Regulation (EC) No 138/2004 of the European Parliament and of the Council of 5 December 2003 on the economic accounts for agriculture in the Community (Text with EEA relevance)

• 1.89. Animal husbandry performed on farms for remuneration (the provision of land for livestock) is agricultural contract work since it is part of the agricultural production process. This heading does not, however, include the private rearing and care of saddle horses, since these activities do not constitute the production of goods but a genuine service within the meaning of the  ESA 2010 (section R of NACE Rev. 2).

• 1.90. The type of compensation paid to the persons performing contract work is unimportant. It does not in any way have to be fixed remuneration (i.e. a wage in the strict sense); the compensation can perfectly well take the form of profit-sharing or a mixed formula (for example, a farmer who fattens calves in return for compensation generally receives a fixed amount for each animal plus a share in net profit). Compensation can also take the form of a specified share of the output.

• 1.91. Nevertheless, the work must always be performed by independent enterprises: work performed by the holding's paid employees does not fall into this category. From the point of view of the holding, remuneration for such work (for example, work done by a paid herdsman) is a wage cost and appears under the heading ‘compensation of employees’. By contrast, work performed by an enterprise which carried out milking on a contract basis for other agricultural holdings is recorded in the EAA both as output (sales of services), from the point of view of the contractor, and as intermediate consumption (purchase of services), from the point of view of the agricultural holding.

(d) Group 01,7: Hunting, trapping and related service activities

• 1.92. This group of activities comprises the following activities: (i) hunting and trapping on a commercial basis; (ii) taking of animals (dead or alive) for food, fur or skin, or for use in research, in zoos or as pets; (iii) production of fur skins or reptile or bird skins from hunting or trapping activities. It should be noted that the production of hide and leather from slaughterhouses and hunting performed as a sports or recreation activity are not included as characteristic activities of the agricultural industry. Additionally, the ‘hunting’ group does not comprise the breeding of game on holdings, which should be recorded under class 01,49 ‘Raising of other animals’.

5. Discrepancy between the EAA agricultural industry and the agricultural branch of the central framework of the national accounts

• 1.93. The EAA agricultural industry, as defined in Sections 1.62 to 1.66, differs in some respects from the branch as defined for national accounts purposes. The differences relate to the definition of both characteristic activities and units. They can be summarised as follows:

EAA agricultural industry = NA agricultural branch (Nace Rev.2 Division 01)

• — Production of units providing associated agricultural services other than agricultural contract work (e.g. the operation of irrigation systems)

• — Units for which the agricultural activity represents solely a leisure activity and which are included in national accounts, cf. ESA 2010, 3.08

• • Production of units producing wine and olive oil (exclusively using grapes and olives grown by the same unit (grouping of producers, cooperatives, etc.))

• • Separable secondary agricultural activities of units whose principal activity is not agricultural (cf. 1.18).

II.   TRANSACTIONS IN PRODUCTS

• 2.001. Transactions in products provide an account of the origin and use of products. Products are goods and services created within the production boundary. The main categories of transactions in products defined by the  ESA 2010 are: output, intermediate consumption, final consumption expenditure, actual final consumption, gross capital formation, exports of goods and services and imports of goods and services.

• 2.002. As mentioned in 1.40 and 1.41, only output, intermediate consumption and gross capital formation are taken into account in the EAA. Output is recorded as a resource and intermediate consumption as a use in the production account. Gross capital formation is recorded as a use (a change in assets) in the capital account.

• A. GENERAL RULES

• 2.003. For the EAA, the reference period is the calendar year.

(a) Quantities

• 2.004. Quantities should generally be shown in 1 000 t, (in 10 000 hl, for grape must and wine) to one decimal place. For animals, live weight is used.

(b) Prices

• 2.005. In the EAA, prices should be shown per tonne (per 10 hl for wine and grape must).

• 2.006. In the EAA, prices shall be recorded either to the nearest whole number or correct to one or two decimal places, depending on the statistical reliability of the price data available. Relevant price information on input and output is necessary to compile the EAA.

(c) Values

• 2.007. Values should be shown in millions of units of national currency.

• 2.008. The ESA 2010 (1.101-1.105) records flows (especially transactions in products and distributive transactions) on an accrual basis, in other words, at the time when an economic value, amount due or claim is created, transformed, cancelled or ceases to exist, and not at the time when payment is actually made.

• (a) Output

• 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.  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.  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.

• (b) Intermediate consumption

• 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 ([^E0017]).

• 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:

• — services connected with the purchase of goods, such as trade and transport services, are recorded as intermediate consumption at the time the goods in question are consumed (cf. 2.111),

• — services considered to be permanent, such as insurance services. These are recorded on a pro-rata basis at the end of the reference period according to the proportion of the payment due for the year, or part-year, in question. Accordingly, the amounts recorded do not necessarily correspond to the insurance premiums paid within the period concerned.

• (c) Gross fixed capital formation

• 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).

• (d) Changes in stocks

• 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.

• B. OUTPUT

• 2.032. Output is the total of products created during the accounting period (ESA 2010, 3.14). It is important to keep the distinction between the term ‘output’ and the term ‘production’, while output denotes the resulting goods and services, production denotes the process.

• 2.033. According to the  ESA 2010, output also includes (i) goods and services supplied by one local KAU to another belonging to the same institutional unit, (ii) goods produced by one local KAU and still in the stocks at the end of the accounting period in which they were produced, whatever use they are intended for subsequently. However, goods or services produced and consumed during the same accounting period by the same local KAU are not recorded separately.  They are therefore not recorded as part of the output or as intermediate consumption of that local KAU.

• 2.034. The concept of output used in the EAA which is related to the concept of ‘total output’ is based on an adaptation of the  ESA 2010, since some agricultural goods and services produced and consumed during the same accounting period within the same agricultural unit are recorded in the output of overall agricultural activity. The criteria for identifying these goods and services for inclusion in the agricultural industry output are set out in 2.055. The difference between the  ESA 2010 and the method adopted in the EAA is represented by these elements of intra-unit consumption whose value is included in both output and intermediate consumption. The value added thus remains identical, whichever method is used.

• 2.035. As mentioned in 1.34, this modification of the ESA rule is based on the special nature of the agricultural activity and the agricultural holding (as a local KAU). Furthermore, it makes it possible to:

• — improve the economic analysis of agricultural accounts, especially the definition of technical coefficients and value added rates (the ratio between output and intermediate consumption),

• — improve the comparison of technical coefficients and value added rates between subbranches of economic activity and countries. In actual fact, the output consumed within a unit is mainly limited to a few specific products (such as cereals, protein and oleaginous products, forage crops and milk for livestock feeding) and rates of intra-unit consumption vary considerably depending on the economic branch and country.

• — strengthen consistency between the production, generation of income and entrepreneurial income accounts: the necessary consistency between transactions in products (output, intermediate consumption, etc.) and distributive transactions (compensation of employees, subsidies, taxes, rents, interest, etc.) has been strengthened since the reform of the common agricultural policy in 1992 in that subsidies (some of which concern products subject to intra-branch consumption) currently play an important role in the formation and development of agricultural income.

• 2.036. Although it is not proposed by the ESA 2010, the rule adopted in the EAA is provided for by the SNA because of the special nature of agriculture, and by the FAO methodological manual ([^E0018]). Finally, it allows the difference between the measurements of output stemming from the choice of basic unit (local KAU or unit of homogeneous production) to be reduced substantially.

• 2.037. In the compilation of the EAA, output is progressively broken down in quantity terms.

Schematic representation of resources and uses of agricultural products

Image omitted; see official source

• 2.038. The starting point for this progressive calculation is either:

• — gross output (1q), or

• — usable output (3q),

depending on whether the reference harvest figures include field, harvest and farm losses or not.

• (a) Gross output

Gross output: (1q)

• 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).

• (b) Losses

Losses: (2q)

• 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.

Types of losses

• 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).

Recording of the three types of losses

• 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.

• (c) Usable output

Usable output: (3q) = (1q) minus (2q) = gross output minus losses (at the producer stage)

• 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.

• (d) Initial stocks

Initial stocks: (4q)

• 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).

• (e) Total available resources

Total available resources: (5q) = usable output plus initial stocks (3q plus 4q)

• (f) Intra-unit consumption

Intra-unit consumption: (6q)

• 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).

Classification of intra-unit consumption

• 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  NACE Rev. 2 four-digit level):

• — seed (for cereals, vegetables, flowers, etc.): reused for the same crop;

• — wine grapes and grape must: used in wine production;

• — olives: used in olive oil production;

• — milk: used in livestock feed.

• 2.053. Products consumed within the industry by a different agricultural activity (i.e. a different class of activity, at  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):

• — normally marketable animal feed products: cereals (wheat, rye, barley, oats, maize, sorghum, rice and other cereal grain); protein crops; potatoes; oilseeds (rape seed, sunflower seed, soya beans and other oilseeds),

• — normally unmarketable animal feed products: — annual fodder products: root crops (sugar beet, fodder beet, swedes, fodder turnips, fodder carrots, fodder kale/curly kale and other root crops); fodder maize and other green fodder (green, dried or preserved), — perennial fodder products: permanent and temporary fodder products derived from an economic activity (green, dried or preserved), — fodder by-products (straw, chaff, plant leaves and ends and other fodder by-products).

Definition of intra-unit consumption to be included in the industry's output

• 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:

• 1. The two activities exercised should come under different four-digit levels of NACE Rev. 2 (Division 01: Crop and animal production, hunting and related service activities). The application of this criterion thus precludes, for example, the valuation of seed produced and used on the same holding for crop production (during the same accounting period);

• 1. The agricultural product should have a significant economic value for a significant number of farmers.

• 1. Data on prices and quantities must be available without too much difficulty. This criterion is difficult to meet for some unmarketable products.

• 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.

• (g) Processing by producers

Processing by producers: (7q)

• 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.

• (h) Own final consumption

Own final consumption: (8q)

• 2.061. This includes:

• (i) products consumed by the farmers' households which produced them;

• (ii) products stemming from the agricultural unit (holding) and used for payment in kind in the form of remuneration paid to holding workers or exchanged for other goods.

• 2.062. 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.

• (i) Sales

Sales: (9q)

• 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.  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 ([^E0019]) 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) ([^E0020]). In view of this special treatment of trade in live animals between agricultural units, there is no intermediate consumption under ‘livestock and animal products’ ([^E0021]).

• 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.

• (j) Own-account produced fixed capital goods

Own-account produced fixed capital goods: (10q)

• 2.071. These only include:

• — work done by agricultural units (e.g. use of labour, machines and other means of production, including planting stock) for the own-account establishment of plantations such as orchards, vineyards, soft fruit plantations and hop-fields. In general, own-account work on planting orchards and vineyards, etc., is made up of a large number of individual work operations which cannot be added up into specific quantities,

• — animals produced in agricultural units and transferred to their fixed capital (cf. 2.161). These are animals reared for the output which they supply on a regular basis (mainly breeding livestock, dairy livestock, draught animals, sheep and other animals reared for their wool; cf. 2.202).

• (k) Final stocks

Final stocks: (11q)

• 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.

• (l) Total uses

Total uses: (12q) (not including intra-unit consumption) = (7q) + (8q) + (9q) + (10q) + (11q) = processing by producers plus own final consumption plus sales plus own-account produced fixed capital goods plus final stocks.

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

• (m) Change in stocks

Change in stocks: (12q) = (11q) minus (4q) = additions to stocks (A) minus withdrawals from stocks (W)

• 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).

• (n) Output of agricultural activities

Output of agricultural activities = (6q, animal feedingstuffs) + (7q) + (8q) + (9q) + (10q) + (12q)

• 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:

Resources	Uses	Agricultural output of the agricultural industry
Gross output	Sales (total, excluding trade in animals between agricultural holdings)	X
Gross output	Change in stocks (with producers)	X
– Losses	Own-account produced fixed capital goods (plantations yielding repeat products, productive animals)	X
– Losses	Own final consumption (of agricultural products)	X
= Usable output	Processing by producers (of agricultural products, separable activities)	X
= Usable output	Intra-unit consumption: — for the same activity: (seeds, milk for livestock feed, wine grapes, olives for olive oil, hatching eggs)
= Usable output	—  for a separate activity: crop products used in animal feed (cereals, oilseeds, fodder crops, marketable or not, etc.)	X
= Usable output	animal by-products used in crop production (slurry, manure)

• 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).

• 2.078. A distinction is made between two types of ‘inseparable non-agricultural secondary activities’ (cf. 1.29):

• — ‘processing of agricultural products’: this group covers activities which are an extension of agricultural activity and in which agricultural products are employed. The processing of agricultural products is the typical activity of this first group,

• — ‘other inseparable non-agricultural secondary activities’: this group covers activities which use the agricultural holding and its means of agricultural production. It is less uniform than the first group.

• 2.079. In general, these activities include a variety of products (goods and services) whose quantities cannot be added together.

• 2.080. The product of these activities is either intended for sale, barter, payment in kind, own final consumption (cf. 2.062) or kept in stocks.

• 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.

• 2.081. In accordance with the definition of the output of the agricultural industry (cf. 1.16), the output of the agricultural industry is made up of the sum of the output of agricultural products (cf. 2.076 to 2.077) and of the goods and services produced in inseparable non-agricultural secondary activities (cf. 2.078 to 2.080.1).

• 2.082. Output is to be valued at the basic price. The basic price is the price receivable by the producers from the purchaser for a unit of a good or service produced as output minus any tax (i.e. taxes on products) payable on that unit as a consequence of its production or sale plus any subsidy (i.e. subsidies on products) receivable on that unit as a consequence of its production or sale. The basic price excludes any transport charges invoiced separately by the producer. It also excludes holding gains and losses on financial and non-financial assets (cf. ESA 2010, 3.44).

• 2.083. Components of output such as sales, payments in kind, additions to stocks and intra-unit consumed products should be valued at the basic price. Similarly, output for own final use (i.e. own-account fixed capital goods and own final consumption) should be valued at the basic price of similar products sold on the market. Work in progress and additions to it are valued proportionally to the current basic price of the finished product. If the latter has to be assessed in advance, the calculation should be based on the actual costs incurred plus an amount corresponding to the anticipated operating surplus or mixed income.

• 2.084. When establishing the EAA according to the ‘net’ recording system (cf. 3.033 and 3.035 to 3.043), the VAT invoiced by the producer is not included when establishing the basic price.

• 2.085. The price obtained by the producer corresponds to the producer price (not including invoiced VAT) as defined in the 2008 SNA, 6.51 to 6.54 (i.e. the ex-farm price). The basic price can be obtained from the producer price by adding subsidies less taxes (other than VAT) on products. When problems of allocating a tax or subsidy on products to a specific product make it difficult to calculate the basic price, output can be calculated direct at the basic price. In this case it is obtained direct from the value of the producer price (exclusive of invoiced VAT), minus the value of taxes on products (other than VAT) and plus the value of subsidies on products.

• 2.086. The valuation of output at the basic price makes it necessary to distinguish between taxes (other than VAT) on products and subsidies on products (cf. 3.027 and 3.053), on the one hand, and other taxes and subsidies on production (cf. 3.044 and 3.058), on the other. Taxes and subsidies on products are not recorded in the generation of income account of the industry (this account only includes other taxes on production and other subsidies on production, cf. 3.055).

• 2.087. The price of a given item received by producers is not necessarily always the same; it may vary, inter alia, according to the type of delivery. For example, the structure, in terms of quality, of goods exported directly by the producer can be different from the structure of the sales intended for national consumption or of domestic sales to other agricultural units. These goods would consequently have a different price. It should be noted that when a producing unit directly exports its output, the receipt or payment of monetary compensatory amounts for the exports must be taken into account in the EAA.

• 2.088. These general principles of valuation require specific applications for certain products such as seasonal products and wine. These are explained in the section treating the valuation of changes in stocks (cf. 2.185 to 2.200).

• C. INTERMEDIATE CONSUMPTION

• 2.089. Intermediate consumption represents the value of all goods and services used as inputs in the production process, excluding fixed assets whose consumption is recorded as fixed capital consumption. The goods and services concerned are either transformed or used up in the production process (cf. ESA 2010, 3.88). In a detailed classification by different categories of items, intermediate consumption shows the interlocking of agriculture with other branches of the economy brought about by inputs. Intermediate consumption is also used as an entry in the calculation of factor intensities (i.e. the ratio of two factors of production, for example of intermediate consumption and labour input).

• 2.090. Intermediate consumption excludes new or existing acquired fixed assets which have been produced in the economy or imported: they are recorded as GFCF (cf. 2.109 (c) to (f)). This concerns items which are non-agricultural fixed assets, such as buildings or other structures, machines and equipment, as well as agricultural fixed assets such as plantations and productive animals. The acquisition of non-produced assets such as land is likewise excluded from intermediate consumption. Inexpensive tools used for common operations such as saws, hammers, screwdrivers, spanners, wrenches and other hand tools, small devices such as pocket calculators are recorded as intermediate consumption.

• 2.091. Intermediate consumption includes goods and services consumed in ancillary activities (e.g. administration of purchases and sales, marketing, accounting, transport, storage, maintenance, etc.). The consumption of these goods and services should not be distinguished from that of goods and services consumed in the course of the main (or secondary) activity of a local KAU.

• 2.092. Intermediate consumption also includes all expenditure on goods and services which, while benefiting employees, are nonetheless mainly for the benefit of the employer ([^E0022]) (e.g. reimbursement of employees for travel, separation, removal and entertainment expenses incurred in the course of their duties; expenditure on providing amenities at the workplace).

• 2.093. In view of the adoption of the concept of industry and local KAU as the basic unit of the EAA, intermediate consumption of the industry includes goods and services provided by one local KAU to another local KAU (for production purposes), even if these units belong to the same institutional unit.

• 2.094. Trade in livestock, which is similar to stocks of work in progress (such as piglets and eggs for hatching) and is carried out between agricultural units, and imports of livestock, are not recorded as intermediate consumption (or as any type of output) (cf. 2.066 to 2.070).

• 2.095. Goods and services produced and consumed within the same agricultural unit (i.e. produced and used in the same reference period for agricultural production purposes) are not recorded as intermediate consumption unless they also appear in the output of the industry (i.e. crop products used in animal feed, cf. 2.049 to 2.057; 2.060).

(a) Seeds and planting stock

• 2.097. This heading covers the total consumption of bought-in domestic and imported seed and planting stock for current production and maintaining stocks in vineyards, orchards, and Christmas tree plantations. It includes in particular direct purchases of seed and planting stock from other farmers. However, seed produced and consumed within the same unit in the same reference period is not recorded under this heading (cf. 2.052).

• 2.098. It should be noted that intermediate consumption of field crop and vegetable seed mainly corresponds to (i) first generation seed purchased by producers for propagation and (ii) certified seed bought by agricultural holders for crop production.

(b) Energy; lubricants

• 2.099. This heading covers electricity, gas and all other solid and liquid fuels and propellants. It should be noted that only the consumption of energy on agricultural holdings is to be shown, and not consumption in farmers' households.

(c) Fertilisers and soil improvers

• 2.100. Soil improvers include, for example, lime, peat, sludge, sand and synthetic foams.

(d) Plant protection products and pesticides

• 2.101. These include herbicides, fungicides, pesticides and other similar inorganic and organic substances (e.g. poisoned bait).

(e) Veterinary expenses

• 2.102. Medicines which are invoiced separately from the veterinary surgeon's fee should be recorded here (medicines administered directly by the veterinary surgeon are recorded with his fee) and veterinary costs.

(f) Animal feedingstuffs

• 2.103. This heading covers all bought-in domestic and imported feedingstuffs, whether processed or not, including those obtained direct from other farmers. Crop products used in animal feed produced and used in the same reference period on the same agricultural holding are also recorded and entered under a subheading of the ‘animal feedingstuffs’ heading as intra-unit consumption (cf. 2.057). They are also recorded in output.

• 2.104. The costs incurred in the preparation and preservation of feedingstuffs (e.g. energy costs and costs for chemical preservatives, etc.) must be broken down by type of cost and not combined with the feedingstuffs themselves.

(g) Maintenance of materials

• 2.105. This heading includes:

• — purchases of goods and services for maintenance (i.e. regular replacement of individual damaged or broken parts) and repairs required to keep capital goods in usable condition (cf. 2.127 to 2.129),

• — purchases of crop protection equipment (excluding preparations for plant protection and pest control, cf. 2.101), such as detonators, anti-hail protection, anti-frost smoke, etc.

(h) Maintenance of buildings

• 2.106. This heading covers purchases of materials (cement, bricks, etc.), labour costs or overall costs incurred by farmers for maintaining agricultural buildings or other structures (except housing structures) (cf. 2.127 to 2.129).

(i) Agricultural services

• 2.107. These agricultural services (which constitute the hire of machines and equipment with the corresponding labour) are an integral part of agriculture (cf. 1.82 to 1.91) and are recorded as intermediate consumption and also entered under ‘output’.

(j) Financial intermediation services indirectly measured (FISIM)

• 2.107.1.In accordance with the convention of ESA 2010, the value of financial intermediation services indirectly measured (FISIM) used by the agricultural industry should be recorded as intermediate consumption of the agricultural industry (cf. ESA 2010, Chapter 14).

(k) Other goods and services

• 2.108. These other goods and services include:

• (a) rental paid, either directly or as a component of a tenancy agreement, for use of non-residential buildings and other capital assets (whether tangible or intangible) such as the hire of machines and equipment without operating staff (cf. 1.23) or computer software. However, if no distinction can be made between the renting of non-residential buildings by a local agricultural KAU and the renting of land, the whole item is recorded as renting of land in the enterprise's income account (cf. 3.082);

• (b) fees for workers' medical examinations;

• (c) fees for agricultural consultants, surveyors, accountants, tax consultants, lawyers, etc.;

• (d) purchases of services of market research and advertising, expenditure on staff training and similar services;

• (e) expenditure on transport services: this includes reimbursement of employees for travel, separation and removal costs incurred in the course of their duties, primarily for the employer's benefit, and the amounts paid by the employer to independent enterprises which provide transport for employees (except for transport between home and the place of work; cf. 2.092, 2.109(b) and 3.016) as well as the transport of goods for fairs and exhibitions. If, on the other hand, transport is provided by the staff and the employer's own transport, the costs should be recorded under appropriate headings. Since purchases of goods are to be valued at the purchaser price and sales at the basic price (cf. 2.110 and 2.111, 2.082), the cost of transport of goods is not normally indicated separately. Transport costs included in sales are considered to be invoiced separately. In the case where the producer engages a third party to transport the goods to the purchaser, the transport costs appear as neither intermediate consumption, nor output in the EAA. In the case where the producer transports the goods himself, this is considered a non-agricultural activity, for which the costs should be recorded appropriately, if the activity is inseparable. Finally, this heading includes expenditure incurred under non-agricultural secondary activities concerning transport, trade and warehousing for third parties;

• (f) postal and telecommunications costs;

• (g) remuneration for services contained in gross premiums of insurance taken out to provide the enterprise with coverage for risks such as the loss of livestock, damage by hail, frost, fire and gales. The remainder, i.e. the net premium, is the component of the gross premium paid which is available to insurance companies for settling claims. An accurate breakdown of the gross premiums into the two components can only be done for the national economy as a whole, as is done for the national accounts. The allocation of the service component between production branches is generally done using adequate breakdown keys, in connection with the construction of input-output tables. Reference shall therefore be made to national accounts when completing that item in the EAA (for the recording of subsidies related to insurance services, see 3.063, footnote 1);

• (h) stud fees;

• (i) billed bank charges (but not interest for bank loans);

• (j) subscriptions, fees for membership of professional associations such as chambers of agriculture, chambers of commerce and agricultural trade unions;

• (k) subscriptions to agricultural cooperatives;

• (l) costs of dairy tests, shows and entries in pedigree registers;

• (m) expenditure on artificial insemination and castration;

• (n) payments for the use of non-produced intangible assets such as patented assets, trade marks, copyright, milk quotas or other production rights, etc. Purchases of these non-produced intangible assets, on the other hand, are recorded in the capital account;

• (o) payments made to public bodies for the purpose of obtaining licences or permits to carry out commercial or professional activities, if the permits are subject to a thorough scrutiny for regulatory purposes (unless the charges are disproportionate to the benefits of the services concerned, cf. 3.048(e), and ESA 2010, 4.80(d));

• (p) purchases of inexpensive small tools, working clothing, spare parts and durable equipment used to perform relatively simple operations (ESA 2010 3.89 (f) (1) and 2008 SNA, 6.225);

• (q) fees for short-term contracts, leases and licences recorded as non-produced assets; this excludes the outright purchase of such non-produced assets.

(k) Items not included in intermediate consumption

• 2.109. Intermediate consumption, does not include:

• (a) goods and market services which production units provide to their employees at no cost or at a reduced rate, in so far as this expenditure is clearly and primarily for the benefit of the employees. The value of these goods and services forms part of compensation of employees (cf. 3.018);

• (b) travel allowances paid by the employer in cash to his employees; these are regarded as an element of compensation of employees (the employee then uses this money to pay for transport between his home and place of work) (cf. 3.018(c)). Likewise, payments made by the employer direct to a transport enterprise for the collective transport of workers (for travel between home and the place of work) count as compensation of employees. These services such as transport from home to work or parking facilities have some of the characteristics of intermediate consumption.  Nonetheless, employers are considered to need this type of service to attract and keep their employees (which they would normally have to pay for themselves anyway) and not due to the needs of the production process itself (cf. 2008 SNA, 7.51);

• (c) purchases of farm buildings and movable property (i.e. capital goods whose normal period of use is over one year); these acquisitions are considered to be GFCF (cf. 2.162);

• (d) financial leasing payments made for the use of fixed assets for agriculture do not constitute purchases of services but transactions to be entered partly under interest (in the entrepreneurial income account) and partly as reimbursement of the capital (in the financial account) (cf. 2.122);

• (e) expenditure on restoration (for maintenance, cf. 2.105 and 2.106) of fixed capital goods (restoration of roofs, gutters, electrical and heating installations in farm buildings) and expenditure on the improvement and repair of capital goods, which are intended to extend their normal service life or increase their productivity; this expenditure is regarded as GFCF since it goes well beyond what is necessary to maintain fixed assets in working order (cf. 2.127 to 2.129);

• (f) purchases of services connected with the acquisition of ownership of land, buildings and other existing fixed capital goods, such as fees for intermediaries, solicitors, surveyors, engineers, etc. as well as fees for entries in the land register (cf. ESA 2010, 3.133). This is regarded as forming part of GFCF (cf. 2.132 and 2.133);

• (g) goods and services produced and consumed within the same unit in the same reference period (except for certain products, cf. 2.056, 2.103, 2.107). These goods and services are not recorded as output either;

• (h) rent paid for the use of land listed under ‘rent’ (cf. 3.080);

• (i) expenditure on the use of dwellings; this is final consumption (accounts for households) and is not shown in the EAA;

• (j) wear of capital goods, which comes under consumption of fixed capital (cf. 3.099);

• (k) net insurance premiums (cf. 2.108(g));

• (l) insurance premiums for personal injury and contributions to sickness and working accident insurance schemes; these are divided between distributive transactions and final consumption (accounts for households);

• (m) water rates paid purely as a tax and unrelated to the quantities of water consumed;

• (n) the purchase of services from public bodies under certain circumstances (cf. 3.048(e)).

• 2.110. Products used for intermediate consumption should be valued at the purchaser prices for similar goods and services applicable at the time of their insertion in the production process.

• 2.111. The purchaser price is the price the purchaser actually pays for the products, at the time of purchase. It includes taxes less subsidies on products (but excluding deductible taxes like VAT on the products).  The purchaser price also includes any transport charges paid separately by the purchaser to take delivery at the required time and place; after deductions for any discounts for bulk or off-peak purchases from standard prices or charges; excluding interest or service charges added under credit arrangements; excluding any extra charges incurred as a result of failing to pay within the period stated at the time the purchases were made (ESA 2010, 3.06).

• 2.112. Unlike in other branches of the economy, subsidies relating to intermediate consumption are important in agriculture. Their purpose is to reduce the cost of intermediate consumption. When these subsidies are classed as subsidies on (non-agricultural) products, they reduce the value of intermediate consumption, which is recorded at the purchaser price (whether they are paid to intermediate consumption suppliers or agricultural producers).

• 2.113. If goods or services are imported direct by production units, the purchaser price used should include all import duties, non-deductible VAT, and monetary compensatory amounts (receipts or payments).

• 2.114. Intermediate consumption is valued exclusive of deductible VAT. Deductible VAT is calculated for all purchases made by agricultural units, whether subject to VAT under the standard or the flat-rate system. The difference between the deductible VAT which agricultural units under the flat-rate system could have deducted, if they had been subject to the standard VAT scheme, and the flat-rate compensation represents VAT over-compensation or under-compensation. This is recorded under other subsidies on production or other taxes on production respectively (cf. 3.041 and 3.042).

• D. GROSS CAPITAL FORMATION

• 2.115. Gross capital formation comprises:

• — GFCF (P.51g),

• — changes in inventories (P.52),

• — acquisitions less disposals of valuables (P.53).

• 2.116. Since the EAA are accounts drawn up in order to depict flows generated by units within their production function, only GFCF and changes in stocks are dealt with below.

• 2.117. Gross capital formation is measured gross of consumption of fixed capital (P.51c).

Net capital formation (P.51n) is obtained by deducting consumption of fixed capital from gross capital formation. Fixed capital consumption is the value of the depreciation of fixed capital goods as a result of normal wear and tear in the course of the production process (cf. 3.099).

• 1. Gross fixed capital formation (GFCF)

(a) Definition

• 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).

(b) Considerations for the national economy as a whole

• 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  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.

(c) Transfer of ownership criterion

• 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) ([^E0023]).

• 2.123. 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.

(d) Acquisitions

• 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. 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.