This chapter first defines equity and investment fund shares, and debt instruments, and then explains the valuation methods to be used when requesting data on direct investment positions. As well, a brief introduction to the model survey forms is provided.

This chapter first defines equity and investment fund shares, and debt instruments, and then explains the valuation methods to be used when requesting data on direct investment positions. As well, a brief introduction to the model survey forms is provided.

Equity and Investment Fund Shares, and Debt Instruments


3.1 Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasicorporation, after the claims of all creditors have been met. Equity is treated as a liability of the issuing institutional unit (a corporation or other unit), see paragraph 5.21 in Balance of Payments Manual and International Investment Position Manual (BPM6).

3.2 Ownership of equity in legal entities is usually evidenced by shares, stocks, depository receipts, or similar documents. Shares and stocks have the same meaning, while depository receipts are securities that represent ownership of shares listed in other economies. Participating preferred shares are those that provide for participation in the residual value upon the dissolution of an incorporated enterprise. Such shares are also equity securities, whether the income is fixed or determined according to a formula (see paragraph 3.9 for nonparticipating preferred shares, which are treated as debt instruments).

3.3 Equity may be split on a supplementary basis into:

  • Listed shares

  • Unlisted shares

  • Other equity.

3.4 Equity securities include listed shares. These shares are those listed on stock exchanges and other financial markets and may sometimes be referred to as quoted shares. Unlisted shares and other equity are not listed on stock exchanges and other financial markets. Unlisted shares may be sometimes referred to as private equity.1

3.5 Other equity is equity that is not in the form of securities. It can include equity in quasicorporations, such as branches, trusts, limited liability partnerships, other types of partnerships, unincorporated funds, and notional units created for ownership of real estate and other natural resources. Where significant, cross-border ownership in land and other natural resources should also be included in direct investment (equity), see paragraphs 2.12 and 2.13. Where capital equipment is provided by a direct investor (DI) to its direct investment enterprise (DIENT) without recognition of a counterpart debt claim, this is regarded as the injection of equity (see paragraph 12.13 in BPM6).

Investment Fund Shares or Units

3.6 Investment funds are collective investment undertakings through which investors pool funds for investment in financial or nonfinancial assets or both. These funds issue shares (if a corporate structure is used) or units (if a trust structure is used). Investment funds include money market funds (MMFs) and non-MMFs. Investment funds shares or units refer to the shares issued by mutual funds and unit trusts rather than the shares they may hold (see paragraph 5.28 in BPM6).

Debt instruments

3.7 Intercompany lending is used to describe direct investment debt positions between affiliated enterprises. It includes all debt instrument transactions and positions other than those between selected financial corporations (see paragraphs 2.21-2.24). Debt instruments are those that require the payment of principal and/or interest at some point(s) in the future.2 The term debt instrument is applicable to both the liability and the corresponding debt claim. Debt instruments may comprise deposits, debt securities, and other debt instruments. These instruments may earn/pay interest but this is not a necessary criterion for an instrument to be classified as debt.3


3.8 Deposits include all claims that are (1) on deposit-taking corporations and, in some cases, other institutional units; and (2) are represented by evidence of deposit. These deposits may be in the form of transferable balances (on which, for example, checks may be written) or other, less liquid forms of deposit.

Debt securities5

3.9 Debt securities are negotiable instruments serving as evidence of a debt normally traded in financial markets. They include bills, bonds, certificates of deposit, bankers’ acceptances, commercial paper, debentures, asset-backed securities, index-linked securities,6 and nonparticipating preferred stocks or shares (instruments that pay a fixed income but do not provide for participation in the distribution of the residual value of an incorporated enterprise on dissolution). Bonds that are convertible into equity should also be classified as debt prior to the time that they are converted to equity.

Other debt instruments7

3.10 Other debt instruments comprise: loans (including financial leases), trade credit and advances, nonlife insurance technical reserves, life insurance and annuity entitlements, pension entitlements, claims of pension funds on pension managers, provision for calls under standardized guarantees, and all other accounts receivable/payable.

  • 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.8

  • Trade credit and advances consist of (1) direct credit extended by the suppliers of goods and services to the 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.9

  • For definition of other debt instruments, see Section 3 of Chapter 5 in BPM6.

Excluded Instruments

3.11 Financial derivatives and employee stock options (ESOs)10 and one-off guarantees11 are excluded from direct investment. Financial derivatives and ESOs are excluded largely on practical grounds.

  • 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.

  • ESOs are options to buy the equity of a company, and sometimes are offered to employees of a company as a form of remuneration.

  • 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 contingent and recognized as financial assets or liabilities only at activation, that is, when the event occurs that makes the guarantor responsible for the liability (i.e., when the principal debtor defaults).

Valuation Principles

Equity and Investment Fund Shares

3.12 Market value is the recommended basis for valuation for equity in BPM6 and OECD Benchmark Definition of Foreign Direct Investment, 4th edition (BD4). However, several different valuation methods12 are offered in these manuals as proxies for market values to facilitate implementation. For the purposes of the CDIS, where the focus is on consistency of valuation for bilateral data, unlisted (or unquoted) equity and other equity should be valued using the concept of Own Funds at Book Value (OFBV), and listed13 (or quoted) equity should be valued at market value; in other words, its most recent bid/ask price (a midpoint should be used) or at the price at which it was last traded.

3.13 OFBV14 reflects the value of the enterprise recorded in its books,15 which is the sum of:

  • (1) Paid-up capital (excluding any shares on issue that the enterprise holds in itself and including share premium accounts)

  • (2) All types of reserves identified as equity in the enterprise’s balance sheet (including investment grants when accounting guidelines consider them company reserves)

  • (3) Cumulated reinvested earnings (which may be negative), which would take into account charges for consumption of fixed capital

  • (4) Cumulated retained holding gains or losses included in enterprise’s own funds in the accounts, whether as revaluation reserves or profits or losses.16

3.14 This valuation principle applies equally to incorporated enterprises and quasicorporations. Essential features of OFBV that make its use appropriate for measuring direct investment equity positions at market value include: most financial instruments on the DIENT’s balance sheet are reflected at an estimate of their current fair values; cumulative reinvested earnings (losses) and cumulative retained holding gains (losses) are included; and depreciation on items of property, plant, and equipment is reflected.

3.15 The CDIS requires that information be collected from the books of the DIENT. First, the books of the DIENT are more likely to take into account the activities of the DIENT than are the books of the DI. This is because the books of the DIENT will typically incorporate current period results in deriving the stock of retained earnings. In contrast, the books of DIs may not reflect the retained earnings of their DIENTs, particularly in the case where the DI does not have a majority ownership in the DIENTs (investments in these DIENTs are sometimes carried at cost on an investor’s books). Second, using the valuation in the DIENT also helps to promote comparability and consistency of the information collected between economies. Thus, if Enterprise B, a DIENT resident in economy 1, has Enterprise A, a resident in economy 2, as its DI, the inward direct investment in economy 1 and outward direct investment from economy 2 should be the same. For compilers in economy 1, where the DIENT is resident, obtaining the information required involves direct contact with Enterprise B. However, compilers in economy 2 may not have direct access to the information about Enterprise B, using Enterprise B’s accounts. Therefore, indirect access may be necessary – that is, the information should be sought from Enterprise A, but it needs to be stressed when approaching Enterprise A that the information on equity investment in Enterprise B should be that on Enterprise B’s accounts, which may not (necessarily) be the same as that held in Enterprise A’s accounts.

3.16 It is often the case that the value that the DI will hold in its accounts of its investment in its DIENT(s) will be lower than the value held on the books of the DIENT. One particular circumstance when the investment by the DI may exceed the counterpart investment recorded on the books of the DIENT may arise where there has been a recent takeover of the DIENT from another investor. In that case, the purchase price may be larger than the value recorded on the books of the DIENT due to the value of goodwill. Nonetheless, for the purposes of the CDIS, unless the value on the books of the DIENT has been changed to reflect the purchase, it is necessary that the values on the books of the DIENT be used to ensure consistency between the data compiled by the DI and the DIENT.

Debt Instruments

3.17 In the CDIS, debt securities are to be valued at market prices, and all types of debt other than debt securities – that is, loans, deposits, insurance, pension, and standardized guarantee schemes, trade credit and advances, and other accounts payable/receivable-other– are to be valued at nominal value. Nominal value is defined as the amount the debtor owes to the creditor, which comprises the outstanding principal amount including any accrued and unpaid interest. That is, it represents the value of funds advanced less any repayments plus outstanding accrued interest; nominal value also takes into account any adjustments to reflect changes in debt denominated in a foreign currency. The rate of exchange to be used is the midpoint between the buy and sell rates on the reference date. Accordingly, let us assume that DIENT B borrowed $100 from its DI A, when the exchange rate was 2:1 between the local currency and the dollar. At that point, the debt should be recorded on B’s books, in local currency, at 200. However, at a later date, if the exchange rate has changed to 3:1, and assuming there has been no further lending or any repayments, and setting aside any accrual of interest, B should record its liability to A as 300 in local currency (which still equals $100).

Model Survey Forms

Model Survey Form 1 Collection Form for Inward Direct Investment collects information on positions between a resident DIENT and its nonresident DI(s). The form also covers positions between resident and nonresident units that are fellow enterprises.

Model Survey Form 2 Collection Form for Outward Direct Investment collects information on positions between a resident DI and its nonresident DIENT(s). The form also covers positions between resident and nonresident units that are fellow enterprises.

Model Survey Form 3 Integrated Collection Form for Inward Direct Investment Positions, Transactions and Other Changes is designed to collect information on financial transactions, income, other changes, as well as positions, between a resident direct investment enterprise and its nonresident direct investor(s). The form also covers financial transactions, income, other changes, and positions between resident and nonresident units that are fellow enterprises.

Model Survey Form 4 Integrated Collection Form for Outward Direct Investment Positions, Transactions and Other Changes is designed to collect information on financial transactions, income, other changes, and positions between a resident direct investor and its nonresident direct investment enterprise(s). The form also covers financial transactions, income, other changes, and positions between resident and nonresident units that are fellow enterprises.

Model Survey Form 5 Collection Form for International Investment Positions for Direct Investment and Other Cross Border Positions is designed to collect positions data for all components of IIP.

Model Survey Forms for Inward and for Outward Direct Investment

3.18 Model survey forms are provided in Appendix IV. Forms 1 and 2 are designed to provide core data items for the CDIS and so they mainly cover identification information and direct investment position data. Forms 3 and 4 are for economies that are exploring changing their collection systems, or those that are starting a survey, that wish to integrate positions, financial transactions, other changes, and income items, into a single comprehensive collection vehicle. Form 5 is a model form for economies that wish to use a single collection vehicle to collect data on all components of the International Investment Position (IIP), including data on portfolio investment, financial derivatives, and other investment, as well as for direct investment. All of these forms may need to be modified to meet the circumstances of individual economies.

3.19 It should be noted that any given unit can simultaneously be a DI, a DIENT, and a fellow enterprise. Therefore, to obtain data on both inward and outward direct investment, the same enterprise may need to complete both forms on inward direct investment and on outward direct investment.


Equity securities have the characteristic feature of negotiability. That is, their legal ownership is readily capable of being transferred from one unit to another unit by delivery or endorsement. While any financial instrument can potentially be traded, securities (debt and equity securities) are designed to be traded, usually on organized stock exchanges or “over the counter.” Negotiability is a matter of the legal form of the instrument. Some securities may be legally negotiable, but there is not, in fact, a liquid market where they can be readily bought or sold (see paragraph 5.15 in BPM6).


See paragraph 5.31 in BPM6.


As indicated in paragraph 2.22, all intercompany lending between affiliated financial intermediaries (except insurance corporations and pension funds) is excluded from direct investment, regardless of the type of debt instrument(s) involved.


For additional information about deposits, see paragraphs 5.39-5.43 in BPM6.


For additional information about debt securities, see paragraphs 5.44-5.50 in BPM6.


These are debt securities whose principal and/or coupons are linked to another item, such as a price index or exchange rate.


For additional information about other debt instruments see Section 3 of Chapter 5 in BPM6.


Negotiability is defined in paragraph 5.15 in BPM6. Loans may be traded, but their legal form is not designed for negotiability in the same way as debt securities. See additional information about loans in paragraph 5.51 in BPM6.


See additional information about trade credit and advances in paragraphs 5.70-5.72 in BPM6.


For additional information about financial derivatives and ESOs see paragraphs 5.79-5.98 in BPM6.


For additional information about one-off guarantees see paragraph 5.68b in BPM6.


Six alternative methods of approximating market value of shareholders’ equity in a DIENT include: (1) recent transaction price, (2) net asset value, (3) present value and price-to-earnings ratios, (4) market capitalization method, (5) OFBV, and (6) apportioning global value. For detailed information see paragraph 7.16 in BPM6.


Usually, the equity securities of only a relatively small number of DIENTs are traded on organized stock exchanges.


For additional information about OFBV see paragraph 521 in Annex 5 of BD4.


OFBV could be used in any case where there is no observable market price for positions in equity not listed on a stock exchange (see paragraph 7.15 in BPM6), including reverse equity investment and equity investment between fellows.


Consumption of fixed capital is used in this context in preference to depreciation as the latter is often based on the historic cost of fixed capital, whereas the former is a current cost accounting concept. However, it is possible that the direct investment enterprise will not use current cost accounting; in that case, depreciation (historic cost accounting) is an acceptable alternative.