Electronic Discussion on Consolidation - OECD Databases- SNA

Presentation to the OECD Working Party on Financial Statistics

Patrick O’HaganSystem of national Accounts, Statistics Canada

October 9, 2006

Background

OECD WPFS 2005 MeetingBackground papers on ConsolidationDiscussants’ commentsDiscussion summary notes

Consolidation in OECD FA and BSA Databases

1. That the current WPFS initiatives with respect to understanding consolidation practices in OECD

countries continue

SUPPORTED. In particular, that the development of comprehensive methodological notes should have high priority (general view of the WPFS)

EDG also provided a clear indication that consolidation issues in the OECD databases went beyond the need for documentation

General consensus that more work is required

2. That the discussion on intra-sector consolidation be extended to include the treatment of complex enterprises

SUPPORTED. Clear recognition of the difficult issues surrounding complex enterprises and intra-sector consolidation

Noted by discussants that FA and BSA source data are collected for domestic groups of companies (legal entities), or noted data problems with consolidated corporations’ source data.

View that the treatment of complex enterprises should figure into our understanding and documentation of consolidated/non-consolidated data

3. That efforts be extended incorporate the requirements of related datasets ... useful to develop a better understanding of policy/analytic needs

SUPPORTED. Consolidation is a cross-cutting issue, on which more work needed to be undertaken

Emphasis on user needs (relevance) when it comes to data in OECD databases. Sense that (outside of government and depository corporations) there was little demand for consolidated data in their respective user communities.

Concern over the relationships among the OECD databases and related databases elsewhere. Re-designed IMF-MFS are SNA93 based, but is it not always clear that the financial data are comparable … problematic for users

Noted that the IMF-FSI program is also focused on consolidated data, but from different perspectives than the OECD databases

4a) That the current OECD requirement for both unconsolidated and consolidated FA and BSA data

be re-considered by the WPFS

SUPPORTED. Most countries produce one set of FA and BSA Concerns over what can be produced vs what is being requested

in OECD (other) financial accounts’ databases Sense that countries can neither present fully unconsolidated or

fully consolidated data – that financial data, by its nature often reflects a mixture of consolidation, especially at the sub-sector level. … brings into question the analytical usefulness (relevance) and accuracy

Concerns that statisticians are coming under increasing pressure to deliver data for purposes other than the original uses of FA and BSA

Feasibility: Burden on the respondent OECD countries; constraints countries face in modifying their statistical systems

4b) Return to a one database submission, consistent with the published data of most countries. Sub-sectors as is; sectors unconsolidated, with consolidated sectors submitted as supplementary information

SUPPORTED. Generally felt that the main OECD databases should be SNA93 based (that is, unconsolidated). Submissions linked to the core countries’ financial accounts. Supporting metadata essential to international comparisons

Strong support for providing consolidated sector data for 2 key sectors: Government and depository corporations. In both of these cases, there is a clear user demand, and sufficient detail

Sense that a certain degree of estimation would be acceptable in producing consolidated data

Suggestion: That OECD databases could be expanded to include counter-party information, where it exists

5. That the WPFS plan to make a substantial contribution to the next round of revisions to SNA, where aspects of income (including consolidation and complex enterprises)

will be a major review item

SUPPORTED

Consolidation in SNA

1. That the SNA93 principle that in general the accounts of the system are not consolidated stand … underlines the

primary roles of the FA and BSA in the overall core SNA

SUPPORTED. Recognition that financial accounts (and, more generally, national accounts) are based on user needs, and the user communities in the respective countries have not requested consolidated data

Some of the recent increased demands for consolidated data from international agencies seem go beyond macro-economic analysis as articulated in the SNA … sense that the SNA cannot be all things

2. To emphasize in SNA that, for certain types of analysis (e.g., government sector deficit/debt), consolidated sector

accounts may be more appropriate

SUPPORTED. Contention that there was a significant macroeconomic demand for both consolidated and unconsolidated government sector data … strengthen the link of the core accounts with the new SNA government-public sector chapter (GFSM)

There was also support for a degree of consolidation in the financial corporations’ sector, in particular for depository corporations, where the need is also evident

Less support for a consolidated financial sector. Feedback on this paper from ISWGNA: indicated that there seems to be a need for such data and that the SNA emphasize this specific need.

3. That SNA general position against netting of financial instruments be retained … however, some degree of netting as an extension/approximation to consolidation

SUPPORTED

4. That consolidation be clarified with respect to complex corporations … proposed the current definition of institutional unit be broadened to also be represented by a consolidation of related legal entity corporations

Acceptance of the points made in the paper that SNA93 did not really deal with the issue of consolidation thoroughly … no discussion of complex corporations

Reluctance it to necessarily modify the definition of corporate institutional sector units to cover associated groups of legal entities.

Sense that this was a difficult issue, and one that could be held over until the next round of SNA revisions. Feedback on this paper from ISWGNA: With respect to broadening the definition of an institutional unit to include groupings of related corporate legal entities … that the definition of an institutional unit has been discussed in the past and decided not to change it.

5. That further debate on consolidated enterprises could be deferred to the next round of revisions to SNA, where aspects of income will be a major review item

Supported. Complex corporations figure prominently in income-side issues. The list could include, among other things, surplus, dividends, re-invested earnings, asset valuation and income, etc.

Sense that the WPFS could play a major role in articulating and discussing such issues