Corporate Profits Q1 2017-Q4 2022

Quarterly Corporate Profits Estimates

The main data sources for this frontier release were the Quarterly CSO Balance of Payments (BOP) Survey data and the Annual Corporation Tax (CT) file. Indicators of activity used included the monthly Revenue VAT file received in CSO, the Monthly Industrial Turnover and Monthly Services Indexes. The quarterly estimates displayed in this release were produced by applying quarterly BOP survey data and the above quarterly indicators of activity to annual corporation tax data in a temporal disaggregation model. This method allows quarterly estimates to be developed while at the same time remaining benchmarked to the annual corporation tax data which is the primary source of company profits data used in Annual National Accounts (ANA). In this release, the estimated quarters of the years 2017 up to 2021 are benchmarked to the aggregated CT data used in ANA 2021. The estimated quarters in the year 2022 are based primarily on the BOP survey data where available. Where BOP data is not available, the profits are extrapolated using the quarterly indicators of activity. The coverage of quarterly balance of payments survey data ensures that only a small proportion of overall value of profits rely solely on the indicators to produce estimates. The sector and foreign / domestic breakdowns displayed in this release mean that each sector is modelled independently, with the choice of indicators depending on the nature of the sector and the level of activity by multinationals in the sector captured in the BOP survey. These indicators are displayed in the table below.

*Quarterly estimates of profits in the financial & insurance activities sector were compiled by combining BOP financial survey returns, CRS data, and FISIM S12 output estimates. The combination of these data sources is assumed to capture all profits activity in this sector. As such, no temporal disaggregation modelling was required to develop the quarterly estimates.

Corporations

The definition of corporations in this analysis encompasses all companies, both public and private, that must file a corporation tax return. It also includes some non-profit institutions that operate like a company (i.e. act autonomously and charge economically significant prices).  The definition of corporations used in this analysis is consistent with the System of National Accounts (SNA) and European System of Accounts (ESA). Corporate profits, therefore, measures the earnings of non-financial (S11), financial (S12) and some non-profit (S15) corporations. 

Corporate Profits

Gross Operating Surplus (GOS) is the profit of enterprises on the goods and services they produce after they have paid their workers. It does not take account of the wear and tear on the buildings and machinery used in production and is also before the producer has paid any corporation taxes, interest on loans or dividends to shareholders (Investment Income): these have to be paid out of GOS. Hence, it is similar to the accounting concept EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). To correctly estimate GOS in the system of national accounts some theoretical adjustments need to be applied. This ensures the income approach is consistent with the output and expenditure approaches when calculating Gross Domestic Product (GDP). The main difference between corporate profits in this release and GOS is the exclusion of two of these adjustments, namely Government operating surplus and the income from imputed rental services, which is the theoretical operating surplus of households as owners of their own homes . Gross mixed income, which is the income of self-employed individuals is excluded as it is not part of GOS. These adjustments therefore eliminate profits in the sectors of Government (S13) and households (S14), allowing corporate profits to be viewed as an indicator of economic performance in the corporate sector, i.e. the non-financial (S11), financial (S12), and non-profit (S15) sectors.

Corporation Tax File

Revenue’s corporation tax (CT) file is a key data source in this analysis. Companies registered in Ireland are required to file their tax return nine months after the accounting year end. The CT tax file becomes available towards the end of the calendar year and contains information on taxable profits for year t-1. A number of additions and subtractions are made to the taxable profits to arrive at an estimate of GOS used in the annual national account’s publication. Further details can be found in Gross Operating Surplus explained.

Balance of Payments (BOP) Survey Data

The Balance of Payments manage several surveys that provide the necessary data to publish Balance of Payments, International Investment Position, and National Accounts statistics on a quarterly basis. These surveys are sent to companies on a quarterly basis, the details of which allow the calculation of quarterly gross operating surplus estimates. Moreover, since the recipients of these surveys are primarily large multinational enterprises that trade internationally, the aggregated estimates of GOS from this source captures a large portion of overall profits in the state.

Sector Breakdown

Data were compiled using the NACE Rev.2 classification system. The table below details the NACE A21 sectors that were aggregated into a higher-level six sector breakdown to display quarterly profits. This higher-level economic sector breakdown was necessary to best utilise available quarterly data but also to adequately model some sections of the economy where no quarterly survey or administrative data was available.

Temporal Disaggregation

Temporal disaggregation, also known as interpolation, was used to produce the quarterly estimates displayed in this release. Specifically, the Fernandez (1981) and Chow-Lin (1971) methods were used. These are both regression-based methods that allow the creation of a high-frequency series (e.g. quarterly) that is temporally constrained to a low-frequency series (e.g. annual) while retaining the short term movements of the high frequency indicator series. The temporal constraint means the quarterly estimates must sum up to the annual values.

Foreign / domestic ownership

Both the Corporation Tax source data and Balance of Payments survey data are available at micro level. Using ultimate controlling parent details and institutional sector coding from the BOP and business register profiling units, a foreign / domestic ownership flag can be attached. By aggregating up from these company level records a foreign / domestic ownership dimension can be created to compare trends in corporate earnings between foreign owned and domestic companies.

Redomiciled Public Limited Companies (PLCs)

The redomiciled PLCs operating in Ireland are treated as foreign-owned companies in this release. For more information on these companies see Redomiciled PLCs 2021.

Adjustment for Stock Appreciation

When goods are produced in a period but not sold in that same period they are recorded in stocks. The overall stock change is the change in the value of stocks between the end and the start of the period. The value change can be split into a price and a volume element. It is only the volume element that is included in the calculation of GDP. Any increases or decreases in the value of stocks in the period due to price increases or decreases must be accounted for. These prices or holding gains are accounted for in the Annual National Accounts (ANA) in the item “Adjustment for Stock Appreciation”. In this release an adjustment to the corporate profits is made for stock appreciation as in the ANA.

Consumption of Fixed Capital & Net Corporate Profits

Consumption of Fixed Capital (CFC) is a measure of the decline in value of fixed assets owned by corporations, as a result of normal wear and tear and obsolescence. It is similar to the concepts of depreciation and amortization in business accounting. In the National Accounts, CFC is estimated for all the assets in the economy using a method called the Perpetual Inventory Model (PIM). The depreciation recorded in companies' annual accounts is not used. Gross corporate profits is a measure of profits before accounting for CFC. Net corporate profits is gross corporate profits less CFC. The net corporate profit estimates in this release use experimental estimates of CFC on a quarterly basis attributed to corporations such as the CFC on buildings, machinery, and intellectual property products.

Seasonal Adjustment

The series in this release are not adjusted for seasonal effects nor for calendar days within quarters. When comparing quarters, users are recommended to compare the same quarters across years, for example, Q4 2022 compared with Q4 2021.