Foggy Figuring

23 April 2013 By Martin Hutchinson

The key measure is already too influenced by arbitrary “hedonic adjustments” and cost-based accounting for government services. A new set of revisions will increase the dependency on estimates and fine demarcations. GDP will become less transparent and easier to distort.

This content is for Subscribers only

Context News

The Bureau of Economic Analysis’ comprehensive review of the GDP accounts, the first since 2009, will make five major changes, which together are expected to add about 3 percent to reported GDP:

It will recognize expenditures by government, businesses and nonprofits on research and development as fixed investment. (This is expected alone to add 2 percent to GDP);
It will recognize expenditures by businesses and non-profits on films, long-lived TV programs, books and other artistic originals as fixed investment;
It will expand the ownership transfer costs of housing and depreciate them more rapidly;
It will measure transactions of defined benefit pension plans on an accrual basis by recognizing the costs of unfunded liabilities (imposing an interest charge on them rather than measuring their quarter-to-quarter fluctuations directly);
It will use accrual accounting consistently for wages and salaries.

Context News

The Bureau of Economic Analysis’ comprehensive review of the GDP accounts, the first since 2009, will make five major changes, which together are expected to add about 3 percent to reported GDP:

It will recognize expenditures by government, businesses and nonprofits on research and development as fixed investment. (This is expected alone to add 2 percent to GDP);

It will recognize expenditures by businesses and non-profits on films, long-lived TV programs, books and other artistic originals as fixed investment;

It will expand the ownership transfer costs of housing and depreciate them more rapidly;

It will measure transactions of defined benefit pension plans on an accrual basis by recognizing the costs of unfunded liabilities (imposing an interest charge on them rather than measuring their quarter-to-quarter fluctuations directly);

It will use accrual accounting consistently for wages and salaries.

Email a friend

Please complete the form below.

Required fields *