Consolidation is the practice of eliminating from the statistical aggregates for a group of entities transactions between the entities in the group, where a group of entities could be entities within the sub-sector local government, or within general government etc.
For any given transaction the consolidation/elimination must be made in the records of both entities involved. The items eliminated from the record of the two entities involved have to be of opposite character, one inflow or asset for entity A and one outflow or liability for entity B.
GFS requires the identification and elimination of transactions between the different parts of government so as to avoid "double counting." It refers to (i) intragovernmental, and (ii) intergovernmental consolidation.
(i) Intragovernmental consolidation refers to the elimination of intragovernmental transactions when statistics for only one level, or subsector, of government are compiled. E.g., the elimination of transfers between local government units.
(ii) Intergovernmental consolidation refers to the elimination of transactions when statistics for combinations of different levels of government are being compiled, in other words when statistics for the subsectors are added up to form general government. E.g., the elimination of transfers from central government to local government (units).
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