Back Matter
Author:
Mr. Eduardo Valdivia-Velarde
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and
Ms. Tamara Razin
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Language:
English
Keywords:
M&G; economy; transaction; goods; enterprise survey; net acquisition; investment fund; balance of payments; financing transaction; incurrence of liability; Foreign direct investment; Income; Securities; Insurance; Currencies; Global; Africa
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Abstract

Comments and Explanatory Notes to the Conversion Matrix

Appendix 1. Conversion Matrix from the BPM5 to the BPM6

Comments and Explanatory Notes to the Conversion Matrix

For the balance of payments and IIP, the conversion matrix matches the standard components and additional details of the BPM5 to the standard components and selected other items of the BPM6; see:

  • BPM5 Balance of Payments: Standard Components, pages 43–48

  • BPM5 Tables 7 and 8, Balance of Payments: Standard Components and Additional Detail

  • BPM5 International Investment Position: Standard Components, pages 108-111

  • BPM5 Table 9, International Investment Position: Standard Components and Additional Detail

  • BPM6 Appendix 9 Standard Components and Selected Other Items

The Comments column of the conversion matrix provides further explanation and information regarding the changes between the BPM5 and BPM6. To enhance clarity, the titles of BPM5 standard components are shown in italics in the comments.

The conversion matrix follows the Standard Components and Selected Other Items of the BPM6. In a number of cases the order of the BPM5 items has been adjusted to facilitate the linking.

In the conversion matrix, the corresponding items of the BPM5 and BPM6 are linked via arrows. To reduce confusion, in cases where nonrelated arrows cross, different fonts have been selected for the crossing arrows.

In cases where the BPM5 item is broken down in the BPM6, split arrows are used to link all new items to the old one. Split arrows are also used when the BPM6 shows not only the original BPM5 item, but also an “of which” item thereof that was not included in the BPM5. For the sake of clarity, in those cases different fonts are used to distinguish the “of which” item.

BPM6 Changes in Treatment or Classification

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Further detail in EBOPS, see MSITS Annex II, Extended Balance of Payments Services Classification.

Standard components for those countries that are unable (e.g., for reasons of confidentiality) to provide the full breakdown by mode of transport; otherwise supplementary, but can be derived by summing the standard components for each mode of transport.

Construction abroad—Construction (CR.); Goods and services acquired (DR.). Construction in the reporting economy—(Goods and services acquired (CR.); (Construction (DR.)

If available for publication. If not available for publication, include in other investment-interest.

Preferably assets and liabilities reported separately, but otherwise a net figure for liabilities less assets, included, by convention, under assets.

If available for publication.

Assets and liabilities combined and reported as a net figure for assets less liabilities, included under assets.

Specify sector involved and standard component in which the item is included.

Arrears related to exceptional financing. Not a transaction, but included in the “analytic” presentation; see BPM6, paragraph 14.17 and Appendix 1, paragraph A1.21.

BPM6-IIP: Changes in Treatment or Classification

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Preferably assets and liabilities reported separately, but otherwise a net figure for liabilities less assets, included, by convention, under assets.

If available for publication.

Assets and liabilities combined and reported as a net figure for assets less liabilities, included under assets.

Appendix 2. Insurance Transactions and Positions, and Pension Schemes

Insurance Transactions and Positions

Introduction

A2.1 Over the lifetime of insurance contracts, insurance companies produce services to their policyholders for which they do not charge explicitly. These services include financial protection against risk and financial intermediation services that arise when funds collected from policyholders and held as technical reserves are invested. These services are an undifferentiated component of premiums, and need to be derived from amounts accruing to the insurers and amounts accruing to the policyholders. These amounts are reflected in various accounts of the balance of payments depending on the type of the activity—that is, the primary income account, secondary income account, financial account, and, in some cases, the capital account. Service fees explicitly charged by insurance companies (e.g., for agents’ commissions, salvage, claims adjustment, actuarial services) are recorded in the goods and services account as auxiliary insurance services. Compilers wishing to improve insurance data first need to understand the current situation regarding crossborder insurance transactions in order to assess their relative importance. The compiler should get acquainted with the situation and gain an understanding by means of interviewing domestic insurance companies, or, in case of resident policyholders and beneficiaries, of assessing the relevance regarding transactions with insurance companies abroad.

A2.2 Two types of insurance schemes are distinguished in the international standards—social insurance and other insurance. Social insurance schemes differ from other insurance in that they are often linked to public insurance programs that provide protection against various social risks (e.g., loss of income due to sickness, old age, or unemployment), and in which participation is often compulsory. Other insurance includes freight insurance on goods imports and exports, life insurance, other types of direct insurance (i.e., nonlife insurance), and reinsurance. Here, the policies are taken out by an institutional unit on its initiative and for its own benefit, independent of any social insurance scheme. The Insurance Transactions and Positions part of the appendix deals with estimating other insurance services.

A2.3 Within other insurance, nonlife insurance and reinsurance are treated similarly, which is a change to previous international standards. However, there are differences between life and nonlife policies leading to different types of entries in the international accounts. For life insurance, the prebenefits period generally extends throughout the entire life of the contract and there is little or no uncertainty about the payment. The payments made over the years are regarded as a financial investment (or saving), which will be returned to the policyholder in later years. Thus the recording of premiums and benefits is made in the financial account.

A2.4 The balance of payments compiler is confronted with different situations regarding the availability of data on cross border insurance activities. The data for estimating exports of insurance services will be best obtained by surveying resident insurance companies. The data collected through this survey should cover data on the nonresident policyholders’ share in net premiums, claims, and reserves. This will enable the conceptual adjustments necessary for the recording of these operations in the balance of payments and international investment position (IIP) statistics.

A2.5 The same will not be possible for the imports of insurance services with the provider of the insurance services being nonresident to the compiler’s economy. Thus estimates have to be either based on ratios available from the domestic insurance sector, information derived from an international transactions reporting system (ITRS), partner economy data, or from a survey that can be used to collect premiums paid and claims recovered from the domestic policyholder. Imports of reinsurance services could be covered by the same survey of domestic insurance companies discussed in the foregoing paragraph. Model form 12 in Appendix 8 is designed for collecting data on insurance services and other related transactions.

Overview of Insurance Accounting: Nonlife Insurance

A2.6 In nonlife insurance, policyholders make regular premium payments to an insurance company. In return, the company guarantees financial protection against the occurrence of events, such as accidents, sickness, and fire. “Term-life insurance” (as opposed to “life insurance”) is also treated as nonlife insurance in external accounts, because it only provides a stated benefit upon the death of the policyholder, provided that the death occurs within a specific time period. However, the policy does not provide any returns beyond the stated benefit, unlike life insurance policies, which have a savings component that can be used for wealth accumulation.

A2.7 The chief function of nonlife insurers lies in the proper redistribution of premiums earned and other income to individuals of homogeneous groups that have incurred losses. A special form of financial intermediation is also involved, in which funds at the disposal of the insurance unit, called (nonlife) insurance technical reserves, are invested in financial and other assets to generate income. Nonlife insurance technical reserves cover unearned premiums, reserves for unexpired risks, and claims outstanding at the end of the reporting period. For the purpose of financial reporting, these funds and the corresponding investment income, called premium supplements, are assets of the policyholders and liabilities of the insurance companies.

Premiums
Written, unearned, and earned premiums

A2.8 An insurance premium represents the price the insurance company charges for the policy and the service it renders to the policyholder. The concept of unearned premiums is important to the insurance business, as it deals with the recognition of revenue for the time period in which the policy is in force. In the jargon of an insurance company, at the time a policy is first written, the total of the premium may be unearned, as premiums are often fully prepaid at the inception of the policy. Direct written premiums are the amounts charged to and actually paid over the life of a contract by the policyholders for insurance coverage. Each day thereafter, the premium amount accrues to the insurance unit until the end of the policy. At the end of the reporting period, the insurance unit assesses the premium reserves representing the unexpired terms of the policy. The earned premium plus the unearned premium for a policy equals the written premium. The recognition of premiums earned versus premiums received and estimates of claims incurred but not yet reported or resolved can be seen as the application of usual accrual accounting principles.

Net written premiums and reinsurance premiums

A2.9 In most of the cases the direct written premiums constitute the basis for the compiler to determine the amounts of premiums related to direct business and to derive earned premiums at the end of the period. However, an intermediate step may be necessary in case the premium amounts in the accounts of insurers are already further adjusted for reinsurance premiums. Insurance companies purchase reinsurance to protect themselves against the risks of losses above certain thresholds. If a risk is reinsured, the insurance company will cede to a reinsurer (i.e., another insurance company) a part of the premiums in proportion to the risk assumed. The other part is used by the insurance company to finance the risk that remains.1

A2.10 On the other hand, insurance companies themselves may act as a reinsurer and accept indirect business from another insurance company in form of assumed premiums. Thus gross written premiums in insurers’ accounts could include both written premiums charged to policyholders (also called direct written premiums)2 and assumed reinsurance premiums from insurance companies. Net written premiums then constitute gross written premiums minus ceded reinsurance premiums.3

Claims
Insurance claims4 incurred and paid

A2.11 At the time the policy becomes effective, the policyholder has transferred the uncertain loss of assets to the insurance company in form of potential claims in exchange for the premium paid. Claims incurred refer to the expected financial obligations that cover the insured risks as provided by the policy. Claims may be known or unknown by the company, reported or unreported. Paid claims occur when actual payments of cash have been made to claimants for insured events of the current or previous periods. To properly match the income earned (premiums) of the insurance company with the expenses incurred in the relevant period, provisions are made in the insurers’ accounts as of the accounting date for claims incurred that will be settled after the current accounting period. Claim associated expenses (also called claim/loss adjustment expenses, incurred to investigate and settle losses) are generally considered part of the claim cost for an insurance company.

A2.12 In insurance accounting, claims incurred for the accounting period are calculated as follows:

Claims/losses paid during the accounting period for nonlife insurance contracts

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A2.13 Loss reserves are the unpaid part of claims incurred as of the accounting date, as explained ahead in Insurance technical reserves and expected income attributable to policyholders.

Insurance technical reserves and expected income attributable to policyholders
Insurance technical reserves

A2.14 An insurance company must apply sound methods to estimate potential claim liabilities on its balance sheet to cover all expected and unexpected claims and expenses, as there is always a delay between the times the insured events occur and the times the claims are reported and settled. The insurance company has incurred a potential liability at the time the policy becomes effective. Until the insured incident occurs, the potential liability is reflected in unearned premiums and the other components of insurance technical reserves.

A2.15 Unearned premiums are established as a liability becauseinsurance companies receive premiums in advance of some or all of the policy period that is covered by the policy. Following the accrual principle, these premiums cannot be recognized as revenue until they are earned. Also, insurance companies may need to refund these premiums to policyholders if the policy is cancelled before its stated ending date.

A2.16 The nonlife insurance technical reserves set aside on the balance sheet (see Example A2.2 ahead) for future commitments that arise out of insurance contracts (including any related administration expenses, taxes, etc.) consist of mainly two components:

  1. Unearned premium reserves are that part of premiums written that apply to the unexpired part of the policy period. These reserves are to be carried forward to the following accounting period. The insurance policy period for which the premium is paid in advance and during which the insurance company bears the risk does (usually) not correspond with the reporting period. If an insurance company expects its unearned premium reserves to be insufficient to cover estimated claims and expenses in the following accounting period from contracts concluded by the end of the accounting period, it may create so-called unexpired risk provisions. Some insurance companies also separately disclose provisions to meet costs of discounts to be granted to certain policyholders.

  2. Estimated loss reserves and reserves for claims incurred but not reported are provisions set aside to meet the estimated costs of settling claims that have occurred up to the end of the accounting period from policies currently in force and policies written in the past, after the deduction of amounts already paid. This amount includes funds for unpaid claims, claims adjustment and handling expenses known but not yet settled, and estimates for claims incurred but not yet notified (so called incurred but not reported) by the balance sheet date. Insurance companies may also set aside funds for preventing cash-flow depletion for significant unforeseen events or catastrophes, when many policyholders may be affected at about the same time. These kinds of reserves should, however, be taken into account only if there has been an event that triggered the increase of liabilities vis-à-vis the policyholders. Otherwise these amounts are seen as internal reserves set aside for saving purposes and should not be included in nonlife technical reserves of the balance of payments and IIP.

Illustration of insurance company profit and loss account

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Excerpt from an insurance company balance sheet

Insurance company X: Insurance liabilities at year end

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Expected income (attributable to policyholders)

A2.17 Insurance companies generally distinguish two sources of income, from investing shareholder (equity) capital and from investing policyholders’ funds (also referred to as holdings of own assets and technical reserves, respectively). The investment of policyholders’ funds is a distinct feature of insurance companies and made possible because of the time span between the collection of premiums and the eventual loss settlements.

Using the Insurance Companies’ Accounting Data to Derive Balance of Payments and IIP Components

A2.18 Box A2.1 summarizes the BPM6 methodology as described in Annex 6c of the BPM6 regarding the balance of payments data on nonlife insurance. Although the terms used to describe transactions of the insurance sector in the BPM6 and the 2008 SNA are based on and in strong accordance with the accounting terminology that insurance companies use to set up their accounts (as explained in Employment-Related Pension Schemes and Social Security Schemes of this appendix), the compiler may need to make certain adjustments before data can be used to derive relevant balance of payments entries according to the BPM6. These adjustments are necessary, for instance, to determine and differentiate the amounts of premiums related to direct business with policyholders, and the amounts related to reinsurance (both ceded and assumed), as further explained ahead.

A2.19 The paragraphs ahead aim at identifying the terms and the necessary adjustments needed to compile balance of payments data. All entries relate to nonresident policyholders.

Secondary income account: Net premiums earned

A2.20 Net premium earned equals premiums earned plus premium supplement minus service charge. For the compilation of balance of payments purposes according to the BPM6, there is no netting between direct insurance and reinsurance. Therefore, the compiler should distinguish between the amounts related to direct business, and the amounts related to reinsurance (both ceded and assumed). This means that direct written premiums received from policyholders should not be netted for any premiums ceded to reinsurers, and should exclude premiums assumed from other insurance companies. The rationale is that the direct insurance company is fully liable vis-à-vis the policyholder, regardless of whether part of the risks are reinsured (see 2008 SNA, paragraph 17.57).

BPM6 Entries in the Balance of Payments Related to Nonlife Insurance Transactions

Services account

The insurance service charge is derived implicitly with the following formula (see BPM6, Appendix 6c):

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Primary income account

Investment income attributable to policyholders in insurance (equal to premium supplements)

Secondary income account

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Financial account

Changes in nonlife insurance technical reserves (e.g., for policyholders’ funds invested)

Currency and deposits (for actual premiums written and claims paid)

A2.21 The written premiums from direct business are used to determine the earned premiums from the insurers’ accounts of the reporting period.5 From the business with nonresident policyholders:

Written premiums (for direct business only)

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A2.22 The adjusted written premiums and derived earned premiums constitute the first two components for the compilation of the insurance accounts according to international standards. Written premiums correspond to premiums received in the BPM6, and are recorded in other investment—for example, as an increase in the insurance companies’ deposits abroad.

A2.23 In Example A2.1 (Illustration of insurance company profit and loss account), to determine the earned premiums, the compiler would have to use the gross premiums written (not taking into account the reinsurance premiums ceded) excluding premiums assumed, and the net change in unearned premium reserves, and inquire about the share of nonresident policyholders. Benefits are payments to life insurance policyholders and would need to be separated from nonlife claims paid.

Secondary income account: Claims payable/due

A2.24 Claims incurred in insurance accounts correspond to claims payable in the BPM6, and are recorded in the secondary income account of the balance of payments (see BPM6, paragraph 12.44), while claims paid are recorded in other investment—for example, as a decrease in the insurance companies’ deposits abroad. The calculation for claims incurred is set out in paragraph A2.12.

A2.25 For insurance companies to accurately estimate future loss payments, especially for claims unknown, predictions are in general based on historical data of settlement and reporting patterns of homogenous groups of policyholders, and actuarial methods that take account of uncertainties to determine the amount of reserves. Certain lines of business with expected individual large risks involved, with high frequency of losses, or with cumulative risks (such as natural disasters) are likely to be hedged by insurance companies through customized reinsurance.

A2.26 In case of a significant unforeseeable event during the accounting period, the derived insurance services rendered by the insurance company to the policyholders should not turn into a negative figure—that is, neither the volume nor the price of insurance services should be affected by the volatility of claims. The 2008 SNA therefore recommends the use of adjusted claims incurred when measuring the output of insurance companies. The adjustment would be negative in periods when large values of claims are incurred, thus increasing the value of the service by reducing the difference between actual claims in a particular period and a normally expected level of claims.

A2.27 There are three different accounting methods to help estimate the expected level of claims (see BPM6, paragraph A6c.22): (1) the expectations approach is based on expected claims using smoothed past figures of gross claims incurred or ratios of gross claims over premiums, applied to current premiums; it replicates the ex-ante model of insurance companies when pricing the premiums based on expectations of loss; (2) the accounting approach uses ex-post data of observed claims incurred and is based on changes in insurance companies’ equalization reserves and changes in own funds; and (3) the sum of costs plus “normal” profit approach measures output by taking the sum of costs plus an estimate of normal profit based on smoothed past actual profits.

A2.28 According to international standards, exceptionally high claims following a natural disaster or catastrophe are recorded as secondary income or a capital transfer provided by the insurance company to the policyholders. The rationale for treating certain claims as capital transfers is that these claims do not affect the level of disposable income of the claimants. The net worth of policyholders will thus show the effects of the destruction of assets and an offsetting increase in financial assets from the capital transfers (see 2008 SNA, paragraph 17.40, and BPM6, paragraph 13.24). The entries in the secondary income account recognize the intermediation effect of direct insurance by transferring a pool of relatively small premiums from many policyholders to a small number of large claims from some of these policyholders.

Primary income account: Premium supplements

A2.29 When a policy is written, insurance companies receive cash, which is at their disposal to invest until claims are later reported and settled. Distinguishing between technical reserves and own assets is relevant for deriving the insurance services according to the BPM6.

A2.30 In international standards, the income earned from the investment of insurance technical reserves are called premium supplements (see BPM6, paragraph 11.83) and are imputed as primary income receivable by policyholders, as the technical reserves are assets of the policyholders. This income is retained by the insurance companies in practice. The same amount is then shown within the equation as payable to the insurance company by the policyholder as premium supplements in the services account.

A2.31 In Example A2.1, the income retained from investing policyholders’ funds is called policyholder dividends (and bonuses). Bonuses are amounts in life insurance policies that are explicitly attributed to policyholders each year. The compiler would need to inquire about the estimated (prorated) share of income payable to nonresident policyholders for nonlife business.

Financial account: Insurance technical reserves

A2.32 Reserves are increased or reduced when premiums are earned and claims are paid from outstanding loss reserves. In the accounting system of the company, the payment is matched to the loss reserve and a corresponding entry is made to reduce the reserve for the payment made to the policyholder. At the end of the accounting period, insurance technical reserves can decrease in net terms when claims paid out of reserves exceed amounts added to respective reserves.

A2.33 These reserves for unearned premiums and against outstanding insurance claims are recorded in the other investment category of the financial account under Insurance, pension, and standardized guarantee schemes (see BPM6, paragraphs 5.64, and 7.63–7.64). The split of these reserves between liabilities to residents and nonresidents may have to be undertaken according to a suitable indicator such as premiums earned or written.

A2.34 For the recording of insurance technical reserves in the IIP, flows that result from exposure to the effect of exchange rates will have to be taken into account (see Chapter 9 for more details on other changes in financial positions).

Goods and services account: Deriving insurance services

A2.35 All components are now available to the compiler to derive the insurance service charge according to the BPM6, paragraph 10.111.

A2.36 The implicit insurance service the insurance company renders is a measurement of the output of the insurance industry. The service provided to residents and nonresidents is derived by determining the output of the insurance in a way that mimics the accounting practices based on premiums earned and losses incurred pertaining to the accounting period:

Gross premiums earned (from direct business)

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Data sources

Conducting a survey of domestic insurance companies

A2.37 The compiler can obtain most comprehensive data for exports of insurance services from surveying resident insurance companies. To enable an appropriate coverage of the domestic insurance sector, a survey frame should be available, including a list of insurance companies, which may be provided by the authority issuing the licenses for insurance business. Insurance agents and brokers are usually required to register with insurance authorities; therefore, a list of these businesses should be readily available from official sources (see also Box A2.2).

A2.38 Through surveying domestic insurance companies, the compiler is able to request information on a conceptually correct basis as explained in previous paragraphs—that is, premiums earned and claims due—as well as insurance technical reserves and the income earned on those reserves.

A2.39 Resident insurance companies should report details of premiums and claims in respect of business obtained from abroad and in respect of international reinsurance flows. In addition, these companies may be asked to report details of premiums and claims in respect of insurance written by them on imports.

A2.40 Supervisory institutions may be a source for qualitative aggregate information. Although balance sheets and profit and loss account information from those institutions may have the caveat of long timeliness, they may be combined with information available from shorter-term external sector statistics (e.g., from the ITRS) or administrative data, for estimating an interim (moving) measure for the distinction between national and international business.

A2.41 Insurance terms may differ due to different accounting practices that are being applied in worldwide insurance accounting.6

A2.42 A model form for insurance survey is presented in Appendix 8.

Insurance Sales Agents and Brokers

Insurance sales agents or brokers commonly sell one or more types of insurance, such as property and casualty, life, health, disability, and long-term care. They either work exclusively for one insurance company based on a contractual agreement, or work independently and represent several companies at the same time. As facilitators, agents help match insurance policies for their clients with the company, and help policyholders settle their insurance claims. Insurance agents and brokers are usually required to register with insurance authorities; therefore, a list of these businesses should be readily available from official sources. An exploratory survey could be undertaken to identify agents and brokers placing insurance abroad.

The agent’s commission is generally a percentage of each premium. If the insurance company that is surveyed collects premiums directly from its policyholders, the premiums balance receivable would include the full amount of premiums due from policyholders. If agents act as intermediary between insurance company and policyholder, there are generally two possibilities. If the insurance company uses an agent but charges directly the policyholders for premiums due, the commissions payable to the agent will not reduce the amount that is received and recorded for premiums. If the agent collects premiums on behalf of the insurance company, the premium shown in the insurance accounts would normally be recorded net of commissions. The compiler should be aware of the possibility that premiums could be collected by agents but not yet transferred to the insurance company (uncollected premium balances), or that commissions have been deducted (premiums generally should be recorded gross of agent commissions, and commissions for agent services should be separately recorded). Insurance companies keep periodic statements of the sums due and owed to an agent, sometimes referred to as agents’ balances.

Insurance technical reserves for life and nonlife insurance policies derived from standardized reporting forms (SRFs) in monetary and financial statistics (MFS)

A2.43 The MFS can be a data source for compiling insurance technical reserves. In MFS, insurance technical reserves receive separate treatment and appear as liabilities in the accounts of insurance corporations and pension funds in the other financial corporations’ sub-sector (see Example A2.3).7 In many economies such reserves constitute a significant contribution to the total liabilities of the financial corporations’ sector. The separate identification therefore supports the analysis of activities of this particular subsector, which is reflected in their specialized treatment in national financial reporting and international statistical standards.

A2.44 Technical reserves have three components. The first component is the liabilities account for obligations for prepaid insurance premiums received from all resident and nonresident policyholders. Included are prepayments for both life insurance and nonlife insurance policies, as well as premium prepayments for reinsurance (see Monetary and Financial Statistics Manual and Compilation Guide (MFSM-CG)). The second component of insurance technical reserves comprises changes in reserves for claims outstanding, which insurance companies hold in order to cover the amounts for (valid) claims that are not yet settled or claims that may be disputed. The third component covers the obligation from net equity of households in life insurance corporations and pension funds reserves, which reflect the present value of the insurance corporation’s estimated (actuarial value of) liabilities for future claims by life insurance policyholders.

Excerpt from the sectoral balance sheet for the financial corporations subsector (liability side)

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A2.45 The assets account in the sectoral balance sheet is used to record the amount of financial corporations’ prepayments of premiums to insurance corporations. It also includes prepayments that insurance corporations have made to other insurance corporations (i.e., to reinsurance companies abroad). In general, the asset category is relatively minor compared to the liability account. Prepayment of insurance premiums is the only category of insurance technical reserves for which there are both asset and liability accounts in the sectoral balance sheet. Report 4SR of the monetary statistics is the report form used to compile the data on all resident insurance corporations and pension funds.

A2.46 MFS do not contain income statements (see MFSM-CG). Data on the investment income from insurance reserve assets could be estimated by applying an appropriate return rate calculated as a specified percentage of the amount of the outstanding balances.

Nonlife insurance services—Deriving insurance services payable from incomplete information

A2.47 The compiler may not always be able to compile a comprehensive set of accounts in order to approximate insurances services exports in a given reporting period, especially for shorter time periods (e.g., quarterly data). Therefore, in conjunction with the national accounts compiler, the insurances services provided to the rest of the world could be estimated from the total estimated output8 of the insurance sector and the average ratio of total premiums earned from abroad to total premiums earned (see Example A2.4). Premiums are a better indicator than claims for determining the share of insurance services attributable to the rest of the world. The reason is that claims are contingent on events incurred to trigger payments, and there may be periods without claims or with irregularly large claims. From the ITRS, there may be data available on a cash basis of premiums received from abroad, and claims paid.

Estimation of insurance services provided to nonresidents

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Import of insurance services with and without an insurance company resident in the reporting economy

A2.48 Insurance services receivable (imported) are much more difficult to capture, as the compiler is not able to request information directly from insurance corporations. Data from an ITRS will be on a cash basis and capture premiums paid and claims received. An appropriate ratio derived from the domestic insurance industry can be applied to premiums paid. If this ratio cannot be obtained, the compiler should estimate the ratio by using the long-term relationship between premiums and claims. The ITRS provides information on economies to which premiums are paid and from where claims are received. The compiler could contact the balance of payments compilers in those economies to obtain appropriate ratios for their services estimates.

Overview of insurance accounting: Reinsurance

A2.49 Reinsurance is the primary vehicle used by insurance companies to diversify, mitigate, and manage their risk. Reinsurance is the acceptance by the reinsurance company of all or part of the risk of loss of the primary insurance company (also called the ceding company). There are different types of reinsurers—those whose basic business is reinsurance, and those that conduct reinsurance business in addition to their primary business. Reinsurance companies either use direct negotiation channels, or contact primary insurance companies through brokers or intermediaries to whom they pay commissions as a percentage of the reinsurance premium.

A2.50 There are two principal forms of reinsurance, pro rata and excess of loss reinsurance, which increase the primary insurance company’s capacity to accept larger exposures than normal. In a pro rata reinsurance contract, the reinsurers and reinsured company share a proportional part of the premiums and losses of the primary insurance company’s pro rata reinsured business. In an excess of loss contract, the primary insurance company pays the amount of each claim up to a limit determined in advance, and the reinsurer pays the amount of the claim above that limit either per risk, per occurrence, or if reinsured losses incurred in aggregate exceed an agreed amount. A reinsurer can cede all or part of the reinsurance it has previously assumed to another reinsurance company. This transaction is called retrocession.

Deriving transactions related to nonlife insurance

This example presents how to calculate/estimate balance of payments entries related to nonlife insurance. It is assumed that the balance of payment compilers received the following information on nonlife insurance from resident insurance companies:

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Based on the foregoing information:

Recording of transactions for nonlife insurance in the balance of payments statistics (economy of insurance companies)

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Supplementary item

A2.51 International standards measure transactions of reinsurance companies in a way similar to transactions of direct nonlife insurance companies (see Overview of insurance accounting: Nonlife insurance). However, there are some peculiar payments in reinsurance. The primary insurance company remits to the reinsurer the net premium after deducting the so-called agreed upon ceding commission. This commission is paid by the reinsurer to reimburse the ceding company for its acquisition expenses and other costs incurred to place the business with the reinsurer.

A2.52 Another commission often found in reinsurance agreements provides for profit sharing. The reinsurer and the ceding company generally agree to a predetermined percentage of the profit realized by the reinsurer on the contracts ceded by the primary insurance companies and the cedants’ share of such profits, called profit commission.

A2.53 As is the case for the primary insurance company, the premiums for the reinsurer are generally not fully earned when received, so provisions are made for the unearned part of the written premiums. Earned premiums are calculated by the sum of premiums written plus the unearned premium reserve at the beginning of the reporting period, less the unearned premium reserve at the end of the reporting period. The amount of the unearned premium reserve less the ceding commission is the amount the reinsurer would have to pay back, in case the contract was canceled.

A2.54 Reinsurers are also required to establish reserves for claims outstanding and for expenses associated with settling and adjusting these claims. Claims or losses incurred are calculated as claims incurred and paid during the current period, plus claims incurred during the current period that are unpaid at the end of the period.

A2.55 The management of the reserves may differ from those of primary insurance companies due to the longer duration of contracts and the magnitude of losses. Conceptually, the income reinsurers earn from investing the reserves is treated similar to that of primary insurers, as investment income payable to the primary insurance company and returned as premium supplement. A primary insurance company thus pays investment income to its policyholders based on the whole of the premiums earned, and receives investment income from the reinsurer corresponding to the amount of the premiums it has ceded to the reinsurer.

A2.56 The value of output of the reinsurer can be expressed with the following formula:

Gross premiums earned less commission payable

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A2.57 International accounting standards prohibit the offsetting of reinsurance assets against related liabilities and require transactions between the direct insurer and its clients on the one hand and the holder of a policy and reinsurer on the other to be recorded as entirely separate sets of transactions. In insurance companies’ accounts of ceding companies net premiums written (received) generally refer to gross premiums written (including direct and reinsurance assumed) less the premiums ceded proportionally to reinsurers. Indirect business accepted from another insurance company is included in gross premiums written as reinsurance assumed.

A2.58 As with direct insurance, in exceptional cases, some part of reinsurance claims may be recorded as capital transfers rather than as current transfers. All other entries in the international accounts are derived and recorded similarly to nonlife insurances (see Example A2.6).

A2.59 Services receivable from reinsurance companies abroad9 can be best captured through surveying the domestic recipient insurance company, as described in paragraphs A2.37–A2.42.

Estimation of insurance services in indirect insurance

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Overview of insurance accounting: Life insurance

A2.60 There are three distinguishing features for life insurance contracts: the relationship between premiums and claims/benefits over time, the length of time for which the contract is written, and the certainty that a claim/benefit will occur. Practically, the insurance company determines the relationship between premium and benefit by combining the saving element of a single policy with actuarial calculations of an insured population.

A2.61 Actuarial calculations are based on valuation assumptions with regard to mortality, disablement, and morbidity, taking into account the premiums to be received in the future, the investment earnings potential, and all the future liabilities under the conditions of each current insurance contract. A policyholder who cancels the policy before the agreed expiration date is generally entitled to partial benefits from the insurer. Benefits are thus always paid to the policyholder or to his or her beneficiary. For these reasons, part of the premiums paid by the policyholders may be regarded as savings and part of the benefits received by the beneficiaries as withdrawals from savings. The recording, therefore, of premiums and payments of benefits takes place in the financial account rather than in the secondary income account (see BPM6, paragraph 5.65).

A2.62 The actuarial reserves represent the present value of the future cash flows payable at the end of the insurance policy, rather than claims in the current period. Actuarial reserves accrue to particular policyholders depending on amounts guaranteed in their policies. Thus the total liability of the insurer is the sum of the actuarial reserves for every individual policy (see Example A2.1).

A2.63 Premium supplements are more significant for life insurance than for nonlife insurance (see 2008 SNA, paragraphs 6.193 and 6.197). Part of the total income earned on the reserves for policyholders—that is, the income allocated to actuarial reserves—is allocated to the (individual) policyholder and added to the insurance technical reserves.

A2.64 Changes in life insurance actuarial reserves are derived as follows:

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A2.65 Policyholders with life insurance policies may be eligible for additional bonuses in each year distributed to the policyholders by means of increasing the future insurance benefits in addition to a minimum guaranteed amount. Generally, life insurance products mentioning “with profit policy” or “participating policy” means the policy and thereby the policyholder is eligible to receive these bonuses. They are included in investment income attributable to life insurance policyholders and recorded as premium supplements in the income account (see BPM6, paragraph 11.81).

A2.66 The value of output of life insurance can be expressed with the following formula:

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A2.67 Similar to nonlife insurance, reserves for unearned premiums and against outstanding insurance claims are recorded in the other investment category of the financial account under Insurance, pension and standardized guarantee schemes; but in addition there are the actuarial reserves for life insurance and with-profit insurance that represent amounts set aside for payments of benefits in future:11

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A2.68 Box A2.3 summarizes the BPM6 methodology as described in Annex 6c of the BPM6 manual, regarding the balance of payments data on life insurance.

BPM6 Entries in the Balance of Payments Related to Life Insurance Transactions

Services account

The insurance service charge is derived implicitly with the following formula (see BPM6, Appendix 6c):

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Primary income account

Investment income attributable to policyholders in insurance (equal to premium supplements)

Financial account

Changes in life insurance reserves

Currency and deposits (for actual premiums written and benefits paid)

Excerpt from an insurance company profit and loss accounts

Insurance company X: Gross premiums by life insurance business line and region (in million U.S. dollars)

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A2.69 Insurance companies offer different types of life insurance products. Insurance companies may offer group insurance contracts concluded for companies’ employees, or insurance contracts for individuals (see Example A2.7). Group insurance has the distinctive feature that the premium is determined by the group of people eligible to purchase insurances as a whole for reasons such as working for a particular employer, rather than related to cover a specific (high-) risk factor. Claims, however, are due individually. With regard to the type of investment, so-called unit-linked life insurance policies are fund-linked products where policyholders can determine the type of investment by choosing a particular fund and thus carrying the investment risk. A life insurance benefit may be paid as a lump sum or as an annuity. The claim may be fixed or may vary to reflect the income earned from the investment of premiums during the period for which the policy operates (with-profit policies). The unit-linked policy is a special kind of with-profit policies, because the claim varies according to the value of the chosen fund. Accruing profits may be paid out in part to the policyholder in the form of dividends. Other policies offer a guaranteed return not dependent on the company’s underlying investment performance.

Insurance on imports

A2.70 The point of uniform valuation is the free-on-board (f.o.b.) statistical value of exports at the customs frontier of the exporting economy (see BPM6, paragraph 10.30). Imports are normally valued at cost, insurance, freight (c.i.f.), at the domestic custom frontier by customs. To convert imports of goods to the f.o.b. valuation, the value of freight and insurance premiums incurred from the frontier of the exporting economy to the border of the importing economy should be deducted (BPM6, paragraph 10.34), and included in balance of payments transport and insurance transactions in case a nonresident transporter or insurer is involved.

A2.71 Insurance premiums are often estimated by the compiler together with freight services on imports by sampling importers and agents of foreign transport operators, or extracting data from customs import documentation.12 In order to avoid overstating insurance services, a ratio can be used to estimate services from the reported insurance premiums recorded in the secondary income account. The ratio may be derived from the domestic nonlife insurance industry and applied to premiums paid.

A2.72 It is often the case that freight insurance costs are based on single events (the shipment of a good) and are of short-term nature. They may be determined by the insurance company based on the value of the specific good being shipped (e.g., replacement cost value, or invoice value), and the category of good that is being shipped (e.g., fragile goods, hazardous materials). In those cases, advance payments for insurance coverage can be recorded as current expense by the policyholder and as current revenue by the insurance company, rather than spreading the payments over time. The claims are recorded when paid in the secondary income account. In cases where traders take out insurance policies to cover their freight on a lump-sum and long-term basis, insurance on imports is treated the same way as other nonlife insurance policies.

Implementation of the BPM6: Insurance, Pension Schemes, and Standardized Guarantee Schemes in the Case of Austria

Background

This example covers the implementation of insurances, pension schemes, and standardized guarantee schemes in accordance with the BPM6 in the case of Austria. Since the calculation of insurance transactions under the BPM6 has become more sophisticated compared to the BPM5 (see BPM6, Appendix 6C), the Oesterreichische Nationalbank (OeNB) adapted the collection and compilation of insurance data for the balance of payments and IIP statistics. Prior to the implementation of this new data collection system, the OeNB used less detailed administrative data from the Financial Market Authority (FMA) for insurance exports and mirror data from other economies of the European Union (EU) for imports. For the compilation of the insurance data, information from the national accounts was used—for example, the ratio of the long-term relationship between net premiums and claims. Life/nonlife insurances position information was compiled from flows only; there were no data on claims, and the database differed between balance of payments statistics and national accounts. For the coverage of reinsurance, primarily highly aggregated balance sheet data were available and the cross border / domestic distinction was based on the assumption that active reinsurance is predominantly a domestic business in Austria.

New data collection

In 2015, the EU will introduce the new Solvency II regulation for insurances to enhance consumer protection. The new regulation allows the FMA to collect more detailed data. The new quarterly reports include data on cross border premiums and claims on a gross basis for direct insurance and reinsurance (best estimates) on an accrual and cash basis, broken down by insurance division and by economy, including domestic business in Austria. The new annual report includes cross border premiums and claims for reinsurance on an accrual and cash basis, broken down by economy. Additionally, the annual report includes financial assets and liabilities from reinsurance by economy, and insurance technical reserves for index linked and other life insurance. These data were used by the OeNB to adapt the compilation of insurance and pension schemes data to the BPM6 requirements.

New data compilation

Some adjustments were necessary to compile insurance, pension schemes, and standardized guarantee schemes for balance of payments and IIP statistics. Therefore, the OeNB implemented several calculations and derivations, which are described ahead, to meet all needs for the compilation.

In order to receive more accurate results, the OeNB decided to adjust the general formula for the calculation of the insurance service charge for all types of insurances asdescribed in the BPM6. The adjustment—which is referred to in the BPM6 as the volatility of claims adjustments—was necessary as high claims could have led to a negative value for the service charge. Therefore, the OeNB used the long-term spread ratio for the calculation:

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The next step was the recording of net premiums and claims. The net premiumswere calculated as described in the BPM6:

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For nonlife insurances, net premiums and claims were recorded in the secondary income, on different sides: if the insurance taker was a nonresident, premiums were recorded as credits and claims as debits, and vice versa if the insurance taker was a resident.

For life insurances, the net premiums and claims were recorded as a transaction in other investment insurance technical reserves, which covers net premiums increase (assets or liabilities) and claims decrease (assets or liabilities). The following adjustments needed to be done for the compilation:

Transactions (+):

  • Financial transaction (increase) in insurance technical reserves by economy = gross premiums (accrual basis) for index linked and other life insurance exports and imports by economy

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Transactions (−):

  • Claims (accrual basis) vs. insurance companies per economy = financial transaction (decrease) in insurance technical reserves

Annual position reports on technical reserves were distinguished between index linked and other life insurances. However, there was no geographical breakdown. Therefore the geographical information received for the premiums was used to derive a geographical breakdown of the positions. The differences between the annual positions and the sum of the quarterly transactions were recorded as other valuation adjustments, which were evenly distributed over the year.

Positions (annually including breakdown indexed linked and other)—recorded in the IIP:

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Other valuation adjustments = difference between opening position, transactions, and closing position

Financial assets and liabilities from reinsurance:

For financial assets and liabilities from reinsurance the transactions by economy were derived from new quarterly (estimates by insurance companies) and annual balance sheet data (revisions were evenly distributed over quarters). The positions by economy were reported annually together with the revised annual flows. Quarterly (intra-annual) positions were estimated based on provisional quarterly transactions by economy. The annual difference between opening position, transaction, and closing position were recorded as other valuation adjustments and evenly distributed over the quarters.

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Investment income attributable to policyholders (= premium supplements):

The premium supplements were recorded in the primary income receivable by policyholders. The same amount was also shown as payable to the insurance company by the policyholder as premium supplements in the secondary income account.

Debits (liabilities vis-à-vis nonresident insurance takers):

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Credits (assets vis-à-vis nonresident insurance companies):

The average rate from debits/liabilities was applied on the position of technical reserves. The rate was still based on cumulated flows and mirror data, however, including benefits.

Pension schemes and standardized guarantees:

The principal logic of the BPM6 for pension schemes and standardized guarantees is similar to life insurance claims and liabilities.

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The market valuation of positions depends on the nature of the pension scheme. The defined contribution schemes (function like mutual funds) are assets of the “fund”; the defined benefit schemes, which were based on “promised” benefits, both funded and unfunded, are equal to the present value of the “promised” benefits.

Standardized guarantees are recorded as equal to the present value of expected calls under outstanding guarantees, net of any recoveries the guarantor expects to receive from the default parties.

Position-taking with Austrian insurance companies and Austrian pension funds resulted in the conclusion that cross border pension entitlements and cross border provisions of standardized guarantees are not existing or rather insignificant. There were no immediate actions taken for balance of payments compilation in these areas for the changeover to the BPM6. A new stock-taking exercise will be carried out within the next years.

Difficulties encountered

  • Insurance companies are not able to deliver data for technical reserves positions by economy. Because these data are necessary for the compilation of balance of payments and IIP statistics, the OeNB decided to estimate the distribution by economy.

  • The differentiation between accrual and cash data can be difficult.

  • Concerning data delivery, the OeNB relies on the supervisory data as well as the infrastructure and resources of the supervisory authority. This additional link between the insurance and pension fund companies and the OeNB can add complexity and make communication more challenging. In addition, the OeNB depends to a large extent on the developments in supervision regarding quality and details available.

Tables A2.2–A2.4 in the annex to this appendix show the collection and compilation of the insurance transactions in detail.

Table A2.1

International Investment Position Entries

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Table A2.2

Data Collection and Compilation of the Insurance Transactions for the Current Account

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Source: Oesterreichische Nationalbank
Table A2.3

Data Collection and Compilation of the Insurance Transactions for the Financial Account

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Source: Oesterreichische Nationalbank
Table A2.4

Data Collection and Compilation of the Insurance Positions for the IIP

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Source: Oesterreichische Nationalbank

Employment-Related Pension Schemes and Social Security Schemes

Introduction

A2.73 The availability, coverage, and mechanisms of pension systems benefitting individuals vary widely from economy to economy. In the 2008 SNA the distinction of so-called social insurance schemes is made between social security and employment-related schemes, based on the provider of these social insurance pensions. The part provided by general government is called social security if it meets certain criteria, and the part by employers is called employment-related schemes other than social security (see 2008 SNA, paragraph 17.118).

A2.74 The estimation of pension services in the international accounts may be important in economies with high percentages of border workers, guest workers, and international organizations that hire staff from the host economy.

A2.75 There are two forms of employment-related pension schemes, the defined benefit scheme and the defined contribution scheme. Both schemes are financed by contributions normally shared between the employer and the employee, which accumulate in special funds, and from which benefits are paid and surplus funds are invested to earn further income. The difference between these schemes lies in the determination of the benefits payable to an employee on retirement, which in turn is determined by who is bearing the risk of the scheme to provide an adequate income in retirement.

A2.76 Conceptually, these two schemes trigger transactions in accounts similar to the ones in insurance accounting (see Insurance Transactions and Positions); namely, the derivation of an output of the pension fund is recorded in the services account, the net contributions made to the pension fund are recorded in the secondary income account, the change in pension entitlements due to transactions is recorded in the financial account as well as an adjustment item in the secondary income account, and the investment income earned on existing entitlements is recorded in the primary income account. However, the different features with regard to the benefits payable upon retirement result in differences in the accounting concepts of these pension schemes and, consequently, in how the compiler will design the reporting forms to obtain the relevant information. This is further explained ahead.

A2.77 In general, the data for exports of cross border pension services are best captured by obtaining information from resident pension funds. This enables the compiler to undertake conceptual adjustments that are necessary for the recording of these operations in the balance of payments statistics.

A2.78 The same comprehensive approach will not be feasible for obtaining imports of pension services because the pension funds are nonresident of the compiler’s economy. Thus when estimating pension services the compiler should take into account data on compensation of employees derived from the ITRS and ratios available from domestic pension funds, or from a combination of estimates and assumptions, such as estimates of the portion of the population receiving pension services combined with estimates of rates of pension compensation.

A2.79 Some social insurance is provided by the government under a social security scheme. Accounting for social security funds is less complex, because there are no funds invested on behalf of the beneficiaries, and instead, current workers’ contributions are used by the government entity operating the scheme to pay out current benefits (the system is also known as “pay-as-you-go”).

A2.80 In the absence of detailed international standards for accounting for cross border positions and transactions of defined benefit and defined contribution pension funds, the compilation guidance contained in the following paragraphs is one acceptable way of accounting for these pension plans in balance of payments statistics.

Defined benefit scheme

Overview of defined benefit accounting

A2.81 In a defined benefit scheme the amount of pension benefits accrues usually according to a function of one or more factors, such as age and length of service within the company, and will take into account the final salary, or the average of the last few years of earnings. The distinctive difference to the defined contribution scheme is that the risk of the defined benefit scheme lies with the employer in its commitment to deliver a pension at retirement, regardless of the return on investment. Making contributions to the pension plan alone usually does not satisfy the employer’s obligation; rather, the employer remains obligated to pay the defined retirement benefit, and has to decide on how much and where to invest, as well as monitor the progress of the investments.13 Thus the benefit to the employee in the current period is determined in terms of the undertakings made by the employer about the level of pension ultimately receivable (see 2008 SNA, paragraph 17.144).

A2.82 Under the accrual approach, the employer’s contribution to the employee’s compensation is no longer confined to the employer’s actual contributions to the plan. Instead, it is the present value of the benefits to which employees become entitled as a result of their service to the employer, and thus additional contributions need to be imputed.

How do pension funds account under a defined benefit scheme?

A2.83 The pension benefit is part of the compensation paid to an employee in future years after the employee retires or terminates service. Generally, the amount of benefit to be paid depends on estimates of relevant future events. Many of such events the employer cannot control, and thus the benefit can be estimated using only a pension plan’s benefit formula. In order to properly account for the liability, many assumptions need to be made: (1) how many more years the employee will work; (2) what the employee’s ending salary will be; (3) how many years the employee will collect a pension in retirement; and (4) what the appropriate rate is to discount the liability to present value. A simplified example of a formula that determines the employee’s retirement benefits is as follows:

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A2.84 The accounting for a defined benefit plan is complex. The pension accounting rules in a defined benefit scheme require recognizing the cost of benefits before the benefits are paid to retirees—that is, the costs are recognized over the employees’ working period. Actuaries of pension funds have to build in their estimation methods assumptions about economic developments (interest rates, salary increases, inflation) and demography (retirement age, life expectancy) in order to determine the amount and timing of the future benefit payments and their attribution to each year of employment according to the pension benefit formula.

A2.85 The application of this accrual accounting method implies that recording of the actual cash flows in the employer’s financial statement does not suffice; instead, the employer needs to compute the periodic (mostly calculated annually) pension cost incurred, which comprises components that reflect different aspects of the employer’s financial arrangements as well as the cost of benefits earned by employees (see Example A2.8). Pension costs are recognized in the company’s income statement and reduce reported earnings.14 The cash payments are referred to as pension contributions a company makes to fund its designated pension plan (also called plan assets), which comprises investments in positions, bonds, and other investments to provide solely for pension benefits. The assets in the pension plan and the earnings on those assets are available only for paying pension benefits. These assets do not belong to shareholders, and earnings are not included in the company’s net income.

A2.86 Several components are relevant to calculate the employer’s periodic pension costs. The starting point is the so-called projected benefit obligation (PBO), the pension liability or the employee’s pension entitlement, which determines the actuarial present value of benefits attributed to an employee by the plan’s benefit formula. It takes into account the employee’s service to-date (assuming that the plan continues), and assumptions on future compensation levels.15

A2.87 The PBO is affected by so-called service costs,16 interest costs, actuarial gains/losses, contributions, and payment of benefits in the current period. These are relevant terms for the compiler in order to derive from the pension funds’ books the entries for the macroeconomic accounts:

  1. Service cost is the additional liability created because another year has elapsed, for which all current employees get another year’s credit for their service; it is estimated as the actuarial present value of the benefits attributed by the pension benefit formula to services rendered by the employees during the current period. In other words, it constitutes the value of benefits earned by employees during the period.17

  2. Interest cost is the additional liability created because these employees are one year nearer to their benefit payouts; the interest/discount rate is used to adjust for the time value of money.

  3. Actuarial gains and losses arise from the difference between expected values (estimates) and actual values in a company’s pension plan. They can result from changes in actuarial estimates when assumptions are adjusted concerning the future rate of salary increases, the length of employee service, the discount rate for the plan obligations, and the expected rate of return on plan assets.

Excerpt of notes to a company’s financial statement on plan asset allocation

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Excerpt of notes to a company’s financial statement, projected benefit obligation

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Principally associated with discount rate changes for principal pension plans.

A2.88 The periodic cost of the pension plan, which is recognized as part of the employer’s income statement under most widely followed financial accounting rules, takes into account the difference between the expected return on plan assets and the service cost, interest cost, amortization of prior service cost, and net actuarial losses or gains.

Excerpt of notes to a company’s financial statement, cost of pension plan

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A2.89 The measure of the pension entitlement of a defined benefit plan participant is the present value of the benefits to which they are expected to become entitled, and not the actual assets of the plan. If the assets of a defined benefit plan are insufficient to pay the promised benefits, the plan sponsor must cover the funding gap.

Accounting for a defined benefit scheme in balance of payments statistics18

A2.90 The following paragraphs explain step-by-step which components are needed for capturing the cross border pension fund activities comprehensively in the balance of payments statistics according to international standards, and how the compiler should derive these from the information provided by pension funds. Although the entries are similar to the ones in insurance accounting, the approach to manipulate the data in order to derive the balance of payments and IIP components are somewhat different.

Employer’s total contribution (actual and imputed contributions) and pension services

A2.91 In the defined benefit scheme, the costs associated with operating the scheme are borne by the employer, and regarded as “a form of income in kind” included with the employer’s contributions (see 2008 SNA, paragraph 17.149) to the employee’s compensation. Based on this, the total contribution of the employer in one period is calculated in a way that, together with any actual contribution by the employee and excluding the administrative cost, it matches the increase in the PBO due to the service costs (see paragraph A2.88a)—that is, the pension earned by the employee during the year.19

A2.92 In Examples A2.11a–11c, the following assumptions are imputed for calculations:

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It is assumed also that actual payments made by the employer and employee are not sufficient to meet the estimated increase in the benefits accruing from the pension earned during the year.

A2.93 The costs incurred to run the pension fund are initially borne by the employer,21 and so they should be included in the calculation of the employer’s contribution (conceptually, they should also be regarded as compensation in kind provided to the employee). These administrative costs need to be imputed by the compiler—for instance, as a percentage of the employer’s and employee’s actual contributions in the current period (assumed equal to around 5 percent). They constitute the pension service that the balance of payments compiler needs to record in the services account. An additional contribution from the employer of 4.1 is imputed to level the contributions with the increase in current service costs.

A2.94 Thus, under the accrual approach, the measure of (cross border) compensation of employees for participants in the defined benefit plan includes the employer’s actual and imputed contributions to the plans as payable by the employer and receivable by the employee (see BPM6, paragraph 11.22). It is the present value of the benefits to which employees become entitled as a result of their service to the employer, and adequately reflects the true cost to the employer.

Calculation of data for a defined benefit scheme1

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See 2008 SNA, paragraph 17.167.

Investment income attributable to beneficiaries in pension schemes

A2.95 As a next step, the investment income attributable to the employee is derived using the so-called interest costs of pension funds,22—that is, the increase in pension entitlements because the employee is one year nearer to its benefit payouts. Conceptually, this means that the beneficiary earns imputed interest on his or her actuarial entitlements, rather than the actual interest and dividends earned by the pension fund on its pension fund plan assets. Because the discount period becomes shorter, the net present value of defined pension benefits grows the closer the employee is to retirement age.

A2.96 In pension accounting, the interest costs are usually calculated by pension fund actuaries as interest rate multiplied by the PBO at the beginning of the financial year. Prevailing accounting standards advise on the interest rates that are supposed to be used by pension funds. The interest rate could be an estimated discount rate reflecting the market rate currently used to settle benefits due, or a rate based on the expected return on high-quality fixed income securities (e.g., long-term government bonds). Different plans will have different valuation interest rates. The compiler needs to inquire about the pension plans’ breakdown into its cross border components (data collection is discussed in Section Data Collection ahead in this appendix).

Transactions for a defined benefit scheme

For recording the investment income attributable to beneficiaries in pension schemes in the primary income account:

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For recording net contributions receivable by the resident pension fund from the nonresident employee as well as the benefits payable/paid to retirees in the accounting period in the secondary income account:

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The term “policyholders” is used for convenience to assure consistency with the balance of payments standard component.

A2.97 In Example A2.11b, in addition to the assumptions presented in paragraphs A2.94–2.95, the increase in the entitlements associated with the passage of time during the year is calculated to be 4. The remaining transactions for the defined benefit scheme can be derived as follows.

A2.98 In cases when employers organize pension schemes for their employees,23 the employers will deduct the pension contributions from the employees’ compensation and pay them directly to the pension scheme; only the net compensation is paid to the employees. The actual contributions received by the retirement scheme from the employer (10) might initially appear to constitute domestic transactions in cases where the employer and the pension fund are resident in the same economy. In the international accounts, however, rerouting records a transaction as taking place in channels different from those observed (see BPM6, paragraph 3.16).24 In the current account, therefore, the gross compensation of the nonresident employee should include the actual and the imputed contribution by the employer to the defined benefit pension scheme, which is then deemed to be paid in full (including the contribution supplement and net of the administrative costs) to the retirement scheme by the employee together with his own contribution (see BPM6, paragraph 11.22). In the financial account, other investment (currency and deposits), the actual contributions payable by the employer and the actual contributions receivable by the pension fund from the nonresident employee are recorded in this example as increasing external liabilities of the employer and increasing external assets of the pension fund.

Changes to pension entitlements

A2.99 In the continuation of the Example A2.11b, the financial account transactions that are the change in the pension fund entitlement (i.e., the change in the PBO) are estimated by the increase of the liability due to the service cost and the increase of the liability due to the interest cost, less the benefits paid in the current period. This change in the pension fund’s liabilities is recorded in the financial account under insurance, pension, and standardized guarantee schemes as a supplementary item.25

Transactions for a defined benefit scheme

For recording the insurance, pension, and standardized guarantee schemes in the financial account, other investment:

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Net contributions receivable in this example, comprise of an increase in PBO due to service cost of 15, and an increase in PBO due to interest cost of 4.

Introducing an adjustment item: adjustment for change in pension entitlements

A2.100 In the balance of payments/IIP accounts, pension contributions and benefits are recorded as current transfers in the secondary income account, and as pension entitlements in the financial account. In this respect the treatment is different from life insurance accounting, where premiums and benefits are recorded only in the financial account, because part of the premiums paid by the policyholders are regarded as savings and part of the benefits received by the beneficiaries as withdrawals from savings (see BPM6, paragraph 5.65).26 Policies that qualify as social insurance differ from insurance policies because beneficiaries usually enter into the initiative by intervention of a third party, the government or the employer, who encourages or obliges the policyholder to make provision for income in retirement (2008 SNA, paragraph 17.51).

A2.101 When cross border transactions of pension contributions and benefits are significant in an economy, in balance of payments/IIP statistics, an adjustment item must be recorded in order to “add back” social contributions to and “subtract” pension receipts from the secondary income account. As a result, the current account is the same as if no current transfers for contributions and receipts were recorded, and the financial and current accounts are reconciled (see BPM6, paragraph12.39).

A2.102 From the viewpoint of compiling data from a resident pension fund, the reconciling adjustment item would be recorded in the balance of payments statistics of the compiler on the debit side as a deduction from the balance of the secondary income, and as a counter entry to the increase in pension entitlements (a credit entry) (see Example A2.11d).

Data collection

A2.103 Estimations regarding the pension fund interest and service costs attributable to nonresidents can best be taken from the accounts of resident pension funds. Through surveying domestic pension funds, the compiler should be able to request information on a conceptually correct basis as explained in Section B.2—that is, actual and imputed contributions—as well as pension entitlements and the interest earned on actuarial entitlements.27

A2.104 Pensionfundsshouldlikelybeabletoprovide either aggregate information on actual contributions received from the respective companies on behalf of their nonresident employees, or on average contribution rates relative to gross wages; information should also be available on the benefits that are being paid to retirees abroad. The percentage points for the administrative costs (pension services) need to be imputed by the compiler—for instance, as a small percentage of the employer’s and employee’s combined estimated contributions in the current period. In general, the compiler needs to inquire about the pension plans’ breakdown into its cross border components. Appendix 8 provides a model survey form for collecting data from pension funds.

A2.105 Due to the increasing attention in the last few decades to pension schemes and their role in the overall system of retirement provision, in some economies surveys or central registrars have been established, which collect data on the domestic pension industry. National accountants, government finance statisticians, or financial account statisticians might already use these available sources for their own estimations. Pension funds may also be obliged to send their monthly or annual reports on their assets, income, and expenses together with actuarial information on their liabilities to government agencies for auditing purposes or tax calculations. The compiler may want to focus on the actuarial information found in the financial reports of the largest pension plans and make estimations for smaller ones.

Recording of transactions for a defined benefit scheme in the balance of payments statistics (economy of pension funds)

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Compensation of employees in this example consists of gross salary (47) including the actual contribution by the employees (1.5), plus actual and imputed contribution of employers (10+4.1).

Entries are presented only for the purpose of showing the balancing entries; no balance of payments transactions are registered because they are resident-to-resident transactions.

A2.106 Supervisory institutions may be a source for qualitative aggregate information. Although balance sheets and profit and loss account information from those institutions may have the caveat of long timeliness, they may be combined with information available from timelier external sector statistics (e.g., ITRS) or administrative data on cross border employment, for estimating an interim (moving) measure for the distinction between national and international business.

A2.107 Furthermore, in certain unionized sectors, multiple domestic employers may agree with their pension fund on so-called collective bargaining agreements, which may provide useful aggregate information or average shares for estimating employers’ contributions credited to nonresident beneficiaries.

A2.108 Estimations for pension transactions are relevant for economies with high percentages of border workers, and guest workers in the domestic economy or abroad28, for economies with international organizations whose staff return to retire in a different (e.g., home) economy, and for economies that are preferred by retired people as “sunnier” locations. Information on cross border workers or “resident aliens” can be sought from government agencies issuing work permits and visas, or from tax authorities. The latter one may also be relevant for pension benefits paid to or received for current retirees as they may be subject to domestic taxation or double tax treaties.

A2.109 Data from an ITRS will be on a cash basis and capture only the compensation of employees net of contributions and benefits paid. For residents paying contributions to defined benefit pension funds abroad, the net salary received on the domestic bank account would need to be augmented by both employee and employer contributions; information on average contribution rates for employees and for employers could be used as starting point. Secondly, a small percentage thereof should be derived as pension service payable to pension funds abroad. The ITRS provides information on economies to which salaries and wages are paid and from which they are received. The compiler could contact the balance of payments compilers in those economies respectively, to obtain appropriate ratios for their contribution rates and services estimates. Alternatively, household surveys may include or could be complemented to provide information on socioeconomic detail with reference to current or past cross border employment. In case there is a pension fund in the domestic economy, information could be available to build useful ratios on actual and imputed contributions, and service costs.

Defined contribution scheme

Overview

A2.110 Due to increasing demographic and financial pressures during the last few decades, there is a shift from defined benefit schemes to defined contribution schemes, which means that the risk is borne by the employee, because the pension solely depends on the value of total contributions and investment returns. Defined contribution plans have become the dominant form of plan in the private sector of many economies.

A2.111 The defined contribution scheme defines the benefits exclusively based on the level of the funds built up from contributions over the employee’s working life and on the performance of the financial assets acquired with the future pensioner’s contributions. The pension scheme secures only a certain level of pensions, with the possibility that the returns on money invested could be poor; the entire risk of receiving an adequate pension income in retirement lies therefore with the employee, and not with the employer. The employer’s contribution may be established at the beginning of the contract, and the employee’s contributions are in addition to the employer’s rate of contribution. The pension scheme invests these contributions and provides the employee with the accumulated sum on retirement—for instance, in form of a lump sum or an annuity, with which the employee can secure a pension income. Defined contribution schemes, unlike defined benefit schemes, are always funded.

How do pension funds account under a defined contribution scheme?

A2.112 The accounting for a defined contribution plan is less complex than for a defined benefit plan. There are no actuarial estimations applied by the fund, and there are no associated imputations. The employer’s contributions can be a fixed amount, or a percentage of the salary. The actual contributions are paid into individual accounts and invested in financial markets; thus the employer contributions to the account are guaranteed, but not the success of the investments, and thus not the future entitlements.29

Accounting for a defined contribution scheme in balance of payments/IIP statistics
Changes in pension entitlements

A2.113 Pension entitlements represent liabilities of the pension fund vis-à-vis its beneficiaries (see BPM6, paragraph 7.65). The factors that trigger the change in pension entitlements in the current period, and thus require recording in the international accounts, are the difference between contributions receivable from abroad less benefits payable to retirees abroad, and any holding gains and losses earned from the investment of the cumulated pension entitlements that contribute to the current market value of the assets of the fund (see BPM6, paragraph 7.65). The transaction for pension entitlements recorded in the financial account under insurance, pension, and standardized guarantee schemes is the difference between net contributions receivable and benefits payable. Holding gains or losses appear, however, in the revaluation account30 of the IIP.

A2.114 The change in net entitlements recorded in the financial account can be negative, when benefits payable exceed net contributions receivable. For example, under the assumptions ahead, the entries in the IIP will be as presented in Table A2.1.

Liabilities in pension entitlements of resident pension schemes vis-à-vis nonresident beneficiaries:

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Income earned on cumulated entitlements and the implicit service charge for running the defined contribution pension scheme

A2.115 Instead of attributing to beneficiaries the imputed investment income on their actuarial entitlements as is the case in defined benefit pension schemes described in Insurance Transactions and Positions of this appendix, in the defined contribution scheme, the actual value of the interest and dividends earned on the plan assets are attributed to the participants.

A2.116 Part of the income earned by the pension scheme by investing the assets is used to meet the administrative costs of operating the pension fund on behalf of the beneficiary. In macroeconomic accounting, these costs constitute the service charge payable by the beneficiary and receivable by the pension fund for this purpose. The remaining part of the income is attributable to and reinvested by the beneficiaries with the pension fund as contribution supplements (see 2008 SNA, paragraph 17.135).

Employers’ and employees’ contributions and benefits in the defined contribution scheme

A2.117 The contributions and benefits are based on actual payments and receipts during the specific period, of which the employer contributions are rerouted through the compensation of the employees. Social contributions payable by nonresidents to resident pension funds should be available from the pension fund, the official budget records, or from the responsible agency (such as the ministry of social security). Pension benefits payable to nonresidents should be available from the pension fund, from official budget records, from the responsible agency (such as the ministry of social security), or from an ITRS (see also Chapter 12).

A2.118 Information on the earnings on employees’ cumulated pension entitlements and the percentage of these earnings pension fund operators use to meet the costs of operating the pension fund needs to be estimated from the accounts of pension schemes. The compiler should consult the funds administrators in splitting between liabilities to residents and nonresidents by using a suitable indicator, such as contributions receivable and/or benefits payable.

A2.119 With this information at hand from the resident pension fund, the compiler can derive the pension service charge due in the current period and the corresponding net contributions as follows. In

Examples A2.12a–2.12c, the following assumptions are imputed for calculations:

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Transactions for a defined contribution scheme1

For recording the pension services in the goods and services account:

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The pension contribution supplements are calculated based on the income distributed to households minus the part used to meet the cost of operating the pension fund (that represent pension services) (see 2008 SNA, paragraph 17.135).

For recording the investment income in the primary income account:

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1 See 2008 SNA, Table 17.7.

A2.120 For defined contribution schemes, the net total amount of contributions payable can be derived as presented in Example A2.12b (see also BPM6, paragraph 12.35).

A2.121 As mentioned earlier, employers often make pension contributions directly to the pension scheme on an employee’s behalf; only the net compensation is transferred to the nonresident employees’ domestic bank account. The actual contributions received by the retirement scheme from the employers (11 in Examples A2.12a and A2.12b) might initially appear as a domestic transaction, in cases where the employer and the pension fund are resident in the same economy. Through the rerouting of these transactions (see BPM6, paragraph 3.16 for an explanation of rerouting), the contribution by the employer to the defined contribution pension scheme is deemed to be paid in full (including the contribution supplement net of the administrative costs) to the retirement scheme by the employee together with his own contribution, and they are recorded in the example as increasing external liabilities of the pension scheme.

Transactions for a defined contribution scheme (based on assumptions and calculations presented in Example A2.12a)

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See footnote 23.

For recording the insurance, pension, and standardized guarantee schemes in the financial account, other investment:

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Adjustment for change in pension entitlements

A2.122 Similar to the defined benefit scheme, the pension contributions and benefits are recorded as current transfers in the secondary income account, and as pension entitlements in the financial account (see Defined benefit scheme). Therefore, when cross border transactions of pension contributions and benefits are significant in an economy, an adjustment item must be recorded in order to “add back” social contributions to and “subtract” pension receipts from the secondary income account. As a result, the current account balance is the same as if no current transfers for contributions and receipts were recorded, and the financial and current account are reconciled (see BPM6, paragraph 12.39) (see Example A2.12c).

A2.123 Example A2.12c shows balance of payments entries related to pension schemes. It is constructed based on assumptions and calculations presented in Examples 12a and 12b.

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Compensation of employees in this example consists of net salary (38.5) plus actual contribution by the employees (11.5) plus actual contribution of employers (11).

Entries are presented only for the purpose of showing the balancing entries; no balance of payments transactions are registered because they are resident-to-resident transactions.

Data collection

A2.124 Pension funds managing defined contribution schemes should likely be able to provide to the compiler either aggregate information on actual contributions received from the respective companies on behalf of their nonresident employees, or on average contribution rates relative to gross wages; information should also be available on the benefits that are being paid to current retirees abroad, as well as on an estimated average of interest and dividends earned on the beneficiaries’ plan assets and the administrative costs of operating the pension fund as explained earlier. The compiler can also estimate it by taking a few percentage points of the employer’s and employee’s combined estimated contributions in the current period. In general, the compiler should inquire about the pension plans’ breakdown into its cross border components. Model form 13 in Appendix 8 presents a model survey form of pension funds.

A2.125 Data from an ITRS are on a cash basis and therefore capture only the compensation of employees net of contributions and benefits payable. For residents paying contributions to defined contribution pension funds abroad, the net salary received on the domestic bank account would need to be augmented by both employee and employer contributions; information on average contribution rates for employees and for employers could be used as starting point. Secondly, a small percentage thereof should be derived as pension service payable to pension funds abroad. The ITRS provides information on economies to which salaries and wages are paid and from which they are received. The compiler could contact the balance of payments compilers in those economies to obtain appropriate ratios for their contribution rates and services estimates.

A2.126 Household surveys may be a source of information or could be complemented to provide information on socioeconomic detail with reference to current or past cross border employment. If there are pension funds in the compiling economy, information from them could be used to build useful ratios for estimating imports of cross border pension services and related transactions.

Social security schemes

A2.127 Compared to the two employment-related schemes discussed earlier, the statistical treatment of social security schemes is rather simple (see 2008 SNA, paragraph 17.124). Social security funds are not invested on behalf of the beneficiaries, and instead, current workers’ contributions and taxes are used by the government operating the scheme to pay current benefits (the system is also known as “pay-as-you-go”). There are no assets set aside and thus no financial account entries need to be made. There is also no need to calculate pension services.

A2.128 Any contribution made by the employer on behalf of nonresident employees directly to the social security pension scheme is rerouted through compensation of employees, and is included together with the nonresident employees’ part in the secondary income account as transferred to the social security fund (see BPM6, paragraph 11.17).

A2.129 The social security benefits are recorded in the secondary income account as payable in the economy of the social security fund, and as receivable in the economy of the employee.

Appendix 3. Financial Intermediation Services Indirectly Measured

Overview

A3.1 The 2008 SNA and BPM6 financial intermediation services indirectly measured (FISIM) comprises financial service output for which producers do not explicitly charge. Instead, they levy an implicit charge in the spread between interest rates receivable on financial assets and interest rates payable on financial liabilities. The 2008 SNA and BPM6 recognize FISIM produced only by certain financial corporations and only on the loan and deposit instruments on their balance sheets.

A3.2 From the financial corporations’ viewpoint, FISIM on loans is the difference between interest receivable and the interest cost of funds calculated at a reference rate on the loan balance. On deposits, FISIM is the difference between interest payable at the reference rate on the deposit balance and actual interest payable to depositors. Depositors receive both the monetary interest payable and financial services for maintaining a balance with a deposit-taking financial corporation. The value of the financial services depositors receive is an implicit rather than explicit charge. The reference rate is described in both the BPM6 and the 2008 SNA as a rate “contain[ing] no service element and reflect[ing] the risk and maturity structure of deposits and loans.” In general, FISIM on the loan assets and deposit liabilities of financial corporations is expected to be positive and a part of their output.

A3.3 The focus of the BPM6 is on FISIM as a component of exported and imported services. FISIM exports comprise the indirectly measured financial services supplied on the loan assets and deposit liabilities of resident financial corporations for which the counterparty is a nonresident unit. FISIM imports comprise indirectly measured financial services purchased by resident units from all institutional sectors (mostly nonfinancial) on their loan liabilities and deposit assets with nonresident financial corporations.

A3.4 Table A3.1 shows FISIM exports in the context of international classifications of products, activities (establishments), financial instruments, and companies (institutional units). Table A3.2 shows FISIM imports in the context of the same international classifications.

Table A3.1

Exports of Financial Intermediation Services Indirectly Measured (FISIM) in the Context of International Classification Standards

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Central banking services (71110) include “services of maintaining deposit accounts for major financial institutions and for the central government” (United Nations, CPC version 2.0 Explanatory Notes). Loan/credit services of the central bank are not explicitly mentioned under this category.

Money market funds (S123) are classified as monetary and financial institutions in monetary statistics along with the central bank (S121) and deposit-taking corporations (S122). Their investment fund shares (AF521) are generally included in the monetary position along with deposits (AF229) in monetary statistics. Like other investment funds, the service charge of money market funds is the difference between the yield on the investment portfolio and the rate paid to shareholders. Normally, investment funds publish this margin as a so-called expense ratio. As such, the calculation of their output is similar to FISIM, except that it applies to securities assets and investment fund share liabilities rather than deposit and loan instruments and is considered an explicit service charge rather than FISIM.

Table A3.2

Imports of Financial Intermediation Services Indirectly Measured (FISIM) in the Context of International Classification Standards

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Source: IMF Staff

A3.5 Table A3.2 shows that FISIM imports are purchased by resident holders of deposit assets and loan liabilities vis-à-vis nonresident financial corporations. Notice that any resident institutional sectors may import FISIM. For FISIM exports the data collected from the resident financial corporations suffices, while for FISIM imports, data should be collected from all resident institutional sectors.

A3.6 The following paragraphs briefly introduce the concept of indirectly measured financial services following BPM6 methodology in Box 10.5 and as described in the 2008 SNA, paragraphs 6.163–6.169 and 17.249–17.257.

The Reference Rate

Note: the text in this section is indicative only, because clarification of BPM6 and 2008 SNA language on determining the reference rate is the subject of review by international bodies.

A3.7 As noted in Overview, for loans, FISIM is the difference between loan interest and the cost of funds at the reference rate, and for deposits, FISIM is the difference between the cost of funds at the reference rate and the interest actually payable to depositors. The 2008 SNA refers to the cost of funds at the reference rate as “SNA interest.” The reference rate thus is a key variable in compiling FISIM and in determining interest flows to and from deposit-taking and/or loan-making financial corporations in the income accounts. According to the BPM6:

10.129 FISIM payable by each of the depositors and borrowers are calculated by using the concept of a “reference” rate of interest. The reference rate should contain no service element and reflect the risk and maturity structure of deposits and loans. The rate prevailing for interbank borrowing and lending may be a suitable choice as a reference rate. A single rate should be used for transactions in the domestic currency, whereas different rates should be applied for loans and deposits in other currencies. The reference rate will change over time with market conditions.

A3.8 This is closely similar to the language regarding the reference rate in the 2008 SNA, paragraph 6.166:

The reference rate to be used in the calculation of SNA interest is a rate between bank interest rates on deposits and loans. However, because there is no necessary equality between the level of loans and deposits, it cannot be calculated as a simple average of the rates on loans or deposits. The reference rate should contain no service element and reflect the risk and maturity structure of deposits and loans. The rate prevailing for inter-bank borrowing and lending may be a suitable choice as a reference rate. However, different reference rates may be needed for each currency in which loans and deposits are denominated, especially when a nonresident financial institution is involved. For banks within the same economy, there is often little if any service provided in association with banks lending to and borrowing from other banks.1

A3.9 The 2008 SNA and BPM6, while specifying no more than one reference rate per currency of denomination, thus allow some flexibility in determination of those rates, advising that they should reflect the risk and maturity structure of deposits and loans, but that the interbank rate may be suitable.2 If the interbank rate is deemed suitable, the reference rate can be calculated as the interbank rate used for calculating FISIM for domestic sectors.3 Economies have implemented or tested a few other alternatives.

A3.10 Ideally reference rates for imported FISIM (from nonresident financial corporations with deposit liabilities to or loan claims on residents) should be calculated for each economy of residence of the financial corporation that supplies the import services, preferably the reference rate used in the calculations of FISIM by the statistical authorities of that economy. If these data are not available, then reference rates considered relevant for assets/liabilities denominated in different currencies or groups of currencies may be used, if data are available for each currency/group of currencies.

Estimation of Export and Import of FISIM

Export of FISIM

A3.11 Exports of FISIM for loans granted to nonresidents should be compiled using the reference rate for domestically produced FISIM as interest receivable less the product of the loan position and the (domestic) reference rate, if it can be assumed that most loans to nonresidents are in national currency. Exports of FISIM for deposits of nonresidents (excluding financial corporations) can be estimated as the product of the deposit position and the domestic reference rate, less interest payable.

A3.12 In calculating loan and deposit positions, it is useful to obtain data on beginning and end of period positions, so that average positions can be calculated. Thus, data needed for the estimations of export of FISIM could be collected in the following format:

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Import of FISIM

A3.13 Imports of FISIM for loans received from nonresidents can be estimated as interest payable to nonresident financial corporations less the product of the loan position and the reference rate for the applicable funds lent. Imports of FISIM for deposits with nonresident financial corporations can be estimated as the product of the deposit position multiplied by the reference rate for the funds deposited, less the deposit interest receivable from the nonresident FISIM provider.

A3.14 The data needed for the estimations of import of FISIM could be collected for each institutional sector in the following format:

Negative FISIM

A3.15 In cases where calculation of FISIM by financial corporations is negative, for practical reasons, the compiler may wish to assume that FISIM is zero.

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Balance of Payments Entries Related to FISIM

A3.16 Box A3.1 presents entries that should be registered in balance of payments related to FISIM.

Data Sources

Reference Rate

A3.17 For exports, the reference rate is, in principle, the cost of funds from the liability side of resident financial corporations’ balance sheets. For imports, the reference rate is, in principle, the cost of funds from the liability sides of nonresident financial corporations’ balance sheets by economy of residency. The data sources available for economies’ own financial corporations sectors and for those of their FISIM trading partners will, however, tend to control the specific approach to determining the relevant reference rates for international trade in FISIM.4

Balance of Payments Entries Related to Financial Intermediation Services Indirectly Measured (FISIM)

Services account

  • Financial services

FISIM is derived with the following formula (see BPM6 Box 10.5):

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Primary income account

  • Interest (at the reference rate)

Secondary income account

None

Financial account

  • Deposits1

  • Loans

1 Including interbank positions, other transferable deposits, and other deposits.

A3.18 For exports, data for directly calculating the reference rate can be the same reference rate used to calculate total domestic FISIM output, if it can be assumed that transactions are mostly in national currency.

A3.19 For imports, in the interest of global consistency of international trade statistics, the reference rates by supplying economy can be the respective domestic reference rates from the FISIM calculations of those economies’ national accounts. For that reason, it would be helpful if economies disseminate their domestic reference rates for possible use by nonresident compilers.

A3.20 For economies where the interbank market does not exist, considering that no internationally accepted methodological guidance exists, the compiler may pick, for practical purposes, a reference rate from a representative government debt security.

Deposit and Loan Interest Flows and Positions between Residents and Nonresidents

A3.21 The data sources for interest flows can be sourced from the balance of payments and for deposit and loan positions from the international investment position.

Financial corporations—FISIM exports and imports

A3.22 The most comprehensive data for exports and imports of FISIM come from surveying resident financial corporations to identify deposits of and loans to nonresidents. In most instances, these data will be available from the administrative data collections of financial supervision authorities, which are usually most comprehensive for deposit-taking corporations. Coverage of captive financial corporations and money lenders may require fielding a supplementary survey, depending on the regulatory and legal environment. International banking statistics (IBS) available from the Bank for International Settlements (BIS) may also be a useful source of information on deposits and loans with nonresidents.

A3.23 The balance of payments compiler should coordinate with the national accounts compiler, to assure that the calculation of FISIM in the balance of payments accounts is consistent with estimates included in the national accounts.

Nonfinancial corporations, households, and NPISH—FISIM imports

A3.24 Data on residents’ accounts with financial corporations resident in other economies may be available from sample surveys. These surveys are selected from a survey frame list built on special filings of resident individuals and corporations reporting positions with nonresident financial corporations to the tax authorities or treasury/finance ministry. A sample survey of units selected from this frame can be used for routine reporting of positions with nonresidents. IBS available from the BIS may also be a useful source of information on deposits and loans with nonresidents by the nonbank sector.

A3.25 As for financial corporations, also here the balance of payments compiler should coordinate with the national accounts compiler, to assure that the calculation of FISIM in the balance of payments accounts is consistent with estimates included in the national accounts.

General government—FISIM imports

A3.26 Balances and interest flows on general government accounts with nonresident financial corporations should be available from the government financial accounts.

Appendix 4. Foreign Direct Investment

Introduction

A4.1 This appendix presents additional material on treatment of direct investment (DI)1 in international accounts. It provides further detailed discussion on some complex conceptual aspects of the DI, as well as further discussion of the compilation of DI profits.

A4.2 DI arises when a unit resident in one economy makes an investment that gives control or a significant degree of influence over the management of a company that is resident in another economy. This concept is operationalized where a direct investor owns equity that entitles it to 10 percent or more of the voting power (if it is incorporated, or the equivalent for an unincorporated company) in the direct investment enterprise (DIENT). Voting power is usually equal to ownership of ordinary shares. Once that threshold has been reached, the entities involved are said to be in an immediate DI relationship when they are residents in different economies. The equity and debt transactions and positions between the direct investor and the DIENT, and between all DIENTs of the same direct investor, are included in DI, except for debt between selected financial intermediaries. DI also includes transactions and positions between companies that are in indirect DI relationships (see paragraph 10.7 in Chapter 10 for defining direct investment relationships). In summary, DI statistics comprise cross border transactions and positions between companies that are in a DI relationship.

A4.3 The coverage of DI for analytical purposes includes income flows and financial transactions recorded in the direct investment functional category in the balance of payments and financial positions recorded in the direct investment functional category in the IIP.

A4.4 DI tends to involve a lasting relationship of a direct investor with the DIENT to ensure a significant degree of influence by the direct investor in the management of the DIENT, although it may be a short-term relationship in some cases. By the very nature of its motivation, DI tends to promote stable economic links between economies through direct access for direct investors in home economies to production units in host economies. Within a proper policy framework, DI assists host economies in developing local companies, promotes international trade through access to markets, and contributes to the transfer of technology and know-how. In addition to its direct effects, DI has an impact on the development of labor and financial markets, and influences other aspects of economic performance through its other spillover effects. For these reasons, DI is of analytical and policy interest in its own right, in addition to its contribution to broader macroeconomic indicators.

A4.5 In addition to the discussion of DI in the various chapters of this Guide (investment income flows in Chapter 13, financial transactions in Chapter 10, and positions in Chapter 9), Appendix 6a of the BPM6 discusses various issues in DI. The IMF conducts the Coordinated Direct Investment Survey (CDIS), a collection of inward and outward FDI positions, and the CDIS Guide provides further discussion of DI.2 In addition, the Organisation for Economic Co-operation and Development (OECD) has a leadership role in research on DI concepts, undertakes a collection of DI positions, transactions, and income flows from member economies, and publishes the OECD Benchmark Definition of Foreign Direct Investment, 4th edition, which describes a range of analytical constructs to assist with the further analysis of DI statistics.

A4.6 This appendix deals with specific issues associated with measuring and analyzing DI.

Statistical Units

A4.7 The choice of statistical unit is one of the most important decisions that the compiler will make for the compilation of DI statistics. The choice of statistical unit for collection and compilation purposes can affect the classification of data and, in some cases, may affect the extent of DI relationships that are identified.

Company

A4.8 A company is defined as an institutional unit engaged in production. Investment funds and other corporations or trusts that hold assets and liabilities on behalf of groups of owners are also companies, even if they are engaged in little or no production. Companies may be corporations (including quasi-corporations), nonprofit institutions, or unincorporated companies (including households or government units in their capacity as producers of goods and services).

A4.9 Companies usually maintain some level of business accounts that are sufficient to satisfy reporting purposes.

Global and Local Enterprise Group

A4.10 Enterprise groups may be either global or local. A global enterprise group refers to an investor and all the companies under that investor. A local enterprise group refers to an investor and legal entities under that investor that are resident in the reporting economy (see BPM6, paragraph 4.54–4.56).

A4.11 The local enterprise group may be used for compiling and presenting DI statistics; the ownership links that involve nonresidents are not recognized for the formation of local enterprise groups. For example, two DIENTs located in the same economy, with a common nonresident direct investor but no links directly between them, are not recognized as belonging to the same local enterprise group (although they would belong to the same global enterprise group).

A4.12 Local enterprise groups usually maintain and have available consolidated accounts. The level of consolidation is often governed by domestic reporting requirements and the organizational structure, and these may not align well with DI concepts.

A4.13 Unless instructions to survey respondents are clear and the compiler is careful, consolidation of companies into local enterprise groups may result in the incorrect inclusion of influencing links within an economy that should break a DI ownership chain when there is an influencing link from abroad (see BPM6, paragraph 6.35).

Notional Units

A4.14 When land located in a territory is owned by a nonresident company (with the exception of land owned by foreign governments or international institutions for diplomatic enclaves or military bases), a notional unit is identified for statistical purposes as being the owner of the land. Because land and buildings produce rental services, the notional unit is usually a company. A notional unit is also identified for a long-term lease by a nonresident lessee of land, or buildings, or land and buildings together.

A4.15 The nonresident is treated as owning the resident notional unit rather than the land and structures directly. The notional resident unit is nearly always a DIENT (the exception being for land where an individual nonresident’s voting power is below 10 percent) and consequently the nonresident is nearly always a direct investor with an equity investment in the notional unit.

A4.16 The notional unit is created with an injection of equity from the nonresident direct investor. A detailed discussion of notional units is presented in the BPM6, paragraphs 4.34–4.40. Information on notional units and, in particular, the income flows and injections of equity after the initial injection should only be compiled where they are significant for either the host economy or the economy of the nonresident investor.

A4.17 Individuals who have migrated to a new economy and become residents there frequently own land or buildings in their economy of origin. These properties should be added to direct investment assets in the IIP of the host economy (and to direct investment liabilities of the originating economy consistently), through a reclassification (other changes in volume), not by imputing transactions in the balance of payments. Notional units should be created as a result of this change in the residence status of an owner.

A4.18 When a migrant’s relatives occupy these properties (real estate) without paying rents (or below market prices), the compiler of the host economy of the migrant should record these rents at market prices through the following imputed transactions: direct investment income, credit and an offsetting entry in the secondary income account, personal transfers, debit (BPM6, paragraph A5.18). The compiler of the economy of origin should record these imputed transactions with the corresponding opposite entries. The value of these transactions would be calculated as the difference between actual transactions and market equivalent values. In practice, it is difficult to identify such transactions and calculate their value. The compiler should assess the magnitude of such phenomena in the economy, and if it is deemed to be significant, the collection of data could be organized using the household surveys, or surveys of bodies/agencies (e.g., rental offices) that are identified as possible data sources.

A4.19 When a migrant uses the rent receipts to maintain and repair his/her property, several transactions should be recorded in the host economy; particularly direct investment income, credit, and an offsetting entry in the financial account under direct investment, net acquisition of financial assets. The latter reflects the increase in the value of the property. The compiler of the economy of origin of the migrant should record these transactions through two opposite entries, accordingly.

Entities Established Abroad for Fiscal Purposes

A4.20 In some instances, a government can establish entities in the economic territory of another government for the purpose of carrying out general government activities (i.e., fiscal activities). Fiscal purposes can be distinguished from commercial purposes because fiscal purposes are always oriented to serving the objectives for the government’s home territory.

A4.21 Such entities are considered residents in the economy of their incorporation; however, they are not considered as part of the general government in either the economy of residence or the economy of government that uses the entities. Also, such entities are not treated as territorial enclaves (e.g., embassies or other diplomatic establishments) when they operate under the law of the host economy (BPM6, paragraph 4.93).

A4.22 To avoid misleading understanding of government expenditures, a special approach is applied in treating transactions and positions of such government entities because, unlike in the private sector, such nonresident entities undertake functions at the request of general government for public policy purposes in another economy and not for commercial purposes. The special treatment refers to the borrowing by such entities on behalf of the government that results in entries under the DI category that are presented in Table A4.1.

Table A4.1

Treatment of Borrowing on Behalf of the Government of Another Economy

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A4.23 Due to their specific features and activity, the best data sources on transactions of fiscal entities are government administrative records (in economy of residence of government) or enterprise surveys (in economy of residence of fiscal entity).

Special Purpose Entities3

A4.24 Although there is no internationally agreed definition of special purpose entities (SPE), it is generally agreed that they display the following characteristics: their owners are not residents of the territory of incorporation, main parts of their balance sheets are claims on or liabilities to nonresidents, they are companies with little or no physical presence in their host economy, little or no employment, little or no significant production, and few (if any) nonfinancial assets, and many SPEs have bank accounts in the host economy (although they may be of a temporary nature). SPEs are often used to channel funds to and borrow funds from third economies; these funds may include equity investments where the SPE is used to route an ownership change through another economy. SPEs may offer taxation, regulatory, or confidentiality benefits due to the regulatory regime in the host economy. SPEs are often associated with offshore financial centers but may be located elsewhere. Examples of SPEs (and alternative terminology used for SPEs) include financing subsidiaries, conduits, holding companies, shell companies, shelf companies, and brass-plate companies.

A4.25 As companies incorporated within their host economy, SPEs are recognized as separate institutional units. SPEs are recorded as DIENTs and direct investors, where appropriate.

A4.26 For some analytical purposes, it may be desirable to “look through” SPEs in the DI ownership change to the first “non-SPE” and to allocate positions and transactions to the economy of the first non-SPE. There is no agreed method of looking through SPEs to the first non-SPE.

A4.27 By their very nature, the compiler might find it difficult to obtain data from SPEs. Nonetheless nearly all their assets and liabilities are likely to be with nonresidents (apart from any deposits or loans they may have with resident banks); it is important that such corporate structures are identified and that their data be collected for international accounts statistics.

A4.28 Data can be collected through different sources; the compiler should assess which data sources are available, and also which of them possess the most comprehensive information. Also, the legal regulation in place guiding the activity of SPEs should allow for collection of data for statistical purposes. The data sources that should be considered by the compiler for collecting data on SPEs activity are presented ahead.

A4.29 Surveys of SPEs could be an efficient approach to data collection; however, some SPEs have no offices in the host economy and act through representatives such as law firms and/or accounting firms. In these cases, the compiler should request the legal representatives, if resident in the host economy, to provide from their principals’ accounts the necessary information for the compilation of the balance of payments and IIP. The compiler should consider the size of the SPEs’ assets; sometimes a very small number of SPEs cover a high percentage of total DI. In this manner, a small sample could provide a very good basis for providing estimates for the total.

A4.30 Financial statements—in some cases, SPEs are required to report annual financial statements to government agencies and the compiler may obtain SPEs’ data from those agencies.

A4.31 Tax records could be an alternative avenue for the collection of data; however, by their nature many SPEs are exempted of taxes. When such tax records are collected by the tax agency, the compiler should correspond with the tax agency to obtain the information required for balance of payments and IIP purposes as part of the tax filing requirements.

A4.32 Other data sources such as an ITRS, approvals of foreign investments, and the financial press could be used to identify SPEs and to verify collected information. The compiler should be aware of the limitations and coverage of each of these listed sources. For instance, because the SPEs by their nature and regulatory acts guiding their activity are meant to deal mainly with nonresidents, if not totally, they may not have financial transactions conducted through domestic banks that would be captured by an ITRS.

Specific Direct Investment Flows and Positions

Pass-through capital4

A4.33 As with SPEs, there is no internationally agreed definition of pass-through capital. The term is used to refer to funds that pass through a company (usually an SPE) in an economy to a third economy with little or no impact on the economy through which the capital passes.

A4.34 Pass-through capital is to be recorded in direct investment as assets and liabilities of the economy through which the funds pass.

A4.35 Pass-through capital has the impact of increasing the gross direct investment flows and positions into and out of an economy. Some analyses use the gross flows as a scaling factor for the size of certain types of transactions or positions, and the inclusion of pass-through capital in the gross flows may distort these analyses. On the other hand, the inflow and outflow of pass-through capital often involve different economies, or the inflow has a number of different attributes than the outflow (e.g., debt vis-à-vis equity, domestic currency vis-à-vis foreign currency, fixed vis-à-vis floating interest rate on debt, short-term vis-à-vis long-term debt). For these reasons, it is important to keep track of the gross flows and positions for compiling the balance of payments and IIP accounts, and for financial surveillance purposes.

A4.36 The recording of these funds are connected with the activities of SPEs. Therefore, the same main data sources as noted earlier (see paragraphs A4.29–A4.33) can be used to capture information on pass-through capital.

Round tripping5

A4.37 Round tripping is a specific case of pass-through funds where funds invested in a SPE in a second economy are to be invested back into the source economy. Round tripping is usually associated with source economies where there are incentives (tax or otherwise) for outward or inward DI. Round tripping can pass through more than one link and more than one economy before it returns to the source economy.

A4.38 Round tripping is to be recorded in DI in the accounts of each of the economies through which the pass-through funds transit. Figure A.4.1 shows an example of round tripping where a company A in the reporting economy provides DI funds through three nonresident related companies (B1, B2, and B3) for investment ultimately in another company (C) in the reporting economy. In the simple case, there may be only one company B.

Figure A4.1
Figure A4.1

A Case of Round-Tripping with Many Companies in Routing Economies

A4.39 If a resident company with a foreign direct investor identifies a resident as the ultimate investor (defined ahead), then this is an example of round tripping. Round tripping is more easily identified in the source/destination economy. The compilation of supplementary data on funds in transit (pass-through funds and round tripping) is recommended in the BPM6 for economies with large values of such transactions.

Voting Power

A4.40 The basis for identifying DI and for classifying ownership links within DI relationships is voting power (see BPM6, paragraph 6.19). Although equity is often used as a proxy for voting power, voting power is not the equivalent of equity. Circumstances including the issue of various classes of shares with higher weight, nonvoting shares, and “golden shares” (shares usually held by government that provide a controlling interest) can cause equity percentages to vary from the voting power in a company. Indeed, some forms of equity are recorded as debt in the IIP and balance of payments accounts. The compiler should be alert to these situations and treat them appropriately in the accounts.

A4.41 Derivative instruments can be constructed in a manner that provides access to voting power without delivering ownership of the underlying equity. Voting power accessed through these instruments is not recognized in determining whether a DI relationship exists.

A4.42 In some economies, regulations disallow foreign investors from owning more than 49 percent of the voting power. Voting power of 49 percent in these economies should be recognized as substantial influence and not control.

Valuation

Unlisted Equity

A4.43 The underlying principle for the valuation of equity is the market value of that equity. Listing on an organized market provides a good basis for valuing listed equity. However, it can be more difficult to determine a market value for unlisted equity and illiquid listed equity.

A4.44 Six methods for approximating market value for unlisted equity are considered acceptable proxies (see BPM6, paragraph 7.16):

  • Recent transaction price

  • Own funds at book value (OFBV)

  • Net asset value

    • Including goodwill and intangibles

    • Excluding goodwill and intangibles

  • Market capitalization method

  • Present value

  • Apportioning global value

A4.45 The choice of method depends primarily on having information available to support the application of the method. In practice, one or more of these methods could be ruled out because of a lack of information available to support the application of the method. Among the methods that could be implemented, the primary consideration should be how well the method approximates market value. A further consideration is the stringency of the requirement for symmetric recording by debtors and creditors.

A4.46 Each method is described in more detail ahead, giving information on what is needed to apply the method and caveats on its use. If there is a material change in a company’s financial position since the date to which the valuation applies (but before the reference date), an adjustment may need to be made. Examples of such material events include an unexpected decision in a lawsuit, credit downgrade or upgrade, major new invention or mineral find, or bankruptcy.

Recent transaction price

A4.47 Unlisted equity may trade from time to time, and recent prices at which the equity exchanged hands may be used. The transaction price must represent an “arm’s length” price between an independent buyer and seller, where neither party is under compulsion or duress to engage in the transaction. More recent transactions are preferable, and it is desirable that the transaction should have occurred within the past year. If the most recent transaction is more than one year old, the compiler may wish to consider an alternate method.

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Own funds at book value

A4.48 OFBV involves valuing a company at the value appearing in its books following International Accounting Standards (IAS). OFBV is based on the books of the DIENT and can be seen on its balance sheet as shareholder’s equity. The definition of OFBV contains paid-up capital. IAS require most financial assets to be revalued on, at least, an annual basis and for plant and equipment to be depreciated.

A4.49 OFBV is the method recommended for the CDIS and described in the CDIS Guide.

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Net asset value, including goodwill and identified intangibles

A4.50 Net asset value (NAV) is total assets at current/market value less total liabilities (excluding equity) at market value. Under this valuation method, all financial and nonfinancial assets and liabilities of the company, including intangible assets, are stated in terms of current period prices. The valuations should be based on very recent appraisals—certainly they must be within the prior year. Appraisals may be conducted by knowledgeable management or directors of the firm, and/or provided by independent appraisers. A capitalization ratio may be calculated and applied (with or without liquidity adjustments) if sufficient information is available (see market capitalization method).

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Net asset value, excluding goodwill and identified intangibles

A4.51 Under this valuation method, all financial and nonfinancial assets and liabilities of the company, excluding intangible assets, are stated in terms of current period prices. The valuations should be based on very recent appraisals—certainly they must be within the prior year. Appraisals may be conducted by knowledgeable management or directors of the firm, and/or provided by independent appraisers.

A4.52 Note that the difference between this method, and the one immediately preceding, is that this method excludes goodwill and identified intangibles. However, it is often very difficult to estimate the value of these assets. If the compiler can develop relatively accurate estimates of unquoted equity that include goodwill and identified intangibles he/she is encouraged to do so. Doing so promotes consistency between the estimates for quoted shares (these shares trade at prices that reflect the value of intangible assets) and the estimates for unquoted shares.

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Market capitalization method

A4.53 This method proposes the use of a capitalization ratio as the ratio of the stock exchange market capitalization to OFBV calculated from a set of listed companies. In constructing the capitalization ratio under this method, stock market data for an individual economy may be used when the stock market in that economy is broad and trading volume is relatively high, and broad regional indexes should be used when these circumstances do not exist. The estimate of market values of direct investment equity in unlisted companies is calculated by multiplying own funds at book value (owners’ equity) of unlisted DIENTs by the capitalization ratio [that is, by the stock exchange market capitalization (numerator) to the own funds at book value of listed companies (denominator)]. Capitalization ratios developed from broad stock exchange data should be adjusted, or individual ratios should be developed for separate industry groups, if the industries represented in the broad stock exchange for a given economy are not representative of the industry mix of DIENTs located in the same economy.

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Present value/price to earnings ratio

A4.54 The value of unlisted equity can be estimated as the present value of the forecast stream of future earnings. This method has at its heart the issue of choosing an appropriate discount rate, which can be inferred from the implicit discount rate obtained for listed equity, and forecasting the future profits. At its simplest, this method can be approximated by applying a market or industry price-to-earnings ratio to the (smoothed) recent past earnings of the unlisted company to calculate a price. In this case, the recent past earnings are used as the basis to forecast the future earnings, and the market price-to-earnings ratio implies the discount rate.

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Apportioning global value

A4.55 If the equity in a particular DIENT is unlisted, but the company belongs to a global enterprise group whose equity is listed, the current market value of the global enterprise group can be calculated and apportioned to the operations in each economic territory. The current market value of the global enterprise group should be based on its market price on the exchange on which it is traded, and the apportionment of this value to each economic territory should be based on an appropriate indicator (e.g., sales, net income, assets, or employment). Where possible, compilers in partner economies may wish to consider using the same indicator.

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Treatment of Transfer Pricing

A4.56 When a transaction in goods or services occurs between two companies, this transaction should be recorded at market prices. The BPM6 defines market prices as “amounts of money that willing buyers pay to acquire something from willing sellers … on commercial considerations only—sometimes called ‘at arm’s length’” (BPM6, paragraph 3.68).

A4.57 Due to the nature of the relationship between companies related under the DI relationship, the transaction value for a good or service between related companies may not always reflect market values. “Transfer pricing” refers to this distortion between transaction values and market values. It can be motivated by income distribution or equity injections. In the unusual case where the distortion is significant and data are available to do so, the BPM6 suggests that adjustments be made to remove the impact of transfer pricing.

A4.58 Identification of instances of transfer pricing and selection of the best market value equivalents to replace reported transaction values is an exercise calling for cautious and informed judgment. In most cases, sample surveys, contacts with companies and government agencies engaging in international transactions on a large scale, exchanges of information between compilers in partner economies, or similar statistical research will be necessary to provide the basis for such judgment. Adjustments for transfer pricing have implications for the data of the counterpart economy; therefore it is useful to exchange information with compilers in counterpart economies (to the extent possible) to avoid asymmetries. More details on treatment of transfer pricing are presented in Chapter 11 of this Guide.

Hidden dividends

A4.59 Where a DIENT is overinvoiced on a good or service provided by the direct investor, the difference in payment between the market value and the invoice price is effectively a distribution by the DIENT to the direct investor (a “hidden dividend”). Distributed earnings and total earnings of the DIENT should be adjusted upwards by the difference (in the balance of payments, this would be balanced by a downwards adjustment to the value of trade in goods or services).

A4.60 Where a direct investor is underinvoiced on a good or service provided by the DIENT, the difference in payment between the market value and the invoice price is effectively a return of assets by the DIENT to the direct investor or a rundown of the assets of the DIENT by the direct investor. This is treated as a hidden dividend; the earnings of the DIENT should be adjusted upwards, and the value of the good or service should be adjusted upwards, by the difference, as in the previous case.

A4.61 The compiler should recall that dividends and remitted earnings are required to be paid out of the accrued profits. If the accumulated profits do not cover the dividends and distributed earnings, then the additional payment should be treated as a withdrawal of equity.

Hidden injections of equity

A4.62 Where a DIENT is underinvoiced on a good or service provided by the direct investor, or a direct investor is overinvoiced on a good or service provided by the DIENT, the difference between the market value and the invoice price is effectively an injection of equity into the DIENT by the direct investor. This injection takes the form of provision of additional assets (underinvoiced goods) or cash (overinvoices). Equity transactions should be adjusted to remove the impact of the transfer pricing. Also, the earnings of the DIENT should be adjusted downwards by the same amount.

Ultimate Controlling Parent

A4.63 This part of the Guide focuses on defining relationships between companies that are important for analytical purposes—either through identifying the economy in which ultimate control over an inward investment is located; and through applying the directional principle to DI data for fellow enterprises and reverse investment.

A4.64 The ultimate controlling parent (UCP) of a resident company in a direct investment relationship is important to identify for the purposes of correctly applying the directional principle in compiling partner economy statistics (the directional principle is described in Chapter 7, along with the asset/liability presentation; see also Table A4.2). The economy of residence of the UCP determines the treatment of positions between fellow enterprises (see Figure A4.2).

Table A4.2

Treatment of Direct Investment under the Assets/Liabilities Presentation and Directional Principle

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Figure A4.2
Figure A4.2

Linkages Between UCP’s Residence and Treatment of Fellow Enterprises

A4.65 The UCP of a fellow enterprise is identified by proceeding up the ownership chain from the resident fellow enterprise through the controlling links (ownership of more than 50 percent of the voting power) until an individual, household, or company that is not controlled by another company is reached. If there is no company, individual, or household that controls the resident company, then the resident company may be considered to be its own UCP.

A4.66 Model form 18 in Appendix 8 requests information on whether the UCP is a resident or nonresident.

Reverse Investment

A4.67 Reverse investment refers to asset positions held by DIENTs in their direct investors. In the case of equity positions, the ownership of the equity by the DIENT is such that it does not provide voting power of 10 percent or more (otherwise, mutual DI occurs, where each company is a direct investor in the other).

A4.68 Reverse investment is treated differently under the directional principle when compared with its treatment under the asset/liability presentation. Under the asset/liability presentation, reverse investment is recorded on a gross asset and liability basis. Under the directional principle, reverse investment is considered a (negative) inward investment position for the DIENT and as a (negative) outward position for the direct investor (see Table A4.3).

Table A4.3

Assets/Liabilities Presentation Compiled from Foreign Direct Investment Survey (model survey form 18 in Appendix 8)

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Presentational Method of Direct Investment

A4.69 The standard components on the balance of payments and on the IIP use the assets/liabilities presentation of DI, which is organized according to whether an investment relates to an asset or liability. The directional principle, which is organized according to the direction of the DI relationship (inward, DI in the reporting economy, and outward, DI abroad), is the principle used in the CDIS. It can be applied to IIP, balance of payments financial account, and investment income.6 When the CDIS is used as the data source for compiling DI data, the compiler should rearrange the CDIS data reported under directional principle to the assets/liabilities presentation.

A4.70 Chapter 7 of this Guide as well as Tables A4.2 and A4.3 describe two presentations of DI information—under the asset/liability presentation and under the directional principle. The identification of fellows is important for the appropriate classification of positions and flows under the directional principle.

Compilation

Calculating DI Earnings

A4.71 DI earnings measure earnings from current operations. Therefore, this amount should be calculated before recognition of holding gains and losses and extraordinary items. Operational earnings of the DIENT should be reported after deducting provisions for depreciation and for corporate taxes charged on these earnings by the government in the host economy. Depreciation should, in principle, be measured at current replacement cost, particularly if market values are available for position figures. If data on depreciable assets and on depreciation are available only on a book value or historical cost basis, those values should be adjusted wherever possible to a current replacement cost basis. The compiler should base the estimates of DI earnings, and of DI positions, on a current market value basis. If market values are unavailable, DI data at book value should be adjusted to estimates of market value.

A4.72 The earnings of DIENTs reported using the Current Operating Performance Concept (COPC) should exclude the following:

  • Any gains or losses arising from valuation changes, such as inventory write-offs, write-downs, or write-ups

  • Gains or losses on plant and equipment from the closure of part or all of a business

  • Writing-off of intangible assets, including goodwill, due to unusual events (the standard amortization of intangible assets is, however, included as an expense under the COPC)

  • Extraordinary gains or losses (e.g., losses by an insurer due to a catastrophic event)

  • Writing-off of research and development expenditures capitalized in a prior period

  • Provisions for losses on long-term contracts

  • Exchange rate gains and losses incurred by the DIENT both from its trading activities and from its holdings of foreign currency assets and liabilities

  • Unrealized gains or losses from the revaluation of fixed assets, investments, and liabilities

  • Realized gains or losses made by the company from the disposal of assets (other than inventory) or liabilities

A4.73 The exclusion of realized and unrealized holding gains and losses is applicable to all DIENTs, including those such as banks and securities dealers for whom the making of such gains is an important or even the main part of their business. This promotes consistency with the calculation and treatment of earnings in the national economic accounts, as prepared pursuant to SNA guidelines.

A4.74 Earnings of a DIENT under COPC include the full profit accruing to that DIENT from any further companies in which the DIENT is, itself, a direct investor—the earnings of the DIENT include accrued reinvested earnings from DI by the company, not just any remitted earnings.

A4.75 In line with the FDIR, the reinvested earnings of each company down the ownership chain should be attributed to each of the immediate direct investors up the chain. Table A4.4 illustrates this point. If A (Level 1) is owned 100 percent by B (Level 2), B is owned 50.01 percent by C (Level 3), and C is 40 percent owned by D (Level 4), then A’s reinvested earnings represent part of the net investment income of B, and, as a result, they are part of the sources of revenue that form part of the reinvested earnings that are deemed distributed to C by B, and then as part of C’s reinvested earnings that are deemed distributed to D. Where ownership is less than 100 percent, the proportional ownership should be applied, even when there is more than one direct investor. This principle applies whether A, B, and C are each in separate economies from D, or are in the same economy, but separate from D.

Table A4.4

Calculation of Reinvested Earnings along a Direct Investment Ownership Chain

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A4.76 In the situation where company C owns 50 percent or less of B, then companies A and B are not in a DI relationship with company D under the FDIR. As company D is not considered to have significant influence over company B, company D cannot be considered to have significant influence over the earnings distribution and savings decisions of company B. As a result, the reinvested earnings that accrue to company C from company B are not considered part of company C’s current operating profit that accrues to company D. The calculation in Table A4.4 would show 16 in reinvested earnings accruing to company D from company C (rather than 60) with 16 being reinvested by company D in company C.

A4.77 Normally, when companies perform the consolidation of transactions for a group, they use data on the total profits, including holding gains and losses, foreign exchange gains and losses, write-offs and write-downs, and dividends. It is, therefore, important that clear instructions be provided to respondents to enable them to report on the required basis.

Model Forms

A4.78 Model form 17 in Appendix 8 requests information on DI in the context of a comprehensive collection of information on external financial assets and liabilities. Model form 18 in Appendix 8 focuses specifically on DI. Both forms collect sufficient information for the application of the directional principle as well as the asset/liability presentation.

A4.79 Box A4.1 presents Mauritius’ practice in collecting and compiling data on special purpose entities. The questionnaire used for collecting data is presented in Annex 1 of this appendix.

Compiling Data on Special Purpose Entities in Mauritius

Background

This example covers the collection and compilation of offshore banking data in Mauritius. The effective integration of the offshore and onshore banking business in July 2005 in balance of payments statistics of Mauritius contributed to significant net errors and omissions. An “external financing” data gap had emerged as banks’ foreign assets continued to grow, reflecting the increase foreign currency deposits of the offshore vehicles, while no data were available on the latter’s liabilities to nonresidents. For this reason, in 2007 the Bank of Mauritius (BOM)—the institution responsible for the compilation of the balance of payments and IIP statistics in Mauritius—started to implement a survey covering the offshore business sector.

There are two different types of global business corporations (GBC) in Mauritius: Type 1 GBCs (GBC1) are considered tax residents of Mauritius, and Type 2 GBCs (GBC2) are considered nonresidents for Mauritius tax purposes. The legislation requires that management companies (MC) administer GBC1s and act as registered agents for GBC2s. Both GBCs and MCs are supervised by the Financial Services Commission (FSC) responsible for all non–deposit-taking financial institutions in Mauritius.1

Approach applied in conducting the survey

The survey was carried out by the BOM and the FSC. As the regulator of the MCs and GBCs, the FSC has the power to ensure compliance, and therefore it was decided that the FSC would act as a facilitator and undertake the survey on BOM’s behalf. The key issue in launching the survey was how to minimize the reporting burden and costs for the MCs, which would be the ones doing the painstaking work of collecting the required information from individual balance sheets. It was decided to adopt a phased approach where only information on GBC1’s activities and positions should be collected until such time that the authorities amend the statutory requirements for GBC2s. Given the magnitude of the task, the option of having a census survey was ruled out and a sample survey was chosen.

An analysis of information on the total assets of all GBC1s showed that a relatively small number of units would provide robust data. The FSC decided that the survey frame will include twelve MCs administering 70 percent of the GBC1’s total assets. MCs that had the financial information in electronic spreadsheets would report the data for the whole population. The MCs that did not have the information available in electronic spreadsheets would report data for at least 75 percent of the total balance sheet value of the GBC1s they administer. Additionally, the latter group had to report at the same time the total balance sheet value of all the GBC1s under their administration, so that their sample value could be grossed up to the total value.

The questionnaire was designed in a simple way, which reflected elements of a typical balance sheet requesting transactions separately from positions data between resident and nonresident companies. To measure the extent of integration of GBC1s’ economic activity with the domestic economy, selected transactions and positions data between residents were also collected. The BOM questionnaire for collecting data on offshore activity is presented in the annex of this appendix. The questionnaire was supplemented by the CDIS and Coordinated Portfolio Investment Survey forms.

Incorporation of survey results in balance of payments and IIP statistics

For the incorporation of survey’s results, a three-tier approach was implemented:

  • 1) For the MCs that did not have an electronic spreadsheets (that reported on a sample basis), their estimates were grossed up to the total assets of all GBC1s under their administration.

  • 2) The total assets of 12 surveyed MCs were grossed up to the universe estimate using the information provided by the FSC on the total assets of all GBC1s under the administration of the MC’s population.

  • 3) The survey collection and the balance of payments statistics compilation had different frequency—the former collected annual data while the latter statistics were published on a quarterly basis. To overcome this problem, an indicator series based on the cross border transactions’ settlement data for all GBCs reported by banks on a monthly basis was used for apportioning the annual data into four quarters.

Difficulties encountered in conducting the survey

  • During the sensitization meetings, the BOM had difficulties in convincing the MCs to report their offshore transactions and positions with nonresidents. The MCs’ arguments were that other competitive offshore jurisdictions were not reporting those data. Also, they viewed the new survey as an additional reporting burden as they were already collecting CPIS data and providing them to the regulator.

  • The FSC was sensitive to the high probability of the exercise of collecting offshore data doing damage to the industry that generally thrived on confidentiality. A high risk that GBCs investors would leave the Mauritian jurisdiction to move to other jurisdictions without such collections was predicted by the MCs. The GBCs needed to be convinced about the advantages of collecting the data and given assurances about the confidentiality policy.

  • During the first survey exercise, BOM was not granted access to the individual survey returns and therefore was unable to validate the aggregated data. Because BOM could not interact directly with the MCs and the communication with reporters was done through the FSC, the data validation was difficult. This changed for the second survey exercise. The direct interaction of the balance of payments compiler with the responding MCs at all stages of the survey increased the quality of survey results.

  • Because the Type 2 GBCs were not required to manage and control their business from Mauritius nor to prepare and audit their financial accounts in Mauritius, the balance of payments compiler considered inappropriate their inclusion in the survey. The alternative course of action would be to amend the financial summary requirements to collect the balance of payments and IIP data and as a substitute to use appropriate estimation methods. The BOM plans to extend the survey coverage to GBC2s; however, no decision has been taken yet.

Lessons learned

  • The support and commitment of the regulator was crucial. In conducting such a survey, all parties involved have to take ownership of the project with a clear demarcation of responsibilities. In the case of Mauritius, the fact that the government had committed to subscribe to the IMF Special Data Dissemination Standard provided the motivation to all parties.

  • The compiler should understand the difficulties of the task and be well prepared to accommodate the respondents’ needs, as well as the concerns of the regulator and the regulatees regarding the reporting burden and costs by adopting a phased approach.

  • The survey is aimed at facilitating the compiler’s task to compile the balance of payments and IIP statistics. In the same time, the MCs have to be motivated by the benefits of the collection of offshore data, so that the survey exercise is seen as a win-win exercise for all groups affected.

  • The compiler should be sensitive to the reporting burden and cost. The survey design should be reviewed over time to attain this objective, and respondents have to be informed about that changes are made with the goal to reduce the reporting burden for the MCs.

  • Sensitization and follow-up meeting before, during, and after the survey exercise are equally essential. Such interactions with the respondents help the compiler to understand the offshore sector and improve the questionnaire design.

  • The reporting burden could be eased to a large extent by the use of IT. In the near future, the BOM plans to design a Web-based questionnaire and to incorporate the editing of checks electronically into the survey form. Respondents will then be able to see for themselves where data inconsistency may arise.

1 As of the end of 2012, there were 10,728 GBC1s, 15,208 GBC2s, and 164 MCs in Mauritius.

Annex to Appendix 4

1 Purpose of Collection

The purpose of this survey is to collect information from the financial statements and supporting details of GBC1s to facilitate compilation of their transactions and positions vis-a-vis nonresidents for compiling the balance of payments accounts and the external assets and liabilities position of Mauritius. Balance of payments statistics are published in the Bank’s Monthly Statistical Bulletin and in the Annual Report and are also posted on the Bank of Mauritius website http://bom.intnet.mu.

2 Role of Management Companies in Filling the Questionnaire

The intention is that management companies (MC) set up a template for Tables A, B, and C in the questionnaire that is linked to the spreadsheets on which the financial accounts of GBC1 are maintained. The accounting period should be for the accounting year followed by the GBC1 in reporting to its shareholders. Each MC will provide an aggregated return to the Financial Services Commission. Two approaches are recommended. For those MCs that have the financial information in spreadsheets (or some other easily aggregated software) for GBC1s that they manage, the information should be provided as an aggregate for all such GBC1s. This approach will not require any decision on what GBC1 should be included, thereby reducing the burden on the MCs. For those MCs that do not have the information available in spreadsheets (or some other easily aggregated software), it is recommended to report transactions and positions data that account for at least 75 percent of the total balance sheet value of the GBCls they manage.

3 Collection Authority

By virtue of the section 51A(1) of the Bank of Mauritius Act 2004, the responsibility for the preparation of the balance of payment accounts and the external assets and liabilities position of Mauritius is vested on the Bank of Mauritius. In this regard, section 51A(2) states that the Bank may, by notice in writing, require any person to furnish, within such time and in such form and manner as the Bank may determine, such information and data as the Bank may require for the preparation of the balance of payments accounts and the external assets and liabilities position of Mauritius.

4 Confidentiality

Information provided in the questionnaire by individual enterprises shall not be published without the written consent of the enterprise. The information supplied will be published only in aggregated form.

5 Offence

Any person who fails to comply with a requirement under section 51A(2) of the Bank of Mauritius Act 2004 shall commit an offence and shall, on conviction, be liable to a fine not exceeding 50,000 rupees for each day on which the offence occurs or continues.

6 Queries

Technical concepts in the questionnaire will be familiar to the director, finance manager, or accountant of your enterprise. Queries or assistance regarding the completion of this form may be addressed to:

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Explanatory Notes for Filling the Questionnaire

7 Residents and Nonresidents

An institutional unit (which may be an individual, an enterprise, or any other entity) is a resident of the Mauritian economy, regardless of its nationality, if it exists, within Mauritius, some location, dwelling, place of production, or other premises on which or from which the unit engages and intends to continue engaging, either indefinitely or over a finite but long period of time—exceeding one year—in economic activities and transactions on a significant scale. Corporations and nonprofit organizations normally may be expected to have a center of economic interest in the economy in which they are legally incorporated and registered. Representation of foreign governments and international organizations are excluded.

Nonresidents are institutional units, regardless of their nationality, living or operating outside the economic territory of Mauritius for one year or more and include the following:

  • (1) Individuals having their principal residence outside the economic territory of Mauritius or enterprises operating abroad for a year or more

  • (2) Foreign governments

  • (3) Bilateral development assistance organizations (e.g., Commonwealth Development Corporation (UK)) or international organizations with shareholders who are governments of more than one economy (e.g., International Finance Corporation; World Bank; African Development Bank, etc.)

If you are not sure of the residency status of any organization, please give its name.

8 The Reporting Year: 20XX

This questionnaire asks for opening position as of 1 January 20XX (≡ C.O.B. 31 December 20XX-1), transactions as well as revaluation and other changes during the year 20XX, and closing position as of end-December 20XX. If the financial accounts are for some other period, please provide the information on the basis of the accounting year as reported in question 1.8.

9 Valuation Principles

Please provide all data in U.S. dollars.

10 Shareholders Funds

Please report on a fair value basis for collective investment funds, and on a book value basis for other entities, if fair value is not available.

11 Loans and Trade Credit (assets and liabilities)

Please report on a nominal value basis (after allowing for any changes that may result from changes in exchange rates).

12 Debt Securities on Issue

Please report the market value of the securities on issue, at the balance sheet date (for positions) and the actual proceeds (or retirement values), for transactions, with both positions and transactions inclusive of accrued interest.

13 Debt and Equity Securities Held

Please report the market value of the securities held at the balance sheet date (for positions) and the actual purchase/sale price, for transactions.

13a Exceptions to the Rule of Foreign Direct Investment

  • (1) Debt positions between affiliated financial intermediaries except insurance companies and pension funds (a subset of financial corporations) are excluded from direct investment.

    The financial corporations covered by the financial intermediary exclusion are deposit-taking corporations, money market funds (MMF), non-MMF investment funds, and other financial intermediaries except insurance companies and pension funds. (In other words, the usual direct investment definitions apply for insurance corporations, pension funds, other financial institutions, and financial auxiliaries.) All debt positions between these selected types of affiliated financial corporations are excluded from direct investment (but equity positions between all types of affiliated financial corporations should be included in direct investment). For example, deposits and other amounts lent by a parent bank or other financial intermediary to its direct investment enterprise located abroad that is also a financial intermediary, and deposits and other borrowings taken from such offices, should not be classified as direct investment.

  • (2) Equity in international organizations is excluded from direct investment, even in cases in which voting power is 10 percent or more. These equity contributions are included in portfolio investment (if in the form of securities) or other investment—equity (if not in the form of securities).

  • (3) Financial derivatives and one-off guarantees are excluded from direct investment. Financial derivatives are excluded largely on practical grounds. One-off guarantees represent loans or securities that are guaranteed with such particular circumstances that it is not possible for the degree of risk associated with them to be calculated with any degree of precision. They are recognized as financial assets or liabilities only at activa-tion—that is, when the event occurs that makes the guarantor responsible for the liability.

  • (4) Direct investment also includes investment in real estate, properties, vacation homes, and lease of land for long periods, provided the property is located in an economy other than that of the direct investor.

14 Affiliated Enterprises

These refer to enterprises that hold 10 percent or more of the GBC1 shares or equivalent or are owned by another enterprise which has such a holding in the GBC1. Affiliates include parent companies, branches, and associate companies.

Section A. Characteristics of the Management Company

Section B. Aggregated Balance Sheet of GBC1s Managed by Your Company

Please report the opening and closing balances, as well as the transactions, other changes in volume and revaluation changes, for the assets, liabilities, and shareholders’ funds, of the population of GBC1s managed by your company.

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Please note that items 1.14 and 1.15 are residual categories and to help us with any reclassification at our end, please specify the nature of the position or transaction. Please also note that unaffiliated nonresidents include banks.

Please note that items 2.8 and 2.9 are residual categories and to help us with any reclassification at our end, please specify the nature of the position or transaction. Please also note that unaffiliated nonresidents include banks.

Section C. Income and Expenditure

Please report Income and expenses during the year 20XX.

1. Income from services provided to:

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2. Recurrent expenses on goods and services paid to:

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3. Other transactions

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4. Number of employees as of June 20XX

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1 Receipt from and payment to GBC1s in Mauritius are considered to be with residents. 2 Includes overtime, payment in kind, travelling allowances, other allowances, retirement pension, employer’s contribution to pension fund and life insurance scheme, fringe benefits, and so forth.

Appendix 5. Compiling Balance of Payments and IIP by Partner Economy

Introduction

A5.1 The body of the Guide is concerned with the compilation of global balance of payments statistics—that is, economic transactions of an economy in respect of all other economies. Similar statistics can be compiled on a regional basis to show an economy’s transactions with residents of a selected foreign economy (e.g., main trade partners) or group of economies. In the Guide, these economies are referred to as partner economies, and this appendix examines methods by which the compiler may compile balance of payments statements by partner economy.

Economy Classification

A5.2 Compilation of balance of payments statistics on a regional basis provides many analytical and compilation benefits. Partner economy statistics provide information that enables users to develop greater insight into balance of payments aggregates. Governments use partner economy statistics as a basis for policy formulation and bilateral negotiations. Use of partner economy statistics facilitates bilateral reconciliations and, therefore, enhances the quality of balance of payments statistics.

A5.3 In compiling partner economy statistics, the compiler must decide on the principle of classification and the list of economies or economy groupings to be shown.

A5.4 The principle of classification used in balance of payments regional statistics is based on change of ownership. Application of this concept to regional balance of payments statistics means that, for transactions in goods, the economy classification should be based on the economies of residence of the former owners of imports and of the new owners of exports; for transactions in services, on the economy of residence of the provider and the recipient of the service; for income, on the economy of residence of the company earning or paying the income; and for transfers, on the economy to which the offset transaction is recorded. For the IIP, liabilities should be classified by the economy of residence of the holder of the claim; and assets should be classified by the economy of the issuer of the liability.

A5.5 The BPM6 indicates that for financial transactions in many cases the transactor principle is applied (BPM6, paragraph 4.148) (noting that the BPM5 allowed the use of either the transactor principle or the debtor/creditor principle) partly because it may represent the only information available.1 Under the transactor principle, transactions are classified by the economy of the nonresident counterparty to the transaction. However, as noted earlier, acquisition of securities should be recorded according to the issuer of the liability.

A5.6 Table A5.1 shows the treatment of a secondary market transaction in a security under the transactor principle. In the example it is assumed that a resident of economy B has issued a security that is initially held by a resident of economy A. The resident of economy A sells the security to a resident of economy C.

Table A5.1

Treatment of Transactions and Other Changes in Securities under the Transactor Principle

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A5.7 In data sources available to the compiler, the classification by economy may not be based on a strict change-of-ownership concept. For example, transactions in goods may be classified by economy of origin or consumption. The balance of payments compiler may wish to publish supplementary statistics based on alternative classifications. For example, publication of information on securities classified on both a transactor principle basis and on a debtor/creditor principle basis could help an analyst gain a better understanding of international capital markets and the impact of these markets on the balance of payments.

Multilateral Settlements

A5.8 Multilateral settlements arise when an company in one economy undertakes a transaction with a resident of a second economy and the payment for that transaction involves a claim on a resident of a third economy. This practice requires the compiler to record offsetting entries in regional balance of payments accounts in order to balance them for particular economies or regions (assuming that balanced accounts at the regional level are required). In practice, those entries will typically be combined with net error and omission items as it is generally not possible to measure a pure multilateral settlement item.

A5.9 An example illustrates these points. Economy A imports a good, valued at 100, from economy B and uses a bank account in economy C to make the settlement. However, as a result of measurement errors, the payment is recorded by economy A as 102. In compiling a partner economy balance of payments statement, economy A would classify imports from economy B, but the transaction in foreign currency assets would be attributed to economy C. To balance the various accounts, the compiler would have to record multilateral settlements items for economies B and C. Table A5.2 shows the entries that would be recorded in a partner economy classification of balance of payments transactions for economy A. The table demonstrates the necessity for creating the multilateral settlement item to balance the accounts and also shows that these entries cancel each other when accounts are consolidated.

Table A5.2

Balance of Payments Transactions of Economy A with Partner Economies

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Data Sources and Specific Treatments

Data Sources

Use of international merchandise trade statistics

A5.10 International merchandise trade statistics (IMTS) are described in Chapter 5, which includes a discussion of the international guidelines, concepts, and definitions that the IMTS compiler is expected to follow. According to the change-of-ownership principle, imports would be classified by economy of purchase—the economy where the importer’s cocontractor is domiciled or has its business—and exports would be classified by economy of sale—the economy where the exporter’s cocontractor is domiciled or has its business. However, the IMTS guidelines reject this concept as it essentially measures the movement of goods rather than the change of ownership of goods. The guidelines illustrate the inconsistency by using an example, shown in Table A5.3, in which a resident of economy A buys goods produced in economy B and sells the goods to a resident in economy C, but ships the goods directly from economy B to economy C (this is an example of merchanting, which should be recorded in the balance of payments accounts as negative exports when the goods are acquired, and as positive exports when resold (see Merchanting in Chapter 11).

Table A5.3

Comparison of Merchandise Trade and Trade in Goods for Merchanting

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A5.11 Table A5.3 uses the purchase/sale (change of ownership) concept and shows transactions of economies B and C with economy A, which would not record the transaction in merchandise trade statistics as there is no physical movement of the good into or out of economy A. If goods were shipped by economy A, the shipment would be treated as direct transit trade (unless the goods were cleared through customs into economy A—an unlikely event) and thus would not be recorded. Another problem with the use of the purchase/sale concept with IMTS is that agents often act on behalf of principals and, according to the guidelines, identification of principals can consume considerable time and resources.

A5.12 Another concept used to classify partner economy data for IMTS is economy of origin and consumption. The economy of origin is the economy in which the goods are produced or manufactured, whereas the economy of consumption is the economy known at the time of dispatch as the economy in which the merchandise is intended to be consumed, utilized, or further processed. As the guidelines point out, determinations of economy of origin are usually straightforward, but determinations of economy of consumption are much more difficult.

A5.13 Still another classification is economy of consignment/economy of destination. For imports, the economy of consignment is the economy from which goods were initially dispatched, without any commercial transactions taking place in intermediate economies, to the importing economy. For exports, the economy of destination is the economy known at the time of dispatch to be the final economy where goods are to be delivered.

A5.14 The International Merchandise Trade Statistics Manual (IMTS 2010) recommends in the case of imports the origin and in the case of exports the destination concept to be the most suitable for IMTS. However, the IMTS 2010 recognizes that the partner economy data compiled on this concept are very often not comparable (IMTS 2010, paragraphs 6.25 and 6.26) and recommends that economy of consignment be recorded for imports as the second partner economy attribution, and that economy of consignment be an encouraged item for exports.2

A5.15 Table A5.4 provides examples of transactions recorded by using the consignment/ destination and the origin/consumption concept. In the example, petroleum is produced and refined in economy B and purchased by a resident of economy A, who imports the petroleum and stores it in economy A. Subsequently, the petroleum is exported to economy C.

Table A5.4

Use of Origin/Consumption and Consignment/Destination to Record Goods Trade

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A5.16 Table A5.4 shows that, if the concept of origin/ consumption approach is used, economy A shows an export to economy C while the latter shows an import from economy B. Further, economy A shows an export to economy C while economy C registers an import from economy B. If the consignment/destination approach is used, economy B shows an export as destined for economy A; economy A shows an import consigned from economy B and destined for economy C; and economy C shows an import consigned form economy A. In other words, the consignment/destination approach produces a symmetrical treatment not achieved by the origin/consumption approach.

A5.17 Apart from transactions that involve merchanting and are recorded in goods, the concept of consignment/destination is the same as the change-of-ownership principle required for use in the balance of payments. This Guide recommends that the IMTS compiler produce IMTS on a consignment/destination basis and that the balance of payments compiler use these data to compile partner economy statistics on goods. Transactions in goods could be adjusted to a complete change-of-own-ership basis if the balance of payments compiler collects data on gross purchases and sales of goods classified by economy from companies involved in merchanting—a subject that is discussed in Chapter 3. Suitable questions in respect of merchanting are contained in model form 5 in Appendix 8.

Use of international transactions reporting system (ITRS)

A5.18 There are no international standards for the content, reporting thresholds, or degree of detail collected in an ITRS, and the method of economy classification varies from economy to economy. Generally, the classification is based on the economy of residence of the nonresident transactor and, in most cases, this is appropriate for balance of payments purposes. For the recording of financial transactions, an ITRS generally supports the transactor principle.

A5.19 A particular problem in using an ITRS to compile partner economy statistics is that the nonresident principal to a transaction may use an agent who is a resident of a different economy. For example, a resident of economy A may use a security broker in economy B to purchase securities from a resident in economy C. It is unlikely that two principals (in economies A and C) will know each other’s identities, and the ITRS in each of these economies will probably reflect transactions with economy B. This classification is inconsistent with the change-of-ownership principle. A similar problem will occur when nominees are used to undertake transactions for nonresident principals. In practice, relatively little can be done to overcome these problems, other than analyzing information that may be available from international financial centers on these types of transactions.

Use of securities databases

A5.20 Chapters 3 and 10 describe the use of securities databases in conjunction with security-by-security collections for the compilation of portfolio securities information. The information included in securities databases can allow for the identification of the economy of the issuer and the economy of the holder.

Use of external sources of information

A5.21 There are a number of external sources that provide information by partner economy to which the compiler will have access. These sources include bilateral data compiled by compilers in other economies that represent the counterparts to transactions of residents of the compiling economy. In addition, the IMF conducts two surveys that can be used as the basis for compilation of bilateral data for components of the financial account and IIP: the Coordinated Direct Investment Survey (CDIS) collects information on direct investment liabilities and can be used in the compilation of direct investment assets and transactions in assets; and the Coordinated Portfolio Investment Survey (CPIS) collects information on portfolio investment assets and can be used in the compilation of portfolio investment liabilities and transactions in liabilities. More details on the use of CDIS and CPIS in the compilation of balance of payments and IIP statements are presented in Chapter 7.

Use of business surveys

A5.22 If business surveys are used to compile balance of payments statistics, the compiler should ensure that information is classified by partner economy in accordance with the change-of-ownership principle. With regard to financial transactions, business surveys generally support the debtor/creditor principle rather than the transactor principle, and model forms 17 and 18 in Appendix 8 are consistent with the debtor/creditor principle. However, there could be problems with identifying the economies of residence of purchasers of bearer securities issued by companies of the compiling economy. In such cases, sometimes the compiler classifies the transactions to a category called international capital markets. While this solution is practical, it is not optimal, and it reduces the usefulness of information for bilateral comparisons. Securities issued by the compiling economy and held by nonresident nominees located in economies other than the economy of the nonresident principal are likely to be misclassified in business surveys. In practice, apart from the use of partner economy sources, little can be done to overcome this problem.

Issues common to all sources

A5.23 When other balance of payments sources are used, the compiler should make every effort to ensure that partner economy information is classified correctly. If it is not possible to obtain correctly classified data from the source, the compiler should, at least in significant cases, investigate alternative sources to obtain supplementary information. For example, partner economy estimates for trade credits could be derived from an analysis of partner economy shares for imports and exports. Care should be taken to ensure that the supplementary source exhibits a partner economy pattern similar to that of the item that the source is being used to measure.

Presentations of Direct Investment by Partner Economy

A5.24 There are two presentations that are available for use when compiling direct investment (DI) information, including income flows, transactions, and positions—DI according to the asset/liability principle, and DI according to the directional principle. These presentations serve different analytical purposes. The standard presentation for global balance of payments is according to the asset/liability principle; however, for partner economy data, the directional principle could be more preferred by economies. The CDIS requires data to be reported on the basis of the directional principle, and the OECD Benchmark Definition of Foreign Direct Investment, 4th edition, recommends the directional principle to be used for bilateral statistics.

The asset/liability principle

A5.25 DI aggregates as a part of national macroeconomic statistics are based on the asset/liability principle. They are consistent with balance of payments statistics and IIPs as well as the components of national accounts statistics. These data provide for an economy the aggregate totals of direct investment positions in assets and liabilities; net acquisition of direct investment assets and net incurrence of direct investment liabilities; and income receivable on assets and income payable on liabilities.

The directional principle

A5.26 DI statistics compiled according to the directional principle show outward investments and inward investments taking into account reverse investments (e.g., investment of DIENTs of the reporting economy into direct investors abroad are recorded as negative inward investment) as well as investment into fellow enterprises—the direction in the latter case depending on whether the ultimate controlling parent of the resident fellow enterprise is a resident or a nonresident of the compiling economy.

A5.27 Note that the use of the ultimate controlling parent of the resident can lead to asymmetries in treatment where compilers in the economies of both fellow enterprises may both recognize the investment as outward (for example, where the common direct investor does not have a controlling stake in either fellow) or as inward (for example, where the common direct investor has a controlling stake in both fellows, and is resident in a third economy). In both cases, the position should be recognized as a positive inward investment for one economy and a negative inward investment in the other economy; both positions should be valued the same (e.g., at market price).3

A5.28 The identification of the ultimate controlling parent is discussed in Appendix 4, where Tables A4.2 and A4.3 show the different treatment of direct investment aggregates under the asset/liability principle and under the directional principle. These treatments are presented also in Chapter 7 of the Guide, Table 7.1.

Specific Treatment of Direct Investment Income

A5.29 Table A5.5 shows the investment income flows among three entities in a direct investment relationship. A company in economy A has a wholly owned subsidiary in economy B, which, in turn, has a wholly owned subsidiary in economy C.

Table A5.5

Income Accounts of Companies in Economies A, B, and C

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Other current income includes interest, dividends, and reinvested earnings on direct investment receivable, less interest payable.

Income earned by the company in economy A includes accrued interest of 35 from the company in economy C on a loan made by the company in economy A to the company in economy C.

A5.30 Table A5.6 shows relevant income entries recorded in the regional balance of payments statements of economies A, B, and C. There are no reinvested earnings and dividend transactions between the company in economy A and the company in economy C because reinvested earnings and dividends payable by the company in economy C are solely attributable to the company in economy B. However, income payable by the company in economy C for a loan made by the company in economy A should be shown as an income payment between economies A and C.

Table A5.6

Partner Economy Direct Investment Income Statistics for Economies A, B, and C

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Attribution of Data on Merchanting of Goods by Partner Economies

A5.31 Merchanting of goods involves two partner economies for one transaction. Therefore, the compiler needs to be aware of the right allocation of partner economies. For the economy of the merchant goods are recorded as gross values: negative export (negative credit) for the acquisition and export (positive credit) for the sale. The economy that sold the goods to the economy of the merchant and the economy that purchased the goods from the economy of the merchant (economy A in Table A5.3) record their merchandise trade in the usual way—that is, as exports and imports of general merchandise, respectively, and not as merchanting transactions. Table A5.3 gives an overview about the recording.

A5.32 As the goods involved do not cross the customs boundary of the economy of residence of the merchant, these data need to be collected directly via enterprise surveys by all involving economies (see Appendix 8, model form 5). Details on compiling data on merchanting are presented in Chapters 3 and 11.

Appendix 6. Linkages with Other Macroeconomic Datasets

Linkages of the International Accounts with the National Accounts

Introduction

A6.1 Information from the international accounts is essential to a full implementation of the System of National Accounts 2008 (2008 SNA). The addition of the balance on primary income converts GDP, a measure of the income arising in an economy from production by units resident in that economy, to gross national income (GNI), a measure of the income arising from production anywhere in the world attributable to the residents of the particular economy. This is further converted to gross disposable income by the balance on secondary income. The difference between domestic saving and capital formation (investment) equal to the current account balance is reflected in the capital account balance and net lending or borrowing in the international accounts. Further, the financial account information and the international investment position (IIP) make it possible to see to what extent an economy has claims on nonresidents or liabilities to nonresidents.

A6.2 This integration of the two systems is made possible because the underlying accounting systems are identical, although different terminology and forms of presentation are sometimes used. Appendix 7 of the BPM6 provides a summary account of the complete concordance between the 2008 SNA and the BPM6 in respect to residence, valuation, time of recording, conversion procedures, and coverage of flows and positions.

A6.3 In addition to measuring activity within the domestic economy, the SNA records the exchanges between the domestic economy and the rest of the world as if the nonresident units engaged in transactions with units resident in the domestic economy formed a distinct institutional sector of the economy. The exchanges (flows) of all resident units with nonresident units (and claims of one set of units on the other) are recorded in the rest of the world sector of the 2008 SNA from the perspective of the rest of the world. Thus, for example, imports are a resource to the domestic economy and exports are used by the rest of the world, reversing the BPM6 convention that imports are a debit and exports a credit.

A6.4 Chapter 2 of the BPM6 includes a separate annex (Annex 2.2) illustrating with a numeric example (1) an overview of the integrated economic accounts as presented in the 2008 SNA, and (2) the links between the financial instruments and the functional categories used in the BPM6, including the conversion of data from instrument to functional category. Furthermore, standard components (BPM6, Appendix 9) include the 2008 SNA codes, where appropriate, which facilitates comparison between the international accounts and the 2008 SNA.

A6.5 This appendix complements the text in the BPM6 with a presentation in parallel of the recording of various flows and positions in the 2008 SNA vis-à-vis the BPM6 along the lines of the accounting structure of the two systems. The intention here is to illustrate the correspondence of indicators and the consistency between the two datasets. It also serves the need for validation of the two datasets by their respective compilers, in particular when different source data are used for some of the indicators. It is worth noting the practice common in many economies whereby the balance of payments and IIP data are compiled first and subsequently incorporated as the relevant components of the 2008 SNA rest of the world accounts.

Classification

A6.6 The classification systems of the 2008 SNA and BPM6 mainly employ consistent coverage and terminology. There is, however, a major presentational difference regarding the grouping of the financial assets and liabilities by functional categories—the primary level of classification in the BPM6 with impacts on the financial account, the IIP, and the categories of investment income—as compared with the categories used by the 2008 SNA in the same accounts. These differences are illustrated in the presentation of the sequence of accounts at the end of this appendix.

A6.7 Other differences between the BPM6 and the 2008 SNA concern the breakdown of the institutional sectors and their groupings. While consistent in coverage, the aggregation of institutional sectors differs according to the importance given to sectors and subsectors in the two datasets. Table A6.1 illustrates the correspondence between the classification of institutional sectors in the two systems.

Table A6.1

Conversion of the Sector Breakdown: System of National Accounts (SNA)—Balance of Payments

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Comparison/Correspondence between the International Accounts and the SNA

A6.8 As in the 2008 SNA, the international accounts (BPM6) cover current and accumulation accounts (flows), as well as positions in the balance sheet (IIP). In the international accounts, transactions (flows) are gathered together under the balance of payments. In the balance of payments the current accounts comprise the goods and services account, the primary income account, and the secondary income account while the accumulation accounts include the capital account and the financial account. In addition, flows that are not transactions but affect the position of assets and liabilities are incorporated in a further account, the other changes in financial assets and liabilities. The IIP covers that part of the national balance sheet that represents the cross border element—that is, the position of financial claims (assets) and liabilities where one party is nonresident, and gold bullion held as reserves.

A6.9 The presentation ahead highlights the similarities and differences in the accounting presentation of the 2008 SNA and BPM6. This presentation is account by account and emphasizes the balancing items, as applicable. In the BPM6, the entries in the current accounts are described as credits and debits. In the 2008 SNA, they are described as resources and uses, but, as noted in paragraph A6.3, a credit for the national economy in the BPM6 is treated as a use by the rest of the world in the 2008 SNA and a BPM6 debit as a resource in the 2008 SNA. In the BPM6, there is a balancing item for each account showing the excess of credits over debits (or a net balance of the financial account). In addition, the BPM6 shows the cumulative value of balancing items up to and including the account under consideration. This is done for comparison with the 2008 SNA, where only the cumulative balance is shown because the 2008 SNA records the balancing item on the use side of the previous account as the first entry on the resource side of the subsequent account.

A6.10 To aid the exposition, Table A6.2 at the end of this appendix shows the main entries for the domestic economy as well as those for the rest of the world from the 2008 SNA perspective, as well as the main entries for the international accounts. The numeric values are those given in the annex to Chapter 2 of the BPM6.

Table A6.2

A Comparative Overview of SNA—International Accounts

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Note: SNA = system of national accounts; IIP = international investment position. An entry of * indicates an entry is possible but in the example given the value is either unknown or zero. Where two values are given separated by /, the first figure relates to assets, the second to liabilities.

Rest of the world, as a pseudo sector in the SNA, records flows reaching/leaving the national economy from/to the rest of the world

The goods and services account (SNA), shows the balance between the total goods and services supplied as resources to the economy and the use of the same gods and services

Balance of payments is part of the goods and services account (SNA)

In this table, “monetary gold and SDRs” are shown at equivalent values on the asset and liability sides of the balance sheet. Because monetary gold bullion has no counterpart liability, this table implicitly assumes that holdings of monetary gold bullion are zero.

Current Accounts

A6.11 As well as accounts showing transactions between different units in the economy, or between a resident and a nonresident unit, the 2008 SNA also contains an account called the goods and services account. It shows how all goods and services made available in the economy through domestic production or imports are used domestically or are exported. It contains all items that do not have counterpart items elsewhere in the sequence of accounts in the SNA and is the source of deriving GDP.

A6.12 There is no equivalent in the international accounts for the SNA’s production account that shows how goods and services are made available to the domestic economy via production. Thus, the recording of imports and exports in the balance of payments is taken as parallel to part of the goods and services account.

A6.13 The balance of payments emphasizes the distinction between goods and services. Goods are presented at an aggregated level while services are covered in detail. The classification of services in the 2008 SNA is strictly consistent with the Central Product Classification (CPC); in the BPM6, it differs from the CPC for a few products—that is, travel, construction, and government goods and services n.i.e., which are transactor-based (relating to the provider/acquirer rather than the product itself). These distinctions reflect policy interests as well as source data issues (see Chapter 10, BPM6). In summary tables of the SNA, imports and exports are usually shown in total or broken down into goods and services separately only.

A6.14 The external balance on goods and services for the rest of the world, which is part of the goods and services account, is mirrored by the balance on goods and services in the international accounts.

A6.15 There are no matching accounts in the international accounts to the SNA’s production account, showing the value of goods and services produced by resident units, or generation of income account, which shows how value added arising from production accrues to government and to the other resident units participating directly in the production process.

A6.16 The primary income account entries in the balance of payments are largely concerned with compensation of employees and property income, exactly as in the allocation of primary income account in the 2008 SNA. Also recorded in the primary income account are the payments of taxes on production payable by a resident to another government, as well as any subsidy receivable by a resident from another government.

A6.17 Property income in the 2008 SNA is equal to investment income in the balance of payments plus rent. Rent rarely arises in cross border situations because all land is deemed to be owned by residents, if necessary by creating a notional resident unit. An example where rent may be recorded in the international accounts may be short-term fishing rights in territorial waters provided to foreign fishing fleets. Also, production sharing agreements in exploration of natural resources may include rent transactions (see Chapter 10, Box 10.1). Investment income in relation to cross border transactions reflects the return to the financial capital invested abroad and vice versa. Interest flows are measured on exactly the same basis in both the BPM6 and the 2008 SNA. With effect from the BPM6, interest is adjusted for the implicit service charge (known as financial intermediation services indirectly measured (FISIM)) levied by deposit-taking corporations and treated by them as part of interest. FISIM is treated as an import/export of financial services.

A6.18 In order to make the reconciliation between investment income in the international accounts and in the 2008 SNA, subcomponents below the level of the functional categories of investment income need to be used. For example, the figures for interest payments to and from the rest of the world as shown in the 2008 SNA are the sum of interest payments under each functional category heading, as indicated by the supplementary table to the right of these headings.

A6.19 The balance on primary income, the balancing item of the primary income account in the balance of payments, shows how GDP is converted to the GNI by payments of primary income to and from abroad. The cumulative balancing item for this sequence of the international accounts is the balance on goods, services, and primary income.

A6.20 The entries in the secondary income account of the balance of payments are mainly current transfers. These entries correspond exactly to those in the secondary distribution of income account in the SNA. Several of these are particularly important in the balance of payments, in particular current international cooperation and personal transfers (remittances) sent by households in one economy to households in another economy (see BPM6, Chapter12 and Appendix 5). Insurance flows related to reinsurance can be of significant importance internationally. The balance of payments records these flows in the same way as the SNA, both as regards the separation of a financial service charge and the treatment of direct insurance and reinsurance flows separately and not on a consolidated basis (more details in Chapter 10, BPM6). The balance of payments also includes in the secondary income account an item known as the adjustment for the change in pension entitlements. This appears in the use of income account in the SNA, but this account does not exist in the balance of payments.

A6.21 The balancing item recorded at this point for the international accounts is the balance on secondary income. The cumulative balance is the current account balance. The SNA records disposable income as the cumulative balancing item on the secondary distribution account. There is then another SNA account, the use of income account, for which there is no corresponding account in the international accounts. The cumulative balancing item on the use of income account is saving for the domestic economy and the current external balance for the rest of the world. This item corresponds exactly to the current account balance from the international accounts.

The Capital Account

A6.22 The elements of the capital account subject to international transactions contain fewer items than those covered in the SNA. There are no transactions recording capital formation of produced assets because the international accounts are not concerned with the final use of products imported/ exported. There are entries to cover acquisitions and disposals of nonproduced nonfinancial assets and capital transfers, although these are infrequent and for many economies may not appear. The account also records capital transfers receivable by and payable by the domestic economy, leading to a capital account balance.

The Financial Account

A6.23 Of major importance for the international accounts is the financial account, which, together with the IIP, plays an important role in understanding the international financing, as well as the international liquidity and vulnerability of a given domestic economy. In particular it indicates how a current account deficit was funded and how a surplus was used.

A6.24 As mentioned earlier, the major difference in presentation in the 2008 SNA and BPM6 concerns the grouping of the financial assets and liabilities by functional categories as the primary level of classification in the BPM6 and the use of the instruments and sectors by the 2008 SNA for the same categories. However, data by functional category are further subdivided by instrument and institutional sector, which makes it possible to link them to the corresponding 2008 SNA and monetary and financial statistics items.

A6.25 It must always be the case that the sum of transactions in financial assets must be equal to the sum of the transactions in liabilities in the matching instruments. Thus the sum of the transactions within the domestic economy and between residents and nonresidents in one financial instrument must be equal for both asset holders and liability holders. For example, Table A6.2 shows that in the financial account the change in assets of currency and deposits held by residents was 89 and by residents in the rest of the world was 11. The matching liability was 102 for residents and -2 for nonresidents, making total assets and liabilities equal to 100.

A6.26 As in the 2008 SNA, the balance of payments has exactly the same balancing item—net lending or net borrowing, which represents the balancing item for the sum of the current and capital accounts, as well as for their counterpart—the financial account. In both systems, net lending or borrowing covers transactions in all instruments used for providing or acquiring funding, without consolidating matching asset and liability transactions. Conceptually, it has the same value as the national accounts item for the total economy, and the same as the national accounts item for the rest of the world but with the sign reversed.

Balance Sheet—IIP

A6.27 The balance sheet in the 2008 SNA measures the positions of assets, both nonfinancial and financial, and liabilities for each institutional sector so as to derive at the end the net worth by the total economy. It also shows how the transactions and other flows occurring during the course of a year explain the changes in positions between the opening and closing balance sheet. The part of the balance sheet covered in the international accounts is called the IIP and matches the rest of the world sector in the 2008 SNA for financial assets and liabilities. Nonfinancial assets do not appear in the international accounts as they do not have a counterpart liability or other international aspect. (If an item previously classified as a capital item is sold abroad, it appears as part of trade in goods.) In the case of financial claims, the cross border element arises when one party is resident and the other party is nonresident. In addition, while gold bullion is an asset that has no counterpart liability, it is included in the IIP when held as a reserve asset, because of its role as a means of international payments.

A6.28 There is also a balancing item for the balance sheet called net worth, reflecting the difference between the total value of assets and liabilities. Changes in net worth due to different transactions and other flows may also be derived.

A6.29 Figure 2.1 in the BPM6. which shows an overview of the SNA as a macroeconomic framework including international accounts, illustrates the sequence of accounts in the 2008 SNA including the balance sheet framework. This is the framework illustrated in the following table showing the relationship between the national and international accounts.

A6.30 Table A6.2 gives you a comparative overview of the SNA—Balance of Payments accounts. For the financial account and financial assets and liabilities in the accumulation account part, as well as for the financial assets and liabilities in the balance sheet part, an additional breakdown is presented of the financial instruments by functional category.

Linkages of the International Accounts with Monetary and Financial Statistics

Introduction

A6.31 The most recent methodology for compiling monetary and financial statistics is contained in the draft Monetary and Financial Statistics Manual and Compilation Guide (MFSM-CG) of 2013. The MFSM-CG is broadly consistent with the 2008 SNA and BPM6, and take account of financial developments since the Monetary and Financial Statistics Manual (MFSM) 2000 was published. The MFS focus on the compilation and reporting of balance-sheet data (end-of-period positions) for the central bank and other depository corporations. However, the new draft MFSM-CG provides more detailed coverage of the other financial corporations sector. A major step in the implementation of the methodology in the MFSM has been the introduction of standardized report forms (SRFs) for economies’ transmittal of monetary data for publication in IFS and for operational purposes of the IMF. The SRFs are designed for reporting of position data only. An overview of the monetary statistics framework supporting the SRFs is presented in Annex 1 of this appendix.

Common Principles and Differences in Classifications

A6.32 Monetary statistics share many principles and concepts with the BPM6 and the SNA.1 The MFSM-CG and the BPM6 are consistent on such issues as the definition and delineation of resident and nonresident entities, time of recording of transactions and other flows, financial asset and liability valuation, and data aggregation and consolidation. However, there are some differences in sectoring of the institutional units and in the classification of the various categories of financial assets and liabilities.

A6.33 As regards the delineation of institutional units and sectors, a special case is the definition of other depository corporations (ODC). In the monetary statistics methodology, all financial corporations that issue liabilities included in broad money are designated as depository corporations. These include the central bank subsector, the other deposit-taking corporations (ODC) subsector, and, in many economies, money market fund shares. The latter two form the ODC subsector in MFSM-CG. In the BPM6, money market funds are not consolidated with deposit-taking corporations but with other financial corporations. In summary in the BPM6 the financial corporations sector is divided into central bank, deposit-taking corporations, except the central bank, and other financial corporations, while the MFSM-CG defines the following subsectors: central bank, ODCs, and other financial corporations (OFC). Therefore if the balance of payments compiler uses monetary statistics the compiler should request separate data on money market funds balance of payments transactions and IIP in order to classify financial transactions and positions correctly within the OFC subsector. The balance of payments compiler should also confirm the institutional coverage of the deposit-taking corporations subsector, as some deposit-takers may be excluded; for instance, offshore banks that do not accept deposits from residents are still considered deposit-taking institutions in the BPM6 but classified as other financial corporations in the monetary statistics.

A6.34 The major categories for financial assets and liabilities in the monetary statistics follow the classification in the 2008 SNA and BPM6 financial instruments classification. Regarding the classification of financial assets, the differences with the BPM6 are as follows:

  • Classification by maturity—In the BPM6, most of debt instruments are divided into separate categories for short-term instruments (original maturity of one year or less) and long-term instruments. The standard components in the MFSM-CG do not include loans and debt securities classified by maturity, although the SRFs include a maturity breakdown for central bank liabilities with nonresidents.

  • Classification by currency of denomination—The BPM6 recommends a breakdown of all debt assets and all debt liabilities by major currency. MFSM-CG requires a breakdown of all instruments, financial assets and liabilities, except equity liabilities, into (1) national currency and (2) foreign currency.

Limitations in Using Monetary Statistics in Compiling an IIP, and How to Overcome Them

A6.35 For the compilation of the IIP using the monetary statistics as source data, the following types of limitations can be identified: valuation, coverage, sector classification, functional categories, and maturity breakdown. These limitations also affect the compilation of other external sector statistics—such as the financial account of the balance of payments and the external debt statistics—that use monetary statistics.

Valuation

A6.36 The valuation principles and other accounting rules in the MFSM-CG are in general agreement with those in the BPM6. However, a major exception for the monetary statistics is the valuation of equity on the liability side of the sectoral balance sheets of financial corporations. For the monetary statistics, liabilities in the form of equity are measured at book value. In the BPM6, equity securities (for both assets and liabilities) should be valued at the market or fair value of the shares.

A6.37 Valuing equity at book value, particularly on the SRFs, has important implications. The equity liability account in the sectoral balance sheet, instead of being subclassified by counterpart sector, as in the rest of the accounts, is classified by types of equity resources (i.e., funds contributed by owners; retained earnings; general and special reserves; and valuation adjustments). Therefore, the value of the equity issued by the domestic financial system and held by nonresidents is not identified.

A6.38 To cover for the compilation needs of the financial statistics, including the financial account of the SNA, the SRFs contain a memorandum item requesting the market or fair value of shares and other equity by counterpart sector, thus allowing for the recognition of equity owned by nonresidents. However, the great majority of economies do not report this memorandum item, implying that this information is not currently compiled by the monetary statisticians. To solve this situation, the IIP compiler (who often does possess data on equity liabilities to nonresidents) should be encouraged to coordinate with their monetary statistics counterparts to promote the compilation of the referred SRF memorandum items, thus avoiding duplication of efforts or excessive reporting burden on financial institutions. Furthermore, foreign liabilities in the monetary statistics are often underestimated because of the lack of liabilities to nonresidents in the form of equity.

Coverage

A6.39 One significant difference between the BPM6 and MFSM-CG regards the treatment of money market funds, which in the BPM6 are part of the other financial corporations sector and in the MFSM-CG are part of the other depository corporations sector. This and other possible deviations from the BPM6 definition of other deposit-takers is discussed in paragraph A6.33.

A6.40 For OFCs in many economies the major reporting challenges arise from the large number and diversity of OFCs, as well as from multiple channels of existing data reporting. The OFCs might well outnumber ODCs owing to the prevalence of insurance corporations, pension funds, and other financial intermediaries and auxiliaries such as financial asset dealers and brokers. In some economies, OFC data reporting is incomplete or is not performed on a timely basis (or both); reporting by some categories of OFCs may not even exist.

A6.41 Ideally, all OFCs should report the monetary data on a timely basis directly to the data compiler. However, such reporting presently exists in relatively few economies. Instead, OFCs report to government agencies responsible for supervision of particular segments of the financial services industry—for example, national agencies for supervision of securities trading or the operation of organized exchanges, and national or state supervisors of insurance corporations or pension funds. Data reporting sometimes is channeled through trade associations or other nongovernment entities that represent the interests of specific groups of OFCs.

A6.42 Establishment of data reporting from OFCs directly to the monetary statistics compiler should result in improved data quality and timelier reporting, with the possibility of sharing these data with the IIP compiler, if efforts to define and gather the data are coordinated. However, national policy may dictate that data reporting to the monetary statistics compiler be channeled through supervisory agencies to which OFCs already report. In any case, if the central bank gathers data on OFCs for monetary or financial sector analysis, and provided BPM6 recording principles are followed, these data should be used for balance of payments purposes too, thus avoiding duplication of efforts.

A6.43 The ODCs subsector may include corporations operating under the control of receivers or regulators or that are no longer dealing with the public. Technically, bankrupt institutions that continue to operate may retain the legal status of operating banks, or a special status may be imposed. In the BPM6, bankrupt deposit-taking corporations that continue to operate remain classified in the deposit-taking corporations institutional sector.

Functional categories

A6.44 Monetary statistics do not use functional categories to classify financial assets and liabilities. This can pose compilation challenges where monetary statistics are used to estimate balance of payments/IIP data on direct investment equity transactions and positions for deposit-takers. For OFCs, as a subsector, there are compilation challenges for direct investment data when monetary data are used in balance of payments / IIP.

A6.45 The emphasis on group consolidated supervision of the financial sector made the relationship between parent, subsidiary, and associate financial corporations broadly available as subaccounts within the accounting chart of accounts used by financial corporations. Nonetheless, the balance of payments compiler faces the difficulty of reconciling the definition of control and significant influence between financial accounting and macroeconomic statistics. In other words, these definitions in the BPM6 do not entirely correspond to the definitions found, for example, in the international financial reporting standards (IFRS). Nevertheless, the closeness of the definitions may encourage some economies to use banking supervisor data or data based on IFRS (without adjustment) for compiling the international accounts.

Maturity breakdown

A6.46 The SRFs contain maturity breakdown only for central bank liabilities with nonresidents, but not for financial assets or for assets and liabilities in other financial subsectors. While traditional monetary analysis does not focus on maturity of financial assets, supervisory data often used to compile the monetary statistics present the short and long-term breakdowns required by the BPM6 for selected financial instruments. These breakdowns are often available to the monetary statistics compiler.

A6.47 New requirements for financial sector data focused on financial stability analysis, particularly on liquidity, are putting emphasis on the availability of maturity breakdowns useful for the compilation of the IIP.2

Reconciliation Exercise between Monetary Statistics and IIP

A6.48 This section presents tables reconciling monetary statistics and IIP components. It shows the use and limitations of the monetary statistics in details—that is, component by component.

A6.49 As mentioned in Chapter 9, the Sectoral Balance Sheet for ODC,3 can be used for the deposit-taking corporations, except the central bank sector of the IIP. The Sectoral Balance Sheet for the Central Bank can be used to compile data for the central bank sector in the IIP. If economies complete the Sectoral Balance Sheet for OFC,4 it can be used to compile IIP data for other sectors—other financial corporations.

A6.50 The Sectoral Balance Sheet for ODC, which can be used by the compiler to identify and select the external assets and liabilities of deposit-taking corporations, except the central bank, is reported to the IMF through the SRFs for reporting monetary and financial data. Table A6.3 presents the reconciliation of positions of depository corporations, except the central bank vis-à-vis nonresidents, with the corresponding IIP components.5

A6.51 Table A6.3 shows that, although the sectoral balance sheet data can largely correspond with IIP components, the differences in the classification do not allow a full reconciliation of the two frameworks.

Table A6.3

Reconciliation of Other Depository Corporations’ Balance Sheet Items with International Investment Position (IIP) Components

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Note: Numbers shown in the table follow the numbering sequence in the standard components of the IIP in the BPM6.

Reserve assets are excluded from this table, because reserves are not commonly held by deposit-taking corporations, except the central bank.

A6.52 Table A6.4 presents the reconciliation of positions of the central bank vis-à-vis nonresidents with the relevant corresponding IIP components.

Table A6.4

Reconciliation of Sectoral Balance Sheet Items for the Central Bank with International Investment Position (IIP) Components

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Note: Numbers shown in the table follow the numbering sequence in the standard components of the IIP in the BPM6.

In the “Monetary statistics: Sectoral Balance Sheet Central Bank” column, the short-term and long-term breakdown is provided only for liabilities in foreign currency.

It includes IMF accounts and use of Fund credit.

A6.53 Tables A6.3 and A6.4 demonstrate that there may be a number of limitations when using monetary statistics to derive the IIP. In many instances, monetary statistics do not provide enough detail to compile the full breakdown of standard components in the IIP. But both systems have enough in common to consider pursuing a coordinated effort to use the same source data with the necessary details to compile both types of statistics. When properly designed and implemented, this approach would avoid duplication of effort and improve consistency between these related datasets.

Linkages of the International Accounts with the Government Finance Statistics

Introduction

A6.54 The Government Finance Statistics Manual 2014 (GFSM 2014) describes an integrated macroeconomic statistical framework (the government finance statistics (GFS)) designed specifically to support fiscal analysis. The manual provides the economic and statistical principles to be used in compiling the statistics and guidelines for the presentation of fiscal statistics within an integrated analytic framework that includes appropriate balancing items.6

A6.55 As a result of the conceptual interlinkages between these two datasets, the compiler of the international accounts and GFS may be able to usefully consult with one another to ensure consistency in definitions, coverage, concepts, and accounting rules. The compiler may also be able to share source data,7 and to reconcile these estimates where they overlap.

A6.56 This appendix summarizes important similarities and differences between GFS and the balance of payments and IIP statistics. It also indicates how the data compiled for general government in the balance of payments and IIP could be reconciled with GFS. It does not list, however, all similarities and differences between the two datasets and should not be considered a comprehensive guide.

Coverage and Accounting Rules

A6.57 Since the GFSM 2014 is harmonized with the 2008 SNA, it is also harmonized with other macroeconomic systems, including the BPM6. In GFS total economy is divided into five mutually exclusive sectors (general government, financial corporations,8 nonfinancial corporations, households, and nonprofit institutions serving households). The units in each sector have similar objectives, and these objectives are, in turn, different from those of units in other sectors. The international accounts use the same sectors and subsectors as the 2008 SNA and the GFS framework but with a different presentation to allow continuity with previous international classifications (such as the Balance of Payments Manual, fifth edition). The international accounts have a shorter list of sectors and include only four main sectors: general government, central bank, deposit-taking corporations, except the central bank, and other sectors9 (see Table 4.2 in the BPM6 for the detailed classification of the institutional sectors) for economies in which it is not practical to implement the full classification. The general government sector10 follows the definitions of the SNA in GFS and the international accounts. The compiler of both datasets should ensure that the actual coverage of the general government used in their statistics is identical.

A6.58 Both frameworks can be described as the systematic recording and presentation of positions and flows, with flows comprising transactions and other economic flows. The accrual basis of recording is used, and the valuation principle is the current market value for recording positions and flows. Both use the doubleentry accounting system (i.e., each transaction is recorded as consisting of a debit and credit entry of equal value), and the sum of credit entries and the sum of the debit entries are the same.

A6.59 Both GFS and the international accounts record, respectively, revenue and expense and current and capital transactions on a gross basis; and both record transactions and other changes in financial assets and liabilities on net bases for each category of assets or liabilities. For dissemination purposes, GFS presents revenue (credits) and expense (debits) separately (i.e., in two different detailed tables), while in the international accounts, credits and debits are presented under the same respective categories. Positions of financial assets and liabilities are recorded on a gross basis in both datasets.

A6.60 Consolidation is a method of presenting statistics for a set of units as if they constituted a single unit. Because the international accounts reflect transactions involving residents and nonresidents and external financial assets and liabilities, including other flows associated with them, consolidation is not relevant for international accounts of an individual economy. In GFS, consolidation is relevant and used for the preparation of statistics for the general government and its subsectors (central, regional, and local governments). General government units by definition are resident units; therefore GFS consolidation principles would not affect the consistency in data between the two datasets.

Comparison of the Structures of GFS and the Balance of Payments and the IIP

A6.61 The structure of the GFS framework is similar to the structure used in the balance of payments and IIP frameworks, and comprises: (1) the statement of operations, which records the results of all transactions during an accounting period; (2) the statement of other economic flows, which summarizes changes in assets, liabilities, and net worth that have not been generated by transactions; and (3) the balance sheet, which shows positions of financial and nonfinancial assets owned, positions of liabilities owed, and net worth, which is equal to the total value of all assets less the total value of all liabilities. As illustrated in Figure A6.1, the comprehensive treatment of transactions and other economic flows in GFS enables the opening and closing balance sheets to be fully integrated. That is, the position of a given type of asset or liability at the beginning of an accounting period plus the changes in that position indicated by transactions and other economic flows equal the stock position at the end of the period.

Figure A6.1
Figure A6.1

Government Finance Statistics Framework

A6.62 The GFS framework generates a set of statistical statements, which if combined, demonstrate that all changes in the positions result from flows. This is similar to the accounting identity in the IIP that requires all changes in investment positions to result from transactions and other flows. In addition, the GFS framework includes a statement of sources and uses of cash to provide key information on liquidity. A similar statement is not prepared in the international accounts.

The Statement of Operations

A6.63 The statement of operations is a summary of transactions of the general government sector in a given accounting period. This statement presents three main categories of transactions (see Table A6.5): (1) transactions affecting net worth that include details of transactions on revenue and expense; (2) transactions in nonfinancial assets (net acquisition of nonfinancial assets);11 and (3) transactions in financial assets and liabilities (net acquisition of financial assets, and the net incurrence of liabilities). The statement of operations has similarities with the balance of payments, because both statements summarize transactions during a period. In the balance of payments, transactions are presented in a sequence of three accounts, the current, capital, and financial account.

Table A6.5

Statement of Operations

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The net operating balance equals revenue minus expense. The gross operating balance equals revenue minus expense other than consumptions of fixed capital.

The net investment in nonfinancial assets equals acquisitions minus disposals minus consumption of fixed capital. The gross investment in nonfinancial assets equals acquisitions minus disposals.

Classified by instrument and/or sector of the counterparty (see Table 9.1 and 9.2, GFSM 2014.).

A6.64 The transactions presented in the first two categories of the GFS framework—namely, revenue and expense—are similar to the transactions in the current account of the balance of payments with one exception: capital transfers included in respectively revenue (credit) and expense (debit) of GFS, because these transactions affect net worth, are presented in the capital account of the balance of payments. Gross acquisitions (debit)/disposals (credit) of nonproduced assets included in the net investment of nonfinancial assets of GFS are presented in the capital account of the balance of payments. The GFS transactions in financial assets and liabilities of the statement of operations are fully consistent with those shown in the financial account of the balance of payments.

A6.65 The statement of operations in GFS has a linkage to the accounts in the balance of payments to the extent that general government sector units are involved in transactions with nonresidents. For grants, interest, and transactions in financial assets and liabilities, GFS separately identifies transactions with nonresidents. However, for other transactions with nonresidents GFS will usually not separately identify these transactions, which limit opportunities for reconciliation between the international accounts and GFS. However, in some cases, supplementary information in the general government sector accounting system may identify such transactions—particularly where these are of an unusual nature, large volume, or large value.

A6.66 In GFS, revenue is defined as an increase in net worth resulting from a transaction, and expense as a decrease in net worth resulting from a transaction. The net investment in nonfinancial assets equals gross fixed capital formation less consumption of fixed capital, plus changes in inventories, transactions in valuables, and nonproduced assets. The net acquisition of financial assets and the net incurrence of liabilities represent financial transactions that change a government’s holdings of financial assets and/or liabilities.

A6.67 Two important analytical balances are derived in GFS in the statement of operations. Revenue less expense equals the net operating balance(change in the net worth due to transactions). The subsequent deduction of the net investment in nonfinancial assets results in net lending (+)/net borrowing (-)(change in the net financial worth), which is also equal to the net result of transactions in financial assets and liabilities—that is, equal to the net acquisition of financial assets minus the net incurrence of liabilities. The net operating balance is a summary measure of the ongoing sustainability of government operations, and the net lending (+)/net borrowing (-) is a summary measure indicating the extent to which the government is either putting financial resources at the disposal of other sectors in the economy or to abroad, or utilizing the financial resources generated by other sectors or from abroad. In addition, the gross operating balance is a balance that differs from the net operating balance in that it does not include consumption of fixed capital as an expense.12

A6.68 There are more balancing items in the balance of payments than in GFS, partly because there are more transaction accounts than categories in the statement of operations. In GFS, as indicated in the previous paragraph, the balancing items are: the net operating balance and the net lending/net borrowing, while in the balance of payments the balancing items are: current account balance; balance on goods and services; balance on goods; balance on services; balance on primary income ; balance on secondary income; capital account balance; net lending/borrowing (i.e., balance from current and capital accounts); and net lending/net borrowing (i.e., balance from financial account). In both datasets, the net lending/net borrowing is equal to the financial account balance.

Revenue

A6.69 Governments receive four major types of revenue from their fiscal operations: compulsory levies in the form of taxes and certain types of social contributions, property income derived from the ownership of assets,13 sales of goods and services,14 and transfers receivable from other units. Of these, compulsory levies and transfers are the main sources of revenue for most general government units. Revenue is composed of heterogeneous elements classified according to different characteristics depending on the type of revenue. The four types of revenue are classified in four categories: (1) taxes ; (2) social contributions; (3) grants; and (4) other revenue.

Taxes

A6.70 Taxes are compulsory, unrequited amounts receivable by government units from institutional units.15 The coverage, timing, and valuation of tax revenue in the balance of payments and GFS are identical, but the classifications differ. The balance of payments has provisions for compilation of (1) taxes on production and imports; (2) current taxes on income, wealth, and so forth; and (3) capital taxes, while the approach adopted in GFS is to classify taxes mainly by the basis on which the tax is levied. Taxes are grouped in six major categories in GFS: (1) taxes on income, profits, and capital gains; (2) taxes on payroll and workforce; (3) taxes on property; (4) taxes on goods and services; (5) taxes on international trade and transactions; and (6) other taxes (see Table A.6.6 for additional details).16

Table A6.6

Taxes in Government Finance Statistics (GFS) and Balance of Payments

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Note: To maintain consistency with codes used in GFSM 2001, the 11414 code does not follow directly the code of the previous category of taxes- taxes on capital and financial transactions (GFS 1134 in GFSM 2001) are now classified in taxes on goods and services (GFS 114) to enhance consistency with 2008 SNA.

A6.71 While certain taxes may be levied on nonresidents (such as some taxes on international trade and on international transactions), the portion attributable to nonresidents may be difficult to identify in GFS and may vary from one tax category to the next and from one year to another.

A6.72 Taxes on products and production reported in the balance of payments primary income account comprise the same tax categories as in the SNA. Some examples of these taxes17 are value added taxes (GFS 11411);18 sales taxes (GFS 11412); excise (GFS 1142); taxes on specific services (GFS 1144); customs and other import duties (GFS 1151); taxes on exports (GFS 1152); and profits of export or import monopolies (GFS 1153). Exceptionally, some taxes and duties may be payable on goods that physically enter the economy but where there is no change of ownership, so they are not treated as imports. Nevertheless, any such taxes and duties are still included in the heading of taxes and duties on imports in the GFS.

A6.73 Current taxes on income, wealth, and so forth reported in the balance of payments secondary income account are the sum of several detailed tax categories as reported in the GFS, and comprise taxes on income, profits and capital gains (GFS 111) and several other tax categories mainly payable by final consumers (such as taxes on use of goods and on permission to use goods or perform activities (GFS 1145), and other taxes on international trade and transactions (GFS 1156).

A6.74 Capital taxes included in the balance of payments capital account consist of taxes levied at irregular and infrequent intervals on the values of the assets or net worth owned by institutional units or on the value of assets transferred between institutional units as a result of legacies, gifts inter vivos, or other transfers. Capital taxes19 are the sum of estate, inheritance, and gift taxes (GFS 1133), and capital levies (GFS 1135).

Social contributions

A6.75 In GFS, social contributions are actual or imputed revenues receivable by social insurance schemes to make provision for social insurance benefits payable. Social contributions may be from either employers on behalf of their employees or from employees, self-employed, or nonemployed persons on their own behalf. These contributions secure entitlement to social benefits (GFS 27) that are payable to the contributors, the dependents, or their survivors. The contributions may be compulsory or voluntary. Social contributions are classified as social security contributions (GFS 121) or other social contributions (GFS 122) depending on the type of scheme receiving them. Additional breakdowns are included to classify this information by employees, employers, and self-employed or nonemployed persons. In GFS, social contributions are not divided between residents and nonresidents.

A6.76 The coverage of social contributions in GFS is more restricted than in the 2008 SNA and BPM6. In GFS, only contributions that constitute revenue are included in social contributions (GFS 12)—that is, only transactions that increase the net worth are included. In GFS, social contributions exclude contributions to autonomous and nonautonomous pension funds and to unfunded employment related pension schemes that provide pension and other retirement benefits. Social contributions to autonomous and nonautonomous pension funds and to unfunded employer social insurance schemes that provide retirement benefits are recorded as incurrence of liabilities by the government.20 The 2008 SNA and BPM621 record all social contributions and incurrence of liabilities, with the accounting being neutralized by recording an adjustment for the change in pension entitlements. Social contributions receivable from nonresidents by general government sector units are included in the secondary income account in the balance of payments, and, when identified, they should be consistent with the corresponding GFS categories.

Grants

A6.77 Grants are transfers receivable by government units from other resident or nonresident government units or international organizations, and that do not meet the definition of a tax, subsidy or a social contribution. Three sources of grants are recognized in GFS: grants from foreign governments (GFS 131), grants from international organizations (GFS 132), and grants from other general government units (GFS 133). Each of these categories distinguishes current and capital grants.

Table A6.7

Other Revenue Categories in Government Finance Statistics (GFS) and Balance of Payments

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A6.78 Current grants receivable from foreign general governments and international organizations (GFS 1311 and 1321, respectively) are often the most important linkage between the GFS and the balance of payments secondary income account. Capital grants receivable from foreign general governments and international organizations (GFS 1312 and 1322, respectively) are linked to the capital transfer category of the general government in the balance of payments capital account. Current (GFS 1331) and capital grants (GFS 1332) receivable from other general government units are transactions between residents—that is, units within the general government of any particular economy, and they do not impact the balance of payments.

A6.79 The following is the treatment of some capital transfers in the GFS and balance of payments accounts:

  • Debt forgiveness22 received from nonresidents will be reflected in the GFS as revenue in capital grants received either from foreign governments (GFS 1312), or international organizations (GFS 1322), or as capital transfers not elsewhere classified (GFS 1442), when received from other nonresident entities. A corresponding reduction in the appropriate external debt instrument will be recorded. In the balance of payments, debt forgiveness is recorded as a capital transfer (see BPM6, paragraph 13.23) in the capital account from the creditor economy to the debtor economy, offset by a reduction in the liability of the debtor (reduction in the asset of the creditor) under the appropriate debt instrument in the financial account.

  • Investment transfer consists of capital transfers in cash23 or in kind made by foreign governments or international organizations to other institutional units to finance all or part of the cost of their acquiring fixed assets. These transfers will be recorded in the same categories of revenue and expense as for debt forgiveness as described earlier in GFS. However, in this case, a corresponding increase in cash will be recorded if the investment grant was received in cash, while the appropriate nonfinancial asset will increase in the case of a grant in kind. In the balance of payments, investment grants are recorded as other capital transfer (see BPM6, paragraph 13.25) in the capital account from the donor economy to the recipient economy, and the counterentry is in the relevant financial instrument, if the transfer was received in cash, or in import of goods and services, if received in kind.

  • Calls on one-off guarantees and other debt assumption are capital transfers that occur when a one-off guarantee is activated and the guarantor acquires no claim on the debtor or a claim worth less than the value of the guarantee, or in other cases of debt assumption. When general government sector units and nonresidents are involved in these transactions, they should be consistently treated in the capital account and GFS. For treatment in balance of payments see the BPM6, paragraph 13.27.

A6.80 Other capital transfers consist of major nonrecurring payments in compensation for extensive damage or serious injuries not covered by insurance policies. When general government sector units are the recipients of this type of transfer from nonresidents, they will be recorded as part of capital grants receivable either from foreign governments (GFS 1312), or international organizations (GFS 1322), or as capital transfers n.e.c. (GFS 1442), when receivable from other nonresident entities. In balance of payments, such payments are recorded as other capital transfers in capital account (see BPM6, paragraph 13.29). When statistics are compiled for the general government sector, grants from other domestic government units would be eliminated in consolidation 24 so that only grants from foreign governments and international organizations would have nonzero values in the general government accounts.

Other revenue

A6.81 In GFS, other revenue includes property income, sales of goods and services, fines, penalties, and forfeits, transfers not elsewhere classified, and premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes.

A6.82 The contribution of the general government sector to investment income in the primary income account is mainly derived from the portion receivable from nonresidents of the GFS categories interest (GFS 1411), dividends (GFS 1412), withdrawals from income of quasi-corporations (GFS 1413), property income from investment income disbursements (GFS 1414),25 rent (GFS 1415), and reinvested earnings on foreign direct investment (GFS 1416). In the balance of payments, the primary income account groups these items by functional category (direct investment, portfolio investment, other investment, and reserve assets). GFS does not present a functional classification26 similar to that in the international accounts.

A6.83 The contribution of the general government sector to the goods and services accounts of the balance of payments comprises the sales of goods and services to nonresidents. These sales are classified in the corresponding categories of the goods and services accounts. In the services account, a separate disclosure of government goods and services n.i.e. is included and covers the following:

  • Goods and services supplied by enclaves, such as embassies, military bases, and international organizations

  • Goods and services acquired from the host economy by diplomats, consular staff, and military personnel located abroad, and their dependents but excluding revenue/expense of workers who are residents of the local economy

  • Services supplied by governments and not included in other categories of services

A6.84 As foreign government and international organization enclaves are not residents of the territory in which they are physically located, their transactions with residents of the territory of location are international transactions. Government revenue from licenses and permits sold to nonresidents is also included in this category if it is not instead treated as taxes, as well as some activities related to technical assistance provided by one economy to another (see BPM6, Box 10.6).

A6.85 The GFS framework does not specifically require the identification of transactions with nonresidents in goods and services, or produced nonfinancial assets owned by the government. However, where these transactions can be identified and classifications are built into the underlying public sector accounting system, the information could be supplied to the balance of payments compiler for estimating credits from the sales of goods and services category of GFS (GFS 142), as well as the net investment in nonfinancial assets, other than nonproduced assets (GFS 31).

A6.86 The secondary income and the capital accounts of the balance of payments have linkages to several GFS other revenue categories, including fines, penalties, and forfeits (GFS 143), current transfers not elsewhere classified (GFS 1441) and premiums, fees, and claims related to nonlife insurance and standardized guarantee schemes (GFS 145) in the secondary income account, and capital grants (GFS 131 and 132) and capital transfers n.e.c. (GFS 1442) in the capital account.

Expenses

A6.87 Sometimes governments supply goods and services to the community. In doing so, a government may produce the goods and services itself and distribute them, purchase them from a third party, or transfer cash to households so they can purchase the goods and services directly. The types of expenses that relate to the costs of production undertaken by government itself incurred for these activities are: compensation of employees, use of goods and services, and consumption of fixed capital. Expenses also include subsidies, grants, social benefits, and other expense related to transfers in cash or in kind, and purchases of goods and services from third parties for delivery to other units. In addition, expenses include interest that is payable by units that incur certain kinds of liabilities—namely, deposits, debt securities, loans, and other accounts payable (see Table A6.8 for additional details).

Table A6.8

Expense in Government Finance Statistics (GFS) and Balance of Payments

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A6.88 The linkages that exist between the international accounts and GFS are presented ahead.

Compensation of employees

A6.89 Compensation of employees is the total remuneration, in cash or in kind, payable to an individual in an employer-employee relationship in return for work done by the latter during the accounting period. Compensation of employees (GFS 21) excludes amounts connected with own-account capital formation. In GFS, compensation of employees payable to employees engaged in own-account capital formation, which is the production of nonfinancial assets for own use, is directly recorded as a component of the cost of the acquisition of nonfinancial assets. It includes both wages and salaries (GFS 211) and employers’ social contributions (GFS 212). Wages and salaries are payments in cash or in kind to employees in return for services rendered, before deduction of withholding taxes and employees’ contributions to social insurance schemes. In the balance of payments, the definition of compensation of employees is the same.

A6.90 Because government employment usually has some residency criteria as preconditions, international payments of employee compensation by government are often not very large. However, in the case of territorial enclaves, all compensation of employees (GFS 21) payable by government to residents of the host economy should be included in the primary income account. The GFS classifications do not specifically require the identification of compensation of employees to nonresidents. However, when such payments are identified in the underlying source system, the information should be reported consistently in the GFS and primary income account debits in the balance of payments.

Uses of goods and services

A6.91 This category consists of goods and services used for the production of market and nonmarket goods and services. Excluded are the consumption of fixed capital (GFS 23), the use of goods and services in own-account capital formation that are recorded as the acquisition of nonfinancial assets, and goods purchased by government and distributed without transformation that are recorded as some type of transfer in kind.27

A6.92 The use of goods and services of the general government sector from nonresidents is reflected in the corresponding categories of the goods and services accounts in the balance of payments where goods and services accounts contain a separate category for government goods and services n.i.e. (see paragraph A6.83). The GFS system does not specifically require the identification of transactions in goods and services of the government with nonresidents. However, where these transactions can be identified and classifications are built into the underlying public sector accounting system, the information could be supplied to the balance of payments compiler for estimating debits from the uses of goods and services (GFS 22) category of the GFS.

Consumption of fixed capital

A6.93 Consumption of fixed capital is the decline during an accounting period in the current value of fixed assets owned and used by a general government unit as a result of physical deterioration, normal obsolescence, or normal accidental damage. It is valued in the average prices of the period. This is an internal transaction where government act in two capacities, and would therefore not have any impact on the balance of payments.

Interest

A6.94 Interest is the expense that the general government unit (the debtor) incurs for the use of certain kinds of financial assets, for putting these financial and other resources at the disposal of another institutional unit. In the GFS framework, the interest category is not compiled using an international account functional classification. The interest expense (GFS 24) category in the GFS framework is broken down in three subcategories: to nonresidents (GFS 241), to residents other than general government (GFS 242), and to general government units (GFS 243). As opposed to other categories in GFS, the nonresident portion of interest (GFS 241) is separately identified and it should be linked with the corresponding categories in the balance of payments accounts. The compiler should also be aware that, as opposed to general government interest receipts and payments recorded in the balance of payments, interest in the GFS framework is not adjusted for FISIM.

Subsidies

A6.95 Subsidies are current unrequited payments that government units make to companies on the basis of the level of their production activities or the quantities or values of the goods or services they produce, sell, export, or import. Subsidies may be designed to influence the level of production and the prices at which outputs are sold, or the profits or losses of the companies involved.

A6.96 In calculating other primary income in the balance of payments, linkages with the GFS data arise from the transactions with nonresidents related to subsidies (GFS 25). Where the identification of such payments to nonresidents is provided in the underlying public sector accounting system, the information should be consistent with the primary income account.

Grants

A6.97 Grants are transfers payable by a government unit to other resident or nonresident government unit, or international organizations, that do not meet the definition of a tax, subsidy, or social contribution. These three recipients of grants are recognized in GFS. For reconciliation with the international accounts, the following grants are relevant: current grants payable to foreign governments (GFS 2611) and to international organizations (GFS 2621) are linked to the secondary income account in the balance of payments, and capital grants payable t o foreign governments (GFS 2612) and to international organizations (GFS 2622) are linked to the capital account in the balance of payments.

A6.98 When the government sector unit is the grantor of debt relief to a nonresident, an expense will be reflected in grants, to foreign governments, capital (GFS 2612); or, grants, international organizations, capital (GFS 2622); or capital transfers not elsewhere classified (GFS 2822), when provided to other entities different from foreign government and international organizations. A corresponding reduction in the appropriate foreign financial asset will be recorded. The GFS framework does not identify a separate category for debt forgiveness. Exceptionally large nonlife insurance claims—where these claims are payable by government sector units—may be recorded as capital claims (GFS category 2832) in the premium, fees, and claims related to nonlife insurance and standardized guarantee schemes (GFS 283) category.

A6.99 Governments are often involved in grant transfers, which should be reported in a consistent way in GFS and the secondary income or capital account of the balance of payments. Governments undertake transfers to convey a benefit to another party, or benefit from transfers receivable. These capital transfers consist of compulsory transfers to governments, transfers under court orders, and voluntary transfers. There may also be imputed capital transfers as a result of governments’ use of entities resident in other economies, for fiscal purposes (see GFSM 2014, paragraph 2.124, and BPM6, paragraphs 8.24–8.26).

Social benefits

A6.100 Social benefits are current transfers receivable by households intended to provide for the needs that arise from certain events or circumstances—for example, sickness, unemployment, retirement, housing, education, or family circumstances.28 In GFS, not all social benefits are treated as expense. The payment of pension and other retirement benefits through employer social insurance schemes is treated as reductions in liabilities (see also paragraph A6.76). Social benefits (GFS 27) payable to nonresidents should feed into those corresponding categories in the secondary income account. In the international accounts, social benefits are divided in two subcategories—that is, those related to the general government and those to the financial corporations, nonfinancial corporations, households, and NPISHs. In the GFS framework, social benefits are compiled with a different disaggregation, social security benefits (GFS 271), social assistance benefits (GFS 272), and employment-related social benefits (GFS 273).

Other expense

A6.101 The GFS framework, in addition to compensation of employees, use of goods and services, consumption of fixed capital, interest, subsidies, grants, and social benefits, identifies other expense. Other expense comprises property expense other than interest, transfers not elsewhere classified, and premium, fees, and claims related to nonlife insurance and standardized guarantees.

A6.102 The contribution of the general government to the primary income account of the balance of payments is often largely derived from the nonresident portion of all the subcategories of property expense other than interest (GFS 281): dividends (GFS 2811), withdrawals from income of quasi-corporations (GFS 2812), property expense for investment income disbursements (GFS 2813), rent (GFS 2814), and reinvested earnings on foreign direct investment (GFS 2815). In GFS, detailed classification of dividends presents breakdowns to nonresidents (GFS 28111) and to residents (GFS 28112).

A6.103 In calculating secondary income and capital account categories of the balance of payments, linkages with the GFS other expense categories arise from the transactions with nonresidents related to current transfers not elsewhere classified (GFS 2821) and premiums, fees, and claims related to nonlife insurance and standardized guarantees (GFS 283) in the secondary income account, and capital transfers not elsewhere classified (GFS 2822) in the capital account.

Transactions in Nonfinancial Assets

A6.104 In GFS, transactions in nonfinancial assets include all categories of produced and nonproduced assets. It should be noted that, contrary to GFS, the capital account in the balance of payments does not include produced nonfinancial assets; it instead records only transactions in nonproduced nonfinancial assets. Transactions in produced nonfinancial assets are included in the respective balance of payments categories—for example, goods as recorded in the goods and services account. The goods and services account does not distinguish whether those goods or services are of a capital or current nature.

A6.105 Nonproduced nonfinancial assets consist of natural resources; contracts, leases, and licenses; and marketing assets and goodwill in the balance of payments, which are identified in the GFS framework. There is full consistency in the macroeconomic statistical framework with regards to the categories of nonproduced, nonfinancial assets that exist. Where general government sector units acquire or dispose of these assets in transactions with nonresidents, supplementary information would be helpful from the GFS transactions to feed into the international accounts.

Transactions in Financial Assets and Liabilities

A6.106 The functional categories in the international accounts take into consideration some aspects of the relationship between the parties and the motivation for investment (see BPM6, Chapter 6). In addition, data in the financial account are also presented according to the financial instrument employed, and the sector of the resident counterpart to the transaction.

A6.107 Although the classification of financial assets and liabilities as presented in the GFS does not follow the same functional categories of the international accounts, it is fully consistent with the financial instrument and sector classification as used in the international accounts. The guidelines of the GFS framework suggest that transactions in financial assets and liabilities with residents and nonresidents be separately disclosed. GFS follows the same criteria for determining residence as the international accounts. Conceptually it therefore allows international financial transactions that are included in GFS to be compared to the data for general government as presented in the financial account of the international accounts.29

The Statement of Other Economic Flows

A6.108 In the GFS framework, the other economic flows in the financial assets and liabilities account shows changes in positions that arise for reasons other than transactions between residents and nonresidents. These changes are also called other flows, and, as with the international accounts, they include holding gains and losses, reclassifications, and other changes in volume of financial assets and liabilities.30 The classification of financial instruments for assets and liabilities is conceptually fully consistent in GFS and international accounts, which should promote consistency in the data reported for other flows in the two datasets.

The Balance Sheet

A6.109 In addition to classifying financial assets and liabilities by the characteristics of the financial instrument, categories of the general government balance sheet are also classified according to the residence of the other party to the instrument (the debtors for financial assets and the creditors for liabilities). Because there has been a growing recognition of the role of balance sheet analysis in understanding sustainability and vulnerability, currency composition and maturity analysis of the balance sheet are encouraged as additional information. In the IIP, the highest level of classification used is the functional categories. However, in addition, the IIP is disaggregated by financial instrument, and most of these instruments are further disaggregated according to the counterpart institutional sector (which is the lender for assets and the borrower for liabilities) and maturity. The currency composition of the IIP debt assets and liabilities is a memorandum item.

A6.110 General governments’ financial asset/liability position with nonresidents as reported in the GFS balance sheet follows the same classification of instruments and accounting rules as the IIP. The maturity and currency breakdowns, as suggested in the Public Sector Debt Statistics: Guide for Compilers and Users and the GFSM 2014, are also fully consistent with the IIP.

Annex to Appendix 6

Overview of the Monetary Statistics Framework

A6.111 This annex describes the framework for the compilation of monetary statistics in accordance with the methodology recommended in the MFSM-CG. The monetary statistics cover position and flow data on the assets and liabilities of the financial corporations sector and its subsectors.

A6.112 The monetary statistics include data for all institutional units in the financial corporations sector, as described in Chapter 3 of the MFSM-CG. For compiling the monetary statistics, the financial corporations sector is divided into central bank subsector, other depository corporations subsector, and other financial corporations subsector. Taken together, the central bank and other depository corporations constitute the depository corporations subsector.

A6.113 The framework for the monetary statistics recommended in the MFSM-CG embodies two levels of data compilation and presentation. At the first level, position and flow data reported by individual institutional units are aggregated into sectoral balance sheets, which contain comprehensive data for the individual financial corporations subsectors—that is, the central bank, other depository corporations, and other financial corporations. At the second level, the data in the sectoral balance sheets are consolidated into surveys.

Table A6.9

Financial Assets and Liabilities in Government Finance Statistics (GFS) and Balance of Payments

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A6.114 Surveys are compiled for financial corporations subsectors and for the entire financial corporations sector. The depository corporations survey (DCS) and its component surveys—the central bank survey (CBS) and the other depository corporations survey (ODCS)—are the major focus of the monetary statistics and constitute a core set of data for macroeconomic analysis. The DCS contains position and flow data on the depository corporations’ liabilities that are components of broad money, as nationally defined, and data on the depository corporations’ assets that are claims on (i.e., credit to) other sectors of the economy. The DCS also contains data on the depository corporations’ claims on and liabilities to nonresidents. The CBS and ODCS show the data that are consolidated to obtain the DCS and other data that are used in monetary and credit analysis at the separate levels of the central bank and other depository corporations.

A6.115 The monetary statistics framework also includes the financial corporations survey (FCS), which extends the coverage beyond the depository corporations covered in the DCS. In the FCS, the position and flow data from the DCS are consolidated with the data from the other financial corporations survey (OFCS), which contains position and flow data consolidated for insurance corporations and pension funds, other financial intermediaries, and financial auxiliaries. The FCS thereby provides the position and flow data for analyzing claims on and liabilities to all other sectors of the economy and nonresidents, at the level of the entire financial corporations sector. In particular, the FCS shows a comprehensive measure of credit extended by financial corporations.

A6.116 The purpose of the sectoral balance sheets is to provide a framework for the collection and presentation of data in a format that facilitates the compilation of surveys, as described in the preceding paragraphs. The data for a sectoral balance sheet are obtained from the individual institutional units within a financial corporations subsector and are classified into standard components, in accordance with the sectorization, instrument classification, and accounting principles in the MFSM-CG. In addition, sectoral balance sheets are directly useful for analyses requiring subsector data that are more highly disaggregated than the asset and liability categories shown in the corresponding financial subsector surveys.

A6.117 The surveys contain position and flow data31 encompassing all assets and liabilities for the units covered by the respective survey. Each is based on data for all institutional units within the subsector. Thus, the term survey refers to comprehensive data for all units in a subsector, rather than to sample survey data that would cover only a subset of units or only a subset of the asset and liability accounts.

A6.118 The DCS covers the accounts of the depository corporations and is a consolidation of the CBS and the ODCS. The FCS is a consolidation of the DCS and the OFCS.

A6.119 For many economies, the DCS will constitute the principal set of monetary statistics for macroeconomic policy. The DCS is a consolidated statement of positions and flows for the accounts of all financial sector corporations that incur liabilities included in the national definition of broad money. The framework of the DCS is designed to facilitate analysis of broad money and its components, credit aggregates and their components, and depository corporations’ foreign assets and liabilities and other assets and liabilities.

A6.120 By maintaining the balance-sheet identity in the DCS, the broad money liabilities of depository corporations are linked to their claims on (i.e., credit to) nonresidents and sectors of the domestic economy, and to their other assets and liabilities. This balance sheet identity is reflected in the position and flow data in the DCS.

A6.121 The DCS is structured to facilitate macroeconomic analysis that makes use of the linkages between the monetary statistics and other macroeconomic statistics. The balance sheet presentation of the DCS links depository corporations’ broad money liabilities to their foreign assets and liabilities and to their claims on and liabilities to central government, thereby linking the monetary statistics to the IIP and GFS, respectively.

A6.122 The DCS can be rearranged to show that broad-money liabilities (BML) equal the sum of net foreign assets (NFA), domestic credit (DC), and other items (net) (OIN). That is, the opening or closing positions in the DCS can be shown as

BML=NFA+DC−OIN

where DC comprises credits to resident sectors (domestic credit). OIN denotes a residual category for other liabilities less other assets, when other liabilities includes all liabilities not included in broad money.

A6.123 Total flows (closing positions less opening positions) for the DCS are shown as

ΔBML=ΔNFA+ΔDC−ΔOIN

where Δ denotes a total flow (period-to-period change). The flow data in each category in the DCS are decomposed into separate flows for transactions, valuation changes, and other changes in volume.

A6.124 Changes in broad money liabilities can arise from changes in the foreign assets and foreign liabilities of the depository corporations, as can be seen from the identity that links ΔBML to ΔNFA, shown in the preceding paragraph.

Appendix 7. Balance of Payments Coding System

Introduction

A7.1 This appendix is aimed at discussing the balance of payments and international investment position (IIP) coding system. The second section of the appendix discusses the balance of payments and IIP coding structure, and the third section covers the steps taken by the international statistical community to implement a common coding system and data reporting structures for external sector statistics based on the Statistical Data and Metadata Exchange (SDMX) standards.

The IMF’s Coding Structure for Balance of Payments and IIP

A7.2 The principal goals and objectives of the IMF’s balance of payments and IIP coding system are completeness of coverage, brevity, simplicity, adaptability to automation, stability over time, and, where appropriate, extensibility. The scope of the codes is narrow. It includes the standard components for balance of payments and IIP data as defined in the BPM6, data items associated with the International Reserves and Foreign Currency Liquidity Template (IRFCL), and trade-in-services items from the Manual on Statistics of International Trade in Services.

A7.3 The coding scheme does not attempt to address dates or periodicity, currency, economy or partner economy, economic activity, or a number of other related topics. These items are the concern of a much broader audience and would therefore involve a different design and consultation process.

A7.4 This coding system consists of five parts: (1) a two-digit aggregate code, (2) a four-digit balance of payments item code, (3) a single-digit accounting code, (4) a single-digit resident sector code, and (5) a single-digit maturity code. All parts of the code are required to fully identify a data item.

A7.5 These codes were formed with the goal of facilitating the navigation of data within the database. A basic hierarchical structure was instilled where possible. As mentioned earlier, the code consists of five components or sections as follows:

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A7.6 Table A7.1 presents an example of the code for other investment components of the balance of payments. It follows the structure described earlier, which is: <Aggregate><BOP Item><Accounting Entry><Resident Sector><Maturity>.

A7.7 In the example presented in Table A7.1, the coding for “Other investment” begins with the aggregate “3D,” which indicates that “Other investment” is part of the financial account (3) and is the fourth component (D). The balance of payments item also has a hierarchical structure, with 9999 indicating the total; the subcomponents A000 and B000 indicate the first child “Other equity” and the second child “Currency and deposits,” respectively. Furthermore, the accounting item in the example determines the accounting unit that is associated with the concept (e.g., N = net, A = assets, and L = liabilities), the resident sector item indicates the sector involved (e.g., C = central bank and M = monetary authorities), and the maturity item stands for the maturity of the instrument (e.g., A = all maturities, S = short-term, and L = long-term).

Table A7.1

Example of the Balance of Payments Codes

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A7.8 The list of values of the first component “Aggregate” of the code is presented in Table A7.2. It describes the position in the balance of payments and IIP accounts.

Table A7.2

List of Values of “Aggregate” Component of the Code

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A7.9 For the purposes of publication, the IMF conducts two main alterations to the reported by member economies’ figures: (1) reported figures for SDR holdings, SDR allocations, reserve position in the IMF, and credit and loans with the IMF are substituted by the IMF Finance Department (FIN) data, and (2) for constructing the analytical presentation of balance of payments, the exceptional financing transactions are removed from the standard components and included below the line reported figures.1 In order to differentiate between reported figures and those affected by these alterations, the last digit of the affected balance of payments items is attributed the value “S” or “F,” which indicates substitution of accounts and removal of exceptional financing, respectively. The affected codes are listed in Table A7.3.

Table A7.3

List of Altered Balance of Payments Codes

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The SDMX Coding Structure for Balance of Payments

Introduction

A7.10 Official data compiling agencies report statistics to many international organizations (IO), but with reporting formats and coding structures that may vary from one IO to another. Four international organizations that collect data on external sector statistics have agreed to jointly develop a common reporting framework using the SDMX standards. These organizations, the European Central Bank (ECB), Eurostat, the IMF, and the Organisation for Economic Co-operation and Development that formed the Technical Group,2 have completed the development of the SDMX reporting framework that will support the specification of common coding structures or data structure definitions (DSD) for balance of payments, IIP, direct investment, and other external sector statistics.

A7.11 It is expected that official data compiling agencies would see significant benefits in adopting the SDMX standards and the common coding structures that were developed for the reporting and dissemination of BPM6-basis statistics. The adoption of the common formats and codes provided by the SDMX standards and the DSD for external sector statistics would enhance access to these statistics for the users’ community, while supporting the automation of the provision of these data to IOs.

A7.12 The DSD provides the various concepts and associated code lists for the SDMX transmission of these data—namely, by compiling agencies to IOs, as well as their dissemination to the public. It provides a unique reporting format, simplifies the process of mapping data from internal production systems of national agencies to the reporting requirements of IOs, and facilitates data sharing across IOs, with the key objective of reducing the reporting burden of economies.

A7.13 The SDMX data exchange standards and the DSD for external sector statistics will be used by the European Union member economies and the Euro Area economies in their data provision to Eurostat and ECB, respectively. Consequently, it will be one of the modes for economies’ data submission to the IMF for redissemination in the IMF International Financial Statistics and Balance of Payments Statistics Yearbook publications.

The Balance of Payments DSD

A7.14 The balance of payments DSD includes 16 dimensions and 12 attributes. Dimensions are used to uniquely identify a time series, and, when joined together, they provide the “time series keys” that are the unique identifier for a time series. When defining a time series key using SDMX, a valid code must be assigned to each dimension of the DSD. Attributes are used to further describe the data. Attributes can be attached at different levels of the data file: (1) at the level of the data file (or dataset in SDMX terminology); (2) at the level of the sibling series (that is the time series keys for all applicable frequencies); (3) at the group level (a group of dimensions); or (4) at the level of the observations. Attributes are either mandatory or conditional (i.e., reporting is not mandatory). Their level of attachment and status are defined in the DSD.

A7.15 In addition to the dimensions and attributes explicitly defined in the DSD, the balance of payments DSD includes the concept of observation value, where the observed value can be found. The DSD also includes the time dimension, which is a specialized dimension. It represents the point in time at which the phenomenon was observed or measured.

A7.16 All dimensions provided in this DSD are coded concepts which are associated with a code list and a descriptor for the coded item, whether they are dimensions or attributes. For some dimensions, the same code list is reused when relevant. For example, the same code list is used for identifying items of the reference area and the counterpart area, as they both refer to the same list of countries, territories, and regional groupings. Items listed are provided in a non-hierarchical presentation (flat list). However, in the Excel version of the DSD, integrity rules are provided for selected items to help users identify the relationships that exist within a code list as well as to describe the composition of an item.

A7.17 The technical group defined the list of concepts necessary to codify the reporting requirements of four international agencies involved in the SDMX development for data collection of external sector statistics compiled based on the BPM6 methodology. The reporting requirements for direct investment statistics are covered by a separate DSD, which reuses several dimensions from the balance of payments DSD and adds a few complementary dimensions to address the specificities of direct investment.

A7.18 Some of the concepts used to identify external sector statistics are overlapping with those used in national accounts statistics. The items lists, codes, and descriptors for these common concepts have, therefore, been harmonized, to the extent possible, across the DSDs for balance of payments and national accounts. As a result, the code lists of harmonized concepts are exhaustive and may include items that are required for national accounts but not used for reporting balance of payments statistics. These longer code lists that are shared across statistical domains promote consistency of coded information, as well as sharing of data. In addition, shared code lists contribute to consistency across statistical domains.

A7.19 The generic codes for common concepts are used when applicable. They are included in a very large number of DSDs because they cover very general and frequently used concepts. The main purpose of a set of generic code lists is to propose standardized identifiers that can be shared. The generic codes are provided in Table A7.4. The leading underscore is used to visually mark the codes as “reserved,” which is in line with established programming practice.

Table A7.4

List of Generic Codes for the Balance of Payments Data Structure Definitions (DSD)

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In a specific context, the code value _T might also be part of a code value to identify a total within a breakdown, and its description might be more specific depending on the concept to which it relates.

A7.20 In the Excel representation of the DSD, filters are provided to preselect items relevant to specific reporting requirements. The filters should facilitate navigating the items list by preselecting items that are applicable for balance of payments reporting to IMF, or reporting of Extended Balance of Payments Services (EBOPS) classification, for example.

Guidelines for Using the Balance of Payments DSD

A7.21 This subsection provides general guidelines for using the 16 dimensions and 12 attributes of the balance of payments DSD for the construction of the time series keys for data exchange and to report external sector statistics. The list of dimensions and attributes used in balance of payments DSD is presented in Tables A7.5 and A7.6.

Table A7.5

Dimensions for the Balance of Payments Data Structure Definitions (DSD)

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Table A7.6

Attributes for the Balance of Payments Data Structure Definitions (DSD)

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Dimensions
Frequency

A7.22 This concept refers to the periodicity of the reported data. A single data file (or a dataset in SDMX terminology) could include multiple frequencies. The most commonly used frequencies are annual, quarterly, and monthly. For example, if the frequency of the time series is quarterly, the “frequency” dimension for that time series should be coded as “Q.”

Reference economy or area

A7.23 This concept identifies the reference area for the time series encoded using the relevant code list of the DSD. The reference area is an economic territory, economy, or region about which external sector statistics are provided. External sector statistics disseminated by IOs would likely include many reference countries, as well as regional economy groupings (areas), of which the composition is provided by IOs.

A7.24 The economy code list follows the ISO 3166–1 alpha-23 classification and is a cross domain code list, according to the recommendation of the SDMX initiative. The codes used for various regional groupings were harmonized across international agencies that use the balance of payments DSD, wherever possible.

Adjustment indicator

A7.25 This concept identifies the type of adjustment made to the time series that refers to seasonal, trading day, and trend cycle adjustments. In practice, the adjustments usually apply only to intra-annual series, while annual time series data would usually be coded as neither seasonally or working day adjusted (code N). In the data exchange agreements, the data collection agency would usually specify which types of adjusted time series (if any) they are seeking. For example, if the time series is not subject to any adjustment, the “adjustment indicator” dimension for that time series should be coded as “N.”

Flows and positions indicator

A7.26 This concept identifies whether the time series is a transaction (flow), a position, or a change in position not due to transactions (e.g., revaluations). It also includes additional items to identify specific external sector transactions required for the IRFCL. For example, if the time series refers to financial instruments, the “flows and positions indicator” dimension for this time series could be coded as “T” when the instruments are transacted (included in balance of payments reporting), or as “LE” when the time series refer to positions (included in the IIP).

International accounts item

A7.27 This concept identifies the detailed items that are outcomes of production activities (goods and services, including the detailed list for the EBOPS classification), types of primary and secondary income, and capital accounts items, and provides a single item for the financial account. The concept provides memorandum items to record specific types of transactions, such as the exceptional financing transactions. The concept also provides items for specific international accounts data required for the IRFCL.

A7.28 While other concepts used in the balance of payments DSD are designed to cover a unique methodological aspect of external sector statistics (e.g., maturity or institutional sector), this concept has a broader scope. It covers many differing concepts, such as the functional classification of services, classification of primary and secondary income, balancing items, including net errors and omissions, and memorandum items. The items provided in this concept are closely aligned with the standard components of the balance of payments and, as such, provide a classification of concepts that is familiar to the compiler.

A7.29 The “financial account” is provided as a single concept in the international accounts item; however, it is further defined by other DSD dimensions, which support identifying the financial instrument, reference sector, functional category, maturity, currency of denomination, and so forth. This approach provides flexibility in the definition of time series keys, supporting the definition of a very large number of time series.

A7.30 In spite of the fact that “financial account” is part of the balance of payments but not of the IIP, a pragmatic approach was adopted under which for reporting IIP statistics the present dimension “international accounts item” should include “financial account” (as one would select for balance of payments statistics).

Accounting entries

A7.31 This concept identifies the type of accounting entry: (1) for transactions on current and capital account components, whether the time series is a credit, a debit, or the balance of credit minus debit (credit and debit series are reported as positive numbers; thus the balance is expected to correspond to credit minus debit);4 and (2) for positions and transactions data in the financial account, whether the time series refers to assets (or the net acquisition of), liabilities (or the net incurrence of), or a net position (defined as assets minus liabilities). In the BPM6 standard components, time series for transactions related to the “financial account” are usually recorded as net acquisition of financial assets and net incurrence of liabilities. However, there are instances when time series for the underlying gross increases and decreases in assets and liabilities could be required (e.g., exceptional financing transactions). As such, the “accounting entries” concept also provides additional items to further identify transactions in financial assets as gross increases and gross decreases of assets, and transactions in financial liabilities as gross increases and gross decreases of liabilities. Gross increases and decreases are reported as positive numbers, while the net acquisition and the net incurrence correspond to increases minus decreases.5

A7.32 For example, for time series that refer to gross acquisitions of equity shares assets, the “accounting entries” dimension will be coded as “AI,” while the net result of acquisitions (AI) minus sales (AD) will be coded as “A.”6

Counterpart area

A7.33 This concept identifies the counterpart area for transactions and positions. All time series for external sector statistics make reference to transactions between residents and nonresidents during a period (transactions) or at a specific point in time (position). The counterpart area concept is used to identify the territory of the nonresident entity of individual time series. For most time series in global balance of payments or IIP data, the counterpart area will be defined as the rest of the world.

A7.34 External statistics can also be compiled with a geographical breakdown for partner economies. Reporting of balance of payments to the ECB and to Eurostat, as well as detailed (EBOPS) trade in services, requires geographical breakdown for partner economies. Detailed information on counterpart areas is also required for the time series provided in the context of the Coordinated Portfolio Investment Survey and Coordinated Direct Investment Survey. The economy code list follows the ISO classification and is a “cross domain” code list harmonized across international agencies that use the balance of payments DSD, wherever possible.

Reference sector

A7.35 This concept identifies the reference (institutional) sector, which is the corresponding resident sector within the compiling economy for the balance of payments and IIP items. Traditionally, time series for the goods and services account of the balance of payments refer to the relations of all institutional sectors of the reference area with the rest of the world. This concept is also used in national accounts statistics; therefore the items and codes included under this concept accommodate the needs of external sector and national accounts statistics (the sector classification in external sector statistics is generally much more aggregated than in national accounts).

A7.36 This concept identifies functional categories applicable to financial accounts. It applies to all time series for which the “international accounts items” are coded as “financial account” and as types of “investment income.” For other time series, this item is coded as “not applicable.”

Instruments and assets classification

A7.37 This concept identifies the type of financial instrument that is reported in the external sector time series as well as in national accounts. Therefore, the items and codes included under this concept accommodate the needs of external sector and national accounts statistics.

A7.38 The list of financial instruments provided under the subheading “memorandum item” reflects in part the structure of the BPM6 presentation, where, for selected functional categories, financial instruments are grouped in clusters rather than the standard classification of these instruments. Similarly, to the functional category concept, the financial instruments concept applies to all time series for which the “international accounts item” is coded as “financial account” and to selected items coded as “investment income.”7 For other time series, this item is coded as “not applicable.”

Maturity

A7.39 This concept identifies the types of maturity of the financial instrument of the external sector statistics time series. For most time series for which the “international accounts items” are subcomponents of the current account or the capital account, the maturity concept will be coded as “not applicable.” For most “international accounts item” coded as “financial account” and for selected items coded as “investment income,” the time series are usually coded with reference to the maturity of the coded financial instrument. For financial instruments that are classified as equity securities, other securities, and investment fund shares, the maturity is “not applicable,” as they do not have a specified redemption or repayment date.

Counterpart sector

A7.40 This concept identifies the counterpart (institutional) sector of the external sector time series and is also used in national accounts. Consequently, the items and codes included under this concept accommodate the needs for both statistics

A7.41 Traditionally, time series for the external sector statistics are vis-à-vis a counterpart area defined as the “rest of the world” and a counterpart sector defined as “total economy” (which covers all counterpart sectors). However, Eurostat and ECB require, for selected financial transactions, a breakdown for the counterpart sector. When used together with the “reference sector,” this level of detail allows establishing what is often referred to as from-whom-to-whom statistics. The “counterpart sector” concept is also used for transactions and positions data on reserve assets to separately identify currency and deposit claims on monetary authorities and on other entities.

A7.42 For most current and capital account transactions, this concept is “not applicable.” However, for secondary income and for capital transfers, this dimension should be used to codify transactions with specific counterpart sectors.

Currency of denomination

A7.43 This concept identifies the currency of denomination of the financial instrument or of the invoice of goods and services. For balance of payments and IIP data, the concept is usually recorded as “all currency of denomination.” However, there are a number of instances when more detailed information is needed on the currency of denomination to accommodate the additional analytical position data required by the BPM6.

Valuation

A7.44 This concept identifies the method of valuation for selected transactions and positions data. For balance of payments and IIP data, a “not applicable” will be used, even though market prices are the recommended basis for valuation of international accounts. Nevertheless, more detailed information on the valuation method is sought for additional analytical position data required by the BPM6. The concept is applicable to both external sector and national accounts statistics.

Compilation methodology

A7.45 The concept is used to distinguish between external sector time series compiled at the national level and similar external sector time series compiled using the methodology applied for economic or currency union statistics.

Unit of measure

A7.46 This concept identifies the unit of measure in which the time series is recorded. Most frequently, but not always, it refers to a currency unit, but it could also refer to fine troy ounces used for the IRFCL reporting.

Attributes

A7.47 Table A7.7 presents the description of attributes used in balance of payments DSD.

Table A7.7

Description of Attributes for the Balance of Payments Data Structure Definitions (DSD)

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A7.48 Some examples of the codes for selected balance of payments series are presented in Table A7.8.

Table A7.8

Statistical Data and Metadata Exchange (SDMX) Coded Example for Selected Balance of Payments Series

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Appendix 8. Model Survey Forms

Table A8.1

Summary of the Model Survey Forms

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Instructions for Form 2—Company Register Form

The company register form is used to record information about members (companies) of the population.

The information is subsequently used to conduct balance of payments and IIP surveys.

In part A, the reference number, the name of the top company in the group, and the address; the name and title of the contact officer in the company (e.g., the person who completed the exploratory form or the person who completes other collection forms); and the contact’s telephone and facsimile numbers are recorded.

In part B, information on the enterprise group is entered. This section allows for both descriptive coding and an alphanumeric code. The type of information that may be stored here includes:

Type of Unit

This section shows whether the statistical unit is:

  • 1. A single company unit

  • 2. A multi enterprise group

  • 3. A split enterprise group—that is, one that has been split according to sector.

Sector

  • 1. General government

  • 2. Central bank

  • 3. Other deposit-taking corporation

  • 4. Other financial corporation

    • 4a. Money market fund (MMF)

    • 4b. Non-MMF investment fund

    • 4c. Other financial intermediary (except insurance corporations and pension funds)

    • 4d. Financial auxiliary

    • 4e. Captive financial institution or money lender

    • 4f. Insurance corporation

    • 4g. Pension fund

  • 5. Nonfinancial corporation, household or nonprofit institution serving households (NPISH)

    • 5a. Nonfinancial corporation

    • 5b. Household

    • 5c. NPISH

Public/private

  • 1. Publicly owned company

  • 2. Privately owned company

(The first category could be subdivided to distinguish among companies owned by central, state, or local governments.)

Types of Companies

  • 1. Direct investment enterprise, branch or subsidiary

  • 2. Direct investment enterprise, associate

  • 3. Direct investor

  • 4. Both a direct investment enterprise and a direct investor

  • 5. Neither a direct investment enterprise nor a direct investor

Direct investor is an entity resident in Newland that has acquired at least 10 percent of voting power of a company resident in another economy.

Direct investment enterprise is a company resident in Newland in which a foreign direct investor owns 10 percent or more of its voting power.

Immediate direct investment is when a direct investor directly owns 10 percent or more of voting power in a direct investment enterprise.

Indirect direct investment is when a direct investor owns 10 percent or more of voting power in a direct investment enterprise through a chain of ownership.

A direct investor has control over a direct investment enterprise when it owns more than 50 percent of voting power in that direct investment enterprise.

A direct investor has a significant degree of influence over a direct investment enterprise when it owns from 10 to 50 percent of voting power in that direct investment enterprise.

Industry

(This section contains whatever coding system is considered appropriate.)

In part C, the activities of the group (which are collected in the exploratory survey) are recorded. The size categories (consistent with the exploratory questionnaire) are:

  • 0 Nil

  • 1 ND1 to less than ND10,000

  • 2 ND10,000 to less than ND100,000

  • 3 ND100,000 to less than ND1 million

  • 4 ND1 million and more

Reporters are asked, on the exploratory form, to mark boxes for activities exceeding certain thresholds. The categories marked should be recorded on the line labeled categories. These data are used to identify the target populations and the sizes of population members for collection design purposes.

The categories for exports of goods and imports of goods are:

  • A Food, live animals, beverages, and tobacco

  • B Minerals, fuels, and lubricants

  • C Chemical, plastic, medical, pharmaceutical, and rubber products, and fertilizers

  • D Wood, paper, and products thereof

  • E Textiles, clothing, and footwear

  • F Machinery, office and communication equipment, and other electrical goods, including spares

  • G Vehicles and transport equipment, including spares

  • H Metal and metal products not included elsewhere

  • I All other goods

For exports of services and imports of services, the categories are:

  • A Manufacturing services on physical inputs owned by others

  • B Maintenance and repair services

  • C Passenger and freight services

  • D Operational leasing or rental without operators

  • E Other transport services

  • F Travel

  • G Construction

  • H Insurance

  • I Pension services

  • J Financial

  • K Charges for use of intellectual property

  • L Telecommunication services

  • M Computer and information services

  • N Merchanting and other trade-related services

  • O Miscellaneous business, professional, and technical services

  • P Personal, cultural, and recreational services

For external financial assets and external financial liabilities, the categories are:

  • A Positions and shares

  • B Investment fund shares and units

  • C Land

  • D Other equity

  • E Debt securities

  • F Loans

  • G Accounts receivable and payable

  • H Deposits

  • I Notes and coin

  • J Insurance and pension reserves and entitlements

  • K Financial derivatives

  • L Other

For other income and transfers, the categories are:

  • A Rent

  • B Donations

  • C Debt forgiveness

  • D Licenses to explore or exploit natural resources

In part C, an additional line is included for other activities. This is a useful place for identifying activities (which may require special targeting) such as merchanting and imports and exports of goods for processing or repair.

In part D, data are recorded on the source used to identify this unit and on the most recent exploratory survey in which this unit was included.

In part E, details of subsidiary companies and any direct investment enterprises abroad are recorded. Including the name of the immediate parent company makes it possible to identify the complete company structure when companies in the group are subsidiaries of subsidiaries.

In part F, major shareholders are identified. Reference numbers should be allocated to these major shareholders, and a separate record created for them, even if they are nonresident entities.

General Notes and Instructions for Form 3.3—ITRS—Companies

1. The international transactions reporting system (ITRS) collects data from companies via several forms. The main form is the Form 3-3—ITRS—Companies, which companies are required to complete and return to the Newland Ministry of Statistics each month. The Annex to Forms 3-1–3-5 for ITRS—Classifications contains the codes and descriptions necessary to complete Form 3-3.

2. A nonresident is an individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland branches and subsidiaries of nonresident companies are regarded as residents of Newland. Similarly, foreign branches and subsidiaries of Newland companies are regarded as nonresidents.

3. Form 3-3—ITRS—Companies collects monthly data on balance of payments transactions from companies that conduct considerable transactions with nonresidents through accounts at resident banks and/or with accounts at nonresident banks. In addition, Form 3-3 collects data on other claims on, or liabilities to, nonresidents.

4. A separate Form 3-3 should be completed for each foreign currency account that your company has at a resident bank and each account at a nonresident bank—unless other arrangements have been made with the Newland Ministry of Statistics.

5. Form 3-4 collects data on payments and receipts passing through particular bank accounts of your company. Separate entries should be recorded for each transaction of ND 5,000 or more; smaller transactions may be combined. When several transaction codes apply to a receipt or a payment or result from payments being partly offset against receipts (or vice versa), the underlying gross transactions should be recorded. (See the Annex to Forms 3-1–3-5 for ITRS—Classifications for more information on multipayment transactions.) Similarly, offset transactions (also described in the Annex) that do not result in bank account entries but otherwise affect your company’s external asset or liability positions should also be recorded. Should your company conduct offset transactions denominated in currencies (including Newland dollars) for which a Form 3.4 is not already being completed, you should record such transactions on a separate Form 3-3.

6. Form 3-3 can be used as a pro forma for supplying relevant data in computer readable format, or information may be entered on the form itself. If space to record all transactions is insufficient, please be sure to attach the additional details.

Completing Form 3.3—ITRS—Companies

Part A

7. The company reference number is listed on page 1 of this form. The currency code classification is included in the Annex to Forms 3-1–3-5 for ITRS—Classifications. Month and year should be entered as a four-digit number (e.g., 0412 for April 2012).

Part B

8. Day should be recorded as a two-digit number (e.g., 02 for the second day of the month). The number of the first transaction recorded each day should be 001; successive three-digit numbers should be used for subsequent transactions. The transaction code, the transaction type, the other party code, and the economy code should be taken from the Annex to Forms 3-1–3-5 for ITRS—Classifications.

9. To limit the reporting burden and processing costs, data should be reported in thousands or millions of currency units and small transactions should be combined. For certain types of transactions (namely, multipayment and offset transactions), it is necessary to identify the underlying transactions and report them on a gross basis (see note 5).

10. In columns G and I where values should be expressed in Newland dollars, transactions should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction.

Parts C and D

11. Parts C and D facilitate reconciliation and verification of data supplied in part B. Any significant reconciliation amounts or unusual exchange rates should be explained.

Part E

12. The asset/liability code should be selected from codes 710 through 790 for assets and 810 through 890 for liabilities from the transaction codes in the Annex to Forms 3-1–3-5 for ITRS—Classification. The economy code should be taken from the relevant listing from the Annex [to be provided by the compiler]. The currency code should be taken from the relevant listing from the Annex [to be provided by the compiler]. One line should be used for each asset/liability, economy, and currency combination. For example, if your company held a portfolio of equity securities in a nonbank company in the United States and had long-term U.S. dollar loans from banks in the United States in U.S. dollars and United Kingdom in pounds, these three entries should be made:

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13. In column A, 710 represents shares in nonresident companies, and 850 represents long-term loan liabilities to nonresidents. In column B, 001 represents the United States and 002 represents the United Kingdom. In column C, USD represents the U.S. dollar and GBP represents the Great Britain pound.

14. Not all of your company’s payments to, and receipts from, nonresidents will be reported in part B as some payments may have been made through foreign exchange orders with domestic banks. These transactions should be reported on Form 3-1—ITRS—Payments and Receipts, which will be provided to you by your bank. However, for purposes of reconciliation, any effect that these payments and receipts have on the external assets and liabilities of your company must be reported in columns H and I.

Part F

15. This section of the form collects, for payments made through accounts covered by Form 3-3, information on goods imported and exported during the month and on payments made during the month. As delivery and payments may occur in different months, goods reported in columns D, E, and F may not correspond with those recorded in column G. As the value in your books may differ from the cost insurance and freight (c.i.f.) and the free on board (f.o.b.) values required for balance of payments purposes, you are requested to provide these bases of valuation, even if some degree of estimation is required. Economy of consignment is the economy from which your imports were initially dispatched. Economy of destination is the economy to which you expect to make final delivery of your exports. The relevant economy codes from the Annex should be used [to be provided by the compiler]. Please note that all amounts in foreign currencies should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction.

Part G

16. This section is included to assist you in checking the form before you return it.

Notes and Instructions for Form 3-4 and Form 3-5

1. The international transactions reporting system (ITRS) collects information from banks via a number of forms.

Definitions of Residents and Nonresidents

2. A nonresident is an individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland branches and subsidiaries of nonresident companies are regarded as residents of Newland. Similarly, foreign branches and subsidiaries of Newland companies are regarded as nonresidents.

Form 3 Series

3. The basic form is the Form 3-1—ITRS—Payments and Receipts. These should be completed by residents of Newland who make payments to, or receive payments from, nonresidents, in any currency. Supplementary Form 3-2—ITRS—Imports and Exports is required for transactions involving goods arriving in or departing from Newland. To reduce reporting burdens and processing costs associated with the Form 3 series, a number of exemptions are permitted. These include:

  • (a) Transactions in the amount less than the equivalent of ND 5,000. However, transactions below this level are the subject of small sample surveys (see note 8).

  • (b) Purchases and sales of travelers’ checks. These should be reported by your bank on Form 3-4—ITRS—Banks, part B, at the time the traveler’s checks are settled with nonresident banks.

4. In accordance with ITRS collection arrangements, your bank is responsible for making resident bank customers aware of their obligations to complete Form 3-1. In most cases, Form 3-1 should be completed when customers enter your bank to undertake the relevant transactions. (Some banks have combined the ITRS forms with bank forms on which payment instructions are specified.) Persons or companies engaging in transactions valued at the equivalent of ND 100,000 or more per year should register with the Newland Ministry of Statistics to obtain a transactor code.

5. Tracking the occurrence of payments made, in Newland dollars, by residents to nonresidents is more difficult; resident transactors may engage in such transactions without approaching a bank. When particular persons or companies regularly conduct such transactions, the Newland Ministry of Statistics will make special arrangements for resident principals to report the transactions directly to the ministry.

6. The staff of your bank should be familiar with Form 3-1 and with the Annex to Forms 3-1–3-5 for ITRS—Classifications, which is used by transactors to complete other forms. An ITRS training package is available from the Newland Ministry of Statistics, or your bank may telephone for assistance at the numbers shown on page 1 (upper right-hand corner) of this form.

7. Your bank should maintain a sufficient supply of forms and should also, if customers complete forms regularly, encourage them to maintain supplies of forms for their use. Your bank may order forms by contacting the Newland Ministry of Statistics at the address shown on page 1 of this form.

ITRS Form 3-4—Banks

8. Form 3-4 primarily collects data on payments and receipts for your bank’s own accounts with nonresidents. Separate entries should be recorded for each transaction of ND 5,000 or more; smaller transactions may be combined. When several transaction codes apply to a receipt or a payment or result from payments being partly offset against receipts (or vice versa), the underlying gross transactions should be recorded. (See Annex to Forms 3-1–3-5 for ITRS—Classifications for further information on multipayment transactions and offset transactions [to be provided by the compiler]) that do not result in bank account entries but otherwise affect the banks’ external asset and liability position should also be recorded.

9. Form 3-4 can be used as a pro forma for supplying relevant data in computer-readable form, or information may be entered on the form itself. If space to record all transactions is insufficient, please be sure to attach the additional details.

Completing ITRS Form 3-4—Banks

Part A

10. The bank reference number is listed on page 1 of this form. The currency code classification is shown in the Annex to Forms 3-1–3-5 for ITRS—Classification [to be provided by the compiler]. Month and year should be entered as a four-digit number (e.g., 0494 for April 1994).

Part B

11. The day should be recorded as a two-digit number (e.g., 02 would represent the second day of the month). Number is a three-digit code. The number 001 should be the first number used each day. Subsequent numbers should be used for subsequent transactions. The transaction code, the transaction type, the other party code, and the economy code should be taken from Form 3-1.

12. To reduce the reporting burden and limit processing costs, data should be reported in thousands or millions of currency units; and small transactions should be combined. For multipayment and offset transactions, it is necessary to identify the underlying transactions, and these should be reported on a gross basis.

13. In columns G and I where values should be expressed in Newland dollars, transactions should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction.

Part C

14. Part C facilitates checking of the conversion rates used in part B. Any unusual conversion rates should be explained.

Parts D, E, and F

15. Parts D, E, and F facilitate reconciliation of positions and flow data supplied in various forms. Data in part D represent a summary of Form 3-5, which is described subsequently. Any significant reconciliation amounts reported in column E of parts E or F should be explained. For transactions in Newland dollars, closing balances in part E, columns A and B should be recorded as zero—unless the bank holds Newland dollar accounts with nonresident banks, in which case the balance of these accounts should be recorded. See Form 3-1 for a list of economy codes.

Part G

16. The asset/liability code should be selected from codes 710 through 790 for assets and 810 through 890 for liabilities from the transaction code classification shown on Form 3-1. The economy code should be selected from the economy classifications shown in the Annex [to be provided by the compiler]. One line should be used for each asset/liability, economy, and currency combination. For example, if your company held a portfolio of equity securities in a nonbank company in the United States and had long-term U.S. dollar loans from banks in the United States in U.S. dollars and United Kingdom in pounds, these three entries should be made:

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17. In column A, 710 represents shares in nonresident companies, and 850 represents long-term loan liabilities to nonresidents. In column B, 001 represents the United States and 002 represents the United Kingdom. In column C, USD represents the U.S. dollar and GBP represents the Great Britain pound.

Part H

18. This section is included to assist you in checking the form before you return it.

Other ITRS Forms

20. Your bank may encounter other special purpose ITRS collection forms requesting information on transactions that cannot readily be collected by using Forms 3-1 to 3-5.

Notes and Instructions for Form 3-5—ITRS—Bank’s Record of Transactions

In accordance with ITRS collection arrangements, your bank should, for transactions that pass through the bank, maintain a record of all transactions with nonresidents. A copy of these records should be sent to the Newland Ministry of Statistics, within six days of the end of the reference month, on Form 3-5—ITRS—Bank’s Record of Transactions. Entries in some table cells are not required (note //// marks). For example, in columns E, F, and G, only currency code, payments and receipts, and value are required. For column A (bank’s own transactions), greater detail is required on the Form 3-4—ITRS—Banks; this column is included in the table on Form 3-5 to show the coverage provided by Form 3-4. Form 3-5 can be regarded as a pro forma for supplying data in computer readable form.

Instructions for Completing Form 4—Goods

Reporting Instructions

Form 4 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 4

Form 4 collects information on the goods transactions of this company and its Newland subsidiaries with nonresidents.

Parts A and B collect data on exports and imports—that is, goods sold to nonresidents (exports) and goods purchased from nonresidents (imports).

Part C covers repairs by nonresidents to goods owned by your company.

Parts D (exports) and E (imports) measure significant differences between date of sale and date of shipment.

Parts F (imports) and J (exports) are concerned with the financing of trade.

Completing Part A (Exports of Goods)

In column A, enter a description of the commodity exported by your company (and its subsidiaries), and in columns E to I the countries in which final delivery of the goods is expected. One row should be completed for each commodity. Please note that the sum of columns E through I should equal column D. The free on board (f.o.b.) value is the value of goods at the point of departure from the exporting economy (in this case, Newland), and the f.o.b. value includes the cost of loading the goods prior to transportation. If the response to item 6 is ND 500 or less, record a dash (—).

Completing Part B (Imports of Goods)

Record the free on board (f.o.b.) value and the cost, insurance, and freight (c.i.f.) values for each commodity group that your company (and its subsidiaries) imports. The f.o.b. value is the value of goods when they leave the exporting economy; the f.o.b. value includes also the cost of loading the goods prior to transportation. The c.i.f. value is the value of goods delivered to the border of the importing economy (in this case, Newland). If you are in doubt about the commodity group for a particular import, please contact the Newland Ministry of Statistics or describe details in the space provided on the form. The economy from which the goods were initially dispatched (consigned) should be entered in the heading for columns C through G, and the sum of the values recorded in those columns should equal column B. If the answer to question 11 or 12 is ND 500 or less, record a dash (—).

Completing Part C (Repairs to Goods)

A separate line should be completed for each commodity and economy. In column D, any associated transportation and insurance costs should be reported separately.

Completing Parts D and E (Consignment Trade)

A separate line should be completed for each commodity and economy combination. In part D, please report details about goods sent abroad on consignment, including value of goods sent abroad during the period, value of goods sold, value of goods destroyed or wasted, value of goods returned and values of goods held. Please verify that the total value of goods held at the end of the period (column D) equals the beginning value (column C) plus the value of goods sent (column E), less the value of goods sold (column G), less goods returned (column F), less goods wasted or destroyed (column H). Details of commissions paid to nonresident agents should also be reported. Similarly, in part E, please report details about goods held domestically on consignment and commissions received from nonresidents for the sale of consignment goods.

Completing Parts F and G (Trade Payables and Receivables)

A separate line should be completed for each economy. In part F, please report any advances paid on goods yet to be imported, payments made on goods imported in previous periods, and goods imported where payment was made in a previous period or is yet to be made. In part G, please report any advances received on goods yet to be exported, payments received on goods exported in previous periods, and goods exported where payment was received in a previous period or is yet to be received.

Instructions for Completing Form 6—International Trade in Services

Reporting Instructions

Form 6 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 6

Form 6 collects quarterly information on selected international service transactions of this company and its subsidiaries.

Parts A and B cover services (except insurance, pension, transportation, and travel services) provided to and received from nonresidents. International insurance transactions should be reported in part C, and international pension payments should be reported in part D. Details of transportation and travel transactions are collected through other survey forms. The activities of resident insurance companies and pension funds are collected through other survey forms.

Economy

Each question seeks information on the economy of transaction. Record the economy of residence of the nonresident transactor.

Services Included

Services, which are products other than tangible goods, include communications, advertising, accounting, and management consulting. Services do not include wages, profits, dividends, or interest. Transportation and travel services should not be included as information on these items is collected through other survey forms.

Services provided to nonresidents include those for which payment is made directly to your company by a nonresident entity (including a foreign affiliate of your company). Record services provided by your company, its employees abroad, or some other resident entity on whose behalf your company receives payment. Exclude services that are provided to nonresidents by your company and paid for through other unrelated resident entities; however, report the names and addresses of these entities in your response to question 39.

Services received from nonresidents include all services provided by nonresidents and paid for directly by your company, its subsidiaries, or its employees. Exclude services that are provided by nonresidents to your company or its subsidiaries and paid for, on your behalf, by other unrelated resident entities; however, record the names and addresses of these entities in your response to question 39.

Because form 6 seeks information on transactions between residents and nonresidents, you should not report services provided to nonresidents by nonresident companies owned by your company. However, you should report services provided by your company to related companies abroad and services provided by related companies abroad to your company. If determinations between branch activities and head office activities prove difficult, or if you are uncertain about whether a particular transaction should be included, please call (XXX) XXX-XXXX for assistance.

Individual Service Categories

Maintenance and Repair Services: These services include fees charged for the maintenance and repair and the value of any parts or material included in the repair fee. Where parts or materials are separately charged, they are excluded from the value of the service.

Postal and Courier Services: These services include the pickup, transport, and delivery of letters, newspapers, periodicals, brochures, other printed matter, parcels, and packages. They also include post office counter services, such as sales of stamps and mailbox rental services.

Financial Services: These services include fees for intermediation services such as lending, financial leasing, letters of credit, bankers’ acceptances, lines of credit, foreign exchange transactions, and traveler’s check transactions; commissions and fees associated with security brokerage, placements of issues, underwriting, redemptions, swaps, options, and commodity futures; and portfolio and other financial management fees.

Charges for the Use of Intellectual Property: These include fees associated with the use of patents, copyrights, trademarks, industrial processes, franchises, and so forth, and licensing agreements associated with manuscripts, paintings, sculptures, and so forth, as well as other outcomes of research and development. Included are also charges for licenses to reproduce and/or distribute (e.g., copyright on books and manuscripts, computer software, cinematographic work, and sound recordings and related rights, such as for recording of live performances, television, cable or satellite). However, outright purchases/sales of such marketing assets (e.g., franchises and trademarks) are recorded as transactions in assets (see Part E).

Telecommunications Services: These services include broadcast or transmission of sound, images, data, or other information by telephone, telex, telegram, radio and television cable transmission, radio and television satellite, electronic mail and networking, teleconferencing, and similar services.

Computer Services: These services include data base development, storage, and online time series facilities; data processing, tabulation, processing services (on a time-share or specific basis), and processing management services; hardware consultancy; software design, development, and customized implementation and programming; maintenance and repair of computers and peripheral equipment; and computer-related online downloads.

Information Services: This category includes news agency services, database services, and Web search portals. Also included are direct nonbulk subscriptions to newspapers and periodicals, whether by mail, electronic transmission, or other means; other online content provision services (except for software or audio, e-books, and video); and library and archive services.

Research and Development: These activities cover those services that are associated with basic research, applied research, and experimental development of new products and processes (e.g., research associated with the physical and social sciences, humanities, etc.).

Professional and Management Consulting Services: These services include legal advice, representation, and documentation; accounting, auditing, bookkeeping, and tax-related services; planning, organization, cost projecting, and human resource management; and public relations. They also include advertising services; trade fair exhibition services; market research; and public opinion polling services.

Architecture, Engineering, and Other Technical Services: These services include architectural design of urban and other development projects; planning, project design, and supervision of dams, bridges, airports, turnkey projects, and so forth; and surveying, product testing and certification, and technical inspection services.

Waste Treatment and Depollution, Agricultural, and Mining Services: This category includes services associated with the treatment of radioactive and other waste and cleanup of pollution and spills and restoring the environment; services associated with agricultural crops—for example, protection against insects and disease, increasing of harvest yields, and so forth; forestry and fishing services; mining, oil and gas-related services—for example, analysis of ores and so forth.

Operating Leasing: Operating leasing includes leasing of buildings, machinery and equipment—other than transportation equipment with crew—and excludes items under financial lease.

Trade-Related Services: These services include commissions on goods and services associated with commodity brokerage, auction sales, sales of ships and aircraft, and so forth.

Other Business Services: These services include distribution services related to water, steam, gas, and other petroleum products and air-conditioning supply (where identified separately from transmission services); security and investigative services, translation and interpretation, photographic services, building cleaning, placement of personnel, real estate services, and so forth.

Personal, Cultural, and Recreational Services: These services include fees received by actors, directors, and producers associated with the production of motion picture and television films; downloading of mass-produced audiovisual products (movies and music, including recordings of live performances); health services, education services, heritage and other cultural services, and sporting and other recreational services.

Note: Services, including education and health services, provided to nonresidents visiting Newland are considered to be travel services and should not be reported on this form.

Insurance Transactions to Be Reported in Part C

Details of insurance premiums and claims for insurance placed directly abroad by Newland residents (other than insurance companies) and by Newland insurance agents and brokers on behalf of Newland residents should be recorded. Insurance companies, unless such companies also act as brokers or agents, should not complete this part of the form. Companies that use a resident agent or broker to place insurance abroad should not report these transactions as the transactions will be reported by the broker or agent.

Pension Transactions to Be Reported in Part D

Details of pension contributions on behalf of resident employees into nonresident pension funds and on behalf of nonresident employees should be recorded.

Instructions for Completing Form 8—Resident Transport Operators

Reporting Instructions

Form 8 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 8

Form 8 collects information on the international transportation activities of this company and its Newland subsidiaries. Part A collects selected earning and expense data. Part B collects information on expected purchases of large equipment. Part C requests selected details of ticket sales to resident travelers on international routes.

Partner Economy

Part A of form 8 requests information on earnings and expenses by economy. The countries in which earnings or expenses were incurred should be indicated. (Transactions with residents of Newland should be recorded as such in sections 2a and 2b of part A.) Part C requests information on amounts of revenue earned by other nonresident airlines on passenger ticket sales by your company. The economy of residence of the nonresident transport operator should be recorded.

Passenger Fares (Item 1)

Amounts reported should include passenger fares earned, for the categories of persons shown in the table, by your company and its subsidiaries. Earnings from the charter of transport equipment with crew (to carry passengers) and from accompanied luggage (excess baggage) should be included. Earnings should be recorded on a gross basis—that is, before any deduction of commissions on ticket sales. Such commissions should be regarded as expenses and reported in item 11.

Freight Services (Item 2)

Amounts reported should include earnings by this company and its subsidiaries from the carriage of goods (freight) and from the charter of transport equipment with crew (to carry goods). Earnings should be recorded on a gross basis—that is, before any deduction of commissions to freight agents. Such commissions should be regarded as expenses and reported in item 12.

Charter of Equipment without Crew (Items 3b and 13)

Amounts reported should cover payments associated with charter of transport equipment without crew—except for transport equipment under a financial lease.

Agent Fees on Passenger Fares (Item 11)

Amounts reported should include fees paid to nonresidents in respect of passenger fares earned.

Passenger Fare Ticket Sales to Residents (Part C)

These data are required to estimate earnings and associated expenses of nonresident operators on passenger services provided to resident travelers. In item 17, data on ticket sales (less refunds) to resident travelers for international routes should be reported. In item 18, revenue paid to nonresident operators on tickets sold by your company should be reported. All amounts should be reported before deduction of commissions on ticket sales. Commissions earned by your company on revenue reported in item 18 should be recorded in item 19 rather than item 3.

Instructions for Completing Form 9—Transactions with Nonresident Transport Operators

Reporting Instructions

Form 9 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 9

Form 9 collects information on the transactions of this company with nonresident transport operators, including foreign airlines, ships, railways, fishing vessels, and so forth (if the company is unaffiliated with nonresident operators to whom services are provided) or on transactions of the branch offices or agencies representing the nonresident transport operators with or on behalf of its nonresident parent company.

Part A, which is divided into two subsections, collects data on goods and services provided to nonresident transport operators. In items 1 through 10, report goods and services that your company provides to nonresidents and for which your company arranges settlement directly with a nonresident transport operator or the nonresident agent thereof. Information on settlements made through other resident companies will be collected directly from them. In items 11 through 20, report goods and services that are acquired by nonresident transport operators from other residents and for which settlement is made through your company or its subsidiaries.

Part B collects data on the ticket sales on behalf of nonresident transport operators and revenue earned by nonresident transport operators. This part should be completed by branch offices or agencies representing nonresident transport operators for nonresident transport operators.

Part C collects data on selected earnings, such as those from the provision of freight services within Newland (inland freight), of nonresident transport operators and other payments to nonresident operators—apart from passenger services and freight services provided on imports and exports). This part should be completed by branch offices or agencies reprinting nonresident transport operators for nonresident transport operators.

Economy

The economy of residence of the nonresident transport operator should be recorded in several sections of form 9.

Passenger Fares (Items 21 and 22)

Item 21 requests data on the value of ticket sales (less refunds) made by nonresident transport operators to Newland resident travelers. Item 22 requests information on passenger revenue earned by nonresident transport operators from tickets sold (irrespective of which operator sold the ticket) to residents of Newland. (A ticket sold by one operator may be used on another operator’s service and thereby generate revenue for the second operator.) If your company is a branch or agent of the first operator, the ticket sale should be reported in item 21. If your company is a branch or agent of the second operator, the ticket sale should be reported in item 22. Fares should be recorded on a gross basis—that is, before deduction of commissions. Commissions paid by nonresident transport operators on ticket sales should be recorded in part A. Revenue includes earnings from the charter of transport equipment with crew (to carry passengers) and from accompanied luggage (excess baggage).

Instructions for Completing Form 10—International Travel

Reporting Instructions

Form 10 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Travelers

Travelers are persons who stay, for work and other purposes (e.g., tourism, education, health), in countries other than those in which they are residents. Normally, a person staying in an economy for less than 12 months should be regarded as a traveler. Students and medical patients should, regardless of their length of stay in the host economy, be regarded as travelers. Officials of foreign governments stationed at embassies and similar institutions are not regarded as travelers.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 10

Form 10 collects information on the international travel transactions of this company.

Part A should be completed by companies issuing credit and debit cards or by companies making settlements abroad for credit and debit card transactions.

Part B should be completed by companies issuing travelers’ checks and making settlements abroad for traveler’s check transactions.

Part C should be completed by tour wholesalers and companies making or receiving prepayments, advances, or travel settlements. Amounts for passenger fares for travel on international routes should be excluded.

Part D should be completed by hotels that provide lodging or other services to international travelers. Part D should include amounts received from supplementary hotel operations (such as gift shops) and amounts received from nonresident travelers and used to acquire, on behalf of these travelers, goods and services from other resident companies.

Economy

In parts A, B, and C, you are requested to classify transactions by economy of the nonresident counterparty. In part D, you should report the economy of residence of the nonresident travelers.

Credit and debit card and traveler’s checks transactions

Traveler’s checks and credit and debit card transactions should be recorded at the face value of the transaction. Any fees earned or paid abroad should be separately recorded.

Instructions for Completing Form 12—International Insurance Transactions

Reporting Instructions

Form 12 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 12

Part A collects information associated with nonlife insurance contracts between your resident insurance company and nonresident policyholders; reinsurance between your resident insurance company and nonresident insurance companies; and information associated with life insurance contracts between your resident insurance company and nonresident policyholders.

The requested information refers to the following:

Direct written premiums are the amounts charged to and physically paid by the nonresident policyholders during the accounting (“risk”) period for insurance coverage.

Important: Direct written premium amounts should not be adjusted for reinsurance premiums—that is, the part of the premiums that is ceded to reinsurers should be left included; any assumed premiums from other direct insurers should be excluded. These ceded or assumed premiums should be shown separately under cross border reinsurance transactions.

Premiums earned refer to the proportion of actual premiums that relate to the accounting period (independent of whether they were paid during current or previous quarters) and that cover the risks incurred during the current accounting period.

Paid claims/benefits occur when actual payments of cash have been made to nonresident claimants for insured events of the current or previous periods.

Claims/benefits due/outstanding are claims that became due, in the current quarter, after the eventualities that gave rise to the claims—that is, the cost of claims is assigned to the relevant period. It should include claims that have been reported but not yet settled, and claims that have been reported and settled but not yet paid at the end of the accounting period.

Claims due on extraordinary events are claims on catastrophic events including earthquakes, tsunami, floods, cyclones, hurricanes, hail storms, bush fires, and so forth, where these events are not periodic and not considered part of normal business.

Ceding commission is paid by the reinsurer to reimburse the ceding company for its acquisition expenses and other costs incurred to place the business with the reinsurer.

Profit commission represents a predetermined percentage of the profit realized by the reinsurer on the contracts ceded by the primary insurance companies and the cedants’ share of such profits.

Income earned refers to income from the investment of reserves held against unearned premiums and unpaid claims (i.e., from investing policyholders’ funds) during the period.

Part B collects data on technical reserves due to nonresidents by type of insurance.

Insurance technical reserves include details of premiums paid and not yet earned and claims due but not yet paid. These amounts refer to reserves set aside on the balance sheet for future commitments that arise out of nonlife insurance contracts (including any related administration expenses, taxes, etc.).

  • a. Unearned premium reserves are that part of premiums written that apply to the unexpired part of the policy period. Please provide the position of unearned premium reserves vis-à-vis nonresident policyholders at the beginning and at the end of the accounting period.

  • b. Please provide the position of estimated reserves for claims incurred vis-à-vis nonresident policyholders but not reported and provisions set aside to meet the estimated costs of settling claims that have occurred up to the end of the accounting period from policies currently in force and policies written in the past, after the deduction of amounts already paid. This amount would include funds for unpaid claims, claims adjustment and handling expenses known but not yet settled, and estimates for claims incurred but not yet notified (so called IBNR, Incurred But Not Reported) by the balance sheet date.

  • c. Insurance technical reserves for life insurances comprise reserves for unearned premiums and against outstanding insurance claims, and, in addition, actuarial reserves for life insurance and with-profit insurance set aside for payments of benefits in future.

  • d. Additional information:

    Changes in life insurance actuarial reserves vis-à-vis nonresident policyholders refers to the changes in the present value of the future expected cash flows of an insurance policy.

Part B collects information on payments for insurance services settled through other resident companies (if any).

Economy

Each question seeks information on the economy of transaction. Record the economy of residence of the nonresident transactor.

Instructions for Completing Form 13—International Pension Services

Reporting Instructions

Form 13 should be completed for the company (and any subsidiaries in Newland) or government entity listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual ordinarily domiciled in an economy other than Newland.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 13

Form 13 collects quarterly information on selected international pension fund transactions and positions of this company or government entity.

Part A collects quarterly and/or annual information associated with pension contributions and benefits between the resident pension fund and nonresident individuals. Information is also requested pertaining to contributions received from domestic companies on behalf of their nonresident employees (e.g., short-term nonresident employees or employees working long-term abroad on behalf of the company).

The requested information refers to the following:

Part A: Cross border transactions and positions regarding defined contribution schemes

Actual contributions paid into individual accounts of nonresident beneficiaries include (domestic or nonresident) companies’ (i.e., employers’) contributions paid on behalf of their employees, and contributions received directly from nonresident employees/beneficiaries during the accounting period.

Benefits paid refer to actual payments made in the accounting period to nonresident retirees.

Please provide the pension entitlements in defined contribution schemes vis-à-vis nonresident beneficiaries at the beginning and at the end of the accounting period. Factors that trigger changes in pension entitlements in the current accounting period are contributions receivable for nonresident employees/beneficiaries, benefits payable to current retirees abroad, and any holding gains and losses arising from the investment of the cumulated pension entitlements vis-à-vis nonresidents that contribute to the current market value of the pension fund’s assets.

Income earned on cumulated pension entitlements attributable to nonresidents refers to actual income (i.e., interest, dividends, rents) earned on the plan assets attributable to nonresident beneficiaries during the accounting period.

Part B: Cross border transactions and positions regarding defined benefit schemes

Actual contributions paid into individual accounts of nonresident beneficiaries include (domestic or nonresident) companies’ (i.e., employers’) contributions paid on behalf of their employees, and contributions received directly from nonresident employees/beneficiaries during the accounting period.

Benefits paid refer to actual payments made in the accounting period to nonresident retirees.

Please provide the Projected Benefit Obligations (PBO) attributable to nonresident employees/beneficiaries at the beginning and the end of the accounting period. Factors that trigger changes in pension entitlements vis-à-vis nonresident employees/ beneficiaries during the accounting period are service costs, interest costs, actuarial gains/losses, contributions to the defined benefit scheme, and payments of benefits.

Please provide information regarding the increase of the PBO in the accounting period due to service costs for nonresident employees/beneficiaries—that is, the additional liability the nonresident employees/beneficiaries earned during the previous accounting period.

Please provide information regarding the increase of the PBO in the accounting period due to interest costs for nonresident employees/beneficiaries—that is, the additional liability created during the accounting period because nonresident employees are X amount of time (e.g., one year) closer to retirement.

Please provide information regarding the increase/decrease of the PBO in the accounting period due to actuarial gains and losses from the difference between expected estimates and actual values in nonresident employees’/beneficiaries’ pension plan.

Economy

Each question seeks information on economy of transaction. Record the economy of residence of the nonresident transactor. If this is not feasible, please provide aggregate information.

Other

Because form 12 seeks information on pension transactions between residents and nonresidents, you should not report transactions provided to nonresidents by nonresident branches and subsidiaries of your company. If distinguishing between activities of the head office and nonresident branches and subsidiaries of your company proves difficult, or if you are uncertain about whether a particular transaction should be included, please call (XXX) XXX-XXX for assistance.

Pension contributions made by companies on behalf of their employees are treated as if the contributions are made by the employees themselves.

Instructions for Completing Form 15—Private Aid and Charitable Organizations

Reporting Instructions

Form 15 should be completed for the organization listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland branches and subsidiaries of nonresident companies are residents of Newland. Similarly, foreign branches and subsidiaries of Newland companies are nonresidents. Foreign aid and charitable organizations associated with resident aid and charitable organizations are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure of Form 15

Form 15 collects quarterly information on selected foreign activities and relationships of this organization and its related resident operations.

Part A collects information on related foreign operations of this organization and the funding between this company and the related foreign operations.

Part B collects information on the nonresidents who work for this organization in Newland and abroad.

Part C collects information on the foreign sources of income for this organization.

Part D collects information on the grants and disbursements made by this organization abroad.

Economy

Each question seeks information on the economy of transaction. Record the economy of residence of the nonresident transactor.

Instructions for Completing Form 16—Current Transfers, Grants, and Technical Assistance

Reporting Instructions

Form 16 should be completed by government entities, nongovernmental organizations (NGO), international or local donor entities respectively, as listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland local NGOs are residents of Newland. International donor agencies or international organizations are considered nonresidents of Newland.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Please convert amounts in foreign currencies to Newland dollars. All amounts for transactions should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction.

Structure and Scope of Form 16

Form 16 sets out information that should be reported quarterly/annually on transfers from nonresidents, in cash or in kind, received by the Newland government entities or by the private sector (including local companies and NGOs).

Furthermore, information is collected on foreign sponsored technical assistance in form of staffed missions sent to Newland for project work. The total costs for such projects and all individual components are relevant for Newland’s balance of payments. The cost components include administrative expenses incurred in the nonresident donor economy, costs incurred in Newland (e.g., for transport, administrative arrangements), and the salaries paid to short-term expatriates as well as long-term personnel and local staff. A rough breakdown of the main technical assistance services provided to Newland (e.g., consulting, accounting, administration, management training, trade-related services) is appreciated.

If the reporter is the government entity, the report should include transfers in cash and in kind, and technical assistance received directly by the Government or provided to private sector under the Government’s monitoring.

If the reporter is a private entity (including NGOs), the report should include transfers in cash and in kind received directly by the private entity.

In part A, you should report details on received transfers in cash and in kind..

In part B, you should report details on received technical assistance in form of project work/staffed missions.

If you are unsure what should actually be reported, please call (XXX) XXX-XXXX.

Economy codes

[An economy code list should be supplied by the compiler.]

Instructions for Completing Form 17—Financial Claims on and Liabilities to Nonresidents

Reporting Instructions

Form 17 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland branches and subsidiaries of nonresident companies are residents of Newland. Similarly, foreign branches and subsidiaries of Newland companies are nonresidents.

Your foreign direct investment enterprises are:

  • nonresident companies in which your company or its subsidiaries in Newland have voting equity of more than 50 percent; these are branches and subsidiaries, controlled by your company;

  • nonresident companies in which your company or its Newland subsidiaries have voting equity of between 10 and 50 percent: these are associates, significantly influenced by your company;

  • nonresident subsidiaries or associates of the immediate direct investment enterprises of your company, in a chain of control or influence.

A nonresident direct investor is a nonresident entity (or group of related nonresidents) that owns voting equity of 10 percent or more in this company. Nonresident companies that control or significantly influence the immediate nonresident direct investor are also considered nonresident direct investors in your company, in a chain of control or influence. Common examples of nonresident direct investors are foreign head offices (for branches) and foreign parent companies (for subsidiaries). An company may have more than one direct investor, and these direct investors may reside in different countries. An investor need not have the largest shareholding to be considered a direct investor.

Fellow enterprises are nonresident companies that are under the control or influence of the same immediate or indirect investor, but neither controls or influences the other (that is to say fellows have less than 10 percent (if any) equity ownership in each other).

Other nonresidents are those that are not direct investors, direct investment enterprises, or fellow enterprises.

The definitions and treatments of direct investment are complex. If you are uncertain about the application of definitions, please call (XXX) XXX-XXXX or e-mail bop@stat.com for assistance.

Structure of Form 17

Form 17 collects quarterly information regarding the financial claims of your company and its subsidiaries on nonresidents and the liabilities of your company and its subsidiaries to nonresidents. The form requests data on positions (stocks), financial transactions, reconciliation items (other changes in stocks), income, and associated financial fees and withholding taxes.

Form 17 consists of ten parts. Part A collects basic data on financial assets; part B collects information on financial assets classified by economy of the nonresident debtor. Parts C and D collect similar data for liabilities. Part E collects information on financial fees and withholding taxes; part F collects information on the valuation of direct investment; and parts G and H collect information on retained earnings and profits. Part I requests details on significant revisions to data for previous periods (if any), and part J includes questions for verifying the comprehensiveness of the completed data.

Financial Instruments

Equity and investment fund shares include stocks (shares) and other equity, such as investment in branches. Nonvoting preferred stock (preference shares) should be recorded under long-term debt securities.

Long-term and short-term debt securities include bonds, debentures, commercial paper, promissory notes, certificates of deposit, and other tradable nonequity securities other than financial derivatives. Long-term debt securities include instruments issued with original maturities of more than 12 months. Instruments with original maturities of 12 or fewer months are included in short-term debt securities. In parts A and C, long-term and short-term debt securities should be included in the respective category.

Financial derivatives (other than reserves) and employee stock options include all tradable financial derivatives or secondary market instruments such as options, futures, and forward contracts.

Loans include loans and financial leases. Long-term loans are those with original maturities of more than 12 months.

Deposits include checking accounts, savings accounts, and other time deposits.

Trade credit and advances are commercial credits extended by exporters to importers and prepayments made by importers to exporters.

Other includes all other financial assets and liabilities, not included in any of the specified instruments.

Positions, Transactions, Other Changes, and Income

Opening position refers to the value of the claims (part A and B) and liabilities (part C and D) of your company and its subsidiaries at the beginning of the quarter. The opening positions you report should agree with the closing positions you reported for the previous quarter. If this is not the case, details should be given in part I. The closing position refers to the value of the claims and liabilities of your company and its subsidiaries at the end of the quarter.

Financial transactions are transactions relating to the acquisition or disposal of your company’s financial claims on, or liabilities to, nonresidents. Purchases of stock made by your company (and its subsidiaries) in nonresident companies, purchases of your company’s shares by nonresidents, issuances and purchases of long- and short-term debt securities, increased deposits in bank accounts, and drawdowns of loans are examples of transactions that increase assets or liabilities. Sales of stock by your company (and its subsidiaries) in nonresident companies, sales of your company’s shares by nonresidents, redemptions and sales of long- and short-term debt securities, withdrawals from bank accounts, and repayments of loans are examples of transactions that decrease assets or liabilities.

Income refers to: (1) income receivable by your company from its ownership of claims on nonresidents; and (2) income payable by your company as a result of its liabilities to nonresidents. Common forms of income are dividends, distributions of profit, and interest.

Dividends and distributions of profit refer to income received from the ownership of stock (shares) or equivalent equity interest in companies. These amounts should be recorded on the basis of dividend (or remittance) payments dates. Interest relates to income earned from the ownership of financial assets other than equity assets. Income includes discounts. A discount is the difference between the value of a financial instrument when it issued and its final redemption value. Interest should be recorded on an accrual basis. The difference between income accrued and income payable should be recorded as a financial transaction in the instrument to which the interest relates.

For direct investments (see definition provided previously), undistributed income (reinvested earnings) should be reported in parts G and H. (See the subsequent instruction for completing these parts.)

Valuation

All values should be reported in thousands of Newland dollars. Please convert amounts expressed in foreign currencies to Newland dollars.

Financial transactions and income denominated in foreign currencies should be converted to Newland dollars by using the midpoint of the appropriate buy and sell rates applicable on the date of the transaction. Financial transactions and income should be recorded on a gross basis—that is, before the deduction of commissions on receipts (or addition of commissions on payments), brokerage fees, and withholding taxes, which are to be recorded in part E if paid to or received from a nonresident.

Positions denominated in foreign currencies should be converted to Newland dollars at the midpoint of the appropriate buy and sell exchange rates applicable on the reference dates.

All valuations should be made at market values. For valuing equity positions at market value, one of the following methods may be used:

  • the midpoint of the stock market buy and sell rates on the reference date

  • a recent transaction value

  • own funds at book value

  • directors’ value

  • net asset value

Net asset value equals total assets, including intangibles, less liabilities and the paid-up value of nonvoting stock. Assets and liabilities should be recorded at current, rather than historical, values. Own funds at book value (OFBV) involves valuing a company using book values that contain major attributes of International Accounting Standards (inclusion of cumulative reinvested earnings; revaluation of most financial instruments in current period prices; and inclusion of cumulative depreciation of plant and equipment, including write-offs of worthless assets).

Relationships between Data Items

Information reported in parts A and C should reflect the following relationships:

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Amounts reported in parts B and D should be consistent with relevant amounts in parts A and C, respectively.

Liabilities Held by Resident Nominees and Other Financial Intermediaries on Behalf of Nonresidents

Certain liabilities (such as securities issued in Newland) of your company may be held by nonresidents through financial intermediaries in Newland, and the details of these liabilities may not be known to you. Information on these liabilities is collected by the Ministry of Statistics from the financial intermediaries.

Treatment of Transactions with Related Banks

All financial transactions involving debt or financial derivatives and positions with related banks should be included as claims on, or liabilities to, other nonresidents rather than as claims on, or liabilities to, direct investors or direct investment enterprises.

Treatment of Hedges

Financial instruments that are hedged by the use of derivatives (such as currency swaps) should be recorded according to the terms of the contract and without regard to the hedge. The details of the hedge, if it is with a nonresident, should be reported under the financial derivative instrument. For example, for a long-term loan that is the subject of a swap, information on the unhedged position, principal repayments, and interest should be recorded in the appropriate columns for long-term loans. The market value of the swap and the actual payments on the swap agreement (excluding underlying instrument) should be recorded under the appropriate position and transaction columns in the row for financial derivatives (other than reserves) and employee stock options.

Economy Classification

Economy refers to the economy of residence of the creditor or debtor. In parts B and C, if the opening and closing positions for particular countries are less than ND1 million, the amounts relating to these countries may be consolidated and attributed to the largest economy.

Transactions with international institutions, such as the Asian Development Bank, should be recorded as INT.

Retained Earnings (Parts G and H)

Parts G and H seek information on retained earnings. Part G should be completed for the foreign direct investment enterprises of your company (and its subsidiaries), and part H should be completed in respect of your company. Part H should be completed only if your company has nonresident direct investors.

Operating profit is profit from the operations of companies. When operating profit is calculated, depreciation should be determined on the basis of replacement cost. Exchange rate gains and losses, special tax provisions (such as accelerated depreciation), and any extraordinary items should be excluded from the calculation.

Net income received equals interest, dividends, and any undistributed profits from the ownership of subsidiaries and associates attributable to the company(s) concerned, less interest payable by the company(s).

Taxes on profits should be recorded when due and without penalty.

Instructions for Completing Form 18—Foreign Direct Investment

Reporting Instructions

Form 18 should be completed for the company listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics. Please take time to review the survey questionnaire before completing it. Do not hesitate to call (XXX) XXX-XXXX if you have any difficulty understanding or completing the survey.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Please convert amounts in foreign currencies to Newland dollars. All amounts for financial transactions, dividends, interests, and withholding taxes should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction; all amounts for opening and closing positions should be reported at the midpoint of the buy and sell rates applicable on the reference dates.

Structure and Scope

Form 18 collects information about Newland’s direct investment that should be reported quarterly/annually including following issues:

  • Part A: General information on your company

  • Part B: Investments between your company and your foreign direct investors (i.e., foreign companies that own 10 percent or more of the voting equity in your company) and investments with nonresident fellow enterprises (i.e., selected investments with foreign companies that have your same direct investors but less than 10 percent equity ownership (if any) in each other).

  • Part C: Investment between your company and your foreign direct investment enterprises (i.e., nonresident companies in which your company directly or indirectly holds 10 percent or more of the voting equity) and investment with nonresident fellow enterprises (i.e., investment with foreign companies that are owned by your same owner).

  • Part D: Income, financial transactions, and assets and liabilities positions between your company and your foreign direct investor(s) (i.e., the foreign company(s) that owns (own) 10 percent or more of the voting equity in your company) and with nonresident fellow enterprises (i.e., investments with foreign companies that have the same owner as your company).

  • Part E: Income, financial transactions, and assets and liabilities positions between your company and foreign company(s) abroad in which your company owns 10 percent or more of the voting equity, and with nonresident fellow enterprises (i.e., investments with foreign companies that have the same owner as your company).

  • Part F: Information on positions in financial assets and liabilities between your company and nonresidents (International Investment Positions)

If audited data are not available, unaudited estimates are acceptable.

Definitions of entities in the questionnaire:

Direct investor:

A direct investor is a company, resident in an economy that directly or indirectly holds 10 percent or more of the equity in a nonresident direct investment enterprise.

Units are viewed as residents of Newland if they have resided (or intend to reside) for a year or more in Newland. A direct investor’s local enterprise group includes the resident company that directly owns a foreign direct investment enterprise (see below for definition), the resident companies that directly or indirectly control this company, and the resident companies that any of these companies directly or indirectly control in their own economy.

Direct investment enterprise:

A direct investment enterprise is a company, resident in one economy, in which a company, resident in another economy, holds 10 percent or more of the equity, either directly or indirectly.

Units are viewed as residents of Newland if they have resided (or intend to reside) for a year or more in Newland. A direct investment enterprise’s local enterprise group includes the resident company that is at least 10 percent directly owned by a foreign direct investor (see above for definition), and the resident companies that it directly or indirectly controls in its own economy.

All of these companies should be included in direct investment whether you report data for them on a single report for the local enterprise group or you report data on separate reports.

Units are viewed as nonresidents of Newland if they have resided (or intend to reside) abroad for a year or more. If you are not sure of the residence of a company, please contact us so that we may determine its status.

A fellow enterprise is a nonresident that has a common (immediate or indirect) parent with your company but neither your company nor the fellow enterprises hold 10 percent or more of the equity in the other.

An unrelated company is one that does not meet the above criteria.

Valuation of data reported in Parts B–E:

Please provide all data in thousands of Newland dollars and according to the following guidelines:

Positions

Currency:

Report all data in thousands of Newland dollars. If the currency(ies) of denomination of any of your company’s foreign assets and liabilities is (are) not in Newland dollars, please use the end-of-year foreign currency exchange rates to convert to Newland dollars.

Owners’ equity:

Please report owners’ equity (i.e., net worth) as the claims on your foreign direct investment enterprise’s, or fellow enterprise’s, net worth consisting of:

  • (1) paid-up capital (excluding any shares on issue that the company holds in itself and including share premium accounts) or equivalent for unincorporated companies

  • (2) all types of reserves identified as equity in the company’s balance sheet (including investment grants when accounting guidelines consider them a component of owners’ equity)

  • (3) cumulated retained earnings (which may be negative)

  • (4) holding gains and losses

Similarly, please include the above three items in calculating the value of reverse equity investment—that is, of your direct investment enterprise’s, or of your fellow enterprise’s, claim on your own net worth.

In determining your net worth (and therefore in determining your foreign direct investor’s or fellow company’s claims on your net worth), most financial assets should be reflected at an estimate of their current fair values; cumulative reinvested earnings should be included; and depreciation on items of property, plant, and equipment should be deducted. If your normal bookkeeping or accounting rules do not value these items as described above, please adjust their values before calculating the amounts to enter in Sections B–E.

Debt instruments:

Loans, trade credit and other accounts payable

Please report on a nominal value basis (after allowing for any changes that may result from changes in exchange rates).

Nominal value represents the value of funds advanced less any repayments plus any outstanding accrued interest.

Debt securities

Please report the market value of the securities, as of the balance sheet date.

Transactions

Transactions should be recorded at the value at the time of the transaction. If the transaction is in a foreign currency, please use the rate of exchange on the day of the transaction, or a weighted average rate for the reporting period if transactions (such as interest receipts and payments) occur continually over the period.

For interest, please report the total value of interest (payable and receivable) that accrued during 20XX, even if some payment were made during the year.

For dividends, please record the total value of dividends received and receivable (and paid and payable) during 20XX.

Loans: Loans are financial assets that (1) are created when a creditor lends funds directly to a debtor, and (2) are evidenced by documents that are not negotiable.

Insurance, pension, and standardized guarantee schemes: Insurance, pension, and standardized guarantee schemes comprise:

  • (1) Nonlife insurance technical reserves

  • (2) Life insurance and annuity entitlements

  • (3) Pension entitlements, claims of pension funds on sponsors, and entitlements to nonpension funds

  • (4) Provisions for calls under standardized guarantees

Trade credit and advances: trade credit and advances comprises (1) credit extended directly by the suppliers of goods and services to their customers and (2) advances for work that is in progress (or is yet to be undertaken) and prepayment by customers for goods and services not yet provided.

Other accounts receivable/payable: Other accounts receivable/payable include accounts receivable or payable other than those included in trade credit and advances or other instruments.

A financial derivative contract: A financial derivative contract is a financial instrument that is linked to another specific financial instrument or indicator or commodity and through which specific financial risks (such as interest rate risk, foreign exchange risk, equity and commodity price risks, credit risk, etc.) can be traded in their own right in financial markets.

Employee stock options: Employee stock options are options to buy the equity of a company, offered to employees of the company as a form of remuneration.

Valuation of data to be reported in Part F:

Please report data according to the following guidelines:

Currency:

Report all data in [thousands of units of domestic currency]. If the currency(ies) of denomination of any of your company’s foreign assets and liabilities is (are) not in [domestic currency], please use the end-of-year foreign currency exchange rates to convert to [domestic currency].

Owners’ equity:

For (related and unrelated) listed entities: Market value, if available; otherwise, a proxy for market value (such as net asset value)

For (related and unrelated) unlisted companies, please report the value of outstanding owners’ equity (i.e., net worth) as at year-end on the following basis.

For related entities: The sum of your foreign direct investor’s or fellow enterprise’s (see below for definitions) claims on your net worth, consisting of:

  • (1) Paid-up capital (excluding any shares on issue that the company holds in itself and including share premium accounts) or equivalent for unincorporated companies

  • (2) All types of reserves identified as equity in the company’s balance sheet (including investment grants when accounting guidelines consider them a component of owners’ equity)

  • (3) Cumulated retained earnings (which may be negative)

Similarly, please include the above three items in calculating the value of your company’s equity claim on your direct investor, direct investment enterprise, or fellow enterprise (see below for definition). Do not use the carrying value on your books.

In determining your company’s net worth, most financial assets should be reflected at an estimate of their current fair values; cumulative reinvested earnings should be included; and depreciation on items of property, plant, and equipment should be included. If your normal bookkeeping or accounting rules do not value these items as described above, please adjust their values before calculating the amounts to enter in Section F.

Debt instruments:

Loans and trade credit and other accounts payable

Please report on a nominal value basis (after allowing for any changes that may result from changes in exchange rates). Nominal value represents the value of funds advanced less any repayments plus any outstanding accrued interest.

Debt securities

Instructions for Completing Form 19—International Securities

Reporting Instructions

Form 19 should be completed for the company (and any subsidiaries in Newland) listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Please convert amounts in foreign currencies to Newland dollars. All amounts for financial transactions, income, fees, and withholding taxes should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction; all amounts for opening and closing positions should be reported at the midpoint of the buy and sell rates applicable on the reference dates.

Structure and Scope of Form 19

Form 19 sets out information that should be reported quarterly by this company in respect of international security transactions undertaken on its own account or on behalf of clients. As arranged with your company, information in respect of parts A and B should be submitted by electronic means and accompanied by completed parts C through E of form 19.

In part A, you should report details on securities issued in Newland (a) by residents and held or traded by your company on behalf of nonresident clients and (b) by nonresidents and held or traded by your company on behalf of resident clients or on your own account.

In part B, you should report details on securities issued abroad (a) by residents and held or traded by your company on behalf of nonresident clients; (b) by nonresidents and held or traded by your company on behalf of resident clients or on your own account, and (c) by residents and held or traded by your company on behalf of resident clients or on your own account. For all categories, separate details should be reported for each unique security reference number (column A) and owner code (column B) combination. If you are unsure what should actually be reported, please call (XXX) XXX- XXXX.

In part C, you should report details of your company’s claims on, or liabilities to, nonresident clients in respect of accounts outstanding for security transactions, income, fees, and so forth.

Security Reference Numbers and Owner Codes

A standard security reference number should be used for each security. When such numbers do not exist—particularly for securities issued abroad—you should create your own codes and provide a list of these codes to the Newland Ministry of Statistics. The list should show, for each code, the type of security, the economy of issue, the currency of denomination, the industry (activity) of the issuer, and the sector (international institution, government, central bank, other bank, other) of the issuer. (International institutions are organizations, such as Asian Development Bank and the European Investment Bank, whose members are governments.)

The nonresident owner code should consist of four digits. The first digit of the code should describe the sector of the nonresident client (1-international institution, 2-government, 3-central bank, 4-other bank, and 5-other). The last three characters should be the economy of residence code of the nonresident client. Economy codes are provided at the conclusion of these instructions.

The resident owner code should be a four-digit alphanumeric code that is determined by your organization. A separate code should be allocated to each company (business) client. A list of these codes, showing the industry (activity) and sector (government, central bank, other bank, other financial institution, and other) of each owner should be provided to the Newland Ministry of Statistics. Clients who are individuals rather than companies should be assigned the code HOUS.

Positions, Transactions, Other Changes, Income, Fees, and Withholding Taxes

The information reported in parts A, B, and C should have the following relationships:

Closing Position = Opening Position + Financial Transactions + Other Changes.

Opening and closing positions should be reported via market prices prevailing at the reference dates.

Financial transactions are transactions relating to the acquisition (including issues) or disposal (including redemptions) of a security. Financial transactions should be recorded before the deduction of fees.

Other changes are valuation changes, such as those caused by exchange rates (in the case of securities denominated in foreign currencies) and market price changes.

Income refers to dividends and interest. Dividends should be recorded on the ex-dividend date. Interest includes discounts. A discount is the difference between the value of a financial instrument when it is issued and its final redemption value. Interest should be recorded on an accrual basis. The difference between income accrued and income payable should be recorded as a financial transaction in the instrument to which the interest relates. If you are unsure how to record these types of transactions, please call (XXX) XXX- XXXX.

Income should be recorded before the deduction of any fees and withholding taxes.

Fees are amounts payable by nonresident clients for services provided by your company.

Withholding Taxes refer to—in the case of securities issued by residents—taxes payable to the Newland government by your company on behalf of nonresident clients and—in the case of securities issued by nonresidents—taxes withheld by foreign governments on securities held by your company on behalf of resident clients or on your own account.

Economy Codes

[An economy code list should be supplied by the compiler.]

Instructions for Completing Form 20—Holdings of and Transactions in Financial Derivatives Contracts with Nonresidents

Reporting Instructions

Form 20 should be completed for all resident companies (and any subsidiaries in Newland) that have derivative contracts with nonresidents—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland branches and subsidiaries of nonresident companies are residents of Newland. Similarly, foreign branches and subsidiaries of Newland companies are nonresidents. Transactions and positions should be reported for the economy in which the direct counterparty resides. Please do not report transactions and positions based on currency of denomination of the instrument, the economy of the parent institution of the counterparty (i.e., nationality), the economy of issuance of the instrument, or the economy of a guarantor (i.e., ultimate risk).

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Please convert amounts in foreign currencies to Newland dollars. All amounts for financial transactions, income, fees, and withholding taxes should be converted at the midpoint of the buy and sell rates applicable on the date of the transaction; all amounts for opening and closing positions should be reported at the midpoint of the buy and sell rates applicable on the reference dates.

Reporting of Positions

In Parts A, B and C, positions reported should be the balances outstanding at the close of business as of the last day of the calendar quarter covered by the report. Financial derivatives are valued at market prices prevailing on the balance sheet recording dates. If market price data are unavailable, other fair value methods (such as option models or present values) may be used to value them. Positions data should be reported on a gross basis. However, multiple contracts with a single counterparty may be reported on a net basis if a master netting agreement is in place and if the contracts are carried out at net values in the reporting company’s accounting records and statements of financial position.

Structure and Scope of Form 20

The purpose of this form is to gather timely and reliable information on transactions in, and holdings of, derivatives contracts with foreign residents, categorized by the economy of the foreign resident. The data are collected according to the derivative instruments: options, futures and forwards, and swaps. The value of commodities, securities, other noncash and cash (for foreign exchange currency swaps) assets received or delivered to settle derivatives contracts of any type should not be included in the reporting of transactions and positions. Employee stock options (financial instruments that may have similar characteristics as call options) should not be included in the reporting of transactions and positions.

Part A—Options: For transactions (columns B and C), report premiums paid or received on options. In columns D and E, report the receipts or payments of cash upon exercise of options that are settled only in cash. End-quarter positions are to be reported in columns F (Assets) and G (Liabilities).

Part B—Futures Transactions and Forward Agreements: For transactions in futures and forwards (columns B and C), report the cumulative payments or receipts (usually daily for futures) that arise from the change in value of the futures contracts (the “variation margin”). Also include the final cash settlement of futures and forwards contracts. For forward rate agreements, report cash received or paid upon maturity or settlement of forward agreements (including foreign exchange contracts). Do not report the amount received or paid upon settlement of a forward with a security or other noncash asset. End-quarter positions are to be reported in columns D (Assets) and E (Liabilities).

Part C—Swaps: Report in columns B and C the net amount of cash received or paid upon maturity or termination of a swap; and any periodic net cash settlement payments required under the terms of the swap (net settlements refer to the netting of individual contract flows and not to the netting of like instruments). End-quarter positions are to be reported in columns D (Assets) and E (Liabilities).

Part D—Notional Value of Foreign-Currency and Foreign Currency-Linked Contracts: Report positions in notional value, classified by foreign current payments and receipts, and by instrument (forwards and options).

Specific Exclusions:

The following should not be reported: (1) spot foreign exchange contracts, (2) short sale of assets, (3) regular securities trades, (4) normal purchases and sales of an item other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold by the reporting entity over a reasonable period in the normal course of business, (5) life insurance, property and casualty contracts, and (6) financial guarantees that do not meet the definition of a derivative. For further information on financial arrangements that are not financial derivatives, see the sixth edition of the Balance of Payments and International Investment Position Manual (paragraph 5.83).

Instructions for Completing Form 23—International Transactions and Positions of Households

Reporting Instructions

Form 23 should be completed for the household listed on page 1 of the form—unless different arrangements have been made with the Newland Ministry of Statistics.

Residents and Nonresidents

A nonresident is any individual, company, or other organization ordinarily domiciled in an economy other than Newland. Newland subsidiaries of nonresident companies are residents of Newland. Similarly, foreign subsidiaries of Newland companies are nonresidents.

Conversion to Newland Dollars

All values should be reported in thousands of Newland dollars. Foreign currencies should be converted to Newland dollars at the midpoint of the buy and sell rates applicable on the date of the transaction. Where amounts are less than ND500, leave blank or indicate with a “—”.

Structure of Form 23

Form 23 collects quarterly information on selected international positions and transactions of this household.

Part A collects information on goods received and sent by parcel post and courier services. Do not include goods purchased abroad and sent home during the personal trip.

Part B collects information on services received from nonresidents. Legal services include conveyancing on property purchases. Education services include correspondence courses and education services purchased online. Entertainment services include purchases of online content, fee-for-use Websites, and pay-per-view television. Do not include services purchased abroad during the personal trip.

Part C collects information on foreign assets, including participation in time-share arrangements on foreign property and holdings of foreign-issued notes and coin. Equity and units in investment funds exclude positions held on your behalf by resident custodians and fund managers. Other changes include changes in the value of assets due to market price changes and exchange rate changes.

Part D collects information on foreign income received.

Part E collects information on foreign liabilities. Mortgages with foreign banks (e.g., on foreign properties) should be included with loans.

Part F collects information on payments made to nonresidents.

Economy

Each question seeks information on the economy of transaction or position. Record the economy of residence of the nonresident transactor.

Index

Numbers in references refer to paragraphs in chapters, boxes, tables, or Appendixes. Page numbers are included for Model forms.

A

  • Accessibility of data, 1.9, 1.28, 17.1, 17.8–17.12, Box 17.1

  • Accounting system, 1.19–1.23

    • for insurance technical reserves, A2.32

  • Accrual basis accounting, 1.21

    • for debt securities, 10.36

    • recording interest income in, 13.63–13.73

    • in services, 3.27

  • Advance release calendar, 8.37

  • Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, 5.21

  • Agriculture, employment relationships in, 13.4

  • Airline services

    • code share agreements, 12.38, 12.48–12.49

    • interlining, 12.38, 12.48–12.49

    • leasing arrangements, 12.28, 12.34

    • passenger fare data, 3.24, 3.28, 3.30–3.31, 12.47–12.50, 12.66

    • residency of multiterritory companies, 8.68–8.69, 10.4

    • surveys of, 3.42–3.47

  • Airspace licensing, 15.10

  • Annuities, changes in volume of, 9.111

B

  • Balance of payments

    • coding systems, 1.10, A7.1–A7.13, Table A7.1–A7.3

    • compiling register for, 2.8–2.19, Figure 4.1

    • component accounts, 1.24

    • consignment trade in, 3.7, Table 11.4, Model form 4

    • data sources for compilation of, 1.9, 1.26, 2.1–2.2, 3.1–3.240, 4.1–4.78, 5.35–5.40, 6.1–6.49, 7.1–7.48

    • data structure definitions, A7.10–A7.46, Table A7.4–A7.7

    • definition of, as statistical statement, 1.13

    • deriving IIP from transactions data, 9.82

    • exceptional financing transactions, 16.1–16.8, Table 16.1

    • financial transactions data, 9.36

    • imbalances, 1.23, 8.88

    • institutional arrangements for agency in charge of data collection on, 3.192, 8.1, 8.3–8.16

    • international transactions reporting system statement of, 4.45–4.58

    • main tasks in compilation of, 1.6

    • merchanting transactions in, 3.8–3.9, 11.29–11.32, Model form 5

    • purpose of Guide in compilation of, 1.1–1.4, 1.8

    • securities transactions and, 3.154

    • surveys in, 3.1

    • use of international merchandise trade statistics in compiling, 3.2–3.4, 5.35–5.40

    • See also Balance of Payments and International Investment Position Compilation Guide; Balance of Payments and International Investment Position Manual

  • Balance of Payments and International Investment Position Compilation Guide (Guide)

    • BPM6 and, 1.1

    • compilation methodology recommendations in, 1.8

    • content and organization of, 1.9–1.11

    • preparation of, 1.5

    • purpose of, 1.1–1.4

    • scope of, 1.6–1.7

  • Balance of Payments and International Investment Position Manual, sixth edition (BPM6)

    • accounting system recommendations, 1.19–1.22

    • on allocation of special drawing rights, 10.92

    • Balance of Payments Manuals, BPM5 and BPM6, 1.10, 8.102–8.103, Appendix 1, Tables 8.10–8.11

    • classification of economic sectors in, A6.57

    • classification of other services in, 3.92, Table 3.1

    • classification of securities in, 3.158

    • on compilation of value of manufacturing services, 3.16

    • conceptual framework of, 1.1, 1.12–1.14

    • on conversion of foreign currency positions and transactions, 3.141

    • on currency composition of financial assets and liabilities, 6.22, 13.40

    • on direct investment relationships, 7.16, 10.7, A4.2

    • on exceptional financing transactions, 16.1–16.8, Table 16.1

    • on freight services, 12.35, 12.37

    • Guide and, 1.1

    • on identification of parties in stock trades, 10.49

    • insurance accounting requirements, 14.34, A2.18, A2.41, Box A2.1, Box A2.4

    • on intellectual property products and transactions, 12.4, 12.120, Table 3.1

    • international merchandise trade statistics guidelines and, 5.3–5.5, 5.16–5.17, Table 5.1

    • on investment funds, 10.15

    • linkage of monetary and financial statistics with, 10.40, A6.31–A6.53

    • on loans with concessional interest, 10.80

    • on manufacturing services, 12.5, 12.11

    • on offshore banks, 3.149

    • positive and negative sign conventions, 8.102, 8.103, Tables 8.10–8.11

    • purpose, 1.1

    • on recording consignment trade in balance of payments, 3.7

    • on recording of stock options, 10.54

    • on recording transactions in financial derivatives, 10.49, 10.56

    • on regional arrangements, 8.74

    • on research and development transactions, 12.126, 12.128

    • on securities repurchase and lending agreements, 3.182, 10.81

    • on special purpose entities, 10.16

    • System of National Accounts 2008 and, 1.2, A6.2–A6.30

    • on technical assistance and aid, 12.156

    • on travel and tourism expenditures, 12.78–12.80

    • on treatment of transfer pricing, 11.25, A4.56–4.57

    • valuation methodology, 10.40

    • on valuation of direct investment flows, 10.16

  • Balance sheet data

    • from banks and financial institutions, 3.142–3.143, 3.146

    • in government finance statistics, A6.109–A6.110

    • in national accounts and IIP, A6.27–A6.30

    • on other accounts receivable/payable, 10.89–10.90

    • reinvested earnings calculation from, 13.54, 13.55

  • Bank for International Settlements, 7.3–7.4

    • adjustments to data from, 7.26–7.28

    • balance of payments data from, 7.23

    • foreign exchange activity data, 12.114

    • IIP data from, 7.23, 9.63–9.70

    • nonbank sector data, 7.26

    • statistics collected by, 7.23–7.25

    • See also International banking statistics

  • Banks

    • international banking statistics, 9.63–9.70

    • in international transactions reporting system, 4.3–4.5

    • monetary and financial statistics from, 9.11–9.22, Table 9.1

    • offshore, 3.149

    • recording of transactions of, in ITRS, 4.22–4.26

    • remittances services to households, 14.12–14.13

    • surveys of, 3.142–3.151

    • See also Central bank; Financial services

  • Benchmark Definition of Foreign Direct Investment, 7.17, 10.5, 10.10, A4.5

  • Bilateral Loan Agreements, IMF, 10.107–10.108

  • BIS Quarterly Review, 9.63–9.64

  • Bonded factories, 12.16 See also Manufacturing services on physical inputs owned by others

  • Bookkeeping system in international accounts, 1.19

  • Border surveys, 12.73, 13.20

  • Border workers, see Foreign workers

  • BPM6. See Balance of Payments and International Investment Position Manual, sixth edition (BPM6)

  • Branch operations

    • companies operating seamlessly across economies, 8.68–8.70, 10.4

    • construction company, residency issues in compilation and, 8.65–8.67, 12.93–12.94, 12.101, Table 8.7

    • in production sharing arrangement, Box 10.1

    • transport equipment ownership, 12.28

  • Broadcast rights transactions, 12.128–12.129

  • Broad Economic Category, 5.19, 5.20

C

  • Cancellation of liabilities, 9.99

  • Capital account

    • acquisition/disposal of nonproduced, nonfinancial assets, 15.4–15.17

    • capital transfers, 15.18–15.40

    • definition of, 15.1

    • linkage with the national accounts, A6.22

    • reporting and types of transactions in, 8.99

    • scope of coverage of, 1.24

    • sign conventions in, Table 8.10

  • Capitalization ratio, A4.50, A4.53

  • Capital taxes, 15.38–15.40

  • Capital transfers

    • current transfers versus, 15.18

    • debt assumption, 15.22–15.25, Table 15.2

    • debt forgiveness, 15.3

    • definition of, 15.2

    • investment grants as, 15.32–15.38

    • nonlife insurance claims including catastrophic events, 15.26–15.31

    • technical assistance as, 14.39–14.41

    • types and characteristics of, 15.3, Table 14.2

  • Carry forward, 9.90

  • Central bank

    • credit and loans with the IMF, 6.19

    • currency and deposits data, 10.72

    • data sources on external assets and liabilities, 6.3

    • external assets and liabilities data collection components from, 6.20, 9.23, 9.26, 9.27, Table 6.1, Table 9.2

    • financial derivatives statistics, 10.64, 10.65, 10.67, 10.100

    • macroeconomic statistical datasets from, 9.11, 9.12, 9.23–9.30

    • public sector external debt data from, 6.19

    • reconciliation of sectoral balance sheet with IIP, 9.30, A6.49, Table A6.4

    • reserve assets data from, 6.25–6.26, 9.23, 9.24, 10.100, 10.104, Table 10.2

    • significance of, in balance of payments compilation, 6.1

  • Centralized Securities Database, Box 10.4

  • Charitable organizations, 3.113–3.115

  • Classification adjustment, 11.9

  • Code sharing agreement, 12.48, 12.49

  • Commercial free zone, 5.8, 5.9, 5.11

  • Commissions and fees, 3.165, 13.37

  • Compensation of employees

    • data models for estimating, 13.23, 13.24

    • data sources, ITRS, 13.11–13.16

    • data sources, official sources, 13.19–13.20

    • data sources, partner economy data, 13.22

    • data sources, surveys, 13.17–13.18, 13.21

    • definition of, 13.3–13.4, Table 14.2

    • in government finance statistics, A6.89, A6.90

    • identifying employment relationships, 13.4–13.7

    • payment in kind, 13.15

    • primary income, 13.1

    • recording, 13.8–13.10, Example 13.1

    • tax withholding, 14.19, 14.21

  • Compilation process

    • gathering data from multiple sources, 8.11–8.15

    • various agencies involved in, 8.4 Consignment trade, 3.7

  • Construction activity, 8.65–8.67, Table 8.7, Example 12.1

  • Construction services

    • abroad, 12.96, 12.99

    • data sources, Table 12.4

    • as direct investment activity, 12.92–12.94

    • example of balance of payments recording, 12.100

    • identifying employment relationships in, 12.98, 12.101, 13.6

    • model form for data collection, 3.68, 3.69

    • other services category, 3.92, Table 3.1

    • in the reporting economy, 12.97, 12.99

    • residency, 8.65–8.67, 12.94, Table 8.7

    • scope of, 3.67

    • See also Other services

  • Contract manufacturing, 12.6

  • Contracts

    • change in contractual terms, 9.103

    • as marketable assets, 15.11

    • transfer agreements, 15.11–15.13

    • types of, 15.7, 15.10

  • Coordinated Direct Investment Survey

    • adjustments to, for balance of payments and IIP, 7.20–7.22, A4.5, A5.21

    • data initiative, 7.4

    • directional principle presentation, 7.22, Table 7.1

    • scope, 7.16–7.19, 10.26

    • valuation, 9.51

  • Coordinated Portfolio Investment Survey

    • adjustments to, for balance of payments and IIP, 7.14–7.15

    • data initiative, 7.4

    • frequency, 7.13

    • mirror data for partner country as proxy, 7.7, 7.11–7.12, 10.48

    • scope, 7.9, A5.21

    • Survey of Securities Held as Foreign Exchange Reserves (SEFER), 7.10

  • Corporate change of residence, 9.110

  • Cost, insurance and freight (c.i.f)/f.o.b, 5.22

    • adjustments, 11.21, 11.22

  • Coverage adjustment, 11.8

  • Currency and deposits, 10.72–10.75, Table 14.2

  • Currency and economic unions, 8.74–8.83

  • Currency conversion

    • customs valuation under international merchandise trade statistics, 5.24, 5.25

    • in international transactions reporting system, 4.18–4.21

    • in margins on buying and selling transactions, 12.108–12.114

    • in monetary and financial statistics, 10.75, 10.91

    • net errors or omissions arising from, 8.95

    • transactions in foreign currency, 10.74

  • Current account

    • bookkeeping system, 1.20

    • linkage with the national accounts, A6.11–A6.21

    • nonlife insurance premiums and claims, 15.26–15.27

    • scope of coverage of, 1.24

    • sign convention in, Table 8.11

    • transactions, types and reporting, 8.99

  • Current transfers

    • capital transfers versus, 15.18

    • compilation of, 14.5, Table 14.1

    • international cooperation, 14.38, 14.40, 14.45

    • miscellaneous, 14.49

    • personal, 14.10–14.13, Table 14.2

    • scope and coverage, 14.1, 14.3, 14.4

    • taxes on income and wealth, 14.18–14.24, 15.39, Example 14.1

    • types of, 14.4, Table 14.1

  • Customs arrangements, 8.84–8.86

  • Customs declaration forms, 5.29, 5.30

    • manufacturing services data in, 12.22

  • Customs procedures, 5.32

D

  • Data models, 8.25–8.28, 13.23–13.24, 13.39

  • Data Quality Assessment Framework

    • accessibility 17.1, Box 2.2

    • consistency evaluation 17.6

    • revision policy, 8.34, 17.7

    • scope 8.6, Box 17.1

  • Data structure definitions, A7.10–A7.46, Table A7.4–A7.7

  • Debt, government-guaranteed, recording, 6.16

  • Debt assumption, 15.22–15.25, Table 15.2

  • Debt forgiveness, 15.19–15.21

  • Debt instruments

    • data from financial statements on, 9.44

    • as source of investment income, 13.25

  • Debt reorganization, 9.93

  • Debt securities

    • coupon payments, 13.70

    • definition, 3.158, 10.32

    • issued at discount, 10.36

    • issued at premium, 10.36

    • in portfolio investment, 10.32

    • reclassification of loans to, 9.102

    • recording of accrued interest, 13.69–13.72

    • valuation, 10.36

  • Defense transactions, 6.12–6.14

  • Depository receipts, 3.161

  • Deposit-taking corporations

    • currency and deposits data, 10.72

    • external debt data, 10.78

    • financial intermediaries, 3.153, 10.13

    • macroeconomic statistical datasets for IIP compilation, 9.11–9.12, 9.19–9.20

    • net operating surplus, 13.53

  • Derivatives. See Financial derivatives

  • Derived data

    • direct investment statistics, 7.20–7.21, 10.18, Box 10.2

    • insurance services, A2.35, A2.36, A2.47–A2.49, Example A2.4

    • insurance technical reserves, A2.43–A2.46

    • loans, 10.84

    • portfolio investment statistics, 7.11–7.12, 10.48

    • quarterly positions from quarterly transactions, 9.81–9.89, Example 9.1

  • Development assistance

    • Development Assistance Data Reporting System, 7.29–7.35

    • in donor economies, measurement of, 6.28, 6.29

    • in recipient economies, measurement of, 6.30–6.35

  • DIENT. See Direct investment enterprises

  • Diplomatic missions. See Embassies and diplomatic missions

  • Direct investment

    • affiliated financial intermediaries, 10.13, 10.14

    • assets/liabilities presentation, A4.70, A4.71, A5.25, Table A4.2, Table A4.3

    • concept and coverage, 10.3–10.4, Appendix 4

    • in construction activity, 8.65, Table 8.7

    • data sources, 9.39–9.60, 10.20–10.31

    • defining relationships in, 10.7–10.10, A4.2, A4.41–A4.43, A4.64–A4.67

    • directional principle presentation, A4.70, A4.71, A5.26–A5.28, Table 7.1, Table A4.2

    • entities established abroad for fiscal purposes, A4.21–A4.24, Table A4.1

    • extrapolation of income, 13.42

    • fellow enterprises, 10.11, 10.12

    • from financial statements, 9.40–9.54

    • income, 13.26–13.27, A5.29, Table 13.1

    • investment funds, 10.15–10.16

    • motivation for, 10.6

    • notional units, A4.15–A4.20

    • operation of mobile equipment, 8.61–8.62, Table 8.5

    • pass-through capital, A4.34–A4.37

    • position data, See CDIS and IIP

    • presentation by partner economy data, A5.24–A5.30

    • production sharing arrangements and, Box 10.1

    • reinvested earnings on, 13.43–13.61

    • round tripping, A4.38, A4.39, Figure A4.1

    • special purpose entities, A4.25–A4.33, A4.80, Box A4.1

    • statistical units, A4.7–A4.13

    • tax data, 6.46, 10.29

    • valuation of transactions and positions, 10.17–10.19, A4.43–A4.55

    • voting power, A4.40–A4.42

    • See also Direct investment enterprises

  • Direct investment enterprise (DIENT) calculation of reinvested earnings. See Reinvested earnings

    • construction services companies, 12.93–12.94

    • definition of, 10.7–10.8

    • foreign investment approvals, 6.41, 9.58

    • framework for, 10.9

    • goods traded between, 4.47

    • grants within, 15.35

    • hidden dividends, A4.60–A4.62

    • hidden injection of equity, A4.63

    • notional units, A4.14–A4.19, Table 14.2

    • pension services, 3.87

    • production sharing arrangements, Box 10.1

    • reverse investment, A4.67

    • surveys of, 10.21

    • tax data, 6.46

    • transfer prices, 11.24–11.28, A4.57–A4.59, Table 11.6

    • treatment of retained earnings in, 9.95

    • See also Direct investment

  • Directional principle presentation of data, 7.22, Table 7.1

  • Direction of Trade Statistics, 7.45–7.48

  • Dividends

    • estimation, 13.39, 13.41

    • ex-dividend date, 13.74–13.77

    • investment fund shareholder income, 13.82–13.90

    • investment income, 13.1, 13.25–13.28, Table 13.1, Figure 13.1

    • net operating surplus of insurance companies and, 13.52

    • retained earnings and, 13.43, 13.49

  • Double-entry bookkeeping, 1.19, 8.97

E

  • E-commerce, 11.7, 12.50, 12.158–12.161

  • Economic territory

    • companies operating seamlessly across multiple economies, 8.68–8.70, 10.4

    • definition of, 1.14

    • definition of residency in, 8.54–8.55

    • split of, 15.15

    • reconciliation with IMTS 2010, 5.4, 5.65.7, 5.10, 5.12, Figure 5.1

  • Economic unions, 8.76–8.83

  • Educational assistance, 6.35

  • Education data, 6.48

  • Embassies and diplomatic missions

    • compensation of employees and, 12.156, 13.16, 13.21

    • government services, 6.12–6.13, 12.152–12.154

    • land transactions, 15.15

    • transactions of, 3.94–3.97

  • Employee stock options

    • definition and characteristics of, 10.53–10.55

    • external debt and, 7.39

    • valuation and recording of, 10.59–10.63

  • Enterprise surveys, See Surveys

  • Equity securities

    • definition 10.32

    • valuation, A6.36

  • European System of Central Banks, Box 10.4

  • Exceptional financing transactions

    • data sources, 16.11–16.13, Table 16.3

    • definition, 16.1

    • identifying, 16.3–16.7

    • recording, 16.8, Table 16.1

    • timing of recording, 16.9, Table 16.2

    • valuation of, 16.9, 16.10, Table 16.2

  • Exchange rate(s)

    • estimation of quarterly position data and, 9.85–9.87

    • multiple, 8.40–8.48, Table 8.1

    • other adjustments, 2.59

    • See also Currency conversion

  • Expansion factors, 8.22, 8.24

  • Export processing zones, 12.16

  • Extended Balance of Payments Services Classification, Table 3.1

  • External assets and liabilities, surveys of central bank data, 9.23–9.29, Table 6.1, Table 9.2

    • classification of positions, transactions and income in, 3.139, 3.140

    • conversion of foreign currency positions and transactions in, 3.141

    • data collection, 3.121–3.123

    • data from banks and financial institutions, deposit taking corporations, 3.142–3.151, 9.13–9.22

    • government data. See Government, external assets and liabilities of model forms for, 3.124–3.130

  • External debt statistics

    • External Debt Statistics: Guide for Compilers and Users, 6.17, 9.5

    • Joint External Debt Hub, 7.41–7.42

    • loans, 10.76

    • other accounts receivable/payable, 10.89

    • Quarterly External Debt Database, 7.37–7.40, 9.71

    • registers of external loans, 9.74

    • trade credit and advances, 10.87

F

  • Fellow enterprises

    • definition of, 10.8, 10.11–10.12

    • directional principle, A5.26

    • investment income, 13.27

    • loans to/from, 9.50, Table 9.4

    • ultimate controlling parent, A4.63–A4.65, Figure A4.2

  • Financial account

    • balance, 8.102, Table 8.9

    • change of sign conventions in, 8.103, Tables 8.10–8.11

    • definition, 10.1

    • functional categories of, 10.2. See also specific category

    • instrument categories of, 10.2. See also specific category

    • insurance technical reserves, A2.32–A2.34

    • international transactions reporting system data on, 4.56

    • linkage between macroeconomic datasets, A6.23–A6.26

    • recording transactions in, 8.100

    • scope, 10.1

    • See also Other changes in financial assets and liabilities account

  • Financial derivatives

    • data sources, 3.210–3.211, 10.64–10.68, Model form 20

    • definition of, 3.209, 10.52

    • transactions and positions, 9.94, 10.56–10.58, Box 10.5

  • Financial intermediaries, selected affiliated, 10.13–10.14

  • Financial intermediation services indirectly measured

    • balance of payments entries, Box A3.1

    • data sources, A3.24, A3.24, A3.26, Table 12.4

    • definition of, 3.89, 12.105, A3.1–A3.3

    • exports of, A3.4, A3.11, A3.12, Table A3.1

    • imports of, A3.5, A3.13, A3.14, Table A3.2

    • interest income and, 13.62

    • negative, A3.15

    • reference rate, A3.2, A3.7–A3.10, A3.17–A3.20

  • Financial lease, 10.82

  • Financial services

    • data sources, 3.90, 12.105–12.107, Table 12.4

    • margins on buying and selling foreign exchange transactions, 12.108–12.118

    • scope of, 3.89, 12.102

  • Financial statements of companies

    • data source for IIP, 9.40, Table 9.5

    • direct investment and, 9.41–9.44, 9.51

    • from official channels, 9.47–9.54

    • portfolio/other investment and, 9.53

    • publicly available, 9.45–9.46

  • FISIM. See Financial intermediation services indirectly measured

  • Fixed capital consumption, 13.48

  • Flows

    • currency conversion, 1.22

    • definition of, 1.15–1.17

    • positions derived from, 9.81–9.89, 10.18, 10.84, Box 10.2, Example 9.1

    • reconciliation with positions, 3.131–3.135, 4.39, Table 4.2

    • time of recording of, 1.21

  • Food aid, 6.34

  • Foreign aid, 4.50

  • Foreign currency, 8.49

  • Foreign exchange accounts, international transactions reporting system and, 4.5, 4.30–4.37

  • Foreign investment boards, 6.38–6.41

  • Foreign workers definition, 12.35–12.36

  • Framework for Direct Investment Relationships, 10.9

  • Franchise and trademark licensing fees, 12.124

  • Frascati Manual: Proposed Standard Practice for Surveys on Research and Experimental Development, 12.138

  • Free circulation area, 5.8

  • Free on board (f.o.b). See Cost, insurance and freight/f.o.b. adjustments

  • Free zone, 5.8–5.9, 12.16

  • Freight services

    • adjustment in imports, 3.79–3.82, 12.37

    • definition, 12.35–12.36

    • estimation for exports and imports, Tables 12.1 and 12.2

G

  • General Arrangements to Borrow, 10.101, 10.105, 10.106

  • General Data Dissemination Standard, 7.37

  • General government, 9.31

    • data from embassy and defense transactions, 6.12–6.14

    • data on other current expenditures and revenues, 6.15

    • data sources, 6.4–6.7, 6.9–6.11

    • public sector external debt, 6.16–6.24

  • Gold, nonmonetary

    • definition, 11.33

    • data source, 11.34–11.35

  • Gold accounts

    • as reserve assets, 10.99

    • unallocated, 9.107, 10.99

  • Gold bullion

    • definition, 9.106

    • monetization and demonetization, 6.26, 9.106, 10.98, Table 9.6

    • as reserve asset, 10.94, 10.99

  • Gold loans and gold swaps, 10.81, 10.88, 10.98–10.99, Table 10.3

  • Goods

    • adjustments to International Merchandise Trade Statistics (IMTS), 11.5, Tables 11.1–11.4

    • adjustments to International Transactions Reporting System (ITRS) data, Table 11.5

    • c.i.f./f.o.b. adjustments, 11.21, 11.22

    • classification adjustments, 11.9, Table 11.2, Table 11.5

    • concept of consignment, A5.17, Table A5.14

    • concept of origin/consumption, A5.12–A5.16, Table A5.4

    • coverage adjustments, 11.8, Table 11.1, Table 11.5

    • definition of, 11.1

    • electronic commerce in, 11.7

    • enterprise surveys as a data source, 11.13

    • estimations, 11.16–11.20

    • IMTS as a data source, 11.11

    • ITRS as a data source, 11.12

    • linkage between macroeconomic datasets, A6.11–A6.21

    • merchanting transactions, 11.29–11.32

    • nonmonetary gold, 11.33–11.35

    • primary entries, 11.2

    • timing adjustments, 11.11, Table 11.4, Table 11.5

    • transfer pricing adjustments, 11.24–11.28, Table 11.6

    • valuation adjustments, 11.10, 11.21, 11.22, Table 11.3, Table 11.5

  • Government external assets and liabilities, 9.32–9.34, Table 9.3

  • Government finance statistics, linkages with international accounts

    • balance sheet, A6.109–A6.110

    • consumption of fixed capital, expense, A6.93

    • compensation of employees, expense, A6.89–A6.90, Table A6.8

    • coverage and accounting rules, A6.57–A6.60

    • data on other accounts receivable/payable, 10.89

    • grants, expense, A6.97–A6.99, Table A6.8

    • interest, expense, A6.94, Table A6.8

    • other expenses, A6.101–A.103, Table A6.8

    • other revenue, A6.81–A6.88, Table A6.7

    • revenue from grants, A6.77–A6.80

    • revenue from social contributions, A6.75–A6.76

    • revenue from taxes, A6.69–A6.74

    • social benefits, expense, A6.100, Table A6.8

    • statement of operations, A6.63–A6.68, Table A6.5

    • statement of other economic flows, A6.108

    • structural framework, comparison with balance of payments and IIP A6.61, A6.62, Table A6.1, Figure A6.1

    • subsidies, expense, A6.95–A6.96

    • transactions in financial assets and liabilities, A6.106, A6.107, Table A6.9

    • transactions in nonfinancial assets, A6.104, A6.105

    • use of goods and services, expense A6.91–A6.92, Table A6.8

  • Government Finance Statistics Manual, A6.54

  • Government goods and services n.i.e.

    • expenditure by foreign governments in compiling economy, 12.152–12.155

    • government expenditure abroad, 12.150–12.151

    • provision of technical assistance and aid, 12.156–12.157

    • See also Other services

  • Government-owned companies, 6.7

  • Grants. See Current transfers; Capital transfers

  • Grossing up data, 2.23, 2.58, 7.14, 7.21

  • Gross recording of transactions, 8.98

  • Guide. See Balance of Payments and International Investment Position Compilation Guide

H

  • Handbook on Deriving Capital Measures of Intellectual Property Products, 12.137, 12.138

  • Harmonized Commodity Description and Coding System, 5.19, 5.20

  • Health services, 6.48, Table 8.8

  • Hidden dividends, A4.59–A4.61

  • Hidden injections of equity, A4.62

  • Holding gains/losses, 9.92

  • Households

    • compensation of employees, 13.15

    • currency and deposits data, 10.72

    • e-commerce transactions, 12.161

    • recording transactions of, in balance of payments, Table 3.3

    • remittances services to, 14.12, 14.13

    • surveys of. See Household surveys

    • transactions and positions, 8.73, Table 8.8

  • Household surveys

    • data sources for, 3.213

    • expenditure, 3.237

    • external assets and liabilities, 9.77

    • income from, 3.240

    • insurance services from, 3.78

    • migration statistics from, 3.215–3.225

    • of transactions associated with foreign workers, 3.107

  • Humanitarian aid, 6.34

I

  • IIP. See International investment position

  • IMF. See International Monetary Fund

  • Income taxes. See Taxes on income

  • Income yield analysis, 3.135

  • Information services, 3.92

  • Insurance services,

    • data sources, 3.73, 3.74, 3.75, 3.77–3.78, 14.35, 14.37, A2.37, A2.4, A2.5, Table 12.4

    • on imports, 3.79–3.82, 12.46, Table 12.2

    • model form for, 3.71, 3.72, 3.77

    • scope of, 3.70, Table 3.1

    • See also Insurance transactions and positions

  • Insurance transactions and positions

    • balance sheet example, Example A2.2

    • BPM6 entries related to, 14.34, A2.18, Box A2.1

    • current account data, Table A2.2

    • data sources, A2.37–A2.48, Table 12.4

    • example of BPM6 compliance, Box A2.4

    • example of profit and loss account, Example A2.1, Example A2.7

    • extraordinary claims, 15.26–15.31

    • financial account, A2.32–A2.34, Table A2.3

    • goods and services account, 12.45, 12.46, A2.35–A2.36, A2.70–A2.72, Table 12.2

    • IIP entries, Tables A2.1, A2.4

    • indirect insurance, Example A2.6

    • life, A2.60–A2.69, Box A2.3

    • net operating surplus, 13.52

    • net premiums earned and claims payable or due, A2.20–A2.28

    • nonlife, A2.6–A2.7, Example A2.5

    • nonlife claims, 15.26–15.31, A2.11–2.13

    • nonlife premiums, 14.32–14.37, A2.8–A2.10

    • nonresidents’ provision, Example A2.4

    • premium supplements, A2.29–A2.31

    • reinsurance, A2.3, A2.49–A2.59

    • sales agents and brokers, Box A2.2

    • scope of, A2.1–A2.5

    • technical reserves, A2.14–A2.16, A2.32–A2.34, A2.43–A2.46, Example 2.3

    • See also Insurance services

  • Intangible assets, 15.3, 15.4–15.13

  • Intellectual property

    • BPM6 entries, 12.120–12.121

    • data sources and methods, 12.119, 12.122, Table 12.4

    • scope, 12.117

    • types of products, 12.123–12.133

  • Inter-American Development Bank, 7.41

  • Interest

    • accrued, 10.79, 13.62–13.73

    • in arrears, 13.67–13.68

    • concessional rates, 10.80

    • contractual changes in, 9.103

    • on debt securities, 10.36

    • as expense in government finance statistics, A6.94

    • fees for security lending recorded as, 13.91–13.94

    • FISIM reference rate, A3.7–A3.10, A3.17–A3.20

    • implications of treatment of, 9.97

    • investment income and, 13.27–13.31, Table 13.1

    • on special drawing rights allocations, 10.92, Table 10.1

    • retained earnings, 13.43

  • Interlining, 12.48–12.49

  • Intermediaries, 3.153

  • International Accounting Standards Board, 10.60

  • International accounts

    • bookkeeping system, 1.19

    • classification used, 1.24–1.25

    • compilation and dissemination, 1.27–1.28

    • components, 1.1, 1.13

    • data sources for compilation of, 1.26

    • linkages with government finance statistics, A6.54–A6.109

    • linkages with monetary and financial statistics, A6.31–A6.53

    • linkages with the system of national accounts, A6.1–A6.30

    • transactions in, 1.16

  • International banking statistics, 7.23, 7.27, 9.62–9.70, 10.78, A3.22

  • International Development Association, 7.41

  • International Direct Investment Statistics, 10.27

  • International Financial Statistics, 13.40, 16.1

  • International investment position (IIP)

    • classification of assets and liabilities in, 1.25

    • coding system, A7.1–A7.13, Table A7.2

    • compilation methodology, 1.8

    • data source, approvals of foreign investment, 9.55–9.59

    • data source, central bank, 9.23–9.30, Table A6.4

    • data source, deposit-taking corporations, except the central bank, 9.13–9.22, Table A6.3

    • data source, financial press, 9.60–9.61

    • data source, financial statements, 9.40–9.54

    • data source, general government, 9.31–9.35

    • data source, nonstatistical, 9.39

    • data source, other, 9.70–9.73

    • data source, surveys, 9.76–9.79

    • data sources, 9.4–9.5

    • definition of, as statistical statement, 1.13

    • domestic data sources, 9.6–9.10

    • external data sources, international banking statistics data, 9.62–9.70

    • institutional arrangements for agency in charge of data collection on, 8.3–8.16

    • pension entitlements, A2.114, Table A2.1

    • quarterly estimates, 9.37–9.38, 9.81–9.89, 9.69

    • reconciliation with balance of payments, 9.36

    • See also Balance of Payments and International Investment Position Compilation Guide (Guide); Other changes in financial assets and liabilities

  • International Merchandise Trade Statistics: Compilers’ Manual 2010, 7.45

  • International Merchandise Trade Statistics: Concepts and Definitions–2010, 5.3

  • International merchandise trade statistics (IMTS), 1.26, 3.2

    • challenges in use of, 3.3

    • commodity classification in, 5.19–5.20

    • compilation procedures, 5.29–5.34, A5.10–A5.17

    • coverage of, 5.4

    • currency conversion issues, 5.24, 5.25

    • data on freight and insurance on imports, Table 12.2

    • data source for goods, 11.3–11.11, 11.20, Tables 11.1–11.4

    • data source for nonmonetary gold, 11.34, 11.35

    • general trade system, 5.6, 5.16

    • import and export flows, goods, 5.10–5.15

    • manufacturing services in, 12.7–12.9, 12.12, 12.22

    • partner economy classification in, 5.28, A5.10–A5.17

    • point of valuation, 5.22, 5.26

    • purpose of, 5.1, 5.35

    • quality control in, 5.34

    • quantity measurement in, 5.27

    • reconciliation with BPM6, 5.5, 5.16, 5.17, Table 5.1

    • scope of, 3.2, 5.1, 5.29

    • special trade system, 5.7–5.9, 5.17, 5.18

    • use of, in international accounts, 5.35–5.40

    • valuation, 5.21–5.26

  • International Monetary Fund

    • balance of payments coding structure, A7.1–A7.9, Table A7.1

    • bilateral data collection, Coordinated Direct Investment Survey, 7.16–7.19, A4.5, A5.21, Table 7.1

    • bilateral data collection, Coordinated Portfolio Investment Survey, 7.4, 7.9–7.13, A5.21

    • borrowing from, as exceptional financing, 16.7

    • data quality assessment framework, 17.1, 17.6, 17.7, Box 17.1

    • data sources, 7.1–7.22

    • General Data Dissemination Standard, 7.37

    • lending to, 10.105–10.109

    • metadata recommendations of, 8.38, 8.39

    • reserve position in, 10.93, 10.101

    • Special Data Dissemination Standard, 7.37

  • International organizations, data collections of, 7.1–7.8

  • International Recommendations for Tourism Statistics 2008, 12.76, 12.77

  • International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template, 10.102

    • See also Reserves Data Template

  • International Securities Identification Number, 7.9

  • International Transaction in Remittances: Guide for Compilers and Users, 14.15

  • International transactions reporting system (ITRS)

    • advantages as data source, 4.69–4.72

    • aggregation process, 4.38, 4.39, Table 4.1, Table 4.2

    • balance of payments statement in, 4.45–4.58

    • bundling of transactions in, 4.28, 4.29

    • classification of transactions in, 4.15–4.17, A5.18

    • collection and processing of data in, 4.59–4.68, Table 4.1, Figure 4.1

    • compensation of employees in, 13.12–13.16

    • for compilation of goods in balance of payments, 3.2, 3.4–3.6, 11.12, Table 11.5

    • for compilation of trade in services, 3.11

    • comprehensiveness of, 4.7

    • currency conversion in, 4.18–4.21

    • data items collected, 4.8–4.11

    • definition of, 4.1, 4.2

    • deposits data in, 10.72

    • direct investment flows from, 10.22

    • disadvantages as data source, 4.69–4.78

    • in economies with relaxed or abolished exchange regulations, 4.40, 4.41

    • financial account transactions in, 4.56

    • financial services data in, 12.104

    • government expenditures abroad in, 12.152, 12.154

    • household transaction data in, 3.213

    • investment income in, 4.54, 13.36–13.38, 13.73

    • limitations of, 12.85–12.86, 14.6, A5.19

    • manufacturing services data in, 12.23

    • measurement of noncash transactions in, 4.42–4.44

    • measures, 4.2

    • model collection forms, 4.9, Model forms 3.1–3.5

    • offshore banking units in, 4.41

    • other services data in, 12.85–12.87

    • portfolio investment data in, 10.42

    • quality control procedures, 4.61, 4.64, 4.67

    • reporters, 4.3–4.6

    • reporting thresholds, 4.12–4.14, 4.72, 4.74

    • research and development data in, 12.141

    • scope, 4.30–4.37

    • social contributions and benefits in, 14.31, 14.32

    • technical assistance and aid in, 12.159

    • time of recording, 4.22–4.26

    • transaction classification codes, 4.11

    • transport services in, 12.51, 12.55, 12.56, 12.60–12.62

    • travel expenditure data in, 12.69–12.71

    • valuation adjustments in, 4.27

  • Interpolation techniques, 8.31

  • Investment funds

    • calculation of reinvested earnings, 13.43–13.61

    • definition and features of, 10.13, 10.15, 13.80, 13.81

    • extrapolation techniques for estimating, 13.41, 13.42

    • investment income attributable to, 13.82–13.89

    • special purpose entities and, 10.16

  • Investment grants, 15.32–15.38, Example 15.1

  • Investment income

    • from accrued interest, 13.62–13.73

    • attributable to investment fund shareholders, 13.81–13.90

    • calculation of reinvested earnings, 13.43–13.61

    • components of, 13.26

    • data sources, 13.32–13.38

    • definition of, 13.25

    • estimation models of, 13.39–13.42

    • from dividends, 13.74–13.80

    • from fees for security lending without cash collateral, 13.91–13.94

    • functional classification, 13.27–13.31, Table 13.1

    • as primary income, 13.1

    • surveys of, 3.121, 3.123, 3.131, 3.135, 3.139

J

  • Joint External Debt Hub, 7.36, 7.41, 7.42, 9.35, 9.75

L

  • Land, international transactions in, 15.14–15.17

  • Leases

    • dry, 12.34

    • financial, 10.82, 12.149–12.150

    • of mobile oil rigs, 12.149, 12.150

    • of natural resource, 12.147, Box 10.1

    • as nonproduced nonfinancial assets, 15.3, 15.12, A6.105

    • operating, 12.143–12.146, 13.105–13.107

    • scope of, 15.7, 15.10

    • time-share arrangements, 15.8, 15.9, Table 15.1

    • transport equipment, 12.28, 12.29–12.31

    • wet, 12.34

  • Legislation, statistical, 8.6–8.8

  • License/Licensing

    • foreign investment data from, 9.55–9.59

    • franchise and trademark, 12.124, 15.5

    • as nonproduced nonfinancial assets, 15.7, 15.10, 15.12

    • to reproduce or distribute audiovisual and related products, 12.128

    • to reproduce or distribute software, 12.127

    • for use of intellectual property, 12.119–12.120, 12.132–12.133

    • for use of research and development outcomes, 12.126

  • Life insurance, 14.34, A2.60–A2.69, Box A2.3

  • Loan agreements, 15.11–15.13

  • Loans

    • accrued interest on, 10.79

    • arrears, 10.79

    • with concessional interest rates, 10.80

    • data collection, 10.76–10.84

    • to International Monetary Fund, 10.105–10.109

  • Local enterprise group, 13.46, A4.10–A4.12

M

  • Maintenance and repair services, 3.18–3.20, Table 12.4. See also Other services

  • Manual on Statistics of International Trade in Services 2010, 3.92, Table 3.1

  • Manufacturing services on physical inputs owned by others

    • data collection, 3.15–3.16, 12.20–12.25

    • versus merchanting, 12.19

    • scope and definition, 12.5–12.19

  • Marketing assets, 12.121, 12.124, 15.3–15.6, A6.105

  • Merchanting

    • data collection on, 3.9, 11.32

    • definition of, 3.8, 11.29

    • versus manufacturing services, 12.19

    • partner economy data, A5.31, A5.32

    • reconciliation between IMTS2010 & BPM6, Table 5.1, Table 11.1, Table A5.3

    • recording in BPM6, 11.30–11.31

  • Metadata, 8.38–8.39

  • Migration

    • alternative statistics on cross-border movements, 3.225

    • arrivals and departures data, 3.221–3.224, Table 3.4

    • balance of payments treatment of, Table 8.8

    • data collection, 3.215–3.218

    • international guidelines, 3.219–3.220

  • Mobile equipment, 5.5

    • residency treatment of, 3.50, 8.56–8.64, Tables 8.2–8.6

    • types of, 8.57

  • Mobile oil rigs and floating production, storage and off-load vessels, 12.149–12.150

  • Model form

    • summary of model survey forms, Table A8.1

    • 1, Exploratory Survey, 2.12; pp. 460–465

    • 2, Company Register Form, 2.17; pp. 466–471

    • 3–1, ITRS—Payments and Receipts, 4.9, 4.31; pp. 472–473

    • 3–2, ITRS—Imports and Exports, 4.9; pp. 474–475

    • 3-3, ITRS—Companies, 4.9, 4.42; pp. 476–481

    • 3–4, ITRS—Banks, 4.9, 4.31; pp. 482–488

    • 3–5, ITRS—Bank’s records of Transactions, 4.31; pp. 489–493

    • 4, Goods 3.6, 3.19, 3.80; pp. 494–498

    • 5, Goods for Merchanting, 3.9, 11.32, A5.17, A5.32; pp. 499–501

    • 6, International Trade in Services, 3.12, 3.20, 3.53, 3.77, 3.86, 3.92, 15.5; pp. 502–508

    • 7, Manufacturing Services, 3.17, 12.20; pp. 509–511

    • 8, Resident Transport Operators, 3.24, 3.25, 3.29, 3.30, 3.46; pp. 512–515

    • 9, Transactions with Nonresident Transport Operators, 3.27, 3.29, 3.30, 3.46; pp. 516–519

    • 10, International Travel, 3.54, 3.56, 3.59, 3.60, 3.65; pp. 520–524

    • 11, Construction Services, 3.68; pp. 525–527

    • 12, International Insurance Transactions, 3.71, 3.72, 3.119, A2.5; pp. 528–533

    • 13, International Pension Services, 3.84, 14.29, A2.124; pp. 534–539

    • 14, Foreign Embassies and International Institutions, 3.95, 12.104; pp. 540–543

    • 15, Private Aid and Charitable Organizations, 3.114; pp. 544–548

    • 16, Current Transfers, Grants, and Technical Assistance, 3.120, 15.37; pp. 549–553

    • 17, Financial Claims on and Liabilities to Nonresidents, 3.90, 3.112, 3.124, 3.125, 3.127, 3.131, 3.135, 3.136, 3.137, 3.140, A4.48; pp. 554–563

    • 18, Foreign Direct Investment, 3.126, 10.20; pp. 564–578

    • 19, Foreign Direct Investment, 3.180, 3.194, 3.196, 3.202, 3.204, 10.34; pp. 579–584

    • 20, Holdings of and Transactions in Financial Derivatives Contracts with Nonresidents, 3.211; pp. 585–589

    • 21, Travel: Returning Residents, 3.223; pp. 590–592

    • 22, Travel: Departing Nonresidents, 3.223; pp. 593–595

    • 23, International Transactions and Positions of Households, 3.238; pp. 596–601

  • Monetary and financial statistics

    • as a data source, 10.40, 10.72, 10.89, 10.91

    • currency conversion, 10.75

    • deriving insurance technical reserves from, A2.43–A2.46

    • limitations of, for compiling IIP, 10.40

    • linkage with international accounts, A6.31–A6.53, Table A6.3

    • overview of framework, A6.31, A6.111–A6.124

  • Monetary and Financial Statistics Manual and Compilation Guide, 9.3, 9.12, 9.29

  • Monetary authorities, 9.23, 9.24

  • Monetization/demonetization of gold, 6.26, 9.106, 10.98

  • Money transfers operators, 14.12, 14.13

  • Multilateral settlements, A5.8–A5.9, Table A5.2

N

  • National accounts, system of

    • BPM6 and, 1.2

    • linkage with international accounts, A6.1–A6.30

  • Natural resource rents and leases, 12.145, 13.101, 13.102, 15.3, 15.7, Box 10.1, A6.105

  • Net asset value, A4.44, A4.50–A4.52

  • Net errors and omissions

    • analysis over time, 8.93–8.96

    • definition of, 1.23, 8.88

    • negative figure for, 8.102

    • revisions and, 8.91, 8.92

    • significance of, in balance of payments analysis, 8.89, 8.90

  • Net incurrence of liabilities, 1.20, 8.103

  • Net operating surplus, 13.47, 13.49–13.53

  • Net recording of transactions, 8.98

  • Neutral/special codes, 4.16

  • New Arrangements to Borrow, 10.101, 10.105, 10.106

  • Nominal valuation, 9.96

  • Non-branch foreign operations, surveys of, 3.116–3.118

  • Noncash transactions, 4.42–4.44, 10.22

  • Nonlife insurance, 14.32–14.34, 15.26–15.30, A2.3, A2.6–A2.7, A2.16, A2.47, Example A2.4

  • Nonnegotiable instruments, 9.96

  • Nonproduced nonfinancial assets

    • acquisitions and disposals of, 15.4–15.17

    • types of, 15.3

  • Nonprofit institutions serving households (NPISH), 14.49

  • Nostro accounts, 4.5

  • Note Purchase Agreements, 10.107, 10.109

  • Notional units for ownership of land, A4.14–A4.18

O

  • Official Development Assistance, 7.29, 12.157

  • Offshore banking units, 3.149, 4.41

  • Oil rigs, 12.147, 12.148

  • Operating leasing, 12.143–12.146, 13.105–13.10715.8

  • Organisation for Economic Co-operation and Development, 7.3, 7.4, 7.41, 10.27, 12.135, 12.138, A4.5

    • Development Assistance Data, 7.29–7.35

  • Other accounts receivable/payable—other, data collection, 10.88–10.91

  • Other business services, 12.145–12.150, Table 12.4

    • See also Other services

  • Other changes in financial assets and liabilities account

    • cancellation and write off, 9.99–9.100

    • categories of, 9.91

    • change in volume of insurance reserves, pension entitlements, and provisions for standardized guarantee schemes, 9.111

    • change of residence, 9.108–9.110, 10.37

    • debt reorganization, 9.93

    • definition of, as statistical statement, 1.13, 9.91

    • financial derivatives and, 9.94

    • interest and, 9.97

    • reclassifications, 9.101–9.107

    • reconciliation statement and, 9.112, 9.113

    • retained earnings and, 9.95

    • revaluations, 9.92

    • transaction in nonnegotiable instruments and, 9.96

    • volume changes, 9.98, Table 9.6

  • Other current transfers, 14.4

  • Other depository corporations

    • monetary and financial statistics, 9.12, 9.15, A6.33, A6.39, A6.43

    • reconciliation with IIP, 9.15, A6.49–A6.50, Table A6.3

    • sectoral balance sheet, 9.14, Table 9.1

  • Other equity, 10.70–10.71

  • Other financial corporations

    • currency and deposits, 10.72

    • external debt, 10.78

    • monetary and financial statistics, 9.12, 9.21, A6.33, A6.40–A6.42, A6.44

  • Other flows

    • definition of, 1.17

    • in government finance statistics, A6.108

  • Other investment, 13.27

    • currency and deposits, data source and compilation issues, 10.72–10.75

    • definition and types of, 10.69

    • income, 13.27, 13.29

    • insurance, pensions and standardized guarantees schemes, data source and compilation issues, 10.85

    • loans, data source and compilation issues, 10.76–10.84

    • other accounts receivable/payable-other, data source and compilation issues, 10.88–10.91

    • other equity, data source and compilation issues,10.70–10.71

    • special drawing rights, data source and compilation issues, 10.92

    • trade credit and advances, data source and compilation issues, 10.86–10.87

  • Other primary income, 13.94, 13.95, Table 13.1

  • Other services

    • data sources and methods, 12.84–12.90, Table 12.4

    • definition and types of, 12.4, 12.83, Table 12.4. See also specific type

  • Own funds at book value, 7.19, 9.51, 9.88, A4.48, A4.49

P

  • Paris Club Secretariat, 7.41

  • Partner economies

    • balance of payments compilation by partner economy, A5.1

    • comparison among multiple sources of, 8.15

    • data from CDIS, 7.17

    • data from CPIS, 7.14

    • data on compensation of employees, 13.22–13.24

    • data on external debt, 7.42, A7.34

    • data on government services, 12.90

    • data on merchanting of goods, A5.31, A5.32

    • data on trade in goods, 7.45–7.48

    • data on travel, 12.74,

    • economy classification, 5.28, A5.2–A5.6

    • multilateral settlements, A5.8, A5.9, Table A5.2

    • presentation of direct investment, A5.24–A5.30, Table A5.5, Table A5.6

    • regional arrangements in compilation process, 8.74–8.86

    • sources and use of, 7.2–7.8, A5.10–A5.23

  • Passenger transport services

    • data collection, 3.30–3.31, 3.213, 12.47–12.50, 12.59

    • estimates of, 12.53, 12.66

    • fare data, 3.24, 3.28, 3.30–3.31, 12.47–12.50

  • Pass-through capital, A4.33–A4.35

  • Pension and standardized guarantee schemes, 10.85

    • data collection on, 14.30–14.32, A2.77–A2.78

    • defined benefit schemes, A2.81–A2.109, Examples, 2.8–2.10, Examples 2.11a-2.11c

    • defined contribution schemes, A2.77, A2.78, A2.110–A2.126, Examples 2.12a-2.12c

    • foreign worker participation in, 3.102, 3.110

    • forms of employment-related pension schemes, A2.75–A2.76

    • investment income from, 13.27, 13.29, 14.26

    • pension services, 3.83–3.88

    • secondary income data from, 14.25–14.26

    • See also Social security

  • Personal, cultural and recreational services, Table 12.4. See also Other services

  • Personal transfers

    • definition of, 14.10–14.11, Table 14.2

    • institutions concerned with, 14.12–14.13

    • See also Remittances

  • Pipeline transport, 12.39

  • Port authorities, 6.5, 8.4

  • Portfolio investment

    • Coordinated Portfolio Investment Survey and, 1.26, 3.154, 7.4, 7.9–7.15, 9.75, 10.48, A5.21

    • data sources, 10.39–10.51, Box 10.4

    • definition of, 10.32–10.33

    • estimation of income, 13.39

    • income from, 13.27–13.28

    • valuation of transactions and positions, 10.34–10.38, Box 10.3

    • See also Coordinated Portfolio Investment Survey

  • Positions

    • currency conversions, 1.22, 3.141

    • definition of, 1.15, 1.18

    • derived from transactions, 9.81–9.89, 10.18, 10.84, Box 10.2, Example 9.1

    • reconciliation statement, 3.131–3.135

  • Postal and courier services, 3.53, 12.26

  • Primary income

    • definition of, 13.1

    • linkage with national accounts, A6.16–A6.19

    • other, 13.94

    • premium supplements, A2.29–A2.31

    • rent, 13.101–13.104

    • rent and rentals, 13.105–13.108

    • taxes and subsidies as, 13.96–13.100

    • See also Compensation of employees; Investment income

  • Private capital flows survey, Box 2.2

  • Production sharing arrangements, Box 10.1

  • Professional associations, data from, 6.49

  • Progressive payments, 10.86

  • Property income, A6.17

  • Public sector external debt

    • credit and loans with the IMF in, 6.19

    • currency composition, 6.22

    • debt management office and, 6.16–6.17

    • maturity breakdown of, 6.23

    • standard components of, 6.20–6.21, Table 6.1

  • Pure interest, 13.26, 13.62

Q

  • Quarterly External Debt Statistics, 7.36, 7.37–7.40, 9.35, 9.71

  • Quarterly International Investment Position Statistics: Data Sources and Compilation Techniques, 9.1

  • Quarterly positions data

    • carry forward estimates in absence of, 9.90

    • deriving from transactions data, 9.81–9.89, Example 9.1

  • Quasi-corporations

    • equity in, 10.70

    • investment income from, 13.1, 13.26, 13.27, 13.74, Table 13.1

R

  • Rail transport, 3.48

  • Reclassification of asset or liability

    • change in contractual terms, 9.103

    • changes in functional category, 9.105

    • changing residence, 9.108–9.110, 10.37

    • definition, 9.101

    • monetization and demonetization of gold bullion and, 9.106

    • tradable loans, 9.102

    • transactions in existing assets, 9.104

    • unallocated gold accounts, 9.107

  • Recommendations of Statistics on International Migration, 3.217, 3.219

  • Refugees, 12.79

  • Regional arrangements

    • currency and economic unions, 8.74–8.83

    • customs arrangements, 8.84–8.86

  • Register, balance of payments

    • data sources for building, 2.9–2.10

    • definition of, 2.8

    • development of, 2.11–2.12

    • maintaining and updating, 2.16, 2.19

    • scope of, 2.15, 2.17

  • Register of Ships, 3.33

  • Reinvested earnings

    • calculation of, 13.43–13.61, A4.71–A4.77, Table A4.4

    • investment fund shares, 13.61

    • negative, 13.57–13.60

    • as primary income, 13.1

  • Remittances, international transactions in

    • compilation guide, 14.15

    • data sources, 13.15, 14.17

    • definition and measures of, 14.14

    • recording in balance of payments, 14.16

    • services to households, 14.12

    • See also Personal transfers

  • Rent

    • definition of, 13.101, 13.106

    • of land by other governments, 13.104

    • of natural resource, 13.102, 13.103

    • primary income, 3.117, 13.1

    • versus rental, 13.105–13.108

    • of rights to use professional athletes and, 13.105

    • scope of, 13.102–13.104

  • Rental

    • of buildings, 12.145

    • definition of, 13.105

    • of dwellings, 12.145

    • of land, 12.145

    • of mobile equipment, 12.145

    • versus rent, 13.105–13.108, Figure 13.2

  • Research and development

    • data collection on, 12.136–12.142

    • licensing for use of outcomes of, 12.126

  • Reserve assets

    • allocation of SDRs, 10.92, Table 10.1

    • Bilateral Loan Agreements (BLA), 10.108

    • central bank data, 6.25, 9.23, 9.24

    • classification of income from, 13.30

    • data compilation, 10.100–10.102, 10.103, 10.104, Table 10.2

    • data sources, 6.25, 6.27, 10.103–10.104, Table 10.2

    • definition and forms of, 10.93, 10.94, 10.95–10.99

    • description of, 10.94–10.99

    • financial derivatives as, 10.65, 10.100

    • IMF reserve position and, 10.101, 10.106

    • income from, 13.27, 13.30, 13.35

    • in international transactions reporting system, 4.57

    • Survey of Securities Held as Foreign Exchange Reserves (SEFER), 7.10

    • See also Reserves Data Template; specific instrument

  • Reserve position in IMF, 10.101, 10.106

  • Reserves Data Template, 7.43, 7.44

    • See also International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template

  • Residency of institutional unit

    • construction activity, 8.65–8.67, Table 8.7

    • definition of, 8.54

    • individuals with multiple residences, 8.71, 8.72

    • multiterritory companies, 8.68–8.70

    • operation of mobile equipment and, 8.56–8.64, Tables 8.2–8.6

    • reclassification of assets and liabilities from change in, 9.108–9.110, 10.37

  • Rest of the world account

    • balance of payments statement and, 1.2, 1.3

    • IMTS and, 5.40

  • Retained earnings

    • calculation of, 13.50, 13.51, 13.55, 13.61

    • in calculation of reinvested earnings, 13.44

    • definition, 13.43

    • net operating surplus, 13.47, 13.49

    • See also Reinvested earnings

  • Revaluations, 9.92

  • Reverse investment, A4.67–A4.68

  • Revision of data, 8.32–8.37, 8.91–8.92

  • Road transport services, 3.50, 3.51

  • Royalties and fees data, 3.92

S

  • Sample expansion, 8.22–8.24

  • Seasonal workers, 3.99

  • Secondary income

    • data sources, 14.6–14.9

    • definition and scope, 14.1–14.4

    • insurance in, 14.32–14.37, A2.20–A2.28

    • international cooperation, 14.38–14.48

    • linkage with national accounts, A6.20, A6.21

    • miscellaneous current transfers, 14.49

    • other current transfers, 14.18–14.23

    • personal transfers, 14.10–14.13

    • remittances, 14.14–14.17

    • social contributions and benefits, 14.24–14.31

  • Sectoral Balance Sheet for Other Depository Corporations, 9.12, 9.14

  • Sectoral Balance Sheet for Other Financial Corporations, 9.12

  • Sectoral Balance Sheet for the Central Bank, 9.12

  • Sector classification, A6.7, Table A6.1

  • Securities

    • data collection on, 3.181–3.184, 10.33, 10.47, A5.20. See also Securities, surveys on international activity in

    • European Centralized Security Database of, Box 10.4

    • fees for lending without cash collateral, 13.91–13.94

    • identification of parties to transactions in, 10.49, 10.50

    • international banking statistics, 9.68

    • repurchase agreements, 3.182, 10.81

    • See also Portfolio investment; Security-by-security database

  • Securities, surveys on international activity in

    • challenges in, 3.154, 3.204–3.208

    • data requirements, 3.152, 3.155–3.165

    • data sources for, 3.180–3.193, Table 3.2

    • identifying issuers and owners in, 3.159, 3.166–3.174

    • issues and redemptions data in, 3.175, 3.176

    • model collection form for, 3.194–3.203

    • secondary market transactions in, 3.177–3.179

  • Security-by-security database

    • definition and scope of, 10.43, 10.44

    • for euro area economies, Box 10.4

    • for IIP compilation, 9.71, 9.72

    • portfolio investment data, 10.43–10.45

  • Serviceability of data, 1.9, 1.28, 17.1, 17.2–17.7

  • Services

    • classification of, Table 3.1

    • e-commerce, 12.158–12.161

    • linkage with national accounts, A6.13

    • manufacturing, on physical inputs owned by others, 12.5–12.25

    • other services, 12.83–12.161

    • scope, 12.1–12.4

    • transport, 12.26–12.66

    • travel, 12.67–12.82

    • See also Services, surveys of

  • Services, surveys of

    • construction, 3.67–3.69, 3.92

    • financial, 3.89–3.91

    • freight and insurance on imports, 3.79–3.82

    • insurance, 3.70–3.78

    • introduction, 3.10–3.14

    • maintenance and repair, 3.18–3.20

    • manufacturing on physical inputs owned by others, 3.15–3.17

    • pension, 3.83–3.88

    • transport, 3.21–3.53

    • travel, 3.54–3.66

  • Shareholders equity, 9.46

  • Social contributions and social benefits, 14.24–14.31

  • Social insurance, 14.25, A2.2, A2.79, A2.100

    • contributions as revenue in government finance statistics, A6.75–A6.76

  • Social security schemes, A2.73, A2.79, A2.127–A2.129

  • Societas europaea, 8.68

  • Space transport, 12.40

  • Special Data Dissemination Standard, 7.37

  • Special drawing rights, 10.92, Table 10.1

  • Special purpose entities, A4.25–A4.32, Box A4.1

  • Special trade system, 5.7–5.9, 5.13–5.18, 11.11, Table 11.1

  • Standard International Trade Classification, 5.19, 5.20

  • Standardized report forms, A6.31, A6.46

    • Standardized Report Form 2SR for Other Depository Corporations, 9.14, A6.50, Table 9.1

    • Standardized Report Form 4SR for Other Financial Corporations, 9.21

    • Standardized Report Form 1SR for the Central Banks, 9.29, Table 9.2

  • Stapled securities, 3.208

  • State and local government data, 6.6

  • Statistical Data and Metadata Exchange, coding structure

    • balance of payments, A7.14–A7.20, Tables A7.1–A7.4

    • data structure definitions, attributes, A7.47–7.48, Tables A7.6–A7.8

    • data structure definitions, dimensions, A7.22–A7.46, Table A7.5

    • introduction, A7.10–A7.13

  • Stock exchange

    • identification of transacting parties, 10.49–10.50

    • portfolio investment data, 10.47

  • Subsidies

    • definition, A6.95

    • linkage with government finance statistics, A6.96

    • on products and production, 13.1, 13.96–13.100

  • Superdividends, 13.78–13.79, Example 13.2

  • Surveys

    • advantages, 2.70–2.75

    • disadvantages, 2.76–2.79

    • discussion with key respondents, 2.46–2.51

    • editing/validating data collected, 2.63–2.69

    • introduction, 2.1–2.3

    • legal mandate, 2.5–2.6

    • questionnaire design, 2.42–2.45

    • response rate, 2.56–2.62

    • timetable, 2.4, 2.46–2.55, Box 2.1

    • training seminars, 2.52

    • trial run, 2.50

    • See also Services, surveys of

  • Survey frame, creating or updating

    • building the population, 2.20–2.30

    • computerizing, 2.34

    • developing a register for, 2.8–2.19

    • information content, 2.31–2.32

    • log, response details, 2.33

    • use of, 2.35–2.41

  • Survey of Securities Held as Foreign Exchange Reserves, 7.10

  • Survey of Securities Held by International Organizations, 7.10

  • Surveys of individuals traveling abroad, 3.226–3.236, Table 3.4

  • System of National Accounts 2008

    • balance sheet, A6.27–A6.30, Table A6.2

    • capital accounts, A6.22

    • classification of economic sectors, A6.6, A6.7, A6.57

    • current account, A6.11–A6.21

    • financial account, A6.23–A6.26

    • international merchandise trade statistics guidelines and, 5.3

    • linkage of government finance statistics with, A6.57

    • linkage with BPM6, 1.2, A6.2–A6.30

    • linkage with IMTS 2010, 5.4–5.5

    • linkage with monetary and financial statistics, A6.31–A6.53

T

  • Taxes

    • capital, 15.39–15.41

    • on income and wealth, 14.18–14.23, Table 14.1, Example 14.1

    • paid by foreign workers, 3.102–3.103

    • on products and production, 13.1, 13.96–13.100

    • sources of government revenue, 6.15, A6.69–A6.74, Table A6.6

    • use of data on, 6.45–6.47

  • Technical assistance

    • data sources, 14.45–14.47

    • examples of reporting in balance of payments, 14.48, Examples 14.2–14.5

    • forms of, 14.38–14.43

    • grants and donations to NPISHs, Example 14.4

    • long-term missions financed by the donor government, Example 14.5

    • model form, 3.120, Model form 16

    • personnel employed by donors, Example 14.2

    • personnel employed by recipient government, Example 14.3

  • Telecommunications, computer and information services, 15.10, Table 12.4. See also Other services

  • Time charter arrangement, 12.32

  • Timeliness, 17.4, Box 17.1

  • Time of recording

    • change of ownership and, 3.4

    • discrepancies in import and export data, 7.47

    • of flows, 1.21

    • in IMTS, 5.6

    • in ITRS, 4.22–4.26

    • in Quarterly External Debt Statistics, 7.39

  • Time-share arrangements, 15.8–15.9, Table 15.1

  • Tourism statistics, 12.75–12.80

  • Trade. See International merchandise trade statistics

  • Trade associations, data from, 6.49

  • Trademark

    • licensing fees, 12.124–12.125

    • sale of, 15.4

  • Transaction(s)

    • accounting system of, 1.19–1.22

    • definition of, 1.16

    • deriving positions from data on, 9.81–9.89, 10.18, 10.84, Box 10.2, Example 9.1

    • direct investment, valuation of, 10.16–10.19

    • financial, 3.139–3.140

    • international transactions reporting system data, 4.8–4.17

    • recording in balance of payments, 8.97–8.104

  • Transactor principle, A5.5–A5.7, A5.18, Table A5.1

  • Transfer agreements, 15.11–15.13

  • Transfer pricing, 11.24–11.28, A4.56–A4.58, Table 11.6

  • Transport services

    • activities of nonresident operators, 12.55–12.60

    • activities of resident operators, 12.51–12.54

    • balance of payment treatment of employees in, Table 8.8

    • data sources, 12.43, Table 12.1

    • freight services, 12.35–12.38

    • international airline, 3.42–3.47

    • international shipping, 3.32–3.41

    • international transactions reporting system data on, 4.52

    • leasing and chartering arrangements, 12.28–12.34

    • other, 12.41–12.42

    • other modes of transport, 3.49–3.52

    • passenger fares, 3.30–3.31, 12.47–12.50

    • passenger services, 12.38

    • postal and courier, 3.53

    • rail, 3.48

    • scope of, 3.21–3.23, 12.26

    • surveys of, 3.24–3.29

    • wet leasing, 12.34

    • See also Mobile equipment

  • Traveler’s checks

    • data collection on, 3.60–3.63, 12.71

    • international transactions reporting system entries for, 4.30, 4.33, 4.35

  • Travel services

    • data sources and methods, 12.68–12.82, Table 12.3

    • description and classification, 12.67

    • medical patients and, 3.215, 12.72, 12.78, Table 8.8

    • students and, 3.215, 3.239, 12.72, 12.78, Table 3.3, Table 8.8, Table 14.2

    • surveys of, 3.54–3.66

    • See also Survey of individuals traveling abroad

  • Treasury International Capital Reporting System of the United States Department of Treasury, 10.66

U

  • Unit of account, 1.22, 8.40

    • conversion of foreign currency positions and transactions to, 3.141

  • Unlisted equity valuation, A4.44–A4.55

  • Unrequited transfers, 1.16

V

  • Valuation

    • of direct investment transactions and positions, 10.17–10.19

    • of employee stock option, 10.59–10.63

    • of exceptional financing transactions, 16.9–16.10, Table 16.2

    • of financial derivatives, 9.94, 10.56–10.58, Box 10.5

    • of goods, 5.21–5.26, 11.1, 11.10, 11.21, 11.22, Table 11.3, Table 11.5

    • of loans sold at discount, 10.84

    • in monetary and financial statistics, A6.36–A6.38

    • of portfolio investments, 10.34–10.38, 10.40, Box 10.3

    • of research and development, 12.139

    • of technical assistance, 14.41–14.42

    • of transactions in nonnegotiable instruments, 9.96

    • of unlisted equity, A4.44–A4.56

  • Vostro accounts, 4.5, 4.22

  • Voyage charters, 3.45, 12.33

W

  • Water rights, 15.10

  • Weighting techniques, 8.22

  • Wire transfers, 3.55, 3.57, 3.61

  • World Bank, 7.3, 7.41, 9.71

  • Write-offs, 9.99–9.100, 9.112

Z

  • Zero-coupon bonds, 10.36

1

There are multiple reinsurance types and, hence, methods for ceding business to a reinsurer.

2

Direct written premiums are the premiums received from policies issued directly by the primary insurance company to its policyholders.

3

The different meaning of “net” in the context of the BPM6 should be noted: “Net” as applied to premiums implies that the service charge for the insurance services has been deducted from actual premiums to record the premiums in the secondary income account, whereas here net written premiums are net of ceded reinsurance premiums. See the BPM6, paragraph 12.42.

4

Claims incurred are also called losses incurred in insurance accounting.

5

The results are measured on an accounting period basis, which could be the calendar or fiscal year, as opposed to the policy period.

6

A joint International Accounting Standards Board and Financial Accounting Standards Board project on the accounting of insurance contracts currently focuses on the recognition and measurement of insurance contracts, and the presentation of income and expenses arising from those contracts; see http://www.ifrs.org/Current+Projects/IASB+Projects/Insurance+Contracts/About+Insurance.htm.

7

Other financial corporations are part of other sectors in the BPM6 classification of institutional sectors (see BPM6, Table 4.2).

8

See 2008 SNA, paragraph 6.185, on the calculation of output for the insurance industry (total premiums earned plus premium supplements less adjusted claims incurred).

9

Reinsurance is often placed with reinsurance companies abroad and therefore is often cross border.

10

Alternatively, the service can be calculated as follows: total investment income earned on the life insurance technical reserves less the part of this investment income actually allocated to the policyholders and added to the insurance reserves (see 2008 SNA, paragraph 6.199).

11

In the commercial accounts of insurance corporations, some of them may be described as provisions for bonuses (and rebates). These comprise amounts intended for policyholders but not yet credited to policyholders, because these are often used by the insurer for smoothing benefits over time (see also 2008 SNA, paragraph 13.77).

12

See in Chapter 11 more details on c.i.f.-f.o.b. conversion of good’s value.

13

An employer may contract another unit to administer the pension fund and arrange disbursement to the beneficiaries. The operator may simply act as the employer’s agent. A second option is for a single unit to contract with several employers to manage their pension funds as a multiemployer pension fund and assume responsibility for meeting the pension obligations (see 2008 SNA, paragraphs 17.163-17.166).

14

Based on prevailing accounting rules, companies may be required to record certain accounts of pension plans directly in their financial statements and make notes of other accounts in memo records attached to the main financial statements.

15

Another actuarial measure is the accrued benefit obligation (ABO), which is the present value of the future benefits to which the employee has actually become entitled. The ABO is often used to estimate the present value of an employee’s pension assuming that the employee ceases to work for the company at the time the estimation is made. The PBO is the ABO increased to reflect expected future compensation and increases in the number of years of service.

16

The term “service” is a synonym for labor, work, employment, and should not be confused with the term “services” in balance of payments/IIP statistics.

17

Companies might also incur so-called prior service costs, which are amortized changes in benefits resulting from a change in the pension contract.

18

The proposed approach to measure pension fund activities largely reflects existing accounting practices in both private and public sectors. In many of the accounting standards, actuarial amounts are used to measure the “current service cost” to business (i.e., labor cost). Information should therefore be observable in the books of the employers, and/or in pension funds’ own accounts.

19

Contributions to defined contribution schemes (explained ahead) are recorded as the amounts actually paid in, because these do not determine the net equity of households on an actuarial basis.

20

These actuarial estimates are carried out by the pension fund’s actuary; they constitute the increase in the PBO due to service cost.

21

The pension manager could be either the employer itself or a unit that has assumed the risk of meeting the pension obligations (see also 2008 SNA, paragraphs 17.149 and 17.151).

22

In the 2008 SNA also called past service.

23

These are also called “occupational pension schemes”—that is, schemes that are established and financed voluntarily by individual employers/companies.

24

Similarly, employer pension contributions are rerouted to employee compensation for national accounts compilation purposes.

25

The 2008 SNA adopted the approach of treating unfunded employers’ pension schemes identically to funded employers’ pension schemes.

26

The rationale for treating pension contributions and benefits as current transfers is that, when looked at for the economy as a whole, the effect of pension provision can be seen as if it were a redistributive process among households (see 2008 SNA, paragraph 9.23), and so it is important that disposable income of households reflects these transactions (see BPM6, paragraph 12.37).

27

The compiler can best assess the justification for the introduction of a new survey measured by the impact on cross border employment on the balance of payments/IIP accounts.

28

When guest workers return to the home economy, an entry in other changes in financial assets and liabilities account should be recorded for the reclassification of pension entitlements as incurrence of liability of pension schemes to nonresident returning workers and an acquisition of the same asset by the economy of returning workers.

29

Unlike in the defined benefit scheme, where the benefits are guaranteed, but the scheme itself may be funded or unfunded.

30

The exact delineation between which changes in pension entitlements are treated as transactions and which changes are treated as other changes in the volume of assets is still being researched. The “Changes in pension entitlements” describes the present situation (see 2008 SNA, paragraph 12.61).

1

The team consists of Mr. Simon Quin (Module Manager), Mr. Kenneth Egesa, and Mr. Howard Murad.

1

The qualifier “For banks within the same economy” allows that FISIM may be significant for interbank positions whose counterparty institutions are resident in different economic territories, the context of this appendix.

2

The interbank rate is not suitable when it does not “reflect the risk and maturity structure of deposits and loans.” As such, alternatives, such as the average cost of funds to the financial corporations sector, are likely to be better choices for the reference rate.

3

There also has been some discussion that a different rate may be needed for each currency in which loans and deposits are denominated, but this question has not been fully resolved.

4

The Advisory Expert Group to the Inter-Secretariat Working Group on National Accounts, which includes national accountants experts from a number of government statistical agencies and central banks, recommended at its meeting in May 2013 the following practical guidelines for setting the reference rate for the financial corporations sectors of a given economy:

The calculation (definition) of the reference rate should be determined according to national circumstances, using preferably any of the following approaches:

1

In this appendix, the terms “direct investment” and “foreign direct investment” are used interchangeably and have the same meaning.

2

The CDIS database as a data source is also discussed in Chapter 7.

3

See the BPM6, paragraphs 4.50–4.52.

4

See the BPM6, paragraphs 6.33–6.34.

5

See the BPM6, paragraph 6.46.

6

The rearrangement of standard components for direct investment positions and transactions is shown in Box 6.4 of the BPM6.

1

The compiler should make the economy attribution clear for users.

2

IMTS 2010 states:

Paragraph 6.25: Although no single method of attributing partner country is ideal, attribution by origin for imports meets what is considered to be a priority application of international merchandise trade statistics, namely, matters of trade policy and related economic analysis. Consequently, it is recommended that:

  1. In the case of imports, the country of origin be recorded;

  2. In the case of exports, the country of last known destination be recorded.

Paragraph 6.26: Country of consignment. Since the partner data compiled on the basis of the country of origin (for imports) and the country of last known destination (for exports) are very often not comparable and in view of the needs for internationally comparable partner data for analytical purposes as well as for trade data reconciliation studies, it is recommended that country of consignment be recorded for imports as the second partner country attribution, alongside country of origin. Considering, in the case of exports, that countries often do not differentiate the country of last known destination and the country of consignment and that their separate recording could create a significant additional data-reporting and data-processing burden, the compilation of export statistics on the country of consignment basis is only encouraged, depending on a country’s needs and circumstances. It is recognized that the compilation of country of consignment for exports may be considered by some countries as a longer-term objective.

3

See the BPM6, paragraphs 3.67–3.91, for more details on valuation in balance of payments and IIP.

1

The annex to the Linkages of the International Accounts with Monetary and Financial Statistics contains an overview of the monetary statistics framework.

2

An IMF project to expand the SRFs called the Supplementary Data Report Forms (SDRFs) is under consideration. The SDRFs include maturity breakdowns.

3

See footnote 3, Chapter 9.

4

See footnote 4, Chapter 9.

5

The reconciliation of OFC vis-à-vis nonresidents with the corresponding IIP components is very similar to the one for ODC and is, therefore, not included in this annex.

6

Balancing items summarize the net value of the activities covered by a set of accounting entries, such as the net operating balances, which is the value of total revenue less total expense.

7

For the selection of data sources for the compilation of GFS, see the Government Finance Statistics-Compilation Guide for Developing Countries (IMF, 2011) at http://www.imf.org/external/data.htm#guide.

8

Financial corporations include subsectors for the central bank, deposit-taking corporations, except the central bank, and other financial corporations, while the GFS framework also recommends that subsectors for public corporations be identified both in the financial and nonfinancial corporate sectors.

9

The “other sector” category in the international accounts includes both financial and nonfinancial sectors, so it is recommended that the other financial corporations be identified separately. The full institutional sector detail is required for international accounts to be fully integrated with monetary, flow of funds, and other financial data. Public corporations may be identified separately on a supplementary basis.

10

The general government sector consists of entities that fulfill the functions of government as their primary activity. Depending on the administrative and legal arrangements, there may be more than one level of government within an economy, and statistics should be compiled for each level. In GFS, provision is made for three levels of government: central, state/provincial/regional, and local. Social security funds are permitted to either be included in one of these levels or constitute a separate level of government. Not all the economies will have all the levels of government. The international accounts identify general government, but they do not present data for the subsectors of the general government, as is the case in GFS.

11

Expenditure is the sum of expense and the net acquisition of nonfinancial assets.

12

Consumption of fixed capital can be difficult to measure in practice, and a satisfactory estimate may not be possible. If so, the gross operating balance may be more practical for analysis than the operating balance. The net operating balance is, however, preferred because it captures all current costs of government operations.

13

Financial assets and natural resources put at the disposal of another institutional unit.

14

In GFS, sales of goods and services consist of sales by market establishments, administrative fees, incidental sales by nonmarket establishments, and imputed sales of goods and services.

15

Tax revenue is considered to be unrequited because the government provides nothing directly to the individual unit in exchange for the payment. Certain compulsory receivables, such as fines, penalties, and most social security contributions, are excluded from taxes. These transfers have, under certain conditions, an element of exchange and are therefore not classified as taxes.

16

The classification of taxes in the GFSM 2014 is quite similar to the classification employed in Revenue Statistics by the Organization for Economic Cooperation and Development (OECD).

17

For a complete list of taxes, see Chapter 5, GFSM 2014.

18

Here and further the numbers in parentheses next to GFS refer to classification codes in the GFSM 2014.

19

GFS does not have a category of capital taxes.

20

For additional information about autonomous and nonautonomous pension funds and funded and unfunded employer social insurance schemes, see Appendix 2 in the GFSM 2014.

21

See the BPM6, paragraph 12.38, for additional information about the adjustment (“adjustment for change in pension entitlements”).

22

Debt forgiveness is defined as the voluntary cancellation by mutual agreement of all or part of a debt obligation within a contractual arrangement between a creditor and a debtor.

23

Cash is used in a broader sense since it includes all types of financial instruments.

24

See paragraph A6.60 for consolidation.

25

Insurance enterprises hold technical reserves in the form of prepayments of premiums, reserves against outstanding claims, and actuarial reserves against outstanding risks with respect to life insurance policies. These reserves are considered to be assets of the insurance company with matching liabilities towards the beneficiaries, including any government units that are policyholders. Any income receivable from the investment of insurance technical reserves is also considered to be the property of the policyholders or beneficiaries and is described as property income from investment income disbursements (GFS 1414). In the BPM6, the account title used is Investment income attributable to policyholders in insurance, standardized guarantees, and pension funds.

26

The GFS framework also uses a functional classification for expenses, based on the OECD/UN classification of the functions of government (COFOG). It is a detailed classification of the functions (socioeconomic objectives) that general government units aim to achieve through various kinds of expenditure (see GFSM 2014, paragraph A6.1 for additional information).

27

See paragraphs 6.25–6.30 in the GFSM 2014.

28

A social risk is an event or circumstance that may adversely affect the welfare of the households concerned either by imposing additional demands on their resources or by reducing their incomes.

29

The international accounts identify general government, but, contrary to GFS, they do not present data for the subsectors of the general government.

30

Because of the importance of different currencies in the IIP, revaluations (holding gains and losses) are separately shown for those arising from exchange rate changes and those arising from other price changes.

31

Through the SRFs, the IMF collects only stock data.

1

For more details on the analytical presentation of balance of payments see Chapter 14 of the BPM6.

2

The BIS is also participating in the technical group responsible for developing the DSD, as it has been involved in SDMX standards and data exchanges for many years and has a long-standing involvement in external sector statistics.

3

ISO 3166–1 alpha-2 codes are two-letter economy codes defined in ISO 3166–1, part of the ISO 3166 standard published by the International Organization for Standardization (ISO), to represent economes, dependent territories, and special areas of geographical interest.

4

There are very few instances when credits and debits may be recorded as a negative number. Such instances include the refund of taxes to taxpayers, the recording of negative reinvestment of earnings by direct investment enterprises, which also implies the recording of negative income receivable and/or payable (depending if the data are about the economy of the direct investor or of the direct investment enterprise). The balance is reported as credit minus debit.

5

Additional net concepts are provided to support the needs of direct investment reporting.

6

For balance of payments reporting of transactions in financial assets and liabilities, only the net result is usually requested: “A” for net acquisition of assets, and “L” for net incurrence of liabilities.

7

The DSD provides for a detailed identification of investment income by instruments, although this is not part of the standard components of the BPM6.

1

A subsidiary is a company over which its owner can exercise control–that is, it owns more than 50 percent of the voting securities.

1.

Including premiums ceded to reinsurers, and excluding premiums assumed from other direct insurers.

2.

Including premiums received for cross border beneficiaries of group insurances.

1.

In most widely followed financial accounting rules, interest costs are calculated as interest rate multiplied by the PBO at the beginning of the accounting period. The interest rate may be an estimated discount rate reflecting the market rate currently used to settle benefits due, or a rate based on the expected return on high-quality fixed income securities (e.g., long-term government bonds).

1.

If the reporter is a private entity, sections 1 and 2 should be skipped.

2.

If in the same period grants are aimed at financing both current expenditures and capital formation, please try to split the total accordingly.

3.

It suffices to provide an estimate for the number and average duration of short-term staff working in the reporting economy.

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Cover Balance of Payments Manual, Sixth Edition Compilation Guide
Balance of Payments Manual, Sixth Edition Compilation Guide
ISBN:
9781484312759
ISSN:
2663-3744
Publication Date:
08 Dec 2014
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781484312759.069
Pages:
634