Nthabiseng Molemoeng

Seminar on Developing a Programme for the

Implementation of the 2008 SNA and supporting statistics

17-19 October 2012

Consumption of Fixed Capital and Capital

Stock

Outline

Definition

Method

Process of computation

2

Consumption of Fixed Capital

Consumption of Fixed Capital

3

Definition

The consumption of fixed capital can be defined as the decline in the current value of the stock of fixed assets as a result of physical deterioration

The consumption of fixed capital is derived from gross fixed capital formation

Estimates are based on PIM - straight-line method

Service lives for different assets4

Service Life Assumptions by Selected Countries

Country Dwellings Construction

Transport equipment

Other equipment

Australia 60 30-70 - 19

Belgium 60 30-80 7 15

Canada 75 25-70 10 22

Finland 50 10-70 10 15

France - 25-60 10 17

Germany 74 35-80 8 13

Italy - 13-40 - 16

Japan 75 - - 10

Sweden 75 25-80 3 25

UK 100 16-100 10 25

US 80 16-50 10 16

“Best practice”

75 35 8 15

5

Average service life – South Africa

6

Type of asset Sector Lifetime

Residential buildings 50 years

Non-residential buildings 50 years

Construction works Agriculture 80 years

Mining 30 years

General government 80 years

Other 50 years

Transport equipment 8 years

Computer equipment 5 years

Machinery & other equipment

Manufacturing 8 years

Mining & Electricity, gas and water

16 years

Other 10 years

Process of computation

Formula programmed  

where X = Number of terms (i.e. service life) Y = GFCF

The results yield:CFC = (Y[t-X] + Y[t-(X-1)] + Y[t-(X-2)] + ... +

Y[t]) / X 

Private business enterprisePublic corporationsGeneral governmentCurrent pricesConstant prices

7

Straight line method based on asset with 5-year service life

Years

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

GFCF

250

GFCF

500

GFCF

600

GFCF

700

GFCF

1000

Total

250 500 600 700 1000

Years

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

CFC 50 50 50 50 50

CFC 100 100 100 100 100

CFC 120 120 120 120 120

CFC 140 140 140 140 140

CFC 200 200 200 200 200

Total

50 150 270 410 610 560 460 340 200 0

8

Consumption of Fixed Capital

Capital Stock

9

Definition

Fixed capital stock is the accumulation of gross fixed capital formation over a particular period less consumption of fixed capital.

Valuation of fixed capital stock is essential for the balance sheet.

Estimates of capital stocks are used for the analysis of economic efficiency and productivity10

Process of computation

Formula programmed FCSt = FCSt-1 + GFCFt - CFCt

 

where FCS = Fixed capital stockGFCF = Gross fixed capital formationCFC = Consumption of fixed capital

formation

 

Private business enterprisePublic corporationsGeneral governmentCurrent pricesConstant prices

11

Method Years

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

GFCF

250

GFCF

500

GFCF

600

GFCF

700

GFCF

1000

Total

250 500 600 700 1000

Years

Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10

CFC 50 50 50 50 50

CFC 100 100 100 100 100

CFC 120 120 120 120 120

CFC 140 140 140 140 140

CFC 200 200 200 200 200

Total

50 150 270 410 610 560 460 340 200 0

FCS 200 550 880 1170

1560

100 540 200 200 0

12

Method – starting value

Years GFCF Depreciated value

Sum of depreciated value

Y1 100 = GFCF *(1-1)/5

0

Y2 150 = GFCF *(2-1)/5

30

Y3 200 = GFCF *(3-1)/5

80

Y4 250 = GFCF *(4-1)/5

150

Y5 300 = GFCF *(5-1)/5

240

Σ 50013

Results

Residential buildings

Non- Res

Construction

Transport

Computer equipment

Machinery

Total

Agric 266 252 730 1106 465 3878 6717

Mining 358 1575 5713 2117 1414 13104 24280

Manufacturing

8 2088 303 2634 484 61503 72015

Electricity 46 93 6218 713 138 2507 9716

Construction

- 77 - 2057 193 3827 6154

Trade - 1699 32 5812 3168 10608 21320

Transport 4 668 5755 20784 5752 13621 46582

Finance 8250 1649 145 8485 6621 2683 37213

Services 857 3892 4755 818 3253 9741 23315

Total12468

11992 23648 44548 26489 128170

247313

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THANK YOU!

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