Government Finance Statistics Manual 2014

28 Government Finance Statistics Manual 2014

large and/or numerous, and may have a signifi cant

economic impact—for example:

• Public corporations may be of signifi cance to gov-
  ernment because of the eff ects their magnitude or
  strategic position may have on macroeconomic
  objectives, such as bank credit, aggregate demand,
  borrowing abroad, and the balance of payments.


• Many public corporations may represent a size-
  able investment of national resources, at consid-
  erable opportunity costs.


• Public corporations are a potential source of fi s-
  cal risk to the extent that their liabilities could be
  explicitly or implicitly guaranteed by government,
  or may hold reputational risks for government.


• Public corporations may over time become
  nonmarket units reclassifi ed to the general gov-
  ernment sector and vice versa; compilation of
  statistics on the public sector avoids the series
  breaks in general government data that may re-
  sult from changes in the way they operate.
  2.106 Statistics on public corporations are also
  likely to be needed to compile comprehensive statis-
  tics for the general government sector. GFS for the
  general government sector should refl ect all transac-
  tions with public corporations, and changes in the net
  worth of public corporations are refl ected in the value
  of the equity of those corporations owned by general
  government units. Th e accounts of public corpora-
  tions will help explain the source of changes in these
  assets, and that information will be useful for an anal-
  ysis of sustainability and other aspects of fi scal policy.

Government control of corporations

2.107 A corporation is a public corporation if

a government unit, another public corporation, or

some combination of government units and public

corporations controls the entity. Control of a corpo-

ration is defi ned as the ability to determine general

corporate policy of the corporation. Th e expression

“general corporate policy” as used here is understood

in a broad sense to mean the key fi nancial and op-

erating policies relating to the corporation’s strategic

objectives as a market producer.

2.108 Because the arrangements for the control of

corporations can vary considerably, it is neither desir-

able nor feasible to prescribe a defi nitive list of factors

to be taken into account. Although a single indicator

could be suffi cient to establish control, in other cases,

a number of separate indicators may collectively in-

dicate control. A decision based on the totality of all

indicators must necessarily be judgmental in nature,

but clearly similar judgments must be made in similar

cases. Box 2.2 presents the most important and likely

factors to consider.

2.109 Because governments exercise sovereign

powers through legislation, regulations, orders, and

other arrangements, care needs to be applied in deter-

mining whether the exercise of such powers amounts

to a determination of the general corporate policy of

a particular corporation, and therefore control of the

corporation. Laws and regulations applicable to all

units as a class or to a particular industry should not

be viewed as amounting to control of these units.

2.110 Th e ability to determine general corporate

policy does not necessarily include the direct control

of the day-to-day activities or operations of a particular

corporation. Th e offi cers of such corporations would

normally be expected to manage these in a manner

consistent with and in support of the overall objectives

of the particular corporation. Nor does the ability to

determine the general corporate policy of a corpora-

tion include the direct control over any professional,

technical, or scientifi c judgments, as these would nor-

mally be viewed as part of the core competence of the

corporation itself. For example, the professional or

technical judgments exercised by a corporation set up

to certify aircraft airworthiness would not be consid-

ered controlled with respect to individual approvals

and disapprovals. However, its broader operating and

fi nancial policies, including the airworthiness criteria,

may well be determined by a government unit as part

of the corporation’s corporate policy.

2.111 Corporations subject to the control of a non-

resident government unit (or a nonresident public

corporation) are not classifi ed as public corporations

in the host economy, but would be part of the private

corporations in that economy.^31

2.112 Quasi-corporations and market NPIs (i.e.,

NPIs engaging in market production) under the con-

trol of government are classifi ed as public corporations.

(^31) Also see the discussion of residence in paragraphs 2.6–2.21
of this chapter and defi nitions of corporations in paragraphs
2.31–2.32.