as€a€venue€for€a€thirdÐ ’!u Ðconference€on€capital€stock€measurement€in€1999,€if€needed.€The€conferenceÏaccepted€the€offers€from€both€the€OECD€and€Russia€and€extended€its€thanks€toÏboth€for€their€generous€offers.ÌÌÔ2ÿÿˆÔÚ  Ú137Ú  Ú.Ô3  Ôà ï àIt€was€noted€that€the€report€of€this€Conference€would€be€an€agenda€itemÐ )& !$ Ðfor€the€Joint€UNECE/Eurostat/OECD€Meeting€on€national€accounts€to€be€held€inÏJune.€As€papers€for€that€meeting€were€required€very€soon,€a€draft€report€wouldÏbe€submitted€to€the€ECE€shortly.€Copies€would€also€be€distributed€to€ConferenceÏparticipants,€whose€comments€would€be€taken€into€account€during€preparation€ofÏthe€final€version€to€be€tabled€as€a€room€document€at€the€June€meeting.ÌÌÔ2ÿÿ‰ÔÚ  Ú138Ú  Ú.Ô3  Ôà ï àMr.€Trewin€thanked€all€delegates€for€their€attendance,€and€for€theirÐ –,y'+ Ðactive€participation.€Authors€of€papers€were€also€thanked€for€theirÏcontribution€to€the€success€of€the€meeting.ÌÐ W/:*. 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