The paper describes the mainmethodological issues underlying the estimation of povertyrates for Croatia. Volume one focuses on the construction ofthe consumption aggregate as a summary measure of livingstandards which is the summary measure used to proxy livingstandards. Special attention is devoted to the estimation ofthe consumption flow from durable goods. Volume two focuseson the estimation of the (absolute) poverty line. Bothelements are at the core of the poverty measurementexercises carried out in two companion papers in thisvolume. This paper is organized into three sections with thefirst dealing with the construction of the consumptionaggregate. The second section describes the choice of theequivalence scale used to adjust the consumption aggregatefor differences in household composition, and the thirdsection details the procedure used to estimate the poverty line.