Joint Expert Meeting: Canberra II Group and NESTI – Capitalisation of R&D

BerlinGermany, 31 May – 1 June 2006

Background

  1. The Intersecretariat Working Group on National Accounts (ISWGNA) has been authorised by the United Statistical Commission (UNSC) to undertake an update of the 1993 System of National Accounts (1993 SNA). The ISWGNA is being aided by the Advisory Expert Group (AEG) and a number of taskforces in achieving its goal of promulgating an updated manual in 2008.
  2. At its meeting in July 2005, the ISWGNA and AEG came to the view that R&D output that meets the standard definitions of an asset should be included in the asset boundary. This is a major change, because the current manual recommends that expenditure on R&D should be treated as consumption expenditure. Country support, as recorded on the United Nations Statistical Division’s (UNSD) website is strong, and there appears to be a high probability that the UNSC will support this proposed change.
  3. The taskforce charged with the carriage of the R&D issue was the Canberra II Group on the Measurement of Non-financial Assets. Members of the Canberra II Group have done quite a lot of work on this issue, including compiling experimentalR&D supply and use tables and capital stock estimates. The AEG accepted the assessment of the Canberra II Group that it was feasible to compile the various R&D estimates required in the national accounts of sufficient quality. In particular, the AEG accepted two very important recommendations made by the Canberra II Group that:
  4. The definition of R&D given in the Frascati manual should be adopted in the SNA,
  5. The Frascati system provides the best source of data for deriving estimates of R&D statistics, principally gross fixed capital formation. However, there are shortcomings in the Frascati data and the FM should be amended to better support the needs of the SNA. (NESTI has indicated a willingness to do this.)
  6. The Canberra II Group sent a paper to NESTI describing changes to the FM and R&D surveys that would better meet the needs of the national accounts, and giving priorities. This paper, which can be found on the Canberra II EDG, was discussed at the NESTI 2005 meeting [see STI/EAS/STP/NESTI(2005)13]. NESTI welcomed the Canberra II priorities. A NESTI Task Force, composed of Australia, Canada, Israel, the Netherlands, Sweden, the United Kingdom and Eurostat, was formed in 2005 to work on R&D and the SNAand look into organising a meeting with National Accountants experts in 2006 with the aim of eventually forming a joint NESTI-Canberra expert group.
  7. Among other difficulties that need to be overcome to produce good quality national accounts estimates are current deficiencies in overseas trade statistics for R&D, the derivation of constant price estimates of R&D, the derivation of capital stocks, capital services and depreciation estimates, and quarterly estimates.
  8. One of the major changes in the 1993 SNA was the inclusion of software in the asset boundary. An OECD taskforce, created in 2002, found considerable inconsistencies in the implementation of the new recommendation - to the detriment of international comparability. The taskforce made extensive recommendations as to how estimates should be derived, and there are indications that more countries are adopting best-practice methods as a result, with a consequent improvement ininternational comparability. However, with hindsight it is clear that it would have been far better if the taskforce had been created much earlier.
  9. To avoid a repetition of the software experience it is proposed that ataskforce be set up now, comprising national accountants and R&D statisticians, to develop guidelines for the compilation of R&D national accounts statistics. These guidelines, along with those already developed for software, would be published in an OECD manual at about the same time as the updated SNA.
  10. Accordingly, a one and half day meeting is to be held in Berlin on the afternoon of 31 May and 1 June to discuss this proposal and to develop a work programme. This meeting will follow immediately after a meeting of the NESTI Group. It is hoped that many of its members will stay on for the extra day and a half, because it is evident that NESTI has a major part to play in the successful implementation of R&D capital in the national accounts.
  11. In order to develop a work programme, it is proposed that each of the major problem areas be discussed in order to determine what our current state of knowledge is and what further work needs to be done. A draft agenda has been developed – see below.
  12. The UN Statistics Division is in the process of arranging a meeting in the second week of July 2006 in New York with members of the US business and accounting community and academia to assess best practices in the measurement and valuation of R&D and intellectual property developed by various industries. This meeting could be of interest to our group. For more information, please contact Ivo Havinga [.

Meeting details

  1. The meeting will begin with an afternoon session where the preceding NESTI meeting is to be held, which is in the Ludwig- Erhard-Haus. This is located near the Tiergarten, the Kurfürstendamm and the Bahnhof Zoo right at the heart of Berlin. The venue can be reached by public transport, station Zoologischer Garten or Ernst-Reuter-Platz.
    Address:
    Ludwig-Erhard-Haus
    Fasanenstraße 85, 10623 Berlin
  2. The location of the second day of the meeting is tentatively scheduled to be at the offices of the Federal Ministry of Education and Research. We have been offered a room that can hold 30 people. It is therefore important that you let us know whether you plan to attend as quickly as possible in order to allow us time to find an alternative venue should the number of participants exceed 30.
  3. Accommodation is in great demand in Berlin this coming northern summer because of the soccer world cup. Participants are therefore advised to book their travel and accommodation early. If you wish we can supply details of hotels that have been provided to those attending the NESTI meeting.

Alessandra Colecchia and Charles Aspden

Joint Expert Meeting: Canberra II Group and NESTI – Capitalisation of R&D

Berlin, 31 May – 1 June

Draft agenda(version March 23)

Wednesday 31 May / Location: Ludwig-Erhard-Haus Fasanenstraße, 85, Berlin
14:30 / Introduction, objectives of the meeting, agenda– Chair, Fred Gault, Statistics Canada
14:45 / AEG recommendations – summary by Charlie Aspden
15:00 / Capitalisation of R&D: main issues
Overview of what is involved: basic framework, conceptual issues, measurement challenges, experiences with satellite accounts – Barbara Fraumeni, US[30 min]
Q&A[15 min]
15:45 / Using bridge tables between Frascati data and National Accounts
Basic principles for constructing bridge tables, data sources- Soli Peleg, National Accounts, Israel[30 min]
16:15 / Coffee break[15min]
16:30 / Using bridge tables between Frascati data and National Accounts – continued
A Frascati to System ofNational Accounts Application to U.S. Data – Carol Robbins, BEA, USA [30 min]
Updates from other countries [30 min]
Discussion[15min]
17:45 / Chairman’s conclusions and next steps
18:00 / End of Day1

Joint Expert Meeting: Canberra II Group and NESTI – Capitalisation of R&D

Thursday 1st June / Location: Federal Ministry of Education and Research (place tbc), Berlin
9:15 / R&D international flows
Measuring R&D Globalisation: the U.S. Experience – John Jankowski, US National Science Foundation [20 min]
Measuring R&D imports and exports, R&D of multinational firms - Mark de Haan, National Accounts, the Netherlands [30 min]
Discussion[25 min]
10:30 / Chairman’s conclusions and next steps
10:45 / Coffee break [15mins]
11:00 / R&D boundary issues
Identifying R&D made freely available - Mark de Haan, National Accounts, the Netherlands [15 min]
Discussion [15min]
Borderline issues: treatment of software and mineral exploration – Charlie Aspden (OECD) and Mark de Haan, National Accounts, the Netherlands [20 min]
Countries’ experiences [20 min]
Discussion[20min]
12:30 / Lunch
14:00 / Volume estimation
Using cost-based measures- overview of issues and ongoing work – Alessandra Colecchia and Vladimir Lopez (OECD) [15 min]
Countries’ experiences [15 min]
Discussion [30min]
15:00 / Estimating R&D capital stocks
Estimating service lives and age/efficiency profiles, overview of issues and countries’ experiences - Charlie Aspden (OECD) [15 min]
Country and/or expert presentations[15min]
Discussion[30min]
16:00 / Coffee break [15min]
16:15 / Quarterly R&D estimates
Forthcoming need to produce quarterly estimates, interpolating and extrapolating from annual data, a note – Charlie Aspden (OECD) [15min]
Discussion [15min]
16:45 / Chairman’s conclusions
Summary, reviewing work plan, outstanding issues, possible Expert Group meetings
17:30 / End of Expert Meeting