GLOSSARY

Data presented in this publication have been compiled from the standard financial accounts of businesses; therefore, the definition of each reported item aligns closely with that adopted in standard business accounting practice. Included in the glossary are published data items and components used to calculate derived items.

ABN unit

The statistical unit used by the ABS to represent businesses, and for which statistics are reported, in most cases. The ABN unit is the business unit which has registered for an ABN, and thus appears on the ATO administered Australian Business Register. In most cases, the ABN unit represents the legal entity. This unit is suitable for ABS statistical needs when the business is simple in structure. For more significant and diverse businesses where the ABN unit is not suitable for ABS statistical needs, the statistical unit used is the type of activity unit (TAU).

Bad and doubtful debts

Represents the amount of bad and doubtful debts written-off, net of bad and doubtful debts previously written-off but recovered.

Billion

One thousand million.

Business

A business is generally considered to be a person, partnership, or corporation engaged in business or commerce.

In this publication, the term represents the ABN unit or type of activity unit (TAU), which are the two standard statistical units for the 2007-08 EAS collections (these two units are explained under separate entries). For details, see Explanatory Notes paragraphs 2-5.

Business Activity Statement (BAS) total sales

Represented by the form item G1 Total sales on businesses' Business Activity Statements, supplied by them to the ATO. This item comprises all payments and other consideration (including GST) received during the nominated tax period for supplies made in the course of business.

Business averages

The relevant item divided by the number of contributing businesses.

Business size

For the purposes of table 2.1, businesses are categorised as:

• large businesses, with employment of 200 or more persons
• medium businesses, with employment of 20 to less than 200 persons
• small businesses, with employment of less than 20 persons (including non-employing businesses).

Capital expenditure

Total (gross) expenditure on acquiring fixed tangible and intangible assets, before deduction of trade-in allowances, and including expenses (except capitalised interest) incurred during the year in acquiring such assets. Fixed tangible assets include land, dwellings, other buildings and structures, plant, machinery and equipment (including motor vehicles). Intangible assets include capitalised exploration expenditure, patents, licences and goodwill.

Capital work done for own use

Capitalised work done by the employees or proprietors of a business in manufacturing, constructing, installing or repairing assets, in mineral and petroleum exploration activities, and the in-house development of computer software, for use by the business or for rental or lease. This work is valued at the capitalised costs of the materials and the wages and salaries involved.

Capitalised purchases

Goods drawn from inventories for use as fixed tangible assets in capital work done by the employees or proprietors of a business for use by the business or for rental or lease.

Capitalised wages and salaries

Capitalised payments for work done by own employees in manufacturing, constructing, installing or repairing assets, mineral and petroleum exploration activities or in developing computer software in-house for use by the business or for rental or lease.

Change in inventories

The value of total closing inventories less total opening inventories.

Closing inventories

The value of all inventories of finished goods (including inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels and containers at the end of the reporting period.

Contract, subcontract and commission expenses

Payments to other businesses and self-employed persons for work done or sales made on a contract or commission basis. Payments to persons paid by commission without a retainer are also included. Excludes commissions paid to persons who receive a retainer and commissions paid to the business' own employees.

Cost of sales

The sum of purchases, selected expenses and opening inventories less closing inventories. Any capitalised purchases are excluded.

Depreciation and amortisation

Depreciation/amortisation allowed on tangible and intangible assets. Includes, for lessees only, depreciation/amortisation in respect of finance leases.

Disposal of assets

Proceeds from the sale of tangible assets (plant, machinery, equipment, land, dwellings, other buildings and structures), and intangible assets (such as patents, licences and goodwill).

Earnings before interest, tax, depreciation and amortisation (EBITDA)

Profit prior to the deduction of net interest (interest income minus interest expenses), income tax, depreciation and amortisation. Items classifiable to other income are also excluded.

Employer contributions into superannuation

Includes all employer contributions to superannuation funds (including the employer productivity contribution) and provisions for employer contributions to superannuation funds. Also includes expenses relating to employer funded defined benefit schemes. Employee contributions and salary sacrifice contributions are excluded.

Employment at end of June

Number of persons working for businesses during the last pay period ending in June of the given year. Includes working proprietors and partners, employees absent on paid or prepaid leave, employees on workers' compensation who continue to be paid through the payroll, and contract workers paid through the payroll. Excludes persons paid by commission only, non-salaried directors, volunteers and self-employed persons such as consultants and contractors.

Enterprise

See Explanatory Notes paragraph 5.

Enterprise group

See Explanatory Notes paragraph 5.

Freight and cartage expenses

Excludes the cost of delivery by own vehicles and employees, as well as overseas freight and cartage on goods exported, and payments to couriers.

Funding from government for operational costs

Funding from federal, state and/or local government for operational costs (e.g. wages and salaries, rent, food). Includes bounties, subsidies, export grants, apprenticeship and traineeship schemes, community service obligations, and amounts reimbursed under the Australian Government's Energy Grants (Credit) Scheme. Excludes funding from government for specific capital items.

Funding from government for specific capital items

Includes capital grants, and low interest or interest free loans made by government to businesses to encourage expenditure on specific equipment (e.g. environmental protection equipment).

Gross fixed capital formation (GFCF)

Gross fixed capital formation is measured by the total value of a producer's acquisitions, less disposals, of fixed assets during the reference period, plus certain additions to the value of non-produced assets realised by the productive activity of institutional units.

Fixed assets are tangible or intangible assets produced as outputs from processes of production that are themselves used repeatedly or continuously in other processes of production for more than one year.

The derivation of GFCF is as follows:

Industry class

The structure of ANZSIC comprises four levels, ranging from industry division (broadest level) to industry class (finest level). Activities are narrowly defined within the industry class level, which is identified by a four-digit code, e.g. Industry Class 1510 Pulp, paper and paperboard manufacturing. Usually, an activity is primarily defined to one class. However, some activities may be primary to more than one class.

Industry division

The structure of ANZSIC comprises four levels, ranging from industry division (broadest level) to industry class (finest level). The main purpose of the industry division level is to provide a limited number of categories which give a broad overall picture of the economy. There are 19 divisions within ANZSIC, each identified by an alphabetical letter, that is, 'A' for Agriculture, forestry and fishing, 'B' for Mining, 'C' for Manufacturing, etc.

Industry subdivision

This is the broadest level category within each industry division of ANZSIC and is identified by a two-digit code, e.g. Industry Subdivision 14 for Wood product manufacturing. Industry subdivisions are built up from industry groups which, in turn, are built up from industry classes.

Industry value added (IVA)

IVA represents the value added by an industry to the intermediate inputs used by the industry. IVA is the measure of the contribution by businesses, in the selected industry, to gross domestic product.

The derivation of IVA for individual businesses depends on whether they are classified as market or non-market producers. Non-market producers are those institutions which provide goods or services either free or at prices that are not economically significant. In other words, their prices are not significantly influenced by the amounts that producers are willing to supply, nor the amounts that users are willing to pay to purchase the goods or services being provided. Conversely, market producers provide goods and services at prices that are economically significant.

For market producers, the derivation of IVA is as follows:

However, it should be noted that IVA is a measure of economic activity and is not equivalent to operating profit before tax (OPBT). Wage and salary expenses and most other labour costs are not taken into account in its calculation for market producers, and nor are most insurance premiums, interest expenses or depreciation and a number of lesser expenses (see the entry for total expenses for further details). On the income side, OPBT includes total income, whereas IVA only includes sales and service income.

As a principle, the output of non-market production is valued at cost, including intermediate input expenses. As shown in the above derivation, purchases and other intermediate input expenses are deducted from output in order to arrive at IVA. Accordingly, the derivation of IVA for non-market producers can be described as follows:

Estimates of industry value added are obtained by summing the contributions of businesses classified to that industry, both market and (if any) non-market producers. Market producers predominate in most industries.

Industry value added is related to, but different from, the national accounting variable gross value added. For national accounts purposes, gross value added is calculated by adjusting industry value added to include General government units and also to account for some other effects.

Industry value added per person employed

IVA of businesses which operated in a given industry during the given year ended 30 June, divided by the number of persons employed by businesses in that industry during the last pay period ending in June of that year. Persons employed include working proprietors and partners.

Insurance premiums

Premiums for fire, general, accident, public liability, optional third-party and comprehensive motor vehicle insurance, professional indemnity insurance, and common law liability. Excludes workers' compensation insurance premiums/costs (included in labour costs) and compulsory third party motor vehicle insurance premiums (included in motor vehicle running expenses).

Interest coverage

The number of times that businesses can meet their interest expenses from their earnings before net interest, tax, depreciation and amortisation (EBITDA), i.e. earnings before interest, tax, depreciation and amortisation / interest expenses.

Interest expenses

Includes interest paid on loans from banks, finance companies, partners, and related or unrelated businesses, and in respect of finance leases. Also includes interest equivalents such as hedging costs and expenses associated with discounted bills. Excludes bank charges other than interest, and capital repayments.

Interest income

Includes interest received from deposits in banks and non-bank financial institutions, loans, advances, finance leases and earnings on discounted bills. Excludes capital payments received.

Intermediate input expenses

See the entry for total expenses.

Intermediate inputs

Intermediate inputs consist of materials and certain services which are used up in the production process.

The calculation is:

Investment rate (value added)

The proportion of industry value added (IVA) used to acquire capital, i.e. ( capital expenditure / IVA ) x 100.

Labour costs

For the purposes of table 1.2, comprises wages and salaries, employer contributions into superannuation, workers' compensation premiums/costs, fringe benefits tax and payroll tax.

Large business

See the entry for business size.

Medium business

See the entry for business size.

Motor vehicle running expenses

Includes expenditure on registration fees, compulsory third-party insurance premiums, fuel, and repair and maintenance expenses. Excludes expenses for off-road motor vehicles (e.g. fork lifts, mobile plant), and lease payments, optional third party and comprehensive motor vehicle insurance premiums, and depreciation.

Natural resource royalties expenses

Includes payments under mineral lease arrangements, and resource rent taxes and royalties. Excludes payments for royalties from intellectual property (e.g. patents and copyrights) and computer software licence fees (both of which are included under other operating expenses), and capitalised computer software licence fees (included under capital expenditure). Gold tax payments are also excluded. See the entry for total expenses for the definition of other operating expenses.

Net capital expenditure

The value of total capital expenditure less proceeds received from the disposal of assets.

Non-employing business

See the entry for business size.

Opening inventories

The value of all inventories of finished goods (including inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels and containers at the beginning of the reporting period.

Operating profit before tax (OPBT)

Profit before extraordinary items are brought to account and prior to the deduction of income tax and appropriations to owners (e.g. dividends paid), i.e. total income - total expenses + change in inventories.

Other income

Includes dividend income and other income such as net profit (or loss) on the sale of fixed tangible assets, net profit (or loss) resulting from variations in foreign exchange rates/transactions, and funding from federal, state and/or local government for specific capital items. It excludes extraordinary profits or losses, i.e. those not associated with the normal operations of the business and of a non-recurring nature.

Other intermediate input expenses

Comprises intermediate input expenses less current purchases of goods and materials used in production (i.e. excludes any capitalised purchases). Further detail is included in the entry for total expenses.

Other operating expenses

See the entry for total expenses.

Payroll tax

A tax levied by state and territory governments on the amount of wages and salaries paid by a business. Excludes pay-as-you-go withholding tax.

Profit margin

The percentage of sales and service income available as operating profit before tax (OPBT), i.e. ( OPBT / sales and service income ) x 100.

Purchases of goods and materials

Purchases of materials, components, containers, packaging materials, fuels, electricity and water, and purchases of finished goods for resale. Also includes capitalised purchases. Excludes purchases of parts and fuels for motor vehicles, but includes fuels for off-road vehicles, such as forklifts and mobile plant.

Reference period

For each collection year, businesses are asked to report data for the financial year ended 30 June. However, if a business has a different financial year, it is asked to report (apart from employment) for the 12 month period which ends between 1 October of the previous year and 30 September of the current year. This period is then used as a substitute for the financial year ended 30 June. For example, for the 2007-08 collection, a business may have reported data for the year ended 31 December 2007.

Rent, leasing and hiring expenses

Payments for the rent, leasing and hiring of land, dwellings, other buildings and structures, motor vehicles, plant, machinery and other equipment (including telecommunication equipment). Includes operating lease payments; excludes finance lease payments.

Rent, leasing and hiring income

See the entry for sales and service income.

Repair and maintenance expenses

Includes repair and maintenance of computer and communication software and hardware, and repair and maintenance of off-road motor vehicles. Excludes wages and salaries of own employees and the repair and maintenance costs of on-road motor vehicles.

Sales and service income

Includes:

Sales of goods

• whether or not produced by the business (including goods produced for the business on a commission basis). Includes export sales, sales or transfers to related businesses or to overseas branches of the business, progress payments relating to long term contracts if they are billed in the period, delivery charges not separately invoiced to customers, sales of goods produced by the business from crude materials purchased, and income from 'specific' rates (e.g. water, sewerage, irrigation and drainage rates). Excludes excise and duties received on behalf of the government (e.g. the petroleum production excise duty), sales of assets, natural resource royalties income, interest income, and delivery charges separately invoiced to customers. Exports are valued free on board (f.o.b.), i.e. export freight charges are excluded.

Income from services

• includes income from consulting services, repair, maintenance and service income and fees, contract, subcontract and commission income, management fees/charges from related and unrelated businesses, installation charges, delivery charges separately invoiced to customers and royalties from intellectual property (e.g. patents and copyrights) and natural resource royalties income. Excludes interest income, and delivery charges not separately invoiced to customers.

Rent, leasing and hiring income

• derived from the ownership of land, dwellings, buildings and other structures, motor vehicles, plant, machinery and other equipment. Excludes royalties from mineral leases, income from finance leases and payments received under hire purchase arrangements.

These are valued net of discounts given and exclusive of goods and services tax (GST). Extraordinary items are also excluded.

Sales and service income per person employed

Sales and service income of businesses which operated in a given industry during the given year ended 30 June, divided by the number of persons employed by businesses in that industry during the last pay period ending in June of that year. Persons employed include working proprietors and partners.

Sales of goods

See the entry for sales and service income.

Selected labour costs

See the entry for total expenses.

Small business

See the entry for business size.

Standard Institutional Sector Classification of Australia (SISCA)

The SISCA is the central classification among ABS Standard Economic Sector Classifications. It is based on the System of National Accounts 1993 (SNA93) institutional sector classification, and comprises the sectors: non-financial corporations, financial corporations, general government, households, non-profit institutions serving households, and rest of the world (which includes only non-resident units, these being excluded from all other sectors). For more information, please refer to the Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0).

Superannuation

See the entry for employer contributions into superannuation.

Total expenses

For the purposes of calculating economic and accounting variables, expenses incurred by businesses are divided into several categories. However, some expenses are excluded entirely from all such calculations: excluded are capital repayments, costs associated with the transfer of real estate, dividends, donations, export freight charges, extraordinary losses, foreign exchange losses, goods and services tax (GST), excise and duties payable to governments, income tax and other direct taxes, losses on asset sales, and unrealised gains/losses from revaluations of assets.

Those expenses used for calculations are categorised as follows:

Intermediate input expenses
This category covers the major expenses incurred by businesses in producing and distributing goods and services (except labour costs), and comprises two sub-categories of operating expenses:

Purchases of goods, materials and services used in production, which include:

• purchases of materials, components, containers and packaging materials, electricity, fuels and water
• purchases of goods for resale (without any further processing or assembly)
• freight and cartage expenses.

Other intermediate input expenses
Expenses related to the sale of goods and administrative expenses, which include:

• management fees/charges paid to related and unrelated businesses
• bank charges other than interest
• audit and other accounting expenses
• legal fees
• advertising expenses
• postal and telecommunication expenses
• office supplies and printing expenses
• travelling, accommodation and entertainment expenses
• staff training
• payments for royalties from intellectual property (e.g. patents and copyrights)
• payments to employment agencies for staff.

Excluded from intermediate input expenses are selected labour costs and other operating expenses, as follows.

Selected labour costs

• wages and salaries (including provisions for employee entitlements, salary sacrificed earnings, share based payments and stock options)
• employer contributions into superannuation
• workers' compensation premiums/costs.

Other operating expenses
Some expenses are excluded from the calculation of intermediate input expenses and selected labour costs, but are included in the calculation of the accounting variable operating profit before tax (OPBT).

These expense items are included in table 2.2 as:

• individually listed items:
  • depreciation and amortisation
  • interest expenses
• part of cost of sales:
  • computer software expenses not capitalised by businesses
  • land tax and land rates
  • mineral/petroleum exploration expenses not capitalised by businesses
  • other expenses not capitalised by businesses
  • payroll tax and fringe benefits tax
• part of other operating expenses:
  • insurance premiums (except workers' compensation and compulsory third party motor vehicle insurance premiums)
  • natural resource royalties expenses
  • bad and doubtful debts.

Total income

Comprises sales and service income, interest income and other income (for details, see the entries for these items).

Total selected industries

Total selected industries comprises data for all ANZSIC divisions, excluding ANZSIC Division K Financial and insurance services. For a detailed discussion of the scope of the estimates, see Explanatory Notes paragraphs 6-13. Units classified to the General government institutional sector are excluded from the scope of estimates for most industries that comprise Total selected industries. This limits coverage to private sector entities only in the Public administration and safety, Education and training, and Health care and social assistance divisions.

Type of activity unit (TAU)

The TAU is the statistical unit used by the ABS to represent businesses, and for which statistics are reported, in cases where the ABN unit is not suitable for ABS statistical needs. For further detail refer to Technical Note 1, paragraph 5.

Wages and salaries

The gross wages and salaries (including capitalised wages and salaries) of all employees of the business. The item includes severance, termination and redundancy payments, salaries and fees of directors and executives, retainers and commissions of persons who received a retainer, bonuses, and annual and other types of leave. Provision expenses for employee entitlements (e.g. provisions for annual leave and leave bonus, long service leave, sick leave, and severance, termination and redundancy payments) are also included, as are salary sacrificed earnings and remuneration of employees in the form of share based payments and stock options. (Note that in issues of this publication prior to 2006-07, salary sacrificed earnings and remuneration of employees in the form of share based payments and stock options were reported under related expense items. For example, salary sacrificed for superannuation was included in employer contributions into superannuation.)

Payments related to self-employed persons such as consultants, contractors and persons paid solely by commission without a retainer are excluded. The drawings of working proprietors and partners are also excluded.

Wages and salaries per employee

The wages and salaries paid by businesses which operated in a given industry during the given year ended 30 June, divided by the number of employees in that industry during the last pay period ending in June of that year. Working proprietors and partners are not included in employee estimates. The drawings of working proprietors and partners are not included in estimates of wages and salaries.

Wages and salaries to sales and service income ratio

The wages and salaries paid by businesses which operated during the year ended 30 June as a proportion of the sales and service income of businesses which operated during the same year.

Workers' compensation premiums/costs

Workers' compensation is a compulsory insurance cover to be taken out by all employers, except for self-insured workers, according to legislative schemes to cover employees suffering injury or disease in the course of or arising out of employment.