Definition: Re-routing

National accounts

A transaction that appears to the units involved as taking place directly between units A and C may be recorded as taking place indirectly through a third unit B.  Thus, the single transaction between A and C is recorded as two transactions: one between A and B, and one between B and C.  In this case the transaction is rerouted.  A well-known example of a rerouting is employers' social contributions paid directly by employers to social insurance funds.  The system records these payments as two transactions: employers pay employer's social contributions to their employees, and employees pay the same contributions to social insurance funds.  As with all re-routings, the purpose of rerouting employers' social contributions is to bring out the economic substance behind the transaction.  In this case this means to show employer's social contributions as contributions paid for the benefit of employees.  Another type of rerouting is that of transactions recorded as taking place between two or more institutional units, although according to the parties involved no transaction takes place at all.  An example is the treatment of property income earned on certain insurance funds, which is retained by insurance enterprises.  The system records this property income as being paid by insurance enterprises to policyholders, who then pay the same amount back to the insurance enterprises as premium supplements.
Source:
Eurostat, "European System of Accounts - ESA 1995", Office for Official Publications of the European Communities, Luxembourg, 1996
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