Appendix 2 New Zealand units model

Statistics NZ reviewed its units model in 1994 as part of a major project to redevelop its business register system. Then called the Business Directory, the register was renamed the Business Frame (BF) when a new units model was implemented in 1996.

The review aimed to ensure that the definition of units being applied was in line with international standards and practice. Statistics NZ endeavoured to align its model, as far as possible, with the main units recommended in ISIC. Rev. 3.

The BF is a database of New Zealand businesses and their structures used primarily as a register or frame for the various business surveys run by Statistics NZ. It facilitates the integration of business tax data with survey data by linking the BF enterprise unit and the administrative tax unit. The BF is maintained using tax data, frame maintenance surveys, survey feedback, profiling initiatives and other sources e.g. Companies Office, media etc.

The units model used by Statistics NZ is hierarchical and comprises three main units: the Enterprise (ENT), the Kind of Activity Unit (KAU) and the Geographic Unit (GEO). In addition, the Enterprise Group (groups of enterprises under common ownership) is identified on the BF. Statistics NZ concluded that it needed three main units, one each to cater for each of the three broad types of data required, namely financial, production and location statistics. Financial statistics are more readily available from upper level (institutional) units, while production and location statistics are more readily available from lower level (producing) units.

Diagram 1 illustrates the nature of the relationships between these unit types.

The enterprise group is the family of institutional units (legal entities or equivalent) controlled or managed by one of them with more than 50 percent ownership (either directly or through a chain of ownership) of each other member of the family. It is used to compile investment/financing data for the Balance of Payments. It is also used to understand financial flows within groups, for producing ownership control statistics and for confidentiality vetting of published statistical outputs.

The enterprise group is not kept on the BF in the form of a statistical unit as such, but can be derived from the BF using the ownership links between enterprises and can be viewed in screen graphic and report formats as a family of units.

The enterprise is an institutional unit and generally corresponds to legal entities such as companies, partnerships, trusts, estates, incorporated societies and sole proprietorships. Some are identified by other characteristics, such as common objectives or an organisational structure e.g. government departments, local authorities, churches, voluntary organisations.

The kind of activity unit is an institutional unit, or part of an institutional unit, which engages in one, or predominantly one, kind of economic activity, without being restricted to a geographic area. Value added statistics must be able to be produced for a KAU, or be able to be readily or meaningfully imputed. Statistics NZ has developed a working definition of the kind of activity (KAU):

A KAU, in practice, is a subdivision of an enterprise consisting of a set of one or more geographic units, at one or more places, for which a single set of accounting records is available from the owners, allowing operating surplus to be meaningfully compiled. It is an objective that the KAU should be as industrially homogeneous as possible, but the accounting set is not broken to achieve this, except in very significant cases after consultation with interested internal parties. Autonomy of decision making with respect to production levels, and buying and selling, should also be considered in structuring and profiling.

KAUs normally need to be able to supply a minimum set of data. To recognise more than one KAU in an enterprise, there must be separate profit and loss accounts for each unit; value added of at least $NZ500,000 for each unit (or at least 20 full-time equivalent persons engaged, if value added data is not available); no vertical integration between each unit; and more than one industrial activity.

The geographic unit is a KAU, or part of a KAU. It is normally an unbroken physical area/site on, or from which, one, or predominantly one, kind of economic activity takes place on a permanent basis. Employment data must be able to be produced for a geographic unit.

The BF system has a function to inhibit or override the KAU's derived ANZSIC in circumstances where the use of value added gives a different result to the use of employment size measures, or where the unit is 'teetering on the boundary' between two codes and it cannot be determined whether a long-term change is occurring. This mechanism is used only for large businesses where the impact on statistical series of any change is likely to be significant, particularly if the business is a major contributor to an industry.

Statistics NZ follows the principles laid down in ISIC Rev. 3, in that where ancillary activities are identified for a geographic unit they are classified to their own activity as well as to the activity of their parent unit. The geographic unit can be coded to both a primary and ancillary ANZSIC.

There is no survey instrument in Statistics NZ which is specifically designed to identify ancillary units. They are generally identified and coded in response to the specific needs of economic surveys. The process is infrequently used and undertaken for very significant units only.