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Frequently Asked Questions (FAQ)

Index

Why are the principles for the national accounts, government finances, and balance of payments revised?
Why are the national accounts revised?
Why a revision?
How does the revision affect the national account time series?
How many years are revised?
Which international principles have changed?
Do other countries revise their national accounts?
Which changes have the greatest effect on GDP?
How great is the combined effect of the revision on the GDP?
What are the effects on the demand and supply?
Will the growth change?
How is this revision different from the continuous revisions of the national accounts?
Is there a connection between the decrease in government consumption and increase in private consumption? 
Which units move between the private and public sector?
How will the revision affect government net-lending and debt?
How does the revision affect government consumption?
What is NPISH?
How will the revision affect the tax burden?
When the tax revenue decreases, will there be less money for kindergartens, nursing homes, etc.? 
What has been changed in the calculation of civil servant pensions and why?
Do the changes in the calculation of the imputed contributions to civil servant pensions have an effect on the volume?
What does the new treatment of research and development expenses mean?
Must consumption of fixed capital (depreciation) for knowledge in the shape of research & development be calculated?
How is consumption of fixed capital for research & development (R&D) calculated in practice?
Will the total of the balance of payments current account be affected by the new principles of calculation?
Will the statistic for international trade in goods be affected by the new principles of calculation?
Will the statistic for international trade in services be affected by the new principles of calculation?
What are the most significant changes caused by the new principles of calculation?

Why are the principles for the national accounts, government finances, and balance of payments revised?

The purpose of the national accounts is to give a complete and relevant picture of the economy. As the economy develops, it is necessary to revise and expand the international principles for the calculation of the national accounts, government finances, and balance of payment to ensure that the picture is still relevant. See also ”Do other countries revise their national accounts?”.

Why are the national accounts revised?

The economy keeps developing and so it is also necessary to develop the methods to describe it, to be able to catch the economic reality as well as possible.

Why a revision?

For two main reasons: First of all the introduction of the revised principles cannot be implemented from a given year, but has to be completed for a longer period to ensure comparability over time.
Secondly, because new statistical information cannot always be incorporated into the continuous production of the national accounts without causing a break in the time series. This type of information can therefore only be incorporated in connection with a revision, where the entire national account time series is revised.

How does the revision affect the national account time series?

During the revision we will ensure that there is comparability over time. That is, that all the national accounts time series are revised all the way back to the beginning year of 1966. New principles (ESA2010) cannot be implemented from a given year without causing breaks in the time series, and new statistical information also cannot always be incorporated in the continuous publications of the national accounts without causing breaks in the time series. One should be aware that the effect of the incorporation of new statistical information can have different effects in some years. The two types of changes can only be implemented during major revisions, and the revision that will be published on September 15th is such a type of revision.

How many years are revised?

It’s different for the different areas of the national accounts but generally the overall amounts like GDP are revised back to 1966, while more detailed series are revised back to their first year. For more information, see also the publication calendar.

Which international principles have changed?

For an overview of the most important changes of the international principles for national accounts, see Major differences between ESA 2010 and ESA 95 (In Danish only)

Do other countries revise their national accounts?

Yes, all countries. Some have already done so, some will do it later. After six years of discussion, the revised principles for the calculation of national accounts was passed by the UN in 2008, when the highest agency in the statistical world, ”UN Statistical Commission”, passed System of National Accounts 2008 (SNA2008). As the first country, Australia switched to the new principles in 2009, the US in the summer of 2013.

In the EU a regulation regarding the introduction of the new principles has been passed (European System of Accounts 2010 (ESA2010)). In this regulation it is determined that the EU will switch to the new principles in September 2014. Some member countries will however switch to the new principles a few months prior.

Which changes have the greatest effect on GDP?

It varies over time, but the two changes that generally have the greatest effect are the capitalization of the research and development (R&D) expenses along with a revision of the calculations of the accrued pension rights for civil servants.

The R&D expenses have so far been considered a part of the ongoing expenses for the producers. In ESA2010 these expenses are assumed to create a production which is activated through investment. In the most recent years this change gives the greatest contribution to an increase of GDP. As the R&D activities have increased significantly more in the period since 1966 than the general economic activity, the effect of this is consequently significantly less in earlier periods.

In the national accounts an addition is made to the salaries of civil servants, which is meant to reflect the pension savings that they would have had, if their pension contributions had been an ordinary employment-related pension with payments of contributions. In the present national accounts, a convention that deposits equal payouts has been used. I.e. the information about general government’s expenses for retired civil servants has been used as an expression of the contributions of employed civil servants. In the revised national accounts the calculation will be based on information about the actual number of employed civil servants.

How great is the combined effect of the revision on the GDP?

GDP is increased in all years from 1966 to now. The increase is between 1.8 and 3.2 per cent. In 2008 the increase is 2.5 per cent.

What are the effects on the demand and supply?

See a more precise account of the changes in 2008. The precise changes will however vary over time.

Will the growth change?

During this revision, it’s mainly the levels that change. As the level changes are not completely identical in the individual years, this will however cause minor revisions of the growth rate in fixed prices.

The changes of the fixed price calculation of government production will, however, directly affect growth. The development in volume for government consumption has until now been based on the development in volume of the input that has been part of the production of government services. In the new method the development in volume in based on the development in the number of services produced. The new method is only used on the individual government services, i.e. education, health, social institutions etc. while the calculation for general administration, police and armed forces etc. will continue to be based on input. The new method can only be used from 2008, so it’s only from this point that growth is revised for this reason. The final effect has not yet been calculated but more information can be found here.

How is this revision different from the continuous revisions of the national accounts?

We designate this revision a major revision. The continuous revisions of the national accounts are those revisions of the most recent years that are routinely done. These continuous revisions stretch from the first calculations which are published two months after the end of the period (year or quarter) and to the “final” calculation in November roughly three years after the end of the year. The continuous revisions are done after a fixed rhythm as updated statistics become available. In the continuous revisions the focus is to describe the development correctly. Changed principles or new statistics can cause changes in the levels. This type of information can therefore only be incorporated in connection with a revision, where the entire national account time series is revised so that the comparability over time is ensured. The revision which will be published on September 15th 2014 is, as mentioned, such a major revision.

Is there a connection between the decrease in government consumption and increase in private consumption?

Private consumption incl. NPISH in adjusted upwards, mainly because the expenses in the non-profit institutions (NPISH) increase. NPISH is the English abbreviation for Non-Profit Institutions Serving Households, which includes e.g. sports clubs, private relief organizations, and unions. In connection with the revision expenses from private schools and boarding schools move from government consumption to private consumption in NPISH. Furthermore the creation of new statistics have led to an upwards adjustment of the consumption in NPISH. Government consumption has decreased in recent years, among other things because private schools and boarding schools move to NPISH. Beyond that there are a number of changes that together contribute further to the decrease in government consumption.

Which units move between the private and public sector?

Private schools and boarding schools move from the public sector to the private sector. Within the public sector a number of units move from market to general government, and that increases the government consumption etc. Among others, this includes Danmarks Radio and Banedanmark.

How will the revision affect government net-lending and debt?

The revision has a limited effect on the government net-lending in 2008. The effect on government debt has not been calculated at this time.

How does the revision affect government consumption?

Government consumption will be adjusted downwards by 2.8 per cent in 2008. The adjustment of government consumption varies over time, and generally speaking there is an adjustment downwards in recent years and adjustment upwards in earlier years.

What is NPISH?

NPISH is the English abbreviation for Non-Profit Institutions Serving Households, which includes e.g. sports clubs, private relief organizations, independent schools, and unions.

How will the revision affect the tax burden?

A result of the revision is that the tax revenue and tax burden decrease. The tax burden decreases both because the tax revenue decreases and because GDP increases. The lower tax revenue does not mean that government revenue decreases but it is a matter of different categorization. This means that government revenue is unaffected.

When the tax revenue decreases, will there be less money for kindergartens, nursing homes, etc.?

No. It is a matter of different categorization of government revenue. The total government revenue is unaffected.

What has been changed in the calculation of civil servant pensions and why

Earlier the imputed – or calculated – pension contributions for civil servants were calculated as the same amount as the pension payouts for that year. In the revised national accounts the calculation will be based on information about the employed civil servants. A pension contribution is imputed for civil servants equivalent to a situation where their pension contributions had been an ordinary employment-related pension with payments of contributions.

Do the changes in the calculation of the imputed contributions to civil servant pensions have an effect on the volume?

Yes.
Earlier the imputed – or calculated – pension contributions for civil servants were calculated as the same amount as the pension payouts for that year. In the revised national accounts the calculation will be based on information about the employed civil servants. A pension contribution is imputed for civil servants equivalent to a situation where their pension contributions had been an ordinary employment-related pension with payments of contributions.
In the 1960s, when there was a relatively large number of civil servants employed but not a lot of retired civil servants, the previous method caused an underestimation of the pension contribution for civil servants and thus the government wage and salary cost. Conversely, in the more recent years when fewer civil servants have been employed and more have retired, the method has caused an overestimation of the pension contribution of civil servants and thus the government wage and salary cost. Combined, the previous method gave a flawed impression of an improved civil servant scheme in current prices and a misleading and too strong impression of the development of the government wage and salary cost.
The indices of average earnings that have been used for the fixed price calculation of the government wage and salary costs have reflected the development in earnings excluding contributions to the civil servant pensions. Consequently the flawed development in contributions to the civil servant pensions in current prices also appears in fixed prices (quantity). However, the revised national accounts bring consistency between the pension contribution for civil servants in current prices and the used indices of average earnings, which are not revised. The method implies that the price development of civil servant pensions follows the price development of earning, which is estimated to be a fair assumption, as there has not been significant changes to the civil servant pension scheme in that period.
Combined the revision means that the civil servant pension contributions and thus the government wage and salary costs are revised in both current and fixed prices (quantity).

What does the new treatment of research and development expenses mean?

In the current national accounts the expenses for R&D have been considered a part of the ongoing expenses. R&D expenses have thus not contributed to the size of the GDP. In the revised national accounts the expenses are expected to create a product (“research results”), which is invested and in this way becomes an asset to the unit that paid the expenses. The accumulated R&D expenses will for that reason be part of the value of the capital stock.

In the revised national accounts both own account expenses on R&D (self-produced R&D) and the purchase of R&D results are acknowledged as an investment. The change includes all expenses for R&D, that is both the expenses of companies and government expenses. The change also includes expenses for R&D which is made freely available to the public. This is especially the case for a part of government expenses for R&D, in particular including a large amount of the research results at institutions of higher learning.

The new treatment of R&D expenses has a significant effect on the GDP and other central items in the national accounts. In 2008 the change causes an increase in the GDP of 2.6 per cent. The effect on the items depends on whether it concerns self-produced R&D results, or purchased R&D results. An example of the latter could be that one ordered studies on rats at a laboratory.

For further descriptions of the change, New Principle for the treatment of expenses for research and Development (in Danish)
 

Must consumption of fixed capital (depreciation) for knowledge in the shape of research & development be calculated?

Yes, consumption of fixed capital for knowledge in the shape of research & development (R&D) will be calculated. Although knowledge does not wear down over time, the gained (monopoly) knowledge – achieved through R&D – will only be able to be used by the companies for a limited time until new and better knowledge trumps the existing knowledge. The depreciation of R&D must therefore happen during the period of time where R&D contributed to the production of new or better products.

How is consumption of fixed capital for research & development (R&D) calculated in practice?

Capital stocks and the consumption of fixed capital are calculated through the ’Perpetual Inventory Method’ (PIM) with a geometrical depreciation profile. The basis is an estimated initial balance and annual increase in the shape of R&D investment, while the annual decrease from the balance (consumption of fixed capital) is determined by a percentage of the current capital stock. The percentage is determined based on assumptions about life span etc. A relatively long life span means a relatively slow depreciation over time. For R&D life spans within the interval of 8 to 12 years are used.

Will the total of the balance of payments current account be affected by the new principles of calculation?

No, the new principles will result in transfers between the accounts in the balance of payments, but the total of the current account will not be affected. Changes may however occur as a result of data and method revisions. The sizes of the revisions vary between the individual years.

Will the statistic for international trade in goods be affected by the new principles of calculation?

No, the statistics for international trade in goods will not be affected. Only the goods accounts in the balance of payments will be affected by the new principles.

Will the statistic for international trade in services be affected by the new principles of calculation?

Yes, international trade in services will be adapted to the new principles and an overview of the most important changes can be found here.

What are the most significant changes caused by the new principles of calculation?

An overview of the most important changes can be found here.