Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community

• 8.27. In the case of general government and non-profit institutions serving households, this account concerns only their market activities.

• 8.28. Entrepreneurial income corresponds to the operating surplus or mixed income (on the resources side):

Property income payable in the form of dividends or reinvested earnings on direct foreign investment is not deducted from entrepreneurial income.

Allocation of other primary income account (II.1.2.2)

• 8.29. The purpose of the allocation of other primary income account is to return from the concept of entrepreneurial income to the concept of primary income. It therefore contains the elements of primary income not included in the entrepreneurial income account:

• (a) in the case of corporations, distributed dividends and reinvested earnings on direct foreign investment (on the uses side);

• (b) in the case of households:
• 1. property income payable, excluding rents and interest payable in connection with the entrepreneurial activity (on the uses side);
• 1. compensation of employees (on the resources side);
• 1. property income receivable, excluding that receivable in connection with the activity of the enterprise (on the resources side);

• (c) in the case of general government:
• 1. property income payable, excluding that payable in connection with market activities (on the uses side);
• 1. taxes on production and imports less subsidies (on the resources side);
• 1. property income receivable, excluding that receivable in connection with market activities (on the resources side).

Secondary distribution of income account (II.2)

• 8.30. The secondary distribution of income account shows how the balance of the primary income of an institutional sector is allocated by redistribution: current taxes on income, wealth etc., social contributions and benefits (excluding social transfers in kind) and other current transfers.

• 8.31. The balancing item of the account is disposable income, which reflects current transactions and explicitly excludes capital transfers, real holding gains and losses and the consequences of events such as natural disasters.

• 8.32. Social contributions are recorded (¹⁶²) on the uses side of the secondary distribution of income account of households and on the resources side of the secondary distribution of income account of the institutional sectors responsible for management of social insurance. When payable by employers for their employees, they are first included under compensation of employees, on the uses side of the employers' generation of income account, since they form part of wage costs; they are also recorded, as compensation of employees, on the resources side of the households' allocation of primary income account, since they correspond to benefits to households.

Table 8.5 — Accounts II.1.2.1: Entrepreneurial income and II.1.2.2: Allocation of other primary income

Table 8.6 — Account II.2: Secondary distribution of income account

Table 8.7. — Account II.3: Redistribution of income in kind account

Redistribution of income in kind account (II.3)

• 8.33. The redistribution of income in kind account gives a broader picture of households' income by including the flows corresponding to the use of individual goods and services which these households receive free of charge, i. e. social benefits in kind and transfers of individual non-market goods and services, these two categories of flows being grouped together under the concept of social transfers in kind. This facilitates comparisons over time when there are differences or changes in economic and social conditions, and supplements the analysis of the role of general government in the redistribution of income.

• 8.34. Social transfers in kind are recorded on the resources side of the redistribution of income in kind account in the case of households, and on the uses side in the case of general government and non-profit institutions serving households.

• 8.35. The balancing item in the redistribution of income in kind account is adjusted disposable income.

Use of income account (II.4)

• 8.36. For the institutional sectors with final consumption, the use of income account shows how disposable income (or adjusted disposable income) is divided between final consumption expenditure (or actual final consumption) and saving.

• 8.37. In the system, only government, NPISHs and households have final consumption. In addition, the use of income account includes, for households and for pension funds, an adjustment item (D.8 Adjustment for the change in the net equity of households in pension funds reserves) which relates to the way that transactions between households and pension funds are recorded (¹⁶³).

Use of disposable income account (II.4.1)

• 8.38. The use of disposable income account includes the concept of final consumption expenditure financed by the various sectors concerned: households, general government and non-profit institutions serving households.

• 8.39. The balancing item in the use of disposable income account is saving.

Use of adjusted disposable income account (II.4.2)

• 8.40. The use of adjusted disposable income account includes the concept of actual final consumption, which corresponds to the value of the goods and services actually at the disposal of households for final consumption, even if their acquisition is financed by general government or non-profit institutions serving households.

Consequently, the actual final consumption of general government corresponds only to collective final consumption. Since final consumption expenditure by non-profit institutions serving households is regarded as entirely individual, their actual final consumption is zero.

• 8.41. At the level of the total economy, final consumption expenditure and actual final consumption are equal; it is only the distribution over the institutional sectors which differs. The same is true of disposable income and adjusted disposable income.

• 8.42. Saving is the balancing item in both versions of the use of income account. Its value is identical for all sectors, regardless of whether it is obtained by subtracting final consumption expenditure from disposable income or by subtracting actual final consumption from adjusted disposable income.

Table 8.8 — Account II.4.1: Use of disposable income account

• 8.43. Saving is the (positive or negative) amount resulting from current transactions which establishes the link with accumulation. If saving is positive, non-spent income is used for the acquisition of assets or for paying off liabilities. If saving is negative, certain assets are liquidated or certain liabilities increase.

ACCUMULATION ACCOUNTS (III) (¹⁶⁴)

• 8.44. The accumulation accounts are flow accounts. They record the various causes of changes in the assets and liabilities of units and the change in their net worth.

• 8.45. Changes in assets are recorded on the left-hand side of the accounts (plus or minus), changes in liabilities and net worth on the right-hand side (plus or minus).

Capital account (III.1)

• 8.46. The capital account records acquisitions less disposals of non-financial assets by resident units and measures the change in net worth due to saving (final balancing item in the current accounts) and capital transfers.

• 8.47. The capital account makes it possible to determine the extent to which acquisitions less disposals of non-financial assets have been financed out of saving and by capital transfers. It shows a net lending corresponding to the amount available to a unit or sector for financing, directly or indirectly, other units or sectors, or a net borrowing corresponding to the amount which a unit or sector is obliged to borrow from other units or sectors.

Change in net worth due to saving and capital transfers account (III.1.1)

• 8.48. This account makes it possible to determine the change in net worth due to saving and capital transfers, which corresponds to net saving plus capital transfers receivable, minus capital transfers payable.

Acquisitions of non-financial assets account (III.1.2)

• 8.49. This account records acquisitions less disposals of non-financial assets in order to return from the concept of change in net worth due to saving and capital transfers to net lending or borrowing.

Financial account (III.2)

• 8.50. The financial account records, by type of financial instrument, the changes in the financial assets and liabilities that compose net lending or borrowing.

• 8.51. The classification of assets and liabilities used in the financial account is identical to that used in the balance sheets.

Other changes in assets account (III.3)

• 8.52. The other changes in assets account records changes in assets and liabilities of units, other than in connection with saving and voluntary transfers of wealth, these being recorded in the capital and financial accounts. It is divided into two: the other changes in volume of assets account (III.3.1) and the revaluation account (III.3.2).

Table 8.9 — Account II.4.2: Use of adjusted disposable income account

Table 8.10 — Account III.1.1: Change in net worth due to saving and capital transfers account

Table 8.11 — Account III.1.2: Acquisition of non-financial assets account

Table 8.12 — Account III.2: Financial account

Other changes in volume of assets account (III.3.1)

• 8.53. The movements recorded in the other changes in volume of assets account affect the net worth of the balance sheets of the units, sectors and subsectors concerned. This change, called change in net worth due to other volume changes of assets, is the balancing item in the account.

Revaluation account (III.3.2)

• 8.54. The revaluation account records changes in the value of assets and liabilities due to changes in their prices.

For a given asset or liability, this change is measured as:

• (a) either the difference between its value at the end of the accounting period and its value at the start of the accounting period or the date on which it was first entered in the balance sheet;

• (b) or the difference between its value at the date on which it was written out of the balance sheet and its value at the start of the accounting period or the date on which it was first entered in the balance sheet.

This difference is called ‘nominal holding gain (or loss)’.

A nominal holding gain corresponds to the positive revaluation of an asset or the negative revaluation of a (financial) liability.

A nominal holding loss corresponds to the negative revaluation of an asset or the positive revaluation of a (financial) liability.

• 8.55. The flows recorded in the revaluation account change the net worth of the balance sheets of the units concerned. This change, called ‘change in net worth due to nominal holding gains and losses’, is the balancing item in the account. It is recorded on the changes in liabilities and net worth side.

• 8.56. The revaluation account is broken down into two sub-accounts: the neutral holding gains and losses account (III.3.2.1) and the real holding gains and losses account (III.3.2.2).

Neutral holding gains and losses account (III.3.2.1)

• 8.57. The neutral holding gains and losses account records changes in the value of assets and liabilities in proportion to changes in the general price level. Such changes correspond to the revaluation necessary to maintain the general purchasing power of assets and liabilities. The general index price to be applied for this calculation is the price index for final national uses, excluding changes in inventories.

Real holding gains and losses account (III.3.2.2)

• 8.58. Real holding gains and losses measure the difference between nominal holding gains and losses and neutral holding gains and losses.

• 8.59. If the nominal holding gains net of the nominal holding losses on a given asset exceed the neutral holding gains net of the neutral holding losses, there is a real holding gain on the asset for the unit holding it. This gain reflects the fact that the actual price of the asset has, on average, risen faster than the general price level. Conversely, a drop in the relative price of the asset produces a real holding loss for the unit holding it.

By the same token, a rise in the relative price of a liability produces a real holding loss on liabilities, while a drop in the relative price of a liability generates a real holding gain on liabilities.

Table 8.13 — Account III.3.1: Other changes in volume of assets account

Table 8.14 — Account III.3.2: Revaluation account