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Value added at factor costs


Value added at factor cost is the gross income from operating activities after adjusting for operating subsidies and indirect taxes.

Value added at factor costs is calculated from turnover, plus capitalised production, plus other operating income (including operating subsidies), plus or minus the changes in stocks, minus the purchases of goods and services, minus other taxes on products which are linked to turnover but not deductible, minus the duties and taxes linked to production. The duties and taxes linked to production are compulsory, unrequited payments, in cash or in kind which are levied by general government, or by the Institutions of the European Union, in respect of the production and importation of goods and services, the employment of labour, the ownership or use of land, buildings or other assets used in production irrespective of the quantity or the value of goods and services produced or sold.

Alternatively it can be calculated from gross operating surplus by adding personnel costs.

Income and expenditure classified as financial in business accounts is excluded from value added. Income and expenditure classified as interest income, dividend income, foreign exchange gain from foreign currency borrowings related to interest costs, gains on redemption and extinguishment of debt or finance costs.

Value added at factor costs is calculated ‘gross’ as value adjustments (such as depreciation and impairment losses) are not subtracted.