Capitalization of Software in the National Accounts - ARCHIVED

A new accounting approach treats software as an investment was implemented in the Canadian System of National Accounts (SNA) during 2001. Preliminary estimates of software capital stocks were included for the first time in the National Balance Sheet Accounts (NBSA) released in March 2001. Software investment was then included in the gross domestic product (GDP) with the first quarter 2001 release (May 31, 2001) of the National Economic and Financial Accounts (NEFA). Later in the year, it was included in the Input-Output (I/O) Accounts, Provincial Economic Accounts (PEA) and the Industry Measures Accounts (IMA) with the release of October 30, 2001.

This mini historical revision brings Canada in line with a number of countries, including the United States and other G-7 member nations, who introduced software into their GDP over the last few years. It also brings Canada in line with the 1993 SNA recommendation that business and government acquisition of software be treated in national accounts as an investment as opposed to a current expense. Software is now treated like any other capital input that is used repeatedly in production over a year or more whereas, formerly, it was treated as if it were fully used up during the production period like any other intermediate input. This new accounting for software has raised the level of GDP, although the effects on GDP growth turn out to be relatively small.