Basic heading are the lowest level of aggregation for which final expenditures can be estimated. In theory, they should cover a homogeneous set of goods or services, but, in practice, they can cover a broader range of products than is theoretically desirable. Basic headings are the building blocks of ICP comparisons. It is at the level of the basic heading that expenditures are defined, products are selected for pricing, and prices are collected and edited.
It is also at the basic heading level that PPPs are first calculated and averaged. The final expenditures at the basic heading level provide the weights with which basic heading PPPs are aggregated and averaged to derive PPPs for classes, groups, categories, aggregates and GDP. It is these PPPs that are used to convert final expenditures to real expenditures at each level of aggregation. The ICP publishes PPPs, price level indices, real expenditures and volume indices for GDP, main aggregates and selected expenditure categories.
Results of ICP comparisons are presented by who consumes: households or government. This is because one of the principle aims of the ICP is to compare the actual individual consumption (of households) across countries at various levels of aggregation.
However, in the ICP classification, individual consumption expenditure is structured by who pays: households, NPISHs or government. Their individual consumption expenditures have to be combined to obtain actual individual consumption. The ICP classification is designed to allow the three sets of individual consumption expenditures to be combined at the lowest level of aggregation feasible. For households and government, this tends to be the basic heading level. For NPISHs, the level is higher because countries generally do not have detailed data for NPISHs.