Abstract

130. Chapter 4 discusses the use of enterprise surveys (ES) to measure certain components of the BOP and IIP—that is, current account transactions as well as transactions in, and levels of, an economy’s external financial assets and liabilities. Chapters 5 and 6 describe international transportation surveys and the measurement, by means of surveys, of activities associated with internationally traded securities. While all are ES, the different types are discussed separately because of their complexity.

Introduction

130. Chapter 4 discusses the use of enterprise surveys (ES) to measure certain components of the BOP and IIP—that is, current account transactions as well as transactions in, and levels of, an economy’s external financial assets and liabilities. Chapters 5 and 6 describe international transportation surveys and the measurement, by means of surveys, of activities associated with internationally traded securities. While all are ES, the different types are discussed separately because of their complexity.

131. The approaches of enterprise surveys may range from data collection by telephone from a few large companies to highly organized, large scale, mail-based collections. An enterprise survey may be designed to capture a specific type of data or to obtain data that supplements other sources, such as an ITRS.

132. ES should be based on clearly defined objectives, sound collection methodology, and a well-established legal basis; properly designed collection forms, full coverage of the population, well-defined data structures and classifications, and effective data validation and aggregation procedures are also required for ES. Survey design for achievement of various objectives is discussed in chapter 18. Questionnaire design is discussed in detail in chapter 19.

Goods and Merchanting Services

Use of ES to Collect Across-the-board Data on Goods

133. ITS are the primary data source used by compilers in most countries for the compilation of the goods item in the BOP. However, as chapter 3 points out, compilers in some countries use international transactions reporting systems. In a few countries, compilers use ES to collect across-the-board data for goods.

134. Parts A and B of model collection form 6 seek the type of data that a compiler could collect in an across-the-board survey of exporters and importers. The form requests data on exports and imports (broken down by broad commodity)30 at f.o.b. valuation and data on export volumes (quantities).31 It may also be desirable to obtain volume data for certain import categories. In addition, model form 6 seeks data on imports on a c.i.f. basis, as well as data on freight and insurance.

135. In using data from ES, the compiler should take account of differences between the ways data are reported for ES and for BOP purposes. Necessary adjustments should be made for any measurement deficiencies, such as less than complete coverage, in the surveys.

Goods for Processing and Repairs to Goods

136. Goods for processing that return to countries of origin without changes of ownership should be recorded on a gross basis in the BOP.32 However, in ITS, these goods may not be recorded at all and, in an ITRS, only net processing fees paid or received may be recorded in respect of these goods. The number of enterprises that undertake processing or send goods abroad for processing may be relatively few. Therefore, enterprises may be surveyed about processing activities in a separate survey or as a supplement to ITS or to an ITRS. To provide a complete accounting of the transactions and the associated value of stocks, a somewhat complex set of data must be collected. It will be necessary to measure export and import flows at f.o.b. valuation and to measure any transportation and insurance costs separately. Also, it will be necessary to measure the stock of such goods held because they represent a claim of the client on the processor. To reconcile changes in stocks with the flow of goods, it will be necessary to obtain the value of the processing and details on any goods not returned to the client. Data required to compile transactions in goods for processing are requested in model form 6, parts C and D, and instructions accompanying the form provide explanations of the data items.

137. The values of repairs to goods should be recorded in the BOP as transactions in goods. Parts E and F of model form 6 request data on the values of repairs. It may also be possible to collect data, on a selective basis, from enterprises known to undertake repairs or to send goods abroad for repair.

Merchanting

138. Merchanting transactions—that is, the buying and selling of goods (including nonmonetary gold) that do not cross national boundaries—should be recorded in the BOP as service transactions in the goods component of the BOP and valued as profits or losses on sales of goods. Entries in the goods component of the BOP will also be required for merchanting transactions in which goods are purchased in one period and sold in another. In the period of acquisition, an import of goods should be recorded. In the period of disposal, a negative import—equal in value to the first period’s entry—should be recorded. Because of the complexity of recording, merchanting transactions are often best collected directly from the enterprises involved. Model form 6 requests data required for recording merchanting transactions in the BOP. Data are collected on a gross basis and by commodity. Collection of gross transactions is not essential for BOP purposes but is suggested to ensure that items are accurately compiled and to facilitate collection of BOP data classified by partner country. It may be possible to collect data, on a selective basis, from enterprises known to undertake merchanting transactions.

139. As neither the original seller nor the ultimate purchaser of goods involved in merchanting transactions is likely to know the merchanting enterprise’s profit (or loss), the BPM does not require the recording of merchanting services provided by nonresidents. Instead, the original seller and ultimate purchaser should record these transactions as transactions in goods on a strict change-of-ownership basis. Accordingly, model form 6 does not seek data on acquisition of merchanting services.

ES of Selected Commodities

140. A number of countries use ES to measure goods transactions for particular commodities. The data are then used to replace data collected for ITS. There are some strong arguments for using ES to approach selected importers and exporters in order to achieve material improvements in BOP accounts.

141. One reason for the use of ES is the potential existence of coverage deficiencies in ITS. For example, defense authorities and transport enterprises may take delivery of large items of mobile equipment—such as satellites, aircraft, and ships—some time before these items enter the country of import. Also, customs officials sometimes fail to record these items when they first arrive in the economy. Major equipment repairs and improvements are even less likely to be recorded by customs. In addition, an approach to enterprises may be used as an opportunity to collect data, which may not be available from other sources, on trade credit and on goods projections. ES may be used to identify other goods not recorded by ITS (for example, goods consumed by offshore installations, goods salvaged, fish and other marine products caught or mined by the compiling economy’s ships and sold directly abroad, electricity and gas, goods under financial lease, etc.). Nonetheless, the BOP compiler should encourage the ITS compiler to include these goods in ITS even though there may be significant differences between the times at which goods change ownership and the times at which they cross national (general trade) or customs (special trade) borders.

142. Another reason for using ES is that values of certain exports may not be known when these commodities cross national borders because final contract prices may still be under negotiation. Prices may be determined, by reference to some quoted price or exchange rate, when goods are delivered. The quality of the goods, and hence their prices, may have to be established by reference to an assay when the goods are delivered. There may be other determinants or a combination thereof. In chapter 2, it is suggested that appropriate corrections be made by the ITS compiler when final data become available. However, this is not always possible, and these adjustments may have to be made by the BOP compiler. A survey of selected enterprises could provide the information necessary to make the adjustments.

143. A third reason for using ES is that there may be known timing differences between the recording of certain goods in ITS and the recording of the same goods in the books of the enterprise concerned. A survey of relatively few exporters and importers may facilitate correction of significant timing differences.

144. In ES, data should be collected on values of goods shipped and on values of goods sold (exports) or bought (imports). Parts H and I of model form 6 contain questions that could be asked.

145. The BPM requires that: (1) goods exported but lost before the importer could take delivery should be excluded from exports and (2) that goods acquired by importers but lost after export should be included in imports. (These goods would be reported in the ITS of the exporting country but not in the ITS of the importing country.) It may be difficult to measure these transactions completely in order to make appropriate adjustments to ITS estimates. However, when the compiler knows of significant occurrences likely to affect the BOP outcome, the enterprises concerned should be approached for relevant information, and necessary adjustments should be made. Questions 6 and 12 in model form 6, parts A and B represent this type of inquiry.

146. When goods have been shipped on consignment, sold from stocks abroad, or sold from buffer stocks prior to shipment, the compiler may wish to collect relevant data and make a timing adjustment to ITS. The compiler would have to obtain data on the time goods crossed the border and on the time goods were sold. It would also be useful, to ensure consistency of recording, to obtain data on opening and closing stocks of goods that were held, prior to sale, by residents located abroad or held, prior to leaving the country, by nonresidents. In each case, values of goods crossing the border should be deducted from goods recorded in ITS and replaced by goods sold. Such adjustments would typically be made only when amounts involved were likely to have significant effects on the BOP. While no questions on consignment are included in enterprise survey model forms, model form questions should provide suitable examples for developing appropriate questions.

147. If an ITRS, rather than ITS, is used to compile basic data for the goods item in the BOP, it might be desirable to use similar ES to correct major cases in which change of ownership and payments do not coincide.

Projection of Exports and Imports

148. Data from ES may be used to make certain export and import projections. Such information may be very useful for projecting commodities consisting of large items for which orders are known well in advance (for example, the export and import of mobile equipment) and for projecting certain rural commodities for which the exporting or importing organizations have a good understanding of markets, potential production, and orders. Parts J and K of model form 6 seek the type of data that a compiler would consider collecting (for example, values and volumes of particular commodities).

Freight and Insurance on Imports

149. Data for freight and insurance on imports may be required for a number of BOP compilation purposes. If imports are recorded on a c.i.f. basis in ITS, data on freight and insurance are necessary to adjust imports of goods to an f.o.b. basis. Data also are necessary to estimate nonresident earnings on freight and insurance premiums paid to nonresident insurers. A common practice is: (1) to collect data on resident carrier earnings from freight on imports and data on insurance premiums paid to resident insurance enterprises on imports; (2) to deduct these amounts from estimates of total freight and insurance on imports; and thereby (3) to derive the residual figure for freight and insurance premiums attributable to nonresidents.

150. An across-the-board survey of importers can be used to obtain an overall measure of freight and insurance. Importers may be asked to supply data on imports on an f.o.b. (or c.i.f.) basis and on freight and insurance components separately. This data may be requested for total imports or for imports at each commodity level. Model form 6, part B seeks the data required. A survey could also seek information on how much of the freight and insurance was paid to resident transport and insurance enterprises.

151. Conducting an across-the-board enterprise survey of importers may not be an option. However, the compiler could still approach selected enterprises to obtain data on freight and insurance for certain enterprises or commodities (such as petroleum) or data that would provide freight and insurance rates for imports (or for various import commodities). Even though the compiler may still have to estimate freight and insurance for some commodities, the scope of arbitrary estimation is reduced.

Use of ES to Measure International Travel

152. ES can be used to measure expenditure by residents traveling abroad (travel debits) or travel expenditure by nonresidents in the host country (travel credits). Enterprises engaged in providing the means to pay for travel can provide information on both travel credits and debits, while enterprises that provide travel services to nonresidents can provide information on travel credits. Model form 9 requests the type of information that could be collected in ES of international travel.

153. Enterprises that provide the means to pay for travel include institutions involved in issuance or redemption of travelers’ checks; credit and debit card companies; and travel agents, tour wholesalers, and retailers providing prepaid or package tours. Surveys of such enterprises could be supplemented by estimates of travel expenditures paid for with other instruments (for example, cash expenditure).

154. Model form 9, part A seeks data that could be collected on the value of:

  • travelers’ checks (less refunds to original purchasers) that are issued by resident enterprises to purchasers abroad and used in the compiling country during the recording period (These are included in travel credits.)

  • travelers’ checks that are issued by resident enterprises to residents and presented for collection by nonresident banks (These are included in travel debits.)

  • travelers’ checks (less refunds) that are issued to residents by resident enterprises on behalf of nonresident banks (These are included in travel debits.)

  • travelers’ checks that are sent for collection to nonresident banks—that is, travelers’ checks issued abroad by nonresident institutions and purchased by resident enterprises from nonresident travelers. (These are included in travel credits.)

Gross data should be collected, and fees and commissions should be collected separately and treated as financial services.

155. Staff of enterprises that issue travelers’ checks can identify the name of the bank or other agent—and hence the country—that sold the travelers’ checks (this information is encoded in the number printed on the travelers check) and any refunds on unused checks. Staff of these enterprises are also able to identify (or estimate) the value of travelers’ checks used in each country. Enterprises acting as travelers’ check sales agents for issuing enterprises have information on locations at which travelers’ checks are sold and on details about refunds. Staff of banks accepting travelers’ checks know the values of checks sent abroad for collection by the banks. Therefore, for BOP compilation purposes, it should be possible to identify flows associated with travelers’ checks.

156. As relatively few institutions (mostly banks) issue and redeem or buy and sell travelers’ checks, data should be readily available. The compiler, in establishing a survey of travelers’ check transactions, should pay particular attention to inclusion and exclusion rules so that all transactions are reported without duplication. The resident transactor undertaking the settlement with the nonresident party is usually designated as the reporting entity in model forms.

157. Data on expenditure by nonresident travelers in host countries and by resident travelers who go abroad and use credit and debit cards are typically available from card-issuing enterprises. Staff of these enterprises can readily distinguish foreign payments and receipts from domestic payments and receipts. As relatively few institutions issue credit and debit cards, this would be a small collection. Model form 9, part B contains the type of questions that may be asked. Data should be collected before fees payable by, or to, nonresident entities are deducted.

158. Caution must, however, be exercised when credit or debit card information is used without supporting information on the transactions covered. Payments may relate to non-travel items (such as the purchase of securities) in the BOP, and the residence of cardholders (as perceived by the issuing enterprise) may differ from balance of payments definitions. Nevertheless, in the absence of comprehensive surveys of travelers, data on credit or debit card expenditures can often serve as the basis for a useful estimate of part of traveler expenditure

159. To measure prepayments, including package tour payments, it is necessary to identify wholesale and retail travel businesses. An exploratory survey could be used to identify enterprises receiving (or making) payments from (or to) abroad. Enterprises involved in this activity on a significant scale could be asked, subsequently, to complete a more detailed questionnaire. Gross amounts involved should be collected so that travel expenditure and commissions can be separately distinguished. Also, it is important to distinguish between payments for international passenger services and international travel. The former are included in the BOP under passenger services (part of transportation services), while the latter are included in travel. The compiler, in establishing a survey of wholesale and retail travel businesses, should pay particular attention to reporting rules so that no overlap or duplication of reporting occurs. Model form 9, part C requests the type of information that could be collected.

160. Enterprise surveys may also be used to measure actual travel services provided. Some compilers collect, from hotels and tourist resorts, data on numbers of nonresident travelers staying at these establishments, numbers of nights spent, and expenditures on accommodations and food. In countries where nonresident travelers stay at relatively few such establishments, a survey of hotels may be a good data source. ES can also be used to approach other establishments likely to provide significant services to nonresident travelers. Such services may be provided by restaurants, car rental companies, tour and transport operators, casinos, entertainment centers, etc. To obtain a profile of nonresident travel expenditure, the survey could collect the total value of services provided or partial information, which could be combined with information from other sources to measure travel credits. Parts D and E of model form 9 contain the types of questions that could be used. The rules about which enterprises should report must be clearly understood so that no overlap or duplication occurs. In the model form, data are collected on the basis of the institution that receives the payment rather than the institution that provides the service.

Insurance Transactions

161. International insurance transactions include reinsurance received from abroad, re-insurance placed abroad, insurance placed abroad by agents and brokers, other insurance placed directly abroad, and insurance received from abroad. Also, it may be desirable to distinguish between insurance on goods, other casualty insurance, and life insurance. Model form 10 requests data that could be collected from enterprises and used for compiling insurance services and related BOP items. Parts C and D of the form contain premium and claim items that may be collected from resident insurance enterprises; part E of the form seeks data that may be collected from non-insurance enterprises and insurance agents and brokers placing insurance abroad. Use of these data to compile relevant BOP items is discussed in chapter 12, paragraphs 551-561.

162. From a conceptual perspective, premiums should be measured when they are earned, and claims should be measured when they are due. However, in practice—particularly for imports of insurance services, premiums will often be recorded when they are paid, and claims will be recorded when they are received.

163. A list of insurance enterprises conducting both insurance and re-insurance business should be available from the authority that issues the licenses for insurance businesses to operate. Resident insurance enterprises should report details of premiums and claims in respect of business obtained from abroad and in respect of international re-insurance flows. In addition, these enterprises may be asked to report details of premiums and claims in respect of insurance written by them on imports.

164. Data regarding premiums on import insurance placed directly abroad and data on associated claims may be collected by approaching importers. However, if such data are not available from importers, an alternative is to deduct from the estimate of total insurance premiums on imports those insurance premiums paid to resident enterprises and collected from these enterprises. In other words, import insurance premiums paid to nonresidents can be derived as a residual. To obtain data on claims paid to importers when data from importers are not available, data on import premiums received and claims paid by resident insurance enterprises could be used to calculate a claims-to-premiums ratio that may also be applied to insurance placed with nonresidents.

165. Data on insurance that covers items other than imports and is placed directly abroad could be obtained from broadly based ES. Branches and subsidiaries of nonresident companies (direct investment enterprises) are more likely to place insurance abroad than are other enterprises—especially when the head office of a multinational enterprise group takes out a global policy or self-insures and recoups premiums from subsidiaries and branches. Premiums on individual life insurance are unlikely to be paid, other than through agents or brokers, directly abroad; therefore, the compiler need not be too concerned about surveying individuals to obtain this information.

166. 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 form could be used to identify agents and brokers placing insurance abroad. These agents and brokers would then be asked to complete a more detailed questionnaire. Data required on insurance transactions include details of premiums paid abroad and claims received. On model form 10, in the section to be completed by agents and brokers, insurance on imports is required as a separate category to ensure that it is not double counted. Insurance agents and brokers may satisfactorily report data on premiums paid abroad, but they may not be aware of claims received by residents. Therefore, the compiler may wish to adjust the claims data accordingly. The adjustment should be made in consultation with agents and brokers or by using a claims-to-premiums ratio that domestic insurers think is appropriate. If such an adjustment is made, the compiler should ensure that allowance is made for any claims information collected directly from the recipient. (Allowance should be made to the extent that such claims relate to premiums paid through resident agents.)

Use of ES to Measure Other Services

167. Collection of data on services such as communications, construction, certain financial services, computer and information services, royalties and fees, other business services, and other personal services are included under other services. The classification of services required by the BPM is presented in table 10.1. The transactions in services that can be collected by ES are listed in model form 10, parts A and B, and the notes in that form describe the services that should be reported.

168. ES of services have proved successful in a number of countries. However, some general observations are in order. ES are designed to collect both credit (earnings) and debit (payments) items. On the earnings side, the particular service provided is likely to relate closely to the industry activity of the enterprise approached; for example, the legal industry is most likely to provide legal services. This is less true on the expenditure side, although there are likely to be greater associations of certain services with particular industries. Enterprises involved in international trade in services are likely to be those undertaking other international business activities. Therefore, it is possible to identify a large part of the population involved in international trade in other services by approaching enterprises involved in a direct investment relationship, enterprises that have large external assets and liabilities, and enterprises that have large transactions in goods. While a more thorough approach to population identification is required, a list of the types of enterprises just mentioned is an extremely useful starting point. In chapter 18, paragraphs 853-862, population identification is discussed more thoroughly. There are some areas in which the boundaries of international service activity must to be established. For example, the boundary for construction services is a complex issue, which is discussed in chapter 10, paragraphs 452-455.

Transactions Associated with Foreign Workers

169. ES of employers and employment agencies engaging foreign workers, as well as special data that may be available from banks, may be used as sources to measure BOP transactions associated with foreign workers.

170. Model form 11, part A seeks data that could be obtained in an employer survey designed to collect information on transactions involving foreign workers employed in the domestic economy. In designing a survey of employers, the compiler should take into account the scope and nature of information known to employers. Total wages, salaries, and supplements should be known. Employers may or may not know workers’ actual expenditures in the domestic economy or amounts remitted to home countries. Some employers may be able to provide information on actual cash remittances. Any approach to collecting information from employers should request data on values of wages, salaries, and supplements and on numbers of foreign workers employed. Such data may be used in the development of a profile of foreign workers, which would be helpful for estimating transactions that are of interest to the compiler.

171. Domestic banks may, in special circumstances, have information on foreign workers that could be used in calculating workers’ remittances, changes in nonresident bank deposits, and migrants’ transfers. Another potential source of information is employment agencies, which may be responsible for recruiting foreign workers to be employed in the domestic economy. Any approach to collecting information from employment agencies should request data on values of wages and salaries, remittances and the like, and numbers of foreign workers employed. If employment agencies do not have actual data, staff may know numbers of workers placed, employment conditions, contractual arrangements, etc., and such information may be useful for constructing a data model on foreign workers.

172. ES may also be used to measure the BOP transactions of residents working abroad. A number of sources could be approached for information. The compiler could survey employment agencies that recruit residents to work abroad. The amount of detail and the scope of information possessed by such agencies may vary, but data on wages and salaries paid in cash and in kind, living expenses, and remittances to home countries could be available. Data may also be available by industry and country. Information on the numbers of workers involved should be collected and, if possible, data on their wages and salaries. Adjustments may have to be made to ensure that, in the overall measure of wages and salaries, employers’ contributions to insurance and pension schemes are included.

173. Special bank data, which are described in the next paragraph, may be available to measure components of employee compensation, workers’ remittances, and migrants’ transfers.

Special Bank Data

174. In some countries, arrangements exist for banks to establish special accounts for certain types of clients, such as foreign nationals working in a host country or citizens working abroad. These accounts may be a useful source of information on such BOP items as employee compensation, workers’ remittances, and migrants’ transfers. Monitoring of bank accounts held by embassies, by military establishments of foreign governments, and by international institutions may be a useful way to measure transactions, with the compiling country, of certain foreign governments and international institutions.

Private Development Aid Transfers

175. Religious organizations and other organizations involved in collecting or distributing goods, services, and funds to be used for development or other assistance can be approached for information on related BOP transactions. Sometimes the compiler may collect relevant data from an umbrella organization formed for the purpose of coordinating these types of activities.

Use of ES to Measure External Assets and Liabilities

Introduction

176. ES may be used to measure stock positions; financial transactions; investment income; financial services; and withholding taxes associated with liabilities to, and claims on, nonresidents. Data on stock positions of external assets and liabilities are required for the IIP statement; data on financial transactions are required for the financial account of the BOP. Remaining items are required for the current account: investment income—for inclusion in the income item, financial services—for inclusion in services, and withholding tax—for inclusion in transfers.

177. Enterprises may not always be aware that some of their liabilities (which take the form of tradeable securities issued in the domestic market) may be managed, on behalf of nonresidents, by domestic financial intermediaries. The measurement of these external liabilities is also complicated by the existence of secondary markets. Collection issues associated with international securities are examined in chapter 6.

178. Many compilers conduct ES to measure financial flows, stock positions, investment income, associated financial services, and withholding taxes. Through these surveys, many different approaches are taken.

179. A compiler may conduct an across-the-board survey of external assets and liabilities; use ES to measure certain components, such as direct investment and loans from nonresidents; and use other methods, such as an ITRS, for the remainder.

Model Form 12

180. Model form 12 seeks the type of data on external assets and liabilities that a compiler could collect through ES. This comprehensive form could be sent to any type of enterprise (a direct investor, a direct investment enterprise, a public enterprise, or any other type of enterprise) for completion.

181. Form 12 contains a classification framework for financial flows, stock positions, reconciliation items, and investment income. These classifications are consistent with the standard components of the BPM. Form 12 should be of assistance to compilers who must record wide-ranging international financial transactions and wish to compile comprehensive data. Less detailed forms (similar to illustration 19.3 in chapter 19) may be used by compilers for economies that have less developed financial structures. As separate forms could, in practice, be used for different types of enterprises, form 12 could be divided into several forms.

182. Parts A and B of form 12 request data on external assets, and parts C and D request data on external liabilities. In turn, in parts A and C, there are separate items for stock positions (opening and closing positions), transactions (increases, decreases, and net), other changes (exchange rate and other), and associated income. Parts B and D request data classified by partner countries.

183. In parts A through D, assets and liabilities are separately classified as representing claims by direct investors on direct investment enterprises, claims by direct investment enterprises on direct investors, or other claims.

184. Each of these classifications is further classified by instrument of investment.

185. Part E of form 12 requests data that could be collected on financial fees and withholding taxes; parts G and H seek data that could be collected in respect of reinvested earnings on direct investment. The instructions accompanying the form provide an explanation of some data items and data relationships contained in the form.

186. Before the model collection forms and procedures contained in this Guide can be used, compilers must develop BOP enterprise registers. For this purpose, it is necessary to define the business entity (statistical unit) about which the compiler collects and publishes data. In chapter 18, the use of the enterprise group at the sector level or, alternatively, the enterprise is advocated. Chapter 18 provides further information on establishing and maintaining a business register.

Classifications of the Statistical Unit

187. The BOP enterprise register should contain information that permits classification of the statistical unit. Important classifications include sector, industry of enterprise, and public/private ownership.

188. The sector classification is required to present BOP data according to the sector classification set out in the BPM and the SNA. For BOP purposes, the compiler should ascertain whether or not the enterprise is a bank For national accounts purposes, the compiler may have to determine whether the enterprise is a bank, another financial institution, a trading enterprise, or—in the case of certain unincorporated enterprises—a member of the household sector.

189. The public/private ownership classification is important for many purposes. If necessary, this classification may be extended to indicate ownership of public enterprises by central government, state or regional government, or local government.

Reconciliation of Stocks and Flows Data

190. As described in chapter 1, paragraph 30, the reconciliation statement shows the opening stock position, changes that occur in stock as a result of financial transactions and other changes, and the closing stock position. In addition, the statement includes investment income because it is important to link investment income with corresponding stock position data. Any data collection of stock positions, financial flows, and investment income should be built around these basic relationships. By collecting data in the form of a reconciliation statement and linking it to related income items, the compiler should ensure the consistency, and therefore the accuracy, of data collected.

191. Changes that occur in stock as a result of transactions will arise from the provision of financing (for example, a new equity investment, a loan drawing, the purchase of a security, the incurring of an account or an arrear) less the repayment of financing (for example, cancellation or withdrawal of equity, repayment of a loan, sale of a security, payment of an account). In form 12, the provision of financing is referred to as an increase, and the repayment is called a decrease.

192. Other changes to the value of a financial asset may occur without any transaction. For example, the value of an asset denominated in one currency may change when the value is expressed in another currency and the relative values of the two currencies change. A write-off of debt or a movement in the share (stock) market price of an equity are other examples.

193. In a statistical collection, the non-transactions component of changes in levels may also reflect errors, other discrepancies, or changes in the treatments of items. For example, in sample surveys, the rotation of units in and out of collections will introduce sample errors because closing values reported by enterprises in previous periods may not equal opening period values of newly selected enterprises. Another common occurrence is that reporters, who discover that previously reported transactions and stock position data are incorrect, do not provide revised data. If such differences have significant impacts on survey results for past periods, revised figures should be obtained.33 The compiler should attempt to measure the causes of the other changes item and keep the statistical error component within acceptable bounds.

194. As shown in form 12, the collection of investment income insures that investment income, financial flows, and stock position items are consistently classified; in addition, the collection of investment income facilitates income yield analysis, which enables the compiler to verify the quality of data reported on investment income and to identify possible misreporting of income or stocks.34 Published data on income yields are useful for purposes of analysis and projection.

Classification of Stock Positions, Financial Transactions, and Investment Income

195. It is important that forms used in ES to obtain information necessary for classifying transactions and stocks are consistent with requirements of the BPM.35 As financial transactions, investment income, and the IIP are classified in similar ways, the use of the reconciliation statement to collect information on the external assets and liabilities of an enterprise facilitates consistent classification of BOP and IIP items.

196. Model form 12 is designed to permit classification of transactions into the standard components of the BPM. In addition, the form also allows for certain supplementary classifications, such as partner country data (see chapter 17), currency denomination of instrument, and sector of the nonresident counterparty.

Financial Services and Withholding Taxes

197. ES of external assets and liabilities also serve as appropriate vehicles for collecting data on financial fees and services associated with external assets and liabilities and on withholding tax payments. Collection of these data on the same form would emphasize that reporting of financial and investment income transactions is required on a gross basis before fees and taxes are deducted.

Conversion of Foreign Currency Stocks and Transactions to the Unit of Account

198. In ES, as in other BOP collections, instruction should be given to reporters on how to convert stock positions and transactions expressed in foreign currencies to the unit of account.36 The instruction should follow the recommendations of the BPM, which states that: (1) stock positions of external assets and liabilities should be converted to the unit of account at the midpoint market rate of exchange applicable to the date of the measurement of stock position data and (2) transactions should be converted on the basis of the midpoint rate applicable to the transaction date. When exchange rates have been hedged, the transaction rate may differ from the market rate prevailing on the date of the transaction. In these instances, the market rate is still to be used. Hedges, if they are set up with nonresidents, are to be recorded separately. See chapter 16, paragraphs 744-759 for further details on the BOP treatment of hedges.

Surveys of Banks and Other Financial Institutions

199. In some countries, enterprise survey (of banks and other financial institutions) data collected by compilers of money and banking statistics or by compilers of other financial statistics are used to compile components of the BOP and IIP statements.

200. Such surveys generally collect data on a balance sheet basis and request classification by instrument and sector of creditor (in the case of banks’ liabilities) and debtor (in the case of banks’ financial assets). The sector classification enables the analyst to identify financial flows between banks and the monetary authorities and between banks and other sectors. Also, these surveys typically identify claims on, and liabilities to, residents and nonresidents; therefore, the data may be used in compilation of BOP and IIP statements.

201. For several reasons, the BOP compiler should take care in using these surveys as data sources. One reason for caution is that, while survey data are collected on a balance sheet- or stock-basis, the BOP requires data on a transactions basis. (Paragraphs 732-739 of chapter 16 describe a method for compiling flow data from stock data.) If such surveys are used as sources, consideration should be given to obtaining supplementary data on gross transactions underlying changes in stock data; for example, for loans to and from nonresidents, data could be collected on drawings and repayments.

202. A second reason for caution is that data provided on foreign and domestic currencies are sometimes used as proxies for residency. That is, foreign currency claims (and liabilities) are regarded as claims (liabilities) on (to) nonresidents, while domestic currency claims (and liabilities) are regarded as claims (liabilities) on (to) residents. These assumptions are often unrealistic, and the compiler should (if this is not already the case) encourage the collection of data on a residency basis.

203. The reference period used in some countries may not be consistent with BOP periodicity. For example, bank accounting periods may end on a particular day of the week, such as the last Wednesday of the month, rather than the last day of the month. The occurrence of large daily fluctuations in the external liabilities and assets of banks may lead to significant timing discrepancies in the BOP.

204. Some bank collections do not provide details of either nonresident investment in the equity of the bank or of the bank’s equity in enterprises abroad. This omission may be important, especially when the bank is owned by nonresidents or has branches and subsidiaries located abroad. In these cases, the BOP compiler may have to collect data on equity separately.

205. The treatment of offshore banking units may not be consistent with BOP requirements; therefore, the compiler may have to collect information directly from offshore units. According to the BPM, offshore banking units are resident entities of the countries in which they are located. The same data collected from other resident banks on financial flows, stock positions, income, services, etc. should be collected from them.

206. Some of the other classifications, such as partner country data, required by the BOP compiler may not be available from these surveys. Therefore, the compiler should approach banks and other financial institutions separately for this information.

207. Balance sheet information may be provided on the basis of historical cost rather than market value. The difference could have implications for compilation of both the BOP and the IIP (particularly the latter). The BOP compiler should approach banks and/or other institutions for information to adjust valuations to the preferred market value basis.

208. These surveys are generally not designed for BOP purposes and therefore may not satisfy the requirements of the BOP compiler. A better approach (described previously in this chapter) may be to include banks and other financial institutions in an enterprise survey on external assets and liabilities. In such circumstances, BOP and money and banking data compilers should attempt to coordinate their requirements so that the same definitions of instrument and of residency are used. It is highly desirable that stock positions reported in BOP and money and banking surveys should be compared on a bank-by-bank basis to ensure consistent reporting and treatment as far as possible. Differences existing between the two data sources should be reconciled; if necessary, any difference between treatments in the two sets of statistics should be drawn to the attention of users from time to time.37