ESA 2010 accounting rules impact of new ESA 2010 on Local and Regional Authorities

The European Commission has recently updated its accounting standards used for the production of national and regional accounts data - the European System of Accounts (ESA) - to better reflect the changes occurring in world economies and production processes globally. The update was implemented through a Regulation in May 2013 and the ESA 2010 rules have been fully in force since September 2014.

The primary motivation for the new standards is to capture more accurately the performance of an economy and also to ensure that the European standards are internationally compatible, making it possible to describe the total economy of a region, country or group of countries in the EU in a way that is reliably comparable with other economies in the world.

A number of methodological changes, which have an impact on macro-economic indicators such as GDP, public debt, etc., have been incorporated in the revised ESA 2010 standards; and most Member States are using the opportunity to also incorporate statistical changes (new data sources, improvement of sources, etc.). The key changes involve capitalisation of research and development (R&D) expenditure, and also military expenditure; modification of methodology for goods sent abroad for processing (recorded only as an export processing service and not as goods exported); a more detailed analysis of pension schemes; and an improvement in measuring the contribution of non-life insurance to GDP by reducing the volatility caused by the varying nature of claims.

Another important change, also pertinent to local and regional authorities (LRAs) is the change in sectoral classification wherein the definitions for assessing whether an entity is government, public corporation or private sector are modified and include also qualitative criteria. In terms of transmission of data, a faster deadline has been envisaged (also for the main regional accounts indicators) for more timely, improved monitoring

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