GrossCapitalFormation.docVIP

Chapter 9 Gross Capital Formation Introduction Gross Capital Formation Defined In the SNA, gross capital formation (GCF) is one of the principal components of final expenditures, typically accounting for around 20% of GDP. The main components of GCF have already been listed in Chapter 3, but for convenience they are repeated here. Table 1. Gross Capital Formation as defined in the SNA Gross fixed capital formation, consisting of Acquisitions less disposals of new or second-hand tangible fixed assets in the form of: Machinery and equipment (conventionally referred to in the ICP context as “equipment goods”); Dwellings; Other buildings and structures; Cultivated assets (trees and livestock that are used repeatedly, or continuously, over long periods of time to produce goods such as rubber, fruit, milk, wool, etc.) Major improvements to existing fixed or natural assets, including land. Acquisitions less disposals of intangible fixed assets (e.g., computer software) plus Changes in inventories (acquisitions less disposals of stocks held by producers) plus Acquisitions less disposals of valuables (precious metals or stones, expensive jewels, works of art, etc. held as investments). equals Gross Capital Formation Gross fixed capital formation (GFCF) is by far the largest component of total gross capital formation. Fixed assets are goods that are used repeatedly, or continuously, for at least a year in the process of producing other goods or services. Notice that dwellings are treated as fixed assets that are used, together with other inputs, to produce housing services for renting or own use. Owner occupiers do not consume the dwellings as such but rather the housing services produced by the dwellings. In the System of National Accounts, fixed assets are valued at purchaser prices payable for them. In the case of equipment goods, the purchaser price includes all the transportation or other costs incurred in delivering and installing the asse