UNECA/UNSD Regional Workshop November 2005 AEG Recommendations on Treatment of land

1. UNECA/UNSD Regional WorkshopNovember 2005AEG Recommendations on Treatment of land UN STATISTICS DIVISION Economic Statistics Branch 1

2. 1993 SNA Current treatment • Land improvements are GFCF. • On the balance sheet, land improvements are included with land as non-produced assets. • The decline in value of land improvements is recorded as CFC. • COTL is treated likewise until land is sold, then written off.

3. Land improvement – SNA93 • Reclamation of land: dykes, sea walls, dams. • Clearance of forests, rocks, etc. • Draining marshes, irrigation of deserts by dykes, ditches, irrigation channels. • Prevention of flooding or erosion by sea or rivers: breakwaters, sea walls, flood barriers.

4. Land improvement – 1993 SNA • Land improvements …..are not in themselves used directly to produce other goods and services in a way that most structures are. Their construction is undertaken to obtain more or better land, and it is the land, a non-produced asset, that is needed for production. For example, a dam built to produce electricity serves quite a different purpose from a dam built to keep out the sea. • Acquisitions of tunnels and other structures associated with the mining of mineral deposits, etc., are classified as GFCF and not as improvements to land.

5. Problems in current treatment • Land improvements are recorded as GFCF but are also recorded as non-produced assets on the balance sheet • CFC is recorded in respect of a non-produced asset. • In some cases, land improvements may account for most of the combined value. • Some countries are unable to obtain estimates of the total value of land, and they can only estimate land improvements.

6. Options considered by Canberra-II Group • Leave the SNA as it is. • Classify land as either produced or non-produced according to how much land improvements contributed to total value. • Identify land improvements as produced assets and unimproved land values as non-produced. • Treat land improvements in the same way as buildings and structures. This means adopting option 3 where possible and option 2 where not.

7. AEG decisions • GFCF of land improvements should be treated like other GFCF and result in a produced asset appearing separately in the balance sheet; • The non-produced component of land should be valued at its present unimproved value; • Where the value of land cannot be partitioned into an improved and unimproved part, adopt recommendations for land and associated structures as in Para 13.57 for balance sheets and Para 7.131 for rent and rentals;

8. AEG decisions – contd. • Costs of ownership transfer on land should be recorded as fixed assets and included with land improvements. • Activities such as land clearance, land contouring, creation of wells and watering holes which are integral to the land in question and which are carried out by the landowner are to be treated as part of land improvements. Activities such as the creation of sea walls, dykes, dams and major irrigation systems which are in the vicinity of the land but not integral to it, often affect land belonging to several owners and which are often carried out by government, are to be classified as structures.

9. Thank You