Extending the Asset Boundary to Include Research and Development
Executive summary 1. Expenditures on research and development (R&D) are not treated as capital formation in the 1993 SNA even though it is acknowledged that they are inherently investment in nature. The reasons that are usually cited, which are essentially technical in nature, are given in paragraph 6.163. 2. Over the last few years a task force set up by the OECD Working Party of National Experts on Science and Technology Indicators (NESTI) has been systematically addressing all the difficulties of using data compiled in the Frascati 1 system to support the inclusion of R&D assets in the national accounts. This task force has also participated in the Canberra II Group on the Measurement of Non-financial Assets and aided the Group in its work. The issues addressed include: a) The scope of R&D capital formation b) The definition of R&D c) The measurement of R&D capital formation and other R&D statistics in the national accounts d) The avoidance of double counting R&D output e) Constant price estimation of R&D output f) The measurement of R&D capital stock, capital services and consumption of fixed capital (CFC) 3. The Canberra II Group believes that the obstacles to incorporating R&D assets in the national accounts can be overcome reasonably well, and now we can proceed to remedy what has long been seen as a shortcoming in the SNA. In fact, the evidence is there that one can expect better estimates of R&D capital formation and related statistics than those relating to some existing assets. With the R&D data collected in the Frascati system, many countries are in a strong position to implement this proposal, and they are almost certainly in a stronger position than they were, and maybe still are, with respect to other intangible fixed assets. It would be a mistake to demand higher standards of R&D statistics than is the case for existing assets. Accordingly, the Canberra II Group makes the following recommendations: 1. The 1993 SNA should be changed to recognise the outputs of R&D as assets, and the acquisition, disposal and depreciation of R&D fixed assets should be treated in the same way as other fixed assets. 2. All R&D output should be treated as an asset, irrespective of its nature or whether it is made freely available. In the latter case, the asset should be recorded on the balance sheet of the owner of the original and be …