Double Counting (accounting) - Persistent Double Counting Problems

Persistent Double Counting Problems

However, even if a consistent system of accounting rules is devised that conceptually eliminates double counting, double counting may technically still occur to some extent.

The first and most obvious reason is that, in actual accounting practice, boundary problems arise, because a flow of expenditures might be interpreted in different ways, from an accounting point of view. Sometimes, it will not be altogether clear which category a flow of expenditure belongs to exactly, it may not "fit" exactly into a category, or, it is technically impossible to separate out different flows in financial data, in such a way that is required by the social accounting system. This may mean that a flow is, in part or as a whole, inadvertently counted twice, because of difficulties with the data sources.

We might, for example, be easily able to identify an expenditure, yet this expenditure may not tally with the corresponding income that should exist, insofar as we can identify it (or vice versa). In that case, we have to make some assumptions or imputations based on what we do know, or can observe. Yet, some statistical discrepancies may remain.

Another reason has to do with the complexities of trade, in particular trade in services and international trade. Not only can it be difficult to correctly identify, survey and allocate particular financial incomes and expenditures, but also revaluations of assets occur, creating problems of how to value goods and services as such.

At the highest level, due to the expansion of foreign trade, a fraction of local value-added may consist of the local inflation of foreign-produced value-added, simply because imported foreign products are resold locally, at inflated prices, without any corresponding additional local production occurring. This may not necessarily create problems of double counting locally, but if we want to estimate world GDP, we may face double counting problems of some kind.