Data in NIPA

Conceputally, NIPA profits are attributed to ‘industries’, so ostensibly you can select the sectors that produce ‘capital goods’ and aggregate their profits.

Practically, though, NIPA profits are derived from corporate reports, and since many corporations today operate in more than one sector (and often in many), it is difficult if not impossible to know what profits come from what sector.

As far as I know, the national accounting rule of thumb is to attribute the company’s entire profit to the sector that generates most of its sales, but if this largest sector accounts for only 20% or 30% of the corporation’s operations, the results can be very misleading.

Here is a link to the BEA’s NIPA Handbook explaining what NIPA’s Corporate Profits data reflect.  I agree with Jonathan that NIPA does not disaggregate profits in the way you would like.

Also, accounting rules allow things like software to be capitalized, i.e., to be treated as capital goods or fixed capital, and depreciated over time.  This is why I think of fixed capital as a “stupid accounting trick” that delays certain expenses from hitting the income statement, smoothing profits and losses over time.  It is a fiction born out of fairness, though.  A manufacturer cannot make or sell any products until it builds a factory.  Accounting rules allow the manufacturer to account for the expense of building the factor on its cash flow statement while deferring the recognition of that expense on the income statement on a pro rata basis over the useful life of the factory, which is usually 20-30 years.  Capital expenses for things like software may have a useful life (reflected in the depreciation schedule) of only 1-2 years.

In his interesting 2010 book, Misplaced Generosity. Extraordinary Profits in Alberta’s Oil and Gas Industry (Edmonton, Alberta: Parkland Institute, University of Alberta), Reagan Boychuk offers an account of Alberta’s oil and gas revenues, costs and profit, plus imputations of ‘normal’ and ‘excess profit’. (Twitter thread)

The computations/imputations are built from the bottom up – i.e., they are based on estimates of the industry’s output, average oil/gas selling prices and investment and production cost, so, on the face of it, they reflect the business performance of Alberta’s oil and gas industry — and nothing else.

But here is a question: output levels are collected at the provincial levels, as are selling prices (I assume). But capital and operating costs probably come from the companies themselves, and since these companies are often large transnationals rather than Albertan only, it is hard to know the extent to which their data reflect local operations ‘uncontaminated’ by transfer pricing.