Statistical effects of ownership relations on the boundary between intermediate consumption and value-added

The statistical boundary between
intermediate consumption and
value added is affected by
ownership relations.
If, for example, an enterprise
buys services from other
enterprises, instead of producing
them in-house, its own value
added will be reduced, and its
intermediate consumption will be
increased.
But because in-house production
itself has intermediate inputs, the
value of the increase in
intermediate consumption that
results from in-house production
is likely to be less than the value
of equivalent services purchased
from another enterprise.
Thus, the sizes of total value
added and intermediate
consumption are affected by the
degree to which ancillary
activities are either produced in-
house by an enterprise, or
bought from other enterprises
within the domestic economy.
Likewise, rentals paid by a
business on buildings or
equipment under an operating
lease are recorded in national
accounts as intermediate
consumption, and are excluded
from its value-added.
Yet, if an enterprise owns its own
buildings, machinery and
equipment, most of the costs
associated with their use are not
recorded under intermediate
consumption; depreciation
charges are included in gross
value added, and interest costs,
both actual and implicit, are
included in net operating
surplus. Only the expenses of
materials needed for physical
maintenance and repairs to
buildings and equipment appear
under intermediate consumption.
Consequently, if businesses
decide for economic reasons to
rent more physical assets, or
alternatively buy more physical
assets, this can independently
affect the size of GDP
components and the size of
intermediate consumption. If
they buy, this boosts GDP; if they
rent or lease, this lowers GDP.