New Developments Towards Resolving The Company‐Establishment Problem

The paper begins by stating various aspects of the national economic accountant's “company‐establishment problem.” Six possible approaches to the problem are briefly outlined. The paper concentrates on one approach based on new developments in business accounting theory and practice, namely divisional‐reporting procedures. The division represents the smallest operating entity capable of reporting both a complete set of production (income) statistics and a set of related financial (balance‐sheet) statistics. When companies are owned and controlled by the same interests, namely the enterprise, each division reports on an enterprise‐wide basis. In this important case, the traditional company‐establishment problem has an enterprise‐division‐establishment resolution. There is considerable emphasis on clarifying the issues needed for systematic development of divisional‐reporting to meet the requirements of a national statistical agency. Key aspects are the provision of appropriate conceptual distinctions relating to statistical structure of corporate organizations and patterns of intercorporate ownership consolidation. Practical experience gained by the U.S. Federal Trade Commission's line of business reporting program is also highlighted. Two tables show details with respect to a proposed divisional income statement and balance‐sheet statement that a systematically developed division‐reporting unit can provide. The tables are related to existing statistics yielded by traditional company‐ and establishment‐reporting units. In effect the paper is part of a movement giving national economic accounting more microdata dimensions. Future research must integrate the proposed new statistical reporting unit within systems of national accounts presently constructed on the basis of a dual sectoring classification.