2.009.

Output should be valued and recorded at the time it is generated. It is therefore to be recorded when produced and not when paid for by the purchaser.

2.010.

In the ESA 2010, production is treated as a continuous process in which goods and services are converted into other goods and services. This process may take place over different periods depending on the products, and the periods may exceed an accounting period. This characterisation of production, combined with the accrual principle, therefore results in the recording of output in the form of work in progress. Thus, according to the ESA 2010 (3.54), the output of agricultural products is recorded as being produced continuously over the entire period of production (and not only when the crops are harvested or animals slaughtered). Growing crops, standing timber and stocks of fish or animals reared for the purposes of food are treated as inventories of work-in-progress during the production process and transformed into inventories of finished products when the process is completed. Output excludes any changes in uncultivated biological resources, e.g. growth of animals, birds, fish living in the wild or uncultivated growth of forests, but it includes catches of animals, birds, fish living in the wild.

2.011.

Recording output as work in progress is both desirable and necessary for economic analysis when the production process occurs over a period exceeding the accounting period. This allows consistency to be maintained between the recording of costs and that of output in order to obtain meaningful data on value added. Since the EAA are based on the calendar year, the recording of work in progress can be assumed to apply only to products whose production process was not completed at the end of the calendar year (but also in cases where the general price level undergoes very rapid changes during the accounting period).

2.012.

However, for farm products whose production cycle is shorter than the accounting period, it would be unnecessary to record the output as work in progress. The recording of output at the finished product stage, i.e. at the harvest (for crop production), in fact allows an adequate degree of consistency between it and the production costs to be maintained. This is the situation for most agricultural output whose production cycle lasts less than a year. It is not necessary, either, to record as work-in-progress short-cycle crop production whose production process overlaps into a second calendar year (cf. 2.172.). In these cases, growing crops are not considered to be stocks of work in progress.

2.013.

In practice, only products with a long production cycle are concerned by the method of recording in the form of work in progress. Such products are in particular livestock, crop products such as wine (whose ageing is an integral part of the production process) and plantations. The normal trend in prices in the European Union is in fact generally not very marked and should not be a reason for recording certain products as work in progress (although this could happen in exceptional cases, cf. 2.172).

2.014.

When products with a long production cycle which have been recorded as work in progress are harvested (crop production) or slaughtered (animals), the production process is completed and the work in progress is transformed into stocks of finished products ready to be sold or used for other purposes. ►M6  During the production process, the value to be recorded each year as output under work in progress can be obtained by distributing the expected value of the finished product in proportion to the costs incurred each period (2008 SNA, 6.112). ◄

2.015.

Animals: animal production normally requires a period of time, possibly spanning several accounting periods before the process is completed. From the time of birth, it is possible and also appropriate to record an entry for each phase of production, i.e. for each age group of individual animals (the part of the production process preceding the birth, however, cannot be recorded because it cannot be isolated from the services consumed in rearing the parent animal).

2.016.

The production process for draught animals is formally completed at their birth; from that time on, they are recorded as capital assets. The animals are, of course, not then ready for their intended use, but the individual variations are such that any selection of a fixed age for all cases would be highly arbitrary. The moment of birth has been selected for practical reasons, particularly since the subsequent use to which they will be put is already determined at this stage.

2.017.

This is not always the case for cattle, pigs, sheep and other livestock which may be reared for breeding purposes or for slaughter. ►M6  When it is possible to differentiate between young animals according to their future use, animals intended for use as factors of production should be recorded as GFCF right from their birth (own-account GFCF, which is recorded when it is produced) i.e. they are considered as work in progress and their growth is registered as output, cf. ESA 2010, 3.134). ◄ Otherwise, animals are included in stocks as work in progress until they become mature and are used themselves as factors of production (e.g. as dairy cows, for breeding or other productive purposes such as wool production). They are then recorded under fixed capital. Animals which have been removed from breeding herds before being slaughtered should also be recorded as stocks and not capital assets.

2.018.

Chick production is given special treatment if it spans two reference periods. Eggs hatching in incubators at the end of a period are regarded as output of chicks and recorded in the EAA under poultry output (in the form of work in progress) (cf. 2.048).

2.019.

Wine: output should be recorded as work in progress since its ageing forms part of the production process and can last over several accounting periods. Similarly, fermenting grape must, which, though no longer raw must, is not yet wine, is treated at the end of an accounting period in the same way as eggs hatching in incubators and shown in the EAA as wine in the form of work in progress.

2.020.

Assets cultivated in plantations: goods intended for own-account GFCF (other than livestock) such as plantations yielding repeat products should be recorded as GFCF at the time of production of the assets concerned.

2.021.

Goods and services should be recorded at the time they enter the production process, i.e. when they are actually consumed and not when they are purchased or taken into storage.

2.022.

The consumption of goods for a given reference period in practice corresponds to purchases or acquisitions of goods plus the initial stocks and minus the final stocks at the end of the period ( 15 ).

2.023.

Services are recorded at the time of purchase. Since services cannot be stored, the time of purchase is also the time of consumption.

2.024.

The following services are an exception to this rule:

2.025.

GFCF is recorded at the time of transfer of ownership of the fixed assets concerned to a unit intending to use them for production purposes. Nevertheless, there are two exceptions to this principle: first, assets acquired through financial leasing are recorded as if the user became the owner when the goods became available to him for use (cf. 2.122). Secondly, own-account GFCF is recorded at the time of production of the assets concerned (except cattle, pigs, sheep and other livestock, the future use of which cannot be clearly defined since these animals are included in stocks as work in progress, cf. 2.017).

2.026.

Correspondingly, in the case of the establishment of orchards and vineyards (fixed capital goods produced on own account), if not all the necessary work has been completed by the end of the accounting period, the value of the materials consumed and services rendered over the reference year is recorded as GFCF at the end of the period.

2.027.

Land purchases and sales as well as associated costs are recorded at the time of transfer of ownership. However, the net acquisition of land is not included in GFCF since the land is a non-produced asset. The net acquisition of land (and other non-produced tangible assets) is recorded in the capital account (acquisitions of non-financial assets account).

2.028.

Changes in stocks correspond to the difference between goods entering and goods withdrawn from stocks over the reference period.

2.029.

Goods entering stocks are either goods intended for consumption in the production process later (input stocks), in which case they are recorded at the time of transfer of ownership, or else they are goods from the industry itself to be put to future use, e.g. by sale or by transfer to the unit's fixed capital (output stocks), in which case they are recorded as stocks when their production is completed.

2.030.

In the case of unfinished products from the industry (recorded as work in progress), the value of the materials consumed and the services rendered over a reference period is also recorded as stocks at the end of that period (except for short-cycle standing crops, cf. 2.012; as a result, part of the materials consumed and services rendered during a reference period will have been consumed without an offsetting increase in the value of the stocks).

2.031.

Goods withdrawn from stocks are, in the case of input stocks, goods entering the production process or, in the case of output stocks, goods leaving the industry to be sold or to serve some other use. In the first case, the goods are deducted from the industry stocks at the time of their actual intermediate consumption in the production process; in the second case, they are deducted from the stocks at the time of their sale or other use.

2.039.

This is the starting point for countries whose official harvest statistics include losses. In accordance with the industry concept, all the products of the agricultural activities of agricultural units within the industry (as mentioned in 1.62 and 1.63) need to be measured. In line with the convention adopted in 1.31 (that the output of the secondary agricultural activities of non-agricultural units is non-existent because all agricultural activities are assumed to be separable and therefore form the main activity of their own local agricultural KAU), all agricultural output needs to be recorded except that produced by units for which the agricultural activity represents solely a leisure activity (cf. 1.24).

2.040.

This item refers to recurrent losses of goods in inventories (cf. 2.041). These include field, harvesting and other losses on farms (due to the perishable nature of the products, weather influences, such as frost, drought, etc.). Losses occurring during the various marketing stages, i.e. during transport from the farm, during storage with dealers and during processing or treatment in the processing industry should not be included here. In contrast, products offered for sale by producers but remaining unsold and therefore spoiled (particularly fruit and vegetables) should also be included here.

2.041.

Following ESA 2010, there are three types of losses that can be incurred by producers: recurrent losses in inventories (ESA 2010, 3.147), exceptional losses in inventories (ESA 2010, 6.13.e) and catastrophic losses (ESA 2010, 6.08 and 6.09).

2.042.

For recording losses of goods in inventories, a distinction needs to be made between recurrent losses, on the one hand, and exceptional and catastrophic losses, on the other. But the recording of losses also depends on the method of calculation of output and the type of basic statistical material of each country.

2.043.

When output is calculated from data on initial and final stocks, sales and possibly other uses (such as own-account produced fixed capital goods), recurrent losses are already deducted from the changes in stocks, and recording of them a further time under the item ‘losses’ would lead to double-counting. In contrast, where the calculation of output is not based on stocks data but instead on a well-founded calculation such as actual birth figures, recurrent losses during production in the reference period concerned should be recorded, as well as losses of animals imported for rearing or fattening or born during previous periods.

2.044.

Exceptional and catastrophic losses of goods in inventories have to be recorded in the accumulation accounts, namely in the ‘other changes in the volume of assets’ account. Output therefore includes the full value of these losses.

2.045.

Losses (whether recurrent, exceptional or catastrophic) of fixed assets (such as dairy cows, breeding animals, etc.) should be recorded in ‘other changes in the volume of assets’ account. They have no impact on the value of output. It should be stressed that losses affecting plantations which are already producing have to be recorded either as ‘fixed capital consumption’ or as ‘other changes in the volume of assets’, depending on the type of loss.

2.046.

This is the first item to be entered by countries whose reference harvest statistics do not include losses. It constitutes the disposable production of the reference period which will be either marketed, used as a means of production, processed by the producer himself, consumed in his household, put into storage, or possibly, used as own-account produced fixed capital goods.

2.047.

These constitute the finished or semi-finished stocks of own products existing on the agricultural holdings (i.e. held by producers) at the beginning of the reference year. Stocks at the different marketing stages and intervention stocks should therefore not be entered here (cf. 2.201 and following regarding the treatment of livestock).

2.048.

The initial stocks of ‘poultry’ should also include eggs hatching in incubators at the start of the reference period since they are regarded as semi-finished poultry products (cf. 2.018).

2.049.

Under the heading of intra-unit consumption recorded are products produced within the agricultural unit (local KAU) and used by the unit as inputs into the production process within the same accounting period.

2.050.

All agricultural products (except livestock; cf. 2.067 and 2.208) sold by an agricultural unit to other producing agricultural units must be recorded as sales and then as intermediate consumption. These include goods subjected to treatment and processing and their by-products (e.g. the return of skimmed milk, bran, oilcake and sugar beet pulp and tops, as well as the return of seeds after treatment).

2.051.

Intra-unit consumption can be broken down according to the use of the products concerned:

2.052.

Products consumed within the industry by the same agricultural activity (i.e. the same class of activity, at ►M3  NACE Rev. 2 ◄ four-digit level):

2.053.

Products consumed within the industry by a different agricultural activity (i.e. a different class of activity, at ►M3  NACE Rev. 2 ◄ four-digit level).

These are mainly crop products used in animal feed, but also animal by-products used in the production process of another activity (slurry and manure used as fertilising elements for crop production). Crop products used in animal feed can be classed according to the degree to which they are normally marketed (which is estimated in general):

2.054.

Agricultural products undergoing intra-unit consumption are not included in the measurement of the output of the industry unless they meet certain criteria. The setting of restrictive criteria for recording intra-unit consumption meets two requirements: first, a methodological one since, after deviating from the letter of the ESA rule, there was a need to follow it in spirit (by involving two separate activities); secondly, a practical one, since the criteria to be developed were to serve as a precise and comparable framework for defining which intra-unit consumption had to be recorded, to make this method of measuring output feasible.

2.055.

These criteria are as follows:

▼M3

▼B

2.056.

In line with the definition of the selection criteria for including intra-unit consumption products in the measurement of output (cf. 2.055), only crop products used in animal feed (marketable or not) are to be recorded in the agricultural output of the industry.

2.057.

When these products are recorded in the industry's output, they must also be recorded as intermediate consumption, thereby respecting the principle that total quantities produced and then used for a different production activity during the reference year are taken into account (cf. 2.055). When the change from output to intermediate consumption takes longer than the reference year in question, then the corresponding quantities of output should be recorded as ‘final stocks’ of the product concerned during the reference year.

2.058.

Animal by-products are excluded from intra-unit consumption because of the practical difficulties of unavailability of data on quantities and especially prices.

2.059.

Under the heading of processing by producers recorded are quantities produced for further processing by agricultural producers (e.g. milk processed to make butter or cheese, apples processed to make apple must or cider) but only in the framework of processing activities which are separable from the main agricultural activity (on the basis of accounting documents, cf. 1.26). Only the raw products (e.g. raw milk, apples) should be recorded and not the processed products manufactured from them (e.g. butter, apple must and cider). In other words, the work incorporated in the processing of agricultural products is not taken into consideration under this heading.

2.060.

Where these processing activities are inseparable non-agricultural activities, the product of these processing activities is recorded in the value of the output of the agricultural industry (cf. 1.25). Basic agricultural products used as intermediate consumption by these processing activities are not recorded as either output or intermediate consumption. This rule stems from the fact that the two activities (the production of agricultural products and the processing of such products) cannot be distinguished on the basis of accounting documents. Accordingly, the costs of these two types of activity are entered together and their output is assessed as the output of processed products.

2.061.

This includes:

2.062.

►M3  Agricultural products processed by the agricultural unit in a separable way (i.e. giving rise to the formation of a local non-agricultural KAU) and consumed by farmers’ households are recorded in the output of the ‘Manufacturing’ industry (section C of NACE Rev. 2), as own final consumption. ◄ By contrast, agricultural household consumption of agricultural products processed in an inseparable way (i.e. the output of inseparable non-agricultural processing activities), is recorded as own final consumption of these activities (cf. 2.080) and included in the output of the agricultural industry.

2.063.

The imputed rental value of the owner-occupied housing unit is not recorded here but in the branch ‘Renting and operating of own or leased real estate’ (Class 68,20 of NACE Rev. 2). Renting of accommodation is a non-agricultural activity which is always considered to be separable from agricultural activity.

2.064.

This heading covers sales of agricultural products made by agricultural units to other units (agricultural or those of other branches), including sales to storage and intervention centres, with the exception of disposals of fixed assets. It is broken down into domestic sales outside the industry, domestic sales to other agricultural units and sales abroad.

2.065.

Consequently, for a given unit, sales correspond to the turnover obtained from the marketing of its output. ►M6  It should be noted that sales of animals classed as fixed assets, which are taken out of the productive herd (exports or slaughterings) are not recorded as sales. ◄ Animals classed as fixed assets and taken out of the productive herd are transferred into stocks before their sale, but the sales of these animals (slaughterings or exports) appear in the accounts as destocking, seen only in the capital account. The corresponding output had already been imputed as a part of own-account produced fixed capital goods ( 17 ) then recorded in the production account.

2.066.

Livestock considered to be stocks: the disposal of livestock considered to be stocks to another holding constitutes a sale in accordance with the definition given in 2.064. This sale may be offset by a removal from stocks if the livestock is recorded as stocks at the start of the reference period (otherwise, only sales are recorded).

2.067.

The acquisition of livestock is a stock entry if the products are not resold during the reference period. Acquired livestock, however, cannot be treated as intermediate consumption because, by definition, intermediate consumption goods are destined to disappear (or at least undergo substantial transformation) during the production process. These animals are regarded as work in progress since the livestock production process is not fully terminated (the production process finishes at the time of slaughter). Acquisitions are therefore recorded as stock entries of work (products) in progress and thus recorded as ‘negative’ sales and not as intermediate consumption. In the case of trading between resident holdings, sales and the corresponding purchases offset each other (except for the costs of transferring ownership) ( 18 ). In view of this special treatment of trade in live animals between agricultural units, there is no intermediate consumption under ‘livestock and animal products’  ( 19 ).

2.068.

Livestock classed as fixed assets: trade in fixed-asset livestock between agricultural units is not recorded in sales as defined above but as trade in assets (recorded in the capital account as GFCF of agriculture). In the case of trading between resident holdings, sales and corresponding purchases offset each other (except for the transfer costs).

2.069.

Recording of imports of live animals (not intended for immediate slaughter): as in the case of trade between resident holdings, livestock treated as stocks (other than animals for immediate slaughter) and imported during the reference period by agricultural units are recorded as stock entries of work in progress and are therefore deducted from sales. On the other hand, livestock classed as fixed assets (such as breeding animals) and imported as such, should not be deducted from sales.

2.070.

Nevertheless, as it is often difficult, in practice, to make relevant distinctions between the different categories of animals on the basis of available sources of EU data (between animals classed as fixed assets and those classed as stocks), all imports are considered to be of animals intended for building up stocks and the value of all imported animals (except those intended for immediate slaughter) is deducted from the value of sales. This method of recording guarantees treatment of external trade in live animals similar to that adopted for calculating gross indigenous production in animal production statistics.

2.071.

These only include:

2.072.

These are stocks of finished products or work in progress on the holdings of the industry (i.e. held by producers) at the end of the reference year. Stocks at different marketing stages (especially reserves held by dealers and processing firms) as well as intervention stocks should not be listed here.

2.073.

Products which are only temporarily stocked and are consumed in a later period within the industry (e.g. cereals for feed, seed and planting stock, etc) should also be entered here since the final use of the product is not known at the time of their entry in stocks.

2.074.

This entry is the sum of columns 7q to 11q.

2.075.

The change in stocks in the industry (excluding stocks at the various marketing stages) during the reference year is measured by calculating the difference between stock entries and withdrawals, or the difference between final and initial stocks. In the latter case other changes in volume and holding gains (net of losses) are to be deducted in the calculation of values (cf. 2.179 and following).

2.076.

In accordance with the concept of output and the rules for recording intra-unit consumption (cf. 2.049 and following), processing of agricultural products (cf. 2.059 and 2.060), and own final consumption (cf. 2.061, 2.062, 2.063), the output of agricultural activities can be depicted as follows:

2.077.

The ‘total output’ concept for measuring the output of agricultural activity includes trade in agricultural goods and services between agricultural units as well as intra-unit consumption of livestock feed products (marketable or not).

2.080.1.

According to ESA 2010, 3.82 Research and development (R & D) is creative work undertaken on a systematic basis to increase the stock of knowledge, and use of this stock of knowledge for the purpose of discovering or developing new products, including improved versions or developing new products, including improved versions or qualities of existing products, or discovering or developing new or more efficient processes of production. R & D of a significant size relative to the principal activity is recorded as secondary activity of a local KAU. A separate local KAU is distinguished for R & D where possible, which is not allocated to agricultural industry. For units having also R & D activities, if they cannot be allocated to a separate local KAU and if it is possible to estimate R & D expenditure on agricultural activities, these estimations should be recorded as agricultural output as ‘other inseparable non-agricultural secondary activities’ (own account production) and as GFCF.

2.118.

GFCF consists of resident producers' acquisitions, less disposals, of fixed assets during a given period plus certain additions to the value of non-produced assets realised by the productive activity of producer or institutional units (ESA 2010 3.125 to 3.129). Fixed assets are produced assets used in production for more than one year (cf. ESA 2010, 3.124 and Annex 7.1).

2.119.

The GFCF of a national economy is understood to mean the proportion of the gross domestic product (GDP) produced during the reference year which is intended to be used for a period of more than one year as a means of production in the production process (as distinct from the final consumption of private or public households, exports and changes in stocks). Consequently, goods which, although produced sometime in the past and therefore included in the national product, are put to a different use in the reference period, are not included in the GFCF of a national economy. A change of use or ownership does not imply that such goods become part of the domestic product a second time and in no way changes the total mass of fixed capital of the national economy as a whole. The inclusion of such transactions is, however, important in analyses by homogenous branch, industry or sector.

2.120.

If a change in ownership results in a different use (i.e. no longer as capital assets), there is a reduction in the capital assets of the national economy. The commonest instances of this are motor vehicles which households buy secondhand from producer units, shipping vessels which are sold secondhand to other countries, and also capital goods which have been broken up and put to some intermediate use. Since the new use in these cases forms part of the national product (final consumption, export or any other use depending on the type of goods produced from the scrap), the GFCF must be reduced as a result. This is why the ►M6  ESA 2010 ◄ uses the concept of net acquisitions of existing produced goods for calculating GFCF: this heading allows capital disposals, i.e. reductions in fixed capital to be taken into account.

2.121.

It is possible for net acquisitions of existing goods to be positive, in other words, to represent increases in the capital assets of the economy as a whole. This is the case, for example, when secondhand vehicles which have already been listed as final consumption in the national product are bought for use as fixed capital. Since sales of existing investment goods exceed purchases, net acquisitions are negative for the national economy as a whole. If, however, the GFCF is broken down by user branch, net acquisitions can be positive for some branches.

2.122.

The determination of the GFCF of sectors or branches of the economy is based on the criterion of ownership (acquisition, disposal) and not on that of the use of the goods. It should be noted that fixed assets acquired by financial leasing (but not those simply on hire) are treated as assets of the lessee if the lessee is a producer) and not of the lessor, who keeps a financial asset equivalent to a notional claim (cf. 2.109(d) and Chapter 15 of the ESA 2010 on the distinction between the different forms of hire of durable goods) ( 21 ).

2.123.

►M6  Application of the ownership criterion depends on the statistical system on the basis of which the GFCF is calculated. ◄ If it is data from purchasers, there will in theory be no difficulties (apart from the practical difficulty of recording all the investors). Often, however, (and this is particularly true of agriculture), it is information from producers of capital goods on their output or sales that is used as the basis for calculations. Apart from those cases where it is not clear whether a product belongs under the capital goods heading or not, it is also difficult to determine the actual purchaser since the nature of the capital goods gives only an indication of who the user is. In agriculture, therefore, there is the risk that capital goods will also be recorded which have not been acquired by agricultural holdings but by commercial enterprises for the purpose of hiring without operating staff.

2.124.

Acquisitions of fixed assets comprise new or existing fixed assets which have been acquired (purchased, acquired in barter transactions, received as capital transfers in kind or acquired as a financial lease), fixed assets produced and retained for the producer's own use, major improvements to fixed assets and to non-produced tangible assets, natural growth in agricultural assets (livestock and plantations) and costs associated with the transfer of ownership of non-produced assets (cf. ESA 2010, 3.125 (a)).

2.126.

►M6  The purchase or production for own account of a set of durable goods needed for an initial installation constitutes fixed capital formation. ◄ The stock of bottles of a brewery or wine-producing enterprise (excluding non-returnable bottles) for example, constitutes a mass of goods to be recorded as assets, although the value of each bottle is negligible. The same applies to seats and tables, crockery and cutlery of restaurants and the tools of an enterprise. The initial installation of these goods constitutes fixed capital formation: nevertheless, no fixed capital consumption is calculated in these cases because it is assumed that once this installation has been made, it will always keep the same value as a result of constant purchases of replacement items to make up for those which have been lost or become unusable. Current replacement purchases are recorded as intermediate consumption. This rule, which in theory is clear, is sometimes difficult to apply in practice as statistical data on production or sales do not give a clear idea of whether the goods in question have been bought for an initial installation or to replace existing items.

2.127.

Goods and services incorporated into existing fixed capital goods for the purpose of improving them, rebuilding or reconstructing them, prolonging their useful life or increasing their productivity, are recorded with the capital goods into which they are incorporated. This work is considered to be acquisition of new fixed assets. In principle, this heading includes all goods and services incorporated into fixed capital goods which go well beyond the scope of current maintenance and repair. Current maintenance is taken to mean all services which, in comparison with the normal lifetime of the capital goods, must be repeatedly provided at relatively short intervals in order to maintain the goods in serviceable condition. It covers, for example, the replacement of fast-wearing components of capital goods, external and internal painting, etc.

2.128.

The size of the sums spent on this maintenance is in no way a criterion for determining whether a service creates an asset or represents current maintenance, since in the case of high-value capital items, even services for current maintenance may be very costly (cf. 2.109(e)). Strictly speaking, the allocation of services performed on existing fixed capital goods either to the ‘current maintenance’ or ‘GFCF’ category should be determined by the interval which will elapse before the service has to be repeated, e.g. the replacement of parts which normally wear out within one year, such as the tyres of a truck, counts as current maintenance, whereas the replacement of an engine constitutes fixed capital formation, not because the value is higher but because an engine does not normally have to be replaced annually but only after several years. Recording a service of this kind under the assets heading (i.e. treatment as fixed capital formation and not as current maintenance) makes it possible to distribute the value uniformly over the entire period of use through the device of fixed capital consumption.

2.129.

The 2008 SNA specifies that improvements made to fixed assets should be determined either by the magnitude of the changes in the characteristics of the fixed assets — i.e. by major changes in their size, shape, performance, capacity or anticipated service life — or by the fact that improvements are not the kinds of changes that are observed to take place routinely in other fixed assets of the same kind, as part of ordinary maintenance and repair programmes (cf. 2008 SNA,10.43 and 10.46).

2.130.

Disposals of fixed assets comprise the sale, demolition, scrapping or destruction of fixed assets by their owner, or their surrender in barter or as capital transfers in kind (cf. ESA 2010, 3.125 (b) and 3.126). These disposals should normally lead to a change in ownership and have a direct economic purpose (therefore fixed assets which are demolished, scrapped or destroyed by their owner in order to be put to no further economic use are not included in these disposals) (cf. 2008 SNA, 10.38). However, some disposals may be kept within the same institutional unit, as in the case of animals slaughtered by a farmer and consumed by his family.

2.131.

GFCF is valued at purchaser prices (including the costs of transferring ownership, installation and other transfer charges) or, when produced on own account, it is valued at the basic prices of similar fixed assets (the basic price can be obtained from the sum of the costs incurred). Disposals should be recorded at the sales price, which should correspond to the purchaser price less the costs incurred in the transfer of ownership of assets, installation and transfer charges (cf. 2.130).

2.132.

The costs of transfer of ownership of assets constitute GFCF by the acquirer, even if some of the costs are paid by the seller. They comprise the expenditure incurred in order to take possession of the assets (installation and transport charges, etc.), fees and commissions of intermediaries (solicitors, experts, etc.) and taxes to be paid on intermediary services used in the transfer of ownership of assets.

2.133.

The GFCF of the acquirer comprises the value of the goods acquired (exclusive of transfer costs) plus the total transfer costs involved in the acquisition. Conversely, the GFCF of the seller only includes the value of the goods sold (exclusive of transfer costs) ( 22 ). In the case of non-produced assets (such as land, or patented assets such as production rights) which are not included in GFCF, these costs must be separated from the acquisition/disposal of these assets and recorded under a different heading as GFCF of the acquirer.

2.134.

The balance sheet, which provides an itemised list of the values of the assets held and commitments entered into, provides information on the different components of the change in the value of assets. ►M6  As defined in the balance sheets (cf. ESA 2010, 7.12 and 7.13) the change in the value of an asset between the end and beginning of an accounting period can be described as follows: ◄

2.135.

Nominal holding gains (net of losses) correspond to holding gains (net of losses) accumulated during the period considered and resulting from a change in the price of the asset whose economic and physical (quantitative and qualitative) characteristics remain unchanged over the period concerned. These changes are recorded in the revaluation account.

2.136.

The other changes in the volume of assets are flows which make it possible to record the discovery, deterioration or depletion of natural assets as well as the consequences of exceptional events which may modify the benefit drawn from assets. As far as the assets of the agricultural industry are concerned, changes in volume may be put into three main categories:

▼M7

▼B

2.137.

GFCF and consumption of fixed capital (cf. 3.098 to 3.106) are therefore not the only elements to take into account when analysing the change in the value of assets.

2.138.

The ESA 2010 distinguishes between several elements which should be recorded as GFCF (cf. ESA 2010, 3.127):

2.139.

For the EAA, a distinction is made between the following types of elements of GFCF:

2.140.

GFCF in agricultural assets concerns two types of assets (plantations and animals) which are used repeatedly and continually for the production of products such as fruit, rubber, milk, etc.: fruit trees, vines, hop fields, soft fruit plantations and asparagus beds. Christmas tree plantations (which only provide a finished product once) are not fixed assets, just as cereals and vegetables are not. Animals which serve as fixed assets include, for example, breeding animals, dairy cattle, sheep reared for their wool and draught animals (animals for slaughter, including poultry, are not fixed assets).

2.141.

According to ESA 2010 (3.125) GFCF in plantations corresponds to the value of acquisitions less disposals of natural assets yielding repeat products (such as fruit trees) which have reached maturity, plus the natural growth of such natural assets until they reach maturity (i.e. generate a product), during the accounting period concerned.

2.142.

This definition of GFCF corresponds to:

2.143.

The first two elements of GFCF in plantations represent own-account agricultural output of GFCF.

2.144.

Disposals of plantations (recorded as negative GFCF) may take two forms: they may be sales of standing plantations to other (agricultural) units, in which case only the costs associated with the transfer of ownership are entered in the EAA. The other possibility is for the plantations to have been felled. In this case, however, according to the general definition of disposals, felled plantations must have a direct economic use; in other words, a counter-entry is required in the form of a use in goods and services (such as a sale to an enterprise specialising in the sale of timber ( 23 )). In this second case, disposals of plantations to be recorded as negative GFCF should represent a modest amount.

2.145.

Consequently, in the majority of cases (i.e. except in the second case set out in 2.144), the value of the grubbings must not be deducted from the value of the investments in plantations. Investments intended for renewing existing plantations should be treated as investments and not as routine maintenance costs.

2.146.

The treatment of grubbings of plantations should be analysed in relation to the calculation of consumption of fixed capital. In accordance with the ►M6  ESA 2010 ◄ , there is consumption of fixed capital in the case of plantations corresponding to the depreciation of the plantations when they have reached maturity. Plantation grubbings ( 24 ) should therefore be interpreted as follows:

2.147.

The change in the value of plantations over the accounting period therefore comprises the following four components (cf. 2.134):

2.148.

Work in cultivated crop assets, i.e. plantations, is recorded either as sales, by enterprises specialising in such kind of agricultural contract work (with soil preparation, supply of machines, plant, labour, etc.), or as output of own-account produced fixed capital goods (cf. 1.75).

2.149.

GFCF for livestock corresponds to the following elements:

2.150.

In accordance with the ►M6  ESA 2010 ◄ , GFCF for livestock is a measure of the difference between livestock acquisitions (natural growth and imports) over the year, including those resulting from own-account production, and livestock disposals (for slaughter ( 27 ), export or any other final use), to which is added the cost of transfer of ownership ( 28 ). GFCF for livestock occurs throughout the animal's life. To begin with, the GFCF mainly consists of the natural growth of the animal. When it reaches the age of maturity, the GFCF is mainly measured by way of disposals (sales for slaughter or export). Imports, exports and costs associated with the transfer of ownership are components of GFCF for livestock which are likely to occur throughout the animal's useful life. The natural growth of livestock (and not the GFCF as a whole) constitutes own-account agricultural production of fixed assets in livestock.

2.151.

Measuring the GFCF for livestock only constitutes one element of the change in the value of assets. In fact, GFCF for livestock can only be measured via the change in the number of livestock valued at the average price for the calendar year for each livestock category (quantitative method), if the following conditions are met:

Another method of calculation (direct method) consists of measuring the flows of entries and withdrawals for each livestock category, at the corresponding prices: apart from acquisitions and disposals, this method has to take into account entries (in particular births) and withdrawals on the holdings.

2.152.

As a general rule, therefore, GFCF for livestock cannot be measured via the difference between the livestock values at the end and beginning of the accounting period. The rule for calculating the GFCF for livestock depends directly on the method adopted for recording and measuring the three elements of the change in the value of livestock (other than GFCF), and in particular the consumption of fixed capital element. ►M6  This is a deviation from the ESA 2010. ◄

2.153.

In the SNA, theoretically, consumption of fixed capital should be calculated for livestock ( 29 ). In actual fact, consumption of fixed capital for livestock corresponds to a measurement of the anticipated decline in productivity of livestock when used for production purposes, a reduction which in turn is reflected in the updated value of future income from this livestock. However, in view of the practical difficulties in evaluating consumption of fixed capital (the definition of the calculation parameters are very complex, cf. 3.105 and 3.106), no consumption of fixed capital should be calculated for productive livestock.

2.154.

GFCF for livestock may be measured by various methods. By using the perpetual inventory method, each of the GFCF elements defined in 2.149 (natural growth of livestock, imports, sales for slaughter and exports, costs associated with the transfer of ownership) can be valued very strictly. Nevertheless, it requires numerous data (such as the prices of productive livestock throughout their useful life). The same is true of methods based on the livestock production cycle. A simpler method therefore needs to be adopted, even if it is less strict.

2.155.

The recommended method employs an indirect calculation approach ( 30 ). It is based on calculating the change in the number of livestock and on the following two assumptions:

2.156.

The measurement of GFCF is made up of the sum of the following elements:

2.157.

The term ‘culling discount’ refers to the difference, at the time of their withdrawal from productive livestock, between the value of the livestock valued as productive animals (at what could be called a ‘capital’ price) and the value of the same livestock valued as animals intended for slaughter (i.e. at the slaughterhouse selling price).

2.158.

The term ‘other losses of productive livestock’ comprises two types of losses:

2.159.

The value of losses to be recorded in the calculation of GFCF corresponds to the difference between the value of livestock at the price prevailing at the start of the period and the disposal value of the animals. These disposals are valued at the selling price of animals which are slaughtered (i.e. for sale or own final consumption) or can have a zero value if they have no economic use (e.g. if they are disposed of, etc.).

2.160.

The terms ‘other losses of productive livestock’ and ‘culling discount’ correspond to flows which are recorded in the ‘other changes in the volume of assets’ account of the balance sheet. They provide a link between the different components of the change in the value of assets and the GFCF, and ensure conformity with the ►M6  ESA 2010 ◄ . Ignoring them would result in the real level of GFCF for livestock being underestimated.

2.161.

The estimation of own-account production of fixed capital in livestock, which corresponds to the natural growth of animals, is derived from the definition of the GFCF for livestock set out in 2.149 applied to categories of animals which are not yet fully mature:

Own-account production = GFCF + disposals (slaughterings and exports) — acquisitions (imports) ( 31 ) — (cost of transfer of ownership).

2.162.

Fixed assets other than agricultural assets (plantations and livestock) comprise the following elements:

2.163.

GFCF corresponds to the acquisition of these assets (new assets produced or imported during the accounting period, or existing assets) less transfers to other units (of the agricultural industry or other industries). It should be recalled that if this transaction concerns two units of the agricultural industry during the same accounting period, the two flows cancel each other out and only the costs associated with the transfer of ownership are recorded under the corresponding fixed asset heading.

2.164.

In the case of construction or capital goods (intended for sale) whose production is spread over several periods, the value of the work performed in the period of production is to be recorded in the change of stocks of the producer in the form of work in progress. These goods (whether movable or immovable) are not recorded in GFCF until the ownership has been transferred. By contrast, when this production is own-account, this work is recorded as GFCF during the entire production period (cf. 2.025).

2.165.

Assets whose economic use changes without any change in ownership taking place (e.g. when a farm building is used for purposes other than an agricultural production activity) are not recorded as disposals of assets. These changes are recorded in the ‘other changes in the volume of assets’ account.

2.166.

Major improvements in non-produced tangible assets correspond mainly to land improvement (better quality of land and higher yield through irrigation, drainage and flood prevention measures, etc.) and should be treated like any other GFCF (ESA 2010, 3.128).

2.167.

These investments correspond to expenditure on the improvement of land and its preparation for other productive uses, with the exception of expenditure on routine maintenance (cf. 2.127 to 2.129). This expenditure has to be made by holders or the result of this expenditure has to become their property. ►M6  This concerns in particular expenditure on infrastructure works such as clearance, levelling, drainage, irrigation and consolidation (cf. ESA 2010, 3.128 and 2008 SNA, 10.79 to 10.81). ◄

2.168.

Costs associated with the transfer of ownership of non-produced assets refer to acquisitions of land and non-produced intangible assets (such as patented assets, production rights, etc.) by agricultural units. These acquisitions are not recorded as GFCF (but under another heading of the capital account, because they are non-produced assets) and only the costs associated with the transfer of ownership are recorded as GFCF (for the acquirer, but not for the seller).

2.168.1.

Research and development consists of the value of expenditure on creative work undertaken on a systematic basis in order to increase the stock of knowledge, and use of this stock of knowledge to devise new applications. Unless the value can be reasonably estimated it is, by convention, valued as the sum of the costs, including those of unsuccessful research and development (cf. ESA 2010 Annex 7.1).

2.169.

The following goods and services are not included in GFCF:

▼M6

▼B

▼M6

▼B

2.170.

The value of fixed capital goods used simultaneously for professional and private purposes (motor vehicles, for example) is recorded in accordance with their two possible types of use; partly as GFCF and partly, as final consumption.

2.171.

Stocks comprise all goods which do not form part of fixed capital and are held by producer units at a given moment. A distinction is made between two types of stocks: input stocks and output stocks:

2.172.

Not recording growing crops as work in progress is justified for European agriculture by the fact that a very large majority of crops have a production cycle which is shorter than an accounting period. It is also felt that recording them at the time of harvesting allows sufficient consistency with production costs to be maintained in the analysis of income from the activity (cf. 2.012). When the harvest, soil preparation and sowing operations are carried out in different accounting periods, the accounts of the period in which the costs occurred show an accounting loss and those of the harvest period an accounting profit. This accounting method may, however, be accepted because if the conditions remain the same from one year to another an approximate balance is established in that expenditure is offset in the same period by the profit from the sale of the previous harvest. Only in the event of a substantial change in production or in cases of very poor harvests does this compensation not occur. Under such circumstances, the recording of output as work in progress might be indicated (see also 2.013).

2.173.

It should be noted that services are not entered as stocks except for those included in the purchase value of goods placed into stock.

2.174.

According to the ►M6  ESA 2010 ◄ , changes in stocks are measured by deducting from the value of stock entries the value of stock withdrawals and any recurrent losses of goods in stock.

2.175.

Stock entries should be valued at the date of entry into stock and withdrawals should be valued at the prices prevailing when withdrawn from stocks. The time of recording (and valuation) of stock entries and withdrawals should be consistent with that of other transactions in products (output and intermediate consumption).

2.176.

The basic price is the price to be used for valuing changes in stocks (entries, withdrawals or recurrent losses of finished products or work in progress). As regards entries of work in progress, the price used should be estimated by applying the fraction of the total production cost incurred by the end of the period to the basic price of a similar finished product. ►M6  Alternatively, the value of the entries of work in progress can be estimated by the value of the production cost with a mark-up for expected operating surplus or (estimated) mixed income (cf. ESA 2010, 3.47 and 3.48). ◄

2.177.

The method recommended in the ►M6  ESA 2010 ◄ for recording stock entries and withdrawals is the perpetual inventory method. However, this solution is not generally applicable in view of the difficulty in obtaining information on entries and withdrawals. In an attempt to get into line with the perpetual inventory method, the ►M6  ESA 2010 ◄ recommends a ‘quantitative’ method which consists in measuring changes in stocks as the difference in volume between the stocks at the opening and closing of the accounting period, valued at the average prices in force during the period concerned. However, this method is only applicable if prices remain stable over the period under consideration or if the prices and quantities stocked increase or decline at a constant rate during the accounting period.

2.178.

This ‘quantitative method’ cannot be applied to crop production because of the fluctuation in prices and quantities resulting from the production process and the structure of supply and demand. ►M6  This problem which is specific to agriculture is recognised by the ESA 2010 (cf. 3.153 (c)). ◄

2.179.

It should also be considered that a change in stocks, as defined in 2.174, is only one of the components of the change in the value of stocks between the start and end of the accounting period. There is in fact a basic accounting equation which connects the opening and closing figures for stock assets:

2.180.

These nominal holding gains and losses and other changes in volume ( 32 ) should not be included in the measurement of output, but in the account of other changes in assets (respectively, in the revaluation account and in the other changes in the volume of assets account).

2.181.

The main difficulty in valuing the change in stocks in the EAA concerns crop products. These products are in fact seasonal products whose entries into stocks only occur after the harvest and whose withdrawals are spread over several months after the harvest and often continues into the next accounting year. Their price may also be subject to substantial fluctuations from one period to another, or even within the same period.

2.182.

When valuing changes in stocks of livestock, it is not very important whether the animals were reared from birth within the country or were imported when young and then reared and fattened in the country. When the imported animals are taken over by the holding which continues rearing them on the national territory, the animals are ‘nationalised’ and consequently assimilated to domestic production.

2.183.

To evaluate changes in the herd at the end of the reference period, a distinction has to be drawn between the ‘stocks’ herd and the ‘fixed assets’ herd (cf. 2.140 and 2.202). The value at basic prices for the first category of animal should be considered to be the sum of the production costs throughout the life of the average animal in the different livestock classes up to and including the reference year, plus a mark-up for the estimated operating surplus or an estimate of mixed income (cf. 2.176). If an animal was originally imported before its period in the national territory, the purchaser price at the time of import can be regarded as representing the sum of the production costs up to that date.

2.184.

Because of the generally regular changes in the prices of animals, it is possible to evaluate the change in livestock stocks by a simple approximation method which excludes nominal holding gains (net of losses). For each category of animal, the change in population between the end and the start of the accounting year is multiplied by the average price observed over the reference period.

2.185.

Seasonal products (cf. 2.178 and 2.181) are products for which the quantitative method does not constitute a good approximation of the perpetual inventory in view of the irregular change in prices and quantities. The application of the quantitative method could lead to the inclusion of nominal holding gains or losses in the measurement of the change in stocks. One solution could consist in measuring the change in stocks over shorter periods than the reference period (for example, each quarter), subperiods which would have more even price and quantity trends. Nevertheless, this type of method is often difficult to apply because of a lack of basic data.

2.186.

Another method of evaluating stocks of seasonal products is that of examining the trend in the prices of stocked goods. The price of a good may change during storage for at least three reasons (2008 SNA, 6.143):

2.187.

The difference between the price at which products are put into stock and the price at which they are withdrawn should reflect the additional output value produced during storage (2008 SNA, 6.143), since products withdrawn from storage several months after harvest are different, in economic terms, from those which have been stored. This type of increase in the value of products should not be counted as a nominal holding gain.

2.188.

On the basis of the different components of the change in the value of stocks and factors determining changes in the prices of products held in stock, and in view of the difficulty in fully excluding the recording of holding gains or losses from the valuation of seasonal output, two methods are recommended. They differ in their interpretation of the storage activity and the time for recording the change in the value of the goods resulting from their stay in stocks. The first method constitutes the reference method to be applied in valuing output and changes in stocks of seasonal agricultural production. The second method may be used for more specific cases (mainly products whose prices are difficult to predict).

2.189.

The reference method consists in determining the change in stocks as the difference between the value of output for the year and the value of sales (and other uses) for the same year ( 33 ). It is founded on the assumption that there are no stocks left over at the end of the marketing year (the end of the first half of the following calendar year). It involves directly evaluating total output harvested during year n using the weighted average price for the marketing year (n/n + 1) and deducting from this the value of all sales (and other uses) made during calendar year n corresponding to the year of harvest ( 34 ) at the prices applicable at the time of sale (or other uses).

2.190.

The reference method treats the storage activity as a factor for raising the prices of goods during storage. It thus makes a distinction between the storage activity and its effects on product prices. The increase in value resulting from the stay in storage is ‘anticipated’ since it is allocated to the output of year n (i.e. the year of harvest, even though the sales are spread over two calendar years), it being possible to anticipate price trends without too much uncertainty because they result from fairly regular and predictable changes (cf. 2.186).

2.191.

The application of this method makes it possible to minimise the inclusion of holding gains or losses in the measurement of output. It ensures consistency between the calculations of output in value and quantity and avoids the recording of output on the basis of work in progress (requiring data on the level of stocks at the start and end of the calendar year, with corresponding prices). It also facilitates the elaboration of accounts in constant prices.

2.192.

A second method is recommended in the specific case of products whose prices are difficult to predict (such as fruit, vegetables, potatoes and olive oil) and whose storage on agricultural holdings reaches economically significant levels. This method is less strict than the reference method in excluding holding gains and losses from the measurement of output; it considers the storage activity to be an extension of the production process in time. The inclusion of the increase in prices of stored goods is delayed and allocated to the year in which the storage took place.

2.193.

By this second method, seasonal output is calculated directly as the sum of sales, other uses and changes in stocks. Stock changes are estimated by valuing the stocks at the end and start of the accounting period on the basis of their current prices.

2.194.

It should be noted that these two methods differ in the way they measure the change in stocks but not in the valuation of sales (which are valued at the basic prices applicable on withdrawal from stocks).

2.195.

Wine is a product which is generally stocked for several years for ageing and maturing. During this storage period, the quality changes. This storage activity at the holding can be regarded as an extension of the wine production process since the wine leaving storage is different from the wine which entered. Stored wine should therefore be treated as work in progress and the increase in value which is then determined should be regarded as an increase in output to be measured continuously over time.

2.196.

The change in the value of wine may result from three factors: the change in its quality, changes in the structure of supply and demand (i.e. relative prices between young and aged wines), and a general increase in prices. Whilst the change in the value of wine due to the first two factors should be included in the measurement of output, any increase in the price of wine due to a general increase in wine prices should not be reflected in the value of output but treated as a holding gain (recorded in the revaluation account).

2.197.

Recording the increase in the value of wine in the value of output should be done throughout the course of the ageing process. However, this would mean having a large amount of data available on the structure of wine stocks based on their production year, quality and production area, as well as on the development of their respective prices. As these data are not generally available in the Member States, two practical methods have been developed which allow the increase in the value of wine due to ageing to be calculated approximately for the EAA. Although not so strict from the conceptual point of view, these two methods nonetheless appear to be acceptable in the current situation regarding availability of data. The choice of each Member State will depend on the structure of its wine-growing industry and statistical system.

2.198.

Anticipation of the increase in value from wine-ageing: the first method is to value stock entries of wines to be aged by the producer, using the selling prices of wines which have already been aged, as observed in the second half of the year. The expected increase in value is anticipated in the output of the year of harvest. This increase is only partial since these wines are not valued at their real selling prices but at the prices of other wines of the same type but older. The difference between their real selling price and that used for evaluating stock entries is not counted in the value of output, since it is interpreted as holding gain (NB: this difference includes the effects of inflation). Since it makes no distinction depending on the harvest year of the stocked or sold wine, it assumes that the quality wine market is even in terms of age of the wine.

2.199.

Delay in taking into account wine ageing: the second method is to value stock entries at the price of ‘unaged’ wines at the time of harvesting and not to record an addition to the wine work in progress (i.e. the increase in price due to ageing, irrespective of the effect of the general change in the price of wine) until the aged wine is sold. Since sales are valued at the average price for the year, any increase in value between the harvest year and the year of sale is recorded in the output of the year of sale (and is therefore not distributed over time). This method requires more data on the structure of wine stocks as it assumes that the distribution of stocks (and stock withdrawals) is known for each harvest year. Nevertheless, it can provide a more accurate idea of sales and stocks of different vintages.

2.200.

Neither of these two practical methods allows the increase in the value of wine from ageing to be distributed over time: one records it in advance and the other after a delay. This disadvantage can be regarded as a relatively minor one in both cases if it is assumed that there is a certain stability over time in the production of ‘aged’ wine. The first method appears to be preferable when the average ageing period is short.

2.201.

As mentioned in 2.140 and 2.151, changes in the number of livestock (for agricultural statistical purposes) are entered either as GFCF or as changes in stocks depending on the type of animal.

(a)

(b)

1.   Animals identifiable as fixed assets:

2.   Animals identifiable as stocks:

3.   Treatment to be adopted:

(c)

(d)

3.037.

The following concepts for the standard VAT system apply also to the flat-rate systems:

3.038.

►M6  The provisions of the ESA 2010, 4.17 lay down a single method of recording VAT. ◄ This is the ‘net’ system, whereby output and input prices are recorded exclusive of deductible VAT.