THE INSTITUTIONAL UNITS

2.12 Definition:

The institutional unit is an elementary economic decision-making centre characterised by uniformity of behaviour and decision-making autonomy in the exercise of its principal function. A resident unit is regarded as constituting an institutional unit if it has decision-making autonomy in respect of its principal function and either keeps a complete set of accounts or it would be possible and meaningful, from both an economic and legal viewpoint, to compile a complete set of accounts if they were required.

In order to be said to have autonomy of decision in respect of its principal function, a unit must:

  1. be entitled to own goods or assets in its own right; it will therefore be able to exchange the ownership of goods or assets in transactions with other institutional units;
  2. be able to take economic decisions and engage in economic activities for which it is itself held to be directly responsible and accountable at law;
  3. be able to incur liabilities on its own behalf, to take on other obligations or further commitments and to enter into contracts.

In order to be said to keep a complete set of accounts, a unit must keep accounting records covering all its economic and financial transactions carried out during the accounting period, as well as a balance sheet of assets and liabilities.

2.13 The following principles apply whenever entities do not clearly possess both the characteristics of an institutional unit:

  1. households always enjoy autonomy of decision in respect of their principal function and must therefore be institutional units, even though they do not keep a complete set of accounts;
  2. entities which do not keep a complete set of accounts, and for which it would not be possible or meaningful to compile a complete set of accounts if required, are combined with the institutional units into whose accounts their partial accounts are integrated;
  3. entities which, while keeping a complete set of accounts, have no autonomy of decision in the exercise of their principal function are combined with the units which control them;
  4. entities which satisfy the definition of an institutional unit are treated as such even if they do not publish their accounts;
  5. entities forming part of a group of units engaged in production and keeping a complete set of accounts are deemed to be institutional units even if they have partially surrendered their autonomy of decision to the central body (the holding corporation) responsible for the general direction of the group; the holding corporation itself is deemed to be an institutional unit distinct from the units which it controls, unless b) is applicable;
  6. quasi-corporations keep a complete set of accounts and have no independent legal status. However, they have an economic and financial behaviour that is different from that of their owners and similar to that of corporations. Therefore they are deemed to have autonomy of decision and are considered as distinct institutional units.
2.14 Holding corporations are institutional units whose main function is to control and direct a group of subsidiaries (see paragraph 2.26).

2.15 Notional resident units are defined as:

  1. those parts of non-resident units which have a centre of economic interest (that is in most cases which engage in economic transactions for a year or more or which carry out a construction activity for a period of less than a year if the output constitutes gross fixed capital formation) on the economic territory of the country;
  2. non-resident units in their capacity as owners of land or buildings on the economic territory of the country, but only in respect of transactions affecting such land or buildings.

Notional resident units, even if they keep only partial accounts and may not always enjoy autonomy of decision, are treated as institutional units.

2.16 In conclusion, the following are deemed to be institutional units:

  1. units which have a complete set of accounts and autonomy of decision:

    (1) private and public corporations;

    (2) co-operatives or partnerships recognised as independent legal entities;

    (3) public producers which by virtue of special legislation are recognised as independent legal entities;

    (4) non-profit institutions recognised as independent legal entities;

    (5) agencies of general government.

  2. units which have a complete set of accounts and which are deemed to have autonomy of decision:

    quasi-corporations (see paragraph 2.13f);.

  3. units which do not necessarily keep a complete set of accounts, but which by convention are deemed to have autonomy of decision:

    (1) households;

    (2) notional resident units (see paragraph 2.15).