Working Party on Financial Statistics

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1 Unclassified COM/STD/DAF(2012)20 COM/STD/DAF(2012)20 Unclassified Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 21-Sep-2012 English - Or. English Directorate for Financial and Enterprise Affairs Statistics Directorate Working Party on Financial Statistics Indonesia s Sectoral Accounts: Progress and Simulation To be held on 1-2 October 2012 OECD Conference Centre Beginning at 2:00 p.m. on the first day This document has been prepared by Rut W. Eka Trisilowati and Nurcholis (Bank of Indonesia) and will be presented under item 9 of the draft agenda The complete document is only available in PDF format English - Or. English JT Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

2 COM/STD/DAF(2012)20 2

3 Indonesia s Sectoral Accounts: Progress and Simulation Background note 1 OECD meeting Working Party on Financial Statistics (WPFS) and Working Party on National Accounts (WPNA), Paris, 1-5 October 2012 The sectoral accounts present an integrated macroeconomic framework of domestic sectors (fiscal, financial and nonfinancial sectors) with those of the rest of the world. To measure how far the Bank Indonesia may go to meet the minimum internationally agreed template, we have attempted to simulate Indonesia s sectoral accounts using annual data of 2010 and The simulation ideally should be able to integrate financial and nonfinancial data for all resident institutional sectors and their interactions with the rest of the world. However, as expected, serious data gaps exist for most nonfinancial assets and less data gaps for financial assets of institutional sectors other than Central Bank and Banks; even, where sub-sectoring of institutional data exists, data accessibility and presentation are not satisfactory enough. GENERAL VIEWS 1 Progress so far Following up two international conference series 2, started this year, the Bank Indonesia has been implementing two years project aimed to provide sectoral accounts 3. At the early stage, sectoral accounts are simulated using annual data covering financial and nonfinancial assets at the minimum template. Later, the Bank Indonesia plans to limit the coverage of institutional sectors to Central Bank, Banks and Finance Companies only since data for other institutional sectors unsupervised by the Bank Indonesia is not that accessible. Therefore, coverage of sectoral accounts would be financial account (flows) plus financial asset and liabilities from the balance sheets, but with higher frequency quarterly. 2 Institutional compilers As the quarterly Indonesia s Flow of Funds (FOF) is published and compiled by Central Statistics Office (Badan Pusat Statistik-BPS) 4, the sectoral accounts will therefore be expected to be organised This note was prepared by Rut W. Eka Trisilowati (ruthwisma@bi.go.id) and Nurcholis (Nurcholis@bi.go.id), Bank Indonesia (BI). The views expressed in this paper are those of the authors and not necessarily the views of the BI. We are grateful to Widyastuti Noviandari, Bambang Irwanto, Widi Agustin S., Eko Ariantoro, Ririn Yuliatiningsih, Bayu Dwi Atmanto and Wahyu Yuwana for their helps with the data compilation, useful comments and suggestions. We also thank Anni V.L. Herman for useful final reviews. The Bank Indonesia attended (1) IMF-OECD Conference on Strengthening Sectoral Position and Flow Data in the Macroeconomic Accounts, Washington DC, February 28- March, 2011; and (2) The Joint Session of the OECD working Party on Financial Statistics and the OECD Working Party on National Accounts, Paris, October 24-28, Two years in constructing sectoral accounts is merely the Bank Indonesia s project without intervention from other institutional units, e.g. central statistics office (BPS) and Ministry of Finance. Annual Indonesia s FOF is available from 1984 covering 8 institutional sectors and from 2000 covering five institutional sectors on quarterly basis. It is compiled by Central Statistics Office (BPS) coordinated with the Bank Indonesia and Ministry 1/21

4 by the BPS as well 5. With the same role in the FOF compilation and data limitation, the Bank Indonesia have plan to provide sectoral accounts of Central Bank, Banks and Finance Companies. 3 Indonesia s FOF and simulation of Indonesia s sectoral accounts Along with the BPS s plan to implement SNA 2008 in 2014, the Bank Indonesia has attempted to construct Indonesia s sectoral accounts based on extended FOF started from this year. The extensions include financial assets and liabilities from balance sheets, financial instruments reclassification, more breakdowns in institutional sector and nonfinancial instruments. 3.1 Indonesia s FOF Indonesia s quarterly FOF (financial accounts) are part of the whole system of SNA and presented in a two-dimensional matrix: the column-wise shows the institutional sectors and row-wise contains various financial instruments at below the line and saving investment gap at above. Each institutional sector has two columns, namely Sources and Uses of funds. The Sources of funds column records all financial transactions stemming from the obligations or liabilities side. The Use of funds column accommodates all financial transactions derived from assets side. The FOF which is also called financial accounts of various types, record transactions involve financial assets and liabilities. This FOF combines current accounts and capital accounts that provide an integrated presentation of nonfinancial and financial accumulation. The combination allows users to analyse the links between saving, capital formation and financial flows for the whole economy and each institutional sector. Thus, there are two main sections in the FOF. 1) Capital accounts records saving and capital transfer as sources and capital accumulation e.g. expenditures on building, structures and machineries as use of funds. A surplus ensues if sources are greater than uses; otherwise, a deficit is recorded. An institution in surplus becomes a lender; while that in deficit becomes a borrower. 2) The financial accounts which are the second accumulation account show the type of financial instruments in which lending and borrowing are utilised by the different institutional sectors in the economy. The net lending from the capital accounts should equal to net financing from the financial accounts. Indonesia s FOF currently covers 5 main institutional sectors. 1) Central Bank 2) Banks (Depository-taking institutions) 3) General Government 4) Other domestic sectors 5) The ROW sector 3.2 Simulation of Indonesia s sectoral accounts The simulation follows the minimum internationally agreed template based on annual data of 2010 and The statistical standard and classification of financial/nonfinancial instruments and institutional sectors ensure consistency with international standards. The simulation shows the financial assets and liabilities of each institutional sector in terms of their yearly financial balance sheets and transactions. Financial balance sheets draw the stock of assets of Finance and available on the BPS website. It is resulted as coordination with the Bank Indonesia and Ministry of Finance and available on the BPS website, 5 According to the BPS s Road Map, sectoral accounts will be started to be compiled soon after implementation of SNA 2008 in the Indonesia System of National Accounts (SNNI) in /21

5 and liabilities broken down by types of instruments. The difference between total assets and total liabilities results the net financial wealth/worth of the sectors. Similarly, yearly financial (nonfinancial) transactions draw transactions in assets (uses) and liabilities (resources) broken down by types of instruments. The difference between transactions in assets (uses) and transactions in liabilities (resources) results the net lending (+) or net borrowing (-) of the sectors over a year. Changes in the balance sheets from year to year can be explained by transactions over the year or by other changes. The later is comprised of valuation changes, exchange rate changes and reclassifications. This is reflected in the following formula. Balance Sheets t Balance Sheets t-1 = Transactions t + Other changes t Meanwhile, stock of nonfinancial assets disaggregates assets into produced nonfinancial and nonproduced nonfinancial assets. But such, on this phase nonfinancial asset classification at Indonesia is only produced nonfinancial asset. 4 Basic methodology 4.1 Financial assets VS nonfinancial assets As mentioned above, the simulation covers financial assets/liabilities and nonfinancial assets.the coverage of assets is limited to those assets used in economic activity and that are subject to ownership rights. There are no nonfinancial liabilities recognized in the SNA, thus the term liability necessarily refers to a liability that is financial in nature. The basic differences between financial and nonfinancial assets are described below (quoted from the SNA 2008). Financial assets Financial assets consist of all financial claims, shares or other equity in corporations plus gold bullion held by monetary authorities as a reserve asset. Financial assets are necessarily and primarily stores of value. Transactions in financial assets and liabilities are recorded at the prices that were actually exchanged. The transaction (as well as stock) should be recorded exclusive of any service charges, commissions, fees, and taxes whether charged explicitly, included in the purchaser s price, or deducted from the seller s proceeds. Nonfinancial assets Assets that are not financial assets are nonfinancial assets subdivided into produced and nonproduced assets. Nonfinancial assets generally are primarily objects usable in economic activity and, at the same time, serve as stores of value. Acquisitions of nonfinancial assets other than inventories are valued at their exchange price. The transaction should be included any costs incurred in the transfer of ownership, but it is excluded interest and other financing charges incurred in connection with a transaction. Thus, the valuation of nonfinancial assets, which includes any costs of ownership transfer. The various values are applied to value stock on nonfinancial assets. 4.2 Stocks and flows Stocks are a position in, or holdings of, assets and liabilities at a point in time. The value of the stock of financial assets changes during the course of the year due to economic flows transactions and other flows (e.g. revaluations/holding gains and losses; other changes in volume (OVC)). 3/21

6 Transactions are how economic value is exchanged between transactors in the economy. Exchange of value implies a change of asset ownership (an accrual basis), and this is a central principle in classifying a change in value to either a transaction or other economic flow. Revaluations/holding gains and losses occur when asset price changes causing an increase or decrease in the stock value of holdings of that asset. Revaluations are an economic flow that does not result from a change of ownership, e.g. share price changes and the impact of exchange rate changes on assets denominated in foreign currency. While revaluations are not transactions, they do have a significant impact on wealth (stock). Asset values may change over time due to other than transactions and price changes, i.e. OCVs. The OCVs also record other statistical issues, e.g. a transactor that changes institutional sector classification through privatisation of a previously public sector owned corporation; and discontinued time series. At some point in the time series the inconsistent treatment between opening and closing stocks will be allocated to OCVs rather than in the transaction series. 4.3 Aggregation and consolidation It is important to distinguish between aggregated statistics and consolidated statistics. When statistics for separate units/entities are added and reciprocal stock positions (or flows) exist but are not eliminated, these statistics are called aggregated statistics, not consolidated statistics. Consolidation for all domestic sectors to a whole of economy aggregate will result an exact counterpart to the Rest of World accounts. The numerical example of aggregated and consolidated statistics is illustrated below (some are modified from PSDG 2011). While the balancing items of the aggregated position and consolidated position are the same, the stock positions in financial assets and liabilities would be smaller under consolidation than under aggregation. Balance sheets/position Central government Local government Aggregated general government Consolidated general government Assets Liab. Assets Liab. Assets Liab. Assets Liab. Net worth 6,500 5,800 12,300 12,300 Nonfinancial assets 10,300 5,000 15,300 15,300 Net financial worth -3, ,000-3,000 Financial 8,600 12,400 4,700 3,900 13,300 16,300 12,900 15,900 o/w loans to/from local government Aggregation of financial data poses some issues. Consider a Central Government that borrows funds by issuing debt securities and on-lends them to Local Governments. Summing the liabilities of all agencies as General Government will double count the borrowings. The numerical example of aggregated and consolidated statistics below shows that total aggregated borrowing position double counts compared with the consolidated position. Balance sheets/position Central government Local government Aggregated general government Consolidated general government Assets Liab. Assets Liab. Assets Liab. Assets Liab. Debt securities 5,000 5,000 5,000 Loans to/from local 5,000 5,000 5,000 5,000 government Total 5,000 5,000 5,000 5,000 10,000 5,000 Another example is that consider a Bank X that incurs a deposit liability and in turn places the funds on deposit with another, but unrelated, Bank Y. The question of what is the value of all bank sector 4/21

7 liabilities deposits is most properly answered from a sectoral behaviour point of view by consolidation (elimination) of the intrabank sector deposit (see below). Balance sheets/position Bank X Bank Y Aggregated banks Consolidated banks Assets Liab. Assets Liab. Assets Liab. Assets Liab. Deposits 3,000 3,000 3,000 3,000 6,000 3,000 3,000 However, in practice, consolidation also has some problems. For example, when a transaction to be consolidated is identified in the records of one unit, the corresponding transaction should appear in the accounts of the counterparty, but it may not be recorded there, it may be recorded in a different period, it may be recorded at a different value, or it may be classified as a different type of transaction. Conversely, the problems of aggregated and consolidated nonfinancial transactions and assets (stocks) are not as complicated as the issues described above. The sum of transaction and nonfinancial assets are done by aggregation of each instrument or each type of asset transaction. FINANCIAL ASSETS 1 Institutional sector and instrument classification The following Table 1 and 2 outline the existing institutional sectors and financial instruments in Indonesia referring to the internationally agreed template. Table 1 Financial assets - Institutional sector classifications in the simulation SNA 2008 code Institutional sector Description S1 Total Economy Sum of all resident sectors of the economy. S11 S11001 S11003 Nonfinancial corporations (NFCs) Public nonfinancial corporations Private nonfinancial corporations Covers private and public nonfinancial corporations whose principal activity is the production of goods and non-financial services on a commercial basis. This sector includes closed stock companies, join stock companies, state and municipal enterprises, nonprofit institutions (NPIs) which cover the larger part of their activity costs by income from goods and services. This sector excludes nonincorporated corporations that are classified under the household sector. Because there are many enterprises, estimation for this sector is derived from data obtained from several different sources, including counterpart information from reporting Banks. The simulation does not obtain directly from individual enterprises balance sheets. Controlled by government. It includes BUMN (state owned enterprises) (140 companies). Since direct data is not accessible, other institutional sectors based on counterparty information have been used to estimate financial assets/liabilities. Not controlled by government. If it is foreign controlled, it is categorized as Foreign controlled nonfinancial corporations; otherwise as National private nonfinancial corporations. 5/21

8 The simulation does not distinguish whether Private nonfinancial corporations are controlled by foreign. Since direct data is not accessible, other institutional sectors based on counterparty information have been used to estimate financial assets/liabilities. Includes private and public institutional sectors that are S12 Financial corporations engaged in financial intermediation and financial auxiliary activities. S121+S122+ S123 S121 S122 S123 S128+S129 S128 S129 S124+S125+ S126+S127 S124 S125 Monetary financial institutions Central bank Other deposit-taking corporations (ODCs) Money market funds (MMF) Insurance corporations and pension funds (ICPF) Insurance corporations Pension funds Other financial corporations (OFC) Non MMF investment funds Other financial Intermediaries except Insurance corporations and pension funds Covers Central Bank, ODCs and MMF. Covers Bank Indonesia Data sourced from Monthly Central Bank s balance sheets (provided by the Bank Indonesia). Includes Commercial Banks (120 banks (also includes foreign banks braches) and Rural Credit Banks (1837 banks). This sector also covers Islamic Banking Units/Banks. Data sourced from Monthly Commercial Banks balance sheets (LBU) (provided by the Bank Indonesia). Money Market Investment Fund (27 companies) means an Investment Fund that invests only in debt Securities which have an initial maturity date of less than one year. The simulation excludes this sector since direct data is not accessible. Covers insurance corporations and pension funds. Includes 139 companies, i.e. general insurance (85), life insurance (45), reinsurance (4) and social insurance (6). Data sourced from Insurances balance sheets (provided by the Ministry of Finance BAPEPAM LK (Capital Market and Financial Institution Supervisory Agency)). Covers 271 companies. Data sourced from Pension Funds balance sheets (provided by the Ministry of Finance BAPEPAM LK). Includes investment funds, leasing companies, securitisation vehicles, treasury companies and a range of other companies engaged in financial intermediation. This sector also includes financial auxiliaries which engage in a variety of financial and advisory activities that assist financial intermediation The simulation excludes this sector since data is not available. Covers Finance Companies (2837 companies), Leasing Companies, Venture Capital Companies (79 companies), Clearing and Guarantee Companies (4 companies), Indonesia Eximbank (1 company), Infrastructure Finance Companies (IFC) (2 companies) and Secondary Mortgage Facility (2 companies). The simulation excludes this sector since direct data is not accessible. 6/21

9 Exception for Finance Companies (2837companies) sourced from Monthly report (provided by the Bank Indonesia and Ministry of Finance BAPEPAM LK). Includes Indonesian Central Securities Depository (1 company), securities exchange (1 company), investment fund selling agent, investment advisors, S126 Financial Auxiliaries and investment fund management. The simulation excludes this sector since direct data is not accessible. S127 S12001 S13 S1311 S S1314 S1314 S14+S15 Captive financial institutions and money lenders Public financial corporations General government Central government State & local government Social Security Funds Households and NPISHs Includes securities administration agencies and trust agents. The simulation excludes this sector since direct data is not accessible. Mixed with financial corporations (4 state-owned Banks). Indirect data sourced from other institutional sectors based on counterparty information have been used to estimate financial assets/liabilities. Covers central and local government and the social security fund. Covers all central government units, including ministries, all governmental department, offices, establishment, and other bodies which are agencies or instruments of the central authority of a country. It also included BUMN, NPIs and Kantor Wilayah (vertical office) at regional level. Data sourced from Central Government s balance sheets (provided by the Ministry of Finance). Covers all regional government units, all regional governmental department and NPIs. Since direct data is not accessible, other institutional sectors based on counterparty information have been used to estimate financial assets/liabilities. The simulation excludes this sector since data is not available. Since direct data is not accessible, other institutional sectors based on counterparty information have been used to estimate financial assets/liabilities. S14 Households The simulation does not distinguish Households from S15 NPISH s NPISHs and direct data is not accessible. S12 Rest of the World Represents the economy s interactions with nonresidents. Assets of the rest of the world represent Indonesian liabilities to nonresidents. Similarly, liabilities of the rest of the world represent Indonesian nonresident assets. Data sourced from Indonesia s International Investment Positions (provided by the Bank Indonesia). 7/21

10 Table 2 Financial instrument classifications used in the simulation F1 F11 F12 F2 F21 F22 SNA 2008 code Financial instrument Description Monetary gold and Special Drawing Rights (SDRs) together form part of the Official External Reserves held by the Central Bank. In the financial accounts statistics they are recorded only on the assets side of Monetary gold and SDRs the table, as they are not considered to be the liabilities of any sector. from Central Bank s balance sheets (provided by the Bank Indonesia). The gold held as a component of foreign reserves by the Bank Indonesia. It includes gold deposits /on loan and swapped. Monetary gold from Central Bank s balance sheets (provided by the Bank Indonesia). International reserve assets created by the International Monetary Fund. SDRs from Central Bank s balance sheets (provided by the Bank Indonesia). Currency consists of all notes and coins in circulation. Transferable deposits are deposits that are immediately convertible into currency or Currency and deposits transferable without restriction. from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia). Of which: Domestic currency Notes and coins in circulation that are commonly used to make payments. Notes and coins are treated as liabilities at full face value. The cost of producing the physical notes and coins is recorded as government expenditure and not netted against the receipts from issuing the currency. The simulation includes cost of production the Currency physical notes and coins. Bank Indonesia has no information about other than banking system s holding notes and coin. Estimation is calculated by taking the value of notes and coin outside the banking system and allocating it by using certain percentage to households and other institutional sectors. Deposits those are exchangeable for bank notes and coins and directly usable for making payments. It excludes all limited transferable deposits. Transferable deposits from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia). 8/21

11 This is embedded counterparty information in the financial instrument classification. Term of Bank can refer to Central Bank and ODCs. F221 Interbank positions All interbank loans and deposits should be recorded separately from other loans and deposits. But, this simulation defines interbank as inter ODCs. Covers all loans and deposits acquired and incurred between different Banks. F229 F29 F3 F31 F32 Other transferable deposits Other deposits Debt securities Of which: Domestic currency Short-term Long-term With remaining maturity of one year and less All transferable deposits which are either the creditors or debtor or both, is not bank. from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia). Other deposits consist of all deposits which are not transferable deposits, such as, savings deposits (which are always non-transferable), fixed-term deposits and non-negotiable certificates of deposit. It also includes Claims on the IMF that are components of international reserves and are not evidenced by loans should be recorded in other deposits. from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia). All negotiable instruments serving as evidence of debt. It is designed to be traded on organized and other markets. Accrued interest should be incorporated into the outstanding amount of the financial asset or liability, rather than being treated as part of other accounts receivable/payable. The simulation treats untraded instruments as debt securities. The valuation uses fair value which is assumed to be constant over its life. Counterparty information taken from the LBU is based on primary market. from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia).Other data sources used to estimate debt securities are, e.g. central government, nonfinancial corporations, and other financial corporations (provided by the Ministry of Finance and individual corporate). F4 With remaining maturity of more than a year Loans are financial assets that are created when a creditor lends funds directly to a debtor, and are evidenced by documents that are not negotiable. It Loans includes claims an or liabilities to the IMF that are in the form of loans, repurchase agreement (repo) and security lending with cash collateral. The securities 9/21

12 provided as collateral under securities lending, including a securities repo, are treated as not having changed economic ownership. This treatment is adopted because the cash receiver is still subject to the risks or benefits of any change in the price of the security. Most of data sources have clear definition of loans. Of which: Domestic currency F41 Short-term F42 Long-term With remaining maturity of one year and less F5 F51 F511 F512 F519 F52 F521 F522 F6 With remaining maturity of more than a year Equity and investment fund shares Equity Listed shares Unlisted shares Other equity Investment fund shares/units Money market fund (MMF) shares/units Non MMF investment fund shares/units Insurance, pension and standardized guarantee schemes Equity and investment fund shares have the distinguishing feature that the holders own a residual claim on the assets of the institutional unit that issued the instrument. from the LBU (provided by the Bank Indonesia). Equity comprises all instruments and records acknowledging claims on the residual value of a corporation or quasi corporation after the claims of all creditors have been met. Equity is treated as a liability of the issuing institutional unit (a corporation or other unit). Ownership of equity in legal entities is usually evidenced by shares, stocks, participations, depository receipts, or similar documents. from the LBU (provided by the Bank Indonesia). The simulation does not implement the following three classification points (F511, F512 and F519) as financial instrument since direct data is not accessible. Mutual Funds are shares issued by a money market funds or investment funds. Money market funds are investment funds that invest only or primarily in short-term money market securities such as Treasury bills, certificates of deposit and commercial paper. from the LBU (provided by the Bank Indonesia). Investment fund shares other than money market. from the LBU (provided by the Bank Indonesia). Insurance, pension and standardised guarantees schemes all function as a form of income redistribution mediated by financial institutions. The simulation does not implement the following four classification points (F61-F66) as financial instrument since direct data is not accessible. 10/21

13 F61 Non-life insurance technical reserves F62 Life insurance and annuity entitlements F63+F64+F65 Retirement entitlements F63 Pension entitlements F64 Claim of pension fund on pension managers F65 Entitlements to non-pension benefits F66 Provisions for calls under standardized guarantees F7 Financial derivatives and employee stock options Derivative is a financial instrument that meets the following three criteria: (1) its value changes in response to a change an underlying; (2) required little or no initial investment; and (3) settled at a future date. Derivative transactions are defined as transactions based on a contract or agreement for payment in which the value is a derivative of the value of underlying instruments, such as interest rates, exchange rates, commodities, equity and indices, whether accompanied by or not accompanied by notional amounts or instruments, F71 Financial derivatives but not including credit derivative transactions. There are several types of financial derivatives: (1) forward type derivatives, e.g. forward contracts, future contracts and swaps; (2) option-type derivatives such as call and put options, caps and collars and warrants; (3) freestanding derivatives (e.g. option, forward contract, swap, future contract); and (2) embedded derivatives. from the LBU (Bank Indonesia). Other data sources used to estimate financial derivatives are, e.g. central government, nonfinancial corporations, and other financial corporations. F711 Options F712 Forwards F72 Employee stock options (ESO) An equity instrument granted to an employee as remuneration and compensation of employee s services shall be measured and recognized at the fair value of the related equity instrument. The fair value shall be determined as follows: (1) The fair value shall be determined based on the market price of an active market; (2) If it is not possible to obtain such market price, the fair value shall be determined through an estimate based on the price of the same type of asset; and (3) If such estimate is not possible to obtain, the fair value shall be determined based on a valuation method appropriate to the conditions. The examples of the method for the determination of the fair value are discounted cash flow, option pricing models, matrix pricing, option-adjusted spread models and fundamental analysis. Since , it has been 32 companies issuing ESO with number of shares , but the simulation excludes this instrument. 11/21

14 Of which: Domestic currency F81 F89 2 Data sources Trade credits and advances Other accounts receivable/payable Financial claims arising from timing differences between the delivery of goods or services and the corresponding payment. Trade credits and advances do not include loans to finance trade credit, which are classified as loans. from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia). Other accounts receivable/payable consists of all claims which stem from the early or late payment for financial transactions in goods and services, distributive transactions or secondary trade in financial assets. It also includes a small statistical discrepancy. Financial claims arising from timing difference between accrued transactions and payments made in taxes, social contributions, wages and salaries, dividends. Interest that accrues but is not paid is included in this item only if the accrued interest is not added to the value of the asset on which the interest is payable (as is usually the case). from the LBU and Central Bank s balance sheets (provided by the Bank Indonesia). A range of stock data sources are used in the simulation of annual sectoral accounts. These data are collected primarily by the BPS, Bank Indonesia and Ministry of Finance. Table 3 below lists macroeconomic stock data available in Indonesia so far and are already used to compile, such as Monetary and Financial Statistics, FOF (derived from stocks), Balance of Payments (BOP) and International Investment Positions (IIP). Table 3 Stock data sources available in Indonesia so far Type stock/position data Central Bank Deposit-taking corporations except the central bank Finance Companies Other financial corporations Description Bank Indonesia Monthly Central Bank s balance sheets Bank Indonesia the LBU Joint report Bank Indonesia and Ministry of Finance (BAPEPAM LK) Quarterly Finance Companies balance sheets Bank Indonesia Monthly Finance Companies balance sheets Ministry of Finance (BAPEPAM LK) Quarterly reporting on the following institutions. Pension Funds; Insurance; Finance Companies; Guarantee Institutions (Lembaga Penjaminan); and Investment Funds (include Money Market Funds) Ministry of Cooperatives Small and Medium Enterprises Credit Unions (Koperasi Simpan Pinjam) - not accessible Ministry of State-Owned Enterprises Mortgage Brokers (Pegadaian) - not accessible State Government Microfinance Institutions (Lembaga Pembiayaan Mikro) - 12/21

15 not accessible Ministry of Finance Central and Local Government s balance General government sheets Ministry of Finance and Bank Indonesia Regular monthly External debt statistics (EDS) report on financial and nonfinancial corporations including general government BIS International banking Bank Indonesia Quarterly data sourced from the LBU statistics Security-by-security data collection system (SBS) BIS Securities statistics Public sector Debt International Investment Positions 3 Simulation techniques Accounting rules Indonesian Central Securities Depository (KSEI) Type of securities registered - Shares; Warrants; Rights; Corporate Bonds; Government Bonds; Medium Term Notes; Promissory Notes; Negotiable Certificate of Deposits; Commercial Papers; Certificate of BI; Treasury Bills; SUKUK; Investment Fund Instrument; Depository Receipt; American Warrant ; Mutual Fund; SBSN National Islamic Securities; and Asset-Backed Securities Bank Indonesia Quarterly data sourced from KSEI, External Debt Statistics and Central Bank s balance sheets Ministry of Finance and Bank Indonesia Quarterly Public Sector Debt Statistics (PSD) Bank Indonesia Quarterly data sourced from External Debt Statistics, Central Bank s balance sheets and the LBU In general, since the mid-1960s, the accounting rule in Indonesia is affected by Indonesian Generally Accepted Accounting Principles (Indonesian GAAP) 6. But, from 2012, it is expected that Indonesian GAAP is fully converged with the International Financial Reporting Standards (IFRS). The simulation is based on the double-entry accounting principle. Each transaction must be recorded twice, once as a resource (i.e. a change in liabilities/liabilities) and once as a use (i.e. a change in assets/financial assets). The total of transactions/positions recorded as resources and the total of transactions/positions recorded as uses must be equal, thus permitting a check for consistent accounts. Financial assets and liabilities are valued at current market prices as of the balance sheets date. Where only nominal prices are available, these are converted to market prices using an estimate. The financial balance is compiled primarily as unconsolidated accounts. Therefore, all assets and liabilities must be recorded on the accounts regardless of whether they relate to transactions outside or within the sectors. Timing of recording on the accounts is made on an accrual basis. The system records flows based on when claims and obligations arise are transformed or are cancelled. Recording flows The simulation records the opening and closing balances of financial assets and liabilities. After the levels data have been finalised, net financial transactions are derived by taking the difference between closing and opening levels of balance sheet items and, where possible, eliminating changes on the balance sheet caused by valuation effects such as exchange rate movements. 6 The efforts have been made to move toward convergence with IFRS and adoption of International Standards of Auditing (ISA) since 2005; however have not fully adopted. 13/21

16 Thus, the decomposition of flows into transactions and other flows (i.e. revaluation and OCV) is not distinguished. Counterparties information The complexity of the linkages amongst institutional sectors and number of institutional sectors that are not subject to supervision for the Bank Indonesia, the making use of counterpart information is a basic principle to cover data from other institutional sectors where direct data is either not accessible or impossible to obtain it. As mentioned before the double-entry - in which one entity s asset is always another entity s liability - has offered the mirror feature how to collect data either from entities investing in financial assets or from issuers/debtors. Thus, data are collected from at least one of these parties the types of relationships and the counterparties are clearly identified. Superior data As mentioned above that a number of data sources are used to simulate annual Indonesia s sectoral accounts. Not surprisingly there are data inconsistencies that lead to differences. Some indicators used are known to be of poor quality and hence these estimates should be used with caution. Counterpart information about certain institutional units can be derived from the records of other institutional sectors with which they have engaged in financial transactions. Thus, the levels (stock) data are prepared by gathering together balance sheets information from various sources and selecting the better estimates. As noted previously, a choice is often possible because and some data sources are superior to others. For example, borrowing by Public Nonfinancial Corporations will be reported by Banks as assets and by the Public Nonfinancial Corporations as liabilities. As the Bank Indonesia does not survey all state Public Nonfinancial Corporations, the data from Banks are therefore used to estimate both the asset and liability aspects of these borrowings. Ensuring consistency The use of mirror features can sometime reveal that data very often differ. Addressing, identifying and eliminating discrepancies are a key task to keep consistent information. Discrepancies between data do not necessarily imply that one of the statistics is wrong. Besides methodological differences (such as different valuations), discrepancies may be due to the use of different primary sources, different update frequencies of reporting entities or different transaction record times. NONFINANCIAL ASSETS 1 Institutional sector and instrument classification As well as financial asset, the descriptions about institutional sectors for nonfinancial assets/transactions in Indonesia is similar to Table 1 above. Table 4 notes that nonfinancial transactions refer to the framework of Financial Social Accounting Matrix (FSAM) arranged by the BPS. Meanwhile, the compilation of nonfinancial assets generally refers to capital stock calculated by the Bank Indonesia and BPS; and gross fixed capital formation (GFCF) concepts compiled by the BPS. Table 5 highlights that most of produced nonfinancial assets are available in Indonesia, except for valuable goods. Nonproduced nonfinancial assets are not available in Indonesia. The source nonfinancial stock/transaction is generally from the BPS. This table explains that the simulation of nonfinancial assets stocks for each institutional sector is estimated using their balance sheets and/or calibrated as a proxy by using structured data, e.g. Gross Domestic Product (GDP), Gross National Income (GNI), Disposable Income (DI), Supply & Uses Table (SUT)/Input-Output Table (IO), FSAM and Social Accounting Matrix (SAM). The following Tables 4 and 5 summarize dataset used in the simulation. 14/21

17 Table 4 Nonfinancial transactions used in the simulation SNA 2008 Code P6 (fors2) P7 (fors2) P1 P11 P2 B1g D1 B2g+B3g D2 D3 Nonfinancial Transaction Exports of goods and services Imports of goods and services Output Market output Intermediate output Value added, gross/gross Domestic Product Compensation of employee Operating surplus, gross and mixed income, gross Taxes on production and imports Subsidies Description Covers export and imports of goods and services from GDP. Trade data is compiled jointly by the Directorate General of Customs and Excise with BPS and Bank Indonesia. Not available Gross Value Added must be obtained from direct sources. It may be compiled on the basis of survey and administrative data sources. The simulation uses the following data sources. o Central Bank Bank Indonesia s balance sheets (provided by the Bank Indonesia). o ODCs the LBU (provided by the Bank Indonesia). o General Government the value added of Government (provided by the BPS. o Household and NPISHs the value added of individual services & households (provided by the BPS). o ICPF & OFC - the value added of nonbank financial institutions and services (provided by the BPS).; and o NFCs - accumulated as residual. Compensation of Employees is obtained from labor force or labor cost surveys and administrative data sources. The simulation uses the following data sources. o Central Bank - the value added data and SUT/IO from Bank Indonesia s balance sheets (provided by the Bank Indonesia and BPS). o ODCs the LBU (provided by the Bank Indonesia). o ICPF, OFC, general government, household & NPISHs SUT/IO (provided by the BPS). o NFCs - accumulated as residual. The simulation uses the following data sources. o Central Bank - the value added data (provided by the BPS). o ODCs the LBU (provided by the Bank Indonesia). o ICPF, OFC, general government, household & NPISHs SUT/IO (provided by the BPS). o NFCs - accumulated as residual. D4 Property income Not available D41g Total interest before FISIM allocation Not available B5g The simulation uses the following data sources. Balance of primary o Central Bank - the value added data incomes, gross/national (provided by the BPS). income, gross o ODCs the LBU (provided by the Bank 15/21

18 Indonesia). o ICPF, OFC, general government, household & NPISHs the value added data (provided by the BPS). o NFCs - accumulated as residual. D5 Current taxes on income, wealth, etc The simulation use State Budget data D61 Net social contributions D62 Social benefits other than The simulation uses SAM. Since data for each social transfer in kind institutional sector is not available, the simulation D63 Social transfer in kind accumulates it as transfer. D7 Other current transfer D71 Net non-life insurance premiums D72 Non-life insurance claims Not available D7N Other current transfers, not elsewhere specified The simulation uses the following data sources. o Central Bank - the value added data (provided by the BPS). o ODCs the LBU (provided by the Bank B6g Disposable income, gross Indonesia). o ICPF, OFC, general government, household & NPISHs the value added data (provided by the BPS). o NFCs - accumulated as residual. D8 Adjustment for the change in pension entitlements Not available P3 Final consumption expenditure The simulation uses the following data sources. HH & NPISHs and general government the value added (provided by the BPS). NFC - accumulated as residual. B8g Saving, gross The simulation uses the FOF. D9 Capital transfers Not available The simulation uses the following data sources. o Central Bank - the value added data (provided by the BPS). o ODCs the LBU (provided by the Bank P5g Gross capital formation Indonesia). o ICPF, OFC, general government, household & NPISHs the value added data (provided by the BPS). o NFCs - accumulated as residual. The simulation uses the following data sources. P51g Gross fixed capital HH & NPISHs and general government the formation (GFCF) value added (provided by the BPS). NFC - accumulated as residual. P52 Changes in inventories The simulation uses the following data sources. Central Bank Bank Indonesia s balance sheets (provided by the Bank Indonesia). ODCs the LBU (provided by the Bank Indonesia). Household and NPISHs, General Government the value added of individual services & households (provided by the BPS). OFC - the value added of nonbank financial institutions and services (provided by the 16/21

19 BPS).; and NFCs - accumulated as residual. P53 Acquisition less disposals of valuables P51c Consumption of fixed capital Not available NP Acquisitions less disposals of non-produced assets B9 Net lending (+)/net borrowing (-) The simulation uses the FOF. Table 5 Stock of nonfinancial assets used in the simulation SNA 2008 Code AN1 AN11 AN111 AN112 AN12 AN13 AN2 AN21 AN211 AN2111 AN212 AN22 AN23 Nonfinancial Transaction Produced nonfinancial assets Fixed assets Dwellings Other buildings and structures Inventories Valuables Nonproduced nonfinancial assets Natural resources Land Land underlying buildings and structures Mineral and energy reserves Contracts, leases and licenses Goodwill and marketing assets Description Divided into fixed assets, inventory, and valuables (provided by the BPS). The valuables data are not available in Indonesia. Covers GFCF, i.e. building, machinery & equipment, transport equipment, and others (provided by the BPS). The simulation takes account inventory and GFCF to estimate the fixed assets for each institutional sector. The simulation takes account inventory and GFCF to estimate the fixed assets for each institutional sector. The simulation presents inventory as changes in inventories (investment concept) (provided by the BPS). The simulation use inventories from NFCs, central bank, ODCs, OFC, general government, and households & NPISHs. Not available Not available Not available 2 Data sources As mentioned above that nonfinancial assets/transactions are compiled primarily by the BPS, e.g. GDP and SUT/IO. Other data are resulted as a join research by the Bank Indonesia and BPS, such as, capital stock and FSAM. Table 6 below summarizes the data source. 17/21

20 Table 6 Stock data sources available in Indonesia so far-non Financial Type stock/position data Central Bank BPS General government Joint Research BI-BPS Description Bank Indonesia the LBU, BOP BPS - GDP, IO, SAM Ministry of Finance Budget Report Capital Stock and FSAM 3 Simulation techniques 3.1 Nonfinancial transaction The flows and relationships with financial accounts The sequence of the national accounts is composed by current accounts, accumulation accounts (capital and financial accounts) and balance sheets. Nonfinancial transactions are put into current and capital accounts. The current accounts record mainly trade balance and generation of incomes. The capital account is kind of a miscellaneous account that measure financial transactions that do not affect any incomes, productions or saving of the economy. The capital accounts derive net lending (+)/net borrowing (-) (B9) by subtracting GFCF (P51g) from gross saving (B8g) that has been carried forward from the current accounts. Thus, net lending (+)/net borrowing (-) summarizes the final balancing item of the nonfinancial accounts. This net amount the sector borrows or lends is equivalent to net financial transactions (financial assets acquired less the net financial liabilities incurred). It means that it shows the amount the sector has available to invest in financial assets (or to repay debt) or the amount the sector has available to borrow through financial liabilities. Any discrepancy between this balance on the capital account and balance on the financial account is shown as the statistical discrepancy, but it is not provided in the agreed template. Calibration The large majority of data used in the nonfinancial transaction are calibrated using data supplied for National Accounts (GDP compilation) purposes and incorporated with other sources (e.g. SUT, IO, SAM, FSAM and BOP). The principal method in calibration includes the following items. The SUT and IO 7 are taken account to obtain more detailed information on the structure of the Indonesian economy, in which it is used to estimate certain instrument (e.g. fixed assets) for each institutional sector. These tables show the components of gross value added, i.e. compensation of employees, other taxes less subsidies on production, net mixed income, net operating surplus and consumption of fixed capital. GDP is main structured data used for whole economy transactions, in which it consists of gross value added, disposable income (DI) and final demand. GDP, GNI and DI are almost available for all institutional sectors, except for MMF (S123) and ROW (S2). While, the value added for institutional sectors in the agreed template are adjusted by Indonesian institutional sector classification, such as, general government, household and NPISHs, nonbank financial institutions (to estimate value added for ICPF and OFC) and residual value added for 7 SUT is matrices by industry and product describing the domestic production processes and transactions in products. A supply table shows the supply of goods and services by product and by industry, distinguishing output by domestic industry and imports. A use table shows the use of goods and services by product and by type of use (intermediate consumption, final consumption, capital formation or exports). 18/21

21 nonfinancial corporations. GDP, GNI and DI for Central Bank and ODCs are taken from their each balance sheet. Transfers data, such as, net social contributions (D61), social transfers in kind (D63), and other current transfers (D7) are estimated from SAM. Other property incomes, such as, adjustments for the change in pension entitlements (D8), capital transfer (D9) acquisitions less disposals of valuables (P52+P53) and acquisition less disposals of nonproduced assets (NP) are currently not available. Top down method In the agreed template, the current accounts are started from trade balance (P6, P7) and continued to value added (B1g) generated by each institutional sector from their production accounts. The balancing item for the generation of income accounts, gross operating surplus (B2g+B3g) is made up of value added (B1g) less compensation of employees (D1) less taxes on production payable (D2) plus subsidies received (D3). This is carried down into the allocation of the primary income account as a resource. The primary income accounts then take gross operating surplus (B2g+B3g) and augment it with property incomes (D4) received. But, the simulation does not include the property incomes since data are currently not available. The balancing item of this account is the balance of gross primary income (B5g). In the secondary distribution of income account, the major item is taxes on income (D5), as well as flows regarding social contributions, benefits and social transfer in kind (D61- D63) and other current transfers (D7). All these yields are estimate for Gross Disposable Income (B6g) and gross savings (B8g). Gross saving (B8g) is the balancing item on the uses side of primary income accounts and equals the net disposable income. It appears in the changes in liabilities and net worth section of the capital account. 3.2 Nonfinancial assets As explained in Table 5, Indonesia nonfinancial assets mainly comprise a balance sheet for fixed assets (AN11) and inventories (AN12). It excludes land and other nonproduced nonfinancial assets 8 ) with the following explanations. Fixed assets for each institutional sector are currently not available and it is disaggregated into institutional sectors by taking account GFCF and inventory; Dwellings, other buildings and structures are part of the fixed assets; and The category of valuable is not included because there is no good data source available for estimation purpose. The compilation of produced nonfinancial assets (AN1) as part of sectoral accounts would be aligned with the capital stock measurement and inventories stocks (AN12). The stock is also referred to the flows of nonfinancial assets associated with GFCF (P51g) and changes in inventories (P52+P53). There are supposed three sets of accounts that explain the changes in the balance sheet account for nonfinancial assets: (1) capital account; (2) other changes in volume account, and (3) the revaluation account. But the simulation does not take into account these decompositions. The links between opening and closing balance sheets for nonfinancial assets are essential for the derivation of consumption of fixed capital (P51c), but the simulation do not take account it. 8 The compilation of nonproduced nonfinancial assets is currently still underway done by the BPS and it should be in line with the BPS s plan to implement the SNA 2008 in /21