Statistical Methods, Standards and Guidelines 38
determine what activities are performed, how they are performed and how long it takes to perform such activities. The time use data can be used in policy analysis in relation to economic and social policies such as those relating to employment and unemployment, services for children, the elderly and people with disabilities, and provision of basic household services such as electricity and water that obviate the need for manual collection of fuel and water for household use.
3.4
HARMONIZED COMMODITY DESCRIPTION AND CODING SYSTEM (HS)
Harmonized commodity description and coding System (HS) was adopted by Customs
Cooperation Council in June 1983, it was recommended by the UN Statistical Commission as the
commodity classification for Compilation and Dissemination of international merchandise trade
statistics (IMTS).
HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.
The objective and uses of HS Harmonized commodity description and coding System is extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade.
3.5
STANDARD INTERNATIONAL TRADE CLASSIFICATION (SITC)
Standard International Trade Classification (SITC) is a classification of goods used to classify the
exports and imports of a country to enable comparing different countries and years. The
classification system is maintained by the United Nations.
The commodity groupings of SITC reflect:
(i)
The materials used in production;
(ii)
The processing stage;
(iii)
Market practices and uses of the products;
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(iv) The importance of the commodities in terms of world trade; and (v) Technological changes.
The Objective and uses of SITC The SITC was developed by the United Nations with the intention of classifying traded products not only on the basis of their material and physical properties, but also according to which stage of processing, as well as their economic functions in order to facilitate economic analysis.
The Economic and Social Council of the UN upon the recommendation of the Statistical Commission urged all governments to make use of the Original SITC. By 1960, many countries were compiling international merchandise trade data according to original SITC or national classifications correlated to it and major international organizations had on adopted SITC as a basis for the reporting of international trade statistics. Some countries also used the Original SITC as the basis of their customs nomenclatures.
3.6
CENTRAL PRODUCT CLASSIFICATION (CPC)
The Central Product Classification (CPC) is a product classification for goods and services
promulgated by the United Nations Statistical Commission. It is intended to be an international
standard for organizing and analyzing data on industrial production, national accounts, and trade
prices.
The objective and uses of CPC Central Product Classification is intended to provide a framework for international comparison of various kinds of statistics dealing with goods, services and assets. Basically, CPC is intended to be used for different types of statistics, for example, industrial statistics and national accounts, price statistics, foreign trade statistics (including trade in services) and balance-of-payments statistics.
Another main characteristic of CPC is that it contains a description of services. No international classification of services covering the whole spectrum of outputs of heterogeneous service industries and serving the different analytical needs of the various types of statistics has been available until now. Rapid technological progress in many service industries has led to new services and service packages being offered, such as financial services, computer services,
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consultancy and advisory services in many fields, technical services and other business services. For data collection and compilation on such outputs, it is essential to attempt to describe these services as accurately as possible to clarify the basic underlying concepts.
3.7
THE SYSTEM OF NATIONAL ACCOUNTS (SNA)
The System of National Accounts (SNA) is the internationally agreed standard set of
recommendations on how to compile measures of economic activity in accordance with strict
accounting conventions based on economic principles. The SNA describes a coherent, consistent
and integrated set of macroeconomic accounts in the context of a set of internationally agreed
concepts, definitions, classifications and accounting rules.
The SNA provides an overview of economic processes, recording how production is distributed among consumers, businesses, government and foreign nations. It shows how income originating in production, modified by taxes and transfers, flows to these groups and how they allocate these flows to consumption, saving and investment. Consequently, the national accounts are one of the building blocks of macroeconomic statistics forming a basis for economic analysis and policy formulation.
The objective and uses of SNA The main objective of the SNA is to provide a comprehensive conceptual and accounting framework, which can be used to create a macroeconomic database suitable for analyzing and evaluating the performance of an economy. The existence of such a database is a prerequisite for informed, rational policy-making and decision taking.
Accounts and their corresponding economic activities
The sequence of accounts Current accounts These accounts record the production of goods and services, the generation of incomes by production, the subsequent distribution and redistribution of incomes among institutional units, and the use of incomes for purposes of consumption or saving.
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Production account The production account records the activity of producing goods and services as defined within the System. Its balancing item, gross value added, is defined as the value of output less the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry or sector. Gross value added is the source from which the primary incomes of the System are generated and is therefore carried forward into the primary distribution of income account. Value added may also be measured net by deducting consumption of fixed capital.
Distribution and use of income accounts These consist of a set of articulated accounts showing how incomes are: (i) Generated by production (ii) Distributed to institutional units with claims on the value added created by production (iii) Redistributed among institutional units, mainly by government units through social security contributions and benefits and taxes
(iv) Eventually used by households, government units or non-profit institutions serving households (NPISHs) for purposes of final consumption or saving.
Accumulation accounts These are flow accounts that record the acquisition and disposal of financial and non-financial assets and liabilities by institutional units through transactions or as a result of other events:
(i)
The capital account records acquisitions and disposals of non-financial assets as a
result of transactions with other units or internal bookkeeping transactions linked to
production (changes in inventories and consumption of fixed capital).
(ii)
The financial account records acquisitions and disposals of financial assets and
liabilities, also through transactions.
(iii)
A third account, the other changes in assets account, consists of two sub-accounts.
The first, the other changes in volume of assets account, records changes in the
amounts of the assets and liabilities held by institutional units or sectors as a result
of factors other than transactions; for example, destruction of fixed assets by
natural disasters. The second, the revaluation account, records those changes in the
values of assets and liabilities that result from changes in their prices.
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Balance sheets The balance sheets show the values of the stocks of assets and liabilities held by institutional units or sectors at the beginning and end of an accounting period. As already noted, the values of the assets and liabilities held at any moment in time vary automatically whenever any transactions, price changes or other changes affecting the volume of assets or liabilities held take place. These are all recorded in one or another of the accumulation accounts so that the difference between the values in the opening and closing balance sheets is entirely accounted for within the System, provided, of course, that the assets and liabilities recorded in the balance sheets are valued consistently with the transactions and other changes - that is, at current prices.
Activities and transactions The accounts of the System are designed to provide analytically useful information about the behaviour of institutional units and the activities in which they engage, such as production, consumption and the accumulation of assets. They usually do this by recording the values of the goods, services or assets involved in the transactions between institutional units that are associated with these activities rather than by trying to record or measure the physical processes directly. For example, the accounts do not record the physical consumption of goods and services by households - the eating of food or the burning of fuel within a given time period. Instead, they record the expenditures that households make on final consumption goods and services or, more generally, the values of the goods and services they acquire through transactions with other units, whether purchased or not.
Data on transactions provide the basic source material from which the values of the various elements in the accounts are built up or derived. The use of transactions data has important advantages. First, the prices at which goods and services are exchanged in transactions between buyers and sellers on markets provide the information needed for valuing, directly or indirectly, all the items in the accounts. Secondly, a transaction that takes place between two different institutional units has to be recorded for both parties to the transaction and therefore generally appears twice in a system of macroeconomic accounts. This enables important linkages to be established in the System.
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3.8 CLASSIFICATION OF THE FUNCTIONS OF GOVERNMENT (COFOG) The Classification of the Function of Government is a detailed classification of the functions, or socioeconomic objectives, that general government units aim to achieve through various kinds of expenditure. COFOG is integral to the GFS presentation. It is one of a family of four classifications referred to as classification of expenditure according to purpose.
The classification codes of COFOG are somewhat different from the structure of other GFS classification codes. The functions are classified using a three-level scheme. There are 10 first- level, or two-digit, categories, referred to as divisions. Examples are health (Division 07) and social protection (Division10). Within each division, there are several groups, or three-digit categories, such as hospital services (Group 073) and sickness and disability (Group101). Within each group, there are one or more classes, or four-digit categories, such as nursing and convalescent home services (Class 0734) and disability (Class 1012). In the GFS framework, the prefix "7" has been added to align the COFOG codes with other GFS classification codes. All three classification levels and detailed descriptions of the contents of each class are presented below.
The objective and uses of COFOG COFOG permits trends in government expenditure on particular functions or policy purposes to be examined over time. Conventional government accounts are not usually suitable for this purpose because they reflect the organizational structure of governments. Not only might time series be distorted by organizational changes, but at a specific time some organizations may be responsible for more than one function, and responsibility for one function might be divided among several organizations. For example, if a government establishes a new department that brings together some of the functions previously administered by several departments or at several levels of government, it will not usually be possible to use conventional government accounts to compare expenditure on these purposes over time.
COFOG is also used for making international comparisons of the extent to which governments are involved in particular economic and social functions. Just as COFOG avoids the problems of organizational changes in a single government, so too does it avoid the problems of organizational differences among countries. In one country, for example, all functions connected with water